UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark One)
For the quarterly period ended
OR
For the transition period from to .
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(Exact name of registrant as specified in its charter)
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(
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Securities registered pursuant to Section 12(b) of the Act:
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interests |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ◻ | Accelerated filer ◻ | Smaller reporting company | Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial standards provided pursuant to Section 13(a) of the Exchange Act. ◻
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Common units outstanding as of August 12, 2021: approximately
EXPLANATORY NOTE
Evolve Transition Infrastructure LP is filing this Amendment No. 1 (this “Amendment”) to its Quarterly Report on Form 10-Q for the quarter ended June 30, 2021 (the “Form 10-Q”), as filed with the Securities and Exchange Commission (the “SEC”) on August 12, 2021, solely to furnish or file, as applicable, Exhibits 31.1, 31.2, 32.1 and 32.2 to the Form 10-Q, which were inadvertently omitted from the Form 10-Q filing.
Except as set forth above, no other amendments have been made to the Form 10-Q. This Amendment does not reflect events occurring after August 12, 2021 or modify or update in any way disclosure contained in the Form 10-Q except as set forth above.
TABLE OF CONTENTS
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COMMONLY USED DEFINED TERMS
As used in this Quarterly Report on Form 10-Q (this “Form 10-Q”), unless the context indicates or otherwise requires, the following terms have the following meanings:
● | “Evolve Transition Infrastructure,” “the Partnership,” “we,” “us,” “our” or like terms refer collectively to Evolve Transition Infrastructure LP, its consolidated subsidiaries and, where the context provides, the entities in which we have a 50% ownership interest. |
● | “Bbl” means one barrel of 42 U.S. gallons of oil or other liquid hydrocarbons. |
● | “Board” means the board of directors of our general partner. |
● | “Class C Preferred Units” means our Class C Preferred Units representing limited partner interests in Evolve Transition Infrastructure. |
● | “common units” means our common units representing limited partner interests in Evolve Transition Infrastructure. |
● | “Credit Agreement” means collectively, the Third Amended and Restated Credit Agreement, dated as of March 31, 2015, among the Partnership, Royal Bank of Canada, as administrative agent and collateral agent, and the lenders party thereto, as amended by (i) Amendment and Waiver of Third Amended and Restated Credit Agreement, dated as of August 12, 2015, (ii) Joinder, Assignment and Second Amendment to Third Amended and Restated Credit Agreement, dated as of October 14, 2015, (iii) Third Amendment to Third Amended and Restated Credit Agreement, dated as of November 12, 2015, (iv) Fourth Amendment to Third Amended and Restated Credit Agreement, dated as of July 5, 2016, (v) Fifth Amendment to Third Amended and Restated Credit Agreement, dated as of April 17, 2017, (vi) Sixth Amendment to Third Amended and Restated Credit Agreement, dated as of November 7, 2017, (vii) Seventh Amendment to Third Amended and Restated Credit Agreement, dated as of February 5, 2018, (viii) Eighth Amendment to Third Amended and Restated Credit Agreement, dated as of May 7, 2018, (ix) Ninth Amendment to Third Amended and Restated Credit Agreement, dated as of November 22, 2019, and (x) Tenth Amendment to Third Amended and Restated Credit Agreement, dated as of November 6, 2020 (individually, the “Tenth Amendment”). |
● | “Gathering Agreement” means the Firm Gathering and Processing Agreement, dated as of October 14, 2015, by and between Catarina Midstream, LLC and SN Catarina LLC, as amended by Amendment No. 1 thereto, dated June 30, 2017. |
● | “MBbl” means one thousand Bbls. |
● | “MBbl/d” means one thousand barrels of oil or other liquid hydrocarbons per day. |
● | “Mcf” means one thousand cubic feet of natural gas. |
● | “Mesquite” means (i) at all times prior to June 30, 2020, Sanchez Energy Corporation and its consolidated subsidiaries, and (ii) at all times after and including June 30, 2020, Mesquite Energy, Inc. and its consolidated subsidiaries. |
● | “Mesquite Chapter 11 Case” means the voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code filed by the SN Debtors in the United States Bankruptcy Court for the Southern District of Texas, Houston Division (the “Bankruptcy Court”). |
● | “MMBtu” means one million British thermal units. |
● | “MMcf” means one million cubic feet of natural gas. |
● | “MMcf/d” means one million cubic feet of natural gas per day. |
● | “NGLs” means natural gas liquids such as ethane, propane, butane, natural gasolines and other components that when removed from natural gas become liquid under various levels of higher pressure and lower temperature. |
● | “our general partner” refers to Evolve Transition Infrastructure GP LLC, our general partner. |
● | “our partnership agreement” means the Third Amended and Restated Agreement of Limited Partnership of the Partnership, dated as of August 2, 2019, as amended by the Stonepeak Letter Agreement (as defined herein), as amended by Amendment No. 1 thereto, dated as of February 12, 2021. |
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● | “Shared Services Agreement” means the Amended and Restated Shared Services Agreement between SP Holdings and the Partnership, dated as of March 6, 2015. |
● | “SEC” means the United States Securities and Exchange Commission. |
● | “Settlement Agreement” means the Settlement Agreement, dated June 6, 2020, as amended by that certain Amendment Agreement, dated as of June 14, 2020 and effective as of June 6, 2020, in each case, by and among the Partnership, our general partner, Catarina Midstream, LLC, Seco Pipeline, LLC, the SN Debtors, SP Holdings, Carnero G&P LLC and TPL SouthTex Processing Company LP. |
● | “SN Debtors” means collectively, Mesquite, SN Palmetto, LLC, SN Marquis LLC, SN Cotulla Assets, LLC, SN Operating, LLC, SN TMS, LLC, SN Catarina, LLC, Rockin L Ranch Company, LLC, SN Payables, LLC, SN EF Maverick, LLC and SN UR Holdings, LLC. |
● | “SP Holdings” means SP Holdings, LLC, the sole member of our general partner. |
● | “Stonepeak” means Stonepeak Catarina and its subsidiaries, other than the Partnership. |
● | “Stonepeak Catarina” means Stonepeak Catarina Holdings, LLC. |
● | “Stonepeak Letter Agreement” means that certain letter agreement, dated as of November 16, 2020, by and between the Partnership and Stonepeak Catarina, wherein the parties agreed that Stonepeak Catarina will be able to elect to receive distributions on the Class C Preferred Units in common units for any quarter following the third quarter of 2020 by providing written noticed to the Partnership no later than the last day of the calendar month following the end of such quarter. |
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Cautionary Note Regarding Forward-Looking Statements
This Form 10-Q contains “forward-looking statements” within the meaning of the federal securities laws. Except for statements of historical fact, all statements in this Form 10-Q constitute forward-looking statements. Forward-looking statements may be identified by words like “may,” “could,” “should,” “expect,” “plan,” “project,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “pursue,” “target,” “continue,” the negative of such terms or other similar expressions. The absence of such words or expressions does not necessarily mean the statements are not forward-looking.
The forward-looking statements contained in this Form 10-Q are largely based on our current expectations, which reflect estimates and assumptions made by the management of our general partner. Although we believe such estimates and assumptions to be reasonable, statements made regarding future results are not guarantees of future performance and are subject to numerous assumptions, uncertainties and risks that are beyond our control. Actual outcomes and results may be materially different from the results stated or implied in such forward-looking statements included in this report. You should not put any undue reliance on any forward-looking statement. All forward-looking information in this Form 10-Q and subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by these cautionary statements.
Important factors that could cause our actual results to differ materially from the expectations reflected in the forward looking statements include, among others:
● | our ability to successfully execute our business, acquisition and financing strategies; |
● | changes in general economic conditions, including market and macro-economic disruptions resulting from the ongoing pandemic caused by a novel strain of coronavirus and related governmental responses; |
● | the ability of our customers to meet their drilling and development plans on a timely basis, or at all, and perform under gathering, processing and other agreements; |
● | the creditworthiness and performance of our counterparties, including financial institutions, operating partners, customers and other counterparties; |
● | our ability to extend, replace or refinance our Credit Agreement; |
● | our ability to grow enterprise value; |
● | the ability of our partners to perform under our joint ventures; |
● | the availability, proximity and capacity of, and costs associated with, gathering, processing, compression and transportation facilities; |
● | our ability to access the credit and capital markets to obtain financing on terms we deem acceptable, if at all, and to otherwise satisfy our capital expenditure requirements; |
● | the timing and extent of changes in prices for, and demand for, natural gas, NGLs and oil; |
● | our ability to successfully execute our hedging strategy and the resulting realized prices therefrom; |
● | the accuracy of reserve estimates, which by their nature involve the exercise of professional judgment and may, therefore, be imprecise; |
● | competition in the oil and natural gas industry for employees and other personnel, equipment, materials and services and, related thereto, the availability and cost of employees and other personnel, equipment, materials and services; |
● | the extent to which our assets operated by others are operated successfully and economically; |
● | our ability to compete with other companies in the oil and natural gas industry; |
● | the impact of, and changes in, government policies, laws and regulations, including tax laws and regulations, environmental laws and regulations relating to air emissions, waste disposal, hydraulic fracturing and access to and use of water, laws and regulations imposing conditions and restrictions on drilling and completion operations and laws and regulations with respect to derivatives and hedging activities; |
● | the use of competing energy sources and the development of alternative energy sources; |
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● | unexpected results of litigation filed against us; |
● | disruptions due to extreme weather conditions, such as extreme rainfall, hurricanes or tornadoes; |
● | the extent to which we incur uninsured losses and liabilities or losses and liabilities in excess of our insurance coverage; and |
● | the other factors described under “Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Part II, Item 1A. Risk Factors” and elsewhere in this Form 10-Q and in our other public filings with the SEC. |
Management cautions all readers that the forward-looking statements contained in this Form 10-Q are not guarantees of future performance, and we cannot assure any reader that such statements will be realized or the forward-looking events and circumstances will occur. Actual results may differ materially from those anticipated or implied in forward-looking statements. The forward-looking statements speak only as of the date made, and other than as required by law, we do not intend to publicly update or revise any forward-looking statements as a result of new information, future events or otherwise. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.
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PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
EVOLVE TRANSITION INFRASTRUCTURE LP and SUBSIDIARIES
Condensed Consolidated Statements of Operations
(In thousands, except unit data)
(Unaudited)
Three Months Ended | Six Months Ended | ||||||||||
June 30, | June 30, | ||||||||||
2021 |
| 2020 |
| 2021 |
| 2020 | |||||
Revenues | |||||||||||
Gathering and transportation sales | $ | — | $ | — | $ | — | $ | | |||
Gathering and transportation lease revenues | | | | | |||||||
Total revenues |
| |
| | |
| | ||||
Expenses | |||||||||||
Operating expenses | |||||||||||
Transportation operating expenses | | | | | |||||||
General and administrative expenses |
| |
| |
| | | ||||
Unit-based compensation expense | | | | | |||||||
Depreciation and amortization |
| |
| |
| | | ||||
Accretion expense |
| |
| |
| | | ||||
Total operating expenses |
| |
| |
| |
| | |||
Other (income) expense | |||||||||||
Interest expense, net |
| | | | | ||||||
Loss (earnings) from equity investments | | ( | ( | ( | |||||||
Other income, net |
| ( | ( | ( | ( | ||||||
Total other expenses |
| |
| |
| |
| | |||
Total expenses |
| |
| |
| |
| | |||
Loss before income taxes |
| ( |
| ( |
| ( |
| ( | |||
Income tax expense (benefit) | ( | | | | |||||||
Loss from continuing operations | ( | ( | ( | ( | |||||||
Income (loss) from discontinued operations | | ( | | ( | |||||||
Net loss | $ | ( | $ | ( | $ | ( | $ | ( | |||
Loss from continuing operations per unit | |||||||||||
Common units - Basic and Diluted | $ | ( | $ | ( | $ | ( | $ | ( | |||
Loss from discontinued operations per unit | |||||||||||
Common units - Basic and Diluted | $ | | $ | ( | $ | | $ | ( | |||
Net loss per unit | |||||||||||
Common units - Basic and Diluted | $ | ( | $ | ( | $ | ( | $ | ( | |||
Weighted Average Units Outstanding | |||||||||||
Common units - Basic and Diluted | | | | |
See accompanying notes to condensed consolidated financial statements.
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EVOLVE TRANSITION INFRASTRUCTURE LP and SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands, except unit data)
(Unaudited)
June 30, | December 31, | ||||
2021 |
| 2020 | |||
ASSETS | |||||
Current assets | |||||
Cash and cash equivalents | $ | | $ | | |
Accounts receivable |
| |
| | |
Prepaid expenses |
| |
| | |
Fair value of warrants | | — | |||
Current assets from discontinued operations | | | |||
Total current assets |
| |
| | |
Gathering and transportation assets, net | | | |||
Intangible assets, net | | | |||
Equity investments | | | |||
Other non-current assets |
| |
| | |
Long-term assets from discontinued operations | — | | |||
Total assets | $ | | $ | | |
LIABILITIES AND PARTNERS' CAPITAL | |||||
Current liabilities | |||||
Accounts payable and accrued liabilities | $ | | $ | | |
Accounts payable and accrued liabilities - related entities | | | |||
Royalties payable |
| |
| | |
Short-term debt, net of debt issuance costs | | | |||
Class C Preferred Units | | | |||
Current liabilities from discontinued operations | — | | |||
Total current liabilities |
| |
| | |
Other liabilities | |||||
Long term accrued liabilities - related entities |
| |
| | |
Asset retirement obligation |
| |
| | |
Other liabilities | | | |||
Long-term liabilities from discontinued operations | — | | |||
Total other liabilities |
| |
| | |
Total liabilities |
| |
| | |
Commitments and contingencies (See Note 12) | |||||
Partners' deficit | |||||
Common units, | ( | ( | |||
Total partners' deficit |
| ( |
| ( | |
Total liabilities and partners' capital | $ | | $ | |
See accompanying notes to condensed consolidated financial statements.
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EVOLVE TRANSITION INFRASTRUCTURE LP and SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Six Months Ended | |||||
June 30, | |||||
2021 |
| 2020 | |||
Cash flows from operating activities: | |||||
Net loss | $ | ( | $ | ( | |
Adjustments to reconcile net loss to cash provided by operating activities: | |||||
Depreciation, depletion and amortization |
| |
| | |
Amortization of debt issuance costs | | | |||
Accretion of Class C discount | | | |||
Class C distribution accrual | — | | |||
Asset impairments |
| — |
| | |
Accretion expense | | | |||
Distributions from equity investments |
| |
| | |
Equity earnings in affiliate | ( | ( | |||
Bad debt expense | ( | — | |||
Gain on sale of assets | ( | — | |||
Mark-to-market on warrant | | | |||
Net (gain) on commodity derivative contracts |
| — |
| ( | |
Net cash settlements received on commodity derivative contracts |
| |
| | |
Gain on Nuvve Holding Warrants | ( | — | |||
Unit-based compensation |
| |
| | |
Amortization of intangible assets | | | |||
Changes in Operating Assets and Liabilities: | |||||
Accounts receivable |
| |
| ( | |
Accounts receivable - related entities | — | | |||
Prepaid expenses | ( | | |||
Other assets |
| |
| ( | |
Accounts payable and accrued liabilities |
| |
| | |
Accounts payable and accrued liabilities- related entities |
| ( |
| | |
Other long-term liabilities | | — | |||
Net cash provided by operating activities |
| |
| | |
Cash flows from investing activities: | |||||
Proceeds from sales of oil and natural gas properties | |
| — | ||
Development of oil and natural gas properties |
| — |
| | |
Construction of gathering and transportation assets | ( | ( | |||
Contributions to equity affiliates |
| ( |
| — | |
Net cash provided by (used in) investing activities |
| |
| ( | |
Cash flows from financing activities: | |||||
Repayment of debt | ( | ( | |||
Proceeds from issuance of debt | | | |||
Issuance of common units | | — | |||
Payments for offering costs | ( | — | |||
Units tendered by employees for tax withholdings | — | ( | |||
Debt issuance costs |
| ( |
| ( | |
Net cash used in financing activities |
| ( |
| ( | |
Net decrease in cash and cash equivalents |
| |
| ( | |
Cash and cash equivalents, beginning of period |
| |
| | |
Cash and cash equivalents, end of period | $ | | $ | | |
Supplemental disclosures of cash flow information: | |||||
Cash paid during the period for income tax | $ | $ | — | ||
Cash paid during the period for interest | $ | | $ | |
See accompanying notes to condensed consolidated financial statements.
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EVOLVE TRANSITION INFRASTRUCTURE LP and SUBSIDIARIES
Condensed Consolidated Statements of Changes in Partners’ Capital
(In thousands, except unit data)
(Unaudited)
Common Units | Total | ||||||
Units |
| Amount | Capital | ||||
Partners' Deficit, December 31, 2020 | | $ | ( | $ | ( | ||
Unit-based compensation programs | | | | ||||
Common units issued as Class C Preferred distributions | | | | ||||
Net loss | — | ( | ( | ||||
Partners' Deficit, March 31, 2021 | | ( | ( | ||||
Unit-based compensation programs | — | | | ||||
Issuance of common units, net of offering costs of $0.3 million | | | | ||||
Common units issued as Class C Preferred distributions | | | | ||||
Net loss | — | ( | ( | ||||
Partners' Deficit, June 30, 2021 | | $ | ( | $ | ( |
Common Units | Total | ||||||
Units |
| Amount | Capital | ||||
Partners' Deficit, December 31, 2019 | | $ | ( | $ | ( | ||
Unit-based compensation programs | ( | | | ||||
Units tendered by SOG employees for tax withholdings | ( | ( | ( | ||||
Net loss | — | ( | ( | ||||
Partners' Deficit, March 31, 2020 | | ( | ( | ||||
Unit-based compensation programs | ( | | | ||||
Units tendered by SOG employees for tax withholdings | ( | ( | ( | ||||
Net loss | — | ( | ( | ||||
Partners' Deficit, June 30, 2020 | | $ | ( | $ | ( |
See accompanying notes to condensed consolidated financial statements.
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EVOLVE TRANSITION INFRASTRUCTURE LP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. ORGANIZATION AND BUSINESS
Organization
We are a publicly-traded limited partnership formed in 2005 focused on the acquisition, development, and ownership of infrastructure critical to the transition of energy supply to lower carbon sources. We own natural gas gathering systems, pipelines, and processing facilities in South Texas and continue to pursue energy transition infrastructure opportunities. Our common units are currently listed on the NYSE American under the symbol “SNMP.”
On February 26, 2021, in connection with our management team’s focus on expanding our business strategy to focus on the ongoing energy transition in the industries in which we operate, we changed our name to Evolve Transition Infrastructure LP and our general partner changed its name to Evolve Transition Infrastructure GP LLC.
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
Accounting policies used by us conform to accounting principles generally accepted in the United States of America (“GAAP”). The accompanying financial statements include the accounts of us and our wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
These unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures, normally included in annual financial statements prepared in accordance with GAAP, have been condensed or omitted pursuant to those rules and regulations. We believe that the disclosures made are adequate to make the information presented not misleading. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary to fairly state the financial position, results of operations and cash flows with respect to the interim condensed consolidated financial statements have been included. The results of operations for the interim periods are not necessarily indicative of the results for the entire year.
These unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the SEC on March 16, 2021.
Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”), which are adopted by us as of the specified effective date. Unless otherwise discussed, management believes that the impact of recently issued standards, which are not effective, will not have a material impact on our consolidated financial statements upon adoption.
In January 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-01 “Investments – Equity Securities (Topic 321), Investments – Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815),” which clarifies the interaction among the accounting standards for equity securities, equity method investments and certain derivatives. This ASU is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2020. The adoption of this standard did not have a material impact on our condensed consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This ASU modifies the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology, which will result in more timely recognition of losses. Additionally, in November 2019, the FASB issued ASU 2019-10, “Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates,” which changed the effective date for certain issuers to annual and interim periods in fiscal years beginning after December 15, 2022, and earlier adoption is permitted. We are currently in the process of evaluating the impact of adoption of this guidance on our condensed consolidated financial statements.
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Other accounting standards that have been issued by the FASB or other standards-setting bodies are not expected to have a material impact on the Partnership’s financial position, results of operations and cash flows.
Liquidity and Going Concern
The Partnership’s inability to generate sufficient liquidity to meet future debt obligations raises substantial doubt regarding our ability to continue as a going concern. The Credit Agreement matures September 30, 2021 and our ability to continue as a going concern is contingent upon our ability to either (i) refinance or extend the maturity of the Credit Agreement, or (ii) obtain adequate new debt or equity financing to repay the Credit Agreement in full at maturity. The consolidated financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets, and satisfaction of liabilities and commitments in the normal course of business. The consolidated financial statements do not include any adjustments that might result from the outcome of substantial doubt as to the Partnership’s ability to continue as a going concern. If the Partnership cannot continue as a going concern, adjustments to the carrying values and classification of its assets and liabilities and the reported amounts of income and expenses could be required and could be material.
As disclosed in Note 17 “Subsequent Events,” we have entered into the Commitment Letter (as defined in Note 17 “Subsequent Events”) with RBC pursuant to which we expect to enter into the Twelfth Amendment prior to the current September 30, 2021 maturity date. The Twelfth Amendment will extend the maturity date to September 30, 2023.
Use of Estimates
The condensed consolidated financial statements are prepared in conformity with GAAP, which requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities and reported amounts of revenues and expenses. The estimates that are particularly significant to our financial statements include estimates of our reserves of natural gas, NGLs and oil; future cash flows from oil and natural gas properties; depreciation, depletion and amortization; asset retirement obligations; certain revenues and operating expenses; fair values of derivatives; and fair values of assets and liabilities. As fair value is a market-based measurement, it is determined based on the assumptions that market participants would use. These estimates and assumptions are based on management’s best judgment using the data available. Management evaluates its estimates and assumptions on an on-going basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. Such estimates and assumptions are adjusted when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ from the estimates. Any changes in estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods.
3. DISCONTINUED OPERATIONS
Palmetto Divestiture
On April 30, 2021, but effective March 1, 2021 (the “Palmetto Effective Time”), SEP Holdings IV, LLC (“SEP IV”), a wholly-owned subsidiary of the Partnership entered into a purchase agreement (the “Palmetto PSA”) with Westhoff Palmetto LP (“Palmetto Buyer”), pursuant to which SEP IV sold to Palmetto Buyer specified wellbores and other associated assets located in Gonzales and Dewitt Counties, Texas (the “Palmetto Assets”) for a base purchase price of approximately $
Maverick Divestiture
On April 30, 2021, but effective March 1, 2021 (the “Maverick Effective Time”), SEP IV entered into a purchase agreement (the “Maverick PSA”) with Bayshore Energy TX LLC (“Maverick Buyer”), pursuant to which SEP IV sold to Maverick Buyer specified wellbores and other associated assets located in Zavala County, Texas (the “Maverick 1 Assets”) for a base purchase price of approximately $
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representations, warranties and covenants and the payment of assumed and excluded obligations. The Maverick 1 Divestiture closed simultaneously with the execution of the Maverick PSA.
Also on April 30, 2021, SEP IV entered into a letter agreement with Maverick Buyer (the “Maverick Letter Agreement”) pursuant to which SEP IV agreed to sell additional other specified wellbores and other associated assets located in Zavala and Dimmit Counties, Texas (the “Maverick 2 Assets”) for a base purchase price of approximately $
On May 14, 2021, but effective as of the Maverick Effective Time, SEP IV and Maverick Buyer entered into a purchase agreement (the “Maverick 2 PSA”) pursuant to which SEP IV sold to Maverick Buyer the Updated Maverick 2 Assets. Pursuant to the Maverick 2 PSA, other than a limited amount of retained obligations, Maverick Buyer agreed to assume all obligations and liabilities related to the Updated Maverick 2 Assets that arose on or after the Maverick Effective Time. The Maverick 2 PSA contains customary representations and warranties by SEP IV and Maverick Buyer, and SEP IV and Maverick Buyer agreed to customary indemnities relating to breaches of representations, warranties and covenants and the payment of assumed and excluded obligations. The Maverick 2 Divestiture closed simultaneously with the execution of the Maverick 2 PSA.
We recorded a net gain of approximately $
Information related to the upstream oil and natural gas assets sold have been reflected in the condensed consolidated financial statements as discontinued operations. The following table presents the results of operations and the gain on disposal which has been included in discontinued operations (in thousands):
Three Months Ended | Six Months Ended | ||||||||||
June 30, | June 30, | ||||||||||
2021 |
| 2020 |
| 2021 |
| 2020 | |||||
Revenues | |||||||||||
Natural gas sales | $ | | $ | | $ | | $ | | |||
Oil sales |
| |
| | |
| | ||||
Natural gas liquid sales |
| |
| | |
| | ||||
Total revenues |
| |
| | |
| | ||||
Expenses | |||||||||||
Operating expenses | |||||||||||
Lease operating expenses | |
| | | | ||||||
Production taxes |
| |
| | | | |||||
Gain on sale of assets |
| ( |
| — |
| ( | — | ||||
Depreciation, depletion and amortization |
| |
| |
| | | ||||
Asset impairments |
| — |
| — |
| — | | ||||
Accretion expense |
| |
| |
| | | ||||
Total operating expenses |
| |
| |
| |
| | |||
Income (loss) before income taxes | | ( | | ( | |||||||
Income tax expense (benefit) | | ( | | ( | |||||||
Income (loss) from discontinued operations | $ | | $ | ( | $ | | $ | ( |
4. REVENUE RECOGNITION
Revenue from Contracts with Customers
We account for revenue from contracts with customers in accordance with ASC 606, “Revenue from Contracts with Customers.” The unit of account in ASC 606 is a performance obligation, which is a promise in a contract to transfer to a customer either a distinct good or service (or bundle of goods or services) or a series of distinct goods or services provided over a period of time. ASC 606 requires that a contract’s transaction price, which is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, is to be allocated to each performance obligation in the contract based on relative standalone selling prices and recognized as revenue when (point in time) or as (over time) the performance obligation is satisfied.
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Disaggregation of Revenue
We recognized revenue of $
The Firm Transportation Service Agreement, dated September 1, 2017, by and between Seco Pipeline, LLC and SN Catarina, LLC (the “Seco Pipeline Transportation Agreement”) is the only contract that we account for under ASC 606. The Seco Pipeline Transportation Agreement was terminated by Mesquite effective February 12, 2020. The Gathering Agreement is classified as an operating lease and is accounted for under ASC 842, “Leases” and is reported as gathering and transportation lease revenues in our condensed consolidated statements of operations.
We account for income from our unconsolidated equity method investments as earnings from equity investments in our condensed consolidated statements of operations. Earnings from these equity method investments are further discussed in Note 11 “Investments.”
Performance Obligations
Under that certain firm transportation service agreement with Mesquite, dated as of September 1, 2017 (the “Seco Pipeline Transportation Agreement”), we agreed to provide transportation services of certain quantities of natural gas from the receipt point to the delivery point. Each MMBtu of natural gas transported is distinct and the transportation services performed on each distinct molecule of product is substantially the same in nature. We applied the series guidance and treated these services as a single performance obligation satisfied over time using volumes delivered as the measure of progress. The Seco Pipeline Transportation Agreement required payment within
The Seco Pipeline Transportation Agreement contained variable consideration in the form of volume variability. As the distinct goods or services (rather than the series) are considered for the purpose of allocating variable consideration, we have taken the optional exception under ASC 606 which is available only for wholly unsatisfied performance obligations for which the criteria in ASC 606 have been met. Under this exception, neither estimation of variable consideration nor disclosure of the transaction price allocated to the remaining performance obligations is required. Revenue is alternatively recognized in the period that control is transferred to the customer and the respective variable component of the total transaction price is resolved.
For forms of variable consideration that are not associated with a specific volume (such as late payment fees) and thus do not meet allocation exception, estimation is required. These fees, however, are immaterial to our condensed consolidated financial statements and have a low probability of occurrence. As significant reversals of revenue due to this variability are not probable, no estimation is required.
Contract Balances
Under our sales contracts, we invoice customers after our performance obligations have been satisfied, at which point payment is unconditional. Accordingly, our contracts do not give rise to contract assets or liabilities under ASC 606. At June 30, 2021 and December 31, 2020, our accounts receivables from contracts with customers were zero and approximately $
5. FAIR VALUE MEASUREMENTS
Measurements of fair value of derivative instruments are classified according to the fair value hierarchy, which prioritizes the inputs to the valuation techniques used to measure fair value. Fair value is the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are classified and disclosed in one of the following categories:
Level 1: Measured based on unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Active markets are considered those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2: Measured based on quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability. Substantially all of these inputs are observable in the marketplace throughout the term of the instrument, can be derived from observable data, or supported by observable levels at which transactions are executed in the marketplace.
Level 3: Measured based on prices or valuation models that require inputs that are both significant to the fair value measurement and less observable from objective sources (i.e., supported by little or no market activity).
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Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. Management's assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels.
The following table summarizes the fair value of our assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2021 (in thousands):
Fair Value Measurements at June 30, 2021 | ||||||||||||
Active Markets for | Observable | |||||||||||
Identical Assets | Inputs | Unobservable Inputs | ||||||||||
| (Level 1) |
| (Level 2) |
| (Level 3) |
| Fair Value | |||||
Fair value of warrants | ||||||||||||
Nuvve Holding Warrants | $ | — | $ | | $ | — | $ | | ||||
Other liabilities | ||||||||||||
Warrant to issue common units | — | ( | — | ( | ||||||||
Total | $ | — | $ | ( | $ | — | $ | ( |
The following table summarizes the fair value of our assets and liabilities that were accounted for at fair value on a recurring basis as of December 31, 2020 (in thousands):
Fair Value Measurements at December 31, 2020 | ||||||||||||
Active Markets for | Observable | |||||||||||
Identical Assets | Inputs | Unobservable Inputs | ||||||||||
| (Level 1) |
| (Level 2) |
| (Level 3) |
| Fair Value | |||||
Other liabilities | ||||||||||||
Warrant to issue common units | — | ( | — | ( | ||||||||
Total | $ | — | $ | ( | $ | — | $ | ( |
As of June 30, 2021and December 31, 2020, the estimated fair value of cash and cash equivalents, accounts receivable, other current assets and current liabilities approximated their carrying value due to their short-term nature.
Fair Value on a Non-Recurring Basis
The Partnership follows the provisions of Topic 820-10, “Fair Value Measurement,” for nonfinancial assets and liabilities measured at fair value on a non-recurring basis. The fair value measurements of assets acquired and liabilities assumed are based on inputs that are not observable in the market and therefore represent Level 3 inputs under the fair value hierarchy. We periodically review oil and natural gas properties and related equipment for impairment when facts and circumstances indicate that their carrying values may not be recoverable.
A reconciliation of the beginning and ending balances of the Partnership’s asset retirement obligations is presented in Note 9 “Asset Retirement Obligation.”
The following table summarizes the non-recurring fair value measurements of our production assets as of December 31, 2020 (in thousands):
Fair Value Measurements at December 31, 2020 | |||||||||
Active Markets for | Observable | ||||||||
Identical Assets | Inputs | Unobservable Inputs | |||||||
| (Level 1) |
| (Level 2) |
| (Level 3) | ||||
Impairment(a) | $ | — | $ | — | $ | | |||
Total net assets | $ | — | $ | — | $ | |
(a) | During the year ended December 31, 2020, we recorded a non-cash impairment charge of $ |
The fair values of oil and natural gas properties and related equipment were measured using valuation techniques that convert future cash flows to a single discounted amount. Significant inputs to the valuation of oil and natural gas properties and related equipment include estimates of: (i) reserves; (ii) future operating and development costs; (iii) future commodity prices; (iv) estimated future cash flows; (v) estimated throughput; and (vi) a market-based weighted average cost of capital rate of
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Seco Pipeline – We own and operate a
The fair value of the Seco Pipeline was measured using probabilistic valuation techniques that convert future cash flows to a single discounted amount. Significant inputs to the valuation of the Seco Pipeline include estimates of: (i) future operating and development costs; (ii) estimated future cash flows; and (iii) a market-based weighted average cost of capital rate. These inputs require significant judgments and estimates by the Partnership’s management at the time of the valuation and are the most sensitive and subject to change.
Fair Value of Financial Instruments
The estimated fair value amounts of financial instruments have been determined using available market information and valuation methodologies described below. We prioritize the use of the highest level inputs available in determining fair value such that fair value measurements are determined using the highest and best use as determined by market participants and the assumptions that they would use in determining fair value.
Credit Agreement – We believe that the carrying value of our Credit Agreement (as defined in Note 7 “Debt”) approximates its fair value because the interest rates on the debt approximate market interest rates for debt with similar terms. The debt is classified as a Level 2 input in the fair value hierarchy and represents the amount at which the instrument could be valued in an exchange during a current transaction between willing parties. The Credit Agreement is discussed further in Note 7 “Debt.”
Warrant to acquire Nuvve Holding shares – The Nuvve Holding Warrants (as defined in Note 6. “Derivative and Financial instruments”) are valued using the value of Nuvve’s common stock and the Nuvve Warrants exercise price. We have therefore classified the fair value measurement of the Nuvve Holding Warrants as Level 2 and is presented within fair value of warrants on the condensed consolidated balance sheets.
Warrant to issue common units – As part of the Exchange, the Partnership issued to Stonepeak the Warrant which entitles the holder to receive junior securities representing ten percent of junior securities deemed outstanding when exercised. The Warrant is valued using ten percent of the junior securities deemed outstanding and the common unit price as of the balance sheet date. We have therefore classified the fair value measurement of the Warrant as Level 2 and is presented within other liabilities on the condensed consolidated balance sheets.
Earnout Derivative – As part of the Carnero Gathering Transaction (as defined in Note 11 “Investments”), we are required to pay Mesquite an earnout based on natural gas received above a threshold volume and tariff at designated delivery points from Mesquite and other producers. The earnout derivative was valued through the use of a Monte Carlo simulation model which utilized observable inputs such as the earnout price and volume commitment, as well as unobservable inputs related to the weighted probabilities of various throughput scenarios. We have therefore classified the fair value measurements of the earnout derivative as Level 3 inputs. As of June 30, 2021 and December 31, 2020, the fair value of the earnout was determined to be zero.
6. DERIVATIVE AND FINANCIAL INSTRUMENTS
On May 17, 2021, the Partnership entered into a letter agreement (the “Levo Letter Agreement”) with Nuvve Holding Corp. (“Nuvve Holding”) and Stonepeak Rocket Holdings LP (“Stonepeak Rocket”), relating to the proposed formation of a joint venture, Levo Mobility LLC (“Levo” and such proposed joint venture, the “Levo JV”). In connection with the Levo Letter Agreement, on May 17, 2021, Nuvve Holding issued
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The following table sets forth a reconciliation of the changes in fair value of the Partnership’s Nuvve Warrants for the periods indicated (in thousands):
Six Months Ended | |||
| June 30, 2021 | ||
Beginning fair value of warrants |
| $ | — |
Net gain on warrants | | ||
Ending fair value of warrants |
| $ | |
To reduce the impact of fluctuations in oil and natural gas prices on our revenues, we periodically enter into derivative contracts with respect to a portion of our projected oil and natural gas production through various transactions that fix or modify the future prices to be realized. These hedging activities are intended to support oil and natural gas prices at targeted levels and to manage exposure to oil and natural gas price fluctuations. It is never our intention to enter into derivative contracts for speculative trading purposes.
Under Topic 815, “Derivatives and Hedging,” all derivative instruments are recorded on the condensed consolidated balance sheets at fair value as either short-term or long-term assets or liabilities based on their anticipated settlement date. We will net derivative assets and liabilities for counterparties where we have a legal right of offset. Changes in the derivatives’ fair values are recognized currently in earnings unless specific hedge accounting criteria are met. We have not elected to designate any of our current derivative contracts as hedges; however, changes in the fair value of all of our derivative instruments are recognized in earnings and included in natural gas sales and oil sales in the condensed consolidated statements of operations. We do not have derivative contracts related to production in 2021 and beyond.
The following table sets forth a reconciliation of the changes in fair value of the Partnership’s commodity derivatives for the year ended December 31, 2020 (in thousands):
Year Ended | |||
| December 31, 2020 | ||
Beginning fair value of commodity derivatives |
| $ | ( |
Net gains (losses) on crude oil derivatives | | ||
Net gains on natural gas derivatives | | ||
Net settlements received on derivative contracts: | |||
Oil | ( | ||
Natural gas | ( | ||
Ending fair value of commodity derivatives |
| $ | — |
The effect of derivative instruments on our condensed consolidated statements of operations was as follows (in thousands):
Location of Gain (Loss) | Three Months Ended | Six Months Ended | ||||||
Derivative Type | in Income | June 30, 2020 | June 30, 2020 | |||||
Commodity – Mark-to-Market | Income (loss) from discontinued operations | $ | ( | $ | | |||
Commodity – Mark-to-Market | Income (loss) from discontinued operations | | | |||||
$ | ( | $ | | |||||
Earnout Derivative
Refer to Note 5 “Fair Value Measurements.”
7. DEBT
Credit Agreement
We have entered into a credit facility with Royal Bank of Canada, as administrative agent and collateral agent, and the lenders party thereto, as amended by the Tenth Amendment to Third Amended and Restated Credit Agreement, dated as of November 6, 2020 (the “Credit Agreement”). The Credit Agreement provides a quarterly amortizing term loan of $
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Credit Agreement are secured by various mortgages of both midstream and upstream properties that we own as well as various security and pledge agreements among us, certain of our subsidiaries and the administrative agent.
Borrowings under the Credit Agreement are available for limited direct investment in oil and natural gas properties, midstream properties, acquisitions, and working capital and general business purposes. The Credit Agreement has a sub-limit of up to $
At our election, interest for borrowings under the Credit Agreement are determined by reference to (i) the LIBOR plus an applicable margin between
The Credit Agreement contains various covenants that limit, among other things, our ability to incur certain indebtedness, grant certain liens, merge or consolidate, sell all or substantially all of our assets, make certain loans, acquisitions, capital expenditures and investments, and pay distributions to unitholders.
In addition, we are required to maintain the following financial covenants:
● | current assets to current liabilities, excluding any current maturities of debt, of at least |
● | senior secured net debt to consolidated adjusted EBITDA for the last twelve months, as of the last day of any fiscal quarter, of not greater than |
The Credit Agreement also includes customary events of default, including events of default relating to non-payment of principal, interest or fees, inaccuracy of representations and warranties when made or when deemed made, violation of covenants, cross-defaults, bankruptcy and insolvency events, certain unsatisfied judgments, loan documents not being valid and a change in control. A change in control is generally defined as the occurrence of one of the following events: (i) our existing general partner ceases to be our sole general partner or (ii) certain specified persons shall cease to own more than
At June 30, 2021, we were in compliance with the financial covenants contained in the Credit Agreement. We monitor compliance on an ongoing basis. If we are unable to remain in compliance with the financial covenants contained in our Credit Agreement or maintain the required ratios discussed above, the lenders could call an event of default and accelerate the outstanding debt under the terms of the Credit Agreement, such that our outstanding debt could become then due and payable. We may request waivers of compliance from the violated financial covenants from the lenders, but there is no assurance that such waivers would be granted.
As described in more detail in Note 17 “Subsequent Events,” on July 28, 2021, the Partnership, as borrower, entered into that certain Eleventh Amendment to the Credit Agreement with the guarantors party thereto, Royal Bank of Canada, as administrative agent and the lenders party thereto (the “Eleventh Amendment” and, the Credit Agreement, as amended by the Eleventh Amendment, the “Amended Credit Agreement”).
Debt Issuance Costs
As of June 30, 2021 and December 31, 2020, our unamortized debt issuance costs were approximately $
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8. GATHERING AND TRANSPORTATION ASSETS
Gathering and transportation assets consisted of the following (in thousands):
| June 30, | December 31, | ||||
| 2021 |
| 2020 | |||
Gathering and transportation assets | ||||||
Midstream assets | $ | | $ | | ||
Less: Accumulated depreciation and impairment |
| ( |
| ( | ||
Total gathering and transportation assets, net | $ | | $ | |
Depreciation and Amortization. Gathering and transportation assets, are stated at historical acquisition cost, net of any impairments, and are depreciated using the straight-line method over the useful lives of the assets, which range from to
Depreciation and amortization consisted of the following (in thousands):
Three Months Ended | Six Months Ended | |||||||||||
June 30, |
| June 30, | ||||||||||
| 2021 |
| 2020 |
| 2021 |
| 2020 | |||||
Depreciation and amortization of gathering and transportation related assets | $ | | $ | | $ | | $ | | ||||
Amortization of intangible assets | | | | | ||||||||
Total depreciation and amortization | $ | | $ | | $ | | $ | |
Impairment of Gathering and Transportation Assets. The recoverability of gathering and transportation assets is evaluated when facts or circumstances indicate that their carrying value may not be recoverable. Asset recoverability is measured by comparing the carrying value of the asset or asset group with its expected future pre-tax undiscounted cash flows. These cash flow estimates require us to make projections and assumptions for many years into the future for pricing, demand, competition, operating cost and other factors. If the carrying amount exceeds the expected future undiscounted cash flows, we recognize an impairment equal to the excess of net book value over fair value. The determination of the fair value using present value techniques requires us to make projections and assumptions regarding the probability of a range of outcomes and the rates of interest used in the present value calculations. Any changes we make to these projections and assumptions could result in significant revisions to our evaluation of recoverability of our gathering and transportation assets and the recognition of additional impairments. Upon disposition or retirement of gathering and transportation assets, any gain or loss is recorded to operations.
9. ASSET RETIREMENT OBLIGATION
We recognize the fair value of a liability for an asset retirement obligation (“ARO”) in the period in which it is incurred if a reasonable estimate of fair value can be made. Each period, we accrete the ARO to its then present value. The associated asset retirement cost (“ARC”) is capitalized as part of the carrying amount of our oil and natural gas properties, equipment and facilities or gathering and transportation assets. Subsequently, the ARC is depreciated using the units-of-production method for production assets and the straight-line method for midstream assets. The AROs recorded by us relate to the plugging and abandonment of oil and natural gas wells and decommissioning of oil and natural gas gathering and other facilities.
Inherent in the fair value calculation of AROs are numerous assumptions and judgments including the ultimate settlement amounts, inflation factors, credit adjusted discount rates, timing of settlement and changes in the legal, regulatory, environmental and political environments. To the extent future revisions to these assumptions result in adjustments to the recorded fair value of the existing ARO, a corresponding adjustment is made to the ARC capitalized as part of the oil and natural gas properties, equipment and facilities or gathering and transportation assets.
The following table is a reconciliation of changes in ARO for the six months ended June 30, 2021 and the year ended December 31, 2020 (in thousands):
Six Months Ended | Year Ended | |||||
| June 30, 2021 |
| December 31, 2020 | |||
Asset retirement obligation, beginning balance | $ | | $ | | ||
Accretion expense |
| |
| | ||
Asset retirement obligation, ending balance | $ | | $ | |
Additional AROs increase the liability associated with new oil and natural gas wells and other facilities as these obligations are incurred. Abandonments of oil and natural gas wells and other facilities reduce the liability for AROs. During the six months ended June 30, 2021 and the year ended December 31, 2020, there were no significant expenditures for abandonments and there were
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legally restricted for purposes of settling existing AROs. During the six months ended June 30, 2021, obligations were relieved as part of the Palmetto Divestiture, Maverick 1 Divestiture and Maverick 2 Divestiture.
10. INTANGIBLE ASSETS
Intangible assets are comprised of customer and marketing contracts. The intangible assets balance as of June 30, 2021 is related to the Gathering Agreement with Mesquite that was entered into as part of the acquisition of the Western Catarina gathering system. The Western Catarina gathering system (“Western Catarina Midstream”) is located on the western portion of Mesquite’s acreage position in Dimmit, La Salle and Webb counties, Texas (the western portion of such acreage, “Western Catarina”). Pursuant to the
Amortization expense for each of the six months ended June 30, 2021 and 2020 was approximately $
June 30, | December 31, | |||||
2021 |
| 2020 | ||||
Beginning balance |
| $ | |
| $ | |
Amortization | ( | ( | ||||
Ending balance |
| $ | |
| $ | |
11. INVESTMENTS
In July 2016, we completed a transaction pursuant to which we acquired from Mesquite a
In November 2016, we completed a transaction pursuant to which we acquired from Mesquite a
In May 2018, we executed a series of agreements with Targa and other parties pursuant to which, among other things: (1) the parties merged their respective
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As of June 30, 2021 the Partnership had paid approximately $
Summarized financial information of unconsolidated entities is as follows (in thousands):
Six Months Ended June 30, | ||||||
2021 |
| 2020 | ||||
Sales |
| $ | |
| $ | |
Total expenses | | | ||||
Net income | $ | | $ | |
12. COMMITMENTS AND CONTINGENCIES
As part of the Carnero Gathering Transaction, we are required to pay Mesquite an earnout based on natural gas received above a threshold volume and tariff at designated delivery points from Mesquite and other producers. This earnout has an approximate value of
13. RELATED PARTY TRANSACTIONS
Please read the disclosure under the headings “Relationship with Stonepeak,” “Relationship with Mesquite,” “Relationship with SP Holdings” and “Shared Services Agreement” in Note 13 “Related Party Transactions” of our Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2020 for a more complete description of certain related party transactions that were entered into prior to 2021.
14. UNIT-BASED COMPENSATION
The Sanchez Production Partners LP Long-Term Incentive Plan (the “LTIP”) allows for grants of restricted common units. Restricted common unit activity under the LTIP during the period is presented in the following table:
Weighted | |||||
Average | |||||
Number of | Grant Date | ||||
Restricted | Fair Value | ||||
| Units |
| Per Unit | ||
Outstanding at December 31, 2020 | | $ | | ||
Granted | | | |||
Returned/Cancelled | ( | | |||
Outstanding at June 30, 2021 |
| | $ |
In March 2021, the Partnership issued
As of June 30, 2021,
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15. PARTNERS’ CAPITAL
Outstanding Units
As of June 30, 2021, we had
Common Unit Issuances
We entered into a letter agreement with SP Holdings providing that during the period beginning with the fiscal quarter ended September 30, 2019 and continuing until the end of the fiscal quarter after the fiscal quarter in which we redeem all of our issued and outstanding Class C Preferred Units, SP Holdings agrees to delay receipt of its fees, not including reimbursement of costs, as a result, we have not issued any common units to SP Holdings in connection with providing services under the Shared Services Agreement for any quarter following the quarter ended June 30, 2019. As of June 30, 2021, the number of units to be issued under the Shared Services Agreement is
Class C Preferred Units
On August 2, 2019, Stonepeak exchanged all of their current equity ownership for newly issued Class C Preferred Units and a warrant exercisable for junior securities (the “Original Warrant”) in a private placement transaction (the “Exchange”). On February 24, 2021, the Partnership and Stonepeak entered into Amendment No. 1 to the Original Warrant and on May 4, 2021, the Partnership and Stonepeak entered into Amendment No. 2 to the Original Warrant (the Original Warrant, as amended by Amendment No. 1 and Amendment No. 2 thereto, the “Warrant”).
The holders of the Class C Preferred Units receive a quarterly distribution of
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The Class C Preferred Units are accounted for as a current liability on our condensed consolidated balance sheet consisting of the following (in thousands):
| June 30, | December 31, | ||||
| 2021 | 2020 | ||||
Class C Preferred Units, beginning balance | $ | | $ | | ||
Accretion of discount | | | ||||
Distribution accrual | — | | ||||
Class C Preferred Units, ending balance | $ | | $ | | ||
The table below reflects the payment of distributions on Class C Preferred Units related to the periods indicated.
| Class C Preferred |
| Date of |
| Date of |
| Date of | ||
Three Months Ended |
| PIK Distribution |
| Declaration |
| Record |
| Distribution | |
December 31, 2019 | | February 13, 2020 | February 28, 2020 | February 20, 2020 | |||||
March 31, 2020 | | April 29, 2020 | May 20, 2020 | May 29, 2020 | |||||
June 30, 2020 | | July 31, 2020 | August 20, 2020 | August 31, 2020 |
On November 16, 2020, the Partnership and Stonepeak entered into the Stonepeak Letter Agreement wherein the parties agreed that the distribution on the Class C Preferred Units for the three months ended September 30, 2020 would be paid in common units instead of Class C Preferred PIK Units, cash or a combination thereof. The Stonepeak Letter Agreement also provides that Stonepeak will be able to elect to receive distributions on the Class C Preferred Units in common units for any quarter following the third quarter of 2020 by providing written notice to the Partnership no later than the last day of the calendar month following the end of such quarter.
The table below reflects distributions on Class C Preferred Units which were elected to be paid in common units related to the periods indicated.
| Class C Preferred |
| Date of | ||
Three Months Ended |
| Distribution of Common Units |
| Distribution | |
September 30, 2020 | | February 1, 2021 | |||
December 31, 2020 | | February 25, 2021 | |||
March 31, 2021 | | May 20, 2021 | |||
June 30, 2021 | | August 20, 2021 |
Warrant to issue common units
On August 2, 2019, in connection with the Exchange, the Partnership issued to Stonepeak the Original Warrant, which entitles the holder to receive junior securities representing ten percent of junior securities deemed outstanding when exercised. The Warrant expires on the later of August 2, 2026 or
Earnings per Unit
Net income (loss) per common unit for the period is based on any distributions that are made to the unitholders (common units) plus an allocation of undistributed net income (loss) based on provisions of the Amended Partnership Agreement, divided by the weighted average number of common units outstanding. The two-class method dictates that net income (loss) for a period be reduced by the amount of distributions and that any residual amount representing undistributed net income (loss) be allocated to common unitholders and other participating unitholders to the extent that each unit may share in net income (loss) as if all of the net income for the period had been distributed in accordance with the Amended Partnership Agreement. Unit-based awards granted but unvested are eligible to receive distributions. The underlying unvested restricted unit awards are considered participating securities for purposes of determining net income (loss) per unit. Undistributed income is allocated to participating securities based on the proportional relationship of the weighted average number of common units and unit-based awards outstanding. Undistributed losses (including those resulting from distributions in excess of net income) are allocated to common units based on provisions of the Amended Partnership Agreement. Undistributed losses are not allocated to unvested restricted unit awards as they do not participate in net losses. Distributions declared and paid in the period are treated as distributed earnings in the computation of earnings per common unit even though cash distributions are not necessarily derived from current or prior period earnings.
The Partnership’s general partner does not have an economic interest in the Partnership and, therefore, does not participate in the Partnership’s net income.
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16. VARIABLE INTEREST ENTITIES
The Partnership’s investment in the Carnero JV represents a variable interest entity (“VIE”) that could expose the Partnership to losses. The amount of losses the Partnership could be exposed to from the Carnero JV is limited to the capital investment of approximately $
As of June 30, 2021, the Partnership had invested approximately $
Below is a tabular comparison of the carrying amounts of the assets and liabilities of the VIE and the Partnership’s maximum exposure to loss as of June 30, 2021 and December 31, 2020 (in thousands):
June 30, | December 31, | |||||
| 2021 |
| 2020 | |||
Acquisitions, earnout and capital investments | $ | | $ | | ||
Earnings in equity investments | | | ||||
Distributions received | ( | ( | ||||
Maximum exposure to loss | $ | | $ | |
17. SUBSEQUENT EVENTS
Credit Agreement Amendment
On July 28, 2021, the Partnership, as borrower, entered into the Eleventh Amendment. Pursuant to the Eleventh Amendment, the parties agreed to, among other things: (a) amend the definition of “Excluded Cash” to include (i) cash and cash equivalents set aside by the Partnership for the purposes of making a Levo JV Investment, (ii) cash and cash equivalents of up to $
Stonepeak Letter Agreement Election
On July 30, 2021, pursuant to the terms of the Stonepeak Letter Agreement, the Partnership received written notice of Stonepeak’s election to receive distributions on the Class C Preferred Units for the quarter ended June 30, 2021, in common units. In accordance with the Stonepeak Letter Agreement, the Partnership will issue
Carnero JV Litigation
On July 30, 2021, the Carnero JV initiated suit against Mesquite and SN EF UnSub, LP, Eagle Ford TX LP, Venado EF L.P., Mitsui E&P Texas LP (collectively, the “WIP Defendants”) in the 269th Judicial District Court of Harris County, Texas (the “Carnero JV Litigation”). In the Carnero JV Litigation, the Carnero JV seeks declarations from the Court regarding Mesquite’s and the WIP Defendants’ respective obligations to deliver gas from over
Warrant Amendment
As previously disclosed, the Partnership’s Long-Term Incentive Plan, effective March 6, 2015 (the “LTIP”), provides that upon the issuance of additional common units from time to time, the maximum number of common units that may be delivered or reserved for delivery with respect to the LTIP shall be automatically increased (such increase, the “LTIP Increase”) by a number of common units equal to the lesser of (i)
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On August 2, 2021, the Partnership and Stonepeak entered into Amendment No. 3 to the Warrant (the “Warrant Amendment”) to exclude from the Warrant the
Levo JV Completion
On August 4, 2021, the Partnership, Stonepeak Rocket and Nuvve Holding completed the formation of Levo.
Levo JV LLC Agreement
In connection with the Levo JV, the Partnership, Stonepeak Rocket, Nuvve Corporation (“Nuvve”), a wholly-owned subsidiary of Nuvve Holding, and Levo JV entered into an Amended and Restated Limited Liability Company Agreement for Levo (the “Levo LLC Agreement”). Pursuant to the Levo LLC Agreement, the Partnership and Stonepeak Rocket plan to make capital contributions to Levo in an aggregate amount of up to $
The Levo LLC Agreement governs the affairs of Levo and the conduct of its business.
The membership interests authorized by the Levo LLC Agreement consist of Class A Common Units, Class B Preferred Units, Class C Common Units and Class D Incentive Units. On August 4, 2021 in connection with the signing of the Levo LLC Agreement, Levo issued
Levo JV Parent Letter Agreement
In connection with the Levo JV, the Partnership also entered into that certain Parent Letter Agreement with Nuvve Holding, Stonepeak Rocket and Levo (the “Parent Letter Agreement”).
The Parent Letter Agreement includes, among other provisions, certain restrictive covenants with respect to Levo’s business, including a business opportunities covenant applicable to Nuvve Holding that is identical to the one in the Levo LLC Agreement described above, and a covenant granting Stonepeak Rocket a right of first offer to participate in certain future financing transactions of Levo. In addition, Nuvve Holding agreed to reimburse each of Stonepeak Rocket and the Partnership for a portion of their out-of-pocket expenses incurred in connection with the due diligence, documentation and negotiation of the agreements.
RBC Commitment Letter
On August 10, 2021, we entered into a letter agreement (the “Commitment Letter”) with Royal Bank of Canada (“RBC”). Pursuant to the terms of the Commitment Letter, RBC has agreed to (a) purchase at par and assume the outstanding Term Loan and Revolving Loan (each as defined in the Amended Credit Agreement) of the other lenders party to the Amended Credit Agreement, (b) enter into an amendment to the Amended Credit Agreement (the “Twelfth Amendment”) to (i) extend the maturity date under the Amended Credit Agreement to September 30, 2023, (ii) provide for a term loan facility in an aggregate principal amount of up to $
Pursuant to the Commitment Letter, we agreed to, among other things, (a) indemnify RBC, its affiliates and its and their directors, officers, employees, advisors or agents in connection with, or as a result of, the Commitment Letter or any other agreement or instrument contemplated therein, (b) reimburse RBC for all reasonable and documented out-of-pocket fees and expenses (including expenses of counsel to RBC and due diligence expenses) incurred by RBC in connection with the transactions contemplated by the Commitment Letter, whether or not the Twelfth Amendment becomes effective, and (c) deliver additional credit support reasonably acceptable to RBC, as the administrative agent. With respect to (c), one or more affiliates of our general partner may provide credit support and RBC has agreed as to the sufficiency of such additional credit support.
Completion of such definitive documentation and the closing of the transactions contemplated by the Twelfth Amendment and the Amended Credit Facilities will be subject to various closing conditions, some of which may be outside of our control. The Commitment Letter terminates on the earlier to occur of September 30, 2021 and the closing date of the Twelfth Amendment. We expect definitive documentation with respect to the Twelfth Amendment to be completed prior to September 30, 2021.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with the financial statements and the summary of significant accounting policies and notes included herein and in our most recent Annual Report on Form 10-K. The following discussion contains “forward-looking statements” that reflect our future plans, estimates, forecasts, guidance, beliefs and expected performance. The “forward-looking statements” are dependent upon events, risks and uncertainties that may be outside our control. Our actual results could differ materially from those discussed in these “forward-looking statements.” Please read “Cautionary Note Regarding Forward-Looking Statements.”
Overview
We are a publicly-traded limited partnership formed in 2005 focused on the acquisition, development, ownership and operation of infrastructure critical to the transition of energy supply to lower carbon sources. We own natural gas gathering systems, pipelines and processing facilities in South Texas and continue to pursue energy transition infrastructure opportunities. Our common units are currently listed on the NYSE American under the symbol “SNMP.”
On February 26, 2021, in connection with our management team’s focus on expanding our business strategy to focus on the ongoing energy transition in the industries in which we operate, we changed our name to Evolve Transition Infrastructure LP and our general partner changed its name to Evolve Transition Infrastructure GP LLC.
Developments during the Quarter Ended June 30, 2021
Amended and Restated Executive Services Agreement for Realignment
On April 15, 2021, the Partnership and our general partner entered into that certain Amended and Restated Executive Services Agreement for Realignment (the “Amended Agreement”) with Gerald F. Willinger, a current member of the Board, and the Chief Executive Officer of our general partner. The Amended Agreement amends and restates that certain Executive Services Agreement, dated August 2, 2019, by and between Mr. Willinger, our general partner and the Partnership. The Amended Agreement is entered into in connection with the Partnership’s go-forward strategy to acquire, develop and own infrastructure critical to the transition of energy supply to lower carbon sources.
Pursuant to the terms of the Amended Agreement, for a period from April 15, 2021 through December 31, 2021, Mr. Willinger will continue to serve in his role as Chief Executive Officer of the General Partner and will cooperate with the Board in connection with the Board’s realignment and transition of his roles and responsibilities to other members of the management team for our general partner and the Partnership. The Amended Agreement includes a customary general release of claims and certain covenants and agreements from Mr. Willinger related to confidential information, cooperation following termination or expiration of the Amended Agreement, non-solicitation of customers and non-competition.
ATM Program
On April 20, 2021 the Partnership entered into an ATM Sales Agreement (the “Sales Agreement”) with Virtu Americas LLC (“Virtu”). Pursuant to the to the terms of the Sales Agreement, the Partnership may sell from time to time through Virtu, as the Partnership’s sales agent or principal, common units having an aggregate offering price of up to $7,000,000 (the “ATM Units”). Sales of the ATM Units can be made by any method permitted that is deemed an “at the market offering” as defined in Rule 415 under the Securities Act of 1933. The Partnership used the net proceeds from sales pursuant to the Sales Agreement, after deducting offering expenses and Virtu’s commissions, for general partnership purposes, which included repaying a portion of the Partnership’s outstanding indebtedness and funding capital expenditures and working capital. During the three months ended June 30, 2021, the Partnership sold 8,774,888 ATM Units with an aggregate offering price of $0.7977, resulting in net proceeds to the Partnership of approximately $6.9 million and aggregate compensation payable to Virtu of approximately $0.1 million.
Gas Lift Agreement
On April 21, 2021, but effective January 1, 2021, Catarina Midstream, LLC, a wholly-owned subsidiary of the Partnership, entered into a Gas Lift Agreement (the “Gas Lift Agreement”) with SN Catarina, LLC, a subsidiary of Mesquite. Pursuant to the Gas Lift Agreement, (i) Catarina Midstream LLC will provide certain gas lift services ancillary to Mesquite’s oil and gas operations on the Piloncillo Ranch in South Texas, and (ii) Mesquite will pay a per-Mcf gas lift fee based on the volume of Catrina Midstream, LLC’s compressed gas delivered to Mesquite in connection with the provision of such gas lift services. The initial term of the Gas Lift Agreement is one year and it will continue on a year-to-year basis thereafter unless terminated by either party at least 60 days prior to
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the expiration of the initial term or any successive one-year term. Under the terms of the Gas Lift Agreement, each of the parties provided general representations and warranties and indemnification to the other party.
NYSE American Update
On April 29, 2021, the Partnership received notice (the “2021 Notice”) from NYSE American LLC (“NYSE American”) that the Partnership was not in compliance with the continued listing standards set forth in Section 1003(a)(ii) of the NYSE American Company Guide (the “Company Guide”). That section applies if a listed company has stockholders’ equity of less than U.S. $4.0 million and has reported losses from continuing operations and/or net losses in three of its four most recent fiscal years. The Partnership can regain compliance under Section 1003(a)(ii) of the Company Guide, as well as under Section 1003(a)(i), as previously disclosed, under the compliance plan approved by the NYSE American on June 25, 2020, which granted the Partnership a plan period through October 3, 2021. The Partnership is not required to submit an additional plan to NYSE American with respect to Section 1003(a)(ii). Receipt of the 2021 Notice does not affect the Partnership’s business, operations, financial or liquidity condition, or reporting requirements with the SEC.
Palmetto Divestiture
On April 30, 2021, but effective March 1, 2021 (the “Palmetto Effective Time”), SEP Holdings IV, LLC (“SEP IV”), a wholly-owned subsidiary of the Partnership entered into a purchase agreement (the “Palmetto PSA”) with Westhoff Palmetto LP (“Palmetto Buyer”), pursuant to which SEP IV sold to Palmetto Buyer specified wellbores and other associated assets located in Gonzales and Dewitt Counties, Texas (the “Palmetto Assets”) for a base purchase price of approximately $11.5 million, which remains subject to customary post-closing adjustments (the “Palmetto Divestiture”). Pursuant to the Palmetto PSA, other than a limited amount of retained obligations, Palmetto Buyer has agreed to assume all obligations relating to the Palmetto Assets that arose on or after the Palmetto Effective Time. The Palmetto PSA contains customary representations and warranties by SEP IV and Palmetto Buyer, and SEP IV and Palmetto Buyer have agreed to customary indemnities relating to breaches of representations, warranties and covenants and the payment of assumed and excluded obligations. The Palmetto Divestiture closed simultaneously with the execution of the Palmetto PSA.
Maverick Divestitures
On April 30, 2021, but effective March 1, 2021 (the “Maverick Effective Time”), SEP IV entered into a purchase agreement (the “Maverick PSA”) with Bayshore Energy TX LLC (“Maverick Buyer”), pursuant to which SEP IV sold to Maverick Buyer specified wellbores and other associated assets located in Zavala County, Texas (the “Maverick 1 Assets”) for a base purchase price of approximately $2.8 million, which remains subject to customary post-closing adjustments (the “Maverick 1 Divestiture”). Pursuant to the Maverick PSA, other than a limited amount of retained obligations, Maverick Buyer has agreed to assume all obligations relating to the Maverick 1 Assets that arose on or after the Maverick Effective Time. The Maverick PSA contains customary representations and warranties by SEP IV and Maverick Buyer, and SEP IV and Maverick Buyer have agreed to customary indemnities relating to breaches of representations, warranties and covenants and the payment of assumed and excluded obligations. The Maverick 1 Divestiture closed simultaneously with the execution of the Maverick PSA.
On April 30, 2021, SEP IV entered into a letter agreement with Maverick Buyer (the “Maverick Letter Agreement”) pursuant to which SEP IV agreed to sell additional other specified wellbores and other associated assets located in Zavala and Dimmit Counties, Texas (the “Maverick 2 Assets”) for a base purchase price of approximately $1.4 million (the “Maverick 2 Divestiture”). The closing of the Maverick 2 Divestiture was conditioned upon SEP IV obtaining certain consents and complying with other preferential rights related to the Maverick 2 Assets. Following the entrance into the Maverick Letter Agreement, SEP IV complied with the preferential rights and obtained multiple consents related to the Maverick 2 Assets. SEP IV did not obtain one of the required consents and, as a result, the Maverick 2 Assets subject to such consent were removed from the Maverick 2 Assets included in the Maverick 2 Disposition (the “Updated Maverick 2 Assets”) and the base purchase price was adjusted downward by approximately $30,000.
On May 14, 2021, but effective as of the Maverick Effective Time, SEP IV and Maverick Buyer entered into a purchase agreement (the “Maverick 2 PSA”) pursuant to which SEP IV sold to Maverick Buyer the Updated Maverick 2 Assets. Pursuant to the Maverick 2 PSA, other than a limited amount of retained obligations, Maverick Buyer agreed to assume all obligations and liabilities related to the Updated Maverick 2 Assets that arose on or after the Maverick Effective Time. The Maverick 2 PSA contains customary representations and warranties by SEP IV and Maverick Buyer, and SEP IV and Maverick Buyer agreed to customary indemnities relating to breaches of representations, warranties and covenants and the payment of assumed and excluded obligations. The Maverick 2 Divestiture closed simultaneously with the execution of the Maverick 2 PSA.
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Levo Letter Agreement
On May 17, 2021, the Partnership entered into a letter agreement (the “Levo Letter Agreement”) with Nuvve Holding Corp. (“Nuvve Holding”) and Stonepeak Rocket Holdings LP (“Stonepeak Rocket”), relating to the proposed formation of a joint venture, Levo Mobility LLC (“Levo” and such proposed joint venture, the “Levo JV”). In connection with the Levo Letter Agreement, on May 17, 2021, Nuvve Holding issued ten-year warrants to the Partnership as follows: (i) Series B Warrants to purchase 20,000 shares of Nuvve Holding’s common stock, at an exercise price of $10.00 per share, which are fully vested upon issuance, (ii) Series C warrants to purchase 10,000 shares of Nuvve Holding’s common stock, at an exercise price of $15.00 per share, which are vested as to 50% of the shares upon issuance and vest as to the remaining 50% when Levo has entered into contracts with third parties for $125 million in aggregate capital expenditures; (iii) Series D warrants to purchase 10,000 shares of Nuvve Holding’s common stock, at an exercise price of $20.00 per share, which are vested as to 50% of the shares upon issuance and vest as to the remaining 50% when Levo has entered into contracts with third parties for $250 million in aggregate capital expenditures; (iv) Series E warrants to purchase 10,000 shares of Nuvve Holding’s common stock, at an exercise price of $30.00 per share, which are vested as to 50% of the shares upon issuance and vest as to the remaining 50% when Levo has entered into contracts with third parties for $375 million in aggregate capital expenditures; and (v) Series F warrants to purchase 100,000 shares of Nuvve Holding’s common stock, at an exercise price of $40.00 per share, which are vested as to 50% of the shares upon issuance and vest as to the remaining 50% when Levo has entered into contracts with third parties for $500 million in aggregate capital expenditures (collectively the “Nuvve Holding Warrants”).
Settlement Agreement Termination
As previously disclosed, on June 6, 2020, we and our general partner, (A) each entered into, (B) caused and approve the Partnership’s wholly-owned subsidiaries Catarina Midstream LLC (“Catarina Midstream”) and Seco Pipeline, LLC (“Seco Pipeline”) entering into, and (C) approved Carnero JV entering into, in each case, that certain Settlement Agreement (as amended by that certain Amendment Agreement, dated as of June 14, 2020 our general partner, and TPL SouthTex Processing Company LP. Also as previously disclosed, as of October 1, 2020, any party to the Settlement Agreement could terminate the Settlement Agreement at any time pursuant to its terms.
On June 24, 2021, the Partnership, the General Partner, Catarina Midstream and Seco Pipeline received written notice from Mesquite, of Mesquite’s intention to terminate the Settlement Agreement (the “Settlement Agreement Termination Notice”). The Settlement Agreement Termination Notice was delivered pursuant to Section 5.1.2 and/or 5.1.3 of the Settlement Agreement and the termination was effective as of the date of the notice.
How We Evaluate Our Operations
We evaluate our business on the basis of the following key measures:
● | our throughput volumes on gathering systems upon acquiring those assets; |
● | our operating expenses; and |
● | our Adjusted EBITDA, a non-GAAP financial measure (for a reconciliation of Adjusted EBITDA to the most comparable GAAP financial measure please read “–Non-GAAP Financial Measures–Adjusted EBITDA”). |
Throughput Volumes
Our management analyzes our performance based on the aggregate amount of throughput volumes on the gathering system. We must connect additional wells or well pads within Mesquite’s Catarina Asset, which is in Dimmit, La Salle and Webb counties in Texas, in order to maintain or increase throughput volumes on Western Catarina Midstream. Our success in connecting additional wells is impacted by successful drilling activity by Mesquite on the acreage dedicated to Western Catarina Midstream, our ability to secure volumes from Mesquite or third parties from new wells drilled on non-dedicated acreage, our ability to attract hydrocarbon volumes currently gathered by our competitors and our ability to cost-effectively construct or acquire new infrastructure. Construction of the Seco Pipeline was completed in August 2017, however, Mesquite does not currently transport any volumes on the Seco Pipeline following termination of the Seco Pipeline Transportation Agreement effective February 12, 2020. Future throughput volumes on the pipeline are dependent on execution of a new transportation agreement with Mesquite or execution of an agreement with a third party.
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Operating Expenses
Our management seeks to maximize Adjusted EBITDA, a non-GAAP financial measure, in part by minimizing operating expenses. These expenses are or will be comprised primarily of field operating costs (which generally consists of lease operating expenses, labor, vehicles, supervision, transportation, minor maintenance, tools and supplies expenses, among other items), compression expense, ad valorem taxes and other operating costs, some of which will be independent of our oil and natural gas production or the throughput volumes on the midstream gathering system but fluctuate depending on the scale of our operations during a specific period.
Non-GAAP Financial Measures—Adjusted EBITDA
To supplement our financial results and guidance presented in accordance with GAAP, we use Adjusted EBITDA, a non-GAAP financial measure, in this Form 10-Q. We believe that non-GAAP financial measures are helpful in understanding our past financial performance and potential future results, particularly in light of the effect of various transactions effected by us. We define Adjusted EBITDA as net income (loss) adjusted by: (i) interest (income) expense, net, which includes interest expense, interest expense net (gain) loss on interest rate derivative contracts, and interest (income); (ii) income tax expense (benefit); (iii) depreciation, depletion and amortization; (iv) asset impairments; (v) accretion expense; (vi) (gain) loss on sale of assets; (vii) unit-based compensation expense; (viii) unit-based asset management fees; (ix) distributions in excess of equity earnings; (x) (gain) loss on mark-to-market activities; (xi) commodity derivatives settled early; (xii) (gain) loss on embedded derivatives; and (xiii) acquisition and divestiture costs.
Adjusted EBITDA is used as a quantitative standard by our management and by external users of our financial statements such as investors, research analysts, our lenders and others to assess: (i) the financial performance of our assets without regard to financing methods, capital structure or historical cost basis; (ii) the ability of our assets to generate cash sufficient to pay interest costs and support our indebtedness; and (iii) our operating performance and return on capital as compared to those of other companies in our industry, without regard to financing or capital structure.
We believe that the presentation of Adjusted EBITDA provides useful information to investors in assessing our financial condition and results of operations. The GAAP measure most directly comparable to Adjusted EBITDA is net income (loss). Our non-GAAP financial measure of Adjusted EBITDA should not be considered as an alternative to GAAP net income (loss). Adjusted EBITDA has important limitations as an analytical tool because it excludes some but not all items that affect net income (loss). Adjusted EBITDA should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Because Adjusted EBITDA may be defined differently by other companies in our industry, our definition of Adjusted EBITDA may not be comparable to similarly titled measures of other companies, thereby diminishing its utility.
The following table sets forth a reconciliation of Adjusted EBITDA to net loss, its most directly comparable GAAP performance measure, for each of the periods presented (in thousands):
Three Months Ended | Six Months Ended | |||||||||||
June 30, | June 30, | |||||||||||
| 2021 |
| 2020 |
| 2021 |
| 2020 | |||||
Net loss |
| $ | (27,796) |
| $ | (22,617) |
| $ | (62,601) |
| $ | (63,958) |
Adjusted by: | ||||||||||||
Interest expense, net | 27,938 | 23,164 | 58,385 | 46,173 | ||||||||
Income tax expense (benefit) | 417 | 30 | 457 | (43) | ||||||||
Depreciation, depletion and amortization | 5,265 | 5,176 | 10,287 | 11,815 | ||||||||
Asset impairments | — | — | — | 23,247 | ||||||||
Accretion expense | 114 | 88 | 189 | 278 | ||||||||
Gain on sale of assets | (334) | — | (334) | — | ||||||||
Unit-based compensation expense | 206 | 725 | 543 | 1,123 | ||||||||
Unit-based asset management fees | (1,800) | 806 | 2,647 | 1,961 | ||||||||
Distributions in excess of equity earnings | 8,064 | (1,507) | 9,075 | 3,314 | ||||||||
(Gain) loss on mark-to-market activities | (764) | 2,197 | (764) | (2,276) | ||||||||
Adjusted EBITDA |
| $ | 11,310 |
| $ | 8,062 |
| $ | 17,884 |
| $ | 21,634 |
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Significant Operational Factors
Throughput. The following table sets forth selected throughput data pertaining to the periods indicated:
Three Months Ended | Six Months Ended | |||||||
June 30, | June 30, | |||||||
| 2021 |
| 2020 |
| 2021 |
| 2020 | |
Western Catarina Midstream: | ||||||||
Oil (MBbl/d) |
| 5.9 |
| 7.8 |
| 6.0 |
| 7.9 |
Natural gas (MMcf/d) | 77.6 |
| 97.8 | 78.2 | 98.8 | |||
Water (MBbl/d) | 1.5 |
| 3.9 | 2.0 | 3.4 | |||
Seco Pipeline: | ||||||||
Natural gas (MMcf/d) | — | — | — | 0.2 |
Subsequent Events
Credit Agreement Amendment
On July 28, 2021, the Partnership, as borrower, entered into that certain Eleventh Amendment to the Credit Agreement with the guarantors party thereto, Royal Bank of Canada, as administrative agent and the lenders party thereto (the “Eleventh Amendment” and the Credit Agreement, as amended by the Eleventh Amendment, the “Amended Credit Agreement”). Pursuant to the Eleventh Amendment, the parties agreed to, among other things: (a) amend the definition of “Excluded Cash” to include (i) cash and cash equivalents set aside by the Partnership for the purposes of making a Levo JV Investment, (ii) cash and cash equivalents of up to $1 million for the proceeds of the issuance or at-the-market sale of the Partnership’s equity interests, and (iii) cash and cash equivalents received by the Partnership from Stonepeak Investors for the purposes of making a Levo JV Investment, in each case, subject to prior or concurrent written notice to Royal Bank of Canada, as administrative agent, of the amounts and the Partnership’s intention to use such amounts for purposes of making a Levo JV Investment in accordance with the Amended Credit Agreement; and (b) expand the exemptions under the Investments, Loans and Advances negative covenant to permit (i) the payment or reimbursement by the Partnership of up to $350,000 in legal and due diligence costs of Levo, (ii) any Levo JV Investment made by the Partnership using cash or cash equivalent proceeds of a concurrent contribution of capital to the Partnership from Stonepeak Investors, or (iii) additional Levo JV Investments, capped at $1 million, made by the Partnership from the proceeds of the issuance or at-the-market sale by the Partnership of any equity interests in the Partnership.
Stonepeak Letter Agreement Election
On July 30, 2021, pursuant to the terms of the Stonepeak Letter Agreement, the Partnership received written notice of Stonepeak Catarina’s election to receive distributions on the Class C Preferred Units for the quarter ended June 30, 2021, in common units. In accordance with the Stonepeak Letter Agreement, the Partnership will issue 8,012,850 common units to Stonepeak Catarina on August 20, 2021 (the “Q221 Stonepeak Units”).
Carnero JV Litigation
On July 30, 2021, the Carnero JV initiated suit against Mesquite and SN EF UnSub, LP, Eagle Ford TX LP, Venado EF L.P., Mitsui E&P Texas LP (collectively, the “WIP Defendants”) in the 269th Judicial District Court of Harris County, Texas (the “Carnero JV Litigation”). In the Carnero JV Litigation, the Carnero JV seeks declarations from the Court regarding Mesquite’s and the WIP Defendants’ respective obligations to deliver gas from the over 315,000 acres located in the Western Eagle Ford on Mesquite’s acreage in Dimmit, Webb, La Salle, Zavala and Maverick counties, Texas (such acreage, collectively, the “Comanche Asset”) to the Carnero JV under the long-term firm gas gathering and processing agreement between Mesquite and the Carnero JV, which was agreed to by the WIP Defendants.
Warrant Amendment
As previously disclosed, the Partnership’s Long-Term Incentive Plan, effective March 6, 2015 (the “LTIP”), provides that upon the issuance of additional common units from time to time, the maximum number of common units that may be delivered or reserved for delivery with respect to the LTIP shall be automatically increased (such increase, the “LTIP Increase”) by a number of common units equal to the lesser of (i) fifteen percent (15%) of such additional common units, or (ii) such lesser number of common units as determined by the Board. On August 2, 2021, the Board determined that the LTIP Increase with respect to the Q221 Stonepeak Units will be fifteen percent (15%).
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On August 2, 2021, the Partnership and Stonepeak Catarina entered into Amendment No. 3 to the Warrant (the “Warrant Amendment”) to exclude from the Warrant the 1,201,928 Common Units included in the LTIP Increase resulting from the issuance of the Q221 Stonepeak Units.
Levo JV Completion
On August 4, 2021, the Partnership, Stonepeak Rocket and Nuvve Holding completed the formation of Levo.
Levo JV LLC Agreement
In connection with the Levo JV, the Partnership, Stonepeak Rocket, Nuvve Corporation (“Nuvve”), a wholly-owned subsidiary of Nuvve Holding, and Levo JV entered into an Amended and Restated Limited Liability Company Agreement for Levo (the “Levo LLC Agreement”). Pursuant to the Levo LLC Agreement, the Partnership and Stonepeak Rocket plan to make capital contributions to Levo in an aggregate amount of up to $750 million to finance Levo’s business, with a maximum of $75 million of such capital contributions being funded by the Partnership.
The Levo LLC Agreement governs the affairs of Levo and the conduct of its business. The membership interests authorized by the Levo LLC Agreement consist of Class A Common Units, Class B Preferred Units, Class C Common Units and Class D Incentive Units. On August 4, 2021 in connection with the signing of the Levo LLC Agreement, Levo issued 2,800 Class B Preferred Units to Stonepeak Rocket, 1 Class B Preferred Unit to the Partnership, 441,000 Class C Common Units to Stonepeak Rocket, 49,000 Class C Common Units to the Partnership and 510,000 Class A Common Units to Nuvve Holding. Stonepeak Rocket agreed to pay to Levo an aggregate purchase price of $2,800,044.10 for its Class B Preferred Units and Class C Common Units. The Partnership agreed to pay to Levo an aggregate purchase price of $1,004.90 for its Class B Preferred Unit and Class C Common Units. Stonepeak Rocket and the Partnership are able to receive additional Class B Preferred Units in consideration for each $1,000 in additional capital contributions made by them.
Levo JV Parent Letter Agreement
In connection with the Levo JV, the Partnership also entered into that certain Parent Letter Agreement with Nuvve Holding, Stonepeak Rocket and Levo (the “Parent Letter Agreement”).
The Parent Letter Agreement includes, among other provisions, certain restrictive covenants with respect to Levo’s business, including a business opportunities covenant applicable to Nuvve Holding that is identical to the one in the Levo LLC Agreement described above, and a covenant granting Stonepeak Rocket a right of first offer to participate in certain future financings of Levo. In addition, Nuvve Holding agreed to reimburse each of Stonepeak Rocket and the Partnership for a portion of their out-of-pocket expenses incurred in connection with the due diligence, documentation and negotiation of the agreements.
RBC Commitment Letter
On August 10, 2021, we entered into a letter agreement (the “Commitment Letter”) with Royal Bank of Canada (“RBC”). Pursuant to the terms of the Commitment Letter, RBC has agreed to (a) purchase at par and assume the outstanding Term Loan and Revolving Loan (each as defined in the Amended Credit Agreement) of the other lenders party to the Amended Credit Agreement, (b) enter into an amendment to the Amended Credit Agreement (the “Twelfth Amendment”) to (i) extend the maturity date under the Amended Credit Agreement to September 30, 2023, (ii) provide for a term loan facility in an aggregate principal amount of up to $65 million and a revolving credit facility in an aggregate principal amount of $5 million (the “Amended Credit Facilities”), and (iii) effect certain other amendments agreed to between us and RBC, and (c) provide the entire principal amount of the Amended Credit Facilities.
Pursuant to the Commitment Letter, we agreed to, among other things, (a) indemnify RBC, its affiliates and its and their directors, officers, employees, advisors or agents in connection with, or as a result of, the Commitment Letter or any other agreement or instrument contemplated therein, (b) reimburse RBC for all reasonable and documented out-of-pocket fees and expenses (including expenses of counsel to RBC and due diligence expenses) incurred by RBC in connection with the transactions contemplated by the Commitment Letter, whether or not the Twelfth Amendment becomes effective, and (c) deliver additional credit support reasonably acceptable to RBC, as the administrative agent. With respect to (c), one or more affiliates of our general partner may provide credit support and RBC has agreed as to the sufficiency of such additional credit support.
Completion of such definitive documentation and the closing of the transactions contemplated by the Twelfth Amendment and the Amended Credit Facilities will be subject to various closing conditions, some of which may be outside of our control. The Commitment Letter terminates on the earlier to occur of September 30, 2021 and the closing date of the Twelfth Amendment. We expect definitive documentation with respect to the Twelfth Amendment to be completed prior to September 30, 2021.
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Results of Operations
Three months ended June 30, 2021 compared to three months ended June 30, 2020
The following table sets forth the selected financial and operating data pertaining to our continuing operations for the periods indicated (in thousands):
Three Months Ended | |||||||||||
June 30, | |||||||||||
| 2021 |
| 2020 |
| Variance | ||||||
Revenues: | |||||||||||
Gathering and transportation lease revenues | $ | 9,142 | $ | 11,339 | $ | (2,197) | (19)% | ||||
Total revenues |
| 9,142 |
| 11,339 |
| (2,197) | (19)% | ||||
Expenses | |||||||||||
Operating expenses | |||||||||||
Transportation operating expenses | 2,097 | 2,577 |
| (480) | (19)% | ||||||
General and administrative expenses | 2,574 | 4,512 | (1,938) | (43)% | |||||||
Unit-based compensation expense | 206 | 725 | (519) | (72)% | |||||||
Depreciation and amortization |
| 5,143 |
| 5,176 |
| (33) | (1)% | ||||
Accretion expense |
| 96 |
| 88 |
| 8 | 9% | ||||
Total operating expenses |
| 10,116 |
| 13,078 |
| (2,962) | (23)% | ||||
Other (income) expense | |||||||||||
Interest expense, net | 27,938 | 23,164 | 4,774 | 21% | |||||||
Loss (earnings) from equity investments | 271 | (3,897) | 4,168 | (107)% | |||||||
Other income, net | (801) | (8) | (793) | 9913% | |||||||
Total other expenses |
| 27,408 |
| 19,259 |
| 8,149 | 42% | ||||
Total expenses |
| 37,524 |
| 32,337 |
| 5,187 | 16% | ||||
Loss before income taxes |
| (28,382) |
| (20,998) | (7,384) | 35% | |||||
Income tax (benefit) expense | (29) | 39 | (68) | (174)% | |||||||
Loss from continuing operations | (28,353) | (21,037) | (7,316) | 35% | |||||||
Income (loss) from discontinued operations | 557 | (1,580) | 2,137 | (135)% | |||||||
Net loss | $ | (27,796) | $ | (22,617) | $ | (5,179) | 23% |
Gathering and transportation lease revenues. Gathering and transportation lease revenues decreased approximately $2.2 million, or 19%, to approximately $9.1 million for the three months ended June 30, 2021, compared to approximately $11.3 million for the same period in 2020. This decrease was primarily the result of a decrease in overall volumes being transported through Western Catarina Midstream under the Gathering Agreement.
Transportation operating expenses. Our transportation operating expenses generally consist of equipment rentals, chemicals, treating, metering fees, permit and regulatory fees, labor, minor maintenance, tools, supplies and pipeline integrity management expenses and ad valorem taxes. Our transportation operating expenses decreased by approximately $0.5 million, or 19%, to approximately $2.1 million for the three months ended June 30, 2021 compared to approximately $2.6 million for the same period in 2020. This decrease was due to the nature of operating expenses being dependent on throughput.
Depreciation and amortization expense. Gathering and transportation assets are stated at historical acquisition cost, net of any impairments, and are depreciated using the straight-line method over the useful lives of the assets, which range from five to 15 years for equipment and up to 36 years for gathering facilities. Our depreciation and amortization expense was consistent for the three months ended June 30, 2021, with only a 1% decrease compared to the same period in 2020.
Earnings from equity investments. Earnings from equity investments decreased approximately $4.2 million, or 107%, to a loss of approximately $0.3 million for the three months ended June 30, 2021, compared to earnings of approximately $3.9 million for the same period in 2020. This decrease was primarily the result of lower margins between the comparative periods.
General and administrative expenses. General and administrative expenses include indirect costs billed by SP Holdings in connection with the Shared Services Agreement, field office expenses, professional fees and other costs not directly associated with field operations. General and administrative expenses decreased by approximately $1.9 million, or 43%, to approximately $2.6 million for the three months ended June 30, 2021 compared to approximately $4.5 million for the same period in 2020. The decrease was primarily the result of a decrease in the market-to-market impact to indirect costs billed in connection with the Shared Services Agreement of approximately $2.7 million as a result of the decrease in the market price of our common units during the period. This decrease was partially offset by bad debt expenses of approximately $1.9 million. Additional decreases in expense over the comparative periods are a result a reduction in legal and professional services. Cash general and administrative expenses for the three months ended June 30, 2021 was approximately $2.4 million compared to approximately $3.7 million for the same period in 2020. The decrease in
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cash general and administrative expenses was primarily the result of lower professional fees when compared to the professional fees attributable to negotiation of the Settlement Agreement and related agreements with Mesquite during the three months ended June 30, 2020.
Unit-based compensation expense. Unit-based compensation expense decreased approximately $0.5 million, or 72%, to approximately $0.2 million for the three months ended June 30, 2021, compared to approximately $0.7 million for the same period in 2020.
Interest expense, net. Interest expense consists of distributions on the Class C Preferred Units, non-cash accretion of the discount on the Class C Preferred Units, the non-cash change in fair value of the Warrant and cash interest expense from borrowings under the Credit Agreement. Interest expense increased approximately $4.8 million, or 21%, to approximately $27.9 million for the three months ended June 30, 2021 compared to approximately $23.2 million for the same period in 2020. This increase was the result of higher distributions on the Class C Preferred Units and an increase in common unit price and junior securities deemed outstanding causing the Warrant value to increase. Cash interest expense for the three months ended June 30, 2021 was approximately $0.8 million compared to approximately $1.3 million for the same period in 2020. The decrease in cash interest expense was primarily the result of the decrease in the outstanding Credit Agreement debt balance between the periods.
Income tax expense. Income tax benefit was approximately $29.0 thousand for the three months ended June 30, 2021, compared to an expense of approximately $39.0 thousand for the same period in 2020. The decrease in income tax expense resulted from a decrease in taxable margin over the comparable periods.
Other income, net. Other income, net includes the mark-to-market impact of the Nuvve Warrants as well as other expenses and income not associated with operations of the Partnership. Other income, net for the three months ended June 30, 2021, was approximately $0.8 million compared to an insignificant of income during the three months ended June 30, 2020. The primary income for the three months ended June 30, 2021, relates to the mark-to-market impact of the Nuvve Warrants which we received in May, 2021.
Results of Operations
Six months ended June 30, 2021 compared to six months ended June 30, 2020
The following table sets forth the selected financial and operating data pertaining to our continuing operations for the periods indicated (in thousands):
Six Months Ended | |||||||||||
June 30, | |||||||||||
| 2021 |
| 2020 |
| Variance | ||||||
Revenues: | |||||||||||
Gathering and transportation sales | $ | — | $ | 785 | $ | (785) | (100)% | ||||
Gathering and transportation lease revenues | 18,436 | 23,945 | (5,509) | (23)% | |||||||
Total revenues |
| 18,436 |
| 24,730 |
| (6,294) | (25)% | ||||
Expenses | |||||||||||
Operating expenses |
| ||||||||||
Transportation operating expenses |
| 4,357 | 5,186 |
| (829) | (16)% | |||||
General and administrative expenses |
| 9,507 | 8,287 |
| 1,220 | 15% | |||||
Unit-based compensation expense |
| 543 | 1,123 |
| (580) | (52)% | |||||
Depreciation and amortization | 10,287 | 10,319 | (32) | (0)% | |||||||
Accretion expense | 189 | 174 | 15 | 9% | |||||||
Total operating expenses |
| 24,883 |
| 25,089 | (206) | (1)% | |||||
Other (income) expense | |||||||||||
Interest expense, net | 58,385 | 46,173 | 12,212 | 26% | |||||||
Earnings from equity investments | (328) | (2,695) | 2,367 | (88)% | |||||||
Other income, net | (801) | (8) | (793) | 9913% | |||||||
Total other expenses |
| 57,256 |
| 43,470 |
| 13,786 | 32% | ||||
Total expenses |
| 82,139 |
| 68,559 |
| 13,580 | 20% | ||||
Loss before income taxes |
| (63,703) |
| (43,829) | (19,874) | 45% | |||||
Income tax expense | 3 | 97 | (94) | (97)% | |||||||
Loss from continuing operations | (63,706) | (43,926) | (19,780) | 45% | |||||||
Income (loss) from discontinued operations | 1,105 | (20,032) | 21,137 | (106)% | |||||||
Net loss | $ | (62,601) | $ | (63,958) | $ | 1,357 | (2)% |
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Gathering and transportation lease revenues. Gathering and transportation lease revenues decreased approximately $5.5 million, or 23%, to approximately $18.4 million for the six months ended June 30, 2021, compared to approximately $23.9 million for the same period in 2020. This decrease was primarily the result of a decrease in overall volumes being transported through Western Catarina Midstream under the Gathering Agreement.
Transportation operating expenses. Our transportation operating expenses generally consist of equipment rentals, chemicals, treating, metering fees, permit and regulatory fees, labor, minor maintenance, tools, supplies and pipeline integrity management expenses and ad valorem taxes. Our transportation operating expenses decreased by approximately $0.8 million, or 16%, to approximately $4.4 million for the six months ended June 30, 2021 compared to approximately $5.2 million for the same period in 2020. This decrease was due to the nature of operating expenses being dependent on throughput.
Depreciation and amortization expense. Gathering and transportation assets are stated at historical acquisition cost, net of any impairments, and are depreciated using the straight-line method over the useful lives of the assets, which range from five to 15 years for equipment and up to 36 years for gathering facilities. Our depreciation and amortization expense was consistent for the six months ended June 30, 2021 compared to the same period in 2020.
Earnings from equity investments. Earnings from equity investments decreased approximately $2.4 million, or 88%, to earnings of approximately $0.3 million for the six months ended June 30, 2021, compared to earnings of approximately $2.7 million for the same period in 2020. This decrease was primarily the result of lower margins between the comparative periods.
General and administrative expenses. General and administrative expenses include indirect costs billed by SP Holdings in connection with the Shared Services Agreement, field office expenses, professional fees and other costs not directly associated with field operations. General and administrative expenses increased by approximately $1.2 million, or 15%, to approximately $9.5 million for the six months ended June 30, 2021 compared to approximately $8.3 million for the same period in 2020. The increase was primarily the result of bad debt expenses of approximately $1.9 million partially offset by a reduction in legal and professional services. Cash general and administrative expense for the six months ended June 30, 2021 was approximately $4.9 million compared to approximately $6.3 million for the same period in 2020. The decrease in cash general and administrative expenses was primarily the result of lower professional fees when compared to the professional fees attributable to negotiation of the Settlement Agreement and related agreements with Mesquite during the six months ended June 30, 2020.
Unit-based compensation expense. Unit-based compensation expense decreased approximately $0.6 million, or 52%, to approximately $0.5 million for the six months ended June 30, 2021, compared to approximately $1.1 million for the same period in 2020.
Interest expense, net. Interest expense consists of distributions on the Class C Preferred Units, non-cash accretion of the discount on the Class C Preferred Units, the non-cash change in fair value of the Warrant and cash interest expense from borrowings under the Credit Agreement. Interest expense increased approximately $12.2 million, or 26%, to approximately $58.4 million for the six months ended June 30, 2021 compared to approximately $46.2 million for the same period in 2020. This increase was the result of higher distributions on the Class C Preferred Units and an increase in common unit price and junior securities deemed outstanding causing the Warrant value to increase. Cash interest expense for the six months ended June 30, 2021 was approximately $1.6 million compared to approximately $3.1 million for the same period in 2020. The decrease in cash interest expense was primarily the result of the decrease in the outstanding Credit Agreement debt balance between the periods.
Income tax expense. Income tax expense was approximately $2.7 thousand for the six months ended June 30, 2021, compared to an expense of approximately $97.1 thousand for the same period in 2020. The decrease in income tax expense resulted from a decrease in taxable margin over the comparable periods.
Other income, net. Other income, net includes the mark-to-market impact of the Nuvve Warrants as well as other expenses and income not associated with operations of the Partnership. Other income, net for the six months ended June 30, 2021, was approximately $0.8 million compared to an insignificant of income during the six months ended June 30, 2020. The primary income for the six months ended June 30, 2021, relates to the mark-to-market impact of the Nuvve Warrants which we received in May, 2021.
Liquidity and Capital Resources
As of June 30, 2021, we had approximately $5.5 million in cash and cash equivalents and $8.0 million available for borrowing under the Credit Agreement, as discussed further below.
During the three months ended June 30, 2021, we paid approximately $0.8 million in cash for interest on borrowings under our Credit Agreement, of which approximately $9.5 thousand was related to the fee on undrawn commitments. During the six months ended
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June 30, 2021, we paid approximately $1.6 million in cash for interest on borrowings under our Credit Agreement, of which approximately $23.9 thousand was related to the fee on undrawn commitments.
Our capital expenditures during the six months ended June 30, 2021 were funded with cash on hand. In the future, capital and liquidity are anticipated to be provided by operating cash flows, borrowings under our Credit Agreement and proceeds from the issuance of additional debt, additional common units or other limited partner interests. We expect that the combination of these capital resources will be adequate to meet our short-term working capital requirements, long-term capital expenditures program and quarterly cash distributions, if any. However, there can be no assurance that operations and other capital resources will provide cash in sufficient amounts to maintain our current debt level, planned levels of capital expenditures, operating expenses or any cash distributions that we may make to unitholders.
We expect that our future cash requirements relating to working capital, maintenance capital expenditures and quarterly cash distributions, if any to our partners will be funded from cash flows internally generated from our operations. Our expansion capital expenditures will be funded by borrowings under our Credit Agreement or from potential capital market transactions. However, there can be no assurance that operations and other capital resources will provide cash in sufficient amounts to maintain our current debt level, planned levels of capital expenditures, operating expenses or any cash distributions that we may make to unitholders.
Credit Agreement
The Credit Agreement provides a quarterly amortizing term loan of $155.0 million (the “Term Loan”) and a maximum revolving credit amount of $17.5 million, which was reduced to the lesser of (i) $15.0 million through May 14, 2021 and (ii) from and after May 15, 2021, the positive difference of the Borrowing Base minus the aggregate outstanding principal amount of the Term Loan (the “Revolving Loan”). The Term Loan and Revolving Loan both have a maturity date of September 30, 2021. Borrowings under the Credit Agreement are secured by various mortgages of both midstream and upstream properties that we own as well as various security and pledge agreements among us, certain of our subsidiaries and the administrative agent.
The Credit Agreement is a current liability that matures on September 30, 2021. We expect to refinance or extend the maturity of the Credit Agreement prior to its maturity date. However, we may not be able to refinance or extend the maturity of the Credit Agreement or, if we are able to refinance or extend the maturity, we may not be able to do so with borrowing and debt issue costs, terms, covenants, restrictions, commitment amount or a borrowing base favorable to us.
Borrowings under the Credit Agreement are available for limited direct investment in oil and natural gas properties, midstream properties, acquisitions, and working capital and general business purposes. The Credit Agreement has a sub-limit of up to $2.5 million which may be used for the issuance of letters of credit. Pursuant to the Credit Agreement, the initial aggregate commitment amount under the Term Loan is $155.0 million, subject to quarterly $10.0 million principal and other mandatory prepayments. The borrowing base is equal to the sum of the rolling four quarter EBITDA of our midstream operations and the amount of distributions received from the Carnero JV multiplied by 4.5 or a lower number dependent upon natural gas volumes flowing through Western Catarina Midstream. Outstanding borrowings in excess of our borrowing base must be repaid within 45 days. As of June 30, 2021, the borrowing base under the Credit Agreement was $90.9 million and we had $72.0 million of debt outstanding, consisting of $65.0 million under the Term Loan and $7.0 million under the Revolving Loan. We are required to make mandatory payments of outstanding principal on the Term Loan of $10.0 million per fiscal quarter. The maximum revolving credit amount is $15.0 million which left us with $8.0 million in unused borrowing capacity at June 30, 2021. There were no letters of credit outstanding under our Credit Agreement as of June 30, 2021.
At our election, interest for borrowings under the Credit Agreement are determined by reference to (i) the London interbank offered rate (“LIBOR”) plus an applicable margin between 2.50% and 3.00% per annum based on net debt to EBITDA or (ii) a domestic bank rate (“ABR”) plus an applicable margin between 1.50% and 2.00% per annum based on net debt to EBITDA plus (iii) a commitment fee of 0.500% per annum based on the unutilized maximum revolving credit. Interest on the borrowings for ABR loans and the commitment fee are generally payable quarterly. Interest on the borrowings for LIBOR loans are generally payable at the applicable maturity date.
The Credit Agreement contains various covenants that limit, among other things, our ability to incur certain indebtedness, grant certain liens, merge or consolidate, sell all or substantially all of our assets, make certain loans, acquisitions, capital expenditures and investments, and pay distributions.
In addition, we are required to maintain the following financial covenants:
● | current assets to current liabilities excluding any current maturities of debt, of at least 1.0 to 1.0 at all times; and |
● | senior secured net debt to consolidated adjusted EBITDA for the last twelve months, as of the last day of any fiscal quarter, of not greater than 3.5 to 1.0. |
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The Credit Agreement also includes customary events of default, including events of default relating to non-payment of principal, interest or fees, inaccuracy of representations and warranties when made or when deemed made, violation of covenants, cross-defaults, bankruptcy and insolvency events, certain unsatisfied judgments, loan documents not being valid and a change in control. A change in control is generally defined as the occurrence of one of the following events: (i) our existing general partner ceases to be our sole general partner or (ii) certain specified persons shall cease to own more than 50% of the equity interests of our general partner or shall cease to control our general partner. If an event of default occurs, the lenders will be able to accelerate the maturity of the Credit Agreement and exercise other rights and remedies.
Our partnership agreement prohibits us from paying any distributions on our common units until we have redeemed all of the Class C Preferred Units. Following such redemption, the Credit Agreement further limits our ability to pay distributions to unitholders.
The Partnership’s inability to generate sufficient liquidity to meet future debt obligations raises substantial doubt regarding our ability to continue as a going concern. The Credit Agreement matures September 30, 2021 and our ability to continue as a going concern is dependent upon our ability to either (i) refinance or extend the maturity of the Credit Agreement, or (ii) obtain adequate new debt or equity financing to repay the Credit Agreement in full at maturity. As disclosed above under “—Subsequent Events,” we have entered into the Commitment Letter (as defined above) with RBC pursuant to which we expect to enter into the Twelfth Amendment prior to the current September 30, 2021 maturity date. The Twelfth Amendment will extend the maturity date to September 30, 2023.
The Tenth Amendment contains a new covenant (the “Transaction Covenant”), which provides that we must engage an Advisory Firm to advise us with respect to a Qualifying Transaction. In accordance with the requirements of a Transaction Covenant, we engaged an Advisory Firm as of March 31, 2021.As a result of such engagement, the target closing date for a Qualifying Transaction must be no later than August 31, 2021 and the net cash proceeds must be reasonably expected to be greater than the full amount due under the Credit Agreement on the maturity date. If we are unable to comply with the Transaction Covenant it will be deemed an immediate event of default under the Credit Agreement, which could cause all of our existing indebtedness to become immediately due and payable. Please read “Item 1A. Risk Factors—Our Credit Agreement has substantial prepayment requirements, other restrictions and financial covenants and requires periodic borrowing base redeterminations.”
At June 30, 2021, we were in compliance with the financial covenants contained in the Credit Agreement. We monitor compliance on an ongoing basis. If we are unable to remain in compliance with the financial covenants contained in our Credit Agreement or maintain the required ratios discussed above, the lenders could call an event of default and accelerate the outstanding debt under the terms of the Credit Agreement, such that our outstanding debt could become then due and payable. We may request waivers of compliance from the violated financial covenants from the lenders, but there is no assurance that such waivers would be granted.
As described in more detail under “—Subsequent Events” above, on July 28, 2021, the Partnership, as borrower, entered into Eleventh Amendment.
Sources of Debt and Equity Financing
As of June 30, 2021, we had $7.0 million of debt outstanding under the Revolving Loan, leaving us with $8.0 million in unused borrowing capacity. There were no letters of credit outstanding under our Credit Agreement as of June 30, 2021. Our Credit Agreement matures on September 30, 2021.
Operating Cash Flows
We had net cash flows provided by operating activities for the six months ended June 30, 2021, of approximately $20.6 million, compared to net cash flows provided by operating activities of approximately $17.4 million for the same period in 2020.
Our operating cash flows are subject to many variables, the most significant of which is the volume of oil and natural gas transported through our midstream assets. Our future operating cash flows will depend on oil and natural gas transported through our midstream assets.
Investing Activities
We had net cash flows provided by investing activities for the six months ended June 30, 2021, of approximately $15.4 million, substantially all of which were proceeds from the sale of oil and natural gas properties. Net cash flows used in investing activities for the six months ended June 30, 2020, of approximately $0.1, substantially all of which were related to midstream activities.
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Financing Activities
Net cash flows used in financing activities was approximately $32.3 million for the six months ended June 30, 2021. During the six months ended June 30, 2021, we repaid borrowings of $39.0 million under our Credit Agreement.
Net cash flows used in financing activities was approximately $20.2 million for the six months ended June 30, 2020. During the six months ended June 30, 2020, we repaid borrowings of $22.0 million under our Credit Agreement and withdrew $2.0 million under the Revolving Loan.
Going Concern
Our historical consolidated financial statements have been prepared under the assumption that we will continue as a going concern. The report on our audited consolidated financial statements for the year ended December 31, 2020, issued by our independent registered public accounting firm and included in our Annual Report on Form 10-K for the year ended December 31, 2020 (“2020 10-K”), includes an explanatory paragraph referring to our inability to generate sufficient liquidity to meet future debt obligations which raises substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to either (i) refinance or extend the maturity of the Credit Agreement, or (ii) obtain adequate new debt or equity financing to repay the Credit Agreement in full at maturity. Our consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. The outcome of these matters cannot be predicted with any certainty at this time and raise doubt that we will be able to continue as a going concern. Our consolidated financial statements do not include any adjustments to the amount and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern.
We have entered into the Commitment Letter with RBC pursuant to which we expect to enter into the Twelfth Amendment prior to the current September 30, 2021 maturity date. The Twelfth Amendment will extend the maturity date to September 30, 2023.
Off-Balance Sheet Arrangements
As of June 30, 2021, we had no off-balance sheet arrangements with third parties, and we maintain no debt obligations that contained provisions requiring accelerated payment of the related obligations in the event of specified levels of declines in credit ratings.
Credit Markets and Counterparty Risk
We actively monitor the credit exposure and risks associated with our counterparties. Additionally, we continue to monitor global credit markets to limit our potential exposure to credit risk where possible. Our primary credit exposures result from the generation of substantially all of our midstream revenues from a single customer, Mesquite.
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant estimates pertain to proved oil and natural gas reserves and related cash flow estimates used in the calculation of depletion and impairment of oil and natural gas properties, the fair value of commodity derivative contracts and asset retirement obligations, accrued oil and natural gas revenues and expenses and the allocation of general and administrative expenses. Actual results could differ materially from those estimates.
As of June 30, 2021, there were no changes with regard to the critical accounting policies disclosed in our 2020 10-K. The policies disclosed included the accounting for oil and natural gas properties, oil and natural gas reserve quantities, revenue recognition and hedging activities. Please read “Part I, Item 1. Note 2 Basis of Presentation and Summary of Significant Accounting Policies” to our condensed consolidated financial statements for a discussion of additional accounting policies and estimates made by management.
New Accounting Pronouncements
See “Part I, Item 1. Note 2 Basis of Presentation and Summary of Significant Accounting Policies” to our condensed consolidated financial statements included in this report for information on new accounting pronouncements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and are not required to provide the information required by this Item.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Principal Executive Officer and the Principal Financial Officer of the general partner of SNMP have evaluated the effectiveness of the disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of June 30, 2021 (the “Evaluation Date”). Based on such evaluation, the Principal Executive Officer and the Principal Financial Officer have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to our management, including the Principal Executive Officer and the Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended June 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Part II—Other Information
Item 1. Legal Proceedings
From time to time we may be the subject of lawsuits and claims arising in the ordinary course of business. Management cannot predict the ultimate outcome of such lawsuits or claims. Management does not currently expect the outcome of any of the known claims or proceedings to individually or in the aggregate have a material adverse effect on our results of operations or financial condition.
To date, no claims relating to the Mesquite Chapter 11 Case have been filed against us. However, on March 13, 2020, the official committee of unsecured creditors in the Mesquite Chapter 11 Case (the “Committee”) filed the Motion of the Official Committee of Unsecured Creditors for Leave, Standing, and Authority to Prosecute Claims on Behalf of the Debtors’ Estate and for Related Relief (the “Standing Motion”). In its Standing Motion, the Committee sought, in relevant part, authority from the Court to prosecute certain identified claims against the Partnership, the general partner and Catarina Midstream, LLC (collectively, the “Claims”) that, if valid, belong to Mesquite.
On June 30, 2020, the SN Debtors emerged from the Mesquite Chapter 11 Case, with Mesquite becoming a privately held corporation. Upon emergence, the Claims re-vested, and are owned by, the Reorganized Debtors (as defined in the Plan). Accordingly, the Committee was dissolved and no longer retains the authority to bring all or a portion of the Claims against the Evolve Parties. While the Settlement Agreement contemplated, in relevant part, the settlement of the Claims between the Reorganized Debtors and the Evolve Parties.
On June 24, 2021, the Partnership, the General Partner, Catarina Midstream and Seco Pipeline received written notice from Mesquite, of Mesquite’s intention to terminate the Settlement Agreement. The notice was delivered pursuant to Section 5.1.2 and/or 5.1.3 of the Settlement Agreement and the termination was effective as of the date of the notice. As a result of the termination of the Settlement Agreement, the Claims will not be released and the Claims or other claims relating to the Mesquite Chapter 11 Case may be filed against us.
Item 1A. Risk Factors
Carefully consider the risk factors under “Part I, Item 1A. Risk Factors” in our 2020 10-K. There have been no significant changes except as follows:
You will not receive cash distributions on your common units until we are able to redeem 100% of the outstanding Class C Preferred Units, as a result, you are unlikely to receive cash distributions on your common units for the foreseeable future.
Our partnership agreement prohibits us from declaring or making any distributions, redemptions or repurchases in respect of any junior securities or any parity securities until the first quarter in which no Class C Preferred Units remain outstanding. This means that you will not receive any cash distributions on your common units until such time as we are able to redeem all of the outstanding Class C Preferred Units. We currently have the right to redeem 100% of the outstanding Class C Preferred Units for cash at the greater of the current market price or the liquidation preference for the Class C Preferred Units. As of August 12, 2021, the liquidation preference for the Class C Preferred Units was approximately $417.8 million. Our total revenues for the three
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months ended June 30, 2021 were approximately $9.1 million. As a result, you are unlikely to receive cash distributions on your common units for the foreseeable future.
Stonepeak and its affiliates may sell common units in the public or private markets, and such sales could have an adverse impact on the trading price of the common units.
As of August 12, 2021, Stonepeak and its affiliates owned (i) 53,386,692 common units, representing approximately 74% of our outstanding common units, and (ii) a warrant exercisable for junior securities that entitles Stonepeak Catarina to receive junior securities of the Partnership (including common units) representing 10% of all junior securities deemed outstanding when exercised. Additionally, we have agreed to provide Stonepeak Catarina with certain registration rights under applicable securities laws. The sale of these common units in the public or private markets could have an adverse impact on the price of the common units or on the trading market for our common units.
If we are unable to continue as a going concern, you may lose some or all of your investment in us.
Our Credit Agreement matures September 30, 2021 and our ability to continue as a going concern is contingent upon our ability to either (i) refinance or extend the maturity of our Credit Agreement, or (ii) obtain adequate new debt or equity financing to repay our Credit Agreement in full at maturity. We intend to enter into the Twelfth Amendment prior to the current maturity date under the Amended Credit Agreement. However, we cannot guarantee that we will be able to enter into definitive documentation for the Twelfth Amendment prior to September 30, 2021. The consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020, have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets, and satisfaction of liabilities and commitments in the normal course of business. The consolidated financial statements do not include any adjustments that might result from the outcome of substantial doubt as to our ability to continue as a going concern. If we cannot continue as a going concern, you may lose some or all of your investment in us.
You may continue to experience substantial dilution.
On November 16, 2020, we entered into the “Stonepeak Letter Agreement” wherein we agreed with Stonepeak Catarina that the distribution on their Class C Preferred Units for the three months ended September 30, 2020 would be paid in common units instead of Class C Preferred PIK Units, cash or a combination thereof. The Stonepeak Letter Agreement also provides Stonepeak Catarina with the ability to elect to receive distributions on the Class C Preferred Units in common units for any quarter following the third quarter of 2020 by providing written notice to us no later than the last day of the calendar month following the end of such quarter. The transactions under the Stonepeak Letter Agreement were approved by the conflicts committee of the board of directors of our general partner. As a result of the Stonepeak Letter Agreement, aggregate distributions of 22,274,869 common units, 12,445,491 common units, and 13,763,249 common units were made to Stonepeak Catarina on February 1, 2021, February 25, 2021, and May 20, 2021, respectively, representing distributions for the third quarter of 2020, the fourth quarter of 2020, and the first quarter of 2021, respectively. In accordance with the Stonepeak Letter Agreement, on July 30, 2021, the Partnership received written notice of Stonepeak Catarina’s election to receive distributions on the Class C Preferred Units for the quarter ended June 30, 2021 in common units. The aggregate distribution of 8,012,850 common units will be paid to Stonepeak Catarina on August 20, 2021. Stonepeak Catarina may elect to receive future distributions on their Class C Preferred Units in common units instead of Class C Preferred PIK Units and, as a result, you may experience substantial future dilution.
Failure to achieve commercial resolution with Mesquite could adversely affect our business, cash flows and results of operations.
The Settlement Agreement contemplated, among other things, our entry into Amendment No. 2 to the Gathering Agreement (the “Gathering Agreement Amendment”) providing for, among other things, the dedication by Mesquite of the eastern portion (“Eastern Catarina”) of Mesquite’s acreage position in Dimmit, La Salle and Webb counties in Texas (such net acreage, collectively, “Mesquite’s Catarina Asset”) and the establishment of field-wide rates.
As a result of our receipt of the Settlement Agreement Termination Notice, the Gathering Agreement Amendment will not become effective. The western portion of Mesquite’s Catarina Asset (“Western Catarina”) is currently dedicated under the Gathering Agreement. As previously disclosed, on June 24, 2021, we increased the tariff rate for interruptible throughput volumes from Eastern Catarina, however, while not yet due and payable, Mesquite has informed us that it will not pay such increased tariff rate and will continue to pay the tariff rate in effect prior to the June 24, 2021 increase. We are currently in discussions with Mesquite on a commercial resolution for Eastern Catarina. If we are unable to reach a commercial resolution with Mesquite including with respect to the dedication of Eastern Catarina and set tariff rate on volumes from Eastern Catarina, we may seek to enforce the increased tariff rate through arbitration or other courses of action available to us. There can be no guarantee that we are able to reach any commercial resolution and our failure to do so could adversely affect our business, financial condition, cash flows and results of operations.
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We are currently not in compliance with the NYSE American listing standards. If our common units are delisted, it could adversely affect our business, cash flows and results of operations.
Our common units are currently listed on the NYSE American. On April 3, 2020, we received notice (the “Notice”) from the NYSE American stating that we were below compliance with the continued listing standards set forth in Section 1003(a)(i) of the NYSE American Company Guide (the “Company Guide”). On April 29, 2021, we received a second notice (the “2021 Notice” and, together with the Notice, the “NYSE Notices”) from the NYSE American that we were not in compliance with the continued listing standards set forth in Section 1003(a)(ii) of the Company Guide.
The NYSE Notices did not have any immediate effect on our listing on the NYSE American and, therefore, our common units are still listed on the NYSE American, subject to our compliance with other continued listing requirements of the NYSE American. Additionally, the NYSE Notices do not affect our business operations or our reporting obligations under the rules and regulations of the SEC, nor do the NYSE Notices conflict with or cause an event of default under any of our material agreements. We submitted a plan of compliance (the “Plan”) to the NYSE American addressing how we intend to regain compliance with Section 1003(a)(i) of the Company Guide and our Plan was accepted by the NYSE American with a plan period extending from May 4, 2020 through October 3,2021 (the “Plan Period”). We were not required to submit an additional plan to the NYSE American with respect to Section 1003(a)(ii).
By October 3, 2021, we must either be in compliance with Sections 1003(a)(i) and 1003(a)(ii) of the Company Guide or must have made progress that is consistent with the Plan during the Plan Period. The Plan approved by the NYSE American was largely dependent on the closing of the transactions contemplated by the Settlement Agreement. Failure to meet the requirements to regain compliance could result in the initiation of delisting proceedings. As a result of our receipt of the Settlement Agreement Termination Notice, our ability to avoid initiation of delisting proceedings is dependent on the NYSE American otherwise being satisfied with our progress as of the end of the Plan Period.
If the NYSE American is not otherwise satisfied with our progress as of the end of the Plan Period, the NYSE American may delist our common units, which could adversely affect our business, cash flows and results of operations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
As previously discussed, on May 20, 2021, pursuant to the terms of the Stonepeak Letter Agreement, the Partnership issued 13,763,249 common units to Stonepeak Catarina in response to Stonepeak Catarina’s election to receive distributions on the Class C Preferred Units for the quarter ended March 31, 2021 in common units. The issuance of these common units was exempt from the registration requirements of the Securities Act pursuant to Section 4(a)(2) thereof as a transaction by an issuer not involve public offering.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
The exhibits required to be filed pursuant to the requirements of Item 601 of Regulation S-K are set forth in the exhibit index below and are incorporated herein by reference.
EXHIBIT INDEX
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Exhibit Number | Description |
10.1 | |
10.2 | |
10.3 | |
10.4** | Purchase Agreement, dated April 30, 2021, by and between SEP Holdings IV, LLC and Bayshore Energy TX LLC. |
10.5** | Letter Agreement, dated April 30, 2021, by and between SEP Holdings IV, LLC and Bayshore Energy TX LLC. |
10.6** | |
10.7** | Amendment No. 2 to Warrant Exercisable for Junior Securities, dated May 4, 2021. |
10.8** | |
10.9** | |
10.10** | |
10.11** | |
10.12** | |
10.13** | |
10.14** | |
10.15** | |
10.16** | |
10.17** | |
31.1** | |
31.2** | |
32.1*** | |
32.2*** | |
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101.INS** | Inline XBRL Instance Document |
101.SCH** | Inline XBRL Schema Document |
101.CAL** | Inline XBRL Calculation Linkbase Document |
101.LAB** | Inline XBRL Label Linkbase Document |
101.PRE** | Inline XBRL Presentation Linkbase Document |
101.DEF** | Inline XBRL Definition Linkbase Document |
EX 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
** | Filed herewith. |
*** | Furnished herewith. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Evolve Transition Infrastructure LP, the Registrant, has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Evolve Transition Infrastructure LP By: Evolve Transition Infrastructure GP LLC, its general partner | |||
Date: October 27, 2021 |
| By | /s/ Charles C. Ward |
|
|
| Charles C. Ward |
|
|
| Chief Financial Officer and Secretary (Duly Authorized Officer and Principal Financial Officer) |
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Exhibit 10.4
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this “Agreement”), dated April 30, 2021 (the “Closing Date”), is by and between SEP HOLDINGS IV, LLC, a Delaware limited liability company (“Assignor”) and BAYSHORE ENERGY TX LLC, a Texas limited liability company (“Assignee”). Assignor and Assignee are collectively referred to herein as the “Parties” and each, individually, as a “Party.”
Recitals:
A.Assignor has agreed to sell to Assignee, and Assignee has agreed to purchase from Assignor, the Conveyed Interests as defined and described in the Assignment, Bill of Sale, and Conveyance attached hereto as Appendix I (the “Assignment”), effective as of 7:00 a.m. Central Time on March 1, 2021 (the “Effective Time”).
B.Assignor and Assignee now desire to memorialize their agreements regarding the purchase of the Conveyed Interests.
C.Capitalized terms used in this Agreement but not defined herein shall have the meanings given to such terms in the Assignment.
Agreements:
NOW, THEREFORE, in consideration of the mutual agreements herein and other good and valuable consideration, the Parties agree as follows:
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3
4
5
6
7
8
9
[Signature page follows.]
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IN WITNESS WHEREOF, each Party has executed and delivered this Agreement as of the Closing Date.
Assignor:
SEP HOLDINGS IV, LLC
By: | Evolve Transition Infrastructure LP, |
By: | Evolve Transition Infrastructure GP, LLC, |
By:/s/ Charles C. Ward
Name:Charles C. Ward
Title:Chief Financial Officer
Address for purposes of notices:
1360 Post Oak Boulevard, Suite 2400
Houston, Texas 77056
Attention: Chief Executive Officer
Email: gwillinger@evolvetransition.com
with a copy (which shall not constitute notice to):
Hunton Andrews Kurth LLP
600 Travis St. Suite 4200
Houston, Texas 77002
Attention:Phil Haines
Email: phaines@huntonak.com
Signature Page to Purchase Agreement (Maverick 1)
Assignee:
BAYSHORE ENERGY TX LLC
By: /s/ Yousuf Chaudhary
Name:Yousuf Chaudhary
Title:Executive Vice President
Address for purposes of notices:
1900 St. James Place, Suite 800
Houston, Texas 77056
Attention: Yousuf Chaudhary
Attention: Legal Department
Email: yousuf@atlasoperating.com
Email: legal@atlasoperating.com
Signature Page to Purchase Agreement (Maverick 1)
Appendix I
Assignment, Bill of Sale, and Conveyance
(Attached.)
ASSIGNMENT, BILL OF SALE AND CONVEYANCE
STATE OF TEXAS§
§
COUNTY OF ZAVALA§
THIS ASSIGNMENT, BILL OF SALE AND CONVEYANCE (this “Assignment”), dated as of April 30, 2021 (the “Closing Date”), but effective as of 7:00 a.m. Central Time on March 1, 2021 (the “Effective Time”), is from SEP HOLDINGS IV, LLC, a Delaware limited liability company, whose mailing address is 1360 Post Oak Boulevard, Suite 2400, Houston, Texas 77056 (“Assignor”) to BAYSHORE ENERGY TX LLC, a Texas limited liability company, whose mailing address is 1900 St. James Place, Suite 800, Houston, Texas 77056 (“Assignee”, together with Assignor, the “Parties” and each individually, a “Party”). Capitalized terms used but not defined herein shall have the respective meanings set forth in that certain Purchase Agreement, dated as of the Closing Date, by and between Assignor and Assignee (as may be amended from time to time, the “Purchase Agreement”).
Section 1.Assignment. For Ten Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are acknowledged, Assignor, does hereby forever GRANT, BARGAIN, SELL, CONVEY, ASSIGN, TRANSFER, SET OVER AND DELIVER to Assignee all of Assignor’s right, title and interest in and to the interests and properties described below, less and except the Excluded Assets (such right, title and interest, less and except the Excluded Assets, collectively, the “Conveyed Interests”):
(a)the undivided Working Interests and Net Revenue Interests of the wellbores of the oil, gas and mineral wells, whether producing, plugged, shut-in or temporarily abandoned, set forth on Exhibit A attached hereto (the “Wells”), together with all oil, gas, casinghead gas, condensate, natural gas liquids, and other gaseous and liquid hydrocarbons or any combination thereof and other minerals extracted from or produced with the foregoing (collectively, “Hydrocarbons”) produced therefrom or allocated thereto, INSOFAR AND ONLY INSOFAR as such Hydrocarbons are produced from the Contractual Depth of such Well from and after the Effective Time;
(b)the oil, gas and mineral leases covering rights in the Wells (and all tenements, hereditaments and appurtenances belonging to such leases), including those described on Exhibit B attached hereto, INSOFAR AND ONLY INSOFAR as such leases entitle the owner of such Wells to Hydrocarbons produced from such Wells and to any pooling rights associated therewith (the “Leases”, together with the Wells and the Hydrocarbons, the “Oil and Gas Properties”);
(c)to the extent assignable, all contracts (excluding any Leases) to which Assignor is a party and relates to the Oil and Gas Properties, but exclusive of any Excluded Information or contracts otherwise relating to the Excluded Assets (collectively, the “Applicable Contracts”), and all rights thereunder, including those set forth on Exhibit C; and
(d)all files, records and data (including electronic data) or copies thereof in the possession of Assignor to the extent specifically related to the Oil and Gas Properties (collectively, the “Records”), including: (i) lease files, deed files, land files, wells files, division order files,
abstracts, title files, production records, non-interpretive maps, and accounting and tax records; (ii) approved authorizations for expenditures, engineering records (to the extent not containing interpretive data), non-interpretive reservoir information, daily drilling and completion plans and reports, and wellbore diagrams; and (iii) environmental files and records; but excluding those subject to a written unaffiliated third party contractual restriction on disclosure or transfer for which no consent to disclose or transfer has been received, despite Assignor’s request therefor, or to the extent such disclosure or transfer is subject to payment of a fee or other consideration, for which Assignee has not agreed in writing to pay the fee or other consideration, as applicable; provided, however, Assignor may retain the originals or copies of such Records.
Section 2.Excluded Assets. Notwithstanding the foregoing, the Conveyed Interests shall not include, and there is EXCEPTED AND EXCLUDED from this Assignment to Assignee, in all such instances, any right, title or interest in or to the following (the “Excluded Assets”), all of which shall be RESERVED AND RETAINED by Assignor: (a) all of Assignor’s corporate minute books, tax and financial records and other business records that relate to Assignor’s business generally; (b) all trade credits, all accounts, all receivables of Assignor and all other proceeds, income or revenues of Assignor attributable to the Conveyed Interests and attributable to any period of time prior to the Effective Time; (c) to the extent that they do not relate to the Assumed Obligations for which Assignee is providing indemnification under the Purchase Agreement, all claims and causes of action of Assignor arising under or with respect to any contracts that are attributable to periods of time prior to the Effective Time (including claims for adjustments or refunds); (d) all rights and interests of Assignor (i) under any policy or agreement of insurance or indemnity, (ii) under any bond, or (iii) to any insurance or condemnation proceeds or awards arising, in each case, from acts, omissions or events or damage to or destruction of property; (e) Assignor’s rights with respect to all Hydrocarbons produced and sold from the Conveyed Interests with respect to all periods prior to the Effective Time; (f) all claims of Assignor for refunds (whether by way of refund, credit, offset, or otherwise) of, rights to receive funds from any governmental authority, or loss carry forwards or credits with respect to (i) asset taxes attributable to any period (or portion thereof) prior to the Effective Time, (ii) income taxes, or (iii) any taxes attributable to the Excluded Assets; (g) any leases, rights and other assets specifically listed in Exhibit D; (h) notwithstanding the definition of “Records,” any Excluded Information; (i) all trademarks and trade names containing “Sanchez”, “Evolve”, “SEP” or “SNMP” or any variations thereof; (j) all amounts paid or payable by any person to Assignor or its affiliates as overhead for periods of time accruing prior to the Closing Date under any operating agreements or other contract burdening the Conveyed Interests; (k) all information technology assets, including desktop computers, laptop computers, servers, networking equipment and any associated peripherals and other computer hardware, all radio and telephone equipment, smartphones, tablets and other mobility devices, well communication devices, any other information technology system, and any computer equipment that is used by Assignor for projects unrelated to the Conveyed Interests; (l) all supervisory control and data acquisition industrial control system and measurement technology of Assignor or its affiliates; and (m) all depths covered by any Wells or Leases that are outside of the Contractual Depth.
TO HAVE AND TO HOLD the Conveyed Interests to Assignee and its successors and assigns, forever subject, however, to the covenants, terms and conditions set forth herein and in the Purchase Agreement, and subject to the Permitted Encumbrances.
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Section 3.Special Warranty of Title. Assignor does hereby bind itself and its successors and assigns to warrant and forever defend all and singular defensible title to the Conveyed Interests unto Assignee and its successors and assigns against every person whomsoever lawfully claiming or to claim the same or any part thereof by, through or under Assignor, but not otherwise, subject, however, to the Permitted Encumbrances (the “Special Warranty”). The Special Warranty shall survive until the first anniversary of the Closing Date. Assignee’s sole remedy for breaches of such Special Warranty shall be in accordance with and subject to Section 9 of the Purchase Agreement and are subject to the limitations set forth in the Purchase Agreement.
Section 4.Disclaimers.
(a)EXCEPT AS SET FORTH IN SECTION 5 OF THE PURCHASE AGREEMENT AND THE SPECIAL WARRANTY IN THIS ASSIGNMENT, (I) ASSIGNOR MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS, STATUTORY OR IMPLIED, REGARDING THE CONVEYED INTERESTS AND (II) ASSIGNEE HAS NOT RELIED UPON, AND ASSIGNOR EXPRESSLY DISCLAIMS ALL LIABILITY AND RESPONSIBILITY FOR ANY REPRESENTATION, WARRANTY, STATEMENT OR INFORMATION REGARDING THE CONVEYED INTERESTS MADE OR COMMUNICATED (ORALLY OR IN WRITING) TO ASSIGNEE OR ANY OTHER MEMBER OF THE ASSIGNEE INDEMNIFIED PARTIES (INCLUDING WITHOUT LIMITATION ANY OPINION, INFORMATION, DOCUMENTS. MATERIALS PROJECTION OR ADVICE THAT MAY HAVE BEEN PROVIDED BY ANY FINANCIAL ADVISOR FOR ASSIGNOR OR ANY OTHER MEMBER OF THE ASSIGNOR INDEMNIFIED PARTIES, CONTAINED IN OR PROVIDED IN VIRTUAL “DATA ROOMS”, MANAGEMENT PRESENTATIONS OR SUPPLEMENTAL DUE DILIGENCE INFORMATION PROVIDED BY ASSIGNOR OR DISCUSSIONS OR ACCESS TO MANAGEMENT OF ASSIGNOR, OR ANY OTHER FORM, IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT).
(b)EXCEPT AS SET FORTH IN SECTION 5 OF THE PURCHASE AGREEMENT AND THE SPECIAL WARRANTY IN THIS ASSIGNMENT, AND WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, ASSIGNOR DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS, STATUTORY OR IMPLIED, AS TO (I) TITLE TO ANY OF THE CONVEYED INTERESTS, (II) THE CONTENTS, CHARACTER OR NATURE OF ANY REPORT OF ANY PETROLEUM ENGINEERING CONSULTANT, OR ANY ENGINEERING, GEOLOGICAL OR SEISMIC DATA OR INTERPRETATION, RELATING TO THE CONVEYED INTERESTS, (III) THE CONTENTS, CHARACTER, OR NATURE, ACCURACY, COMPLETENESS, OR MATERIALITY OF ANY RECORDS, INFORMATION, DATA, OR OTHER MATERIALS (WRITTEN OR ORAL) NOW, HERETOFORE OR HEREAFTER FURNISHED TO ASSIGNEE BY OR ON BEHALF OF ASSIGNOR; (IV) THE QUANTITY, QUALITY OR RECOVERABILITY OF HYDROCARBONS IN OR FROM THE CONVEYED INTERESTS, (V) ANY ESTIMATES OF THE VALUE OF THE CONVEYED INTERESTS OR FUTURE REVENUES TO BE GENERATED BY THE CONVEYED INTERESTS, (VI) THE PRODUCTION OF OR ABILITY TO PRODUCE HYDROCARBONS FROM THE CONVEYED INTERESTS, (VII) ANY ESTIMATES OF OPERATING COSTS AND CAPITAL REQUIREMENTS FOR ANY WELL, LEASE, OPERATION, OR PROJECT, (VIII) THE MAINTENANCE, REPAIR,
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CONDITION, QUALITY, SUITABILITY, DESIGN OR MARKETABILITY OF THE CONVEYED INTERESTS, (IX) THE CONTENT, CHARACTER OR NATURE OF ANY DESCRIPTIVE MEMORANDUM, REPORTS, BROCHURES, CHARTS OR STATEMENTS PREPARED BY THIRD PARTIES, (X) ANY OTHER MATERIALS OR INFORMATION THAT MAY HAVE BEEN MADE AVAILABLE OR COMMUNICATED TO ASSIGNEE OR ITS AFFILIATES, OR ITS OR THEIR EMPLOYEES, AGENTS, OFFICERS, DIRECTORS, MEMBERS, MANAGERS, EQUITY OWNERS, CONSULTANTS, REPRESENTATIVES OR ADVISORS IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY DISCUSSION OR PRESENTATION RELATING THERETO, AND (XI) ANY IMPLIED OR EXPRESS WARRANTY OF FREEDOM FROM PATENT OR TRADEMARK INFRINGEMENT. EXCEPT AS AND TO THE LIMITED EXTENT REPRESENTED OTHERWISE AS SET FORTH IN SECTION 5 OF THE PURCHASE AGREEMENT AND THE SPECIAL WARRANTY IN THIS ASSIGNMENT, AND WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, ASSIGNOR FURTHER DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS, STATUTORY OR IMPLIED, OF MERCHANTABILITY, FREEDOM FROM LATENT VICES OR DEFECTS, FITNESS FOR A PARTICULAR PURPOSE OR CONFORMITY TO MODELS OR SAMPLES OF MATERIALS OF ANY OF THE CONVEYED INTERESTS, RIGHTS OF A PURCHASER UNDER APPROPRIATE STATUTES TO CLAIM DIMINUTION OF CONSIDERATION OR RETURN OF THE PURCHASE PRICE, IT BEING EXPRESSLY UNDERSTOOD AND AGREED BY THE PARTIES THAT ASSIGNEE SHALL BE DEEMED TO BE OBTAINING THE CONVEYED INTERESTS IN THEIR PRESENT STATUS, CONDITION AND STATE OF REPAIR, “AS IS” AND “WHERE IS” WITH ALL FAULTS OR DEFECTS (KNOWN OR UNKNOWN, LATENT, DISCOVERABLE OR UNDISCOVERABLE), AND THAT ASSIGNEE HAS MADE OR CAUSED TO BE MADE SUCH INSPECTIONS AS ASSIGNEE DEEMS APPROPRIATE.
(c)EXCEPT AS AND TO THE LIMITED EXTENT EXPRESSLY REPRESENTED OTHERWISE IN SECTION 5(E) OF THE PURCHASE AGREEMENT, ASSIGNOR HAS NOT 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 THE PROTECTION OF HUMAN HEALTH, SAFETY, NATURAL RESOURCES OR THE ENVIRONMENT, OR ANY OTHER ENVIRONMENTAL CONDITION OF THE CONVEYED INTERESTS. NOTHING IN THIS AGREEMENT OR OTHERWISE SHALL BE CONSTRUED AS SUCH A REPRESENTATION OR WARRANTY, AND ASSIGNEE SHALL BE DEEMED TO BE TAKING THE CONVEYED INTERESTS “AS IS” AND “WHERE IS” WITH ALL FAULTS FOR PURPOSES OF THEIR ENVIRONMENTAL CONDITION AND THAT ASSIGNEE HAS MADE OR CAUSED TO BE MADE SUCH ENVIRONMENTAL INSPECTIONS AS ASSIGNEE DEEMS APPROPRIATE.
(d)THE PARTIES AGREE THAT, TO THE EXTENT REQUIRED BY APPLICABLE LAW TO BE EFFECTIVE, THE DISCLAIMERS OF CERTAIN REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS SECTION 4 ARE “CONSPICUOUS” DISCLAIMERS FOR THE PURPOSE OF ANY APPLICABLE LAW.
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Section 5.Certain Definitions. For purposes of this Assignment, the following capitalized terms shall have the meaning set forth below:
“Burden” means any and all royalties (including lessor’s royalty), overriding royalties, production payments, carried interests, net profits interests, reversionary interests and other burdens upon, measured by or payable out of production (excluding, for the avoidance of doubt, any taxes).
“Contractual Depth” means with respect to the Wells, the depth in the Eagle Ford Shale Formation; provided that if a Well is producing from a greater depth than the Eagle Ford Shale Formation as of the Effective Time, the Contractual Depth for that specific Well shall also include all such greater depths at which there are open perforations for such applicable Well.
“Eagle Ford Shale Formation” means the stratigraphic equivalent of the formation which is the entire correlative interval from 10,294 feet to 10,590 feet as shown on the log of the EOG Resources, Inc. - Milton Unit, Well No. 1 (API No. 42-255-31608), Section 64, John Randon Survey, A-247, Karnes County, Texas.
“Encumbrance” means any lien, mortgage, security interest, pledge, charge or similar encumbrance.
“Excluded Information” means (a) all legal records and files of Assignor constituting work product of, and attorney-client communications with, legal counsel (but excluding title opinions); (b) any records or information relating to the offer, negotiation or sale of the Conveyed Interests, including bids received from and records of negotiations with third parties; and (c) any records, information, data, software and licenses relating to the Excluded Assets.
“Net Revenue Interest” means the interest (expressed as a percentage or decimal fraction), in and to all Hydrocarbons produced and saved or sold from or allocated to the relevant Well, subject to any reservations, limitations, or depth restrictions described herein after giving effect to all Burdens.
“Permitted Encumbrances” means: (i) the terms and conditions of all Leases, Burdens, unit agreements, pooling agreements, operating agreements, farmout agreements, Hydrocarbon production sales contracts (including calls on production), division orders and other contracts applicable to the Wells or Leases; (ii) liens for taxes not yet due or delinquent or, if delinquent, that are being contested in good faith; (iii) all rights to consent by, required notices to, filings with, or other actions by governmental authorities in connection with the sale or conveyance of properties such as the Conveyed Interests that are customarily obtained after the assignment of properties similar to the Conveyed Interests; (iv) conventional rights of reassignment; (v) all applicable laws and all rights reserved to or vested in any governmental authority: (I) to control or regulate any Well or Lease, in any manner; (II) by the terms of any right, power, franchise, grant, license or permit, or by any provision of applicable law, to terminate such right, power, franchise, grant, license or permit or to purchase, condemn, expropriate or recapture or to designate a purchaser of any of the Wells or Leases; (III) to use such property in a manner which does not materially impair the use of such property for the purposes for which it is currently owned and operated; or (IV) to enforce any obligations or duties affecting the Wells or Leases, to any
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governmental authority with respect to any right, power, franchise, grant, license or permit; (vii) rights of a common owner of any interest in rights-of-way, permits or easements held by Assignor and such common owner as tenants in common or through common ownership; (vii) easements, conditions, covenants, restrictions, servitudes, permits, rights-of-way, surface leases, and other rights in the Wells or Leases, for the purpose of operations, facilities, roads, alleys, highways, railways, pipelines, transmission lines, transportation lines, distribution lines, power lines, telephone lines, removal of timber, grazing, logging operations, canals, ditches, reservoirs and other like purposes, or for the joint or common use of real estate, rights-of-way, facilities and equipment; (viii) vendors, carriers, warehousemen’s, repairmen’s, mechanics’, workmen’s, materialmen’s, employee’s, construction or other like liens arising by operation of law in the ordinary course of business or incident to the construction or improvement of any Well in respect of obligations which are not yet due or delinquent or, if delinquent, which are being contested in good faith by appropriate proceedings by or on behalf of Assignor; (ix) liens created under a Well or operating agreements or by operation of law in respect of obligations that are not yet due or delinquent, or if delinquent, that are being contested in good faith by appropriate proceedings by or on behalf of Assignor; (x) the terms and conditions of any contract (including Applicable Contracts); (xi) any mortgage lien on the fee estate or mineral fee estate from which title to the relevant Lease is derived which (I) predates the creation of the Lease and which is not currently subject to foreclosure or other enforcement proceedings by the holder of the mortgage lien or (II) has been subordinated to the applicable Lease; and (xii) all other Encumbrances, instruments, obligations, defects and irregularities affecting the Wells that individually or in the aggregate (I) do not materially detract from the value of or materially interfere with the use or ownership of the Wells, subject thereto or affected thereby (as currently used or owned), (II) do not operate to reduce the Net Revenue Interest of Assignor with respect to any Well to an amount less than the Net Revenue Interest set forth in Exhibit A for such Well with respect to the Contractual Depth for such Well, or (III) do not obligate Assignor to bear a Working Interest with respect to any Well with respect to the Contractual Depth for such Well, in any amount greater than the Working Interest set forth in Exhibit A for such Well (unless the Net Revenue Interest for such Well with respect to the Contractual Depth for such Well is greater than the Net Revenue Interest set forth in Exhibit A in the same or greater proportion as any increase in such Working Interest).
“Working Interest” means the percentage of costs and expenses associated with the exploration, drilling, development, operation and abandonment of any Wells required to be borne with respect thereto, without giving effect to any Burdens.
Section 6.Assumed Obligations. Subject to the terms of the Purchase Agreement, Assignee assumes and hereby agrees to fulfill, perform, pay and discharge (or cause to be fulfilled, performed, paid and discharged) all of the Assumed Obligations.
Section 7.Further Assurances. The Parties shall execute and deliver, or shall cause to be executed and delivered from time to time, such further instruments of conveyance and transfer, and shall take such other actions as a Party may reasonably request, to convey and deliver the Conveyed Interests to Assignee, to perfect Assignee’s title thereto, and to accomplish the orderly transfer of the Conveyed Interests to Assignee in the manner contemplated by this Assignment and the Purchase Agreement.
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Section 8.Purchase Agreement. This Assignment is subject to and delivered under the terms and conditions of the Purchase Agreement. If any provision of this Assignment is construed to conflict with any provision of the Purchase Agreement, the provisions of the Purchase Agreement shall be deemed controlling to the extent of that conflict.
Section 9.Successors and Assigns. This Assignment shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns.
Section 10.Governing Law; Jurisdiction; Venue; Jury Waiver. THIS ASSIGNMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS ASSIGNMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THE RIGHTS, DUTIES AND THE LEGAL RELATIONS AMONG THE PARTIES HERETO AND THERETO SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, EXCLUDING ANY CONFLICTS OF LAW RULE OR PRINCIPLE THAT MIGHT REFER CONSTRUCTION OF SUCH PROVISIONS TO THE LAWS OF ANOTHER JURISDICTION. BOTH PARTIES HERETO CONSENT TO THE EXERCISE OF JURISDICTION IN PERSONAM BY THE FEDERAL COURTS OF THE UNITED STATES LOCATED IN HARRIS COUNTY, TEXAS OR THE STATE COURTS LOCATED IN HARRIS COUNTY, TEXAS FOR ANY ACTION ARISING OUT OF THIS ASSIGNMENT OR ANY TRANSACTION CONTEMPLATED HEREBY. ALL ACTIONS OR PROCEEDINGS WITH RESPECT TO, ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO, OR FROM THIS ASSIGNMENT OR ANY TRANSACTION CONTEMPLATED HEREBY SHALL BE EXCLUSIVELY LITIGATED IN SUCH COURTS DESCRIBED ABOVE HAVING SITES IN HOUSTON, TEXAS AND EACH PARTY IRREVOCABLY SUBMITS TO THE JURISDICTION OF SUCH COURTS SOLELY IN RESPECT OF ANY PROCEEDING ARISING OUT OF OR RELATED TO THIS ASSIGNMENT. THE PARTIES HERETO HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER PARTY AGAINST ANOTHER IN ANY MATTER WHATSOEVER ARISING OUT OF OR IN RELATION TO OR IN CONNECTION WITH THIS ASSIGNMENT.
Section 11.Severability. If any term or other provision of this Assignment is invalid, illegal, or incapable of being enforced by any rule of law or public policy, all other terms and provisions of this Assignment shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any adverse manner to either Party. Upon any such determination, the Parties shall negotiate in good faith to modify this Assignment so as to effect the original intent of the Parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.
Section 12.Counterparts. This Assignment may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an original instrument, but
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all of such counterparts shall constitute for all purposes one agreement. Any signature hereto delivered by a Party by electronic transmission shall be deemed an original signature hereto.
[Signature and acknowledgement pages follow.]
8
EXECUTED by each Party on the Closing Date, but effective for all purposes as of the Effective Time.
ASSIGNOR:
SEP HOLDINGS IV, LLC
By: | Evolve Transition Infrastructure LP, |
By: | Evolve Transition Infrastructure GP, LLC |
By: /s/ Charles C. Ward
Name: Charles C. Ward
Title: Chief Financial Officer
STATE OF TEXAS§
§
COUNTY OF HARRIS§
Subscribed, sworn to and acknowledged before me on this 30th day of April, 20121 by Charles C. Ward, to me personally known, who, being by me duly sworn, did say that he is the Chief Financial Officer of EVOLVE TRANSITION INFRASTRUCTURE GP, LLC, a Delaware limited liability company, which is the sole general partner of EVOLVE TRANSITION INFRASTUCTURE LP, a Delaware limited liability partnership, which is the sole member of SEP HOLDINGS IV, LLC, a Delaware limited liability company, and that said instrument was signed on behalf of said limited liability company.
Notary Public: /s/ Jeana L. Gonzales
Printed Name: Jeana L. Gonzales
My Commission Expires: 5/17/2022
Commission Number: 746335-4
Signature and Acknowledgement Page to
Assignment, Bill of Sale and Conveyance
ASSIGNEE:
BAYSHORE ENERGY TX LLC
By: /s/ Yousuf Chaudhary
Name:Yousuf Chaudhary
Title: Executive Vice President
STATE OF TEXAS§
§
COUNTY OF HARRIS§
Subscribed, sworn to and acknowledged before me on this 30th day of April, 2021 by Yousuf Chaudhary to me personally known, who, being by my duly sworn, did say that he/she is a Executive VP of Bayshore Energy TX LLC, a limited liability company, and that said instrument was signed on behalf of said limited liability company.
/s/ Gracie Castillo
Notary Public
Printed Name: Gracie Castillo
My Commission Expires: 12-17-2024
Commission Number: 132830132
Signature and Acknowledgement Page to
Assignment, Bill of Sale and Conveyance
Exhibit A
Attached to and made a part of that Certain Assignment, Bill of Sale and Conveyance,
dated effective March 1, 2021, by and between SEP Holdings IV, LLC, as Assignor,
and Bayshore Energy TX LLC, as Assignee
Wells
# | WELL NAME | API | WI | NRI |
1. | ALPHA WARE 1 | 50732778 | 0.59617000 | 0.44357457 |
2. | PETRO PARDS 1H | 50732872 | 1.00000000 | 0.72400000 |
3. | PETRO PARDS 2H | 50732897 | 1.00000000 | 0.72400000 |
4. | PETRO PARDS 3H | 50732941 | 1.00000000 | 0.72400000 |
5. | PETRO PARDS 4H | 50732945 | 1.00000000 | 0.72400000 |
6. | PETRO PARDS 5H | 50733258 | 1.00000000 | 0.72400000 |
7. | PETRO PARDS 6H | 50733259 | 1.00000000 | 0.72400000 |
8. | RAY 1H | 50732866 | 1.00000000 | 0.75000000 |
END OF EXHIBIT A
Exhibit B
Attached to and made a part of that Certain Assignment, Bill of Sale and Conveyance,
dated effective March 1, 2021, by and between SEP Holdings IV, LLC, as Assignor,
and Bayshore Energy TX LLC, as Assignee
Leases
# | Lessor | Lessee | Lease Effective Date | Book | Page | County | State |
1. | ADAMS, PATRICIA RAY, ET AL | SANCHEZ OIL & GAS CORPORATION | 2008-03-26 | 297 | 642 | Zavala | Texas |
2. | PETRO-PARDS LTD | SEP HOLDINGS II LLC | 2008-05-12 | 299 | 265 | Zavala | Texas |
3. | WARE, J.K., ET UX | N A MAFFI | 1948-05-03 | 58 | 215 | Zavala | Texas |
4. | WARE, J.K., ET UX | N A MAFFI | 1948-05-03 | 58 | 215 | Zavala | Texas |
END OF EXHIBIT B
Exhibit C
Attached to and made a part of that Certain Assignment, Bill of Sale and Conveyance,
dated effective March 1, 2021, by and between SEP Holdings IV, LLC, as Assignor,
and Bayshore Energy TX LLC, as Assignee
Applicable Contracts
Each of the following contracts, agreements, and instruments, including all amendments, supplements, and/ or restatements thereof or thereto, as applicable:
1. | Any and all pooling, unitization, and communitization orders, declarations, and agreements in effect with respect to any of the Acquired Leases, including all interests in the units created thereby. |
END OF EXHIBIT C
Exhibit D
Attached to and made a part of that Certain Assignment, Bill of Sale and Conveyance,
dated effective March 1, 2021, by and between SEP Holdings IV, LLC, as Assignor,
and Bayshore Energy TX LLC, as Assignee
Excluded Assets
None.
END OF EXHIBIT D
Exhibit 10.5
April 30, 2021
Bayshore Energy TX LLC
1900 St. James Place, Suite 800
Houston, Texas 77056
Attention: Yousuf Chaudhary
Attention: Legal Department
Email: yousuf@atlasoperating.com
Email: legal@atlasoperating.com
Re: Purchase Agreement
Mr. Chaudhary,
This letter agreement (this “Letter”) memorializes certain agreements between SEP Holdings IV, LLC, a Delaware limited liability company (“Assignor”) and Bayshore Energy TX LLC, a Texas limited liability company (“Assignee”) regarding the sale of the Conveyed Interests (as defined in the Assignment, Bill of Sale and Conveyance attached hereto as Exhibit B (the “Assignment”)) from Assignor to Assignee (the “Transaction”). Assignor and Assignee are referred to herein individually as a “Party” and collectively as the “Parties.”
The Conveyed Interests are burdened by certain preferential rights held by lessors under oil and gas leases, requiring Assignor to: (i) obtain a consent from Phillip A. Goodwin (the “Goodwin Consent”), (ii) obtain a consent from Texas Osage Royalty Pool Inc. (the “Osage Consent”), (iii) obtain a consent from Devon Energy Production Company, L.P. (the “Devon Consent”), (iv) obtain a consent from Ronald W. Harris (the “Harris Consent”), (v) obtain a consent from Mark & Sandra, Ltd. (the “M&S Consent”), (vi) comply with a first right of refusal held by Jackie Lynn Russell (the “Russell ROFR”), and (vii) comply with a first right of refusal held by Larry and Judy Votaw (the “Votaw ROFR,” and collectively with the Goodwin Consent, the Osage Consent, the Devon Consent, the Harris Consent, the M&S Consent and the Russell ROFR, the “Preferential Rights”). As a result of the Preferential Rights, Assignor must either obtain the consent of the applicable lessor, or comply with the terms of the applicable first right of refusal, in each case, prior to transferring the Conveyed Interests subject to the applicable Preferential Right.
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On April 27, 2021, Assignor sent (i) written requests for consent to the Transaction with respect to the Goodwin Consent, the Osage Consent, the Devon Consent, the Harris Consent and the M&S Consent; and (ii) written notices of the Transaction with respect to the Russell ROFR and the Votaw ROFR.
Assignee and Assignor agree that immediately upon the satisfaction of Assignor’s obligations, pursuant to the Preferential Rights, that are required to be observed prior to execution of a definitive agreement for the sale of the Conveyed Interests, Assignor and Assignee shall execute and deliver the Purchase Agreement attached hereto as Exhibit A (the “Purchase Agreement”) and the Assignment.
From the date of this Letter until the earlier to occur of (i) the execution and delivery of the Purchase Agreement and the Assignment, and (ii) May 31, 2021 (the “Exclusivity Period”):
The Parties agree that during the Exclusivity Period they will maintain the confidentiality of the terms of the Purchase Agreement and the Assignment pursuant to that certain Non-Disclosure Agreement, dated as of March 8, 2021, by and between Evolve Transition Infrastructure LP and Atlas Operating LLC. The Parties shall not make or issue, or cause to be made or issued, any publication or press release which includes a description of the proposed sale of the Conveyed Interests without (i) providing the other Party with an opportunity to review and comment on any such publication or press release, and (ii) receipt of the prior written consent of the other Party (which consent will not be unreasonably withheld or delayed) except to the extent, but only to such extent, that, in the opinion of the Party issuing such publication or press release such announcement or statement may be required by applicable law, any listing agreement with any securities exchange or any securities exchange regulation, in which case the Party issuing such
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publication or press release shall use its commercially reasonable efforts to consult in good faith with the other Party before issuing any such publication or press release and shall reasonably cooperate with the other Party in good faith with respect to the timing, manner and content of disclosure.
The Parties agree that if some, but not all, of the Preferential Rights are resolved during the Exclusivity Period, then on May 31, 2021, or an earlier date agreed upon by the Parties, the Parties shall: (i) make the applicable downward adjustment(s) to the Purchase Price (as defined in Section 3 of the Purchase Agreement) with respect to any Preferential Right that is not resolved prior to the expiration of the Exclusivity Period, and (ii) execute and deliver the Purchase Agreement. The Parties agree that prior to the execution and delivery of the Purchase Agreement, the Parties shall edit the Purchase Agreement form attached as Exhibit A hereto to reflect (x) the applicable downward Purchase Price Adjustment(s) set forth in the table below, and (y) any changes to the Conveyed Interests (as defined in the Assignment), including changes required in Exhibit A and Exhibit B to the Assignment to remove Wells or Leases associated with any Preferential Rights that are not resolved prior to the expiration of the Exclusivity Period. Additionally, if Assignor does not receive the Devon Consent and/or the Osage Consent, then the Texas Osage Clawback Amount (as defined in the Purchase Agreement), shall be reduced by the Purchase Price Adjustment set forth in the table below and the Parties shall edit the Purchase Agreement to reflect such updated Texas Osage Clawback Amount.
Preferential Right | Purchase Price Adjustment |
Goodwin Consent | $425,263.00 |
Osage Consent | $92,411.62 |
Devon Consent | $30,803.87 |
Harris Consent | $38,434.86 |
M&S Consent | $198,050.05 |
Russell ROFR | $131,460.38 |
Votaw ROFR | $18,569.62 |
Neither Assignor nor Assignee shall, directly or indirectly, take or fail to take, nor permit any affiliate or Representative to take or fail to take, any action with the intent or effect of avoiding or otherwise circumventing any provision or the intent of this Letter.
This Letter may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Any Portable Document Format (.pdf) copies hereof or signature hereon shall, for all purposes, be deemed originals.
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THIS LETTER SHALL BE GOVERNED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT GIVING EFFECT TO ANY CONFLICT OR CHOICE OF LAW PROVISION THAT WOULD RESULT IN THE IMPOSITION OF ANOTHER JURISDICTION’S LAW. The Parties acknowledge that this Letter is legally binding. The Parties irrevocably submit to the exclusive jurisdiction of the federal courts of the United States located in Harris County, Texas, and appropriate courts of appeal therefrom, over any dispute arising out of or relating to this Letter or the enforcement thereof, and each Party irrevocably agrees that all claims in respect of such dispute or proceeding may be heard and determined in such courts. Each Party irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of venue of any dispute arising out of or relating to this Letter or the enforcement thereof brought in such court or any defense of inconvenient forum for the maintenance of such dispute. Each Party agrees that a judgment in any such dispute may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.
Each Party agrees that the rights of the other Party under this Letter are special, unique and of extraordinary character and that, if either Party violates or fails or refuses to perform any agreement made by it herein, the non-breaching Party may be without an adequate remedy at law. If any Party violates or fails or refuses to perform any agreement made in this Letter, the non-breaching Party (in addition to any remedy at law for damages or other relief) may institute and prosecute an action in any court of competent jurisdiction to enforce specific performance of such agreement or seek any other equitable relief.
The terms and provisions of this Letter are intended solely for the benefit of Assignee and Assignor and their respective successors or permitted assigns, and it is not the intention of the Parties to confer third party beneficiary rights upon any other party. This Letter may not be assigned (by operation of law or otherwise) by either Party without the written consent of the other Party (which may be withheld in such non-assigning Party’s sole discretion), and any attempted assignment absent such consent shall be void ab initio. Any term or condition of this Letter may be waived at any time by the Party that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the Party waiving such term or condition. No waiver by either Party of any term or condition of this Letter, in any one or more instances, shall be deemed to be or construed as a waiver of the same or any other term or condition of this Letter on any future occasion.
This Letter, including the exhibits attached hereto, collectively constitute the entire agreement between the Parties, and supersede all agreements entered into prior to the date hereof, understandings, negotiations, and discussions, whether oral or written, of the Parties, pertaining to the subject matter of this Letter.
[Remainder of page intentionally left blank; signature pages follow]
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Sincerely,
SEP HOLDINGS IV, LLC
By: | Evolve Transition Infrastructure LP, |
By: | Evolve Transition Infrastructure GP, LLC, |
/s/ Charles C. Ward
Charles C. Ward
Chief Financial Officer
Evolve Transition Infrastructure GP LLC
Signature Page to Letter Agreement
EXECUTED AND AGREED THIS 30th DAY OF APRIL, 2021:
BAYSHORE ENERGY TX LLC
By: /s/ Yousuf Chaudhary
Name:Yousuf Chaudhary
Title:Executive Vice President
Signature Page to Letter Agreement
EXHIBIT A
PURCHASE AGREEMENT
[Attached]
Exhibit A
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this “Agreement”), dated [__________, 2021] (the “Closing Date”), is by and between SEP HOLDINGS IV, LLC, a Delaware limited liability company (“Assignor”) and BAYSHORE ENERGY TX LLC, a Texas limited liability company (“Assignee”). Assignor and Assignee are collectively referred to herein as the “Parties” and each, individually, as a “Party.”
Recitals:
Agreements:
NOW, THEREFORE, in consideration of the mutual agreements herein and other good and valuable consideration, the Parties agree as follows:
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The Parties acknowledge and agree that, for a period of one hundred eighty (180) days after Closing (the “Corrective Period”), Assignor shall use commercially reasonable efforts to obtain a corrective assignment from its predecessor-in-interest to the Texas-Osage 01 well and Texas-Osage 02 well (collectively, the “Texas Osage Wells”) regarding certain additional depths related to the Texas Osage Wells in the Austin Chalk Formation and the Buda Formation (such corrective assignment, the “Texas Osage Corrective Assignment”). The Texas Osage Wells are included within the Wells, and constitute Conveyed Interests hereunder.
If Assignor receives the Texas Osage Corrective Assignment during the Corrective Period, Assignor shall notify Assignee, and the Parties shall enter into a corrective assignment amending the Assignment hereunder to convey any additional interests in the Texas Osage Wells that Assignor receives pursuant to the Texas Osage Corrective Assignment.
If Assignor does not receive the Texas Osage Corrective Assignment during the Corrective Period, then within five (5) business days after the expiration of the Corrective Period, Assignor agrees to pay to Assignee an amount equal to Two Hundred Forty-Six Thousand Four Hundred
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Thirty-One Dollars ($246,431.00) (the “Texas Osage Clawback Amount”) by wire transfer of immediately available funds pursuant to wire transfer instructions designated in advance by Assignee to Assignor in writing.
TO THE EXTENT THAT ASSIGNOR HAS MATERIALLY COMPLIED WITH THIS SECTION 20, ASSIGNEE SHALL ASSUME ALL RISK AND SHALL DEFEND AND INDEMNIFY THE ASSIGNOR INDEMNIFIED PARTIES FOR ALL CLAIMS RELATED TO THE TEXAS OSAGE WELLS, AND SUCH OBLIGATIONS SHALL BE ASSUMED OBLIGATIONS UNDER THIS AGREEMENT.
As used herein, “Austin Chalk Formation” means the stratigraphic equivalent of the formation which is the entire correlative interval from 9,770 feet to 10,294 feet as shown on the log of the EOG Resources, Inc. - Milton Unit, Well No. 1 (API No. 42-255-31608), Section 64, John Randon Survey, A-247, Karnes County, Texas.
As used herein, “Buda Formation” means the stratigraphic equivalent of the formation which is the entire correlative interval from 10,590 feet to 10,700 feet as shown on the log of the EOG Resources, Inc. - Milton Unit, Well No. 1 (API No. 42-255-31608), Section 64, John Randon Survey, A-247, Karnes County, Texas..
[Signature page follows.]
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IN WITNESS WHEREOF, each Party has executed and delivered this Agreement as of the Closing Date.
Assignor:
SEP HOLDINGS IV, LLC
By: | Evolve Transition Infrastructure LP, |
By: | Evolve Transition Infrastructure GP, LLC, |
By:
Name:Gerald F. Willinger
Title:Chief Executive Officer
Address for purposes of notices:
1360 Post Oak Boulevard, Suite 2400
Houston, Texas 77056
Attention: Chief Executive Officer
Email: gwillinger@evolvetransition.com
with a copy (which shall not constitute notice) to:
Hunton Andrews Kurth LLP
600 Travis St, Suite 4200
Houston, Texas 77002
Attention: Phil Haines
Email: phaines@huntonak.com
Signature Page to Purchase Agreement (Maverick 2)
Assignee:
BAYSHORE ENERGY TX LLC
By:
Name:Yousuf Chaudhary
Title: Executive Vice President
Address for purposes of notices:
1900 St. James Place, Suite 800
Houston, Texas 77056
Attention: Yousuf Chaudhary
Attention: Legal Department
Email: yousuf@atlasoperating.com
Email: legal@atlasoperating.com
Signature Page to Purchase Agreement (Maverick 2)
Signature Page to Purchase Agreement (Maverick 2)
EXHIBIT B
ASSIGNMENT, BILL OF SALE AND CONVEYANCE
[Attached]
Exhibit B
ASSIGNMENT, BILL OF SALE AND CONVEYANCE
STATE OF TEXAS §
§
COUNTIES OF ZAVALA AND DIMMIT §
THIS ASSIGNMENT, BILL OF SALE AND CONVEYANCE (this “Assignment”), dated as of [____________, 2021] (the “Closing Date”), but effective as of 7:00 a.m. Central Time on March 1, 2021 (the “Effective Time”), is from SEP HOLDINGS IV, LLC, a Delaware limited liability company, whose mailing address is 1360 Post Oak Boulevard, Suite 2400, Houston, Texas 77056 (“Assignor”) to BAYSHORE ENERGY TX LLC, a Texas limited liability company, whose mailing address is 1900 St. James Place, Suite 800, Houston, Texas 77056 (“Assignee”, together with Assignor, the “Parties” and each individually, a “Party”). Capitalized terms used but not defined herein shall have the respective meanings set forth in that certain Purchase Agreement, dated as of the Closing Date, by and between Assignor and Assignee (as may be amended from time to time, the “Purchase Agreement”).
TO HAVE AND TO HOLD the Conveyed Interests to Assignee and its successors and assigns, forever subject, however, to the covenants, terms and conditions set forth herein and in the Purchase Agreement, and subject to the Permitted Encumbrances.
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“Burden” means any and all royalties (including lessor’s royalty), overriding royalties, production payments, carried interests, net profits interests, reversionary interests and other burdens upon, measured by or payable out of production (excluding, for the avoidance of doubt, any taxes).
“Contractual Depth” means with respect to the Wells, the depth in the Eagle Ford Shale Formation; provided that if a Well is producing from a greater depth than the Eagle Ford Shale Formation as of the Effective Time, the Contractual Depth for that specific Well shall also include all such greater depths at which there are open perforations for such applicable Well.
“Eagle Ford Shale Formation” means the stratigraphic equivalent of the formation which is the entire correlative interval from 10,294 feet to 10,590 feet as shown on the log of the EOG Resources, Inc. – Milton Unit, Well No. 1 (API No. 42-255-31608), Section 64, John Randon Survey, A-247, Karnes County, Texas.
“Encumbrance” means any lien, mortgage, security interest, pledge, charge or similar encumbrance.
“Excluded Information” means (a) all legal records and files of Assignor constituting work product of, and attorney-client communications with, legal counsel (but excluding title opinions); (b) any records or information relating to the offer, negotiation or sale of the Conveyed Interests, including bids received from and records of negotiations with third parties; and (c) any records, information, data, software and licenses relating to the Excluded Assets.
“Net Revenue Interest” means the interest (expressed as a percentage or decimal fraction), in and to all Hydrocarbons produced and saved or sold from or allocated to the relevant Well, subject to any reservations, limitations, or depth restrictions described herein after giving effect to all Burdens.
“Permitted Encumbrances” means: (i) the terms and conditions of all Leases, Burdens, unit agreements, pooling agreements, operating agreements, farmout agreements, Hydrocarbon production sales contracts (including calls on production), division orders and other contracts applicable to the Wells or Leases; (ii) liens for taxes not yet due or delinquent or, if delinquent, that are being contested in good faith; (iii) all rights to consent by, required notices to, filings with, or other actions by governmental authorities in connection with the sale or conveyance of properties such as the Conveyed Interests that are customarily obtained after the assignment of properties similar to the Conveyed Interests; (iv) conventional rights of reassignment; (v) all applicable laws and all rights reserved to or vested in any governmental authority: (I) to control or regulate any Well or Lease, in any manner; (II) by the terms of any right, power, franchise, grant, license or permit, or by any provision of applicable law, to terminate such right, power, franchise, grant, license or permit or to purchase, condemn, expropriate or recapture or to designate a purchaser of any of the Wells or Leases; (III) to use such property in a manner which does not materially impair the use of such property for the purposes for which it is currently owned and operated; or (IV) to enforce any obligations or duties affecting the Wells or Leases, to any
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governmental authority with respect to any right, power, franchise, grant, license or permit; (vii) rights of a common owner of any interest in rights-of-way, permits or easements held by Assignor and such common owner as tenants in common or through common ownership; (vii) easements, conditions, covenants, restrictions, servitudes, permits, rights-of-way, surface leases, and other rights in the Wells or Leases, for the purpose of operations, facilities, roads, alleys, highways, railways, pipelines, transmission lines, transportation lines, distribution lines, power lines, telephone lines, removal of timber, grazing, logging operations, canals, ditches, reservoirs and other like purposes, or for the joint or common use of real estate, rights-of-way, facilities and equipment; (viii) vendors, carriers, warehousemen’s, repairmen’s, mechanics’, workmen’s, materialmen’s, employee’s, construction or other like liens arising by operation of law in the ordinary course of business or incident to the construction or improvement of any Well in respect of obligations which are not yet due or delinquent or, if delinquent, which are being contested in good faith by appropriate proceedings by or on behalf of Assignor; (ix) liens created under a Well or operating agreements or by operation of law in respect of obligations that are not yet due or delinquent, or if delinquent, that are being contested in good faith by appropriate proceedings by or on behalf of Assignor; (x) the terms and conditions of any contract (including Applicable Contracts); (xi) any mortgage lien on the fee estate or mineral fee estate from which title to the relevant Lease is derived which (I) predates the creation of the Lease and which is not currently subject to foreclosure or other enforcement proceedings by the holder of the mortgage lien or (II) has been subordinated to the applicable Lease; and (xii) all other Encumbrances, instruments, obligations, defects and irregularities affecting the Wells that individually or in the aggregate (I) do not materially detract from the value of or materially interfere with the use or ownership of the Wells, subject thereto or affected thereby (as currently used or owned), (II) do not operate to reduce the Net Revenue Interest of Assignor with respect to any Well to an amount less than the Net Revenue Interest set forth in Exhibit A for such Well with respect to the Contractual Depth for such Well, or (III) do not obligate Assignor to bear a Working Interest with respect to any Well with respect to the Contractual Depth for such Well, in any amount greater than the Working Interest set forth in Exhibit A for such Well (unless the Net Revenue Interest for such Well with respect to the Contractual Depth for such Well is greater than the Net Revenue Interest set forth in Exhibit A in the same or greater proportion as any increase in such Working Interest).
“Working Interest” means the percentage of costs and expenses associated with the exploration, drilling, development, operation and abandonment of any Wells required to be borne with respect thereto, without giving effect to any Burdens.
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[Signature and acknowledgement pages follow.]
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EXECUTED by each Party on the Closing Date, but effective for all purposes as of the Effective Time.
ASSIGNOR:
SEP HOLDINGS IV, LLC
By: | Evolve Transition Infrastructure LP, |
By: | Evolve Transition Infrastructure GP, LLC |
By:
Name:Gerald F. Willinger
Title:Chief Executive Officer
STATE OF TEXAS §
§
COUNTY OF HARRIS §
Subscribed, sworn to and acknowledged before me on this ___ day of April, 2021 by __________________, to me personally known, who, being by me duly sworn, did say that he is the Chief Executive Officer of EVOLVE TRANSITION INFRASTRUCTURE GP, LLC, a Delaware limited liability company, which is the sole general partner of EVOLVE TRANSITION INFRASTRUCTURE LP, a Delaware limited partnership, which is the sole member of SEP HOLDINGS IV, LLC, a Delaware limited liability company, and that said instrument was signed on behalf of said limited liability company.
Notary Public
Printed Name:
My Commission Expires:
Commission Number:
Signature and Acknowledgement Page to
Assignment, bill of Sale and Conveyance
ASSIGNEE:
BAYSHORE ENERGY TX LLC
By:
Name:Yousuf Chaudhary
Title:Executive Vice President
STATE OF __________ §
§
COUNTY OF __________ §
Subscribed, sworn to and acknowledged before me on this ___ day of _________, 2021 by __________________, to me personally known, who, being by me duly sworn, did say that he/she is a __________ of _______________, a __________________, and that said instrument was signed on behalf of said ____________________.
__________________________________________
Notary Public
Printed Name: ______________________________
My Commission Expires: _____________________
Commission Number: _______________________
Signature and Acknowledgement Page to
Assignment, bill of Sale and Conveyance
Exhibit A
Wells
# | WELL NAME | API | WI | NRI |
1. | GOODWIN 1V | 50732899 | 1.00000000 | 0.76000000 |
2. | GOODWIN 2H | 50733200 | 1.00000000 | 0.76000000 |
3. | MARK AND SANDRA 2H | 50732900 | 1.00000000 | 0.75193360 |
4. | MARK AND SANDRA 3H | 50732943 | 1.00000000 | 0.74500000 |
5. | RUSSELL A 1H | 12736057 | 1.00000000 | 0.67500001 |
6. | TEXAS OSAGE 1 | 50732738 | 0.42750000 | 0.30308750 |
7. | TEXAS OSAGE 2 | 50732748 | 0.49481000 | 0.35256035 |
END OF EXHIBIT A
Exhibit B
Leases
# | Lessor | Lessee | Lease Effective Date | Book | Page | County | State |
1. | GOODWIN, PHILLIP A. | RATTLER OIL & GAS CORP | 2005-06-08 | 91 | 582 | Zavala | Texas |
2. | MARK & SANDRA, LTD. | RATTLER OIL & GAS CORP | 2005-06-08 | 91 | 577 | Zavala | Texas |
3. | MARK & SANDRA, LTD. | SANCHEZ OIL & GAS CORPORATION | 2008-01-15 | 294 | 291 | Zavala | Texas |
4. | THE PATSY H. MIDDLETON FAMILY PARTN | AMERITEX MINERALS INC | 2007-11-15 | 294 | 51 | Zavala | Texas |
5. | HARRIS, RONALD W., ET AL | AMERITEX MINERALS INC | 2008-07-07 | 300 | 68 | Zavala | Texas |
6. | TEXAS OSAGE ROYALTY POOL, INC. | AMERITEX MINERALS INC | 2007-08-14 | 290 | 308 | Zavala | Texas |
7. | THE PROSPECT COMPANY | AMERITEX MINERALS INC | 2007-07-12 | 290 | 443 | Zavala | Texas |
8. | DEVON ENERGY PRODUCTION COMPANY, L. | SEP HOLDINGS II LLC | 2008-06-10 | 299 | 267 | Zavala | Texas |
9. | RUSSELL, JACKIE LYNN | EAGLE FORD MINERALS, LLC | 2013-09-17 | 504 | 54 | Dimmit | Texas |
10. | VOTAW, LARRY, ET AL | EAGLE FORD MINERALS, LLC | 2013-09-17 | 504 | 51 | Dimmit | Texas |
END OF EXHIBIT B
Exhibit C
Applicable Contracts
Each of the following contracts, agreements, and instruments, including all amendments, supplements, and/ or restatements thereof or thereto, as applicable:
1. | Any and all pooling, unitization, and communitization orders, declarations, and agreements in effect with respect to any of the Acquired Leases, including all interests in the units created thereby. |
END OF EXHIBIT C
Exhibit D
Excluded Assets
None.
END OF EXHIBIT D
Exhibit 10.6
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this “Agreement”), dated April 30, 2021 (the “Closing Date”), is by and between SEP HOLDINGS IV, LLC, a Delaware limited liability company (“Assignor”) and WESTHOFF PALMETTO LP, a Delaware limited partnership (“Assignee”), and solely for purposes of Section 20, EVOLVE TRANSITION INFRASTRUCTURE LP, a Delaware limited partnership (“Assignor Parent”). Assignor and Assignee are collectively referred to herein as the “Parties” and each, individually, as a “Party.”
Recitals:
A.Assignor has agreed to sell to Assignee, and Assignee has agreed to purchase from Assignor, the Conveyed Interests as defined and described in the Assignment, Bill of Sale, and Conveyance attached hereto as Appendix I (the “Assignment”), effective as of 7:00 a.m. Central Time on March 1, 2021 (the “Effective Time”).
B.Assignor and Assignee now desire to memorialize their agreements regarding the purchase of the Conveyed Interests.
C.Capitalized terms used in this Agreement but not defined in Section 27 below or otherwise herein shall have the meanings given to such terms in the Assignment.
Agreements:
NOW, THEREFORE, in consideration of the mutual agreements herein and other good and valuable consideration, the Parties agree as follows:
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[Signature page follows.]
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IN WITNESS WHEREOF, each Party and Assignor Parent has executed and delivered this Agreement as of the Closing Date.
Assignor:
SEP HOLDINGS IV, LLC
By: | Evolve Transition Infrastructure LP, |
By: | Evolve Transition Infrastructure GP, LLC, |
By:/s/ Charles C. Ward
Name: Charles C. Ward
Title: Chief Financial Officer and Secretary
Solely with respect to Assignor Parent’s obligations pursuant to Section 20 herein:
Assignor Parent:
EVOLVE TRANSITION INFRASTRUCTURE LP
By: | Evolve Transition Infrastructure GP, LLC, |
By:/s/ Charles C. Ward
Name: Charles C. Ward
Title: Chief Financial Officer and Secretary
Address for purposes of notice:
1360 Post Oak Boulevard, Suite 2400
Houston, Texas 77056
Attention: Chief Financial Officer
Email: cward@evolvetransition.com
with a copy (which shall not constitute notice) to:
Hunton Andrews Kurth LLP
600 Travis St. Suite 4200
Houston, TX 77002
Attention: Phil Haines
Email: phaines@huntonak.com
Signature Page to Purchase Agreement
Assignee:
WESTHOFF PALMETTO LP
By: | Westhoff Palmetto GP LLC, |
By:/s/ Paul F. Barnhart, III
Paul F. Barnhart, III
as sole member
Address for purposes of notice:
2121 Sage Road, Suite 333,
Houston, Texas 77056
Attention: Paul F. Barnhart, III
Email: paul@biiusa.com
With a copy (which shall not constitute notice) to:
Porter Hedges LLP
1000 Main Street, 36th Floor
Houston, TX 77002
Attention: Jeremy Mouton
Email: jmouton@porterhedges.com
Signature Page to Purchase Agreement
APPENDIX I
Attached to and made a part of that certain Purchase Agreement, dated April 30, 2021, by and between SEP Holdings IV, LLC, as Assignor, and Westhoff Palmetto LP, as Assignee
ASSIGNMENT, BILL OF SALE, AND CONVEYANCE
(Attached.)
ASSIGNMENT, BILL OF SALE AND CONVEYANCE
STATE OF TEXAS§
§
COUNTIES OF GONZALES AND DEWITT§
THIS ASSIGNMENT, BILL OF SALE AND CONVEYANCE (this “Assignment”), dated as of April 30, 2021 (the “Closing Date”), but effective as of 7:00 a.m. Central Time on March 1, 2021 (the “Effective Time”), is from SEP HOLDINGS IV, LLC, a Delaware limited liability company, whose mailing address is 1360 Post Oak Boulevard, Suite 2400, Houston, Texas 77056 (“Assignor”) to WESTHOFF PALMETTO LP, a Delaware limited partnership, whose mailing address is 2121 Sage Road, Suite 333, Houston, Texas 77056 (“Assignee”, together with Assignor, the “Parties” and each individually, a “Party”). Capitalized terms used but not defined herein shall have the respective meanings set forth in that certain Purchase Agreement, dated as of the Closing Date, by and between Assignor and Assignee (as may be amended from time to time, the “Purchase Agreement”).
Section 1.Assignment. For Ten Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are acknowledged, Assignor, does hereby forever GRANT, BARGAIN, SELL, CONVEY, ASSIGN, TRANSFER, SET OVER AND DELIVER to Assignee all of Assignor’s right, title and interest in and to the interests and properties described below, less and except the Excluded Assets (such right, title and interest, less and except the Excluded Assets, collectively, the “Conveyed Interests”):
(a)the oil, gas and mineral wells, whether producing, plugged, shut-in or temporarily abandoned, set forth on Exhibit A attached hereto (collectively, the “Wells”), together with (i) all oil, gas, casinghead gas, condensate, natural gas liquids, and other gaseous and liquid hydrocarbons or any combination thereof and other minerals extracted from or produced with the foregoing (collectively, “Hydrocarbons”) produced therefrom or allocated thereto, INSOFAR AND ONLY INSOFAR as such Hydrocarbons are produced from and after the Effective Time and (ii) all proceeds, rights, and claims related to such Hydrocarbons;
(b)the oil, gas and mineral leases covering rights in the Wells together with (i) all other right, title, and interest of Assignor in and to the lands covered or burdened thereby or pooled or unitized therewith and (ii) all tenements, hereditaments and appurtenances belonging to such leases, including those leases described on Exhibit B attached hereto (collectively, the “Leases”, together with the Wells and the Hydrocarbons, the “Oil and Gas Properties”);
(c)to the extent assignable, all contracts (excluding any Leases) to which Assignor is a party, or may otherwise be deemed to have obligations with respect thereto, to the extent relating to the Oil and Gas Properties, insofar and only insofar as such contracts relate to Assignor’s interests in the Wells, but exclusive of any Excluded Information and contracts to the extent relating to the Excluded Assets (collectively, the “Applicable Contracts”), and all rights thereunder, including those set forth on Exhibit C;
(d)to the extent assignable, all easements, rights-of-way, licenses, servitudes, surface leases, surface use agreements, permits, and similar instruments and authorizations used or held
for use, or otherwise granted or issued, in connection with the ownership or operation of the Oil and Gas Properties;
(e)all Fixtures, Equipment, and Inventory that are appurtenant to or otherwise used or held for use in connection with the ownership or operation of the Oil and Gas Properties or the production, treating, storing, or transportation of Hydrocarbons produced therefrom;
(f)all rights, claims, judgments, awards, recoveries, settlements, indemnities, rights to insurance proceeds, refunds, obligations, and liabilities in favor of or owed to Assignor or its Affiliates to the extent relating to ownership or operation of the Conveyed Interests from and after the Effective Time or to any of the Assumed Obligations; and
(g)all files, records and data (including electronic data) or copies thereof in the possession or control of Assignor to the extent specifically related to the Conveyed Interests (collectively, the “Records”), including: (i) lease files, deed files, land files, wells files, division order files, abstracts, title files, production records, Applicable Contract files, non-interpretive maps, and accounting and tax records; (ii) approved authorizations for expenditures, engineering records (to the extent not containing restricted 3rd party interpretive data), reservoir information, daily drilling and completion plans and reports, and wellbore diagrams; and (iii) environmental files and records; but excluding those subject to a written unaffiliated third party contractual restriction on disclosure or transfer for which no consent to disclose or transfer has been received, or the extent such disclosure or transfer is subject to payment of a fee or other consideration, for which Assignee has not agreed in writing to pay the fee or other consideration, as applicable, provided, however, Assignor may retain a duplicate copy of such Records.
It is the intent of Assignor to convey and this Assignment hereby conveys to Assignee, from and after the Effective Time, the Conveyed Interests, regardless of errors in description, any incorrect or misspelled names, or any mistranscribed or incorrect recording references.
TO HAVE AND TO HOLD the Conveyed Interests to Assignee and its successors and assigns, forever, subject, however, to the covenants, terms and conditions set forth herein and in the Purchase Agreement, and subject to the Permitted Encumbrances.
Section 2.Excluded Assets. Notwithstanding the foregoing, the Conveyed Interests shall not include, and there is EXCEPTED AND EXCLUDED from this Assignment to Assignee, in all such instances, any right, title or interest in or to the following (the “Excluded Assets”), all of which shall be RESERVED AND RETAINED by Assignor: (a) all of Assignor’s corporate minute books, tax and financial records and other business records that relate to Assignor’s business generally; (b) all trade credits, all accounts, all receivables of Assignor and all other proceeds, income or revenues of Assignor attributable to the Conveyed Interests and attributable to any period of time prior to the Effective Time; (c) to the extent that they do not relate to the Assumed Obligations for which Assignee is providing indemnification under the Purchase Agreement, all claims and causes of action of Assignor against Third Parties arising under or with respect to any contracts that are attributable to periods of time prior to the Effective Time (including claims for adjustments or refunds); (d) to the extent that they do not relate to the Assumed Obligations for which Assignee is providing indemnification under the Purchase Agreement, all rights and interests of Assignor (i) under any policy or agreement of insurance or
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indemnity, (ii) under any bond, or (iii) to any insurance or condemnation proceeds or awards arising, in each case, from acts, omissions or events or damage to or destruction of property; (e) Assignor’s rights with respect to all Hydrocarbons produced and sold from the Conveyed Interests with respect to all periods prior to the Effective Time; (f) all claims of Assignor for refunds (whether by way of refund, credit, offset, or otherwise) of, rights to receive funds from any Governmental Authority, or loss carry forwards or credits with respect to (i) asset taxes attributable to any period (or portion thereof) prior to the Effective Time, (ii) income taxes, or (iii) any taxes attributable to the Excluded Assets; (g) any futures trade, put option, synthetic put option, call option, or other arrangement relating to commodities entered into on any commodities exchange to hedge exposure to or to speculate on commodity prices, and any swap, collar, floor or other derivative transaction or hedging arrangement of any type or nature whatsoever in the over-the-counter derivatives market; (h) notwithstanding the definition of “Records,” any Excluded Information; (i) all trademarks and trade names containing “Sanchez”, “Evolve”, “SEP” or “SNMP” or any variations thereof; (j) all instruments evidencing obligations created, issued, or incurred for borrowed money (including deferred payment of purchase price or carry obligation), including mortgages, deeds of trust, notes, bonds, and debentures, and all guarantees of the foregoing; (k) all information technology assets, including desktop computers, laptop computers, servers, networking equipment and any associated peripherals and other computer hardware, all radio and telephone equipment, smartphones, tablets and other mobility devices (excluding well communication devices), any other information technology system, and any computer equipment that is used by Assignor for projects unrelated to the Conveyed Interests; (l) all supervisory control and data acquisition industrial control system and measurement technology of Assignor or its affiliates; and (m) all amounts paid or payable by any Third Party to Assignor or its affiliate for periods of time accruing prior to Closing Date under any operating agreements or other contract burdening the Conveyed Interests.
Section 3.Special Warranty of Title; Subrogation. Assignor does hereby bind itself and its successors and assigns to warrant and forever defend all and singular Defensible Title to the Conveyed Interests unto Assignee and its successors and assigns against every Person whomsoever lawfully claiming or to claim the same or any part thereof by, through or under Assignor, but not otherwise, subject, however, to the Permitted Encumbrances (the “Special Warranty”). The Special Warranty shall survive until the first (1st) anniversary of the Closing Date (including as to all claims made thereunder prior to such anniversary). Assignee’s sole remedy for breaches of such Special Warranty shall be in accordance with and subject to Section 9 of the Purchase Agreement and are subject to the limitations set forth in the Purchase Agreement. Assignor hereby assigns to Assignee, and Assignee is subrogated to, all rights, claims and causes of action under title warranties given or made by Assignor’s predecessors in interest with respect to the Conveyed Interests, and Assignee is specifically subrogated to all rights which Assignor may have against such predecessors in interest with respect to the Conveyed Interests, to the extent Assignor may legally transfer such rights and grant such subrogation.
Section 4.Disclaimers.
(a)EXCEPT AS SET FORTH IN SECTION 5 OF THE PURCHASE AGREEMENT AND THE SPECIAL WARRANTY IN THIS ASSIGNMENT, (I) ASSIGNOR MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS, STATUTORY OR IMPLIED, REGARDING THE CONVEYED INTERESTS AND (II) ASSIGNEE HAS NOT RELIED
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UPON, AND ASSIGNOR EXPRESSLY DISCLAIMS ALL LIABILITY AND RESPONSIBILITY FOR ANY REPRESENTATION, WARRANTY, STATEMENT OR INFORMATION REGARDING THE CONVEYED INTERESTS MADE OR COMMUNICATED (ORALLY OR IN WRITING) TO ASSIGNEE OR ANY OTHER MEMBER OF THE ASSIGNEE INDEMNIFIED PARTIES (INCLUDING WITHOUT LIMITATION ANY OPINION, INFORMATION, DOCUMENTS. MATERIALS PROJECTION OR ADVICE THAT MAY HAVE BEEN PROVIDED BY ANY FINANCIAL ADVISOR FOR ASSIGNOR OR ANY OTHER MEMBER OF THE ASSIGNOR INDEMNIFIED PARTIES, CONTAINED IN OR PROVIDED IN VIRTUAL “DATA ROOMS”, MANAGEMENT PRESENTATIONS OR SUPPLEMENTAL DUE DILIGENCE INFORMATION PROVIDED BY ASSIGNOR OR DISCUSSIONS OR ACCESS TO MANAGEMENT OF ASSIGNOR, OR ANY OTHER FORM, IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT).
(b)EXCEPT AS SET FORTH IN SECTION 5 OF THE PURCHASE AGREEMENT AND THE SPECIAL WARRANTY IN THIS ASSIGNMENT, AND WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, ASSIGNOR DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS, STATUTORY OR IMPLIED, AS TO (I) TITLE TO ANY OF THE CONVEYED INTERESTS, (II) THE CONTENTS, CHARACTER OR NATURE OF ANY REPORT OF ANY PETROLEUM ENGINEERING CONSULTANT, OR ANY ENGINEERING, GEOLOGICAL OR SEISMIC DATA OR INTERPRETATION, RELATING TO THE CONVEYED INTERESTS, (III) THE CONTENTS, CHARACTER, OR NATURE, ACCURACY, COMPLETENESS, OR MATERIALITY OF ANY RECORDS, INFORMATION, DATA, OR OTHER MATERIALS (WRITTEN OR ORAL) NOW, HERETOFORE OR HEREAFTER FURNISHED TO ASSIGNEE BY OR ON BEHALF OF ASSIGNOR; (IV) THE QUANTITY, QUALITY OR RECOVERABILITY OF HYDROCARBONS IN OR FROM THE CONVEYED INTERESTS, (V) ANY ESTIMATES OF THE VALUE OF THE CONVEYED INTERESTS OR FUTURE REVENUES TO BE GENERATED BY THE CONVEYED INTERESTS, (VI) THE PRODUCTION OF OR ABILITY TO PRODUCE HYDROCARBONS FROM THE CONVEYED INTERESTS, (VII) ANY ESTIMATES OF OPERATING COSTS AND CAPITAL REQUIREMENTS FOR ANY WELL, LEASE, OPERATION, OR PROJECT, (VIII) THE MAINTENANCE, REPAIR, CONDITION, QUALITY, SUITABILITY, DESIGN OR MARKETABILITY OF THE CONVEYED INTERESTS, (IX) THE CONTENT, CHARACTER OR NATURE OF ANY DESCRIPTIVE MEMORANDUM, REPORTS, BROCHURES, CHARTS OR STATEMENTS PREPARED BY THIRD PARTIES, (X) ANY OTHER MATERIALS OR INFORMATION THAT MAY HAVE BEEN MADE AVAILABLE OR COMMUNICATED TO ASSIGNEE OR ITS AFFILIATES, OR ITS OR THEIR EMPLOYEES, AGENTS, OFFICERS, DIRECTORS, MEMBERS, MANAGERS, EQUITY OWNERS, CONSULTANTS, REPRESENTATIVES OR ADVISORS IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY DISCUSSION OR PRESENTATION RELATING THERETO, AND (XI) ANY IMPLIED OR EXPRESS WARRANTY OF FREEDOM FROM PATENT OR TRADEMARK INFRINGEMENT. EXCEPT AS AND TO THE LIMITED EXTENT REPRESENTED OTHERWISE AS SET FORTH IN SECTION 5 OF THE PURCHASE AGREEMENT AND THE SPECIAL WARRANTY IN THIS ASSIGNMENT, AND WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, ASSIGNOR FURTHER DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS, STATUTORY OR IMPLIED, OF
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MERCHANTABILITY, FREEDOM FROM LATENT VICES OR DEFECTS, FITNESS FOR A PARTICULAR PURPOSE OR CONFORMITY TO MODELS OR SAMPLES OF MATERIALS OF ANY OF THE CONVEYED INTERESTS, RIGHTS OF A PURCHASER UNDER APPROPRIATE STATUTES TO CLAIM DIMINUTION OF CONSIDERATION OR RETURN OF THE PURCHASE PRICE, IT BEING EXPRESSLY UNDERSTOOD AND AGREED BY THE PARTIES THAT ASSIGNEE SHALL BE DEEMED TO BE OBTAINING THE CONVEYED INTERESTS IN THEIR PRESENT STATUS, CONDITION AND STATE OF REPAIR, “AS IS” AND “WHERE IS” WITH ALL FAULTS OR DEFECTS (KNOWN OR UNKNOWN, LATENT, DISCOVERABLE OR UNDISCOVERABLE), AND THAT ASSIGNEE HAS MADE OR CAUSED TO BE MADE SUCH INSPECTIONS AS ASSIGNEE DEEMS APPROPRIATE.
(c)EXCEPT AS AND TO THE LIMITED EXTENT EXPRESSLY REPRESENTED OTHERWISE IN SECTION 5(E) OF THE PURCHASE AGREEMENT, (I) ASSIGNOR HAS NOT 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 THE PROTECTION OF HUMAN HEALTH, SAFETY, NATURAL RESOURCES OR THE ENVIRONMENT, OR ANY OTHER ENVIRONMENTAL CONDITION OF THE CONVEYED INTERESTS, (II) NOTHING IN THIS AGREEMENT OR OTHERWISE SHALL BE CONSTRUED AS SUCH A REPRESENTATION OR WARRANTY, AND (III) ASSIGNEE SHALL BE DEEMED TO BE TAKING THE CONVEYED INTERESTS “AS IS” AND “WHERE IS” WITH ALL FAULTS FOR PURPOSES OF THEIR ENVIRONMENTAL CONDITION AND THAT ASSIGNEE HAS MADE OR CAUSED TO BE MADE SUCH ENVIRONMENTAL INSPECTIONS AS ASSIGNEE DEEMS APPROPRIATE.
(d)THE PARTIES AGREE THAT, TO THE EXTENT REQUIRED BY APPLICABLE LAW TO BE EFFECTIVE, THE DISCLAIMERS OF CERTAIN REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS SECTION 4 ARE “CONSPICUOUS” DISCLAIMERS FOR THE PURPOSE OF ANY APPLICABLE LAW.
Section 5.Certain Definitions. For purposes of this Assignment, the following capitalized terms shall have the meaning set forth below:
“Burden” means any and all royalties (including lessor’s royalty), overriding royalties, production payments, carried interests, net profits interests, reversionary interests and other burdens upon, measured by or payable out of production (excluding, for the avoidance of doubt, any taxes).
“Contractual Depth” means the Eagle Ford Shale Formation; provided that if a Well is producing from a greater depth than the Eagle Ford Shale Formation as of the Effective Time, the Contractual Depth for that specific Well shall also include all such greater depths at which there are open perforations for such applicable Well.
“Defensible Title” means, with respect to a Conveyed Interest, title of Assignor therein and thereto that, other than Permitted Encumbrances, (a) as to each Well, limited to the Contractual Depth for such Well, (i) entitles Assignor to receive not less than the Net Revenue Interest as set
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forth in Appendix II to the Purchase Agreement for such Well, except for any decreases required to allow other Working Interest owners to make up wellhead imbalances or pipelines to make up pipeline imbalances, as applicable, and (ii) obligates Assignor to bear not more than the Working Interest as set forth in Appendix II to the Purchase Agreement for such Well, except for any such increases that are accompanied by a proportionate increase in Assignor’s Net Revenue Interest, and (b) as to each Conveyed Interest, is free and clear of any and all Encumbrances created by, through, or under Assignor and/or its Affiliates.
“Eagle Ford Shale Formation” means the stratigraphic equivalent of the formation which is the entire correlative interval from 10,294 feet to 10,590 feet as shown on the log of the EOG Resources, Inc. – Milton Unit, Well No. 1 (API No. 42-255-31608), Section 64, John Randon Survey, A-247, Karnes County, Texas.
“Encumbrance” means any lien, mortgage, security interest, pledge, charge or similar encumbrance.
“Excluded Information” means (a) all legal records and files of Assignor constituting work product of, and attorney-client communications with, legal counsel (but excluding title opinions); (b) any records or information relating to the offer, negotiation or sale of the Conveyed Interests, including bids received from and records of negotiations with third parties; and (c) any records, information, data, software and licenses relating to the Excluded Assets.
“Fixtures, Equipment, and Inventory” means all (i) fixtures, equipment, physical facilities, surface and subsurface machinery, and other personal property, including all tanks, boilers, buildings, improvements, injection facilities, saltwater disposal facilities, compression facilities, gathering systems, treating and processing facilities, Christmas trees, derricks, platforms, separators, compressors, gun barrels, SCADA and other radio equipment and licenses associated therewith, and similar items (including all facilities, pipelines, fixtures, equipment, and other personal property governed by, or owned, developed, or operated pursuant to, that certain Barnhart Facility Agreement dated May 8, 2013, by and between Marathon Oil EF LLC and SEP Holdings III, LLC, as amended), and (ii) rolling stock, pipes, casing, tubing, tubulars, fittings, and other spare parts, supplies, tools, and materials held as operating inventory.
“Net Revenue Interest” means the interest (expressed as a percentage or decimal fraction), in and to all Hydrocarbons produced and saved or sold from or allocated to the relevant Well, subject to any reservations, limitations, or depth restrictions described herein after giving effect to all Burdens.
“Permitted Encumbrances” means: (i) the terms and conditions of all Leases; (ii) liens for taxes not yet due or delinquent, (iii) all rights to consent by, required notices to, filings with, or other actions by Governmental Authorities in connection with the sale or conveyance of properties such as the Conveyed Interests that are customarily obtained after the assignment of properties similar to the Conveyed Interests; (iv) conventional rights of reassignment; (v) all applicable Laws and all rights reserved to or vested in any Governmental Authority: (i) to control or regulate any Well or Lease, in any manner; (ii) by the terms of any right, power, franchise, grant, license or permit, or by any provision of applicable Law, to terminate such right, power, franchise, grant, license or permit or to purchase, condemn, expropriate or recapture or to designate
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a purchaser of any of the Wells or Leases; (iii) to use such property in a manner which does not materially impair the use of such property for the purposes for which it is currently owned and operated; or (iv) to enforce any obligations or duties affecting the Wells or Leases, to any Governmental Authority with respect to any right, power, franchise, grant, license or permit; (vi) rights of a common owner of any interest in rights-of-way, permits or easements held by Assignor and such common owner as tenants in common or through common ownership, to the extent the foregoing neither individually nor in the aggregate causing any Impermissible Effects; (vii) easements, conditions, covenants, restrictions, servitudes, permits, rights-of-way, surface leases, and other rights in the Wells or Leases, for the purpose of operations, facilities, roads, alleys, highways, railways, pipelines, transmission lines, transportation lines, distribution lines, power lines, telephone lines, removal of timber, grazing, logging operations, canals, ditches, reservoirs and other like purposes, or for the joint or common use of real estate, rights-of-way, facilities and equipment, to the extent the foregoing neither individually nor in the aggregate causing any Impermissible Effects; (viii) vendors, carriers, warehousemen’s, repairmen’s, mechanics’, workmen’s, materialmen’s, employee’s, construction or other like liens arising by operation of Law in the ordinary course of business or incident to the construction or improvement of any Well in respect of obligations which are not yet due or delinquent; (ix) liens created under operating agreements, by operation of Tex. Prop. Code § 56.002, or by operation of any other Law in respect of obligations that are not yet due or delinquent; (x) the terms and conditions of any Applicable Contracts to the extent the foregoing neither individually nor in the aggregate cause any Impermissible Effects (excluding, for clarity, application of customary non-consent provisions in operating agreements); (xi) any mortgage lien on a Third Party’s fee estate or mineral fee estate from which title to the relevant Lease is derived which (i) predates the creation of the Lease and which is not currently subject to foreclosure or other enforcement proceedings by the holder of the mortgage lien or (ii) has been subordinated to the applicable Lease; and (xii) all other Encumbrances, instruments, obligations, defects and irregularities affecting the Wells that neither individually nor in the aggregate (i) materially detract from the value of or materially interfere with the use or ownership of the Wells, subject thereto or affected thereby (as currently used or owned), (ii) operate to reduce the Net Revenue Interest of Assignor with respect to any Well to an amount less than the Net Revenue Interest set forth in Appendix II to the Purchase Agreement for such Well with respect to the Contractual Depth for such Well, and/or (iii) obligate Assignor to bear a Working Interest with respect to any Well with respect to the Contractual Depth for such Well in any amount greater than the Working Interest set forth in Appendix II to the Purchase Agreement for such Well (unless the Net Revenue Interest for such Well with respect to the Contractual Depth for such Well is greater than the Net Revenue Interest set forth in Appendix II to the Purchase Agreement in the same or greater proportion as any increase in such Working Interest) (each of clause (I), (II), and (iii) in this subpart (xii) an “Impermissible Effect”).
“Working Interest” means the percentage of costs and expenses associated with the exploration, drilling, development, operation and abandonment of any Wells required to be borne with respect thereto, without giving effect to any Burdens.
Section 6.Assumed Obligations. Subject to the terms of the Purchase Agreement, Assignee assumes and hereby agrees to fulfill, perform, pay and discharge (or cause to be fulfilled, performed, paid and discharged) all of the Assumed Obligations.
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Section 7.Further Assurances. The Parties shall execute and deliver, or shall cause to be executed and delivered from time to time, such further instruments of conveyance and transfer, and shall take such other actions as a Party may reasonably request, to convey and deliver the Conveyed Interests to Assignee, to perfect Assignee’s title thereto, and to accomplish the orderly transfer of the Conveyed Interests to Assignee in the manner contemplated by this Assignment and the Purchase Agreement.
Section 8.Purchase Agreement. This Assignment is subject to and delivered under the terms and conditions of the Purchase Agreement. If any provision of this Assignment is construed to conflict with any provision of the Purchase Agreement, the provisions of the Purchase Agreement shall be deemed controlling to the extent of that conflict; provided, however, that third parties may conclusively rely on this Assignment to vest title to the Conveyed Interests in Assignee.
Section 9.Successors and Assigns. This Assignment shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns.
Section 10.Governing Law; Jurisdiction; Venue; Jury Waiver. THIS ASSIGNMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS ASSIGNMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THE RIGHTS, DUTIES AND THE LEGAL RELATIONS AMONG THE PARTIES HERETO AND THERETO SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, EXCLUDING ANY CONFLICTS OF LAW RULE OR PRINCIPLE THAT MIGHT REFER CONSTRUCTION OF SUCH PROVISIONS TO THE LAWS OF ANOTHER JURISDICTION. BOTH PARTIES HERETO CONSENT TO THE EXERCISE OF JURISDICTION IN PERSONAM BY THE FEDERAL COURTS OF THE UNITED STATES LOCATED IN HARRIS COUNTY, TEXAS OR THE STATE COURTS LOCATED IN HARRIS COUNTY, TEXAS FOR ANY ACTION ARISING OUT OF THIS ASSIGNMENT OR ANY TRANSACTION CONTEMPLATED HEREBY. ALL ACTIONS OR PROCEEDINGS WITH RESPECT TO, ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO, OR FROM THIS ASSIGNMENT OR ANY TRANSACTION CONTEMPLATED HEREBY SHALL BE EXCLUSIVELY LITIGATED IN SUCH COURTS DESCRIBED ABOVE HAVING SITES IN HOUSTON, TEXAS AND EACH PARTY IRREVOCABLY SUBMITS TO THE JURISDICTION OF SUCH COURTS SOLELY IN RESPECT OF ANY PROCEEDING ARISING OUT OF OR RELATED TO THIS ASSIGNMENT. THE PARTIES HERETO HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER PARTY AGAINST ANOTHER IN ANY MATTER WHATSOEVER ARISING OUT OF OR IN RELATION TO OR IN CONNECTION WITH THIS ASSIGNMENT.
Section 11.Severability. If any term or other provision of this Assignment is invalid, illegal, or incapable of being enforced by any rule of law or public policy, all other terms and provisions of this Assignment shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any adverse manner to either Party. Upon any such determination, the Parties shall negotiate in good faith to modify this Assignment so as to effect the original intent of the Parties as closely as possible in an
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acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.
Section 12.Counterparts. This Assignment may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an original instrument, but all of such counterparts shall constitute for all purposes one agreement. Any signature hereto delivered by a Party by electronic transmission shall be deemed an original signature hereto.
Section 13.Interpretation. References in this Assignment to sections and exhibits are to the sections of and exhibits to this Assignment unless otherwise specified. The words “hereby”, “hereof”, “herein”, “hereunder”, and similar words refer to all of this Assignment, including the exhibits, and not to any particular Section or other subdivision of this Assignment. The words “include”, “includes”, and “including” are deemed to be followed by “without limitation” whether or not they are in fact followed by such words or words of similar import. The word “or” is not necessarily exclusive.
[Signature and acknowledgement pages follow.]
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EXECUTED by each Party on the Closing Date, but effective for all purposes as of the Effective Time.
ASSIGNOR:
SEP HOLDINGS IV, LLC
By: | Evolve Transition Infrastructure LP, |
By: | Evolve Transition Infrastructure GP, LLC |
By:/s/ Charles C. Ward
Name: Charles C. Ward
Title: Chief Financial Officer
STATE OF TEXAS§
§
COUNTY OF HARRIS§
Subscribed, sworn to and acknowledged before me on this 30th day of April, 2021 by Charles C. Ward, to me personally known, who, being by me duly sworn, did say that he is the Chief Financial Officer and Secretary of EVOLVE TRANSITION INFRASTRUCTURE GP, LLC, a Delaware limited liability company and the general partner of EVOLVE TRANSITION INFRASTRUCTURE LP, a Delaware limited partnership and the sole member SEP HOLDING IV, LLC, a Delaware limited liability company, and that said instrument was signed on behalf of said limited liability company.
Notary Public: /s/ Jeana L. Gonzales
Printed Name: Jeana L. Gonzales
My Commission Number: 5/17/2022
Commission Number: 746335-4
Signature and Acknowledgement Page to
Assignment, Bill of Sale and Conveyance
ASSIGNEE:
WESTHOFF PALMETTO LP
By: | Westhoff Palmetto GP LLC, |
By:/s/ Paul F. Barnhart, III
Paul F. Barnhart, III
as sole member
STATE OF TEXAS§
§
COUNTY OF HARRIS§
Subscribed, sworn to and acknowledged before me on this ___ day of April, 2021 by Paul F. Barnhart, III, to me personally known, who, being by me duly sworn, did say that he is the sole member of WESTHOFF PALMETTO GP LLC, a Delaware limited liability company and the general partner of WESTHOFF PALMETTO LP, a Delaware limited partnership, and that said instrument was signed on behalf of said limited partnership.
/s/ Kathy Jean Fogle
Notary Public
Printed Name: Kathy Jean Fogle
My Commission Expires: 8/14/2024
Commission Number: 665239
Signature and Acknowledgement Page to
Assignment, Bill of Sale and Conveyance
EXHIBIT A
Attached to and made a part of that certain assignment, Bill of Sale and Conveyance, Dated effective March 1, 2021, by and between SEP Holdings IV, LLC, as Assignor and Westhoff Palmetto LP, as Assignee
Wells
API Number | Operator Name | Lease Name | Well # | County | State |
---|---|---|---|---|---|
42-177-32097-0000 | MARATHON OIL EF LLC | BARNHART (EF) | 1H | Gonzales | Texas |
42-177-32100-0201 | MARATHON OIL EF LLC | BARNHART (EF) | 2H | Gonzales | Texas |
42-177-32098-0000 | MARATHON OIL EF LLC | BARNHART (EF) | 3H | Gonzales | Texas |
42-177-32148-0100 | MARATHON OIL EF LLC | BARNHART (EF) | 4H | Gonzales | Texas |
42-177-32277-0000 | MARATHON OIL EF LLC | BARNHART (EF) | 5H | Gonzales | Texas |
42-177-32278-0000 | MARATHON OIL EF LLC | BARNHART (EF) | 6H | Gonzales | Texas |
42-177-32494-0000 | MARATHON OIL EF LLC | BARNHART (EF) | 7H | Gonzales | Texas |
42-177-32556-0000 | MARATHON OIL EF LLC | BARNHART (EF) | 9H | Gonzales | Texas |
42-177-32576-0000 | MARATHON OIL EF LLC | BARNHART (EF) | 10H | Gonzales | Texas |
42-177-32577-0000 | MARATHON OIL EF LLC | BARNHART (EF) | 11H | Gonzales | Texas |
42-177-32881-0000 | MARATHON OIL EF LLC | BARNHART (EF) | 12H | Gonzales | Texas |
42-177-32880-0000 | MARATHON OIL EF LLC | BARNHART (EF) | 13H | Gonzales | Texas |
42-177-32622-0000 | MARATHON OIL EF LLC | BARNHART (EF) | 14H | Gonzales | Texas |
42-177-32621-0000 | MARATHON OIL EF LLC | BARNHART (EF) | 15H | Gonzales | Texas |
42-177-32690-0000 | MARATHON OIL EF LLC | BARNHART (EF) | 18H | Gonzales | Texas |
42-177-32696-0000 | MARATHON OIL EF LLC | BARNHART (EF) | 19H | Gonzales | Texas |
42-177-32836-0000 | MARATHON OIL EF LLC | BARNHART (EF) | 20H | Gonzales | Texas |
42-177-32837-0100 | MARATHON OIL EF LLC | BARNHART (EF) | 21H | Gonzales | Texas |
42-177-32730-0100 | MARATHON OIL EF LLC | BARNHART (EF) | 23H | Gonzales | Texas |
42-177-32753-0000 | MARATHON OIL EF LLC | BARNHART (EF) | 24H | Gonzales | Texas |
42-177-32731-0000 | MARATHON OIL EF LLC | BARNHART (EF) | 25H | Gonzales | Texas |
42-177-32766-0100 | MARATHON OIL EF LLC | BARNHART (EF) | 30H | Gonzales | Texas |
42-177-33040-0000 | MARATHON OIL EF LLC | BARNHART (EF) | 37H | Gonzales | Texas |
Exhibit A – Page 1 of 3
API Number | Operator Name | Lease Name | Well # | County | State |
---|---|---|---|---|---|
42-177-33041-0000 | MARATHON OIL EF LLC | BARNHART (EF) | 38H | Gonzales | Texas |
42-177-32924-0000 | MARATHON OIL EF LLC | BARNHART (EF) | 44H | Gonzales | Texas |
42-177-32926-0000 | MARATHON OIL EF LLC | BARNHART (EF) | 50H | Gonzales | Texas |
42-177-33505-0000 | MARATHON OIL EF LLC | BARNHART (EF) | 59H | Gonzales | Texas |
42-177-33263-0100 | MARATHON OIL EF LLC | BARNHART (EF) | 60H | Gonzales | Texas |
42-177-33503-0000 | MARATHON OIL EF LLC | BARNHART (EF) | 61H | Gonzales | Texas |
42-177-33504-0000 | MARATHON OIL EF LLC | BARNHART (EF) | 501H | Gonzales | Texas |
42-177-33506-0000 | MARATHON OIL EF LLC | BARNHART (EF) | 502H | Gonzales | Texas |
42-177-32638-0000 | MARATHON OIL EF LLC | BARNHART (EF) A | 1H | Gonzales | Texas |
42-177-32640-0100 | MARATHON OIL EF LLC | BARNHART (EF) A | 2H | Gonzales | Texas |
42-177-32883-0100 | MARATHON OIL EF LLC | BARNHART (EF) B | 1H | Gonzales | Texas |
42-177-32761-0000 | MARATHON OIL EF LLC | BARNHART (EF) C | 1H | Gonzales | Texas |
42-177-32738-0100 | MARATHON OIL EF LLC | BARNHART (EF) C | 2H | Gonzales | Texas |
42-177-32763-0000 | MARATHON OIL EF LLC | BARNHART (EF) C | 3H | Gonzales | Texas |
42-177-32757-0000 | MARATHON OIL EF LLC | BARNHART (EF) C | 4H | Gonzales | Texas |
42-177-33156-0000 | MARATHON OIL EF LLC | BARNHART (EF) D | 1H | Gonzales | Texas |
42-177-33161-0000 | MARATHON OIL EF LLC | BARNHART (EF) D | 2H | Gonzales | Texas |
42-177-33088-0000 | MARATHON OIL EF LLC | BARNHART (EF) D | 3H | Gonzales | Texas |
42-177-33160-0000 | MARATHON OIL EF LLC | BARNHART (EF) D | 4H | Gonzales | Texas |
42-177-33162-0000 | MARATHON OIL EF LLC | BARNHART (EF) D | 5H | Gonzales | Texas |
42-177-33089-0000 | MARATHON OIL EF LLC | BARNHART (EF) D | 6H | Gonzales | Texas |
42-177-33459-0000 | MARATHON OIL EF LLC | BARNHART (EF) D | 7H | Gonzales | Texas |
42-177-33470-0000 | MARATHON OIL EF LLC | BARNHART (EF) D | 8H | Gonzales | Texas |
42-177-32976-0000 | MARATHON OIL EF LLC | BARNHART (EF) E | 3H | Gonzales | Texas |
42-177-32977-0000 | MARATHON OIL EF LLC | BARNHART (EF) E | 4H | Gonzales | Texas |
42-177-32978-0000 | MARATHON OIL EF LLC | BARNHART (EF) E | 5H | Gonzales | Texas |
42-177-32984-0000 | MARATHON OIL EF LLC | BARNHART (EF) E | 6H | Gonzales | Texas |
Exhibit A – Page 2 of 3
API Number | Operator Name | Lease Name | Well # | County | State |
---|---|---|---|---|---|
42-177-32985-0000 | MARATHON OIL EF LLC | BARNHART (EF) E | 7H | Gonzales | Texas |
42-177-32986-0000 | MARATHON OIL EF LLC | BARNHART (EF) E | 8H | Gonzales | Texas |
42-177-33178-0100 | MARATHON OIL EF LLC | BARNHART (EF) G | 5H | Gonzales | Texas |
42-177-32884-0000 | MARATHON OIL EF LLC | BARNHART (EF) H | 1H | Gonzales | Texas |
42-177-33147-0000 | MARATHON OIL EF LLC | BARNHART (EF) J | 1H | Gonzales | Texas |
42-177-33148-0000 | MARATHON OIL EF LLC | BARNHART (EF) J | 2H | Gonzales | Texas |
42-177-33149-0000 | MARATHON OIL EF LLC | BARNHART (EF) J | 3H | Gonzales | Texas |
42-177-33199-0100 | MARATHON OIL EF LLC | BARNHART (EF) J | 4H | Gonzales | Texas |
42-177-33085-0000 | MARATHON OIL EF LLC | BARNHART (EF) K | 1H | Gonzales | Texas |
42-177-33086-0000 | MARATHON OIL EF LLC | BARNHART (EF) K | 2H | Gonzales | Texas |
42-177-33087-0000 | MARATHON OIL EF LLC | BARNHART (EF) K | 3H | Gonzales | Texas |
42-177-33082-0000 | MARATHON OIL EF LLC | BARNHART (EF) K | 5H | Gonzales | Texas |
42-177-33083-0000 | MARATHON OIL EF LLC | BARNHART (EF) K | 6H | Gonzales | Texas |
42-177-33084-0000 | MARATHON OIL EF LLC | BARNHART (EF) K | 7H | Gonzales | Texas |
42-177-33337-0000 | MARATHON OIL EF LLC | BARNHART (EF) K | 8H | Gonzales | Texas |
42-177-33336-0000 | MARATHON OIL EF LLC | BARNHART (EF) K | 9H | Gonzales | Texas |
42-177-33352-0000 | MARATHON OIL EF LLC | BARNHART (EF) K | 10H | Gonzales | Texas |
42-177-33164-0100 | MARATHON OIL EF LLC | BARNHART (EF) L | 1H | Gonzales | Texas |
42-177-32531-0000 | LONESTAR OPERATING LLC | WARD E | 1H | Gonzales | Texas |
42-177-32882-0000 | LONESTAR OPERATING LLC | WARD E | 2H | Gonzales | Texas |
End of Exhibit A
Exhibit A – Page 3 of 3
Exhibit B
Attached to and made a part of that certain Assignment, Bill of Sale and Conveyance, dated effective March 1, 2021, by and between SEP Holdings IV, LLC, as Assignor, and Westhoff Palmetto LP, as Assignee
Leases
Lessor | Lessee | Lease Date | Book | Page | File No | County | State | |
---|---|---|---|---|---|---|---|---|
PILGRIM LAKE, LTD. | SEP HOLDINGS II LLC | 08/25/2008 | 269 | 759 | 61055 | DeWitt | Texas | |
PILGRIM LAKE, LTD. | SEP HOLDINGS II LLC | 08/25/2008 | 989 | 143 | 237576 | Gonzales | Texas | |
BUNCH, CANDACE SCOTT | MARATHON OIL EF LLC | 04/04/2013 | 1123 | 434 | 265852 | Gonzales | Texas | |
THOMPSON, BRENDA STRAIT, ET AL | MARATHON OIL EF LLC | 02/07/2013 | 1118 | 755 | 265054 | Gonzales | Texas | |
JACKSON, CHARLES LEE, LIFE ESTATE | MARATHON OIL EF LLC | 02/10/2013 | 1118 | 750 | 265053 | Gonzales | Texas | |
BROWN, EMMET, ET AL, BY & THROUGH RECEIVERSHIP | MARATHON OIL EF LLC | 08/07/2013 | 1140 | 370 | 269112 | Gonzales | Texas | |
BARNHART SALT CREEK, LTD. | SEP HOLDINGS II LLC | 08/25/2008 | 989 | 138 | 237575 | Gonzales | Texas | |
BARNHART GRANDCHILDREN'S DEC. 1992 TRUST | SEP HOLDINGS II LLC | 08/25/2008 | 989 | 134 | 237574 | Gonzales | Texas | |
SANDIES CREEK, LTD. | SEP HOLDINGS II LLC | 08/25/2008 | 989 | 129 | 237573 | Gonzales | Texas | |
WARD, ESMA JEAN, INDV. & TTEE | HILCORP ENERGY I L.P | 03/05/2010 | 1020 | 205 | 244216 | Gonzales | Texas | |
LORD, ROBERT J., ET UX | AUGUSTUS MAY ENERGY INC. | 12/23/2008 | 1000 | 440 | 239998 | Gonzales | Texas | |
DENNIS H. & OPAL LEE GILL TRUST | MODERN EXPLORATION INC. | 09/12/2008 | 992 | 237 | 238181 | Gonzales | Texas | |
MILLER, WILLIAM H., ET UX | MODERN EXPLORATION INC. | 09/12/2008 | 991 | 339 | 237984 | Gonzales | Texas | |
MCCASKILL, DONNA JAN | THOMAS SCHLEIER | 09/20/2010 | 1044 | 283 | 249250 | Gonzales | Texas | |
HANDLER, SYLVIA ANN RASCHKE | THOMAS SCHLEIER | 09/20/2010 | 1044 | 286 | 249251 | Gonzales | Texas |
Exhibit B – Page 1 of 2
Lessor | Lessee | Lease Date | Book | Page | File No | County | State | |
---|---|---|---|---|---|---|---|---|
SIMPSON, LYNNE MARIE RASCHKE | THOMAS SCHLEIER | 09/20/2010 | 1044 | 280 | 249249 | Gonzales | Texas | |
ROGER D. KRAUSE FAMILY PARTNER | MARATHON OIL EF LLC | 05/21/2012 | 1098 | 93 | 0260455 | Gonzales | Texas | |
ESTATE OF WILLIAM A KRAUSE, DE | MARATHON OIL EF LLC | 06/19/2012 | 1098 | 98 | 0260456 | Gonzales | Texas | |
WEINBERG, CAROLYN JUDITH ALPERT | MARATHON OIL EF LLC | 05/24/2012 | 1100 | 60 | 0261150 | Gonzales | Texas | |
BRY, MARVIN | MARATHON OIL EF LLC | 05/16/2012 | 1098 | 103 | 0260457 | Gonzales | Texas | |
RUTSTEIN, JUDY BRY | MARATHON OIL EF LLC | 05/16/2012 | 1098 | 108 | 0260458 | Gonzales | Texas | |
MILLS, JAMES ROYCE, ET UX | HILCORP ENERGY I, L.P. | 04/22/2010 | 1022 | 189 | 244683 | Gonzales | Texas | |
NIXON-SMILEY CONSOLIDATED ISD | MARATHON OIL EF LLC | 12/12/2012 | 1115 | 34 | 264334 | Gonzales | Texas | |
KOENNING, ROY ALLEN | EOG RESOURCES, INC. | 02/10/2009 | 999 | 837 | 239874 | Gonzales | Texas | |
KOENNING, ROY ALLEN | EOG RESOURCES, INC. | 02/10/2009 | 434 | 1-3 | 89879 | DeWitt | Texas | |
JAMES L. COCKRUM, IND & AS EXE | AUGUSTUS MAY ENERGY, INC. | 12/23/2008 | 1003 | 176 | 240544 | Gonzales | Texas | |
LORD, CARL THOMAS | AUGUSTUS MAY ENERGY, INC. | 12/23/2008 | 1002 | 450 | 240544 | Gonzales | Texas | |
LORD, GEORGE EUGENE | AUGUSTUS MAY ENERGY, INC. | 12/23/2008 | 1002 | 448 | 240408 | Gonzales | Texas | |
SAGER, JOHN CLAY, ET UX | AUGUSTUS MAY ENERGY, INC. | 12/23/2008 | 1002 | 439 | 240406 | Gonzales | Texas | |
LORD, ROBERT J., ET UX | AUGUSTUS MAY ENERGY, INC. | 12/23/2008 | 1002 | 452 | 240410 | Gonzales | Texas | |
LORD, CARL THOMAS, ET AL | AUGUSTUS MAY ENERGY, INC. | 12/23/2008 | 1002 | 441 | 240407 | Gonzales | Texas | |
HEATHER, SARAH L. | AUGUSTUS MAY ENERGY, INC. | 12/23/2008 | 1003 | 174 | 240543 | Gonzales | Texas |
End of Exhibit B
Exhibit B – Page 2 of 2
EXHIBIT C
Attached to and made a part of that certain Assignment, Bill Of Sale And Conveyance, dated Effective March 1, 2021, by and between SEP Holdings IV, LLC, as Assignor, and Westhoff Palmetto LP, as Assignee
APPLICABLE CONTRACTS
Each of the following contracts, agreements, and instruments, including all amendments, supplements, and/ or restatements thereof or thereto, as applicable:
1. | Barnhart Facility Agreement dated May 8, 2013, by and between Marathon Oil EF LLC and SEP Holdings III, LLC. |
2. | Marketing Agreement dated May 8, 2013, by and between Marathon Oil EF LLC and SEP Holdings III, LLC. |
3. | Participation Agreement dated December 28, 2009, by and between SEP Holdings II, LLC as Seller, and Hilcorp Energy I, L.P., as Buyer, as amended. |
4. | Joint Operating Agreement dated December 28, 2009, by and between Hilcorp Energy Company, as Operator, and Hilcorp Energy I, L.P., and SEP Holdings II, LLC, as Non-Operators, as amended. |
5. | Any and all pooling, unitization, and communitization orders, declarations, and agreements in effect with respect to any of the Acquired Leases, including all interests in the units created thereby. |
END OF EXHIBIT C
Exhibit C – Page 1 of 1
APPENDIX II
Attached to and made a part of that certain Purchase Agreement, dated April 30, 2021, by and between Sep Holdings IV, LLC, as Assignor, and Westhoff Palmetto LP, as Assignee
WELLS
All of the following in Gonzalez County, Texas:
# | WELL NAME | WI | NRI |
---|---|---|---|
1. | BARNHART (EF) 10H | 0.47500000 | 0.34200000 |
2. | BARNHART (EF) 11H | 0.47500000 | 0.34200000 |
3. | BARNHART (EF) 12H | 0.47500000 | 0.34200000 |
4. | BARNHART (EF) 13H | 0.47500000 | 0.34200000 |
5. | BARNHART (EF) 14H | 0.47500000 | 0.34200000 |
6. | BARNHART (EF) 15H | 0.47500000 | 0.34200000 |
7. | BARNHART (EF) 18H | 0.47500000 | 0.34200000 |
8. | BARNHART (EF) 19H | 0.47500000 | 0.34200000 |
9. | BARNHART (EF) 1H | 0.47500000 | 0.33010000 |
10. | BARNHART (EF) 20H | 0.47500000 | 0.34200000 |
11. | BARNHART (EF) 21H | 0.47500000 | 0.34200000 |
12. | BARNHART (EF) 23H | 0.47500000 | 0.34200000 |
13. | BARNHART (EF) 24H | 0.47500000 | 0.34200000 |
14. | BARNHART (EF) 25H | 0.47500000 | 0.34200000 |
15. | BARNHART (EF) 2H | 0.47500000 | 0.33010000 |
16. | BARNHART (EF) 30H | 0.47500000 | 0.34200000 |
17. | BARNHART (EF) 37H | 0.47500000 | 0.34200000 |
18. | BARNHART (EF) 38H | 0.47500000 | 0.34200000 |
19. | BARNHART (EF) 3H | 0.47500000 | 0.33010000 |
20. | BARNHART (EF) 44H | 0.47500000 | 0.34200000 |
21. | BARNHART (EF) 4H | 0.47500000 | 0.34200000 |
22. | BARNHART (EF) 501H | 0.47500000 | 0.34200000 |
23. | BARNHART (EF) 502H | 0.47500000 | 0.34200000 |
24. | BARNHART (EF) 50H | 0.47500000 | 0.34200000 |
25. | BARNHART (EF) 59H | 0.47500000 | 0.34200000 |
26. | BARNHART (EF) 5H | 0.47500000 | 0.34200000 |
27. | BARNHART (EF) 60H | 0.47500000 | 0.34200000 |
28. | BARNHART (EF) 61H | 0.47500000 | 0.34200000 |
29. | BARNHART (EF) 6H | 0.47500000 | 0.34200000 |
30. | BARNHART (EF) 7H | 0.47500000 | 0.34200000 |
31. | BARNHART (EF) 9H | 0.47500000 | 0.34200000 |
32. | BARNHART (EF) A 1H | 0.47500000 | 0.34210000 |
33. | BARNHART (EF) A 2H | 0.47500000 | 0.34210000 |
34. | BARNHART (EF) B 1H | 0.47500000 | 0.34240000 |
35. | BARNHART (EF) C 1H | 0.47500000 | 0.34200000 |
# | WELL NAME | WI | NRI |
---|---|---|---|
36. | BARNHART (EF) C 2H | 0.47500000 | 0.34200000 |
37. | BARNHART (EF) C 3H | 0.47500000 | 0.34200000 |
38. | BARNHART (EF) C 4H | 0.47500000 | 0.34200000 |
39. | BARNHART (EF) D 1H | 0.47500000 | 0.34800000 |
40. | BARNHART (EF) D 2H | 0.47500000 | 0.34800000 |
41. | BARNHART (EF) D 3H | 0.47500000 | 0.34800000 |
42. | BARNHART (EF) D 4H | 0.47500000 | 0.34800000 |
43. | BARNHART (EF) D 5H | 0.47500000 | 0.34800000 |
44. | BARNHART (EF) D 6H | 0.47500000 | 0.34800000 |
45. | BARNHART (EF) D 7H | 0.47500000 | 0.34800000 |
46. | BARNHART (EF) D 8H | 0.47500000 | 0.34800000 |
47. | BARNHART (EF) E 3H | 0.47500000 | 0.34200000 |
48. | BARNHART (EF) E 4H | 0.47500000 | 0.34200000 |
49. | BARNHART (EF) E 5H | 0.47500000 | 0.34200000 |
50. | BARNHART (EF) E 6H | 0.47500000 | 0.34200000 |
51. | BARNHART (EF) E 7H | 0.47500000 | 0.34200000 |
52. | BARNHART (EF) E 8H | 0.47500000 | 0.34200000 |
53. | BARNHART (EF) G 5H | 0.47500000 | 0.34530000 |
54. | BARNHART (EF) H 1H | 0.47500000 | 0.34590000 |
55. | BARNHART (EF) J 1H | 0.47500000 | 0.34200000 |
56. | BARNHART (EF) J 2H | 0.47500000 | 0.34200000 |
57. | BARNHART (EF) J 3H | 0.47500000 | 0.34200000 |
58. | BARNHART (EF) J 4H | 0.47500000 | 0.34200000 |
59. | BARNHART (EF) K 10H | 0.47500000 | 0.34900000 |
60. | BARNHART (EF) K 1H | 0.47500000 | 0.34900000 |
61. | BARNHART (EF) K 2H | 0.47500000 | 0.34900000 |
62. | BARNHART (EF) K 3H | 0.47500000 | 0.34900000 |
63. | BARNHART (EF) K 5H | 0.47500000 | 0.34900000 |
64. | BARNHART (EF) K 6H | 0.47500000 | 0.34900000 |
65. | BARNHART (EF) K 7H | 0.47500000 | 0.34900000 |
66. | BARNHART (EF) K 8H | 0.47500000 | 0.34900000 |
67. | BARNHART (EF) K 9H | 0.47500000 | 0.34900000 |
68. | BARNHART (EF) L 1H | 0.47500000 | 0.34680000 |
69. | WARD E 1H | 0.47500000 | 0.35630000 |
70. | WARD E 2H | 0.47500000 | 0.35630000 |
APPENDIX III
Attached to and made a part of that certain Purchase Agreement,
dated April 30, 2021, by and between SEP Holdings IV, LLC, as Assignor, and Westhoff Palmetto LP, as Assignee
CLOSING STATEMENT
EFFECTIVE TIME: March 1, 2021
PURCHASE PRICE: | Amount Due to Seller | |
3.1 Base Purchase Price | $11,500,000.00 | |
| | |
AMOUNT DUE BEFORE PURCHASE PRICE ADJUSTMENTS: | $11,500,000.00 | |
| ||
UPWARD ADJUSTMENTS (through [____], 2021):1 | | |
4.1(a)(i) all proceeds (including proceeds held in suspense or escrow and proceeds received after the Effective Time for Hydrocarbons produced and held in storage but not sold as of the Effective Time) actually received by or credited to Assignee that are attributable to the sale of Hydrocarbons produced from the Conveyed Interests prior to the Effective Time and that are not otherwise paid to Assignor (excluding, for clarity, any proceeds against which Marathon offset any Satisfied Pipeline Costs, regardless of whether Assignor disputes the appropriateness of such offsets) | | |
$ | - | |
$ | - | |
4.1(a)(ii) all Property Expenses paid or borne by Assignor and attributable to the ownership or operation of the Conveyed Interests from and after the Effective Time and not otherwise reimbursed by Assignee | $ | - |
4.1(a)(iii) all Burdens paid or borne by Assignor and attributable to Hydrocarbons produced from the Conveyed Interests after the Effective time | $ | - |
4.1(a)(iv) all Property Taxes allocated to Assignee under Section 19 that are paid or otherwise economically borne by Assignor | $ | - |
1Figures are based on actual numbers, where available, and otherwise on agreed upon estimates. To be updated in the Final Statement.
Appendix III – Page 1 of 3
4.1(a)(v) to the extent the Conveyed Interests are under-produced, the volume of such wellhead imbalances as of the Effective Time attributable to the Conveyed Interests, multiplied by $2.50 per MCF | $ | - |
4.1(a)(vi) to the extent the Conveyed Interests are over-delivered, the volume of any such pipeline or transportation imbalances as of the Effective Time attributable to the Conveyed Interests, multiplied by the monthly price applicable to deliveries to the applicable pipeline during the calendar month of the Closing Date | ||
| | |
DOWNWARD ADJUSTMENTS (through [____], 2021): 1 | | |
4.1(b)(i) all proceeds (including proceeds held in suspense or escrow) actually received by or credited to Assignor that are attributable to the sale of Hydrocarbons produced from the Conveyed Interests on or after the Effective Time | $ | - |
4.1(b)(ii) all Property Expenses attributable to the ownership or operation of the Conveyed Interests prior to the Effective Time which are paid or borne by Assignee but not otherwise reimbursed by Assignor | $ | (2,428.07) |
4.1(b)(iii) all Burdens paid or borne by Assignee and attributable to Hydrocarbons produced from the Conveyed Interests prior to the Effective Time. | $ | - |
4.1(b)(iv) the amount of all Property Taxes allocated to Assignor under Section 19 that are paid or otherwise economically borne by Assignee | $ | (13,231.62) |
4.1(b)(v) to the extent the Conveyed Interests are over-produced, the volume of such wellhead imbalances as of the Effective Time attributable to the Conveyed Interests, multiplied by $2.50 per MCF | $ | - |
4.1(b)(vi) to the extent the Conveyed Interests are under-delivered, the volume of any such pipeline or transportation imbalances as of the Effective Time attributable to the Conveyed Interests, multiplied by the monthly price applicable to deliveries to the applicable pipeline during the calendar month of the Closing Date | $ | - |
| | |
NET CLOSING ADJUSTMENTS: | $ | (15,659.69) |
| | |
ADJUSTED PURCHASE PRICE (at Closing): | $ | 11,484,340.31 |
Appendix III – Page 2 of 3
ASSIGNOR WIRE INSTRUCTIONS:
Bank:Amegy Bank of Texas
ABA Number:113011258
Account Number:0054212428
Account Name:Evolve Transition Infrastructure LP
Reference:Project Nueces
Appendix III – Page 3 of 3
SCHEDULE 5(f)
Attached to and made a part of that certain Purchase Agreement, dated April 30, 2021,by and between SEP Holdings IV, LLC, as Assignor, and Westhoff Palmetto LP, as Assignee
MATERIAL CONTRACTS
Each of the following contracts, agreements, and instruments, including all amendments, supplements, and/ or restatements thereof or thereto, as applicable:
1. | Barnhart Facility Agreement dated May 8, 2013, by and between Marathon Oil EF LLC and SEP Holdings III, LLC. |
2. | Marketing Agreement dated May 8, 2013, by and between Marathon Oil EF LLC and SEP Holdings III, LLC. |
3. | Participation Agreement dated December 28, 2009, by and between SEP Holdings II, LLC as Seller, and Hilcorp Energy I, L.P., as Buyer, as amended. |
4. | Joint Operating Agreement dated December 28, 2009, by and between Hilcorp Energy Company, as Operator, and Hilcorp Energy I, L.P., and SEP Holdings II, LLC, as Non-Operators, as amended. |
5. | Any and all pooling, unitization, and communitization orders, declarations, and agreements in effect with respect to any of the Acquired Leases, including all interests in the units created thereby. |
END OF SCHEDULE 5(f)
Schedule 5(F) – Page 1 of 1
SCHEDULE 5(h)
Attached to and made a part of that certain Purchase Agreement, dated April 30, 2021,by and between SEP Holdings IV, LLC, as Assignor, and Westhoff Palmetto LP, as Assignee
Imbalances
None.
END OF SCHEDULE 5(h)
Schedule 5(H) – Page 1 of 1
SCHEDULE 5(j)
Attached to and made a part of that certain Purchase Agreement, dated April 30, 2021,by and between SEP Holdings IV, LLC, as Assignor, and Westhoff Palmetto LP, as Assignee
CURRENT COMMITMENTS
AFE | Well Name | Purpose | Gross AFE Cost | AFE Received | Election Due Date |
WO.20.02498 | Barnhart 60H | Workover | $105,000.00 | 1/6/2021 | 2/5/2021 |
WO.20.02631 | Barnhart J 02H | Workover | $105,000.00 | 1/6/2021 | 2/5/2021 |
WO.20.02493 | Barnhart E 04H | Workover | $105,000.00 | 1/6/2021 | 2/5/2021 |
WO.20.02495 | Barnhart E 08H | Workover | $105,000.00 | 1/6/2021 | 2/5/2021 |
WO.20.02494 | Barnhart K 08H | Workover | $105,000.00 | 1/6/2021 | 2/5/2021 |
WO.21.00006 | Barnhart (EF) 502H | RP Repair | $105,000.00 | 3/16/2021 | 4/15/2021 |
WO.21.00935 | Barnhart (EF) 9H | Workover | $47,000.00 | 4/12/2021 | 5/11/2021 |
WO.21.00696 | Barnhart (EF) K 10H | Workover | $105,000.00 | 4/12/2021 | 5/11/2021 |
END OF SCHEDULE 5(j)
Schedule 5(J) – Page 1 of 1
SCHEDULE 5(k)
Attached to and made a part of that certain Purchase Agreement, dated April 30, 2021,
by and between SEP Holdings IV, LLC, as Assignor, and Westhoff Palmetto LP, as Assignee
REQUIRED CONSENTS
Lessor | Lessee | Lease Date | Book | Page | File No | County | State |
WARD, ESMA JEAN, INDV. & TTEE | HILCORP ENERGY 1 L.P | 03/05/2010 | 1020 | 205 | 244216 | Gonzales | Texas |
END OF SCHEDULE 5(j)
Schedule 5(K) – Page 1 of 1
EXHIBIT 10.7
AMENDMENT NO. 2
TO
WARRANT EXERCISABLE FOR JUNIOR SECURITIES
This Amendment No. 2 (this “Amendment”) to Warrant Exercisable for Junior Securities is entered into effective as of May 3, 2021 by Evolve Transition Infrastructure LP, a Delaware limited partnership (the “Partnership”), and Stonepeak Catarina Holdings LLC, a Delaware limited liability company (the “Holder”). Capitalized terms used but not defined herein have the meanings ascribed to them in the Third Amended and Restated Agreement of Limited Partnership of the Partnership, dated as of August 2, 2019, as amended by the Letter Agreement (as defined below).
RECITALS
WHEREAS, on August 2, 2019, the Partnership issued to the Holder that certain Warrant Exercisable for Junior Securities, dated August 2, 2019 (the “Original Warrant”);
WHEREAS, the Partnership and the Holder entered into Amendment No.1 to Warrant Exercisable for Junior Securities (the “First Amendment”);
WHEREAS, the Original Warrant entitles the Holder to receive from the Partnership a number of each class of Junior Securities (including Common Units but excluding Excluded Junior Securities) representing ten percent (10%) of the Junior Securities Deemed Outstanding (as defined in the Original Warrant) of such class as of the Exercise Date (as defined in the Original Warrant);
WHEREAS, Junior Securities Deemed Outstanding includes, among other things, the number of such class of Junior Securities reserved for issuance at such time under the stock option or other equity incentive plans approved by the Board of Directors (the “Board”) of Evolve Transition Infrastructure GP LLC, the sole general partner of the Partnership (the “General Partner”), regardless of whether such Junior Securities are actually subject to outstanding Options at such time or whether any outstanding Options are actually exercisable at such time;
WHEREAS, the Partnership’s Long-Term Incentive Plan, effective March 6, 2015 (the “LTIP”), is such an equity incentive plan approved by the Board;
WHEREAS, on November 16, 2020, the Holder entered into a letter agreement with the Partnership and the General Partner (the “Letter Agreement”), pursuant to which the Holder was provided the option to elect to receive the Class C Preferred Quarterly Distribution in Common Units for any Quarter following the Quarter ended September 30, 2020, by providing written notice to the Partnership no later than the last day of the calendar month following the end of such Quarter;
WHEREAS, on April 30, 2021, pursuant to the Letter Agreement, the Holder provided its notice of election to receive 13,763,249 Common Units in lieu of receiving Class C Preferred PIK
Units with respect to the Class C Preferred Quarterly Distribution for the Quarter ended March 31, 2021 (the “First Quarter Units”);
WHEREAS, Section 4(a) of the LTIP, provides that upon the issuance of additional Units from time to time, the maximum number of Units that may be delivered or reserved for delivery with respect to the LTIP shall be automatically increased by a number of Units equal to the lesser of (i) fifteen percent (15%) of such additional Units, or (ii) such lesser number of Units as determined by the Board (such increase, the “LTIP Increase”);
WHEREAS, the maximum LTIP Increase resulting from the issuance of the First Quarter Units is 2,064,487 Units (the “First Quarter LTIP Units”);
WHEREAS, the First Quarter LTIP Units are Junior Securities Deemed Outstanding for purposes of the Original Warrant; and
WHEREAS, the Partnership and the Holder desire to amend the Original Warrant to include the First Quarter LTIP Units in the definition of Excluded Junior Securities.
NOW, THEREFORE, in consideration of the covenants, conditions and agreements contained herein, the General Partner does hereby amend the Partnership Agreement as follows:
a.The definition of “Excluded Junior Securities” in Section 1 of the Original Warrant is hereby amended and restated in its entirety as follows:
“Excluded Junior Securities” means (i) any class or series of Junior Security that, with respect to distributions on such Junior Securities of cash or property and distributions upon liquidation of the Partnership (taking into account the intended effects of the allocation of gain and losses as provided in this Agreement), ranks junior to the Class C Preferred Units and senior to the Common Units, the proceeds from the sale of which are used to redeem the Class C Preferred Units, (ii) 1,866,823 Common Units reserved for issuance under the LTIP on February 25, 2021, so long as such Common Units are so reserved or issued pursuant to the LTIP, and (iii) 2,064,487 Common Units reserved for issuance under the LTIP on May 20, 2021, so long as such Common Units are so reserved for issued pursuant to the LTIP.
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[Signature Pages Follow]
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IN WITNESS WHEREOF, this Amendment has been executed as of the effective date written above.
PARTNERSHIP:
EVOLVE TRANSITION INFRASTRUCTURE LP
By: | Evolve Transition Infrastructure GP LLC, |
By:/s/ Charles C. Ward
Name:Charles C. Ward
Title:Chief Financial Officer and Secretary
HOLDER:
STONEPEAK CATARINA HOLDINGS, LLC
By: | Stonepeak Texas Midstream Holdco LLC, |
By: | Stonepeak Associates LLC, |
By: | Stonepeak GP Holdings LP, |
By: | Stonepeak GP Investors LLC, |
By: | Stonepeak GP Investors Manager LLC, |
By:/s/ Jack Howell
Name:Jack Howell
Title:Senior Managing Director
By:/s/ Luke Taylor
Name:Luke Taylor
Title:Senior Managing Director
Signature Page to Amendment No. 2 to
Warrant Exercisable for Junior Securities
Exhibit 10.8
May 11, 2021
Royal Bank of Canada
Agency Services Group
4th Floor, 20 King Street West
Toronto, Ontario, Canada
M5H 1CA
Attention: Manager Agency
Ladies and Gentlemen:
Reference is made to that certain Third Amended and Restated Credit Agreement dated as of March 31, 2015 (as amended, restated, modified or supplemented from time to time prior to the date hereof, the “Credit Agreement”) among Evolve Transition Infrastructure LP (formerly known as Sanchez Midstream Partners LP), a Delaware limited partnership, as borrower (the “Borrower”), the financial institutions from time to time party thereto (the “Lenders”), and Royal Bank of Canada, as administrative agent (the “Administrative Agent”) for the Lenders, as collateral agent and as letter of credit issuer. Capitalized terms used herein and not otherwise defined herein have the meaning ascribed thereto in the Credit Agreement.
The Borrower has informed the Administrative Agent and the Lenders that (i) the Borrower and certain of its Affiliates are evaluating a potential joint venture transaction described in a brief Lender Request & Update presentation distributed to the Lenders on or about May 6, 2021 involving a publicly traded company identified to the Administrative Agent (the “PubCo”), (ii) in connection therewith, the Borrower proposes to enter into a certain letter agreement with PubCo with respect to the Borrower’ s evaluation of PubCo and the contemplated joint venture transaction (the “JV Letter Agreement”) pursuant to which the Borrower will commit to pay or reimburse certain legal and due diligence costs of PubCo in an aggregate amount not to exceed $200,000 if the joint venture transaction is ultimately consummated (the “PubCo Reimbursement”), and (iii) concurrently with the Borrower entering into such letter agreement, the Borrower, certain Affiliates of the Borrower and PubCo will enter into a warrant agreement pursuant to which the Borrower will be issued certain warrants in PubCo (such agreement, the “PubCo Warrant Agreement” and the warrants issued thereunder, the “PubCo Warrants”; and the JV Letter Agreement and the PubCo Warrant Agreement, collectively the “PubCo Transaction Agreements”).
The Borrower hereby requests that the Lenders waive the provisions of Section 9.05 of the Credit Agreement (which restricts the Borrower and its Subsidiaries from making certain Investments except as otherwise permitted therein) to the extent, and only to the extent, that the Borrower’ s undertaking to pay the PubCo Reimbursement, the Borrower’ s entering into the PubCo Transaction Agreements and the issuance to the Borrower of the PubCo Warrants (or any and/or all of the foregoing in combination) constitutes an Investment that is not otherwise permitted under Section 9.05 of the Credit Agreement. For the avoidance of doubt, the Borrower acknowledges and agrees that the requested waiver does not include or extend to the exercise by the Borrower of the PubCo Warrants, the entering into of the potential joint venture transaction,
purchasing any stock of PubCo or any other Investment or transaction that is otherwise not permitted by the Credit Agreement.
Each Lender party hereto hereby waives the provisions of Section 9.05 of the Credit Agreement to the extent, and only to the extent, that the Borrower’s undertaking to pay the PubCo Reimbursement, the Borrower’s entering into the PubCo Transaction Agreements and the issuance to the Borrower of the PubCo Warrants (or any and/or all of the foregoing in combination) constitutes an Investment that is not otherwise permitted under Section 9.05 of the Credit Agreement.
This Letter Agreement constitutes a limited waiver of the Credit Agreement with respect to the specific matters set forth above, and the provisions of this Letter Agreement shall be strictly limited as set forth above. Except to the extent (but only to such extent) of the waivers provided above, the Borrower hereby further ratifies, approves and confirms all of the other Obligations under the Credit Agreement and the other Loan Documents.
This Letter Agreement shall become effective upon receipt by the Administrative Agent of duly executed counterparts of this Letter Agreement from the Borrower and Lenders comprising at least the Majority Lenders.
This Letter Agreement may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. A facsimile signature or electronic signature (e.g. pdf), of any party hereto shall be deemed to be an original signature for the purposes of this Letter Agreement.
This Letter Agreement shall constitute a Loan Document.
Please confirm that the foregoing is our mutual understanding by signing and returning to us an executed counterpart of this letter agreement.
Very truly yours,
EVOLVE TRANSITION
INFRASTRUCTURE LP,
as Borrower
By: | Evolve Transition Infrastructure GP LLC, |
By: /s/ Charles C. Ward
Name:Charles C. Ward
Title:Chief Financial Officer
Accepted and agreed to as of
the date first above written:
ROYAL BANK OF CANADA, as a Lender
By: /s/ Don J. McKinnerney
Name:Don J. McKinnerney
Title:Authorized Signatory
BBVA USA
as a Lender
By: /s/ Mark H. Wolf
Name:Mark H. Wolf
Title:Senior Vice President
TRUIST BANK,
as a Lender
By: /s/ Greg Krablin
Name:Greg Krablin
Title:Director
CAPITAL ONE, NATIONAL ASSOCIATION
as a Lender
By: /s/ Matthew Brice
Name:Matthew Brice
Title:Duly Authorized Signatory
Citibank, N.A.
as a Lender
By: /s/ Jeff Ard
Name:Jeff Ard
Title:Vice President
ING Capital LLC
as a Lender
By: /s/ Juli Bieser
Name: Juli Bieser
Title: Managing Director
By: /s/ Scott Lamoreaux
Name:Scott Lamoreaux
Title:Director
CIT BANK, N.A.
as a Lender
By: /s/ John Feeley
Name:John Feeley
Title:Director
Exhibit 10.9
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this “Agreement”), dated May 14, 2021 (the “Closing Date”), is by and between SEP HOLDINGS IV, LLC, a Delaware limited liability company (“Assignor”) and BAYSHORE ENERGY TX LLC, a Texas limited liability company (“Assignee”). Assignor and Assignee are collectively referred to herein as the “Parties” and each, individually, as a “Party.”
Recitals:
A.Assignor has agreed to sell to Assignee, and Assignee has agreed to purchase from Assignor, the Conveyed Interests as defined and described in the Assignment, Bill of Sale, and Conveyance attached hereto as Appendix I (the “Assignment”), effective as of 7:00 a.m. Central Time on March 1, 2021 (the “Effective Time”).
B.Assignor and Assignee now desire to memorialize their agreements regarding the purchase of the Conveyed Interests.
C.Capitalized terms used in this Agreement but not defined herein shall have the meanings given to such terms in the Assignment.
Agreements:
NOW, THEREFORE, in consideration of the mutual agreements herein and other good and valuable consideration, the Parties agree as follows:
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The Parties acknowledge and agree that, for a period of one hundred eighty (180) days after Closing (the “Corrective Period”), Assignor shall use commercially reasonable efforts to obtain a corrective assignment from its predecessor-in-interest to the Texas-Osage 01 well and Texas-Osage 02 well (collectively, the “Texas Osage Wells”) regarding certain additional depths related to the Texas Osage Wells in the Austin Chalk Formation and the Buda Formation (such corrective assignment, the “Texas Osage Corrective Assignment”). The Texas Osage Wells are included within the Wells, and constitute Conveyed Interests hereunder.
If Assignor receives the Texas Osage Corrective Assignment during the Corrective Period, Assignor shall notify Assignee, and the Parties shall enter into a corrective assignment amending the Assignment hereunder to convey any additional interests in the Texas Osage Wells that Assignor receives pursuant to the Texas Osage Corrective Assignment.
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If Assignor does not receive the Texas Osage Corrective Assignment during the Corrective Period, then within five (5) business days after the expiration of the Corrective Period, Assignor agrees to pay to Assignee an amount equal to Two Hundred Fifteen Thousand Six Hundred Twenty-Seven Dollars ($215,627.00) (the “Texas Osage Clawback Amount”) by wire transfer of immediately available funds pursuant to wire transfer instructions designated in advance by Assignee to Assignor in writing.
TO THE EXTENT THAT ASSIGNOR HAS MATERIALLY COMPLIED WITH THIS SECTION 20, ASSIGNEE SHALL ASSUME ALL RISK AND SHALL DEFEND AND INDEMNIFY THE ASSIGNOR INDEMNIFIED PARTIES FOR ALL CLAIMS RELATED TO THE TEXAS OSAGE WELLS, AND SUCH OBLIGATIONS SHALL BE ASSUMED OBLIGATIONS UNDER THIS AGREEMENT.
As used herein, “Austin Chalk Formation” means the stratigraphic equivalent of the formation which is the entire correlative interval from 9,770 feet to 10,294 feet as shown on the log of the EOG Resources, Inc. - Milton Unit, Well No. 1 (API No. 42-255-31608), Section 64, John Randon Survey, A-247, Karnes County, Texas.
As used herein, “Buda Formation” means the stratigraphic equivalent of the formation which is the entire correlative interval from 10,590 feet to 10,700 feet as shown on the log of the EOG Resources, Inc. - Milton Unit, Well No. 1 (API No. 42-255-31608), Section 64, John Randon Survey, A-247, Karnes County, Texas.
[Signature page follows.]
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IN WITNESS WHEREOF, each Party has executed and delivered this Agreement as of the Closing Date.
Assignor:
SEP HOLDINGS IV, LLC
By: | Evolve Transition Infrastructure LP, |
By: | Evolve Transition Infrastructure GP, LLC, |
By:/s/ Gerald F. Willinger
Name:Gerald F. Willinger
Title:Chief Executive Officer
Address for purposes of notices:
1360 Post Oak Boulevard, Suite 2400
Houston, Texas 77056
Attention: Chief Executive Officer
Email: gwillinger@evolvetransition.com
with a copy (which •shall not constitute notice) to:
Hunton Andrews Kurth LLP
600 Travis St, Suite 4200
Houston, Texas 77002
Attention:Phil Haines
Email:phaines@huntonak.com
Signature Page to Purchase Agreement (Maverick II)
Assignee:
BAYSHORE ENERGY TX LLC
By:/s/ Yousuf Chaudhary
Name:Yousuf Chaudhary
Title:Executive Vice President
Address for purposes of notices:
1900 St. James Place, Suite 800
Houston, Texas 77056
Attention: Yousuf Chaudhary
Attention: Legal Department
Email: yousuf@atlasoperating.com
Email: legal@atlasoperaitng.com
Signature Page to Purchase Agreement (Maverick 2)
Appendix I
Assignment, Bill of Sale, and Conveyance
(Attached.)
ASSIGNMENT, BILL OF SALE AND CONVEYANCE
STATE OF TEXAS | § | |
| § | |
COUNTIES OF ZAVALA AND DIMMIT | § | |
THIS ASSIGNMENT, BILL OF SALE AND CONVEYANCE (this “Assignment”), dated as of May 14, 2021 (the “Closing Date”), but effective as of 7:00 a.m. Central Time on March 1, 2021 (the “Effective Time”), is from SEP HOLDINGS IV, LLC, a Delaware limited liability company, whose mailing address is 1360 Post Oak Boulevard, Suite 2400, Houston, Texas 77056 (“Assignor”) to BAYSHORE ENERGY TX LLC, a Texas limited liability company, whose mailing address is 1900 St. James Place, Suite 800, Houston, Texas 77056 (“Assignee”, together with Assignor, the “Parties” and each individually, a “Party”). Capitalized terms used but not defined herein shall have the respective meanings set forth in that certain Purchase Agreement, dated as of the Closing Date, by and between Assignor and Assignee (as may be amended from time to time, the “Purchase Agreement”).
Section 1Assignment. For Ten Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are acknowledged, Assignor, does hereby forever GRANT, BARGAIN, SELL, CONVEY, ASSIGN, TRANSFER, SET OVER AND DELIVER to Assignee all of Assignor’s right, title and interest in and to the interests and properties described below, less and except the Excluded Assets (such right, title and interest, less and except the Excluded Assets, collectively, the “Conveyed Interests”):
(a)the undivided Working Interests and Net Revenue Interests of the wellbores of the oil, gas and mineral wells, whether producing, plugged, shut-in or temporarily abandoned, set forth on Exhibit A attached hereto (the “Wells”), together with all oil, gas, casinghead gas, condensate, natural gas liquids, and other gaseous and liquid hydrocarbons or any combination thereof and other minerals extracted from or produced with the foregoing (collectively, “Hydrocarbons”) produced therefrom or allocated thereto, INSOFAR AND ONLY INSOFAR as such Hydrocarbons are produced from the Contractual Depth of such Well from and after the Effective Time;
(b)the oil, gas and mineral leases covering rights in the Wells (and all tenements, hereditaments and appurtenances belonging to such leases), including those described on Exhibit B attached hereto, INSOFAR AND ONLY INSOFAR as such leases entitle the owner of such Wells to Hydrocarbons produced from such Wells and to any pooling rights associated therewith (the “Leases”, together with the Wells and the Hydrocarbons, the “Oil and Gas Properties”);
(c)to the extent assignable, all contracts (excluding any Leases) to which Assignor is a party and relates to the Oil and Gas Properties, but exclusive of any Excluded Information or contracts otherwise relating to the Excluded Assets (collectively, the “Applicable Contracts”), and all rights thereunder, including those set forth on Exhibit C; and
(d)all files, records and data (including electronic data) or copies thereof in the possession of Assignor to the extent specifically related to the Oil and Gas Properties (collectively, the “Records”), including: (i) lease files, deed files, land files, wells files, division order files,
abstracts, title files, production records, non-interpretive maps, and accounting and tax records; (ii) approved authorizations for expenditures, engineering records (to the extent not containing interpretive data), non-interpretive reservoir information, daily drilling and completion plans and reports, and wellbore diagrams; and (iii) environmental files and records; but excluding those subject to a written unaffiliated third party contractual restriction on disclosure or transfer for which no consent to disclose or transfer has been received, despite Assignor’s request therefor, or to the extent such disclosure or transfer is subject to payment of a fee or other consideration, for which Assignee has not agreed in writing to pay the fee or other consideration, as applicable; provided, however, Assignor may retain the originals or copies of such Records.
Section 2.Excluded Assets. Notwithstanding the foregoing, the Conveyed Interests shall not include, and there is EXCEPTED AND EXCLUDED from this Assignment to Assignee, in all such instances, any right, title or interest in or to the following (the “Excluded Assets”), all of which shall be RESERVED AND RETAINED by Assignor: (a) all of Assignor’s corporate minute books, tax and financial records and other business records that relate to Assignor’s business generally; (b) all trade credits, all accounts, all receivables of Assignor and all other proceeds, income or revenues of Assignor attributable to the Conveyed Interests and attributable to any period of time prior to the Effective Time; (c) to the extent that they do not relate to the Assumed Obligations for which Assignee is providing indemnification under the Purchase Agreement, all claims and causes of action of Assignor arising under or with respect to any contracts that are attributable to periods of time prior to the Effective Time (including claims for adjustments or refunds); (d) all rights and interests of Assignor (i) under any policy or agreement of insurance or indemnity, (ii) under any bond, or (iii) to any insurance or condemnation proceeds or awards arising, in each case, from acts, omissions or events or damage to or destruction of property; (e) Assignor’s rights with respect to all Hydrocarbons produced and sold from the Conveyed Interests with respect to all periods prior to the Effective Time; (f) all claims of Assignor for refunds (whether by way of refund, credit, offset, or otherwise) of, rights to receive funds from any governmental authority, or loss carry forwards or credits with respect to (i) asset taxes attributable to any period (or portion thereof) prior to the Effective Time, (ii) income taxes, or (iii) any taxes attributable to the Excluded Assets; (g) any leases, rights and other assets specifically listed in Exhibit D; (h) notwithstanding the definition of “Records,” any Excluded Information; (i) all trademarks and trade names containing “Sanchez”, “Evolve”, “SEP” or “SNMP” or any variations thereof; (j) all amounts paid or payable by any person to Assignor or its affiliates as overhead for periods of time accruing prior to the Closing Date under any operating agreements or other contract burdening the Conveyed Interests; (k) all information technology assets, including desktop computers, laptop computers, servers, networking equipment and any associated peripherals and other computer hardware, all radio and telephone equipment, smartphones, tablets and other mobility devices, well communication devices, any other information technology system, and any computer equipment that is used by Assignor for projects unrelated to the Conveyed Interests; (l) all supervisory control and data acquisition industrial control system and measurement technology of Assignor or its affiliates; and (m) all depths covered by any Wells or Leases that are outside of the Contractual Depth.
TO HAVE AND TO HOLD the Conveyed Interests to Assignee and its successors and assigns, forever subject, however, to the covenants, terms and conditions set forth herein and in the Purchase Agreement, and subject to the Permitted Encumbrances.
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Section 3.Special Warranty of Title. Assignor does hereby bind itself and its successors and assigns to warrant and forever defend all and singular defensible title to the Conveyed Interests unto Assignee and its successors and assigns against every person whomsoever lawfully claiming or to claim the same or any part thereof by, through or under Assignor, but not otherwise, subject, however, to the Permitted Encumbrances (the “Special Warranty”). The Special Warranty shall survive until the first anniversary of the Closing Date. Assignee’s sole remedy for breaches of such Special Warranty shall be in accordance with and subject to Section 9 of the Purchase Agreement and are subject to the limitations set forth in the Purchase Agreement.
Section 4.Disclaimers.
(a)EXCEPT AS SET FORTH IN SECTION 5 OF THE PURCHASE AGREEMENT AND THE SPECIAL WARRANTY IN THIS ASSIGNMENT, (I) ASSIGNOR MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS, STATUTORY OR IMPLIED, REGARDING THE CONVEYED INTERESTS AND (II) ASSIGNEE HAS NOT RELIED UPON, AND ASSIGNOR EXPRESSLY DISCLAIMS ALL LIABILITY AND RESPONSIBILITY FOR ANY REPRESENTATION, WARRANTY, STATEMENT OR INFORMATION REGARDING THE CONVEYED INTERESTS MADE OR COMMUNICATED (ORALLY OR IN WRITING) TO ASSIGNEE OR ANY OTHER MEMBER OF THE ASSIGNEE INDEMNIFIED PARTIES (INCLUDING WITHOUT LIMITATION ANY OPINION, INFORMATION, DOCUMENTS. MATERIALS PROJECTION OR ADVICE THAT MAY HAVE BEEN PROVIDED BY ANY FINANCIAL ADVISOR FOR ASSIGNOR OR ANY OTHER MEMBER OF THE ASSIGNOR INDEMNIFIED PARTIES, CONTAINED IN OR PROVIDED IN VIRTUAL “DATA ROOMS”, MANAGEMENT PRESENTATIONS OR SUPPLEMENTAL DUE DILIGENCE INFORMATION PROVIDED BY ASSIGNOR OR DISCUSSIONS OR ACCESS TO MANAGEMENT OF ASSIGNOR, OR ANY OTHER FORM, IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT).
(b)EXCEPT AS SET FORTH IN SECTION 5 OF THE PURCHASE AGREEMENT AND THE SPECIAL WARRANTY IN THIS ASSIGNMENT, AND WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, ASSIGNOR DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS, STATUTORY OR IMPLIED, AS TO (I) TITLE TO ANY OF THE CONVEYED INTERESTS, (II) THE CONTENTS, CHARACTER OR NATURE OF ANY REPORT OF ANY PETROLEUM ENGINEERING CONSULTANT, OR ANY ENGINEERING, GEOLOGICAL OR SEISMIC DATA OR INTERPRETATION, RELATING TO THE CONVEYED INTERESTS, (III) THE CONTENTS, CHARACTER, OR NATURE, ACCURACY, COMPLETENESS, OR MATERIALITY OF ANY RECORDS, INFORMATION, DATA, OR OTHER MATERIALS (WRITTEN OR ORAL) NOW, HERETOFORE OR HEREAFTER FURNISHED TO ASSIGNEE BY OR ON BEHALF OF ASSIGNOR; (IV) THE QUANTITY, QUALITY OR RECOVERABILITY OF HYDROCARBONS IN OR FROM THE CONVEYED INTERESTS, (V) ANY ESTIMATES OF THE VALUE OF THE CONVEYED INTERESTS OR FUTURE REVENUES TO BE GENERATED BY THE CONVEYED INTERESTS, (VI) THE PRODUCTION OF OR ABILITY TO PRODUCE HYDROCARBONS FROM THE CONVEYED INTERESTS, (VII) ANY ESTIMATES OF OPERATING COSTS AND CAPITAL REQUIREMENTS FOR ANY WELL, LEASE, OPERATION, OR PROJECT, (VIII) THE MAINTENANCE, REPAIR,
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CONDITION, QUALITY, SUITABILITY, DESIGN OR MARKETABILITY OF THE CONVEYED INTERESTS, (IX) THE CONTENT, CHARACTER OR NATURE OF ANY DESCRIPTIVE MEMORANDUM, REPORTS, BROCHURES, CHARTS OR STATEMENTS PREPARED BY THIRD PARTIES, (X) ANY OTHER MATERIALS OR INFORMATION THAT MAY HAVE BEEN MADE AVAILABLE OR COMMUNICATED TO ASSIGNEE OR ITS AFFILIATES, OR ITS OR THEIR EMPLOYEES, AGENTS, OFFICERS, DIRECTORS, MEMBERS, MANAGERS, EQUITY OWNERS, CONSULTANTS, REPRESENTATIVES OR ADVISORS IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY DISCUSSION OR PRESENTATION RELATING THERETO, AND (XI) ANY IMPLIED OR EXPRESS WARRANTY OF FREEDOM FROM PATENT OR TRADEMARK INFRINGEMENT. EXCEPT AS AND TO THE LIMITED EXTENT REPRESENTED OTHERWISE AS SET FORTH IN SECTION 5 OF THE PURCHASE AGREEMENT AND THE SPECIAL WARRANTY IN THIS ASSIGNMENT, AND WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, ASSIGNOR FURTHER DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS, STATUTORY OR IMPLIED, OF MERCHANTABILITY, FREEDOM FROM LATENT VICES OR DEFECTS, FITNESS FOR A PARTICULAR PURPOSE OR CONFORMITY TO MODELS OR SAMPLES OF MATERIALS OF ANY OF THE CONVEYED INTERESTS, RIGHTS OF A PURCHASER UNDER APPROPRIATE STATUTES TO CLAIM DIMINUTION OF CONSIDERATION OR RETURN OF THE PURCHASE PRICE, IT BEING EXPRESSLY UNDERSTOOD AND AGREED BY THE PARTIES THAT ASSIGNEE SHALL BE DEEMED TO BE OBTAINING THE CONVEYED INTERESTS IN THEIR PRESENT STATUS, CONDITION AND STATE OF REPAIR, “AS IS” AND “WHERE IS” WITH ALL FAULTS OR DEFECTS (KNOWN OR UNKNOWN, LATENT, DISCOVERABLE OR UNDISCOVERABLE), AND THAT ASSIGNEE HAS MADE OR CAUSED TO BE MADE SUCH INSPECTIONS AS ASSIGNEE DEEMS APPROPRIATE.
(c)EXCEPT AS AND TO THE LIMITED EXTENT EXPRESSLY REPRESENTED OTHERWISE IN SECTION 5(E) OF THE PURCHASE AGREEMENT, ASSIGNOR HAS NOT 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 THE PROTECTION OF HUMAN HEALTH, SAFETY, NATURAL RESOURCES OR THE ENVIRONMENT, OR ANY OTHER ENVIRONMENTAL CONDITION OF THE CONVEYED INTERESTS. NOTHING IN THIS AGREEMENT OR OTHERWISE SHALL BE CONSTRUED AS SUCH A REPRESENTATION OR WARRANTY, AND ASSIGNEE SHALL BE DEEMED TO BE TAKING THE CONVEYED INTERESTS “AS IS” AND “WHERE IS” WITH ALL FAULTS FOR PURPOSES OF THEIR ENVIRONMENTAL CONDITION AND THAT ASSIGNEE HAS MADE OR CAUSED TO BE MADE SUCH ENVIRONMENTAL INSPECTIONS AS ASSIGNEE DEEMS APPROPRIATE.
(d)THE PARTIES AGREE THAT, TO THE EXTENT REQUIRED BY APPLICABLE LAW TO BE EFFECTIVE, THE DISCLAIMERS OF CERTAIN REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS SECTION 4 ARE “CONSPICUOUS” DISCLAIMERS FOR THE PURPOSE OF ANY APPLICABLE LAW.
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Section 5.Certain Definitions. For purposes of this Assignment, the following capitalized terms shall have the meaning set forth below:
“Burden” means any and all royalties (including lessor’s royalty), overriding royalties, production payments, carried interests, net profits interests, reversionary interests and other burdens upon, measured by or payable out of production (excluding, for the avoidance of doubt, any taxes).
“Contractual Depth” means with respect to the Wells, the depth in the Eagle Ford Shale Formation; provided that if a Well is producing from a greater depth than the Eagle Ford Shale Formation as of the Effective Time, the Contractual Depth for that specific Well shall also include all such greater depths at which there are open perforations for such applicable Well.
“Eagle Ford Shale Formation” means the stratigraphic equivalent of the formation which is the entire correlative interval from 10,294 feet to 10,590 feet as shown on the log of the EOG Resources, Inc. - Milton Unit, Well No. 1 (API No. 42-255-31608), Section 64, John Randon Survey, A-247, Karnes County, Texas.
“Encumbrance” means any lien, mortgage, security interest, pledge, charge or similar encumbrance.
“Excluded Information” means (a) all legal records and files of Assignor constituting work product of, and attorney-client communications with, legal counsel (but excluding title opinions); (b) any records or information relating to the offer, negotiation or sale of the Conveyed Interests, including bids received from and records of negotiations with third parties; and (c) any records, information, data, software and licenses relating to the Excluded Assets.
“Net Revenue Interest” means the interest (expressed as a percentage or decimal fraction), in and to all Hydrocarbons produced and saved or sold from or allocated to the relevant Well, subject to any reservations, limitations, or depth restrictions described herein after giving effect to all Burdens.
“Permitted Encumbrances” means: (i) the terms and conditions of all Leases, Burdens, unit agreements, pooling agreements, operating agreements, farmout agreements, Hydrocarbon production sales contracts (including calls on production), division orders and other contracts applicable to the Wells or Leases; (ii) liens for taxes not yet due or delinquent or, if delinquent, that are being contested in good faith; (iii) all rights to consent by, required notices to, filings with, or other actions by governmental authorities in connection with the sale or conveyance of properties such as the Conveyed Interests that are customarily obtained after the assignment of properties similar to the Conveyed Interests; (iv) conventional rights of reassignment; (v) all applicable laws and all rights reserved to or vested in any governmental authority: (I) to control or regulate any Well or Lease, in any manner; (II) by the terms of any right, power, franchise, grant, license or permit, or by any provision of applicable law, to terminate such right, power, franchise, grant, license or permit or to purchase, condemn, expropriate or recapture or to designate a purchaser of any of the Wells or Leases; (III) to use such property in a manner which does not materially impair the use of such property for the purposes for which it is currently owned and operated; or (IV) to enforce any obligations or duties affecting the Wells or Leases, to any
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governmental authority with respect to any right, power, franchise, grant, license or permit; (vii) rights of a common owner of any interest in rights-of-way, permits or easements held by Assignor and such common owner as tenants in common or through common ownership; (vii) easements, conditions, covenants, restrictions, servitudes, permits, rights-of-way, surface leases, and other rights in the Wells or Leases, for the purpose of operations, facilities, roads, alleys, highways, railways, pipelines, transmission lines, transportation lines, distribution lines, power lines, telephone lines, removal of timber, grazing, logging operations, canals, ditches, reservoirs and other like purposes, or for the joint or common use of real estate, rights-of-way, facilities and equipment; (viii) vendors, carriers, warehousemen’s, repairmen’s, mechanics’, workmen’s, materialmen’s, employee’s, construction or other like liens arising by operation of law in the ordinary course of business or incident to the construction or improvement of any Well in respect of obligations which are not yet due or delinquent or, if delinquent, which are being contested in good faith by appropriate proceedings by or on behalf of Assignor; (ix) liens created under a Well or operating agreements or by operation of law in respect of obligations that are not yet due or delinquent, or if delinquent, that are being contested in good faith by appropriate proceedings by or on behalf of Assignor; (x) the terms and conditions of any contract (including Applicable Contracts); (xi) any mortgage lien on the fee estate or mineral fee estate from which title to the relevant Lease is derived which (I) predates the creation of the Lease and which is not currently subject to foreclosure or other enforcement proceedings by the holder of the mortgage lien or (II) has been subordinated to the applicable Lease; and (xii) all other Encumbrances, instruments, obligations, defects and irregularities affecting the Wells that individually or in the aggregate (I) do not materially detract from the value of or materially interfere with the use or ownership of the Wells, subject thereto or affected thereby (as currently used or owned), (II) do not operate to reduce the Net Revenue Interest of Assignor with respect to any Well to an amount less than the Net Revenue Interest set forth in Exhibit A for such Well with respect to the Contractual Depth for such Well, or (III) do not obligate Assignor to bear a Working Interest with respect to any Well with respect to the Contractual Depth for such Well, in any amount greater than the Working Interest set forth in Exhibit A for such Well (unless the Net Revenue Interest for such Well with respect to the Contractual Depth for such Well is greater than the Net Revenue Interest set forth in Exhibit A in the same or greater proportion as any increase in such Working Interest).
“Working Interest” means the percentage of costs and expenses associated with the exploration, drilling, development, operation and abandonment of any Wells required to be borne with respect thereto, without giving effect to any Burdens.
Section 6.Assumed Obligations. Subject to the terms of the Purchase Agreement, Assignee assumes and hereby agrees to fulfill, perform, pay and discharge (or cause to be fulfilled, performed, paid and discharged) all of the Assumed Obligations.
Section 7.Further Assurances. The Parties shall execute and deliver, or shall cause to be executed and delivered from time to time, such further instruments of conveyance and transfer, and shall take such other actions as a Party may reasonably request, to convey and deliver the Conveyed Interests to Assignee, to perfect Assignee’s title thereto, and to accomplish the orderly transfer of the Conveyed Interests to Assignee in the manner contemplated by this Assignment and the Purchase Agreement.
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Section 8.Purchase Agreement. This Assignment is subject to and delivered under the terms and conditions of the Purchase Agreement. If any provision of this Assignment is construed to conflict with any provision of the Purchase Agreement, the provisions of the Purchase Agreement shall be deemed controlling to the extent of that conflict.
Section 9.Successors and Assigns. This Assignment shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns.
Section 10.Governing Law; Jurisdiction; Venue; Jury Waiver. THIS ASSIGNMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS ASSIGNMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THE RIGHTS, DUTIES AND THE LEGAL RELATIONS AMONG THE PARTIES HERETO AND THERETO SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, EXCLUDING ANY CONFLICTS OF LAW RULE OR PRINCIPLE THAT MIGHT REFER CONSTRUCTION OF SUCH PROVISIONS TO THE LAWS OF ANOTHER JURISDICTION. BOTH PARTIES HERETO CONSENT TO THE EXERCISE OF JURISDICTION IN PERSONAM BY THE FEDERAL COURTS OF THE UNITED STATES LOCATED IN HARRIS COUNTY, TEXAS OR THE STATE COURTS LOCATED IN HARRIS COUNTY, TEXAS FOR ANY ACTION ARISING OUT OF THIS ASSIGNMENT OR ANY TRANSACTION CONTEMPLATED HEREBY. ALL ACTIONS OR PROCEEDINGS WITH RESPECT TO, ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO, OR FROM THIS ASSIGNMENT OR ANY TRANSACTION CONTEMPLATED HEREBY SHALL BE EXCLUSIVELY LITIGATED IN SUCH COURTS DESCRIBED ABOVE HAVING SITES IN HOUSTON, TEXAS AND EACH PARTY IRREVOCABLY SUBMITS TO THE JURISDICTION OF SUCH COURTS SOLELY IN RESPECT OF ANY PROCEEDING ARISING OUT OF OR RELATED TO THIS ASSIGNMENT. THE PARTIES HERETO HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER PARTY AGAINST ANOTHER IN ANY MATTER WHATSOEVER ARISING OUT OF OR IN RELATION TO OR IN CONNECTION WITH THIS ASSIGNMENT.
Section 11.Severability. If any term or other provision of this Assignment is invalid, illegal, or incapable of being enforced by any rule of law or public policy, all other terms and provisions of this Assignment shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any adverse manner to either Party. Upon any such determination, the Parties shall negotiate in good faith to modify this Assignment so as to effect the original intent of the Parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.
Section 12.Counterparts. This Assignment may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an original instrument, but all of such counterparts shall constitute for all purposes one agreement. Any signature hereto delivered by a Party by electronic transmission shall be deemed an original signature hereto.
[Signature and acknowledgement pages follow.]
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EXECUTED by each Party on the Closing Date, but effective for all purposes as of the Effective Time.
ASSIGNOR:
SEP HOLDINGS IV, LLC
By: | Evolve Transition Infrastructure LP, |
By: | Evolve Transition Infrastructure GP, LLC |
By:/s/ Gerald F. Willinger
Name:Gerald F. Willinger
Title:Chief Executive Officer
STATE OF TEXAS | § | |
| § | |
COUNTY OF HARRIS | § | |
Subscribed, sworn to and acknowledged before me on this ___ day of May, 2021 by Gerald F. Willinger, to me personally known, who, being by me duly sworn, did say that he is the Chief Executive Officer of EVOLVE TRANSITION INFRASTRUCTURE GP, LLC, a Delaware limited liability company, which is the sole general partner of EVOLVE TRANSITION INFRASTRUCTURE LP, a Delaware limited partnership, which is the sole member of SEP HOLDINGS IV, LLC, a Delaware limited liability company, and that said instrument was signed on behalf of said limited liability company.
Notary Public: /s/ Dwayne Adams
Printed Name: Dwayne Adams
My Commission Expires: 12-6-23
Commission Number: 126186205
Signature and Acknowledgment Page to
Assignment, Bill of Sale and Conveyance
ASSIGNEE:
BAYSHORE ENERGY TX LLC
By: /s/ Yousuf Chaudhary
Name:Yousuf Chaudhary
Title:Executive Vice President
STATE OF TEXAS | § | |
| § | |
COUNTY OF HARRIS | § | |
Subscribed, sworn to and acknowledged before me on this 14 day of May, 2021 by Yousuf Chaudhary, to me personally known, who, being by me duly sworn, did say that he/she is a Executive Vice President of BAYSHORE ENERGY TX, a LIMITED LIABILITY COMPAY, and that said instrument was signed on behalf of said Limited Liability Company.
/s/ Vanessa Aguilar
Notary Public
Printed Name: Vanessa Aguilar
My Commission Expires: 01/19/2024
Commission Number: 130500563
Signature and Acknowledgment Page to
Assignment, Bill of Sale and Conveyance
Exhibit A
Wells
# | WELL NAME | API | WI | NRI |
1. | GOODWIN 1V | 50732899 | 1.00000000 | 0.76000000 |
2. | GOODWIN 2H | 50733200 | 1.00000000 | 0.76000000 |
3. | MARK AND SANDRA 2H | 50732900 | 1.00000000 | 0.75193360 |
4. | MARK AND SANDRA 3H | 50732943 | 1.00000000 | 0.74500000 |
5. | RUSSELL A 1H | 12736057 | 1.00000000 | 0.67500001 |
6. | TEXAS OSAGE 1 | 50732738 | 0.37406250 | 0.26569219 |
7. | TEXAS OSAGE 2 | 50732748 | 0.43295875 | 0.30927713 |
END OF EXHIBIT A
Exhibit B
Leases
# | Lessor | Lessee | Lease Effective Date | Book | Page | County | State |
1. | GOODWIN, PHILLIP A. | RATTLER OIL & GAS CORP | 2005-06- 08 | 91 | 582 | Zavala | Texas |
2. | MARK & SANDRA, LTD. | RATTLER OIL & GAS CORP | 2005-06- 08 | 91 | 577 | Zavala | Texas |
3. | MARK & SANDRA, LTD. | SANCHEZ OIL & GAS CORPORATION | 2008-01- 15 | 294 | 291 | Zavala | Texas |
4. | THE PATSY H. MIDDLETON FAMILY PARTN | AMERITEX MINERALS INC | 2007-11- 15 | 294 | 51 | Zavala | Texas |
5. | HARRIS, RONALD W., ET AL | AMERITEX MINERALS INC | 2008-07- 07 | 300 | 68 | Zavala | Texas |
6. | TEXAS OSAGE ROYALTY POOL, INC. | AMERITEX MINERALS INC | 2007-08- 14 | 290 | 308 | Zavala | Texas |
7. | THE PROSPECT COMPANY | AMERITEX MINERALS INC | 2007-07- 12 | 290 | 443 | Zavala | Texas |
8. | RUSSELL, JACKIE LYNN | EAGLE FORD MINERALS, LLC | 2013-09- 17 | 504 | 54 | Dimmit | Texas |
9. | VOTAW, LARRY, ET AL | EAGLE FORD MINERALS, LLC | 2013-09- 17 | 504 | 51 | Dimmit | Texas |
END OF EXHIBIT B
Exhibit C
Applicable Contracts
Each of the following contracts, agreements, and instruments, including all amendments, supplements, and/ or restatements thereof or thereto, as applicable:
1. | Any and all pooling, unitization, and communitization orders, declarations, and agreements in effect with respect to any of the Acquired Leases, including all interests in the units created thereby. |
END OF EXHIBIT C
Exhibit D
Excluded Assets
None.
END OF EXHIBIT D
Execution Copy
Exhibit 10.10
VOID AFTER 5:00 P.M. EASTERN TIME, MAY 17, 2031
SERIES B WARRANT
for the Purchase of
200,000 Shares of Common Stock
of
NUVVE HOLDING CORP.
Original Issue Date: May 17, 2021
NUVVE HOLDING CORP. HEREBY CERTIFIES THAT Evolve Transition Infrastructure LP, or its registered assigns (the “Holder”), is the registered owner of this Series B Warrant of Nuvve Holding Corp. (the “Company”), exercisable for shares of Common Stock, par value $0.0001 (the “Common Stock”), of the Company. This Series B Warrant is one of a series of duly authorized warrants, denominated as Series B Warrants, which are being issued pursuant to the Letter Agreement concurrently with four other series of duly authorized warrants, denominated as Series C, Series D, Series E, and Series F Warrants (collectively, with the Series B Warrants, the “Warrants”). Unless the context otherwise requires, references to the “Holders” are to the holders of all the Warrants.
This Series B Warrant is exercisable for 200,000 shares of Common Stock (the “Exercise Shares”). Each Series B Warrant entitles the registered holder upon exercise at any time from 9:00 a.m. on the applicable Exercisability Date (as defined below) until 5:00 p.m., New York City Time on May 17, 2031 (the “Expiration Time”), to receive from the Company an amount of fully paid and nonassessable shares of Common Stock (the “Warrant Shares”) at an initial exercise price (the “Exercise Price”) of ten dollars ($10) (as such price may be adjusted as provided in this Warrant), subject to the conditions and terms set forth herein. The Exercise Price and the number of Warrant Shares issuable upon exercise of the Series B Warrant are subject to adjustment upon the occurrence of certain events set forth in this Warrant.
To the extent vested pursuant to the Vesting Schedule contained in Section 2 below, this Warrant may be exercised at any time on or after the date that is 180 days after the applicable Vesting Date (each such date, an “Exercisability Date”) and on or before the Expiration Time; provided that holders shall be able to exercise their Warrants only if the exercise of such Warrants is exempt from, or in compliance with, the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), and such securities are qualified for sale or exempt from qualification under the applicable securities laws of the states in which the various holders of the Warrants or other persons to whom it is proposed that any Warrant Shares be issued on exercise of the Warrants reside (any exercise that would not, in the opinion of the Company upon advice of counsel, qualify for exemption from the registration requirements of
the Securities Act will be effected as an exchange of the Warrants for Warrant Shares as provided herein).
“act” has the meaning set forth in Section 7.2.1.
“Accredited Investor Certificate” means a certificate substantially in the form of Exhibit B hereto.
“Affiliate” shall have the meaning ascribed to it, on the date hereof, in Rule 405 under the Securities Act.
“Average VWAP” per share over a certain period shall mean the arithmetic average of the VWAP per share for each Trading Day in such period.
“Board of Directors” shall mean the Board of Directors of the Company or, with respect to any action to be taken by the Board of Directors, any committee of the Board of Directors duly authorized to take such action.
“Business Combination” means a merger, consolidation, statutory exchange or similar transaction of the Company with another Person.
“Business Day” shall mean Monday through Friday of each week, except that a legal holiday recognized as such by the government of the United States of America or the States of Texas or New York shall not be regarded as a Business Day.
“Capital Stock” means:
(1)in the case of a corporation, corporate stock;
(2)in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;
(3)in the case of a partnership or limited liability company, partnership interests (whether general or limited) or membership interests, respectively; and
(4)any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person, but excluding from all of the foregoing any debt securities convertible into Capital Stock, whether or not such debt securities include any right of participation with Capital Stock.
“Cash Exercise” has the meaning assigned to such term in Section 4.1.2.
“Certificate of Incorporation” shall mean the Amended and Restated Certificate of Incorporation of the Company, as amended or modified.
“Change of Control” shall mean
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(i) the direct or indirect sale, lease, transfer, conveyance or other disposition (other than by way of a merger or consolidation, which is covered by subsection (ii) below, and for the avoidance of doubt, other than non-exclusive licenses of the Company’s intellectual property), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company and its subsidiaries, taken as a whole, to any Person;
(ii) the consummation of any transaction (including, without limitation, pursuant to a merger or consolidation), the result of which is that any Person becomes the “beneficial owner” (as defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or indirectly, of more than 50% of the voting power of the Company; provided, however, solely for purposes of this subsection (ii), a “Person” shall include, in connection with a direct merger of a publicly traded entity with the Company, the shareholders of such publicly traded entity with whom the Company merges; or
(iii) any event which constitutes a “Change of Control” under any indenture or similar agreement governing the outstanding (as of the Issue Date) or future senior notes or debentures of the Company and such “Change of Control” is not waived by the holders of such notes or debentures pursuant to the applicable indenture or similar agreement.
“Closing Sale Price” of the Common Stock shall mean, as of any date, the closing sale price per share (or if no closing sale price is reported, the average of the closing bid and ask prices or, if more than one in either case, the average of the average closing bid and the average closing ask prices) on such date as reported on the principal United States securities exchange on which the Common Stock is traded or, if the Common Stock is not listed on a United States national or regional securities exchange, in the over-the-counter market as reported by OTC Markets Group Inc. or a similar organization. In the absence of such a quotation, the Closing Sale Price shall be an amount determined reasonably and in good faith by the Board of Directors to be the fair market value of a share of Common Stock based on relevant facts and circumstances at the time of any such determination.
“Commission” means the Securities and Exchange Commission.
“Common Stock” shall mean the common stock, par value $0.0001 per share, of the Company or any other Capital Stock of the Company into which such common stock shall be reclassified or changed.
“Company” shall mean Nuvve Holding Corp., a Delaware corporation or any successor to the Company.
“Evolve” means Evolve Transition Infrastructure LP, a Delaware limited partnership.
“Ex-Date” means, when used with respect to any issuance of or distribution in respect of the Common Stock or any other securities, the first date on which the Common Stock or such other securities trade without the right to receive such issuance or distribution.
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Exercise Notice” has the meaning assigned to such term in Section 4.1.2.
“Exercise Price” means $10 per Warrant Share, subject to adjustment pursuant to Section 6.1.
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“Exercise Shares” has the meaning assigned to such term in Section 4.1.3.
“Expiration Time” has the meaning assigned to such term in Section 4.1.1.
“GAAP” means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board Accounting Standards Codification or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect on the Issue Date.
“Holder” or “Warrantholder” means the registered holder of any Warrant.
“Issue Date” means May 17, 2021.
“Letter Agreement” means that certain Letter Agreement, dated as of May 17, 2021, by and among Stonepeak, Evolve and Nuvve Holding Corp.
“Market Value” means the Average VWAP during a 10 consecutive Trading Day period ending on the Trading Day immediately prior to the date of determination.
“Nasdaq” means the Nasdaq Capital Market, Nasdaq Global Market or Nasdaq Global Select Market, as applicable.
“Nasdaq Stockholder Approval” has the meaning assigned to such term in Section 3.5.1.
“National Securities Exchange” shall mean an exchange registered with the Commission under Section 6(a) of the Exchange Act.
“Net Share Settlement” has the meaning assigned to such term in Section 4.1.2.
“Net Share Settlement Election” has the meaning assigned to such term in Section 4.1.2.
“Officer” shall mean the Chief Executive Officer, the President and Chief Operating Officer, the Chief Financial Officer, any Executive Vice President, any Senior Vice President, any Vice President, the Treasurer, the Secretary or any Assistant Secretary of the Company.
“Option” shall mean the right of Stonepeak and Evolve to purchase a share of Common Stock pursuant to that certain Securities Purchase Agreement, dated as of May 17, 2021, between Nuvve Holding Corp., Stonepeak and Evolve, which is attached hereto as Exhibit C.
“Option Securities” has the meaning assigned to such term in Section 3.5.1.
“Person” shall mean any individual, corporation, general partnership, limited partnership, limited liability partnership, joint venture, association, joint-stock company, trust, limited liability company, unincorporated organization or government or any agency or political subdivision thereof.
“Pro Rata Repurchases” means any purchase of shares of Common Stock by the Company or any Affiliate thereof pursuant to (i) any tender offer or exchange offer directed to all of the holders of Common Stock subject to Section 13(e) or 14(e) of the Exchange Act or Regulation 14E promulgated thereunder or (ii) any other tender offer available to substantially all holders of Common Stock, in the case of both (i) and (ii), whether for cash, shares of Capital
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Stock of the Company, other securities of the Company, evidences of indebtedness of the Company or any other Person or any other property (including shares of Capital Stock, other securities or evidences of indebtedness of a subsidiary), or any combination thereof, effected while the Warrants are outstanding, other than purchases in the open market that do not constitute a tender offer subject to Section 13(e) or 14(e). The “Effective Date” of a Pro Rata Repurchase shall mean the date of purchase with respect to any Pro Rata Purchase.
“Reduction Event” shall have the meaning assigned to such term in Section 3.5.1.
“Register” means the register established by the Company pursuant to Section 3.3.1.
“Registrar” means a Person engaged to maintain the Register.
“Restricted Legend” means the legend set forth in Exhibit D.
“Rule 144” means Rule 144 promulgated under the Securities Act.
“Rule 144A” means Rule 144A under the Securities Act.
“Rule 144A Certificate” means a certificate substantially in the form of Exhibit A hereto.
“Securities Act” shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Stockholder Approval Threshold” shall have the meaning assigned to such term in Section 3.5.1.
“Stonepeak” means Stonepeak Rocket Holdings LP.
“Stonepeak Group” means Stonepeak Rocket Holdings LP, Stonepeak Partners LP and their controlled Affiliates.
“Trading Day” shall mean a day during which trading in securities generally occurs on the Nasdaq Capital Market or, if the Common Stock is not listed on the Nasdaq Capital Market, on the principal other national or regional securities exchange on which the Common Stock is then listed or, if the Common Stock is not listed on a national or regional securities exchange, on the principal other market on which the Common Stock is then traded. If the Common Stock is not so listed or traded, “Trading Day” shall mean a Business Day.
“Transfer Agent” has the meaning assigned to such term in Section 5.3.2.
“Trigger Event” has the meaning assigned to such term in Section 6.1.1(i).
“VWAP” per share of Common Stock on any Trading Day means the per share volume-weighted average price as displayed on Bloomberg page “NVVE <Equity> AQR” (or its equivalent successor if such page is not available) in respect of the period from 9:30 a.m. to 4:00 p.m., New York City time, on such Trading Day; or, if such price is not available, “VWAP” means the market value per share of Common Stock on such Trading Day as determined, using a volume-weighted average method, by a nationally recognized independent investment banking firm retained by the Company for this purpose.
“Warrant Exercise” has the meaning assigned to such term in Section 4.1.2.
“Warrant Shares” has the meaning assigned to such term in the Recitals.
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“Warrants” has the meaning assigned to such term in the Recitals and includes Warrants issued on the Issue Date and additional Warrants, if any, in each case issued to the Holders hereunder.
This Warrant shall vest 100% on the Issue Date (the “Vesting Date”).
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From time to time the Company will execute additional Warrants as necessary in order to permit the registration of a transfer or exchange in accordance with this Section. All Warrants issued upon transfer or exchange shall be the duly authorized, executed and delivered Warrants of the Company.
No service charge will be imposed in connection with any transfer or exchange of any Warrant.
A party requesting transfer of Warrants or other securities must provide any evidence of authority that may be required by the Company, including but not limited to, a signature guarantee from an eligible guarantor institution participating in a signature guarantee program approved by the Securities Transfer Association.
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Any Warrant delivered in reliance upon this paragraph will not bear the Restricted Legend.
8
9
10
11
X = ((A - B)/A) × C
where:
X | = | the Warrant Shares issuable upon exercise pursuant to this paragraph (c). |
A | = | the Market Value on the day immediately preceding the date on which the Holder delivers the applicable Exercise Notice. |
B | = | the Exercise Price. |
C | = | the number of shares of Common Stock as to which the Warrants are then being exercised (the “Exercise Shares”). |
If the foregoing calculation results in a negative number, then no shares of Common Stock shall be issued upon exercise pursuant to this paragraph (c).
12
13
14
15
OS1
_______________________
OS0
where
OS0 | = | the number of shares of Common Stock outstanding immediately prior to the record date for such dividend or distribution; and |
OS1 | = | the sum of (A) the number of shares of Common Stock outstanding immediately prior to the record date for such dividend or distribution and (B) the total number of shares of Common Stock constituting such dividend. |
In any such event, the number of Warrant Shares issuable upon exercise of each Warrant at the time of the record date for such dividend or distribution shall be proportionately adjusted so that the Holder, after such date, shall be entitled to purchase the number of shares of Common Stock that such Holder would have owned or been entitled to receive in respect of the shares of Common Stock subject to the Warrant after such date had the Warrant been exercised immediately prior to such date.
OS0 + X
_______________________
OS0 + Y
where
OS0 | = | the number of shares of Common Stock outstanding at the close of business on the record date for such issuance; |
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X | = | the total number of shares of Common Stock issuable pursuant to such rights, options or warrants; and |
Y | = | the number of shares of Common Stock equal to the aggregate price payable to exercise such rights, options or warrants divided by the Market Value determined as of the Ex-Date for such issuance. |
In any such event, the number of Warrant Shares issuable upon the exercise of each Warrant shall be increased to the number obtained by dividing (x) the product of (1) the number of Warrant Shares issuable upon the exercise of the Warrant before such adjustment, and (2) the Exercise Price in effect immediately prior to the distribution giving rise to this adjustment by (y) the new Exercise Price determined in accordance with the immediately preceding sentence.
To the extent that such rights, options or warrants are not exercised prior to their expiration or shares of Common Stock are otherwise not delivered pursuant to such rights or warrants upon the exercise of such rights or warrants, the Exercise Price and the number of Warrant Shares shall be readjusted to the Exercise Price and the number of Warrant Shares that would have then been in effect had the adjustment made upon the issuance of such rights, options or warrants been made on the basis of the delivery of only the number of shares of Common Stock actually delivered. If such rights, options or warrants are only exercisable upon the occurrence of certain triggering events, then the Exercise Price and the number of Warrant Shares shall not be adjusted until such triggering events occur. In determining the aggregate offering price payable for such shares of Common Stock, the conversion agent shall take into account any consideration received for such rights, options or warrants and the value of such consideration (if other than cash, to be determined by the Board of Directors).
OS1
_______________________
OS0
where
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OS0 | = | the number of shares of Common Stock outstanding immediately prior to the effective date of such share subdivision, combination or reclassification; and |
OS1 | = | the number of shares of Common Stock outstanding immediately after the opening of business on the effective date of such share subdivision, combination or reclassification. |
In any such event, the number of Warrant Shares issuable upon exercise of each Warrant at the time of the effective date of such subdivision, combination or reclassification shall be proportionately adjusted so that the Holder, after such date, shall be entitled to purchase the number of shares of Common Stock that such Holder would have owned or been entitled to receive in respect of the shares of Common Stock subject to the Warrant after such date had the Warrant been exercised immediately prior to such date.
SP0
_______________________
SP0 – FMV
where
SP0 | = | the Closing Sale Price per share of Common Stock on the Trading Day immediately preceding the Ex-Date; and |
FMV | = | the fair market value of the portion of the distribution applicable to one share of Common Stock on the Trading Day immediately preceding the Ex-Date as determined by the Board of Directors. |
In any such event, the number of Warrant Shares issuable upon the exercise of each Warrant shall be increased to the number obtained by dividing (x) the
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product of (1) the number of Warrant Shares issuable upon the exercise of the Warrant before such adjustment, and (2) the Exercise Price in effect immediately prior to the distribution giving rise to this adjustment by (y) the new Exercise Price determined in accordance with the immediately preceding sentence.
In a spin-off, where the Company makes a distribution to all holders of shares of Common Stock consisting of Capital Stock of any class or series, or similar equity interests of, or relating to, a subsidiary or other business unit the Exercise Price shall be adjusted on the fourteenth Trading Day after the effective date of the distribution by dividing the Exercise Price in effect immediately prior to such fourteenth Trading Day by the following fraction:
MP0 + MPS
_______________________
MP0
where
MP0 | = | the average of the Closing Sale Price of the Common Stock over each of the first 10 Trading Days commencing on and including the fifth Trading Day following the effective date of such distribution; and |
MPS | = | the average of the closing sale price of the Capital Stock or equity interests representing the portion of the distribution applicable to one share of Common Stock over each of the first 10 Trading Days commencing on and including the fifth Trading Day following the effective date of such distribution, or, as reported in the principal securities exchange or quotation system or market on which such shares are traded, or if not traded on a national or regional securities exchange or over-the-counter market, the fair market value of the Capital Stock or equity interests representing the portion of the distribution applicable to one share of Common Stock on such date as determined by the Board of Directors. |
In any such event, the number of Warrant Shares issuable upon the exercise of each Warrant shall be increased to the number obtained by dividing (x) the product of (1) the number of Warrant Shares issuable upon the exercise of the Warrant before such adjustment, and (2) the Exercise Price in effect immediately prior to the distribution giving rise to this adjustment by (y) the new Exercise Price determined in accordance with the immediately preceding sentence.
In the event that such distribution described in this clause (iv) is not so made, the Exercise Price shall be readjusted, effective as of the date the Board of Directors publicly announces its decision not to pay such dividend or distribution, to the
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Exercise Price that would then be in effect if such dividend distribution had not been declared.
20
21
22
23
Series B Warrants: $6,390,000
Series C Warrants: $1,872,000
Series D Warrants: $1,260,000
24
Series E Warrants: $702,000
Series F Warrants: $405,000
None of the parties hereto (nor any beneficiary hereto) shall take any position or permit any of its Affiliates to take any position (whether in connection with audits, tax returns or otherwise) that is inconsistent with such fair market value.
Nuvve Holding Corp.
2468 Historic Decatur Road
San Diego, California 92106
Attention: Gregory Poilasne and Stephen Moran
Email: gregory@nuvve.com and smoran@nuvve.com
with a copy to, which shall not constitute notice to the Company:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, Massachusetts 02110
Attention: Sahir Surmeli and Eric Macaux
Email: ssurmeli@mintz.com, ewmacaux@mintz.com
and
Graubard Miller
The Chrysler Building
405 Lexington Ave., 11th Floor
25
New York, NY 10174
Attention: Eric Schwartz
Email: eschwartz@graubard.com
If to Stonepeak:
Stonepeak Partners LP
55 Hudson Yards
550 W. 34th Street, 48th Floor
New York, NY 10001
Attention: Trent Kososki, William Demas and Adrienne Saunders
Email: kososki@stonepeakpartners.com; demas@stonepeakpartners.com; LegalandCompliance@stonepeakpartners.com
A copy of the communication (which shall not constitute notice) shall be sent to:
Kirkland & Ellis LLP
609 Main St.
Houston, Texas 77002
Attention: Julian J. Seiguer, P.C. and John D. Pitts, P.C.
Email: julian.seiguer@kirkland.com; john.pitts@kirkland.com
If to Evolve:
Evolve Transition Infrastructure LP
1360 Post Oak Blvd
Suite 2400
Houston, TX 77056
Attention: Charles Ward
Email: cward@evolvetransition.com
A copy of the communication (which shall not constitute notice) shall be sent to:
Sidley Austin LLP
1000 Louisiana Street
26
Houston, Texas 77002
Attention: Cliff Vrielink and George Vlahakos
Email: cliff.vrielink@sidley.com; George.vlahakos@sidley.com
except, in each case, for adjustments expressly provided for in this Warrant.
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[Signature Page Follows]
29
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly authorized officer as of the 17th day of May, 2021.
NUVVE HOLDING CORP.
By: /s/ Gregory Poilasne
Name: Gregory Poilasne
Title: Chairman and Chief Executive Officer
Accepted and agreed,
HOLDER:
EVOLVE TRANSITION INFRASTRUCTURE LP
By: Evolve Transition Infrastructure GP LLC, its general partner
By: /s/ Charles C. Ward
Name: Charles C. Ward
Title: Chief Financial Officer & Secretary
[Form of Exercise Notice]
(To Be Executed Upon Exercise Of Series B Warrant)
The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to receive shares of Common Stock and, unless making a Net Share Settlement Election as provided below, herewith tenders payment for such shares of Common Stock to the order of Nuvve Holding Corp. (the “Company”) in the amount of $ in accordance with the terms of the Warrant Agreement. Notwithstanding the foregoing, by checking the box following this paragraph, the undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to receive shares of Common Stock pursuant to the Net Share Settlement procedures set forth in the Warrant Agreement in lieu of a Cash Exercise: ◻
The undersigned requests that a certificate for such shares be registered in the name of, whose address is and that such shares be delivered to , whose address is . If said number of shares is less than all of the shares of Common Stock issuable hereunder, the undersigned requests that a new Warrant representing the remaining balance of such shares be registered in the name of , whose address is , and that such Warrant be delivered to , whose address is .
If the Warrant Shares to be delivered pursuant this Exercise Notice have not been registered pursuant to a registration statement that has been declared effective under the Securities Act, the undersigned represents and warrants that (x) it is a qualified institutional buyer (as defined in Rule 144A) and is receiving the Warrant Shares for its own account or for the account of another qualified institutional buyer, and it is aware that the Company is issuing the Warrant Shares to it in reliance on Rule 144A; (y) it is an “accredited investor” within the meaning of Rule 501 under the Securities Act; or (z) it is receiving the Warrant Shares pursuant to another available exemption from the registration requirements of the Securities Act. Prior to receiving Warrant Shares pursuant to clause (x) above, the Company may request a certificate substantially in the form of Exhibit A to the Warrant Agreement. Prior to receiving Warrant Shares pursuant to clause (y) above, the Company may request a certificate substantially in the form of Exhibit B and/or an opinion of counsel.
Date:
Signatures must be guaranteed by an “eligible guarantor institution”, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s), assign(s) and transfer(s) unto (the “Assignee”)
(Please type or print block letters)
(Please print or typewrite name and address including zip code of assignee)
the within Warrant and all rights thereunder (the “Securities”), hereby irrevocably constituting and appointing attorney to transfer said Warrant Certificate on the books of the Company with full power of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED ON ALL CERTIFICATES BEARING A RESTRICTED LEGEND]
In connection with any transfer of this Warrant Certificate occurring prior to the removal of the Restricted Legend, the undersigned confirms (i) the understanding that the Securities have not been registered under the Securities Act of 1933, as amended; (ii) that such transfer is made without utilizing any general solicitation or general advertising; and (iii) further as follows:
Check One
☐ (1) This Warrant Certificate is being transferred to a “qualified institutional buyer” in compliance with Rule 144A under the Securities Act of 1933, as amended and certification in the form of Exhibit A to the Warrant Agreement is being furnished herewith.
or
☐ (2) This Warrant Certificate is being transferred other than in accordance with (1) above and documents are being furnished which comply with the conditions of transfer set forth in this Warrant and the Warrant Agreement.
If none of the foregoing boxes is checked, the Company is not obligated to register this Warrant in the name of any Person other than the Holder hereof unless and until the conditions to any such transfer of registration set forth herein and in the Warrant Agreement have been satisfied.
Seller
NOTICE: The signature to this assignment must correspond with the name as written upon the face of the within-mentioned instrument in every particular, without alteration or any change whatsoever.
__________________________________
[Signature Guaranteed]
Signatures must be guaranteed by an “eligible guarantor institution”, which requirements include membership or participation in the Security Transfer Agent Medallion Program
(“STAMP”) or such other “signature guarantee program” in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.
EXHIBIT A
Rule 144A Certificate
,
[●]
[●]
Attention: [●]
Re: | Warrants to acquire Common Stock of Nuvve Holding Corp. (the “Warrants”) Issued under the Warrant Agreement (the “Agreement”) dated as of May 17, 2021 relating to the Warrants |
Ladies and Gentlemen:
This Certificate relates to:
[CHECK A OR B AS APPLICABLE.]
☐ A. Our proposed purchase of Series [●] Warrants issued under the Agreement.
☐ B. Our proposed exchange of Series [●] Warrants issued under the Agreement for an equal number of Series [●] Warrants to be held by us.
We and, if applicable, each account for which we are acting, in the aggregate owned and invested more than $100,000,000 in securities of issuers that are not affiliated with us (or such accounts, if applicable), as of , 20 , which is a date on or since close of our most recent fiscal year. We and, if applicable, each account for which we are acting, are a qualified institutional buyer within the meaning of Rule 144A (“Rule 144A”) under the Securities Act of 1933, as amended (the “Securities Act”). If we are acting on behalf of an account, we exercise sole investment discretion with respect to such account. We are aware that the transfer of Warrants to us, or such exchange, as applicable, is being made in reliance upon the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A. Prior to the date of this Certificate we have received such information regarding the Company as we have requested pursuant to Rule 144A(d)(4) or have determined not to request such information.
You and the Company are entitled to rely upon this Certificate and are irrevocably authorized to produce this Certificate or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby.
A-1
Very truly yours,
[NAME OF PURCHASER (FOR TRANSFERS) OR OWNER (FOR EXCHANGES)]
A-2
EXHIBIT B
Accredited Investor Certificate
,
[●]
[●]
Attention: [●]
Re: | Warrants to acquire Common Stock of Nuvve Holding Corp. (the “Warrants”) Issued under the Warrant Agreement (the “Agreement”) dated as of May 17, 2021 relating to the Warrants |
Ladies and Gentlemen:
This Certificate relates to:
[CHECK A OR B AS APPLICABLE.]
☐ A. Our proposed purchase of Series [●] Warrants issued under the Agreement.
☐ B. Our proposed exchange of Series [●] Warrants issued under the Agreement for an equal number of Warrants to be held by us.
We hereby confirm that:
1.We are an “accredited investor” (an “Accredited Investor”) within the meaning of Rule 501 under the Securities Act of 1933, as amended (the “Securities Act”).
2.Any acquisition of Warrants by us will be for our own account or for the account of one or more other Accredited Investors as to which we exercise sole investment discretion.
3.We have such knowledge and experience in financial and business matters that we are capable of evaluating the merits and risks of an investment in the Warrants and we and any accounts for which we are acting are able to bear the economic risks of and an entire loss of our or their investment in the Warrants.
4.We are not acquiring the Warrants with a view to any distribution thereof in a transaction that would violate the Securities Act or the securities laws of any State of the United States or any other applicable jurisdiction; provided that the disposition of our property and the property of any accounts for which we are acting as fiduciary will remain at all times within our and their control.
5.We acknowledge that the Warrants have not been registered under the Securities Act and that the Warrants may not be offered or sold within the United States or to or for the benefit of U.S. persons except as set forth below.
We agree for the benefit of the Company, on our own behalf and on behalf of each account for which we are acting, that such Warrants may be offered, sold, pledged or otherwise transferred only in accordance with the Securities Act and any applicable securities laws of any State of the United States and only (a) to the Company or any subsidiary thereof, (b) pursuant to a
B-1
registration statement that has been declared effective under the Securities Act, (c) to a person it reasonably believes is a qualified institutional buyer in compliance with Rule 144A under the Securities Act, (d) to an Accredited Investor that, prior to such transfer, delivers a duly completed and signed certificate (the form of which may be obtained from the Company) relating to the restrictions on transfer of the Warrants, or (e) pursuant to any other available exemption from the registration requirements of the Securities Act.
Prior to the registration of any transfer in accordance with (c) above, we acknowledge that a duly completed and signed certificate (the form of which may be obtained from the Company) must be delivered to the Company. Prior to the registration of any transfer in accordance with (d) or (e) above, we acknowledge that the Company reserves the right to require the delivery of such legal opinions, certifications or other evidence as may reasonably be required in order to determine that the proposed transfer is being made in compliance with the Securities Act and applicable state securities laws. We acknowledge that no representation is made as to the availability of any exemption from the registration requirements of the Securities Act.
We understand that the Company will not be required to accept for registration of transfer any Warrants acquired by us, except upon presentation of evidence satisfactory to the Company that the foregoing restrictions on transfer have been complied with. We further understand that the Warrants acquired by us will bear a legend reflecting the substance of the preceding paragraph. We further agree to provide to any person acquiring any of the Warrants from us a notice advising such person that resales of the Warrants are restricted as stated herein and that the Warrants will bear a legend to that effect.
We agree to notify you promptly in writing if any of our acknowledgments, representations or agreements herein ceases to be accurate and complete.
We represent to you that we have full power to make the foregoing acknowledgments, representations and agreements on our own behalf and on behalf of any account for which we are acting.
You and the Company are entitled to rely upon this Certificate and are irrevocably authorized to produce this Certificate or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby.
B-2
Very truly yours,
[NAME OF PURCHASER (FOR
TRANSFERS) OR OWNER (FOR
EXCHANGES)]
Upon transfer, the Warrants would be registered in the name of the new beneficial owner as follows:
Taxpayer ID number: ____________________
B-3
EXHIBIT C
Securities Purchase Agreement
[See attached]
C-1
EXHIBIT D
Restricted Legend
THIS WARRANT AND THE UNDERLYING COMMON STOCK THAT MAY BE ISSUED UPON ITS EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THIS WARRANT EVIDENCES AND ENTITLES THE REGISTERED HOLDER HEREOF TO CERTAIN RIGHTS AS SET FORTH HEREIN. THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT (A) IT IS A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN “ACCREDITED INVESTOR” WITHIN THE MEANING OF RULE 501 UNDER THE SECURITIES ACT AND (2) AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH WARRANT AND THE UNDERLYING COMMON STOCK THAT MAY BE ISSUED UPON ITS EXERCISE, PRIOR TO THE EXPIRATION OF THE APPLICABLE HOLDING PERIOD WITH RESPECT TO RESTRICTED SECURITIES SET FORTH IN RULE 144 UNDER THE SECURITIES ACT, ONLY (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHICH NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (C) TO AN “ACCREDITED INVESTOR” WITHIN THE MEANING OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, (D) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (C) OR (D) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO THE COMPANY, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE COMPANY. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER
D-1
AFTER THE EXPIRATION OF THE APPLICABLE HOLDING PERIOD WITH RESPECT TO RESTRICTED SECURITIES SET FORTH IN RULE 144 UNDER THE SECURITIES ACT.
D-2
Execution Version
Exhibit 10.11
VOID AFTER 5:00 P.M. EASTERN TIME, MAY 17, 2031
SERIES C WARRANT
for the Purchase of
100,000 Shares of Common Stock
of
NUVVE HOLDING CORP.
Original Issue Date: May 17, 2021
NUVVE HOLDING CORP. HEREBY CERTIFIES THAT Evolve Transition Infrastructure LP, or its registered assigns (the “Holder”), is the registered owner of this Series C Warrant of Nuvve Holding Corp. (the “Company”), exercisable for shares of Common Stock, par value $0.0001 (the “Common Stock”), of the Company. This Series C Warrant is one of a series of duly authorized warrants, denominated as Series C Warrants, which are being issued pursuant to the Letter Agreement concurrently with four other series of duly authorized warrants, denominated as Series B, Series D, Series E, and Series F Warrants (collectively, with the Series C Warrants, the “Warrants”). Unless the context otherwise requires, references to the “Holders” are to the holders of all the Warrants.
This Series C Warrant is exercisable for 100,000 shares of Common Stock (the “Exercise Shares”). Each Series C Warrant entitles the registered holder upon exercise at any time from 9:00 a.m. on the applicable Exercisability Date (as defined below) until 5:00 p.m., New York City Time on May 17, 2031 (the “Expiration Time”), to receive from the Company an amount of fully paid and nonassessable shares of Common Stock (the “Warrant Shares”) at an initial exercise price (the “Exercise Price”) of fifteen dollars ($15) (as such price may be adjusted as provided in this Warrant), subject to the conditions and terms set forth herein. The Exercise Price and the number of Warrant Shares issuable upon exercise of the Series C Warrant are subject to adjustment upon the occurrence of certain events set forth in this Warrant.
To the extent vested pursuant to the Vesting Schedule contained in Section 2 below, this Warrant may be exercised at any time on or after the date that is 180 days after the applicable Vesting Date (each such date, an “Exercisability Date”) and on or before the Expiration Time; provided that holders shall be able to exercise their Warrants only if the exercise of such Warrants is exempt from, or in compliance with, the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), and such securities are qualified for sale or exempt from qualification under the applicable securities laws of the states in which the various holders of the Warrants or other persons to whom it is proposed that any Warrant Shares be issued on exercise of the Warrants reside (any exercise that would not, in the opinion of the Company upon advice of counsel, qualify for exemption from the registration requirements of
the Securities Act will be effected as an exchange of the Warrants for Warrant Shares as provided herein).
“act” has the meaning set forth in Section 7.2.1.
“Accredited Investor Certificate” means a certificate substantially in the form of Exhibit B hereto.
“Affiliate” shall have the meaning ascribed to it, on the date hereof, in Rule 405 under the Securities Act.
“Average VWAP” per share over a certain period shall mean the arithmetic average of the VWAP per share for each Trading Day in such period.
“Board of Directors” shall mean the Board of Directors of the Company or, with respect to any action to be taken by the Board of Directors, any committee of the Board of Directors duly authorized to take such action.
“Business Combination” means a merger, consolidation, statutory exchange or similar transaction of the Company with another Person.
“Business Day” shall mean Monday through Friday of each week, except that a legal holiday recognized as such by the government of the United States of America or the States of Texas or New York shall not be regarded as a Business Day.
“Capital Stock” means:
(1)in the case of a corporation, corporate stock;
(2)in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;
(3)in the case of a partnership or limited liability company, partnership interests (whether general or limited) or membership interests, respectively; and
(4)any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person, but excluding from all of the foregoing any debt securities convertible into Capital Stock, whether or not such debt securities include any right of participation with Capital Stock.
“Cash Exercise” has the meaning assigned to such term in Section 4.1.2.
“Certificate of Incorporation” shall mean the Amended and Restated Certificate of Incorporation of the Company, as amended or modified.
“Change of Control” shall mean
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(i) the direct or indirect sale, lease, transfer, conveyance or other disposition (other than by way of a merger or consolidation, which is covered by subsection (ii) below, and for the avoidance of doubt, other than non-exclusive licenses of the Company’s intellectual property), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company and its subsidiaries, taken as a whole, to any Person;
(ii) the consummation of any transaction (including, without limitation, pursuant to a merger or consolidation), the result of which is that any Person becomes the “beneficial owner” (as defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or indirectly, of more than 50% of the voting power of the Company; provided, however, solely for purposes of this subsection (ii), a “Person” shall include, in connection with a direct merger of a publicly traded entity with the Company, the shareholders of such publicly traded entity with whom the Company merges; or
(iii) any event which constitutes a “Change of Control” under any indenture or similar agreement governing the outstanding (as of the Issue Date) or future senior notes or debentures of the Company and such “Change of Control” is not waived by the holders of such notes or debentures pursuant to the applicable indenture or similar agreement.
“Closing Sale Price” of the Common Stock shall mean, as of any date, the closing sale price per share (or if no closing sale price is reported, the average of the closing bid and ask prices or, if more than one in either case, the average of the average closing bid and the average closing ask prices) on such date as reported on the principal United States securities exchange on which the Common Stock is traded or, if the Common Stock is not listed on a United States national or regional securities exchange, in the over-the-counter market as reported by OTC Markets Group Inc. or a similar organization. In the absence of such a quotation, the Closing Sale Price shall be an amount determined reasonably and in good faith by the Board of Directors to be the fair market value of a share of Common Stock based on relevant facts and circumstances at the time of any such determination.
“Commission” means the Securities and Exchange Commission.
“Common Stock” shall mean the common stock, par value $0.0001 per share, of the Company or any other Capital Stock of the Company into which such common stock shall be reclassified or changed.
“Company” shall mean Nuvve Holding Corp., a Delaware corporation or any successor to the Company.
“Evolve” means Evolve Transition Infrastructure LP, a Delaware limited partnership.
“Ex-Date” means, when used with respect to any issuance of or distribution in respect of the Common Stock or any other securities, the first date on which the Common Stock or such other securities trade without the right to receive such issuance or distribution.
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Exercise Notice” has the meaning assigned to such term in Section 4.1.2.
“Exercise Price” means $15 per Warrant Share, subject to adjustment pursuant to Section 6.1.
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“Exercise Shares” has the meaning assigned to such term in Section 4.1.3.
“Expiration Time” has the meaning assigned to such term in Section 4.1.1.
“GAAP” means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board Accounting Standards Codification or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect on the Issue Date.
“Holder” or “Warrantholder” means the registered holder of any Warrant.
“Issue Date” means May 17, 2021.
“Letter Agreement” means that certain Letter Agreement, dated as of May 17, 2021, by and among Stonepeak, Evolve and Nuvve Holding Corp.
“Market Value” means the Average VWAP during a 10 consecutive Trading Day period ending on the Trading Day immediately prior to the date of determination.
“Nasdaq” means the Nasdaq Capital Market, Nasdaq Global Market or Nasdaq Global Select Market, as applicable.
“Nasdaq Stockholder Approval” has the meaning assigned to such term in Section 3.5.1.
“National Securities Exchange” shall mean an exchange registered with the Commission under Section 6(a) of the Exchange Act.
“Net Share Settlement” has the meaning assigned to such term in Section 4.1.2.
“Net Share Settlement Election” has the meaning assigned to such term in Section 4.1.2.
“Officer” shall mean the Chief Executive Officer, the President and Chief Operating Officer, the Chief Financial Officer, any Executive Vice President, any Senior Vice President, any Vice President, the Treasurer, the Secretary or any Assistant Secretary of the Company.
“Option” shall mean the right of Stonepeak and Evolve to purchase a share of Common Stock pursuant to that certain Securities Purchase Agreement, dated as of May 17, 2021, between Nuvve Holding Corp., Stonepeak and Evolve, which is attached hereto as Exhibit C.
“Option Securities” has the meaning assigned to such term in Section 3.5.1.
“Person” shall mean any individual, corporation, general partnership, limited partnership, limited liability partnership, joint venture, association, joint-stock company, trust, limited liability company, unincorporated organization or government or any agency or political subdivision thereof.
“Pro Rata Repurchases” means any purchase of shares of Common Stock by the Company or any Affiliate thereof pursuant to (i) any tender offer or exchange offer directed to all of the holders of Common Stock subject to Section 13(e) or 14(e) of the Exchange Act or Regulation 14E promulgated thereunder or (ii) any other tender offer available to substantially all holders of Common Stock, in the case of both (i) and (ii), whether for cash, shares of Capital
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Stock of the Company, other securities of the Company, evidences of indebtedness of the Company or any other Person or any other property (including shares of Capital Stock, other securities or evidences of indebtedness of a subsidiary), or any combination thereof, effected while the Warrants are outstanding, other than purchases in the open market that do not constitute a tender offer subject to Section 13(e) or 14(e). The “Effective Date” of a Pro Rata Repurchase shall mean the date of purchase with respect to any Pro Rata Purchase.
“Reduction Event” shall have the meaning assigned to such term in Section 3.5.1.
“Register” means the register established by the Company pursuant to Section 3.3.1.
“Registrar” means a Person engaged to maintain the Register.
“Restricted Legend” means the legend set forth in Exhibit D.
“Rule 144” means Rule 144 promulgated under the Securities Act.
“Rule 144A” means Rule 144A under the Securities Act.
“Rule 144A Certificate” means a certificate substantially in the form of Exhibit A hereto.
“Securities Act” shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Stockholder Approval Threshold” shall have the meaning assigned to such term in Section 3.5.1.
“Stonepeak” means Stonepeak Rocket Holdings LP.
“Stonepeak Group” means Stonepeak Rocket Holdings LP, Stonepeak Partners LP and their controlled Affiliates.
“Trading Day” shall mean a day during which trading in securities generally occurs on the Nasdaq Capital Market or, if the Common Stock is not listed on the Nasdaq Capital Market, on the principal other national or regional securities exchange on which the Common Stock is then listed or, if the Common Stock is not listed on a national or regional securities exchange, on the principal other market on which the Common Stock is then traded. If the Common Stock is not so listed or traded, “Trading Day” shall mean a Business Day.
“Transfer Agent” has the meaning assigned to such term in Section 5.3.2.
“Trigger Event” has the meaning assigned to such term in Section 6.1.1(i).
“VWAP” per share of Common Stock on any Trading Day means the per share volume-weighted average price as displayed on Bloomberg page “NVVE <Equity> AQR” (or its equivalent successor if such page is not available) in respect of the period from 9:30 a.m. to 4:00 p.m., New York City time, on such Trading Day; or, if such price is not available, “VWAP” means the market value per share of Common Stock on such Trading Day as determined, using a volume-weighted average method, by a nationally recognized independent investment banking firm retained by the Company for this purpose.
“Warrant Exercise” has the meaning assigned to such term in Section 4.1.2.
“Warrant Shares” has the meaning assigned to such term in the Recitals.
5
“Warrants” has the meaning assigned to such term in the Recitals and includes Warrants issued on the Issue Date and additional Warrants, if any, in each case issued to the Holders hereunder.
This Warrant shall vest 50% on the Issue Date and 50% on the Subsequent Vesting Date (each of the Issue Date and Subsequent Vesting Date, a “Vesting Date”). The Subsequent Vesting Date shall be the date that Levo Mobility LLC, a Delaware limited liability company and subsidiary of the Company, has entered into contracts with third parties to spend at least $125 million in aggregate of capital expenditures after the Issue Date. The Company shall provide the Holders with written notice no later than five Business Days prior to the Subsequent Vesting Date containing the date of the Subsequent Vesting Date.
6
From time to time the Company will execute additional Warrants as necessary in order to permit the registration of a transfer or exchange in accordance with this Section. All Warrants issued upon transfer or exchange shall be the duly authorized, executed and delivered Warrants of the Company.
No service charge will be imposed in connection with any transfer or exchange of any Warrant.
7
A party requesting transfer of Warrants or other securities must provide any evidence of authority that may be required by the Company, including but not limited to, a signature guarantee from an eligible guarantor institution participating in a signature guarantee program approved by the Securities Transfer Association.
Any Warrant delivered in reliance upon this paragraph will not bear the Restricted Legend.
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10
11
X = ((A - B)/A) × C
where:
X | = | the Warrant Shares issuable upon exercise pursuant to this paragraph (c). |
A | = | the Market Value on the day immediately preceding the date on which the Holder delivers the applicable Exercise Notice. |
B | = | the Exercise Price. |
C | = | the number of shares of Common Stock as to which the Warrants are then being exercised (the “Exercise Shares”). |
If the foregoing calculation results in a negative number, then no shares of Common Stock shall be issued upon exercise pursuant to this paragraph (c).
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OS1
_______________________
OS0
where
OS0 | = | the number of shares of Common Stock outstanding immediately prior to the record date for such dividend or distribution; and |
OS1 | = | the sum of (A) the number of shares of Common Stock outstanding immediately prior to the record date for such dividend or distribution and (B) the total number of shares of Common Stock constituting such dividend. |
In any such event, the number of Warrant Shares issuable upon exercise of each Warrant at the time of the record date for such dividend or distribution shall be proportionately adjusted so that the Holder, after such date, shall be entitled to purchase the number of shares of Common Stock that such Holder would have owned or been entitled to receive in respect of the shares of Common Stock subject to the Warrant after such date had the Warrant been exercised immediately prior to such date.
16
OS0 + X
_______________________
OS0 + Y
where
OS0 | = | the number of shares of Common Stock outstanding at the close of business on the record date for such issuance; |
X | = | the total number of shares of Common Stock issuable pursuant to such rights, options or warrants; and |
Y | = | the number of shares of Common Stock equal to the aggregate price payable to exercise such rights, options or warrants divided by the Market Value determined as of the Ex-Date for such issuance. |
In any such event, the number of Warrant Shares issuable upon the exercise of each Warrant shall be increased to the number obtained by dividing (x) the product of (1) the number of Warrant Shares issuable upon the exercise of the Warrant before such adjustment, and (2) the Exercise Price in effect immediately prior to the distribution giving rise to this adjustment by (y) the new Exercise Price determined in accordance with the immediately preceding sentence.
To the extent that such rights, options or warrants are not exercised prior to their expiration or shares of Common Stock are otherwise not delivered pursuant to such rights or warrants upon the exercise of such rights or warrants, the Exercise Price and the number of Warrant Shares shall be readjusted to the Exercise Price and the number of Warrant Shares that would have then been in effect had the adjustment made upon the issuance of such rights, options or warrants been made on the basis of the delivery of only the number of shares of Common Stock actually delivered. If such rights, options or warrants are only exercisable upon the occurrence of certain triggering events, then the Exercise Price and the number of Warrant Shares shall not be adjusted until such triggering events occur. In determining the aggregate offering price payable for such shares of Common Stock, the conversion agent shall take into account any consideration received for such rights, options or warrants and the value of such consideration (if other than cash, to be determined by the Board of Directors).
17
OS1
_______________________
OS0
where
OS0 | = | the number of shares of Common Stock outstanding immediately prior to the effective date of such share subdivision, combination or reclassification; and |
OS1 | = | the number of shares of Common Stock outstanding immediately after the opening of business on the effective date of such share subdivision, combination or reclassification. |
In any such event, the number of Warrant Shares issuable upon exercise of each Warrant at the time of the effective date of such subdivision, combination or reclassification shall be proportionately adjusted so that the Holder, after such date, shall be entitled to purchase the number of shares of Common Stock that such Holder would have owned or been entitled to receive in respect of the shares of Common Stock subject to the Warrant after such date had the Warrant been exercised immediately prior to such date.
SP0
_______________________
SP0 – FMV
where
18
SP0 | = | the Closing Sale Price per share of Common Stock on the Trading Day immediately preceding the Ex-Date; and |
FMV | = | the fair market value of the portion of the distribution applicable to one share of Common Stock on the Trading Day immediately preceding the Ex-Date as determined by the Board of Directors. |
In any such event, the number of Warrant Shares issuable upon the exercise of each Warrant shall be increased to the number obtained by dividing (x) the product of (1) the number of Warrant Shares issuable upon the exercise of the Warrant before such adjustment, and (2) the Exercise Price in effect immediately prior to the distribution giving rise to this adjustment by (y) the new Exercise Price determined in accordance with the immediately preceding sentence.
In a spin-off, where the Company makes a distribution to all holders of shares of Common Stock consisting of Capital Stock of any class or series, or similar equity interests of, or relating to, a subsidiary or other business unit the Exercise Price shall be adjusted on the fourteenth Trading Day after the effective date of the distribution by dividing the Exercise Price in effect immediately prior to such fourteenth Trading Day by the following fraction:
MP0 + MPS
_______________________
MP0
where
MP0 | = | the average of the Closing Sale Price of the Common Stock over each of the first 10 Trading Days commencing on and including the fifth Trading Day following the effective date of such distribution; and |
MPS | = | the average of the closing sale price of the Capital Stock or equity interests representing the portion of the distribution applicable to one share of Common Stock over each of the first 10 Trading Days commencing on and including the fifth Trading Day following the effective date of such distribution, or, as reported in the principal securities exchange or quotation system or market on which such shares are traded, or if not traded on a national or regional securities exchange or over-the-counter market, the fair market value of the Capital Stock or equity interests representing the portion of the distribution applicable to one share of Common Stock on such date as determined by the Board of Directors. |
19
In any such event, the number of Warrant Shares issuable upon the exercise of each Warrant shall be increased to the number obtained by dividing (x) the product of (1) the number of Warrant Shares issuable upon the exercise of the Warrant before such adjustment, and (2) the Exercise Price in effect immediately prior to the distribution giving rise to this adjustment by (y) the new Exercise Price determined in accordance with the immediately preceding sentence.
In the event that such distribution described in this clause (iv) is not so made, the Exercise Price shall be readjusted, effective as of the date the Board of Directors publicly announces its decision not to pay such dividend or distribution, to the Exercise Price that would then be in effect if such dividend distribution had not been declared.
20
21
22
23
24
Series B Warrants: $6,390,000
Series C Warrants: $1,872,000
Series D Warrants: $1,260,000
Series E Warrants: $702,000
Series F Warrants: $405,000
None of the parties hereto (nor any beneficiary hereto) shall take any position or permit any of its Affiliates to take any position (whether in connection with audits, tax returns or otherwise) that is inconsistent with such fair market value.
Nuvve Holding Corp.
2468 Historic Decatur Road
San Diego, California 92106
Attention: Gregory Poilasne and Stephen Moran
Email: gregory@nuvve.com and smoran@nuvve.com
with a copy to, which shall not constitute notice to the Company:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
25
Boston, Massachusetts 02110
Attention: Sahir Surmeli and Eric Macaux
Email: ssurmeli@mintz.com, ewmacaux@mintz.com
and
Graubard Miller
The Chrysler Building
405 Lexington Ave., 11th Floor
New York, NY 10174
Attention: Eric Schwartz
Email: eschwartz@graubard.com
If to Stonepeak:
Stonepeak Partners LP
55 Hudson Yards
550 W. 34th Street, 48th Floor
New York, NY 10001
Attention: Trent Kososki, William Demas and Adrienne Saunders
Email: kososki@stonepeakpartners.com; demas@stonepeakpartners.com; LegalandCompliance@stonepeakpartners.com
A copy of the communication (which shall not constitute notice) shall be sent to:
Kirkland & Ellis LLP
609 Main St.
Houston, Texas 77002
Attention: Julian J. Seiguer, P.C. and John D. Pitts, P.C.
Email: julian.seiguer@kirkland.com; john.pitts@kirkland.com
If to Evolve:
Evolve Transition Infrastructure LP
1360 Post Oak Blvd
26
Suite 2400
Houston, TX 77056
Attention: Charles Ward
Email: cward@evolvetransition.com
A copy of the communication (which shall not constitute notice) shall be sent to:
Sidley Austin LLP
1000 Louisiana Street
Houston, Texas 77002
Attention: Cliff Vrielink and George Vlahakos
Email: cliff.vrielink@sidley.com; George.vlahakos@sidley.com
27
except, in each case, for adjustments expressly provided for in this Warrant.
28
[Signature Page Follows]
29
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly authorized officer as of the 17th day of May, 2021.
NUVVE HOLDING CORP.
By: /s/ Gregory Poilasne
Name: Gregory Poilasne
Title: Chairman and Chief Executive Officer
Accepted and agreed,
HOLDER:
EVOLVE TRANSITION INFRASTRUCTURE LP
By: Evolve Transition Infrastructure GP LLC, its general partner
By: /s/ Charles C. Ward
Name: Charles C. Ward
Title: Chief Financial Officer & Secretary
[Form of Exercise Notice]
(To Be Executed Upon Exercise Of Series C Warrant)
The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to receive shares of Common Stock and, unless making a Net Share Settlement Election as provided below, herewith tenders payment for such shares of Common Stock to the order of Nuvve Holding Corp. (the “Company”) in the amount of $ in accordance with the terms of the Warrant Agreement. Notwithstanding the foregoing, by checking the box following this paragraph, the undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to receive shares of Common Stock pursuant to the Net Share Settlement procedures set forth in the Warrant Agreement in lieu of a Cash Exercise: ◻
The undersigned requests that a certificate for such shares be registered in the name of, whose address is and that such shares be delivered to , whose address is . If said number of shares is less than all of the shares of Common Stock issuable hereunder, the undersigned requests that a new Warrant representing the remaining balance of such shares be registered in the name of , whose address is , and that such Warrant be delivered to , whose address is .
If the Warrant Shares to be delivered pursuant this Exercise Notice have not been registered pursuant to a registration statement that has been declared effective under the Securities Act, the undersigned represents and warrants that (x) it is a qualified institutional buyer (as defined in Rule 144A) and is receiving the Warrant Shares for its own account or for the account of another qualified institutional buyer, and it is aware that the Company is issuing the Warrant Shares to it in reliance on Rule 144A; (y) it is an “accredited investor” within the meaning of Rule 501 under the Securities Act; or (z) it is receiving the Warrant Shares pursuant to another available exemption from the registration requirements of the Securities Act. Prior to receiving Warrant Shares pursuant to clause (x) above, the Company may request a certificate substantially in the form of Exhibit A to the Warrant Agreement. Prior to receiving Warrant Shares pursuant to clause (y) above, the Company may request a certificate substantially in the form of Exhibit B and/or an opinion of counsel.
Date:
Signatures must be guaranteed by an “eligible guarantor institution”, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s), assign(s) and transfer(s) unto (the “Assignee”)
(Please type or print block letters)
(Please print or typewrite name and address including zip code of assignee)
the within Warrant and all rights thereunder (the “Securities”), hereby irrevocably constituting and appointing attorney to transfer said Warrant Certificate on the books of the Company with full power of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED ON ALL CERTIFICATES BEARING A RESTRICTED LEGEND]
In connection with any transfer of this Warrant Certificate occurring prior to the removal of the Restricted Legend, the undersigned confirms (i) the understanding that the Securities have not been registered under the Securities Act of 1933, as amended; (ii) that such transfer is made without utilizing any general solicitation or general advertising; and (iii) further as follows:
Check One
☐ (1) This Warrant Certificate is being transferred to a “qualified institutional buyer” in compliance with Rule 144A under the Securities Act of 1933, as amended and certification in the form of Exhibit A to the Warrant Agreement is being furnished herewith.
or
☐ (2) This Warrant Certificate is being transferred other than in accordance with (1) above and documents are being furnished which comply with the conditions of transfer set forth in this Warrant and the Warrant Agreement.
If none of the foregoing boxes is checked, the Company is not obligated to register this Warrant in the name of any Person other than the Holder hereof unless and until the conditions to any such transfer of registration set forth herein and in the Warrant Agreement have been satisfied.
Seller
NOTICE: The signature to this assignment must correspond with the name as written upon the face of the within-mentioned instrument in every particular, without alteration or any change whatsoever.
__________________________________
[Signature Guaranteed]
Signatures must be guaranteed by an “eligible guarantor institution”, which requirements include membership or participation in the Security Transfer Agent Medallion Program
(“STAMP”) or such other “signature guarantee program” in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.
EXHIBIT A
Rule 144A Certificate
,
[●]
[●]
Attention: [●]
Re: | Warrants to acquire Common Stock of Nuvve Holding Corp. (the “Warrants”) Issued under the Warrant Agreement (the “Agreement”) dated as of May 17, 2021 relating to the Warrants |
Ladies and Gentlemen:
This Certificate relates to:
[CHECK A OR B AS APPLICABLE.]
☐ A. Our proposed purchase of Series [●] Warrants issued under the Agreement.
☐ B. Our proposed exchange of Series [●] Warrants issued under the Agreement for an equal number of Series [●] Warrants to be held by us.
We and, if applicable, each account for which we are acting, in the aggregate owned and invested more than $100,000,000 in securities of issuers that are not affiliated with us (or such accounts, if applicable), as of , 20 , which is a date on or since close of our most recent fiscal year. We and, if applicable, each account for which we are acting, are a qualified institutional buyer within the meaning of Rule 144A (“Rule 144A”) under the Securities Act of 1933, as amended (the “Securities Act”). If we are acting on behalf of an account, we exercise sole investment discretion with respect to such account. We are aware that the transfer of Warrants to us, or such exchange, as applicable, is being made in reliance upon the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A. Prior to the date of this Certificate we have received such information regarding the Company as we have requested pursuant to Rule 144A(d)(4) or have determined not to request such information.
You and the Company are entitled to rely upon this Certificate and are irrevocably authorized to produce this Certificate or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby.
A-1
Very truly yours,
[NAME OF PURCHASER (FOR TRANSFERS) OR OWNER (FOR EXCHANGES)]
A-2
EXHIBIT B
Accredited Investor Certificate
,
[●]
[●]
Attention: [●]
Re: | Warrants to acquire Common Stock of Nuvve Holding Corp. (the “Warrants”) Issued under the Warrant Agreement (the “Agreement”) dated as of May 17, 2021 relating to the Warrants |
Ladies and Gentlemen:
This Certificate relates to:
[CHECK A OR B AS APPLICABLE.]
☐ A. Our proposed purchase of Series [●] Warrants issued under the Agreement.
☐ B. Our proposed exchange of Series [●] Warrants issued under the Agreement for an equal number of Warrants to be held by us.
We hereby confirm that:
1.We are an “accredited investor” (an “Accredited Investor”) within the meaning of Rule 501 under the Securities Act of 1933, as amended (the “Securities Act”).
2.Any acquisition of Warrants by us will be for our own account or for the account of one or more other Accredited Investors as to which we exercise sole investment discretion.
3.We have such knowledge and experience in financial and business matters that we are capable of evaluating the merits and risks of an investment in the Warrants and we and any accounts for which we are acting are able to bear the economic risks of and an entire loss of our or their investment in the Warrants.
4.We are not acquiring the Warrants with a view to any distribution thereof in a transaction that would violate the Securities Act or the securities laws of any State of the United States or any other applicable jurisdiction; provided that the disposition of our property and the property of any accounts for which we are acting as fiduciary will remain at all times within our and their control.
5.We acknowledge that the Warrants have not been registered under the Securities Act and that the Warrants may not be offered or sold within the United States or to or for the benefit of U.S. persons except as set forth below.
We agree for the benefit of the Company, on our own behalf and on behalf of each account for which we are acting, that such Warrants may be offered, sold, pledged or otherwise transferred only in accordance with the Securities Act and any applicable securities laws of any State of the United States and only (a) to the Company or any subsidiary thereof, (b) pursuant to a
B-1
registration statement that has been declared effective under the Securities Act, (c) to a person it reasonably believes is a qualified institutional buyer in compliance with Rule 144A under the Securities Act, (d) to an Accredited Investor that, prior to such transfer, delivers a duly completed and signed certificate (the form of which may be obtained from the Company) relating to the restrictions on transfer of the Warrants, or (e) pursuant to any other available exemption from the registration requirements of the Securities Act.
Prior to the registration of any transfer in accordance with (c) above, we acknowledge that a duly completed and signed certificate (the form of which may be obtained from the Company) must be delivered to the Company. Prior to the registration of any transfer in accordance with (d) or (e) above, we acknowledge that the Company reserves the right to require the delivery of such legal opinions, certifications or other evidence as may reasonably be required in order to determine that the proposed transfer is being made in compliance with the Securities Act and applicable state securities laws. We acknowledge that no representation is made as to the availability of any exemption from the registration requirements of the Securities Act.
We understand that the Company will not be required to accept for registration of transfer any Warrants acquired by us, except upon presentation of evidence satisfactory to the Company that the foregoing restrictions on transfer have been complied with. We further understand that the Warrants acquired by us will bear a legend reflecting the substance of the preceding paragraph. We further agree to provide to any person acquiring any of the Warrants from us a notice advising such person that resales of the Warrants are restricted as stated herein and that the Warrants will bear a legend to that effect.
We agree to notify you promptly in writing if any of our acknowledgments, representations or agreements herein ceases to be accurate and complete.
We represent to you that we have full power to make the foregoing acknowledgments, representations and agreements on our own behalf and on behalf of any account for which we are acting.
You and the Company are entitled to rely upon this Certificate and are irrevocably authorized to produce this Certificate or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby.
B-2
Very truly yours,
[NAME OF PURCHASER (FOR
TRANSFERS) OR OWNER (FOR
EXCHANGES)]
Upon transfer, the Warrants would be registered in the name of the new beneficial owner as follows:
Taxpayer ID number: ____________________
B-3
EXHIBIT C
Securities Purchase Agreement
[See attached]
C-1
EXHIBIT D
Restricted Legend
THIS WARRANT AND THE UNDERLYING COMMON STOCK THAT MAY BE ISSUED UPON ITS EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THIS WARRANT EVIDENCES AND ENTITLES THE REGISTERED HOLDER HEREOF TO CERTAIN RIGHTS AS SET FORTH HEREIN. THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT (A) IT IS A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN “ACCREDITED INVESTOR” WITHIN THE MEANING OF RULE 501 UNDER THE SECURITIES ACT AND (2) AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH WARRANT AND THE UNDERLYING COMMON STOCK THAT MAY BE ISSUED UPON ITS EXERCISE, PRIOR TO THE EXPIRATION OF THE APPLICABLE HOLDING PERIOD WITH RESPECT TO RESTRICTED SECURITIES SET FORTH IN RULE 144 UNDER THE SECURITIES ACT, ONLY (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHICH NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (C) TO AN “ACCREDITED INVESTOR” WITHIN THE MEANING OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, (D) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (C) OR (D) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO THE COMPANY, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE COMPANY. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER
D-1
AFTER THE EXPIRATION OF THE APPLICABLE HOLDING PERIOD WITH RESPECT TO RESTRICTED SECURITIES SET FORTH IN RULE 144 UNDER THE SECURITIES ACT.
D-2
Execution Version
Exhibit 10.12
VOID AFTER 5:00 P.M. EASTERN TIME, MAY 17, 2031
SERIES D WARRANT
for the Purchase of
100,000 Shares of Common Stock
of
NUVVE HOLDING CORP.
Original Issue Date: May 17, 2021
NUVVE HOLDING CORP. HEREBY CERTIFIES THAT Evolve Transition Infrastructure LP, or its registered assigns (the “Holder”), is the registered owner of this Series D Warrant of Nuvve Holding Corp. (the “Company”), exercisable for shares of Common Stock, par value $0.0001 (the “Common Stock”), of the Company. This Series D Warrant is one of a series of duly authorized warrants, denominated as Series D Warrants, which are being issued pursuant to the Letter Agreement concurrently with four other series of duly authorized warrants, denominated as Series B, Series C, Series E, and Series FWarrants (collectively, with the Series D Warrants, the “Warrants”). Unless the context otherwise requires, references to the “Holders” are to the holders of all the Warrants.
This Series D Warrant is exercisable for 100,000 shares of Common Stock (the “Exercise Shares”). Each Series D Warrant entitles the registered holder upon exercise at any time from 9:00 a.m. on the applicable Exercisability Date (as defined below) until 5:00 p.m., New York City Time on May 17, 2031 (the “Expiration Time”), to receive from the Company an amount of fully paid and nonassessable shares of Common Stock (the “Warrant Shares”) at an initial exercise price (the “Exercise Price”) of twenty dollars ($20) (as such price may be adjusted as provided in this Warrant), subject to the conditions and terms set forth herein. The Exercise Price and the number of Warrant Shares issuable upon exercise of the Series D Warrant are subject to adjustment upon the occurrence of certain events set forth in this Warrant.
To the extent vested pursuant to the Vesting Schedule contained in Section 2 below, this Warrant may be exercised at any time on or after the date that is 180 days after the applicable Vesting Date (each such date, an “Exercisability Date”) and on or before the Expiration Time; provided that holders shall be able to exercise their Warrants only if the exercise of such Warrants is exempt from, or in compliance with, the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), and such securities are qualified for sale or exempt from qualification under the applicable securities laws of the states in which the various holders of the Warrants or other persons to whom it is proposed that any Warrant Shares be issued on exercise of the Warrants reside (any exercise that would not, in the opinion of the Company upon advice of counsel, qualify for exemption from the registration requirements of
the Securities Act will be effected as an exchange of the Warrants for Warrant Shares as provided herein).
“act” has the meaning set forth in Section 7.2.1.
“Accredited Investor Certificate” means a certificate substantially in the form of Exhibit B hereto.
“Affiliate” shall have the meaning ascribed to it, on the date hereof, in Rule 405 under the Securities Act.
“Average VWAP” per share over a certain period shall mean the arithmetic average of the VWAP per share for each Trading Day in such period.
“Board of Directors” shall mean the Board of Directors of the Company or, with respect to any action to be taken by the Board of Directors, any committee of the Board of Directors duly authorized to take such action.
“Business Combination” means a merger, consolidation, statutory exchange or similar transaction of the Company with another Person.
“Business Day” shall mean Monday through Friday of each week, except that a legal holiday recognized as such by the government of the United States of America or the States of Texas or New York shall not be regarded as a Business Day.
“Capital Stock” means:
(1)in the case of a corporation, corporate stock;
(2)in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;
(3)in the case of a partnership or limited liability company, partnership interests (whether general or limited) or membership interests, respectively; and
(4)any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person, but excluding from all of the foregoing any debt securities convertible into Capital Stock, whether or not such debt securities include any right of participation with Capital Stock.
“Cash Exercise” has the meaning assigned to such term in Section 4.1.2.
“Certificate of Incorporation” shall mean the Amended and Restated Certificate of Incorporation of the Company, as amended or modified.
“Change of Control” shall mean
2
(i) the direct or indirect sale, lease, transfer, conveyance or other disposition (other than by way of a merger or consolidation, which is covered by subsection (ii) below, and for the avoidance of doubt, other than non-exclusive licenses of the Company’s intellectual property), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company and its subsidiaries, taken as a whole, to any Person;
(ii) the consummation of any transaction (including, without limitation, pursuant to a merger or consolidation), the result of which is that any Person becomes the “beneficial owner” (as defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or indirectly, of more than 50% of the voting power of the Company; provided, however, solely for purposes of this subsection (ii), a “Person” shall include, in connection with a direct merger of a publicly traded entity with the Company, the shareholders of such publicly traded entity with whom the Company merges; or
(iii) any event which constitutes a “Change of Control” under any indenture or similar agreement governing the outstanding (as of the Issue Date) or future senior notes or debentures of the Company and such “Change of Control” is not waived by the holders of such notes or debentures pursuant to the applicable indenture or similar agreement.
“Closing Sale Price” of the Common Stock shall mean, as of any date, the closing sale price per share (or if no closing sale price is reported, the average of the closing bid and ask prices or, if more than one in either case, the average of the average closing bid and the average closing ask prices) on such date as reported on the principal United States securities exchange on which the Common Stock is traded or, if the Common Stock is not listed on a United States national or regional securities exchange, in the over-the-counter market as reported by OTC Markets Group Inc. or a similar organization. In the absence of such a quotation, the Closing Sale Price shall be an amount determined reasonably and in good faith by the Board of Directors to be the fair market value of a share of Common Stock based on relevant facts and circumstances at the time of any such determination.
“Commission” means the Securities and Exchange Commission.
“Common Stock” shall mean the common stock, par value $0.0001 per share, of the Company or any other Capital Stock of the Company into which such common stock shall be reclassified or changed.
“Company” shall mean Nuvve Holding Corp., a Delaware corporation or any successor to the Company.
“Evolve” means Evolve Transition Infrastructure LP, a Delaware limited partnership.
“Ex-Date” means, when used with respect to any issuance of or distribution in respect of the Common Stock or any other securities, the first date on which the Common Stock or such other securities trade without the right to receive such issuance or distribution.
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Exercise Notice” has the meaning assigned to such term in Section 4.1.2.
“Exercise Price” means $20 per Warrant Share, subject to adjustment pursuant to Section 6.1.
3
“Exercise Shares” has the meaning assigned to such term in Section 4.1.3.
“Expiration Time” has the meaning assigned to such term in Section 4.1.1.
“GAAP” means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board Accounting Standards Codification or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect on the Issue Date.
“Holder” or “Warrantholder” means the registered holder of any Warrant.
“Issue Date” means May 17, 2021.
“Letter Agreement” means that certain Letter Agreement, dated as of May 17, 2021, by and among Stonepeak, Evolve and Nuvve Holding Corp.
“Market Value” means the Average VWAP during a 10 consecutive Trading Day period ending on the Trading Day immediately prior to the date of determination.
“Nasdaq” means the Nasdaq Capital Market, Nasdaq Global Market or Nasdaq Global Select Market, as applicable.
“Nasdaq Stockholder Approval” has the meaning assigned to such term in Section 3.5.1.
“National Securities Exchange” shall mean an exchange registered with the Commission under Section 6(a) of the Exchange Act.
“Net Share Settlement” has the meaning assigned to such term in Section 4.1.2.
“Net Share Settlement Election” has the meaning assigned to such term in Section 4.1.2.
“Officer” shall mean the Chief Executive Officer, the President and Chief Operating Officer, the Chief Financial Officer, any Executive Vice President, any Senior Vice President, any Vice President, the Treasurer, the Secretary or any Assistant Secretary of the Company.
“Option” shall mean the right of Stonepeak and Evolve to purchase a share of Common Stock pursuant to that certain Securities Purchase Agreement, dated as of May 17, 2021, between Nuvve Holding Corp., Stonepeak and Evolve, which is attached hereto as Exhibit C.
“Option Securities” has the meaning assigned to such term in Section 3.5.1.
“Person” shall mean any individual, corporation, general partnership, limited partnership, limited liability partnership, joint venture, association, joint-stock company, trust, limited liability company, unincorporated organization or government or any agency or political subdivision thereof.
“Pro Rata Repurchases” means any purchase of shares of Common Stock by the Company or any Affiliate thereof pursuant to (i) any tender offer or exchange offer directed to all of the holders of Common Stock subject to Section 13(e) or 14(e) of the Exchange Act or Regulation 14E promulgated thereunder or (ii) any other tender offer available to substantially all holders of Common Stock, in the case of both (i) and (ii), whether for cash, shares of Capital
4
Stock of the Company, other securities of the Company, evidences of indebtedness of the Company or any other Person or any other property (including shares of Capital Stock, other securities or evidences of indebtedness of a subsidiary), or any combination thereof, effected while the Warrants are outstanding, other than purchases in the open market that do not constitute a tender offer subject to Section 13(e) or 14(e). The “Effective Date” of a Pro Rata Repurchase shall mean the date of purchase with respect to any Pro Rata Purchase.
“Reduction Event” shall have the meaning assigned to such term in Section 3.5.1.
“Register” means the register established by the Company pursuant to Section 3.3.1.
“Registrar” means a Person engaged to maintain the Register.
“Restricted Legend” means the legend set forth in Exhibit D.
“Rule 144” means Rule 144 promulgated under the Securities Act.
“Rule 144A” means Rule 144A under the Securities Act.
“Rule 144A Certificate” means a certificate substantially in the form of Exhibit A hereto.
“Securities Act” shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Stockholder Approval Threshold” shall have the meaning assigned to such term in Section 3.5.1.
“Stonepeak” means Stonepeak Rocket Holdings LP.
“Stonepeak Group” means Stonepeak Rocket Holdings LP, Stonepeak Partners LP and their controlled Affiliates.
“Trading Day” shall mean a day during which trading in securities generally occurs on the Nasdaq Capital Market or, if the Common Stock is not listed on the Nasdaq Capital Market, on the principal other national or regional securities exchange on which the Common Stock is then listed or, if the Common Stock is not listed on a national or regional securities exchange, on the principal other market on which the Common Stock is then traded. If the Common Stock is not so listed or traded, “Trading Day” shall mean a Business Day.
“Transfer Agent” has the meaning assigned to such term in Section 5.3.2.
“Trigger Event” has the meaning assigned to such term in Section 6.1.1(i).
“VWAP” per share of Common Stock on any Trading Day means the per share volume-weighted average price as displayed on Bloomberg page “NVVE <Equity> AQR” (or its equivalent successor if such page is not available) in respect of the period from 9:30 a.m. to 4:00 p.m., New York City time, on such Trading Day; or, if such price is not available, “VWAP” means the market value per share of Common Stock on such Trading Day as determined, using a volume-weighted average method, by a nationally recognized independent investment banking firm retained by the Company for this purpose.
“Warrant Exercise” has the meaning assigned to such term in Section 4.1.2.
“Warrant Shares” has the meaning assigned to such term in the Recitals.
5
“Warrants” has the meaning assigned to such term in the Recitals and includes Warrants issued on the Issue Date and additional Warrants, if any, in each case issued to the Holders hereunder.
This Warrant shall vest 50% on the Issue Date and 50% on the Subsequent Vesting Date (each of the Issue Date and Subsequent Vesting Date, a “Vesting Date”). The Subsequent Vesting Date shall be the date that Levo Mobility LLC, a Delaware limited liability company and subsidiary of the Company, has entered into contracts with third parties to spend at least $250 million in aggregate of capital expenditures after the Issue Date. The Company shall provide the Holders with written notice no later than five Business Days prior to the Subsequent Vesting Date containing the date of the Subsequent Vesting Date.
6
From time to time the Company will execute additional Warrants as necessary in order to permit the registration of a transfer or exchange in accordance with this Section. All Warrants issued upon transfer or exchange shall be the duly authorized, executed and delivered Warrants of the Company.
No service charge will be imposed in connection with any transfer or exchange of any Warrant.
7
A party requesting transfer of Warrants or other securities must provide any evidence of authority that may be required by the Company, including but not limited to, a signature guarantee from an eligible guarantor institution participating in a signature guarantee program approved by the Securities Transfer Association.
Any Warrant delivered in reliance upon this paragraph will not bear the Restricted Legend.
8
9
10
11
X = ((A - B)/A) × C
where:
X | = | the Warrant Shares issuable upon exercise pursuant to this paragraph (c). |
A | = | the Market Value on the day immediately preceding the date on which the Holder delivers the applicable Exercise Notice. |
B | = | the Exercise Price. |
C | = | the number of shares of Common Stock as to which the Warrants are then being exercised (the “Exercise Shares”). |
If the foregoing calculation results in a negative number, then no shares of Common Stock shall be issued upon exercise pursuant to this paragraph (c).
12
13
14
15
OS1
_______________________
OS0
where
OS0 | = | the number of shares of Common Stock outstanding immediately prior to the record date for such dividend or distribution; and |
OS1 | = | the sum of (A) the number of shares of Common Stock outstanding immediately prior to the record date for such dividend or distribution and (B) the total number of shares of Common Stock constituting such dividend. |
In any such event, the number of Warrant Shares issuable upon exercise of each Warrant at the time of the record date for such dividend or distribution shall be proportionately adjusted so that the Holder, after such date, shall be entitled to purchase the number of shares of Common Stock that such Holder would have owned or been entitled to receive in respect of the shares of Common Stock subject to the Warrant after such date had the Warrant been exercised immediately prior to such date.
16
OS0 + X
_______________________
OS0 + Y
where
OS0 | = | the number of shares of Common Stock outstanding at the close of business on the record date for such issuance; |
X | = | the total number of shares of Common Stock issuable pursuant to such rights, options or warrants; and |
Y | = | the number of shares of Common Stock equal to the aggregate price payable to exercise such rights, options or warrants divided by the Market Value determined as of the Ex-Date for such issuance. |
In any such event, the number of Warrant Shares issuable upon the exercise of each Warrant shall be increased to the number obtained by dividing (x) the product of (1) the number of Warrant Shares issuable upon the exercise of the Warrant before such adjustment, and (2) the Exercise Price in effect immediately prior to the distribution giving rise to this adjustment by (y) the new Exercise Price determined in accordance with the immediately preceding sentence.
To the extent that such rights, options or warrants are not exercised prior to their expiration or shares of Common Stock are otherwise not delivered pursuant to such rights or warrants upon the exercise of such rights or warrants, the Exercise Price and the number of Warrant Shares shall be readjusted to the Exercise Price and the number of Warrant Shares that would have then been in effect had the adjustment made upon the issuance of such rights, options or warrants been made on the basis of the delivery of only the number of shares of Common Stock actually delivered. If such rights, options or warrants are only exercisable upon the occurrence of certain triggering events, then the Exercise Price and the number of Warrant Shares shall not be adjusted until such triggering events occur. In determining the aggregate offering price payable for such shares of Common Stock, the conversion agent shall take into account any consideration received for such rights, options or warrants and the value of such consideration (if other than cash, to be determined by the Board of Directors).
17
OS1
_______________________
OS0
where
OS0 | = | the number of shares of Common Stock outstanding immediately prior to the effective date of such share subdivision, combination or reclassification; and |
OS1 | = | the number of shares of Common Stock outstanding immediately after the opening of business on the effective date of such share subdivision, combination or reclassification. |
In any such event, the number of Warrant Shares issuable upon exercise of each Warrant at the time of the effective date of such subdivision, combination or reclassification shall be proportionately adjusted so that the Holder, after such date, shall be entitled to purchase the number of shares of Common Stock that such Holder would have owned or been entitled to receive in respect of the shares of Common Stock subject to the Warrant after such date had the Warrant been exercised immediately prior to such date.
SP0
_______________________
SP0 – FMV
where
18
SP0 | = | the Closing Sale Price per share of Common Stock on the Trading Day immediately preceding the Ex-Date; and |
FMV | = | the fair market value of the portion of the distribution applicable to one share of Common Stock on the Trading Day immediately preceding the Ex-Date as determined by the Board of Directors. |
In any such event, the number of Warrant Shares issuable upon the exercise of each Warrant shall be increased to the number obtained by dividing (x) the product of (1) the number of Warrant Shares issuable upon the exercise of the Warrant before such adjustment, and (2) the Exercise Price in effect immediately prior to the distribution giving rise to this adjustment by (y) the new Exercise Price determined in accordance with the immediately preceding sentence.
In a spin-off, where the Company makes a distribution to all holders of shares of Common Stock consisting of Capital Stock of any class or series, or similar equity interests of, or relating to, a subsidiary or other business unit the Exercise Price shall be adjusted on the fourteenth Trading Day after the effective date of the distribution by dividing the Exercise Price in effect immediately prior to such fourteenth Trading Day by the following fraction:
MP0 + MPS
_______________________
MP0
where
MP0 | = | the average of the Closing Sale Price of the Common Stock over each of the first 10 Trading Days commencing on and including the fifth Trading Day following the effective date of such distribution; and |
MPS | = | the average of the closing sale price of the Capital Stock or equity interests representing the portion of the distribution applicable to one share of Common Stock over each of the first 10 Trading Days commencing on and including the fifth Trading Day following the effective date of such distribution, or, as reported in the principal securities exchange or quotation system or market on which such shares are traded, or if not traded on a national or regional securities exchange or over-the-counter market, the fair market value of the Capital Stock or equity interests representing the portion of the distribution applicable to one share of Common Stock on such date as determined by the Board of Directors. |
19
In any such event, the number of Warrant Shares issuable upon the exercise of each Warrant shall be increased to the number obtained by dividing (x) the product of (1) the number of Warrant Shares issuable upon the exercise of the Warrant before such adjustment, and (2) the Exercise Price in effect immediately prior to the distribution giving rise to this adjustment by (y) the new Exercise Price determined in accordance with the immediately preceding sentence.
In the event that such distribution described in this clause (iv) is not so made, the Exercise Price shall be readjusted, effective as of the date the Board of Directors publicly announces its decision not to pay such dividend or distribution, to the Exercise Price that would then be in effect if such dividend distribution had not been declared.
20
21
22
23
24
Series B Warrants: $6,390,000
Series C Warrants: $1,872,000
Series D Warrants: $1,260,000
Series E Warrants: $702,000
Series F Warrants: $405,000
None of the parties hereto (nor any beneficiary hereto) shall take any position or permit any of its Affiliates to take any position (whether in connection with audits, tax returns or otherwise) that is inconsistent with such fair market value.
Nuvve Holding Corp.
2468 Historic Decatur Road
San Diego, California 92106
Attention: Gregory Poilasne and Stephen Moran
Email: gregory@nuvve.com and smoran@nuvve.com
with a copy to, which shall not constitute notice to the Company:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
25
Boston, Massachusetts 02110
Attention: Sahir Surmeli and Eric Macaux
Email: ssurmeli@mintz.com, ewmacaux@mintz.com
and
Graubard Miller
The Chrysler Building
405 Lexington Ave., 11th Floor
New York, NY 10174
Attention: Eric Schwartz
Email: eschwartz@graubard.com
If to Stonepeak:
Stonepeak Partners LP
55 Hudson Yards
550 W. 34th Street, 48th Floor
New York, NY 10001
Attention: Trent Kososki, William Demas and Adrienne Saunders
Email: kososki@stonepeakpartners.com; demas@stonepeakpartners.com; LegalandCompliance@stonepeakpartners.com
A copy of the communication (which shall not constitute notice) shall be sent to:
Kirkland & Ellis LLP
609 Main St.
Houston, Texas 77002
Attention: Julian J. Seiguer, P.C. and John D. Pitts, P.C.
Email: julian.seiguer@kirkland.com; john.pitts@kirkland.com
If to Evolve:
Evolve Transition Infrastructure LP
1360 Post Oak Blvd
26
Suite 2400
Houston, TX 77056
Attention: Charles Ward
Email: cward@evolvetransition.com
A copy of the communication (which shall not constitute notice) shall be sent to:
Sidley Austin LLP
1000 Louisiana Street
Houston, Texas 77002
Attention: Cliff Vrielink and George Vlahakos
Email: cliff.vrielink@sidley.com; George.vlahakos@sidley.com
27
except, in each case, for adjustments expressly provided for in this Warrant.
28
[Signature Page Follows]
29
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly authorized officer as of the 17th day of May, 2021.
NUVVE HOLDING CORP.
By: /s/ Gregory Poilasne
Name: Gregory Poilasne
Title: Chairman and Chief Executive Officer
Accepted and agreed,
HOLDER:
EVOLVE TRANSITION INFRASTRUCTURE LP
By: Evolve Transition Infrastructure GP LLC, its general partner
By: /s/ Charles C. Ward
Name: Charles C. Ward
Title: Chief Financial Officer & Secretary
[Form of Exercise Notice]
(To Be Executed Upon Exercise Of Series D Warrant)
The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to receive shares of Common Stock and, unless making a Net Share Settlement Election as provided below, herewith tenders payment for such shares of Common Stock to the order of Nuvve Holding Corp. (the “Company”) in the amount of $ in accordance with the terms of the Warrant Agreement. Notwithstanding the foregoing, by checking the box following this paragraph, the undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to receive shares of Common Stock pursuant to the Net Share Settlement procedures set forth in the Warrant Agreement in lieu of a Cash Exercise: ◻
The undersigned requests that a certificate for such shares be registered in the name of, whose address is and that such shares be delivered to , whose address is . If said number of shares is less than all of the shares of Common Stock issuable hereunder, the undersigned requests that a new Warrant representing the remaining balance of such shares be registered in the name of , whose address is , and that such Warrant be delivered to , whose address is .
If the Warrant Shares to be delivered pursuant this Exercise Notice have not been registered pursuant to a registration statement that has been declared effective under the Securities Act, the undersigned represents and warrants that (x) it is a qualified institutional buyer (as defined in Rule 144A) and is receiving the Warrant Shares for its own account or for the account of another qualified institutional buyer, and it is aware that the Company is issuing the Warrant Shares to it in reliance on Rule 144A; (y) it is an “accredited investor” within the meaning of Rule 501 under the Securities Act; or (z) it is receiving the Warrant Shares pursuant to another available exemption from the registration requirements of the Securities Act. Prior to receiving Warrant Shares pursuant to clause (x) above, the Company may request a certificate substantially in the form of Exhibit A to the Warrant Agreement. Prior to receiving Warrant Shares pursuant to clause (y) above, the Company may request a certificate substantially in the form of Exhibit B and/or an opinion of counsel.
Date:
Signatures must be guaranteed by an “eligible guarantor institution”, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s), assign(s) and transfer(s) unto (the “Assignee”)
(Please type or print block letters)
(Please print or typewrite name and address including zip code of assignee)
the within Warrant and all rights thereunder (the “Securities”), hereby irrevocably constituting and appointing attorney to transfer said Warrant Certificate on the books of the Company with full power of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED ON ALL CERTIFICATES BEARING A RESTRICTED LEGEND]
In connection with any transfer of this Warrant Certificate occurring prior to the removal of the Restricted Legend, the undersigned confirms (i) the understanding that the Securities have not been registered under the Securities Act of 1933, as amended; (ii) that such transfer is made without utilizing any general solicitation or general advertising; and (iii) further as follows:
Check One
☐ (1) This Warrant Certificate is being transferred to a “qualified institutional buyer” in compliance with Rule 144A under the Securities Act of 1933, as amended and certification in the form of Exhibit A to the Warrant Agreement is being furnished herewith.
or
☐ (2) This Warrant Certificate is being transferred other than in accordance with (1) above and documents are being furnished which comply with the conditions of transfer set forth in this Warrant and the Warrant Agreement.
If none of the foregoing boxes is checked, the Company is not obligated to register this Warrant in the name of any Person other than the Holder hereof unless and until the conditions to any such transfer of registration set forth herein and in the Warrant Agreement have been satisfied.
Seller
NOTICE: The signature to this assignment must correspond with the name as written upon the face of the within-mentioned instrument in every particular, without alteration or any change whatsoever.
__________________________________
[Signature Guaranteed]
Signatures must be guaranteed by an “eligible guarantor institution”, which requirements include membership or participation in the Security Transfer Agent Medallion Program
(“STAMP”) or such other “signature guarantee program” in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.
EXHIBIT A
Rule 144A Certificate
,
[●]
[●]
Attention: [●]
Re: | Warrants to acquire Common Stock of Nuvve Holding Corp. (the “Warrants”) Issued under the Warrant Agreement (the “Agreement”) dated as of May 17, 2021 relating to the Warrants |
Ladies and Gentlemen:
This Certificate relates to:
[CHECK A OR B AS APPLICABLE.]
☐ A. Our proposed purchase of Series [●] Warrants issued under the Agreement.
☐ B. Our proposed exchange of Series [●] Warrants issued under the Agreement for an equal number of Series [●] Warrants to be held by us.
We and, if applicable, each account for which we are acting, in the aggregate owned and invested more than $100,000,000 in securities of issuers that are not affiliated with us (or such accounts, if applicable), as of , 20 , which is a date on or since close of our most recent fiscal year. We and, if applicable, each account for which we are acting, are a qualified institutional buyer within the meaning of Rule 144A (“Rule 144A”) under the Securities Act of 1933, as amended (the “Securities Act”). If we are acting on behalf of an account, we exercise sole investment discretion with respect to such account. We are aware that the transfer of Warrants to us, or such exchange, as applicable, is being made in reliance upon the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A. Prior to the date of this Certificate we have received such information regarding the Company as we have requested pursuant to Rule 144A(d)(4) or have determined not to request such information.
You and the Company are entitled to rely upon this Certificate and are irrevocably authorized to produce this Certificate or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby.
A-1
Very truly yours,
[NAME OF PURCHASER (FOR TRANSFERS) OR OWNER (FOR EXCHANGES)]
A-2
EXHIBIT B
Accredited Investor Certificate
,
[●]
[●]
Attention: [●]
Re: | Warrants to acquire Common Stock of Nuvve Holding Corp. (the “Warrants”) Issued under the Warrant Agreement (the “Agreement”) dated as of May 17, 2021 relating to the Warrants |
Ladies and Gentlemen:
This Certificate relates to:
[CHECK A OR B AS APPLICABLE.]
☐ A. Our proposed purchase of Series [●] Warrants issued under the Agreement.
☐ B. Our proposed exchange of Series [●] Warrants issued under the Agreement for an equal number of Warrants to be held by us.
We hereby confirm that:
1.We are an “accredited investor” (an “Accredited Investor”) within the meaning of Rule 501 under the Securities Act of 1933, as amended (the “Securities Act”).
2.Any acquisition of Warrants by us will be for our own account or for the account of one or more other Accredited Investors as to which we exercise sole investment discretion.
3.We have such knowledge and experience in financial and business matters that we are capable of evaluating the merits and risks of an investment in the Warrants and we and any accounts for which we are acting are able to bear the economic risks of and an entire loss of our or their investment in the Warrants.
4.We are not acquiring the Warrants with a view to any distribution thereof in a transaction that would violate the Securities Act or the securities laws of any State of the United States or any other applicable jurisdiction; provided that the disposition of our property and the property of any accounts for which we are acting as fiduciary will remain at all times within our and their control.
5.We acknowledge that the Warrants have not been registered under the Securities Act and that the Warrants may not be offered or sold within the United States or to or for the benefit of U.S. persons except as set forth below.
We agree for the benefit of the Company, on our own behalf and on behalf of each account for which we are acting, that such Warrants may be offered, sold, pledged or otherwise transferred only in accordance with the Securities Act and any applicable securities laws of any State of the United States and only (a) to the Company or any subsidiary thereof, (b) pursuant to a
B-1
registration statement that has been declared effective under the Securities Act, (c) to a person it reasonably believes is a qualified institutional buyer in compliance with Rule 144A under the Securities Act, (d) to an Accredited Investor that, prior to such transfer, delivers a duly completed and signed certificate (the form of which may be obtained from the Company) relating to the restrictions on transfer of the Warrants, or (e) pursuant to any other available exemption from the registration requirements of the Securities Act.
Prior to the registration of any transfer in accordance with (c) above, we acknowledge that a duly completed and signed certificate (the form of which may be obtained from the Company) must be delivered to the Company. Prior to the registration of any transfer in accordance with (d) or (e) above, we acknowledge that the Company reserves the right to require the delivery of such legal opinions, certifications or other evidence as may reasonably be required in order to determine that the proposed transfer is being made in compliance with the Securities Act and applicable state securities laws. We acknowledge that no representation is made as to the availability of any exemption from the registration requirements of the Securities Act.
We understand that the Company will not be required to accept for registration of transfer any Warrants acquired by us, except upon presentation of evidence satisfactory to the Company that the foregoing restrictions on transfer have been complied with. We further understand that the Warrants acquired by us will bear a legend reflecting the substance of the preceding paragraph. We further agree to provide to any person acquiring any of the Warrants from us a notice advising such person that resales of the Warrants are restricted as stated herein and that the Warrants will bear a legend to that effect.
We agree to notify you promptly in writing if any of our acknowledgments, representations or agreements herein ceases to be accurate and complete.
We represent to you that we have full power to make the foregoing acknowledgments, representations and agreements on our own behalf and on behalf of any account for which we are acting.
You and the Company are entitled to rely upon this Certificate and are irrevocably authorized to produce this Certificate or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby.
B-2
Very truly yours,
[NAME OF PURCHASER (FOR
TRANSFERS) OR OWNER (FOR
EXCHANGES)]
Upon transfer, the Warrants would be registered in the name of the new beneficial owner as follows:
Taxpayer ID number: ____________________
B-3
EXHIBIT C
Securities Purchase Agreement
[See attached]
C-1
EXHIBIT D
Restricted Legend
THIS WARRANT AND THE UNDERLYING COMMON STOCK THAT MAY BE ISSUED UPON ITS EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THIS WARRANT EVIDENCES AND ENTITLES THE REGISTERED HOLDER HEREOF TO CERTAIN RIGHTS AS SET FORTH HEREIN. THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT (A) IT IS A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN “ACCREDITED INVESTOR” WITHIN THE MEANING OF RULE 501 UNDER THE SECURITIES ACT AND (2) AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH WARRANT AND THE UNDERLYING COMMON STOCK THAT MAY BE ISSUED UPON ITS EXERCISE, PRIOR TO THE EXPIRATION OF THE APPLICABLE HOLDING PERIOD WITH RESPECT TO RESTRICTED SECURITIES SET FORTH IN RULE 144 UNDER THE SECURITIES ACT, ONLY (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHICH NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (C) TO AN “ACCREDITED INVESTOR” WITHIN THE MEANING OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, (D) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (C) OR (D) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO THE COMPANY, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE COMPANY. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER
D-1
AFTER THE EXPIRATION OF THE APPLICABLE HOLDING PERIOD WITH RESPECT TO RESTRICTED SECURITIES SET FORTH IN RULE 144 UNDER THE SECURITIES ACT.
D-2
Execution Version
Exhibit 10.13
VOID AFTER 5:00 P.M. EASTERN TIME, MAY 17, 2031
SERIES E WARRANT
for the Purchase of
100,000 Shares of Common Stock
of
NUVVE HOLDING CORP.
Original Issue Date: May 17, 2021
NUVVE HOLDING CORP. HEREBY CERTIFIES THAT Evolve Transition Infrastructure LP, or its registered assigns (the “Holder”), is the registered owner of this Series E Warrant of Nuvve Holding Corp. (the “Company”), exercisable for shares of Common Stock, par value $0.0001 (the “Common Stock”), of the Company. This Series E Warrant is one of a series of duly authorized warrants, denominated as Series E Warrants, which are being issued pursuant to the Letter Agreement concurrently with four other series of duly authorized warrants, denominated as Series B, Series C, Series D, and Series F Warrants (collectively, with the Series E Warrants, the “Warrants”). Unless the context otherwise requires, references to the “Holders” are to the holders of all the Warrants.
This Series E Warrant is exercisable for 100,000 shares of Common Stock (the “Exercise Shares”). Each Series E Warrant entitles the registered holder upon exercise at any time from 9:00 a.m. on the applicable Exercisability Date (as defined below) until 5:00 p.m., New York City Time on May 17, 2031 (the “Expiration Time”), to receive from the Company an amount of fully paid and nonassessable shares of Common Stock (the “Warrant Shares”) at an initial exercise price (the “Exercise Price”) of thirty dollars ($30.00) (as such price may be adjusted as provided in this Warrant), subject to the conditions and terms set forth herein. The Exercise Price and the number of Warrant Shares issuable upon exercise of the Series E Warrant are subject to adjustment upon the occurrence of certain events set forth in this Warrant.
To the extent vested pursuant to the Vesting Schedule contained in Section 2 below, this Warrant may be exercised at any time on or after the date that is 180 days after the applicable Vesting Date (each such date, an “Exercisability Date”) and on or before the Expiration Time; provided that holders shall be able to exercise their Warrants only if the exercise of such Warrants is exempt from, or in compliance with, the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), and such securities are qualified for sale or exempt from qualification under the applicable securities laws of the states in which the various holders of the Warrants or other persons to whom it is proposed that any Warrant Shares be issued on exercise of the Warrants reside (any exercise that would not, in the opinion of the Company upon advice of counsel, qualify for exemption from the registration requirements of
the Securities Act will be effected as an exchange of the Warrants for Warrant Shares as provided herein).
“act” has the meaning set forth in Section 7.2.1.
“Accredited Investor Certificate” means a certificate substantially in the form of Exhibit B hereto.
“Affiliate” shall have the meaning ascribed to it, on the date hereof, in Rule 405 under the Securities Act.
“Average VWAP” per share over a certain period shall mean the arithmetic average of the VWAP per share for each Trading Day in such period.
“Board of Directors” shall mean the Board of Directors of the Company or, with respect to any action to be taken by the Board of Directors, any committee of the Board of Directors duly authorized to take such action.
“Business Combination” means a merger, consolidation, statutory exchange or similar transaction of the Company with another Person.
“Business Day” shall mean Monday through Friday of each week, except that a legal holiday recognized as such by the government of the United States of America or the States of Texas or New York shall not be regarded as a Business Day.
“Capital Stock” means:
(1)in the case of a corporation, corporate stock;
(2)in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;
(3)in the case of a partnership or limited liability company, partnership interests (whether general or limited) or membership interests, respectively; and
(4)any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person, but excluding from all of the foregoing any debt securities convertible into Capital Stock, whether or not such debt securities include any right of participation with Capital Stock.
“Cash Exercise” has the meaning assigned to such term in Section 4.1.2.
“Certificate of Incorporation” shall mean the Amended and Restated Certificate of Incorporation of the Company, as amended or modified.
“Change of Control” shall mean
2
(i) the direct or indirect sale, lease, transfer, conveyance or other disposition (other than by way of a merger or consolidation, which is covered by subsection (ii) below, and for the avoidance of doubt, other than non-exclusive licenses of the Company’s intellectual property), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company and its subsidiaries, taken as a whole, to any Person;
(ii) the consummation of any transaction (including, without limitation, pursuant to a merger or consolidation), the result of which is that any Person becomes the “beneficial owner” (as defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or indirectly, of more than 50% of the voting power of the Company; provided, however, solely for purposes of this subsection (ii), a “Person” shall include, in connection with a direct merger of a publicly traded entity with the Company, the shareholders of such publicly traded entity with whom the Company merges; or
(iii) any event which constitutes a “Change of Control” under any indenture or similar agreement governing the outstanding (as of the Issue Date) or future senior notes or debentures of the Company and such “Change of Control” is not waived by the holders of such notes or debentures pursuant to the applicable indenture or similar agreement.
“Closing Sale Price” of the Common Stock shall mean, as of any date, the closing sale price per share (or if no closing sale price is reported, the average of the closing bid and ask prices or, if more than one in either case, the average of the average closing bid and the average closing ask prices) on such date as reported on the principal United States securities exchange on which the Common Stock is traded or, if the Common Stock is not listed on a United States national or regional securities exchange, in the over-the-counter market as reported by OTC Markets Group Inc. or a similar organization. In the absence of such a quotation, the Closing Sale Price shall be an amount determined reasonably and in good faith by the Board of Directors to be the fair market value of a share of Common Stock based on relevant facts and circumstances at the time of any such determination.
“Commission” means the Securities and Exchange Commission.
“Common Stock” shall mean the common stock, par value $0.0001 per share, of the Company or any other Capital Stock of the Company into which such common stock shall be reclassified or changed.
“Company” shall mean Nuvve Holding Corp., a Delaware corporation or any successor to the Company.
“Evolve” means Evolve Transition Infrastructure LP, a Delaware limited partnership.
“Ex-Date” means, when used with respect to any issuance of or distribution in respect of the Common Stock or any other securities, the first date on which the Common Stock or such other securities trade without the right to receive such issuance or distribution.
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Exercise Notice” has the meaning assigned to such term in Section 4.1.2.
“Exercise Price” means $30 per Warrant Share, subject to adjustment pursuant to Section 6.1.
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“Exercise Shares” has the meaning assigned to such term in Section 4.1.3.
“Expiration Time” has the meaning assigned to such term in Section 4.1.1.
“GAAP” means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board Accounting Standards Codification or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect on the Issue Date.
“Holder” or “Warrantholder” means the registered holder of any Warrant.
“Issue Date” means May 17, 2021.
“Letter Agreement” means that certain Letter Agreement, dated as of May 17, 2021, by and among Stonepeak, Evolve and Nuvve Holding Corp.
“Market Value” means the Average VWAP during a 10 consecutive Trading Day period ending on the Trading Day immediately prior to the date of determination.
“Nasdaq” means the Nasdaq Capital Market, Nasdaq Global Market or Nasdaq Global Select Market, as applicable.
“Nasdaq Stockholder Approval” has the meaning assigned to such term in Section 3.5.1.
“National Securities Exchange” shall mean an exchange registered with the Commission under Section 6(a) of the Exchange Act.
“Net Share Settlement” has the meaning assigned to such term in Section 4.1.2.
“Net Share Settlement Election” has the meaning assigned to such term in Section 4.1.2.
“Officer” shall mean the Chief Executive Officer, the President and Chief Operating Officer, the Chief Financial Officer, any Executive Vice President, any Senior Vice President, any Vice President, the Treasurer, the Secretary or any Assistant Secretary of the Company.
“Option” shall mean the right of Stonepeak and Evolve to purchase a share of Common Stock pursuant to that certain Securities Purchase Agreement, dated as of May 17, 2021, between Nuvve Holding Corp., Stonepeak and Evolve, which is attached hereto as Exhibit C.
“Option Securities” has the meaning assigned to such term in Section 3.5.1.
“Person” shall mean any individual, corporation, general partnership, limited partnership, limited liability partnership, joint venture, association, joint-stock company, trust, limited liability company, unincorporated organization or government or any agency or political subdivision thereof.
“Pro Rata Repurchases” means any purchase of shares of Common Stock by the Company or any Affiliate thereof pursuant to (i) any tender offer or exchange offer directed to all of the holders of Common Stock subject to Section 13(e) or 14(e) of the Exchange Act or Regulation 14E promulgated thereunder or (ii) any other tender offer available to substantially all holders of Common Stock, in the case of both (i) and (ii), whether for cash, shares of Capital
4
Stock of the Company, other securities of the Company, evidences of indebtedness of the Company or any other Person or any other property (including shares of Capital Stock, other securities or evidences of indebtedness of a subsidiary), or any combination thereof, effected while the Warrants are outstanding, other than purchases in the open market that do not constitute a tender offer subject to Section 13(e) or 14(e). The “Effective Date” of a Pro Rata Repurchase shall mean the date of purchase with respect to any Pro Rata Purchase.
“Reduction Event” shall have the meaning assigned to such term in Section 3.5.1.
“Register” means the register established by the Company pursuant to Section 3.3.1.
“Registrar” means a Person engaged to maintain the Register.
“Restricted Legend” means the legend set forth in Exhibit D.
“Rule 144” means Rule 144 promulgated under the Securities Act.
“Rule 144A” means Rule 144A under the Securities Act.
“Rule 144A Certificate” means a certificate substantially in the form of Exhibit A hereto.
“Securities Act” shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Stockholder Approval Threshold” shall have the meaning assigned to such term in Section 3.5.1.
“Stonepeak” means Stonepeak Rocket Holdings LP.
“Stonepeak Group” means Stonepeak Rocket Holdings LP, Stonepeak Partners LP and their controlled Affiliates.
“Trading Day” shall mean a day during which trading in securities generally occurs on the Nasdaq Capital Market or, if the Common Stock is not listed on the Nasdaq Capital Market, on the principal other national or regional securities exchange on which the Common Stock is then listed or, if the Common Stock is not listed on a national or regional securities exchange, on the principal other market on which the Common Stock is then traded. If the Common Stock is not so listed or traded, “Trading Day” shall mean a Business Day.
“Transfer Agent” has the meaning assigned to such term in Section 5.3.2.
“Trigger Event” has the meaning assigned to such term in Section 6.1.1(i).
“VWAP” per share of Common Stock on any Trading Day means the per share volume-weighted average price as displayed on Bloomberg page “NVVE <Equity> AQR” (or its equivalent successor if such page is not available) in respect of the period from 9:30 a.m. to 4:00 p.m., New York City time, on such Trading Day; or, if such price is not available, “VWAP” means the market value per share of Common Stock on such Trading Day as determined, using a volume-weighted average method, by a nationally recognized independent investment banking firm retained by the Company for this purpose.
“Warrant Exercise” has the meaning assigned to such term in Section 4.1.2.
“Warrant Shares” has the meaning assigned to such term in the Recitals.
5
“Warrants” has the meaning assigned to such term in the Recitals and includes Warrants issued on the Issue Date and additional Warrants, if any, in each case issued to the Holders hereunder.
This Warrant shall vest 50% on the Issue Date and 50% on the Subsequent Vesting Date (each of the Issue Date and Subsequent Vesting Date, a “Vesting Date”). The Subsequent Vesting Date shall be the date that Levo Mobility LLC, a Delaware limited liability company and subsidiary of the Company, has entered into contracts with third parties to spend at least $375 million in aggregate of capital expenditures after the Issue Date. The Company shall provide the Holders with written notice no later than five Business Days prior to the Subsequent Vesting Date containing the date of the Subsequent Vesting Date.
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From time to time the Company will execute additional Warrants as necessary in order to permit the registration of a transfer or exchange in accordance with this Section. All Warrants issued upon transfer or exchange shall be the duly authorized, executed and delivered Warrants of the Company.
No service charge will be imposed in connection with any transfer or exchange of any Warrant.
7
A party requesting transfer of Warrants or other securities must provide any evidence of authority that may be required by the Company, including but not limited to, a signature guarantee from an eligible guarantor institution participating in a signature guarantee program approved by the Securities Transfer Association.
Any Warrant delivered in reliance upon this paragraph will not bear the Restricted Legend.
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9
10
11
X = ((A - B)/A) × C
where:
X | = | the Warrant Shares issuable upon exercise pursuant to this paragraph (c). |
A | = | the Market Value on the day immediately preceding the date on which the Holder delivers the applicable Exercise Notice. |
B | = | the Exercise Price. |
C | = | the number of shares of Common Stock as to which the Warrants are then being exercised (the “Exercise Shares”). |
If the foregoing calculation results in a negative number, then no shares of Common Stock shall be issued upon exercise pursuant to this paragraph (c).
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13
14
15
OS1
_______________________
OS0
where
OS0 | = | the number of shares of Common Stock outstanding immediately prior to the record date for such dividend or distribution; and |
OS1 | = | the sum of (A) the number of shares of Common Stock outstanding immediately prior to the record date for such dividend or distribution and (B) the total number of shares of Common Stock constituting such dividend. |
In any such event, the number of Warrant Shares issuable upon exercise of each Warrant at the time of the record date for such dividend or distribution shall be proportionately adjusted so that the Holder, after such date, shall be entitled to purchase the number of shares of Common Stock that such Holder would have owned or been entitled to receive in respect of the shares of Common Stock subject to the Warrant after such date had the Warrant been exercised immediately prior to such date.
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OS0 + X
_______________________
OS0 + Y
where
OS0 | = | the number of shares of Common Stock outstanding at the close of business on the record date for such issuance; |
X | = | the total number of shares of Common Stock issuable pursuant to such rights, options or warrants; and |
Y | = | the number of shares of Common Stock equal to the aggregate price payable to exercise such rights, options or warrants divided by the Market Value determined as of the Ex-Date for such issuance. |
In any such event, the number of Warrant Shares issuable upon the exercise of each Warrant shall be increased to the number obtained by dividing (x) the product of (1) the number of Warrant Shares issuable upon the exercise of the Warrant before such adjustment, and (2) the Exercise Price in effect immediately prior to the distribution giving rise to this adjustment by (y) the new Exercise Price determined in accordance with the immediately preceding sentence.
To the extent that such rights, options or warrants are not exercised prior to their expiration or shares of Common Stock are otherwise not delivered pursuant to such rights or warrants upon the exercise of such rights or warrants, the Exercise Price and the number of Warrant Shares shall be readjusted to the Exercise Price and the number of Warrant Shares that would have then been in effect had the adjustment made upon the issuance of such rights, options or warrants been made on the basis of the delivery of only the number of shares of Common Stock actually delivered. If such rights, options or warrants are only exercisable upon the occurrence of certain triggering events, then the Exercise Price and the number of Warrant Shares shall not be adjusted until such triggering events occur. In determining the aggregate offering price payable for such shares of Common Stock, the conversion agent shall take into account any consideration received for such rights, options or warrants and the value of such consideration (if other than cash, to be determined by the Board of Directors).
17
OS1
_______________________
OS0
where
OS0 | = | the number of shares of Common Stock outstanding immediately prior to the effective date of such share subdivision, combination or reclassification; and |
OS1 | = | the number of shares of Common Stock outstanding immediately after the opening of business on the effective date of such share subdivision, combination or reclassification. |
In any such event, the number of Warrant Shares issuable upon exercise of each Warrant at the time of the effective date of such subdivision, combination or reclassification shall be proportionately adjusted so that the Holder, after such date, shall be entitled to purchase the number of shares of Common Stock that such Holder would have owned or been entitled to receive in respect of the shares of Common Stock subject to the Warrant after such date had the Warrant been exercised immediately prior to such date.
SP0
_______________________
SP0 – FMV
where
18
SP0 | = | the Closing Sale Price per share of Common Stock on the Trading Day immediately preceding the Ex-Date; and |
FMV | = | the fair market value of the portion of the distribution applicable to one share of Common Stock on the Trading Day immediately preceding the Ex-Date as determined by the Board of Directors. |
In any such event, the number of Warrant Shares issuable upon the exercise of each Warrant shall be increased to the number obtained by dividing (x) the product of (1) the number of Warrant Shares issuable upon the exercise of the Warrant before such adjustment, and (2) the Exercise Price in effect immediately prior to the distribution giving rise to this adjustment by (y) the new Exercise Price determined in accordance with the immediately preceding sentence.
In a spin-off, where the Company makes a distribution to all holders of shares of Common Stock consisting of Capital Stock of any class or series, or similar equity interests of, or relating to, a subsidiary or other business unit the Exercise Price shall be adjusted on the fourteenth Trading Day after the effective date of the distribution by dividing the Exercise Price in effect immediately prior to such fourteenth Trading Day by the following fraction:
MP0 + MPS
_______________________
MP0
where
MP0 | = | the average of the Closing Sale Price of the Common Stock over each of the first 10 Trading Days commencing on and including the fifth Trading Day following the effective date of such distribution; and |
MPS | = | the average of the closing sale price of the Capital Stock or equity interests representing the portion of the distribution applicable to one share of Common Stock over each of the first 10 Trading Days commencing on and including the fifth Trading Day following the effective date of such distribution, or, as reported in the principal securities exchange or quotation system or market on which such shares are traded, or if not traded on a national or regional securities exchange or over-the-counter market, the fair market value of the Capital Stock or equity interests representing the portion of the distribution applicable to one share of Common Stock on such date as determined by the Board of Directors. |
19
In any such event, the number of Warrant Shares issuable upon the exercise of each Warrant shall be increased to the number obtained by dividing (x) the product of (1) the number of Warrant Shares issuable upon the exercise of the Warrant before such adjustment, and (2) the Exercise Price in effect immediately prior to the distribution giving rise to this adjustment by (y) the new Exercise Price determined in accordance with the immediately preceding sentence.
In the event that such distribution described in this clause (iv) is not so made, the Exercise Price shall be readjusted, effective as of the date the Board of Directors publicly announces its decision not to pay such dividend or distribution, to the Exercise Price that would then be in effect if such dividend distribution had not been declared.
20
21
22
23
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Series B Warrants: $6,390,000
Series C Warrants: $1,872,000
Series D Warrants: $1,260,000
Series E Warrants: $702,000
Series F Warrants: $405,000
None of the parties hereto (nor any beneficiary hereto) shall take any position or permit any of its Affiliates to take any position (whether in connection with audits, tax returns or otherwise) that is inconsistent with such fair market value.
Nuvve Holding Corp.
2468 Historic Decatur Road
San Diego, California 92106
Attention: Gregory Poilasne and Stephen Moran
Email: gregory@nuvve.com and smoran@nuvve.com
with a copy to, which shall not constitute notice to the Company:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
25
Boston, Massachusetts 02110
Attention: Sahir Surmeli and Eric Macaux
Email: ssurmeli@mintz.com, ewmacaux@mintz.com
and
Graubard Miller
The Chrysler Building
405 Lexington Ave., 11th Floor
New York, NY 10174
Attention: Eric Schwartz
Email: eschwartz@graubard.com
If to Stonepeak:
Stonepeak Partners LP
55 Hudson Yards
550 W. 34th Street, 48th Floor
New York, NY 10001
Attention: Trent Kososki, William Demas and Adrienne Saunders
Email: kososki@stonepeakpartners.com; demas@stonepeakpartners.com; LegalandCompliance@stonepeakpartners.com
A copy of the communication (which shall not constitute notice) shall be sent to:
Kirkland & Ellis LLP
609 Main St.
Houston, Texas 77002
Attention: Julian J. Seiguer, P.C. and John D. Pitts, P.C.
Email: julian.seiguer@kirkland.com; john.pitts@kirkland.com
If to Evolve:
Evolve Transition Infrastructure LP
1360 Post Oak Blvd
26
Suite 2400
Houston, TX 77056
Attention: Charles Ward
Email: cward@evolvetransition.com
A copy of the communication (which shall not constitute notice) shall be sent to:
Sidley Austin LLP
1000 Louisiana Street
Houston, Texas 77002
Attention: Cliff Vrielink and George Vlahakos
Email: cliff.vrielink@sidley.com; George.vlahakos@sidley.com
27
except, in each case, for adjustments expressly provided for in this Warrant.
28
[Signature Page Follows]
29
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly authorized officer as of the 17th day of May, 2021.
NUVVE HOLDING CORP.
By: /s/ Gregory Poilasne
Name: Gregory Poilasne
Title: Chairman and Chief Executive Officer
Accepted and agreed,
HOLDER:
EVOLVE TRANSITION INFRASTRUCTURE LP
By: Evolve Transition Infrastructure GP LLC, its general partner
By: /s/ Charles C. Ward
Name: Charles C. Ward
Title: Chief Financial Officer & Secretary
[Form of Exercise Notice]
(To Be Executed Upon Exercise Of Series E Warrant)
The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to receive shares of Common Stock and, unless making a Net Share Settlement Election as provided below, herewith tenders payment for such shares of Common Stock to the order of Nuvve Holding Corp. (the “Company”) in the amount of $ in accordance with the terms of the Warrant Agreement. Notwithstanding the foregoing, by checking the box following this paragraph, the undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to receive shares of Common Stock pursuant to the Net Share Settlement procedures set forth in the Warrant Agreement in lieu of a Cash Exercise: ◻
The undersigned requests that a certificate for such shares be registered in the name of, whose address is and that such shares be delivered to , whose address is . If said number of shares is less than all of the shares of Common Stock issuable hereunder, the undersigned requests that a new Warrant representing the remaining balance of such shares be registered in the name of , whose address is , and that such Warrant be delivered to , whose address is .
If the Warrant Shares to be delivered pursuant this Exercise Notice have not been registered pursuant to a registration statement that has been declared effective under the Securities Act, the undersigned represents and warrants that (x) it is a qualified institutional buyer (as defined in Rule 144A) and is receiving the Warrant Shares for its own account or for the account of another qualified institutional buyer, and it is aware that the Company is issuing the Warrant Shares to it in reliance on Rule 144A; (y) it is an “accredited investor” within the meaning of Rule 501 under the Securities Act; or (z) it is receiving the Warrant Shares pursuant to another available exemption from the registration requirements of the Securities Act. Prior to receiving Warrant Shares pursuant to clause (x) above, the Company may request a certificate substantially in the form of Exhibit A to the Warrant Agreement. Prior to receiving Warrant Shares pursuant to clause (y) above, the Company may request a certificate substantially in the form of Exhibit B and/or an opinion of counsel.
Date:
Signatures must be guaranteed by an “eligible guarantor institution”, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s), assign(s) and transfer(s) unto (the “Assignee”)
(Please type or print block letters)
(Please print or typewrite name and address including zip code of assignee)
the within Warrant and all rights thereunder (the “Securities”), hereby irrevocably constituting and appointing attorney to transfer said Warrant Certificate on the books of the Company with full power of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED ON ALL CERTIFICATES BEARING A RESTRICTED LEGEND]
In connection with any transfer of this Warrant Certificate occurring prior to the removal of the Restricted Legend, the undersigned confirms (i) the understanding that the Securities have not been registered under the Securities Act of 1933, as amended; (ii) that such transfer is made without utilizing any general solicitation or general advertising; and (iii) further as follows:
Check One
☐ (1) This Warrant Certificate is being transferred to a “qualified institutional buyer” in compliance with Rule 144A under the Securities Act of 1933, as amended and certification in the form of Exhibit A to the Warrant Agreement is being furnished herewith.
or
☐ (2) This Warrant Certificate is being transferred other than in accordance with (1) above and documents are being furnished which comply with the conditions of transfer set forth in this Warrant and the Warrant Agreement.
If none of the foregoing boxes is checked, the Company is not obligated to register this Warrant in the name of any Person other than the Holder hereof unless and until the conditions to any such transfer of registration set forth herein and in the Warrant Agreement have been satisfied.
Seller
NOTICE: The signature to this assignment must correspond with the name as written upon the face of the within-mentioned instrument in every particular, without alteration or any change whatsoever.
__________________________________
[Signature Guaranteed]
Signatures must be guaranteed by an “eligible guarantor institution”, which requirements include membership or participation in the Security Transfer Agent Medallion Program
(“STAMP”) or such other “signature guarantee program” in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.
EXHIBIT A
Rule 144A Certificate
,
[●]
[●]
Attention: [●]
Re: | Warrants to acquire Common Stock of Nuvve Holding Corp. (the “Warrants”) Issued under the Warrant Agreement (the “Agreement”) dated as of May 17, 2021 relating to the Warrants |
Ladies and Gentlemen:
This Certificate relates to:
[CHECK A OR B AS APPLICABLE.]
☐ A. Our proposed purchase of Series [●] Warrants issued under the Agreement.
☐ B. Our proposed exchange of Series [●] Warrants issued under the Agreement for an equal number of Series [●] Warrants to be held by us.
We and, if applicable, each account for which we are acting, in the aggregate owned and invested more than $100,000,000 in securities of issuers that are not affiliated with us (or such accounts, if applicable), as of , 20 , which is a date on or since close of our most recent fiscal year. We and, if applicable, each account for which we are acting, are a qualified institutional buyer within the meaning of Rule 144A (“Rule 144A”) under the Securities Act of 1933, as amended (the “Securities Act”). If we are acting on behalf of an account, we exercise sole investment discretion with respect to such account. We are aware that the transfer of Warrants to us, or such exchange, as applicable, is being made in reliance upon the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A. Prior to the date of this Certificate we have received such information regarding the Company as we have requested pursuant to Rule 144A(d)(4) or have determined not to request such information.
You and the Company are entitled to rely upon this Certificate and are irrevocably authorized to produce this Certificate or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby.
A-1
Very truly yours,
[NAME OF PURCHASER (FOR TRANSFERS) OR OWNER (FOR EXCHANGES)]
A-2
EXHIBIT B
Accredited Investor Certificate
,
[●]
[●]
Attention: [●]
Re: | Warrants to acquire Common Stock of Nuvve Holding Corp. (the “Warrants”) Issued under the Warrant Agreement (the “Agreement”) dated as of May 17, 2021 relating to the Warrants |
Ladies and Gentlemen:
This Certificate relates to:
[CHECK A OR B AS APPLICABLE.]
☐ A. Our proposed purchase of Series [●] Warrants issued under the Agreement.
☐ B. Our proposed exchange of Series [●] Warrants issued under the Agreement for an equal number of Warrants to be held by us.
We hereby confirm that:
1.We are an “accredited investor” (an “Accredited Investor”) within the meaning of Rule 501 under the Securities Act of 1933, as amended (the “Securities Act”).
2.Any acquisition of Warrants by us will be for our own account or for the account of one or more other Accredited Investors as to which we exercise sole investment discretion.
3.We have such knowledge and experience in financial and business matters that we are capable of evaluating the merits and risks of an investment in the Warrants and we and any accounts for which we are acting are able to bear the economic risks of and an entire loss of our or their investment in the Warrants.
4.We are not acquiring the Warrants with a view to any distribution thereof in a transaction that would violate the Securities Act or the securities laws of any State of the United States or any other applicable jurisdiction; provided that the disposition of our property and the property of any accounts for which we are acting as fiduciary will remain at all times within our and their control.
5.We acknowledge that the Warrants have not been registered under the Securities Act and that the Warrants may not be offered or sold within the United States or to or for the benefit of U.S. persons except as set forth below.
We agree for the benefit of the Company, on our own behalf and on behalf of each account for which we are acting, that such Warrants may be offered, sold, pledged or otherwise transferred only in accordance with the Securities Act and any applicable securities laws of any State of the United States and only (a) to the Company or any subsidiary thereof, (b) pursuant to a
B-1
registration statement that has been declared effective under the Securities Act, (c) to a person it reasonably believes is a qualified institutional buyer in compliance with Rule 144A under the Securities Act, (d) to an Accredited Investor that, prior to such transfer, delivers a duly completed and signed certificate (the form of which may be obtained from the Company) relating to the restrictions on transfer of the Warrants, or (e) pursuant to any other available exemption from the registration requirements of the Securities Act.
Prior to the registration of any transfer in accordance with (c) above, we acknowledge that a duly completed and signed certificate (the form of which may be obtained from the Company) must be delivered to the Company. Prior to the registration of any transfer in accordance with (d) or (e) above, we acknowledge that the Company reserves the right to require the delivery of such legal opinions, certifications or other evidence as may reasonably be required in order to determine that the proposed transfer is being made in compliance with the Securities Act and applicable state securities laws. We acknowledge that no representation is made as to the availability of any exemption from the registration requirements of the Securities Act.
We understand that the Company will not be required to accept for registration of transfer any Warrants acquired by us, except upon presentation of evidence satisfactory to the Company that the foregoing restrictions on transfer have been complied with. We further understand that the Warrants acquired by us will bear a legend reflecting the substance of the preceding paragraph. We further agree to provide to any person acquiring any of the Warrants from us a notice advising such person that resales of the Warrants are restricted as stated herein and that the Warrants will bear a legend to that effect.
We agree to notify you promptly in writing if any of our acknowledgments, representations or agreements herein ceases to be accurate and complete.
We represent to you that we have full power to make the foregoing acknowledgments, representations and agreements on our own behalf and on behalf of any account for which we are acting.
You and the Company are entitled to rely upon this Certificate and are irrevocably authorized to produce this Certificate or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby.
B-2
Very truly yours,
[NAME OF PURCHASER (FOR
TRANSFERS) OR OWNER (FOR
EXCHANGES)]
Upon transfer, the Warrants would be registered in the name of the new beneficial owner as follows:
Taxpayer ID number: ____________________
B-3
EXHIBIT C
Securities Purchase Agreement
[See attached]
C-1
EXHIBIT D
Restricted Legend
THIS WARRANT AND THE UNDERLYING COMMON STOCK THAT MAY BE ISSUED UPON ITS EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THIS WARRANT EVIDENCES AND ENTITLES THE REGISTERED HOLDER HEREOF TO CERTAIN RIGHTS AS SET FORTH HEREIN. THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT (A) IT IS A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN “ACCREDITED INVESTOR” WITHIN THE MEANING OF RULE 501 UNDER THE SECURITIES ACT AND (2) AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH WARRANT AND THE UNDERLYING COMMON STOCK THAT MAY BE ISSUED UPON ITS EXERCISE, PRIOR TO THE EXPIRATION OF THE APPLICABLE HOLDING PERIOD WITH RESPECT TO RESTRICTED SECURITIES SET FORTH IN RULE 144 UNDER THE SECURITIES ACT, ONLY (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHICH NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (C) TO AN “ACCREDITED INVESTOR” WITHIN THE MEANING OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, (D) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (C) OR (D) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO THE COMPANY, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE COMPANY. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER
D-1
AFTER THE EXPIRATION OF THE APPLICABLE HOLDING PERIOD WITH RESPECT TO RESTRICTED SECURITIES SET FORTH IN RULE 144 UNDER THE SECURITIES ACT.
D-2
Execution Version
Exhibit 10.14
VOID AFTER 5:00 P.M. EASTERN TIME, MAY 17, 2031
SERIES F WARRANT
for the Purchase of
100,000 Shares of Common Stock
of
NUVVE HOLDING CORP.
Original Issue Date: May 17, 2021
NUVVE HOLDING CORP. HEREBY CERTIFIES THAT Evolve Transition Infrastructure LP, or its registered assigns (the “Holder”), is the registered owner of this Series F Warrant of Nuvve Holding Corp. (the “Company”), exercisable for shares of Common Stock, par value $0.0001 (the “Common Stock”), of the Company. This Series F Warrant is one of a series of duly authorized warrants, denominated as Series F Warrants, which are being issued pursuant to the Letter Agreement concurrently with four other series of duly authorized warrants, denominated as Series B, Series C, Series D, and Series E Warrants (collectively, with the Series F Warrants, the “Warrants”). Unless the context otherwise requires, references to the “Holders” are to the holders of all the Warrants.
This Series F Warrant is exercisable for 100,000 shares of Common Stock (the “Exercise Shares”). Each Series F Warrant entitles the registered holder upon exercise at any time from 9:00 a.m. on the applicable Exercisability Date (as defined below) until 5:00 p.m., New York City Time on May 17, 2031 (the “Expiration Time”), to receive from the Company an amount of fully paid and nonassessable shares of Common Stock (the “Warrant Shares”) at an initial exercise price (the “Exercise Price”) of forty dollars ($40) (as such price may be adjusted as provided in this Warrant), subject to the conditions and terms set forth herein. The Exercise Price and the number of Warrant Shares issuable upon exercise of the Series F Warrant are subject to adjustment upon the occurrence of certain events set forth in this Warrant.
To the extent vested pursuant to the Vesting Schedule contained in Section 2 below, this Warrant may be exercised at any time on or after the date that is 180 days after the applicable Vesting Date (each such date, an “Exercisability Date”) and on or before the Expiration Time; provided that holders shall be able to exercise their Warrants only if the exercise of such Warrants is exempt from, or in compliance with, the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), and such securities are qualified for sale or exempt from qualification under the applicable securities laws of the states in which the various holders of the Warrants or other persons to whom it is proposed that any Warrant Shares be issued on exercise of the Warrants reside (any exercise that would not, in the opinion of the Company upon advice of counsel, qualify for exemption from the registration requirements of
the Securities Act will be effected as an exchange of the Warrants for Warrant Shares as provided herein).
“act” has the meaning set forth in Section 7.2.1.
“Accredited Investor Certificate” means a certificate substantially in the form of Exhibit B hereto.
“Affiliate” shall have the meaning ascribed to it, on the date hereof, in Rule 405 under the Securities Act.
“Average VWAP” per share over a certain period shall mean the arithmetic average of the VWAP per share for each Trading Day in such period.
“Board of Directors” shall mean the Board of Directors of the Company or, with respect to any action to be taken by the Board of Directors, any committee of the Board of Directors duly authorized to take such action.
“Business Combination” means a merger, consolidation, statutory exchange or similar transaction of the Company with another Person.
“Business Day” shall mean Monday through Friday of each week, except that a legal holiday recognized as such by the government of the United States of America or the States of Texas or New York shall not be regarded as a Business Day.
“Capital Stock” means:
(1)in the case of a corporation, corporate stock;
(2)in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;
(3)in the case of a partnership or limited liability company, partnership interests (whether general or limited) or membership interests, respectively; and
(4)any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person, but excluding from all of the foregoing any debt securities convertible into Capital Stock, whether or not such debt securities include any right of participation with Capital Stock.
“Cash Exercise” has the meaning assigned to such term in Section 4.1.2.
“Certificate of Incorporation” shall mean the Amended and Restated Certificate of Incorporation of the Company, as amended or modified.
“Change of Control” shall mean
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(i) the direct or indirect sale, lease, transfer, conveyance or other disposition (other than by way of a merger or consolidation, which is covered by subsection (ii) below, and for the avoidance of doubt, other than non-exclusive licenses of the Company’s intellectual property), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company and its subsidiaries, taken as a whole, to any Person;
(ii) the consummation of any transaction (including, without limitation, pursuant to a merger or consolidation), the result of which is that any Person becomes the “beneficial owner” (as defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or indirectly, of more than 50% of the voting power of the Company; provided, however, solely for purposes of this subsection (ii), a “Person” shall include, in connection with a direct merger of a publicly traded entity with the Company, the shareholders of such publicly traded entity with whom the Company merges; or
(iii) any event which constitutes a “Change of Control” under any indenture or similar agreement governing the outstanding (as of the Issue Date) or future senior notes or debentures of the Company and such “Change of Control” is not waived by the holders of such notes or debentures pursuant to the applicable indenture or similar agreement.
“Closing Sale Price” of the Common Stock shall mean, as of any date, the closing sale price per share (or if no closing sale price is reported, the average of the closing bid and ask prices or, if more than one in either case, the average of the average closing bid and the average closing ask prices) on such date as reported on the principal United States securities exchange on which the Common Stock is traded or, if the Common Stock is not listed on a United States national or regional securities exchange, in the over-the-counter market as reported by OTC Markets Group Inc. or a similar organization. In the absence of such a quotation, the Closing Sale Price shall be an amount determined reasonably and in good faith by the Board of Directors to be the fair market value of a share of Common Stock based on relevant facts and circumstances at the time of any such determination.
“Commission” means the Securities and Exchange Commission.
“Common Stock” shall mean the common stock, par value $0.0001 per share, of the Company or any other Capital Stock of the Company into which such common stock shall be reclassified or changed.
“Company” shall mean Nuvve Holding Corp., a Delaware corporation or any successor to the Company.
“Evolve” means Evolve Transition Infrastructure LP, a Delaware limited partnership.
“Ex-Date” means, when used with respect to any issuance of or distribution in respect of the Common Stock or any other securities, the first date on which the Common Stock or such other securities trade without the right to receive such issuance or distribution.
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Exercise Notice” has the meaning assigned to such term in Section 4.1.2.
“Exercise Price” means $40 per Warrant Share, subject to adjustment pursuant to Section 6.1.
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“Exercise Shares” has the meaning assigned to such term in Section 4.1.3.
“Expiration Time” has the meaning assigned to such term in Section 4.1.1.
“GAAP” means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board Accounting Standards Codification or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect on the Issue Date.
“Holder” or “Warrantholder” means the registered holder of any Warrant.
“Issue Date” means May 17, 2021.
“Letter Agreement” means that certain Letter Agreement, dated as of May 17, 2021, by and among Stonepeak, Evolve and Nuvve Holding Corp.
“Market Value” means the Average VWAP during a 10 consecutive Trading Day period ending on the Trading Day immediately prior to the date of determination.
“Nasdaq” means the Nasdaq Capital Market, Nasdaq Global Market or Nasdaq Global Select Market, as applicable.
“Nasdaq Stockholder Approval” has the meaning assigned to such term in Section 3.5.1.
“National Securities Exchange” shall mean an exchange registered with the Commission under Section 6(a) of the Exchange Act.
“Net Share Settlement” has the meaning assigned to such term in Section 4.1.2.
“Net Share Settlement Election” has the meaning assigned to such term in Section 4.1.2.
“Officer” shall mean the Chief Executive Officer, the President and Chief Operating Officer, the Chief Financial Officer, any Executive Vice President, any Senior Vice President, any Vice President, the Treasurer, the Secretary or any Assistant Secretary of the Company.
“Option” shall mean the right of Stonepeak and Evolve to purchase a share of Common Stock pursuant to that certain Securities Purchase Agreement, dated as of May 17, 2021, between Nuvve Holding Corp., Stonepeak and Evolve, which is attached hereto as Exhibit C.
“Option Securities” has the meaning assigned to such term in Section 3.5.1.
“Person” shall mean any individual, corporation, general partnership, limited partnership, limited liability partnership, joint venture, association, joint-stock company, trust, limited liability company, unincorporated organization or government or any agency or political subdivision thereof.
“Pro Rata Repurchases” means any purchase of shares of Common Stock by the Company or any Affiliate thereof pursuant to (i) any tender offer or exchange offer directed to all of the holders of Common Stock subject to Section 13(e) or 14(e) of the Exchange Act or Regulation 14E promulgated thereunder or (ii) any other tender offer available to substantially all holders of Common Stock, in the case of both (i) and (ii), whether for cash, shares of Capital
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Stock of the Company, other securities of the Company, evidences of indebtedness of the Company or any other Person or any other property (including shares of Capital Stock, other securities or evidences of indebtedness of a subsidiary), or any combination thereof, effected while the Warrants are outstanding, other than purchases in the open market that do not constitute a tender offer subject to Section 13(e) or 14(e). The “Effective Date” of a Pro Rata Repurchase shall mean the date of purchase with respect to any Pro Rata Purchase.
“Reduction Event” shall have the meaning assigned to such term in Section 3.5.1.
“Register” means the register established by the Company pursuant to Section 3.3.1.
“Registrar” means a Person engaged to maintain the Register.
“Restricted Legend” means the legend set forth in Exhibit D.
“Rule 144” means Rule 144 promulgated under the Securities Act.
“Rule 144A” means Rule 144A under the Securities Act.
“Rule 144A Certificate” means a certificate substantially in the form of Exhibit A hereto.
“Securities Act” shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Stockholder Approval Threshold” shall have the meaning assigned to such term in Section 3.5.1.
“Stonepeak” means Stonepeak Rocket Holdings LP.
“Stonepeak Group” means Stonepeak Rocket Holdings LP, Stonepeak Partners LP and their controlled Affiliates.
“Trading Day” shall mean a day during which trading in securities generally occurs on the Nasdaq Capital Market or, if the Common Stock is not listed on the Nasdaq Capital Market, on the principal other national or regional securities exchange on which the Common Stock is then listed or, if the Common Stock is not listed on a national or regional securities exchange, on the principal other market on which the Common Stock is then traded. If the Common Stock is not so listed or traded, “Trading Day” shall mean a Business Day.
“Transfer Agent” has the meaning assigned to such term in Section 5.3.2.
“Trigger Event” has the meaning assigned to such term in Section 6.1.1(i).
“VWAP” per share of Common Stock on any Trading Day means the per share volume-weighted average price as displayed on Bloomberg page “NVVE <Equity> AQR” (or its equivalent successor if such page is not available) in respect of the period from 9:30 a.m. to 4:00 p.m., New York City time, on such Trading Day; or, if such price is not available, “VWAP” means the market value per share of Common Stock on such Trading Day as determined, using a volume-weighted average method, by a nationally recognized independent investment banking firm retained by the Company for this purpose.
“Warrant Exercise” has the meaning assigned to such term in Section 4.1.2.
“Warrant Shares” has the meaning assigned to such term in the Recitals.
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“Warrants” has the meaning assigned to such term in the Recitals and includes Warrants issued on the Issue Date and additional Warrants, if any, in each case issued to the Holders hereunder.
This Warrant shall vest 50% on the Issue Date and 50% on the Subsequent Vesting Date (each of the Issue Date and Subsequent Vesting Date, a “Vesting Date”). The Subsequent Vesting Date shall be the date that Levo Mobility LLC, a Delaware limited liability company and subsidiary of the Company, has entered into contracts with third parties to spend at least $500 million in aggregate of capital expenditures after the Issue Date. The Company shall provide the Holders with written notice no later than five Business Days prior to the Subsequent Vesting Date containing the date of the Subsequent Vesting Date.
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From time to time the Company will execute additional Warrants as necessary in order to permit the registration of a transfer or exchange in accordance with this Section. All Warrants issued upon transfer or exchange shall be the duly authorized, executed and delivered Warrants of the Company.
No service charge will be imposed in connection with any transfer or exchange of any Warrant.
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A party requesting transfer of Warrants or other securities must provide any evidence of authority that may be required by the Company, including but not limited to, a signature guarantee from an eligible guarantor institution participating in a signature guarantee program approved by the Securities Transfer Association.
Any Warrant delivered in reliance upon this paragraph will not bear the Restricted Legend.
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X = ((A - B)/A) × C
where:
X | = | the Warrant Shares issuable upon exercise pursuant to this paragraph (c). |
A | = | the Market Value on the day immediately preceding the date on which the Holder delivers the applicable Exercise Notice. |
B | = | the Exercise Price. |
C | = | the number of shares of Common Stock as to which the Warrants are then being exercised (the “Exercise Shares”). |
If the foregoing calculation results in a negative number, then no shares of Common Stock shall be issued upon exercise pursuant to this paragraph (c).
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OS1
_______________________
OS0
where
OS0 | = | the number of shares of Common Stock outstanding immediately prior to the record date for such dividend or distribution; and |
OS1 | = | the sum of (A) the number of shares of Common Stock outstanding immediately prior to the record date for such dividend or distribution and (B) the total number of shares of Common Stock constituting such dividend. |
In any such event, the number of Warrant Shares issuable upon exercise of each Warrant at the time of the record date for such dividend or distribution shall be proportionately adjusted so that the Holder, after such date, shall be entitled to purchase the number of shares of Common Stock that such Holder would have owned or been entitled to receive in respect of the shares of Common Stock subject to the Warrant after such date had the Warrant been exercised immediately prior to such date.
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OS0 + X
_______________________
OS0 + Y
where
OS0 | = | the number of shares of Common Stock outstanding at the close of business on the record date for such issuance; |
X | = | the total number of shares of Common Stock issuable pursuant to such rights, options or warrants; and |
Y | = | the number of shares of Common Stock equal to the aggregate price payable to exercise such rights, options or warrants divided by the Market Value determined as of the Ex-Date for such issuance. |
In any such event, the number of Warrant Shares issuable upon the exercise of each Warrant shall be increased to the number obtained by dividing (x) the product of (1) the number of Warrant Shares issuable upon the exercise of the Warrant before such adjustment, and (2) the Exercise Price in effect immediately prior to the distribution giving rise to this adjustment by (y) the new Exercise Price determined in accordance with the immediately preceding sentence.
To the extent that such rights, options or warrants are not exercised prior to their expiration or shares of Common Stock are otherwise not delivered pursuant to such rights or warrants upon the exercise of such rights or warrants, the Exercise Price and the number of Warrant Shares shall be readjusted to the Exercise Price and the number of Warrant Shares that would have then been in effect had the adjustment made upon the issuance of such rights, options or warrants been made on the basis of the delivery of only the number of shares of Common Stock actually delivered. If such rights, options or warrants are only exercisable upon the occurrence of certain triggering events, then the Exercise Price and the number of Warrant Shares shall not be adjusted until such triggering events occur. In determining the aggregate offering price payable for such shares of Common Stock, the conversion agent shall take into account any consideration received for such rights, options or warrants and the value of such consideration (if other than cash, to be determined by the Board of Directors).
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OS1
_______________________
OS0
where
OS0 | = | the number of shares of Common Stock outstanding immediately prior to the effective date of such share subdivision, combination or reclassification; and |
OS1 | = | the number of shares of Common Stock outstanding immediately after the opening of business on the effective date of such share subdivision, combination or reclassification. |
In any such event, the number of Warrant Shares issuable upon exercise of each Warrant at the time of the effective date of such subdivision, combination or reclassification shall be proportionately adjusted so that the Holder, after such date, shall be entitled to purchase the number of shares of Common Stock that such Holder would have owned or been entitled to receive in respect of the shares of Common Stock subject to the Warrant after such date had the Warrant been exercised immediately prior to such date.
SP0
_______________________
SP0 – FMV
where
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SP0 | = | the Closing Sale Price per share of Common Stock on the Trading Day immediately preceding the Ex-Date; and |
FMV | = | the fair market value of the portion of the distribution applicable to one share of Common Stock on the Trading Day immediately preceding the Ex-Date as determined by the Board of Directors. |
In any such event, the number of Warrant Shares issuable upon the exercise of each Warrant shall be increased to the number obtained by dividing (x) the product of (1) the number of Warrant Shares issuable upon the exercise of the Warrant before such adjustment, and (2) the Exercise Price in effect immediately prior to the distribution giving rise to this adjustment by (y) the new Exercise Price determined in accordance with the immediately preceding sentence.
In a spin-off, where the Company makes a distribution to all holders of shares of Common Stock consisting of Capital Stock of any class or series, or similar equity interests of, or relating to, a subsidiary or other business unit the Exercise Price shall be adjusted on the fourteenth Trading Day after the effective date of the distribution by dividing the Exercise Price in effect immediately prior to such fourteenth Trading Day by the following fraction:
MP0 + MPS
_______________________
MP0
where
MP0 | = | the average of the Closing Sale Price of the Common Stock over each of the first 10 Trading Days commencing on and including the fifth Trading Day following the effective date of such distribution; and |
MPS | = | the average of the closing sale price of the Capital Stock or equity interests representing the portion of the distribution applicable to one share of Common Stock over each of the first 10 Trading Days commencing on and including the fifth Trading Day following the effective date of such distribution, or, as reported in the principal securities exchange or quotation system or market on which such shares are traded, or if not traded on a national or regional securities exchange or over-the-counter market, the fair market value of the Capital Stock or equity interests representing the portion of the distribution applicable to one share of Common Stock on such date as determined by the Board of Directors. |
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In any such event, the number of Warrant Shares issuable upon the exercise of each Warrant shall be increased to the number obtained by dividing (x) the product of (1) the number of Warrant Shares issuable upon the exercise of the Warrant before such adjustment, and (2) the Exercise Price in effect immediately prior to the distribution giving rise to this adjustment by (y) the new Exercise Price determined in accordance with the immediately preceding sentence.
In the event that such distribution described in this clause (iv) is not so made, the Exercise Price shall be readjusted, effective as of the date the Board of Directors publicly announces its decision not to pay such dividend or distribution, to the Exercise Price that would then be in effect if such dividend distribution had not been declared.
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Series B Warrants: $6,390,000
Series C Warrants: $1,872,000
Series D Warrants: $1,260,000
Series E Warrants: $702,000
Series F Warrants: $405,000
None of the parties hereto (nor any beneficiary hereto) shall take any position or permit any of its Affiliates to take any position (whether in connection with audits, tax returns or otherwise) that is inconsistent with such fair market value.
Nuvve Holding Corp.
2468 Historic Decatur Road
San Diego, California 92106
Attention: Gregory Poilasne and Stephen Moran
Email: gregory@nuvve.com and smoran@nuvve.com
with a copy to, which shall not constitute notice to the Company:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
25
Boston, Massachusetts 02110
Attention: Sahir Surmeli and Eric Macaux
Email: ssurmeli@mintz.com, ewmacaux@mintz.com
and
Graubard Miller
The Chrysler Building
405 Lexington Ave., 11th Floor
New York, NY 10174
Attention: Eric Schwartz
Email: eschwartz@graubard.com
If to Stonepeak:
Stonepeak Partners LP
55 Hudson Yards
550 W. 34th Street, 48th Floor
New York, NY 10001
Attention: Trent Kososki, William Demas and Adrienne Saunders
Email: kososki@stonepeakpartners.com; demas@stonepeakpartners.com; LegalandCompliance@stonepeakpartners.com
A copy of the communication (which shall not constitute notice) shall be sent to:
Kirkland & Ellis LLP
609 Main St.
Houston, Texas 77002
Attention: Julian J. Seiguer, P.C. and John D. Pitts, P.C.
Email: julian.seiguer@kirkland.com; john.pitts@kirkland.com
If to Evolve:
Evolve Transition Infrastructure LP
1360 Post Oak Blvd
26
Suite 2400
Houston, TX 77056
Attention: Charles Ward
Email: cward@evolvetransition.com
A copy of the communication (which shall not constitute notice) shall be sent to:
Sidley Austin LLP
1000 Louisiana Street
Houston, Texas 77002
Attention: Cliff Vrielink and George Vlahakos
Email: cliff.vrielink@sidley.com; George.vlahakos@sidley.com
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except, in each case, for adjustments expressly provided for in this Warrant.
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[Signature Page Follows]
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly authorized officer as of the 17th day of May, 2021.
NUVVE HOLDING CORP.
By: /s/ Gregory Poilasne
Name: Gregory Poilasne
Title: Chairman and Chief Executive Officer
Accepted and agreed,
HOLDER:
EVOLVE TRANSITION INFRASTRUCTURE LP
By: Evolve Transition Infrastructure GP LLC, its general partner
By: /s/ Charles C. Ward
Name: Charles C. Ward
Title: Chief Financial Officer & Secretary
[Form of Exercise Notice]
(To Be Executed Upon Exercise Of Series F Warrant)
The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to receive shares of Common Stock and, unless making a Net Share Settlement Election as provided below, herewith tenders payment for such shares of Common Stock to the order of Nuvve Holding Corp. (the “Company”) in the amount of $ in accordance with the terms of the Warrant Agreement. Notwithstanding the foregoing, by checking the box following this paragraph, the undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to receive shares of Common Stock pursuant to the Net Share Settlement procedures set forth in the Warrant Agreement in lieu of a Cash Exercise: ◻
The undersigned requests that a certificate for such shares be registered in the name of, whose address is and that such shares be delivered to , whose address is . If said number of shares is less than all of the shares of Common Stock issuable hereunder, the undersigned requests that a new Warrant representing the remaining balance of such shares be registered in the name of , whose address is , and that such Warrant be delivered to , whose address is .
If the Warrant Shares to be delivered pursuant this Exercise Notice have not been registered pursuant to a registration statement that has been declared effective under the Securities Act, the undersigned represents and warrants that (x) it is a qualified institutional buyer (as defined in Rule 144A) and is receiving the Warrant Shares for its own account or for the account of another qualified institutional buyer, and it is aware that the Company is issuing the Warrant Shares to it in reliance on Rule 144A; (y) it is an “accredited investor” within the meaning of Rule 501 under the Securities Act; or (z) it is receiving the Warrant Shares pursuant to another available exemption from the registration requirements of the Securities Act. Prior to receiving Warrant Shares pursuant to clause (x) above, the Company may request a certificate substantially in the form of Exhibit A to the Warrant Agreement. Prior to receiving Warrant Shares pursuant to clause (y) above, the Company may request a certificate substantially in the form of Exhibit B and/or an opinion of counsel.
Date:
Signatures must be guaranteed by an “eligible guarantor institution”, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s), assign(s) and transfer(s) unto (the “Assignee”)
(Please type or print block letters)
(Please print or typewrite name and address including zip code of assignee)
the within Warrant and all rights thereunder (the “Securities”), hereby irrevocably constituting and appointing attorney to transfer said Warrant Certificate on the books of the Company with full power of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED ON ALL CERTIFICATES BEARING A RESTRICTED LEGEND]
In connection with any transfer of this Warrant Certificate occurring prior to the removal of the Restricted Legend, the undersigned confirms (i) the understanding that the Securities have not been registered under the Securities Act of 1933, as amended; (ii) that such transfer is made without utilizing any general solicitation or general advertising; and (iii) further as follows:
Check One
☐ (1) This Warrant Certificate is being transferred to a “qualified institutional buyer” in compliance with Rule 144A under the Securities Act of 1933, as amended and certification in the form of Exhibit A to the Warrant Agreement is being furnished herewith.
or
☐ (2) This Warrant Certificate is being transferred other than in accordance with (1) above and documents are being furnished which comply with the conditions of transfer set forth in this Warrant and the Warrant Agreement.
If none of the foregoing boxes is checked, the Company is not obligated to register this Warrant in the name of any Person other than the Holder hereof unless and until the conditions to any such transfer of registration set forth herein and in the Warrant Agreement have been satisfied.
Seller
NOTICE: The signature to this assignment must correspond with the name as written upon the face of the within-mentioned instrument in every particular, without alteration or any change whatsoever.
__________________________________
[Signature Guaranteed]
Signatures must be guaranteed by an “eligible guarantor institution”, which requirements include membership or participation in the Security Transfer Agent Medallion Program
(“STAMP”) or such other “signature guarantee program” in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.
EXHIBIT A
Rule 144A Certificate
,
[●]
[●]
Attention: [●]
Re: | Warrants to acquire Common Stock of Nuvve Holding Corp. (the “Warrants”) Issued under the Warrant Agreement (the “Agreement”) dated as of May 17, 2021 relating to the Warrants |
Ladies and Gentlemen:
This Certificate relates to:
[CHECK A OR B AS APPLICABLE.]
☐ A. Our proposed purchase of Series [●] Warrants issued under the Agreement.
☐ B. Our proposed exchange of Series [●] Warrants issued under the Agreement for an equal number of Series [●] Warrants to be held by us.
We and, if applicable, each account for which we are acting, in the aggregate owned and invested more than $100,000,000 in securities of issuers that are not affiliated with us (or such accounts, if applicable), as of , 20 , which is a date on or since close of our most recent fiscal year. We and, if applicable, each account for which we are acting, are a qualified institutional buyer within the meaning of Rule 144A (“Rule 144A”) under the Securities Act of 1933, as amended (the “Securities Act”). If we are acting on behalf of an account, we exercise sole investment discretion with respect to such account. We are aware that the transfer of Warrants to us, or such exchange, as applicable, is being made in reliance upon the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A. Prior to the date of this Certificate we have received such information regarding the Company as we have requested pursuant to Rule 144A(d)(4) or have determined not to request such information.
You and the Company are entitled to rely upon this Certificate and are irrevocably authorized to produce this Certificate or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby.
A-1
Very truly yours,
[NAME OF PURCHASER (FOR TRANSFERS) OR OWNER (FOR EXCHANGES)]
A-2
EXHIBIT B
Accredited Investor Certificate
,
[●]
[●]
Attention: [●]
Re: | Warrants to acquire Common Stock of Nuvve Holding Corp. (the “Warrants”) Issued under the Warrant Agreement (the “Agreement”) dated as of May 17, 2021 relating to the Warrants |
Ladies and Gentlemen:
This Certificate relates to:
[CHECK A OR B AS APPLICABLE.]
☐ A. Our proposed purchase of Series [●] Warrants issued under the Agreement.
☐ B. Our proposed exchange of Series [●] Warrants issued under the Agreement for an equal number of Warrants to be held by us.
We hereby confirm that:
1.We are an “accredited investor” (an “Accredited Investor”) within the meaning of Rule 501 under the Securities Act of 1933, as amended (the “Securities Act”).
2.Any acquisition of Warrants by us will be for our own account or for the account of one or more other Accredited Investors as to which we exercise sole investment discretion.
3.We have such knowledge and experience in financial and business matters that we are capable of evaluating the merits and risks of an investment in the Warrants and we and any accounts for which we are acting are able to bear the economic risks of and an entire loss of our or their investment in the Warrants.
4.We are not acquiring the Warrants with a view to any distribution thereof in a transaction that would violate the Securities Act or the securities laws of any State of the United States or any other applicable jurisdiction; provided that the disposition of our property and the property of any accounts for which we are acting as fiduciary will remain at all times within our and their control.
5.We acknowledge that the Warrants have not been registered under the Securities Act and that the Warrants may not be offered or sold within the United States or to or for the benefit of U.S. persons except as set forth below.
We agree for the benefit of the Company, on our own behalf and on behalf of each account for which we are acting, that such Warrants may be offered, sold, pledged or otherwise transferred only in accordance with the Securities Act and any applicable securities laws of any State of the United States and only (a) to the Company or any subsidiary thereof, (b) pursuant to a
B-1
registration statement that has been declared effective under the Securities Act, (c) to a person it reasonably believes is a qualified institutional buyer in compliance with Rule 144A under the Securities Act, (d) to an Accredited Investor that, prior to such transfer, delivers a duly completed and signed certificate (the form of which may be obtained from the Company) relating to the restrictions on transfer of the Warrants, or (e) pursuant to any other available exemption from the registration requirements of the Securities Act.
Prior to the registration of any transfer in accordance with (c) above, we acknowledge that a duly completed and signed certificate (the form of which may be obtained from the Company) must be delivered to the Company. Prior to the registration of any transfer in accordance with (d) or (e) above, we acknowledge that the Company reserves the right to require the delivery of such legal opinions, certifications or other evidence as may reasonably be required in order to determine that the proposed transfer is being made in compliance with the Securities Act and applicable state securities laws. We acknowledge that no representation is made as to the availability of any exemption from the registration requirements of the Securities Act.
We understand that the Company will not be required to accept for registration of transfer any Warrants acquired by us, except upon presentation of evidence satisfactory to the Company that the foregoing restrictions on transfer have been complied with. We further understand that the Warrants acquired by us will bear a legend reflecting the substance of the preceding paragraph. We further agree to provide to any person acquiring any of the Warrants from us a notice advising such person that resales of the Warrants are restricted as stated herein and that the Warrants will bear a legend to that effect.
We agree to notify you promptly in writing if any of our acknowledgments, representations or agreements herein ceases to be accurate and complete.
We represent to you that we have full power to make the foregoing acknowledgments, representations and agreements on our own behalf and on behalf of any account for which we are acting.
You and the Company are entitled to rely upon this Certificate and are irrevocably authorized to produce this Certificate or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby.
B-2
Very truly yours,
[NAME OF PURCHASER (FOR
TRANSFERS) OR OWNER (FOR
EXCHANGES)]
Upon transfer, the Warrants would be registered in the name of the new beneficial owner as follows:
Taxpayer ID number: ____________________
B-3
EXHIBIT C
Securities Purchase Agreement
[See attached]
C-1
EXHIBIT D
Restricted Legend
THIS WARRANT AND THE UNDERLYING COMMON STOCK THAT MAY BE ISSUED UPON ITS EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THIS WARRANT EVIDENCES AND ENTITLES THE REGISTERED HOLDER HEREOF TO CERTAIN RIGHTS AS SET FORTH HEREIN. THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT (A) IT IS A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN “ACCREDITED INVESTOR” WITHIN THE MEANING OF RULE 501 UNDER THE SECURITIES ACT AND (2) AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH WARRANT AND THE UNDERLYING COMMON STOCK THAT MAY BE ISSUED UPON ITS EXERCISE, PRIOR TO THE EXPIRATION OF THE APPLICABLE HOLDING PERIOD WITH RESPECT TO RESTRICTED SECURITIES SET FORTH IN RULE 144 UNDER THE SECURITIES ACT, ONLY (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHICH NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (C) TO AN “ACCREDITED INVESTOR” WITHIN THE MEANING OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, (D) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (C) OR (D) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO THE COMPANY, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE COMPANY. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER
D-1
AFTER THE EXPIRATION OF THE APPLICABLE HOLDING PERIOD WITH RESPECT TO RESTRICTED SECURITIES SET FORTH IN RULE 144 UNDER THE SECURITIES ACT.
D-2
Exhibit 10.15
May 17, 2021
Nuvve Holding Corp.
Attention: Gregory Poilasne
2468 Historic Decatur Road
San Diego, California 92106
Re:Project Rocket Joint Venture Summary of Indicative Terms and Conditions
Dear Mr. Poilasne:
This letter agreement (this “Agreement”) establishes the terms and conditions upon which Nuvve Holding Corp., a Delaware corporation (“Nuvve Parent” and together with its subsidiaries, “Nuvve”), Stonepeak Rocket Holdings LP, a Delaware limited partnership (“Stonepeak”), and Evolve Transition Infrastructure LP, a Delaware limited partnership (“Evolve”), agree to, subject to the terms and conditions set forth herein, form a joint venture, Levo Mobility LLC, a Delaware limited liability company (such proposed joint venture, the “Proposed Transaction”), to pursue the business of (a) acquiring, owning, selling, leasing, developing and managing electric buses, vehicles, transportation assets, and related vehicle-to-grid charging infrastructure and ancillary assets, in each case, that are provided to third parties that are utilizing financing, leasing or other similar arrangements in respect of such assets and (b) participating in or otherwise providing equity, debt or other financing to any entity or other person engaged in the businesses described in the foregoing clause (a) (the “Business”). The terms of the Proposed Transaction are more fully described in the non-binding Summary of Indicative Terms and Conditions attached hereto as Annex A and incorporated herein (the “Term Sheet”).
In consideration of the premises and the mutual covenants set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto covenant and agree as follows:
KE 76500513
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if to Nuvve Parent:
Nuvve Holding Corp.
2468 Historic Decatur Road
San Diego, California 92106
Attention: Gregory Poilasne and Stephen Moran
Email: gregory@nuvve.com and smoran@nuvve.com
With a copy (which shall not constitute notice) to:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, Massachusetts 02110
Attention: Sahir Surmeli and Eric Macaux
Email: ssurmeli@mintz.com and ewmacaux@mintz.com
if to Stonepeak:
Stonepeak Partners LP
55 Hudson Yards
550 W 34th Street, 48th Floor
6
New York, NY 10001
Attention: Trent Kososki, William Demas and Adrienne Saunders
Email: kososki@stonepeakpartners.com; demas@stonepeakpartners.com; LegalandCompliance@stonepeakpartners.com
With a copy (which shall not constitute notice) to:
Kirkland & Ellis LLP
609 Main St.
Houston, Texas 77002
Attention: John D. Pitts, P.C. and Julian J. Seiguer, P.C.
Email: john.pitts@kirkland.com; julian.seiguer@kirkland.com
if to Evolve:
Evolve Transition Infrastructure LP
1360 Post Oak Blvd, Suite 2400
Houston, Texas 77056
Attention: Charles Ward
Email: cward@evolvetransition.com
With a copy (which shall not constitute notice) to:
Sidley Austin LLP
1000 Louisiana Street, Suite 5900
Houston, Texas 77002
Attention: Cliff Vrielink and George Vlahakos
Email: cvrielink@sidley.com; gvlahakos@sidley.com
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Corporation, a Delaware corporation (the “NDA”), and that certain joinder to the NDA by and between Stonepeak and Evolve, constitute the entire agreement between the parties hereto with respect to the subject matter of this Agreement and supersede all prior understandings, whether written or oral, between Nuvve Parent, Stonepeak and Evolve with respect to the contents hereof. This Agreement may not be amended or modified, in whole or in part, except by a written instrument executed by Stonepeak, Evolve and Nuvve Parent expressly so amending, or modifying this Agreement or any part hereof. Any agreement on the part of any party hereto to any waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. No failure or delay on the part of any party hereto in the exercise of any right hereunder shall impair such right or be construed as a waiver of, or acquiescence in, any breach of any agreement herein, nor shall any single or partial exercise of any such right preclude other or further exercise thereof or of any other right.
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[Remainder of page intentionally left blank]
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Each of the parties hereto have executed this Agreement through such party’s duly authorized representative as of the day first above written.
Sincerely,
Stonepeak Rocket Holdings LP
By: STONEPEAK ASSOCIATES IV LLC,
its general partner
By:__/s/ Jack Howell______________________
Name: Jack Howell
Title: Senior Managing Director
EVOLVE TRANSITION INFRASTRUCTURE LP
By: EVOLVE TRANSITION INFRASTRUCTURE GP LLC,
its general partner
By:__/s/ Charles C. Ward__________________
Name: Charles C. Ward
Title: Chief Financial Officer & Secretary
Acknowledged and Agreed:
Nuvve Holding Corp.
By:__/s/ Gregory Poilasne_________________
Name: Gregory Poilasne
Title: Chairman and Chief Executive Officer
[Signature Page to Letter Agreement]
ANNEX A
Project Rocket Joint Venture Summary of Indicative Terms and Conditions
(See attached.)
[Annex A to Letter Agreement]
Execution Version
Exhibit 10.16
267764589
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of May 17, 2021 by and among Nuvve Holding Corp., a Delaware corporation (the “Company”) and the undersigned purchasers (the “Purchasers”), for the issuance and sale by the Company to the Purchasers of up to 5,000,000 shares of common stock, par value $0.0001, of the Company (“Common Stock”).
RECITALS
WHEREAS, the Company and the Purchasers have entered into that certain Letter Agreement (the “Letter Agreement”), dated as of the date hereof, pursuant to which the Company and the Purchasers have committed to negotiate in good faith to form a joint venture for the purpose of (i) acquiring, owning, leasing, developing and managing electric buses, vehicles, transportation assets, and related vehicle-to-grid charging infrastructure and ancillary assets, in each case, that are provided to third parties that are utilizing financing, leasing or other similar arrangements in respect of such assets and (ii) participating in or otherwise providing equity, debt or other financing to any entity or other person engaged in the businesses described in the foregoing subsection (i);
WHEREAS, in connection with the foregoing, the Company desires to issue and sell to the Purchasers, and the Purchasers desire to purchase from the Company, certain shares of Common Stock following the date hereof, on the terms and subject to the conditions set forth in this Agreement;
WHEREAS, contemporaneously with the execution of this Agreement, the Company issued the Series B, C, D, E and F warrants of the Company (the “Warrants”) to the Purchasers, which Warrants are exercisable for shares of Common Stock;
WHEREAS, contemporaneously with the execution of this Agreement, the Company entered into that certain Registration Rights Agreement with the Purchasers, pursuant to which the Company has agreed to provide certain registration and other rights for the benefit of the Purchasers in connection with the issuance of Common Stock pursuant to this Agreement and the Warrants (the “Registration Rights Agreement,” and together with this Agreement, the Letter Agreement, the Warrants and the other agreements and instruments contemplated hereby and thereby, the “Transaction Documents” ).
NOW, THEREFORE, in consideration of the premises and the representations, warranties, covenants and agreements herein contained and intending to be legally bound hereby, the Company and the Purchasers hereby agree as follows:
2
3
The Company hereby represents and warrants to the Purchasers as of the date hereof and at each Closing that the statements contained in this Article II are true and correct as of the date hereof and as of the applicable Closing (other than, in each case, representations and warranties made below as of a specific date, which shall be as of such date), except as may be disclosed in the Company Reports (as defined herein) (other than in the case of fraud or intentional misrepresentation or as set forth in any risk factor contained in the Company Reports) filed with
4
or furnished to the Commission and publicly available prior to the date of this Agreement (or in the case of any Closing, prior to such Closing).
5
6
7
Each Purchaser hereby represents and warrants to the Company, severally and not jointly, as of the date hereof and at each Closing that the statements contained in this Article IV are true and correct as of the date hereof and as of the applicable Closing (other than, in each case, representations and warranties made below as of a specific date, which shall be as of such date); and, with respect to Evolve Transition Infrastructure LP only, except as may be disclosed in the Evolve Reports (as defined herein) (other than in the case of fraud or intentional misrepresentation or as set forth in any risk factor contained in the Evolve Reports) filed with or furnished to the Commission and publicly available prior to the date of this Agreement (or in the case of any Closing, prior to such Closing).
8
9
Each Purchaser’s election to purchase the Commitment Shares at any Closing is subject to the fulfillment of the following conditions (any or all of which may be waived by such Purchaser in its sole discretion):
10
The obligation of the Company to issue and sell the Commitment Shares at any Closing is subject to the fulfillment of the following conditions (any or all of which may be waived by the Company in its sole discretion):
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X = ((A - B)/A) × C
where:
X | = | the Commitment Shares issuable to such Purchaser pursuant to Section 6.7(a)(i). |
A | = | the Market Value on the day immediately preceding the date on which such Purchaser delivers the applicable Purchase Election. |
B | = | the Purchase Price. |
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C | = | the number of Commitment Shares elected to be purchased pursuant to the applicable Purchase Election. |
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15
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if to the Company:
Nuvve Holding Corp.
2468 Historic Decatur Road
San Diego, California, 92106
Attention: Gregory Poilasne and Stephen Moran
Email: gregory@nuvve.com, smoran@nuvve.com
with a copy to, which shall not constitute notice to the Company:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, Massachusetts 02110
Attention: Sahir Surmeli and Eric Macaux
Email: ssurmeli@mintz.com, ewmacaux@mintz.com
and
Graubard Miller
The Chrysler Building
405 Lexington Ave., 11th Floor
New York, NY 10174
Attention: Eric Schwartz
Email: eschwartz@graubard.com
if to the Purchasers (other than Evolve Transition Infrastructure LP):
Stonepeak Partners LP
55 Hudson Yards
18
550 W. 34th Street, 48th Floor
New York, New York 10001
Attention: Trent Kososki, William Demas and Adrienne Saunders
Email: kososki@stonepeakpartners.com; demas@stonepeakpartners.com; LegalandCompliance@stonepeakpartners.com
with a copy to, which shall not constitute notice to the Purchasers:
Kirkland & Ellis LLP
609 Main St
Houston, TX 77002
Attention: Julian J. Seiguer, P.C.
John D. Pitts, P.C.
Email: julian.seiguer@kirkland.com
john.pitts@kirkland.com
if to Evolve Transition Infrastructure LP:
Evolve Transition Infrastructure LP
1360 Post Oak Blvd
Suite 2400
Houston, TX 77056
Attention: Charles Ward
Email: cward@evolvetransition.com
with a copy to (which shall not constitute notice):
Sidley Austin LLP
1000 Louisiana Street
Suite 5900
Houston, TX 77002
Attention: Cliff Vrielink
George Vlahakos
Email: cvrielink@sidley.com
gvlahakos@sidley.com
Each party by notice to the other party may designate additional or different addresses for subsequent notices or communications.
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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have caused this Agreement to be executed by their respective duly authorized officers, as of the date first above written.
COMPANY:
NUVVE HOLDING CORP.
By: /s/ Gregory Poilasne
Name: Gregory Poilasne
Title: Chairman and Chief Executive Officer
Signature Page to Securities Purchase Agreement
PURCHASERS:
STONEPEAK ROCKET HOLDINGS LP
By: Stonepeak Associates IV LLC, its general partner
By: /s/ Jack Howell
Name: Jack Howell
Title: Senior Managing Director
Signature Page to Purchase Agreement
EVOLVE TRANSITION INFRASTRUCTURE LP
By: Evolve Transition Infrastructure GP LLC, its
general partner
By: /s/ Charles C. Ward
Name: Charles C. Ward
Title: Chief Financial Officer & Secretary
Signature Page to Purchase Agreement
Schedule I
Purchaser Commitment Shares
Purchaser | Commitment Shares | Aggregate Fair Market Value |
Stonepeak Rocket Holdings LP | 4,500,000 | $2,673,000 |
Evolve Transition Infrastructure LP | 500,000 | $297,000 |
Total: | 5,000,000 | $2,970,000 |
Exhibit A
Registration Rights Agreement
[see attached]
Exhibit B
Restricted Securities Legend
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. THE SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OR (2) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE STATE SECURITIES LAWS AND THE SECURITIES LAWS OF OTHER JURISDICTIONS, AND IN THE CASE OF A TRANSACTION EXEMPT FROM REGISTRATION, UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT AND SUCH OTHER APPLICABLE LAWS.
Exhibit 10.17
Execution Version
REGISTRATION RIGHTS AGREEMENT
among
NUVVE HOLDING CORP.
and
THE HOLDERS PARTY HERETO
Article I DEFINITIONS2
Section 1.01Definitions2
Section 1.02Registrable Securities4
Article II REGISTRATION RIGHTS5
Section 2.01Shelf Registration5
Section 2.02Piggyback Registration7
Section 2.03Underwritten Offering10
Section 2.04Further Obligations10
Section 2.05Cooperation by Holders15
Section 2.06Restrictions on Public Sale by Holders of Registrable Securities15
Section 2.07Expenses15
Section 2.08Indemnification16
Section 2.09Rule 144 Reporting18
Section 2.10Transfer or Assignment of Registration Rights19
Section 2.11Limitation on Subsequent Registration Rights19
Article III MISCELLANEOUS19
Section 3.01Communications19
Section 3.02Binding Effect21
Section 3.03Assignment of Rights21
Section 3.04Recapitalization, Exchanges, Etc. Affecting Units21
Section 3.05Aggregation of Registrable Securities21
Section 3.06Specific Performance21
Section 3.07Counterparts21
Section 3.08Governing Law, Submission to Jurisdiction22
Section 3.09Waiver of Jury Trial22
Section 3.10Entire Agreement22
Section 3.11Amendment23
Section 3.12No Presumption23
Section 3.13Obligations Limited to Parties to Agreement23
Section 3.14Interpretation23
Section 3.15Severability of Provisions24
i
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT, dated as of May 17, 2021 (this “Agreement”) is entered into by and among NUVVE HOLDING CORP., a Delaware corporation (including such Person’s successors by merger, acquisition, reorganization or otherwise, the “Company”), and each of the undersigned Holders (collectively, “Stonepeak Purchasers”).
WHEREAS, this Agreement is made in connection with (i) the issuance of the Series B, C, D, E and F Warrants of the Company (the “Warrants”), and (ii) the Common Stock issuable pursuant to the Securities Purchase Agreement, dated as of May 17, 2021, by and among the Company and Stonepeak Purchasers (the “Securities Purchase Agreement”); and
WHEREAS, the Company has agreed to provide the registration and other rights set forth in this Agreement for the benefit of Stonepeak Purchasers in connection with its entry into Securities Purchase Agreement and issuance of the Warrants.
NOW THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows:
“Affiliate” shall have the meaning ascribed to it, on the date hereof, in Rule 405 under the Securities Act; provided, that for purposes of this Agreement, Stonepeak Purchasers (and their respective Affiliates) shall not be Affiliates of the Company or any of its subsidiaries, and neither the Company nor any of its subsidiaries shall be an Affiliate of any Stonepeak Purchaser (or any of such Stonepeak Purchaser’s respective Affiliates).
“Agreement” has the meaning set forth in the introductory paragraph of this Agreement.
“Business Day” means any day other than a Saturday, Sunday, any federal legal holiday or day on which banking institutions in the State of New York or State of California are authorized or required by law or other governmental action to close.
“Commission” means the United States Securities and Exchange Commission.
“Commitment Shares” means the Common Stock issuable pursuant to the Securities Purchase Agreement.
“Common Stock” means the common stock of the Company, par value $0.0001 per share.
“Company Cooperation Event” has the meaning specified in Section 2.04(r).
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“Effective Date” means the date of effectiveness of any Registration Statement.
“Effectiveness Period” has the meaning specified in Section 2.01(a).
“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations of the Commission promulgated thereunder.
“Existing Registration Rights Agreement” means the Amended and Restated Registration Rights Agreement, dated as of the March 19, 2021, by and among the Company and the parties listed under Investor on the signature page thereto.
“Financial Counterparty” has the meaning specified in Section 2.04(r).
“Holder” means the record holder of any Registrable Securities.
“Holder Underwriter Registration Statement” has the meaning specified in Section 2.04(q).
“In-the-Money Registrable Securities” means Warrant Shares to the extent the exercise price for the Warrant Shares is less than the Market Value (as defined in the Warrants) of the Common Stock and Commitment Shares to the extent the purchase price is less than the Market Value (as defined in the Warrants) of the Common Stock, in each case as of the date of determination.
“Included Registrable Securities” has the meaning specified in Section 2.02(a).
“Issue Date” shall mean May 17, 2021.
“Liquidated Damages” has the meaning specified therefor in Section 2.01(b).
“Liquidated Damages Multiplier” means the product of (i) the Purchased Common Stock Price and (ii) the number of In-the-Money Registrable Securities then held by the applicable Holder and included on the applicable Registration Statement.
“Losses” has the meaning specified in Section 2.08(a).
“Managing Underwriter” means, with respect to any Underwritten Offering, the book running lead manager of such Underwritten Offering.
“Nasdaq” means the Nasdaq Capital Market.
“Other Holder” has the meaning specified in Section 2.02(a)
“Person” means any individual, corporation, company, voluntary association, company, joint venture, trust, limited liability company, unincorporated organization, government or any agency, instrumentality or political subdivision thereof or any other form of entity.
“Piggyback Notice” has the meaning specified in Section 2.02(a).
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“Piggyback Opt-Out Notice” has the meaning specified in Section 2.02(a).
“Piggyback Registration” has the meaning specified in Section 2.02(a).
“Purchased Common Stock Price” means the weighted average exercise price of the In-the-Money Registrable Securities.
“Registration” means any registration pursuant to this Agreement, including pursuant to a Registration Statement or a Piggyback Registration.
“Registrable Securities” means, collectively, (a) the Warrants, (b) the Warrant Shares, and (c) the Commitment Shares, all of which are subject to the rights provided herein until such time as such securities cease to be Registrable Securities pursuant to Section 1.02.
“Registration Expenses” has the meaning specified in Section 2.07(a).
“Registration Statement” has the meaning specified in Section 2.01(a).
“Securities Act” means the Securities Act of 1933, as amended from time to time, and the rules and regulations of the Commission promulgated thereunder.
“Securities Purchase Agreement” has the meaning specified in the Preamble of this Agreement.
“Selling Expenses” has the meaning specified in Section 2.07(a).
“Selling Holder” means a Holder who is selling Registrable Securities pursuant to a registration statement.
“Selling Holder Indemnified Persons” has the meaning specified in Section 2.08(a).
“Stonepeak Purchasers” has the meaning specified in the Preamble of this Agreement.
“Target Effective Date” has the meaning specified therefor in Section 2.01(a).
“Underwritten Offering” means an offering (including an offering pursuant to a Registration Statement) in which Common Stock are sold to an underwriter on a firm commitment basis for reoffering to the public or an offering that is a “bought deal” with one or more investment banks.
“Warrant” has the meaning specified in the Recitals of this Agreement.
“Warrant Shares” means the Common Stock issuable on exercise of the Warrants.
“WKSI” means a well-known seasoned issuer (as defined in the rules and regulations of the Commission).
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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, (b) when such Registrable Security has been disposed of (excluding transfers or assignments by a Holder to an Affiliate or to another Holder or any of its Affiliates or to any assignee or transferee to whom the rights under this Agreement have been transferred pursuant to Section 2.10) pursuant to any section of Rule 144 (or any similar provision then in effect) under the Securities Act, (c) when such Registrable Security is held by the Company or one of its direct or indirect subsidiaries, and (d) when such Registrable Security has been sold or disposed of in a private transaction in which the transferor’s rights under this Agreement are not assigned to the transferee of such securities pursuant to Section 2.10. In addition, any Registrable Securities shall not be considered Registrable Securities for so long as such Registrable Securities may be sold by a Holder without volume or manner of sale limitations pursuant to any section of Rule 144 (or any similar provision then in effect) under the Securities Act.
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Notwithstanding anything to the contrary in this Section 2.04, the Company will not name a Holder as an underwriter (as defined in Section 2(a)(11) of the Securities Act) in any Registration Statement or Holder Underwriter Registration Statement, as applicable, without such Holder’s consent. If the staff of the Commission requires the Company to name any Holder as an underwriter (as defined in Section 2(a)(11) of the Securities Act), and such Holder does not consent thereto, then such Holder’s Registrable Securities shall not be included on the applicable Registration Statement and the Company shall have no further obligations hereunder with respect to Registrable Securities held by such Holder, unless such Holder has not had an opportunity to conduct customary underwriter’s due diligence as set forth in subsection (q) of this Section 2.04 with respect to the Company at the time such Holder’s consent is sought.
Each Selling Holder, upon receipt of notice from the Company of the happening of any event of the kind described in subsection (f) of this Section 2.04, shall forthwith discontinue offers
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and sales of the Registrable Securities by means of a prospectus or prospectus supplement until such Selling Holder’s receipt of the copies of the supplemented or amended prospectus contemplated by subsection (f) of this Section 2.04 or until it is advised in writing by the Company that the use of the prospectus may be resumed and has received copies of any additional or supplemental filings incorporated by reference in the prospectus, and, if so directed by the Company, such Selling Holder will, or will request the Managing Underwriter or Managing Underwriters, if any, to deliver to the Company (at the Company’s expense) all copies in their possession or control, other than permanent file copies then in such Selling Holder’s possession, of the prospectus covering such Registrable Securities current at the time of receipt of such notice.
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Stonepeak Partners LP
55 Hudson Yards
550 W. 34th Street, 48th Floor
New York, NY 10001
Attention: Trent Kososki, William Demas and Adrienne Saunders
Email: kososki@stonepeakpartners.com; demas@stonepeakpartners.com; LegalandCompliance@stonepeakpartners.com
with a copy to (which shall not constitute notice):
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Kirkland & Ellis LLP
609 Main Street
Houston, TX 77002
Attention: Julian J. Seiguer, P.C. and John D. Pitts, P.C.
Email: julian.seiguer@kirkland.com; john.pitts@kirkland.com
Evolve Transition Infrastructure LP
1360 Post Oak Blvd
Suite 2400
Houston, TX 77056
Attention: Charles Ward
Email: cward@evolvetransition.com
with a copy to (which shall not constitute notice):
Sidley Austin LLP
1000 Louisiana Street
Suite 5900
Houston, TX 77002
Attention: Cliff Vrielink and George Vlahakos
Email: cvrielink@sidley.com; gvlahakos@sidley.com
Nuvve Holding Corp.
2468 Historic Decatur Road
San Diego, California 92106
Attention: Gregory Poilasne and Stephen Moran
Email: gregory@nuvve.com and smoran@nuvve.com
with a copy to (which shall not constitute notice):
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, Massachusetts 02110
Attention: Sahir Surmeli and Eric Macaux
Email: ssurmeli@mintz.com, ewmacaux@mintz.com
and
Graubard Miller
The Chrysler Building
405 Lexington Ave., 11th Floor
New York, NY 10174
Attention: Eric Schwartz
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Email: eschwartz@graubard.com
or to such other address as the Company or any Holder may designate to each other in writing from time to time or, if to a transferee or assignee of any Stonepeak Purchaser or any transferee or assignee thereof, to such transferee or assignee at the address provided pursuant to Section 2.10. All notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; upon actual receipt if sent by certified or registered mail, return receipt requested, or regular mail, if mailed; upon actual receipt of the facsimile or email copy, if sent via facsimile or email; and upon actual receipt when delivered to an air courier guaranteeing overnight delivery.
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when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same agreement.
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action shall be in such Holder’s sole discretion, unless otherwise specified in this Agreement. If any provision in this Agreement is held to be illegal, invalid, not binding or unenforceable, (a) such provision shall be fully severable and this Agreement shall be construed and enforced as if such illegal, invalid, not binding or unenforceable provision had never comprised a part of this Agreement, and the remaining provisions shall remain in full force and effect, and (b) the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible. When calculating the period of time before which, within which or following which any act is to be done or step taken pursuant to this Agreement, the date that is the reference date in calculating such period shall be excluded. If the last day of such period is a non-Business Day, the period in question shall end on the next succeeding Business Day. Any words imparting the singular number only shall include the plural and vice versa. The words such as “herein,” “hereinafter,” “hereof” and “hereunder” refer to this Agreement as a whole and not merely to a subdivision in which such words appear unless the context otherwise requires. The provision of a Table of Contents, the division of this Agreement into Articles, Sections and other subdivisions and the insertion of headings are for convenience of reference only and shall not affect or be utilized in construing or interpreting this Agreement.
[Remainder of Page Left Intentionally Blank]
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IN WITNESS WHEREOF, the parties hereto execute this Agreement, effective as of the date first above written.
COMPANY:
NUVVE HOLDING CORP.
By: /s/ Gregory Poilasne
Name: Gregory Poilasne
Title: Chairman and Chief Executive Officer
Signature Page to Registration Rights Agreement
HOLDERS:
STONEPEAK ROCKET HOLDINGS LP
By: STONEPEAK ASSOCIATES IV LLC,
its general partner
By: /s/ Jack Howell
Name: Jack Howell
Title: Senior Managing Director
Signature Page to Registration Rights Agreement
EVOLVE TRANSITION INFRASTRUCTURE LP
By: Evolve Transition Infrastructure GP LLC, its
general partner
By: /s/ Charles C. Ward
Name: Charles C. Ward
Title: Chief Financial Officer & Secretary
Signature Page to Registration Rights Agreement
Exhibit 31.1
eVOLVE TRANSITION INFRASTRUCTURE LP
CERTIFICATION
I, Gerald F. Willinger, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Evolve Transition Infrastructure LP;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: October 27, 2021
/s/ Gerald F. Willinger | |
Gerald F. Willinger | |
Chief Executive Officer | |
Evolve Transition Infrastructure GP, LLC, as general partner of Evolve Transition Infrastructure LP
(Principal Executive Officer)
Exhibit 31.2
EVOLVE TRANSITION INFRASTRUCTURE LP
CERTIFICATION
I, Charles C. Ward, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Evolve Transition Infrastructure LP;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: October 27, 2021
/s/ Charles C. Ward | |
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Charles C. Ward | |
Chief Financial Officer and Secretary | |
Evolve Transition Infrastructure GP, LLC, as general partner of Evolve Transition Infrastructure LP
(Principal Financial Officer)
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Gerald F. Willinger, Chief Executive Officer of Evolve Transition Infrastructure GP, LLC, as general partner of Evolve Transition Infrastructure LP, certify pursuant to 18 U.S.C. Section 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that to my knowledge:
(i) The accompanying Quarterly Report on Form 10-Q for the quarter ended June 30, 2021 fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and
(ii) The information contained in such report fairly presents, in all material respects, the financial condition and results of operations of Evolve Transition Infrastructure LP.
/s/ Gerald F. Willinger | |
Gerald F. Willinger | |
Chief Executive Officer | |
Date: October 27, 2021 | |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Charles C. Ward, Chief Financial Officer and Secretary of Evolve Transition Infrastructure GP, LLC, as general partner of Evolve Transition Infrastructure LP, certify pursuant to 18 U.S.C. Section 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that to my knowledge:
(i) The accompanying Quarterly Report on Form 10-Q for the quarter ended June 30 2021 fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and
(ii) The information contained in such report fairly presents, in all material respects, the financial condition and results of operations of Evolve Transition Infrastructure LP.
/s/ Charles C. Ward | |
Charles C. Ward | |
Chief Financial Officer and Secretary | |
Evolve Transition Infrastructure GP, LLC, as general partner of Evolve Transition Infrastructure LP
(Principal Financial Officer)
Date: October 27, 2021