--12-31 false 0001831481 0001831481 2024-02-14 2024-02-14 0001831481 us-gaap:WarrantMember 2024-02-14 2024-02-14 0001831481 us-gaap:CommonStockMember 2024-02-14 2024-02-14

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR SECTION 15(D)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): February 14, 2024

 

 

Sable Offshore Corp.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   001-40111   85-3514078

(State or other jurisdiction of

incorporation or organization)

   (Commission
File Number)		   (I.R.S. Employer
Identification Number)

700 Milam Street, Suite 3300

Houston, Texas 77002

(713) 579-6106

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Flame Acquisition Corp.

(Former name or former address, if changed since last report)

 

 

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

 

☐

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

 

☐

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

 

☐

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

 

☐

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

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

 

Title of each class

  

Trading
Symbols

  

Name of each exchange
on which registered

Common stock, par value $0.0001 per share   SOC   The New York Stock Exchange
Warrants, each whole warrant exercisable for one share of common stock at an exercise price of $11.50 per share   SOC.WS   The New York Stock Exchange

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

Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

INTRODUCTORY NOTE

Unless the context otherwise requires, “we,” “us,” “our,” “Sable” and the “Company” refer to Sable Offshore Corp., a Delaware corporation (f/k/a Flame Acquisition Corp., a Delaware corporation), and its consolidated subsidiaries following the Closing (as defined below). Unless the context otherwise requires, references to “Flame” refer to Flame Acquisition Corp., a Delaware corporation, prior to the Closing. All references herein to the “Board” refer to the board of directors of the Company.

Terms used in this Current Report on Form 8-K (this “Report”) but not defined herein, or for which definitions are not otherwise incorporated by reference herein, shall have the meaning given to such terms in the Proxy Statement (as defined below) in the section entitled “Frequently Used Terms” beginning on page 1 thereof, the section entitled “Glossary” beginning on page 8 thereof or elsewhere in the Proxy Statement, and such definitions are incorporated herein by reference.

 

Item 1.01.

Entry into a Material Definitive Agreement.

Business Combination

As disclosed under the section entitled “Proposal No. 1—The Business Combination Proposal” beginning on page 134 of the proxy statement (the “Proxy Statement”) filed with the Securities and Exchange Commission (the “SEC”) by Flame on January 31, 2024, Flame entered into an Agreement and Plan of Merger (the “Merger Agreement”), dated as of November 2, 2022 (as amended on December 22, 2022 and June 30, 2023), with Sable Offshore Corp., a Texas corporation (“SOC”), and Sable Offshore Holdings LLC, a Delaware limited liability company and parent company of SOC (“Holdco” and together with SOC, “Legacy Sable”). Pursuant to the Merger Agreement, on February 14, 2024, (i) Holdco merged with and into Flame, with Flame surviving such merger (the “Holdco Merger”) and (ii) SOC merged with and into Flame, with Flame surviving such merger (the “SOC Merger” and, together with the Holdco Merger, the “Mergers” and, along with the other transactions contemplated by the Merger Agreement, the “Business Combination”). In connection with the Business Combination, Flame changed its name to “Sable Offshore Corp.”

Special Meeting and Closing of the Transactions

On February 12, 2024, Flame held a special meeting of stockholders (the “Special Meeting”), at which the Flame stockholders considered and adopted, among other matters, a proposal to approve the Business Combination, including (a) adopting the Merger Agreement and (b) approving the other transactions contemplated by the Merger Agreement.

Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, following the Special Meeting, on February 14, 2024 (the “Closing Date”), the Business Combination was consummated (the “Closing”).

Item 2.01 of this Report discusses the consummation of the Business Combination and the entry into agreements relating thereto and is incorporated herein by reference.

PIPE Subscription Agreements

As previously disclosed on November 2, 2022, July 21, 2023, July 27, 2023, August 3, 2023, December 18, 2023 and January 16, 2024, in connection with the Business Combination, Holdco and Flame entered into subscription agreements (collectively, as amended, supplemented or otherwise modified, the “Initial PIPE Subscription Agreements”) with certain investors (the “PIPE Investors”) for an aggregate commitment amount of $520,000,000 (the “Initial PIPE Investments”), pursuant to which such investors agreed to purchase an aggregate of 52,000,000 shares of common stock of the Company, par value of $0.0001 per share (“Common Stock”), at a price of $10.00 per share upon the consummation of the Business Combination.

On February 12, 2024, following the Special Meeting, a PIPE Investor that subscribed for $125,000,000 of the Initial PIPE Investment informed the Company that it would not be able to fund that subscribed amount by the Closing due to difficulties it is experiencing related to receiving called capital from certain of its foreign investors. The inability of that PIPE Investor to fund its commitment did not relieve the obligations of the other PIPE Investors to fund their commitments in connection with the Closing.

On February 12, 2024 and February 13, 2024, the Company entered into subscription agreements (collectively, the “Additional PIPE Subscription Agreements” and, together with the Initial PIPE Subscription Agreements, the “PIPE Subscription Agreements”) (including an additional $25,000,000 commitment from James C. Flores, our Chairman and Chief Executive Officer) on substantially the same terms as those contained in the Initial PIPE Subscription Agreements to replace, in the aggregate, $55,000,000 of the amount previously committed by the PIPE Investor described above (the “Additional PIPE Investments” and, together with the Initial PIPE Investments, the “PIPE Investments”).

The Company will continue to seek additional investments, to be funded shortly after the Closing, to provide additional liquidity following the Closing. The Company may not be able to obtain additional funds to account for such shortfall on favorable terms or at all, and any financing shortfall would reduce the amount of funds that the Company has available following the Closing.

On February 14, 2024, immediately following the Closing, the Company issued 44,024,910 shares of Common Stock of the Company, at a price of $10.00 per share for an aggregate PIPE Investment of $440,249,100 in accordance with the terms of the PIPE Subscription Agreements. The shares of Common Stock issued in the PIPE Investments were offered in a private placement under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to the PIPE Subscription Agreements.

Working Capital Loans

On the Closing Date, in connection with the consummation of the Business Combination, the Company issued an aggregate of 3,306,370 private placement warrants pursuant to the Working Capital Loans (as defined in the Proxy Statement) (the “Working Capital Loan Issuance”) to James C. Flores, Gregory Patrinely, J. Caldwell Flores and Anthony Duenner after each of them elected, at each of their option, to convert their respective outstanding amounts into private placement warrants at a price of $1.00 per warrant. The above description of the Working Capital Loans does not purport to be complete and is qualified in its entirety by reference to the full text of each Working Capital Loan, copies of which are filed as Exhibit 10.17, 10.18, 10.19, 10.20, 10.21, 10.23, 10.24, 10.25 and 10.26 hereto and incorporated herein by reference.

Registration Rights Agreement

On the Closing Date, in connection with the consummation of the Business Combination and as contemplated by the Merger Agreement, the holders of the limited liability company interests in Holdco designated as Holdco Class A shares entered into that certain Registration Rights Agreement (the “Registration Rights Agreement”). The material terms of the Registration Rights Agreement are described in the section of the Proxy Statement beginning on page 164 titled “Related Agreements—Registration Rights Agreement.” Such description is qualified in its entirety by the text of the Registration Rights Agreement, which is included as Exhibit 10.31 to this Report and is incorporated herein by reference.

Sable-EM Purchase Agreement and Term Loan Agreement

As previously disclosed in the section of the Proxy Statement beginning on page 146 titled “Related Agreements—Sable-EM Purchase Agreement,” SOC entered into a Purchase and Sale Agreement (the “Sable-EM Purchase Agreement”) on November 1, 2022 (as amended on June 13, 2023 and December 15, 2023) with Exxon Mobil Corporation (“Exxon”) and Mobil Pacific Pipeline Company (“MPPC,” and together with Exxon, “EM”) pursuant to which SOC agreed to acquire from EM certain assets constituting the Santa Ynez field in Federal waters offshore California and associated onshore processing and pipeline assets (such “Assets,” as defined in the Sable-EM Purchase Agreement, the “SYU Assets”).

Pursuant to the terms and subject to the conditions set forth in the Sable-EM Purchase Agreement, the transactions contemplated by the Sable-EM Purchase Agreement were consummated on February 14, 2024 (the “Sable-EM Closing Date”) immediately after the Closing, as a result of which the Company purchased the SYU Assets, effective as of January 1, 2022, at 12:00:01 a.m. (Houston time).

On the Sable-EM Closing Date, in connection with the consummation of the transactions contemplated by the Sable-EM Purchase Agreement, the Company entered into a five-year secured term loan with Exxon (the “Term Loan Agreement”), pursuant to which SOC agreed to pay to Exxon, on or before the payment due date, $622,886,982.

The Term Loan Agreement, among other things:

 

  •  

provides for a $606,250,000 term loan before certain specified purchase price adjustments;

 

  •  

will bear interest at ten percent (10.0%) per annum (computed on a 360-day year);

 

  •  

provides that, unless the Company elects in writing prior to an applicable interest payment date to pay accrued but unpaid interest in cash, all such accrued and unpaid interest will be compounded annually on January 1st of each year by adding the relevant amount to the then outstanding principal amount of the term loan;

 

  •  

will mature on the earliest to occur of (i) January 1, 2027, (ii) ninety days after “Restart Production” (i.e., one hundred eighty (180) days after resumption of actual production from the wells) under the Sable-EM Purchase Agreement or (iii) acceleration of the term loan in accordance with the terms of the Term Loan Agreement;

 

  •  

provides for obligations that will be guaranteed by all subsidiaries of the Company, and secured by substantially all of the assets of the Company and such subsidiaries, which include certain oil and gas property and other related oil and gas assets conveyed to the Company under the Sable-EM Purchase Agreement, all of the equity interests in the subsidiaries of the Company, including Pacific Offshore Pipeline Company, a California corporation, and Pacific Pipeline Company, a Delaware corporation, the 901/903 Pipeline and the other 901/903 Assets (each as defined in the Sable-EM Purchase Agreement), as well as other specified assets (subject to certain limited exclusions) (collectively, “Collateral”);

 

2

  •  

requires the Company to make mandatory prepayments of the term loan, subject to certain exceptions and reinvestment rights, with (i) 100% of the net cash proceeds upon certain non-permitted dispositions of property by the Company or any guarantor that results in net cash proceeds exceeding $1 million, (ii) 100% of the net cash proceeds upon receipt of insurance proceeds following a loss, casualty, or damage to or final taking or condemnation of any property of the Company or any guarantor, where such proceeds are in excess of $1 million and (iii) 100% of the net proceeds from the incurrence or issuance of any non-permitted debt by the Company or any guarantor;

 

  •  

permits the Company to voluntarily prepay the term loan (in whole or in part) without premium or penalty, subject to certain specific requirements, provided that amounts repaid or prepaid under the Term Loan Agreement may not be reborrowed;

 

  •  

provides that upon the exercise by EM of the Reassignment Option (as defined in the Sable-EM Purchase Agreement) under the Sable-EM Purchase Agreement and the consummation thereof in accordance with the Sable-EM Purchase Agreement, the aggregate outstanding principal amount of the term loan (including interest added thereto) and all accrued but unpaid interest thereon will be deemed to be repaid in full;

 

  •  

contains a number of negative covenants that, among other things, restrict, subject to certain exceptions and/or qualifications, the ability of the Company and its subsidiaries to (i) engage in mergers, consolidations, liquidations, or dissolutions, (ii) create or incur debt or liens, (iii) pay dividends, distributions, management fees or certain other restricted payments, (iv) make investments, acquisitions, loans, or purchase oil and gas properties, (v) sell, assign, farm-out or dispose of properties, (vi) enter into certain transactions with affiliates, (vii) enter into certain burdensome agreements, (viii) prepay certain subordinated debt, (ix) amend their organizational documents and material contracts and (x) change the nature of its business;

 

  •  

contains certain specified representations and warranties (subject to certain knowledge qualifiers or materiality qualifiers), affirmative covenants, and events of default (including a change of control); and

 

  •  

provides that during the continuance of an event of default, Exxon may exercise all remedies available under the financing documents or applicable law or equity, including, among other things, accelerating the term loan and foreclosing or otherwise causing the sale of Collateral (including cash and any other assets not acquired pursuant to the Sable-EM Purchase Agreement, subject to limited exceptions) or imposing default interest in certain cases.

The above descriptions of the Sable-EM Purchase Agreement and the Term Loan Agreement are qualified in their entirety by the text of the Sable-EM Purchase Agreement and the Term Loan Agreement, respectively, which are included as Exhibits 10.27 and 10.1, respectively, to this Report and are incorporated herein by reference.

 

Item 2.01.

Completion of Acquisition or Disposition of Assets.

As described in Item 1.01 above, on February 12, 2024, Flame held the Special Meeting, at which the Flame stockholders considered and adopted, among other matters, a proposal to approve the Merger Agreement and the Business Combination. On February 14, 2024, the parties consummated the Business Combination. In connection with the Closing, the Company changed its name from Flame Acquisition Corp. to Sable Offshore Corp.

In connection with the Special Meeting, holders of 150,823 shares of Flame’s Class A common stock, par value $0.0001 per share (“Flame Class A Common Stock”), sold in its initial public offering (the “Initial Shares”) properly exercised their right to have such shares redeemed for a full pro rata portion of the trust account holding the proceeds from Flame’s initial public offering, calculated as of two business days prior to the consummation of the Business Combination, which was approximately $10.44 per share, or approximately $1.6 million in the aggregate.

As a result of the Business Combination, the limited liability company interests in Holdco designated as Holdco Class A shares were converted into the right to receive 3,000,000 shares of Common Stock.

As described in Item 1.01 above, on February 14, 2024, pursuant to the PIPE Subscription Agreements, the Company issued and sold to the PIPE Investors an aggregate of 44,024,910 shares of Common Stock.

 

3

After giving effect to the Business Combination and the redemption of Initial Shares as described above, there are currently 60,166,269 shares of Common Stock issued and outstanding.

The Common Stock and warrants will commence trading on the New York Stock Exchange (“NYSE”) under the symbols “SOC” and “SOC.WS,” respectively, on February 15, 2024, subject to ongoing review of the Company’s satisfaction of all listing criteria following the Business Combination.

As noted above, an aggregate of approximately $1.6 million was paid from the Company’s trust account to holders that properly exercised their right to have Initial Shares redeemed in conjunction with the Business Combination, and the remaining balance immediately prior to the Closing of approximately $62.3 million remained in the trust account. The remaining amount in the trust account was released to the Company.

 

4

FORM 10 INFORMATION

Item 2.01(f) of Form 8-K states that if the registrant was a shell company, as the Company was immediately before the Business Combination, then the registrant must disclose the information that would be required if the registrant were filing a general form for registration of securities on Form 10. As a result of the consummation of the Business Combination, and as discussed below in Item 5.06 of this Report, the Company has ceased to be a shell company. Accordingly, the Company is providing below the information that would be included on Form 10 if it were to file a Form 10. Please note that the information provided below relates to the combined company after the consummation of the Business Combination, unless otherwise specifically indicated or the context otherwise requires.

Cautionary Note Regarding Forward-Looking Statements

This Report includes statements that express the Company’s opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and therefore are, or may be deemed to be, “forward-looking statements.” These forward-looking statements can generally be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “expects,” “predicts,” “projects,” “forecasts,” “may,” “might,” “will,” “could,” “should,” “would,” “seeks,” “plans,” “scheduled,” “possible,” “continue,” “potential,” “anticipates” or “intends” or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this Report (including in information that is incorporated by reference into this Report) and include statements regarding our intentions, beliefs or current expectations concerning, among other things, the benefits of the Business Combination, including results of operations, financial condition, liquidity, prospects, growth, strategies and the markets in which the Company operates. Such forward-looking statements are based on available current market material and management’s expectations, beliefs and forecasts concerning future events impacting the Company. Factors that may impact such forward-looking statements include:

 

  •  

our ability to maintain the listing of our Common Stock and warrants on the NYSE;

 

  •  

our ability to recommence production of the SYU Assets and the cost and time required therefor, and production levels once recommenced;

 

  •  

our financial performance;

 

  •  

our ability to satisfy future cash obligations;

 

  •  

restrictions in existing or future debt agreements or structured or other financing arrangements;

 

  •  

commodity price volatility, low prices for oil and/or natural gas, global economic conditions, inflation, increased operating costs, lack of availability of drilling and production equipment, supplies, services and qualified personnel, processing volumes and pipeline throughput;

 

  •  

uncertainties related to new technologies, geographical concentration of operations, environmental risks, weather risks, security risks, drilling and other operating risks, regulatory changes and regulatory risks;

 

  •  

the uncertainty inherent in estimating oil and natural gas resources and in projecting future rates of production;

 

  •  

reductions in cash flow and lack of access to capital;

 

  •  

the timing of development expenditures, managing growth and integration of acquisitions, and failure to realize expected value creation from acquisitions;

 

  •  

the ability to recognize the anticipated benefits of the Business Combination, which may be affected by, among other things, our ability to grow and manage growth profitably, maintain relationships with customers and compete within our industry;

 

5

  •  

our success in retaining or recruiting, or changes required in, our officers, directors or other key personnel;

 

  •  

our officers and directors allocating their time to other businesses and potentially having conflicts of interest with our business;

 

  •  

developments relating to our competitors and our industry;

 

  •  

the possibility that we may be adversely impacted by other economic, business, and/or competitive factors;

 

  •  

litigation, complaints and/or adverse publicity;

 

  •  

privacy and data protection laws, privacy or data breaches, or the loss of data;

 

  •  

our ability to comply with laws and regulations applicable to our business; and

 

  •  

other risks and uncertainties described in the Proxy Statement, including those under the section titled “Risk Factors.”

The forward-looking statements contained in this Report are based on the Company’s current expectations and beliefs concerning future developments and their potential effects on the Company. These statements are based upon information available to the Company as of the date of this Report, and while the Company believes such information forms a reasonable basis for such statements, such information may be limited or incomplete, and statements should not be read to indicate that the Company has conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and you are cautioned not to unduly rely upon these statements. There can be no assurance that future developments affecting the Company will be those that the Company has anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond the Company’s control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described or incorporated by reference under the heading “Risk Factors” below. Should one or more of these risks or uncertainties materialize, or should any of the assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. The Company will not and does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

Business

The business of the Company is described in the Proxy Statement in the section titled “Information About SYU” beginning on page 254 thereof and that information is incorporated herein by reference.

Risk Factors

The risks associated with the Company’s business are described in the Proxy Statement in the section titled “Risk Factors” beginning on page 71 thereof and are incorporated herein by reference. A summary of the risks associated with the Company’s business are also described on pages 58-61 of the Proxy Statement under the heading “Risk Factor Summary” and are incorporated herein by reference.

Carve Out Combined Financial Statements

The unaudited condensed carve out combined financial statements of SYU as of and for the nine months ended September 30, 2023 and 2022 and the audited carve out combined financial statements of SYU as of and for the years ended December 31, 2022 and 2021 and the related notes thereto are included in the Proxy Statement beginning on page F-57 of the Proxy Statement, which is incorporated herein by reference.

 

6

Unaudited Pro Forma Combined Financial Information

The Company’s unaudited pro forma combined financial information as of and for the nine months ended September 30, 2023 and for the year ended December 31, 2022 is filed as Exhibit 99.1 to this Report and incorporated herein by reference.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s discussion and analysis of the financial condition and results of operation of SYU as of and for the year ended December 31, 2022 and as of and for the nine months ended September 30, 2023 is included in the Proxy Statement in the section titled “SYU Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 296 of the Proxy Statement, which is incorporated herein by reference.

Properties

The properties of the Company are described in the Proxy Statement in the section titled “Information About SYU” beginning on page 254 thereof and that information is incorporated herein by reference.

Security Ownership of Certain Beneficial Owners and Management

The following table and accompanying footnotes sets forth information known to us regarding the beneficial ownership of our Common Stock immediately following consummation of the Business Combination by:

 

  •  

each person who is the beneficial owner of more than 5% of the outstanding shares of our Common Stock;

 

  •  

each of our named executive officers and directors; and

 

  •  

all of our executive officers and directors as a group.

Beneficial ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power over that security, including options and warrants that are currently exercisable or exercisable within 60 days. Except as described in the footnotes below and subject to applicable community property laws and similar laws, we believe that each person listed below has sole voting and investment power with respect to such shares. Unless otherwise noted, the address of each beneficial owner is c/o Sable Offshore Corp., 700 Milam Street, Suite 3300, Houston, Texas, 77002.

The beneficial ownership of our Common Stock is based on 60,166,269 shares of Common Stock issued and outstanding immediately following consummation of the Business Combination, including the redemption of the Initial Shares as described above.

 

7

Beneficial Ownership Table

 

Name of Beneficial Owners(1)

    Number of
Shares of
Common Stock
Beneficially
Owned		      Percentage of
Outstanding
Common Stock		  

5% Stockholders:

      

Pilgrim Global ICAV(2)

      8,000,000        13.3 % 

FMR LLC(3)

      9,024,910        15.0 % 

Directors and Named Executive Officers:

      

James C. Flores(4)

      16,970,120        25.5 % 

Gregory D. Patrinely(5)

      406,042         * 

Michael E. Dillard(6)

      581,875         * 

Gregory P. Pipkin(7)

      296,875         * 

Christopher B. Sarofim(8)

      6,924,375        11.5 % 

J. Caldwell Flores(9)

      935,942        1.5 % 

Doss R. Bourgeois(10)

      300,000         * 

Anthony C. Duenner(11)

      371,666         * 

 

*

Less than one percent.

(1)

Unless otherwise indicated, the business address of each of the individuals is Sable Offshore Corp., 700 Milam Street, Suite 3300, Houston, Texas 77002.

(2)

May be deemed to be beneficially owned by Pilgrim Global Advisors LLC, the investment adviser to Pilgrim Global ICAV. Darren Maupin is the majority owner of Pilgrim Global Advisors LLC. The principal business address of Pilgrim Global ICAV is 33 Sir John Rogerson’s Quay, Dublin 2, Ireland.

(3)

May be deemed to be beneficially owned by FMR LLC, certain of its subsidiaries and affiliates, and other companies. Abigail P. Johnson is the Director, Chair and the Chief Executive Officer of FMR LLC. Members of the Johnson family, including Abigail P. Johnson, are the predominant owners, directly or through trusts, of Series B voting common shares of FMR LLC, representing 49% of the voting power of FMR LLC. The Johnson family group and all other Series B shareholders have entered into a shareholders’ voting agreement under which all Series B voting common shares will be voted in accordance with the majority vote of Series B voting common shares. Accordingly, through their ownership of voting common shares and the execution of the shareholders’ voting agreement, members of the Johnson family may be deemed, under the Investment Company Act of 1940, to form a controlling group with respect to FMR LLC. The address of FMR LLC is 245 Summer Street, Boston, MA 02210.

(4)

Consists of (i) 7,963,750 shares of Common Stock, (ii) 6,481,370 warrants to acquire Common Stock that are exercisable within 60 days, and (iii) 2,500,000 shares of Common Stock held of record by Flores Family Limited Partnership #2. Mr. Flores is the general partner of Flores Family Limited Partnership #2. As such, Mr. Flores may be deemed to share beneficial ownership of the shares of Common Stock of record by Flores Family Limited Partnership #2. Mr. Flores may be deemed to share beneficial ownership of 25,000 shares of Common Stock held of record by certain family limited partnerships that he may be deemed to control.

(5)

Consists of (i) 71,875 shares of Common Stock and (ii) 334,167 warrants to acquire Common Stock that are exercisable within 60 days.

(6)

Consists of (i) 101,875 shares of Common Stock and (ii) 480,000 warrants to acquire Common Stock that are exercisable within 60 days.

(7)

Consists of (i) 211,875 shares of Common Stock and (ii) 85,000 warrants to acquire Common Stock that are exercisable within 60 days.

(8)

Consists of (i) 596,875 shares of Common Stock held of record by Mr. Sarofim, (ii) 327,500 warrants to acquire Common Stock that are exercisable within 60 days, (iii) 3,000,000 shares of Common Stock held of record by Victorious Angel Group LTD and (iv) 3,000,000 shares of Common Stock held of record by Fayez Sarofim & Co. Mr. Sarofim is the managing member of Victorious Angel Group LTD. As such, Mr. Sarofim may be deemed to share beneficial ownership of the shares of Common Stock held of record by Victorious Angel Group LTD. Mr. Sarofim is the direct, majority member of Fayez Sarofim & Co. and as a result may be deemed to share beneficial ownership of the securities held by Fayez Sarofim & Co.

(9)

Consists of (i) 71,875 shares of Common Stock and (ii) 514,067 warrants to acquire Common Stock that are exercisable within 60 days. Includes 350,000 shares of Common Stock held of record by JCF Capital, LLC. Mr. Flores is the managing member of JCF Capital, LLC. As such, Mr. Flores may be deemed to share beneficial ownership of the shares of Common Stock held of record by JCF Capital, LLC.

(10)

Consists of (i) 200,000 shares of Common Stock and (ii) 100,000 warrants to acquire Common Stock that are exercisable within 60 days.

(11)

Consists of (i) 100,000 shares Common Stock and (ii) 271,666 warrants to acquire Common Stock that are exercisable within 60 days.

 

8

Directors and Executive Officers

The Company’s directors and executive officers upon the Closing are described in the Proxy Statement in the section titled “Management of New Sable After the Business Combination” beginning on page 274 thereof and that information is incorporated herein by reference.

Directors

The following persons constitute the Board effective upon the Closing: James C. Flores, Michael E. Dillard, Gregory S. Pipkin and Christopher B. Sarofim. Mr. Flores serves as Chairman of the Board. Mr. Dillard was appointed to serve as a Class I director, with his term expiring at the Company’s annual meeting of stockholders to be held in 2025; Mr. Pipkin was appointed to serve as a Class II director, with his term expiring at the Company’s annual meeting of stockholders to be held in 2026; and Messrs. Flores and Sarofim were appointed to serve as Class III directors, with terms expiring at the Company’s annual meeting of stockholders to be held in 2027. Biographical information for these individuals is set forth in the Proxy Statement in the section titled “Other Information Related to Flame—Management, Directors and Executive Officers” beginning on page 233, which is incorporated herein by reference.

Independence of Directors

The NYSE requires that a majority of our Board must be composed of “independent directors,” which is defined generally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship, which, in the opinion of the Board would interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director. Our Board has determined that Messrs. Dillard, Pipkin and Sarofim are “independent directors” as defined in the NYSE listing standards and applicable SEC rules. Our independent directors will have regularly scheduled meetings at which only independent directors are present.

Committees of the Board of Directors

Effective as of the Closing, the standing committees of the Board consist of an audit committee (the “Audit Committee”), a compensation committee (the “Compensation Committee”) and a nominating and corporate governance committee (the “Nominating Committee”). Each of the committees reports to the Board and operates under a charter that has been approved by the Board.

Effective as of the Closing, the Board appointed Messrs. Dillard, Pipkin and Sarofim to serve on the Audit Committee, with Mr. Sarofim as Chairperson. The Board appointed Messrs. Dillard, Pipkin and Sarofim to serve on the Compensation Committee, with Mr. Pipkin as Chairperson. The Board appointed Messrs. Dillard, Pipkin and Sarofim to serve on the Nominating Committee, with Mr. Dillard as Chairperson.

Executive Officers

Each of Flame’s directors and officers will, effective as of the Closing, continue their service as directors and officers of the Company. Accordingly, James C. Flores will serve as the Company’s Chairman and Chief Executive Officer, J. Caldwell Flores will serve as the Company’s President, Gregory D. Patrinely will serve as the Company’s Executive Vice President and Chief Financial Officer, Doss R. Bourgeois will serve as the Company’s Executive Vice President and Chief Operating Officer and Anthony C. Duenner will serve as the Company’s Executive Vice President, General Counsel and Secretary. Biographical information for these individuals is set forth in the Proxy Statement in the section titled “Other Information Related to Flame—Management, Directors and Executive Officers” beginning on page 233, which is incorporated herein by reference.

Executive Compensation

The executive compensation of the Company’s named executive officers is described in the Proxy Statement in the section titled “Executive Compensation of New Sable” beginning on page 279 thereof and that information is incorporated herein by reference.

 

9

Compensation Committee Interlocks and Insider Participation

None of our executive officers serves as a member of a compensation committee (or other committee performing equivalent functions) of any entity that has one or more executive officers serving on our Compensation Committee.

Certain Relationships and Related Transactions

Certain Relationships and Related Person Transactions

Certain relationships and related person transactions are described in the Proxy Statement in the section titled “Certain Relationships and Related Person Transactions” beginning on page 320 thereof and are incorporated herein by reference.

Legal Proceedings

Reference is made to the disclosure regarding legal proceedings in the section of the Proxy Statement titled “Information About SYU—Legal Proceedings” beginning on page 272, which is incorporated herein by reference.

Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters

Market Price and Dividend Information

The market price of and dividends on Flame Class A Common Stock, warrants and units and related stockholder matters is described in the Proxy Statement in the Section titled “Market Price of Securities and Dividend Information” beginning on page 314 thereof and that information is incorporated herein by reference.

The Common Stock and warrants will commence trading on NYSE under the symbols “SOC” and “SOC.WS,” respectively, on February 15, 2024, subject to ongoing review of the Company’s satisfaction of all listing criteria following the Business Combination, in lieu of the Flame Class A Common Stock and warrants of Flame. Flame’s units will cease trading separately on NYSE on February 15, 2024.

Holders of Record

As of the Closing and following the completion of the Business Combination, including the redemption of the Initial Shares as described above, the Company had 60,166,269 shares of Common Stock outstanding held of record by 67 holders and 14,375,000 public warrants outstanding held of record by 1 holder. Such amounts do not include DTC participants or beneficial owners holding shares through nominee names.

Securities Authorized for Issuance Under Equity Compensation Plans

Reference is made to the disclosure described in the Proxy Statement in the section titled “Proposal No. 4—The Incentive Plan Proposal” beginning on page 220 thereof, which is incorporated herein by reference. As described below, the Sable Offshore Corp. 2023 Incentive Award Plan (the “Incentive Plan”) and the material terms thereunder, including the authorization of the initial share reserve thereunder, were approved by Flame’s stockholders at the Special Meeting.

Recent Sales of Unregistered Securities

Reference is made to the disclosure set forth below under Item 3.02 of this Report concerning the issuance and sale by the Company of certain unregistered securities, which is incorporated herein by reference.

Description of Registrant’s Securities to be Registered

The Company’s securities are described in the Proxy Statement in the section titled “Description of Securities” beginning on page 305 thereof and that information is incorporated herein by reference. As described below, the Company’s Second Amended and Restated Certificate of Incorporation was approved by Flame’s stockholders at the Special Meeting and became effective as of the Closing.

 

10

Indemnification of Directors and Officers

The indemnification of our directors and officers is described in the Proxy Statement in the section titled “Description of Securities—Limitations on Liability and Indemnification of Officers and Directors” beginning on page 311 thereof and that information is incorporated herein by reference.

 

Item 2.03.

Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The disclosure set forth above in the section titled “Sable-EM Purchase Agreement and Term Loan Agreement” in Item 1.01 is incorporated by reference into this Item 2.03.

 

Item 3.02.

Unregistered Sale of Equity Securities

PIPE Investments

At the Closing, the Company consummated the PIPE Investments. The disclosure set forth above in the section titled “PIPE Subscription Agreements” in Item 1.01 is incorporated by reference into this Item 3.02.

The Company issued the foregoing securities under Section 4(a)(2) of the Securities Act as a transaction not requiring registration under Section 5 of the Securities Act. The parties receiving the securities represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution, and appropriate restrictive legends were affixed to the certificates representing the securities (or reflected in restricted book entry with the Company’s transfer agent). The parties also had adequate access, through business or other relationships, to information about the Company.

Working Capital Loans

On the Closing Date, the Company consummated the Working Capital Loan Issuance. The disclosure set forth above in the section titled “Working Capital Loans” in Item 1.01 is incorporated by reference into this Item 3.02.

 

Item 3.03.

Material Modification to Rights of Security Holders.

The information set forth in Item 5.03 to this Report is incorporated herein by reference.

 

Item 4.01.

Changes in Registrant’s Certifying Accountant

For accounting purposes, the Business Combination is accounted for under the scope of the Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”). Pursuant to ASC 805, Flame has been determined to be the accounting acquirer. SYU constitutes a business in accordance with ASC 805 and the Business Combination constitutes a change in control. Accordingly, the Business Combination will be accounted for using the acquisition method of accounting. Upon consummation of the Business Combination, SYU will be the predecessor entity and its historical operations will be presented as that of the Company on a go forward basis, which have been audited by Ham, Langston & Brezina, LLP (“HL&B”).

(a) Dismissal of independent registered public accounting firm.

On February 14, 2024 the Audit Committee dismissed Marcum LLP (“Marcum”), Flame’s independent registered public accounting firm prior to the Business Combination, as the Company’s independent registered public accounting firm effective immediately following the filing of the Company’s annual report on Form 10-K for the year ended December 31, 2023, which will include audited financial statements for the year ended December 31, 2023, consisting only of the accounts of the pre-Business Combination special purpose acquisition company, Flame.

The report of Marcum on Flame’s, the Company’s legal predecessor, financial statements as of and for the years ended December 31, 2022 and December 31, 2021 did not contain an adverse opinion or a disclaimer of opinion, and were not qualified or modified as to uncertainties, audit scope or accounting principles, except for an explanatory paragraph in such report regarding the substantial doubt about the Company’s ability to continue as a going concern.

 

11

During the years ended December 31, 2022 and 2021, and subsequent interim period through September 30, 2023, there were no disagreements between the Company and Marcum on any matter of accounting principles or practices, financial disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Marcum, would have caused it to make reference to the subject matter of the disagreements in its reports on Flame’s financial statements for such period.

During the years ended December 31, 2022 and 2021, and subsequent interim period through September 30, 2023, there were no “reportable events” (as defined in Item 304(a)(1)(v) of Regulation S-K under the Exchange Act), except that, for the three months ended September 30, 2023, based upon an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures, the Chief Executive Officer and the Chief Financial Officer of Flame concluded that Flame’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective due to its accounting for complex financial instruments. Based on the foregoing, it was determined that Flame had a material weakness as of September 30, 2023 relating to its internal controls over financial reporting.

The Company has provided Marcum with a copy of the foregoing disclosures and has requested that Marcum furnish the Company with a letter addressed to the SEC stating whether it agrees with the statements made by the Company set forth above. A copy of Marcum’s letter, dated February 14, 2024, is filed as Exhibit 16.1 to this Report.

(b) Disclosures regarding the new independent auditor.

On February 14, 2024 the Board approved the engagement of HL&B as the Company’s independent registered public accounting firm to audit the Company’s consolidated financial statements for the year ending December 31, 2024.

HL&B served as independent registered public accounting firm of SYU prior to the Business Combination. During the period from October 16, 2020 (inception) to December 31, 2020, the year ended December 31, 2021, the year ended December 31, 2022 and subsequent interim period through September 30, 2023, neither the Company nor anyone on the Company’s behalf consulted with HL&B with respect to (i) the application of accounting principles to a specified transaction, either completed or proposed, the type of audit opinion that might be rendered on our financial statements, and neither a written report nor oral advice was provided to us that HL&B concluded was an important factor considered by us in reaching a decision as to any accounting, auditing or financial reporting issue, or (ii) any other matter that was the subject of a disagreement or a reportable event (each as defined above).

 

Item 5.01.

Changes in Control of the Registrant.

The information set forth above under Item 1.01 and Item 2.01 of this Report is incorporated herein by reference.

 

Item 5.02.

Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

The information set forth above in the sections titled “Directors and Executive Officers,” “Executive Compensation,” “Certain Relationships and Related Transactions” and “Indemnification of Directors and Officers” in Item 2.01 to this Report is incorporated herein by reference.

As previously disclosed, at the Special Meeting, Flame’s stockholders considered and approved the Incentive Plan, which became effective immediately upon the Closing. A description of the Incentive Plan is included in the Proxy Statement in the section titled “Proposal No. 4—The Incentive Plan Proposal” beginning on page 220 thereof, which is incorporated herein by reference.

The foregoing description of the Incentive Plan is qualified in its entirety by the full text of the Incentive Plan, which is attached hereto as Exhibit 10.32 and incorporated herein by reference.

 

Item 5.03.

Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

On the Closing Date, in connection with the consummation of the Business Combination, the Company amended and restated its certificate of incorporation, effective as of the Closing (the “A&R Charter”), and amended and restated its bylaws (as amended, the “A&R Bylaws”) effective as of the Closing.

Copies of the A&R Charter and the A&R Bylaws are attached as Exhibit 3.1 and Exhibit 3.2 to this Report, respectively, and are incorporated herein by reference.

 

 

12

The material terms of each of the A&R Charter and the A&R Bylaws and the general effect upon the rights of holders of the Company’s capital stock are included in the Proxy Statement under the sections titled “Proposal No. 2—The Charter Proposal,” “Proposal No. 3—The Governance Proposal,” and “Description of Securities” beginning on pages 212, 218 and 305 of the Proxy Statement, respectively, which are incorporated herein by reference.

 

Item 5.05.

Amendments to the Registrant’s Code of Ethics, or Waiver of a Provision of the Code of Ethics.

In connection with the Business Combination, on February 14, 2024, the Board approved and adopted a new Code of Business Conduct and Ethics applicable to all employees, officers and directors of the Company. A copy of the Code of Business Conduct and Ethics can be found at https://www.sableoffshore.com under the link “Governance Documents.” The above description of the Code of Business Conduct and Ethics does not purport to be complete and is qualified in its entirety by reference to the full text of the Code of Business Conduct and Ethics, a copy of which is filed as Exhibit 14.1 hereto and incorporated herein by reference.

 

Item 5.06.

Change in Shell Company Status.

As a result of the Business Combination, the Company ceased to be a shell company. Reference is made to the disclosure in the Proxy Statement in the sections titled “Proposal No. 1—The Business Combination Proposal” beginning on page 134 thereof, which is incorporated herein by reference.

 

Item 9.01.

Financial Statements and Exhibits.

 

(a)

Financial Statements of Businesses Acquired.

The unaudited condensed carve out combined financial statements of SYU as of and for the nine months ended September 30, 2023 and 2022 and the audited carve out combined financial statements of SYU as of and for the years ended December 31, 2022 and 2021 and the related notes thereto are included in the Proxy Statement beginning on page F-57 of the Proxy Statement, which is incorporated herein by reference.

 

(b)

Pro forma financial information.

The unaudited pro forma combined financial information of the Company as of and for the nine months ended September 30, 2023 and for the year ended December 31, 2022 is included in Exhibit 99.1.

 

13

(c)

Exhibits.

 

         

Incorporated by Reference

Exhibit
Number		   

Description

   

Form

   

Exhibit

   

Filing
Date

 2.1†    Agreement and Plan of Merger, dated as of November 2, 2022, by and among Flame Acquisition Corp., Sable Offshore Corp. and Sable Offshore Holdings LLC, as amended by the First Amendment to Agreement and Plan of Merger, dated as of December 22, 2022 and the Second Amendment to Agreement and Plan of Merger, dated as of June 30, 2024    —    —    —
 3.1    Second Amended and Restated Certificate of Incorporation of Sable Offshore Corp.    —    —    —
 3.2    Amended and Restated Bylaws of Sable Offshore Corp.    —    —    —
 4.1    Specimen Common Stock Certificate.    S-1    4.2    7/2/20
 4.2    Specimen Warrant Certificate.    S-1    4.3    7/2/20
 4.3    Warrant Agreement, dated as of February 24, 2021, between Flame Acquisition Corp. and American Stock Transfer & Trust Company, as warrant agent.    8-K    4.1    3/2/21
10.1*    Senior Secured Term Loan Agreement, dated as of February 14, 2024, by and among Sable Offshore Corp. (f/k/a Flame Acquisition Corp., Exxon Mobil Corporation and Alter Domus Products Corp.    —    —    —
10.2    Securities Subscription Agreement, dated November 18, 2020, between the Company and Flame Acquisition Sponsor LLC.    S-1    10.4    2/5/21
10.3    Securities Subscription Agreement, dated November 18, 2020, between the Company and FL Co-Investment LLC.    S-1    10.5    2/5/21
10.4    Securities Subscription Agreement, dated November 18, 2020, between the Company and Intrepid Financial Partners, L.L.C.    S-1    10.6    2/5/21
10.5    Promissory Note issued in favor of Flame Acquisition Sponsor LLC, dated November 25, 2020.    S-1    10.12    2/5/21
10.6    Promissory Note issued in favor of FL Co-Investment LLC, dated November 25, 2020.    S-1    10.13    2/5/21
10.7    Promissory Note issued in favor of Intrepid Financial Partners, L.L.C., dated November 25, 2020.    S-1    10.14    2/5/21
10.8    Letter Agreement, dated February 24, 2021, among the Company, Flame Acquisition Sponsor LLC, FL Co-Investment LLC, Intrepid Financial Partners, L.L.C. and certain security holders named therein.    8-K    10.1    3/2/21
10.9    Private Placement Warrants Purchase Agreement, dated February 24, 2021, between Flame Acquisition Corp. and Flame Acquisition Sponsor LLC.    8-K    10.4    3/2/21
10.10    Private Placement Warrants Purchase Agreement, dated February 24, 2021, between Flame Acquisition Corp. and FL Co-Investment LLC.    8-K    10.5    3/2/21
10.11    Private Placement Warrants Purchase Agreement, dated February 24, 2021, between Flame Acquisition Corp. and Intrepid Financial Partners, L.L.C.    8-K    10.6    3/2/21

 

14

         

Incorporated by Reference

Exhibit
Number		   

Description

   

Form

   

Exhibit

   

Filing
Date

10.12    Private Placement Warrants Purchase Agreement, dated February 24, 2021, between Flame Acquisition Corp. and Gregory D. Patrinely.    8-K    10.7    3/2/21
10.13    Private Placement Warrants Purchase Agreement, dated February 24, 2021, between Flame Acquisition Corp. and Michael E. Dillard.    8-K    10.8    3/2/21
10.14    Private Placement Warrants Purchase Agreement, dated February 24, 2021, between Flame Acquisition Corp. and Gregory P. Pipkin.    8-K    10.9    3/2/21
10.15    Private Placement Warrants Purchase Agreement, dated February 24, 2021, between Flame Acquisition Corp. and Christopher B. Sarofim.    8-K    10.10    3/2/21
10.16    Private Placement Warrants Purchase Agreement, dated February 24, 2021, between Flame Acquisition Corp. and Caldwell Flores.    8-K    10.11    3/2/21
10.17    Promissory Note issued in favor of Flame Acquisition Sponsor LLC, dated March 1, 2021.    8-K    10.1    3/8/21
10.18    Promissory Note issued in favor of Flame Acquisition Sponsor LLC, dated December 27, 2021.    8-K    10.1    12/28/21
10.19    Promissory Note issued in favor of Flame Acquisition Sponsor LLC, dated March 29, 2022.    8-K    10.1    4/1/22
10.20    Promissory Note issued in favor of Flame Acquisition Sponsor LLC, dated September 30, 2022.    8-K    10.1    9/30/22
10.21    Promissory Note issued in favor of Flame Acquisition Sponsor LLC, dated October 31, 2022.    8-K    10.1    11/1/22
10.22    Form of Holdco PIPE Subscription Agreement.    8-K    10.1    11/2/22
10.23    Promissory Note issued in favor of Flame Acquisition Sponsor LLC, dated February 6, 2023.    8-K    10.1    2/7/23
10.24    Promissory Note issued in favor of Flame Acquisition Sponsor LLC, dated May 12, 2023.    8-K    10.1    5/16/23
10.25    Promissory Note issued in favor of Flame Acquisition Sponsor LLC, dated June 22, 2023.    8-K    10.1    6/26/23
10.26    Promissory Note issued in favor of Flame Acquisition Sponsor LLC, dated August 30, 2023.    8-K    10.1    8/31/23
10.27*    Purchase and Sale Agreement between Exxon Mobil Corporation, Mobil Pacific Pipeline Company and Sable Offshore Corp., dated as of November 1, 2022, as amended by the First Amendment to Purchase and Sale Agreement, dated as of June 13, 2023 and the Second Amendment to Purchase and Sale Agreement, dated as of December 15, 2023.    —    —    —

 

15

         

Incorporated by Reference

Exhibit
Number		   

Description

   

Form

   

Exhibit

   

Filing
Date

10.28    Form of Holdco PIPE Subscription Agreement Amendment.    8-K    10.1    1/16/24
10.29    Form of Additional Holdco PIPE Subscription Agreement.    8-K    10.2    1/16/24
10.30    Form of Flame PIPE Subscription Agreement.    8-K    10.3    1/16/24
10.31    Registration Rights Agreement, dated as of February 14 2024, by and among Sable Offshore Corp. (f/k/a Flame Acquisition Corp.) and the undersigned party listed under Holder on the signature page thereto.    —    —    —
10.32#    Sable Offshore Corp. 2023 Incentive Award Plan.    —    —    —
10.33    Form of Indemnity Agreement.    —    —    —
14.1    Code of Business Conduct and Ethics of Sable Offshore Corp.    —    —    —
16.1    Letter from Marcum to the Securities and Exchange Commission.    —    —    —
21.1    Subsidiaries of the Company.    —    —    —
99.1    Unaudited Pro Forma Combined Information.    —    —    —

 

†

Certain of the annexes, exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(b)(2). The Company agrees to furnish a copy of all omitted exhibits and schedules to the SEC upon its request.

#

Indicates a management contract or compensatory plan.

*

Certain portions of this exhibit (indicated by “[***]”) have been omitted pursuant to Regulation S-K, Item 601(b)(10).

 

16

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    SABLE OFFSHORE CORP.
Date: February 14, 2024     By:  

/s/ Gregory D. Patrinely

    Name:   Gregory D. Patrinely
    Title:   Executive Vice President and Chief Financial Officer

 

17

Exhibit 2.1

AGREEMENT AND PLAN OF MERGER

dated as of

November 2, 2022

by and among

FLAME ACQUISITION CORP.

SABLE OFFSHORE CORP.

and

SABLE OFFSHORE HOLDINGS LLC

as amended by

FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER,

dated as of December 22, 2022

and

SECOND AMENDMENT TO AGREEMENT AND PLAN OF MERGER,

dated as of June 30, 2023

TABLE OF CONTENTS

 

          Page  

ARTICLE I CERTAIN DEFINITIONS

     2  

1.01

    Definitions      2  

1.02

    Construction      9  

ARTICLE II THE MERGERS; CLOSING

     10  

2.01

    The Mergers      10  

2.02

    Effects of the Mergers      11  

2.03

    Closing      11  

2.04

    Organizational Documents; Officers and Directors – Holdco Merger      11  

2.05

    Organizational Document; Officers and Directors – SOC Merger      12  

2.06

    Acquiror Class B Common Stock Conversion      12  

ARTICLE III EFFECTS OF THE MERGERS

     12  

3.01

    Effect on Capital Stock and Units      12  

3.02

    Exchange of Holdco Equity      13  

3.03

    Withholding      14  

3.04

    Payment of Expenses      14  

3.05

    No Appraisal Rights      15  

3.06

    No Fractional Shares      15  

3.07

    Anti-Dilution Provisions      15  

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     16  

4.01

    Organization, Standing and Corporate Power      16  

4.02

    Corporate Authority; Approval; Non-Contravention      16  

4.03

    Governmental Approvals      17  

4.04

    Capitalization      17  

4.05

    Subsidiaries      17  

4.06

    Information Supplied      17  

4.07

    Brokers      18  

4.08

    Affiliate Agreements      18  

4.09

    PSA      18  

4.10

    Company Operations      18  

4.11

    Taxes      18  

4.12

    No Outside Reliance      18  

4.13

    Subscriptions      19  

4.14

    No Other Representations or Warranties      20  

 

i

          Page  

ARTICLE V REPRESENTATIONS AND WARRANTIES OF ACQUIROR

     20  

5.01

    Organization, Standing and Corporate Power      20  

5.02

    Corporate Authority; Approval; Non-Contravention      20  

5.03

    Litigation      21  

5.04

    Compliance with Laws      21  

5.05

    Employee Benefit Plans      21  

5.06

    Financial Ability; Trust Account      21  

5.07

    Taxes      22  

5.08

    Brokers      23  

5.09

    Acquiror SEC Reports; Financial Statements; Sarbanes-Oxley Act      23  

5.10

    Business Activities; Absence of Changes      24  

5.11

    Proxy Statement      25  

5.12

    No Outside Reliance      25  

5.13

    Capitalization      26  

5.14

    NYSE Stock Market Quotation      26  

5.15

    Contracts; No Defaults      26  

5.16

    Title to Property      27  

5.17

    Investment Company Act      27  

5.18

    Affiliate Agreements      27  

5.19

    Takeover Statutes and Charter Provisions      27  

5.20

    No Other Representations or Warranties      27  

ARTICLE VI COVENANTS OF THE COMPANY

     27  

6.01

    Conduct of Business      27  

6.02

    Inspection      29  

6.03

    No Claim Against the Trust Account      29  

6.04

    Proxy Solicitation; Other Actions      30  

6.05

    Non-Solicitation; Acquisition Proposals      31  

ARTICLE VII COVENANTS OF ACQUIROR

     32  

7.01

    Indemnification and Insurance      32  

7.02

    Conduct of Acquiror During the Interim Period      32  

7.03

    Trust Account      34  

7.04

    Inspection      34  

7.05

    Acquiror NYSE Listing      35  

7.06

    Acquiror Public Filings      35  

 

ii

          Page  

7.07

    Additional Insurance Matters      35  

7.08

    Section 16 Matters      35  

7.09

    Exclusivity      35  

7.10

    Acquiror Equity Incentive Plan      36  

7.11

    Termination of Acquiror Affiliate Agreements      36  

ARTICLE VIII JOINT COVENANTS

     36  

8.01

    Support of Transaction      36  

8.02

    HSR Act and Regulatory Approvals      37  

8.03

    Preparation of Proxy Statement; Special Meeting      38  

8.04

    Tax Matters      39  

8.05

    Confidentiality; Publicity      39  

8.06

    Purchase and Sale Agreement      40  

8.07

    Financing      40  

8.08

    Post-Closing Cooperation; Further Assurances      40  

ARTICLE IX CONDITIONS TO OBLIGATIONS

     41  

9.01

    Conditions to Obligations of All Parties      41  

9.02

    Additional Conditions to Obligations of Acquiror      41  

9.03

    Additional Conditions to the Obligations of the Company      42  

ARTICLE X TERMINATION/EFFECTIVENESS

     43  

10.01

    Termination      43  

10.02

    Effect of Termination      44  

ARTICLE XI MISCELLANEOUS

     44  

11.01

    Waiver      44  

11.02

    Notices      44  

11.03

    Assignment      45  

11.04

    Rights of Third Parties      45  

11.05

    Expenses      45  

11.06

    Governing Law      45  

11.07

    Captions; Counterparts      45  

11.08

    Schedules and Exhibits      45  

11.09

    Entire Agreement      45  

11.10

    Amendments      45  

11.11

    Severability      46  

11.12

    Jurisdiction; WAIVER OF TRIAL BY JURY      46  

 

iii

          Page  

11.13

    Enforcement      46  

11.14

    Non-Recourse      47  

11.15

    Non-survival of Representations, Warranties and Covenants      47  

11.16

    Acknowledgements      47  

11.17

    Conflicts and Privilege      48  

11.18

    Action by Acquiror      49  

 

Exhibits

   

Exhibit A – Form of Subscription Agreement

   

Exhibit B – Form of Registration Rights Agreement

   

Exhibit C – Form of Certificate of Incorporation of Acquiror

   

Exhibit D – Form of Bylaws of Acquiror

   

Exhibit E – Equity Incentive Plan

   

Exhibit F – Form of Letter of Transmittal

   

 

iv

AGREEMENT AND PLAN OF MERGER

This Agreement and Plan of Merger (this “Agreement”), dated as of November 2, 2022, is entered into by and among Flame Acquisition Corp., a Delaware corporation (“Acquiror”), Sable Offshore Corp., a Texas corporation (“SOC”), and Sable Offshore Holdings LLC, a Delaware limited liability company (the “Holdco” and together with SOC, the “Company”). Except as otherwise indicated, capitalized terms used herein shall have the meanings set forth in Article I of this Agreement.

RECITALS

WHEREAS, SOC is a wholly-owned Subsidiary of the Holdco and in coordination with Acquiror, and at Acquiror’s direction, entered into that certain Purchase and Sale Agreement, dated as of November 1, 2022, with Exxon Mobil Corporation and Mobil Pacific Pipeline Company (together, “Exxon,” such agreement, the “PSA,” and the transactions contemplated thereby, the “Asset Acquisition”, and the assets (including equity interests) acquired thereby, the “Assets”);

WHEREAS, Acquiror is a blank check company incorporated to acquire one or more operating businesses through a Business Combination;

WHEREAS, subject to the terms and conditions hereof, at the Closing, (i) Holdco shall merge with and into Acquiror, with Acquiror surviving such merger (the “Holdco Merger”), and (ii) immediately following the effective time of the Holdco Merger, SOC shall merge with and into Acquiror, with Acquiror surviving such merger (the “SOC Merger”, and together with the Holdco Merger, the “Mergers”);

WHEREAS, the respective boards of directors of each of Acquiror and SOC, and the sole member of the Holdco, have each approved and declared advisable this Agreement and the Transactions upon the terms and subject to the conditions of this Agreement and in accordance with the laws of its jurisdiction, and the Holdco, as the sole stockholder of SOC, has approved and adopted this Agreement, the Mergers and the Transactions;

WHEREAS, contemporaneously with, prior to, or following the execution and delivery of this Agreement, the Holdco or Acquiror is entering into subscription agreements substantially in the form set forth on Exhibit A (the “Subscription Agreements”) with certain investors (the “Subscribers”), pursuant to which the Subscribers, upon the terms and subject to the conditions set forth therein, have agreed to, or will agree to, in each case, subject to the terms thereof, purchase Acquiror Class A Common Stock at $10.00 per share in a private placement or placements (the “Private Placement”) for an aggregate subscription amount up to $400,000,000, to be consummated contemporaneously with the Closing and immediately following the Effective Time;

WHEREAS, contemporaneously with the Closing but immediately after the Effective Time (as defined below), in connection with the Transactions, Acquiror, the Company and the Holdco Equityholders will enter into that certain Registration Rights Agreement (the “Registration Rights Agreement”), in the form set forth on Exhibit B, to be effective upon the Closing;

WHEREAS, pursuant to the Acquiror Organizational Documents, Acquiror shall provide an opportunity to the Acquiror Stockholders (other than the Sponsor or any other party to an Insider Letter) to have their shares of Acquiror Common Stock redeemed for the consideration, and on the terms and subject to the conditions and limitations, set forth in this Agreement, the Acquiror Organizational Documents and the Trust Agreement in conjunction with, inter alia, obtaining approval from the Acquiror Stockholders for the Business Combination (the “Offer”);

WHEREAS, immediately following the Effective Time, the certificate of incorporation in the form set forth on Exhibit C (the “Acquiror Charter”), shall become the certificate of incorporation of Acquiror, until thereafter supplemented or amended in accordance with its terms and the DGCL;

WHEREAS, immediately following the Effective Time, the bylaws in the form set forth on Exhibit D (the “Acquiror Bylaws”), shall become the bylaws of Acquiror, until thereafter supplemented or amended in accordance with its terms and the DGCL;

WHEREAS, prior to the consummation of the Transactions, Acquiror shall, subject to obtaining the Acquiror Stockholder Approvals, adopt an equity incentive plan in the form set forth on Exhibit E (the “Acquiror Equity Incentive Plan”); and

WHEREAS, immediately following the Effective Time, Acquiror shall be renamed “Sable Offshore Corp.” and shall trade publicly on the NYSE under a new ticker symbol mutually selected by the Company and the Acquiror.

NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth in this Agreement, and intending to be legally bound hereby, Acquiror and the Company agree as follows:

ARTICLE I

CERTAIN DEFINITIONS

1.01 Definitions. As used herein, the following terms shall have the following meanings:

“Acquiror” has the meaning specified in the preamble hereto.

“Acquiror Affiliate Agreement” has the meaning specified in Section 5.18.

“Acquiror Board” means the board of directors of Acquiror.

“Acquiror Board Change in Recommendation” has the meaning specified in Section 8.03(d).

“Acquiror Board Recommendation” has the meaning specified in Section 8.03(d).

“Acquiror Bylaws” has the meaning specified in the Recitals hereto.

“Acquiror Charter” has the meaning specified in the Recitals hereto.

“Acquiror Class A Common Stock” means Class A Common Stock, par value $0.0001 per share, of Acquiror.

“Acquiror Class B Common Stock” means Class B Common Stock, par value $0.0001 per share, of Acquiror.

“Acquiror Common Stock” means, collectively, Acquiror Class A Common Stock and Acquiror Class B Common Stock.

“Acquiror Cure Period” has the meaning specified in Section 10.01(c).

“Acquiror Equity Incentive Plan” has the meaning specified in the Recitals hereto.

“Acquiror Equity Plan Proposal” has the meaning specified in Section 8.03(c).

“Acquiror Material Contracts” has the meaning specified in Section 5.15(a).

“Acquiror Organizational Documents” means the Amended and Restated Certificate of Incorporation of Acquiror, dated February 24, 2021 (the “Existing Acquiror Charter”), and the Bylaws of Acquiror, dated October 16, 2020, in each case as may be amended from time to time.

“Acquiror Preferred Stock” has the meaning specified in Section 5.13(a).

“Acquiror Representations” means the representations and warranties of Acquiror expressly and specifically set forth in Article V of this Agreement, as qualified by the Schedules, any certificate delivered in accordance with Section 9.03(c) and the Ancillary Agreements. For the avoidance of doubt, the Acquiror Representations are solely made by Acquiror and not any other Person.

“Acquiror SEC Reports” has the meaning specified in Section 5.09(a).

“Acquiror Stockholder” means a holder of Acquiror Common Stock.

 

 

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“Acquiror Stockholder Approvals” means, with respect to any Proposal, the approval of such Proposal by the affirmative vote of the holders of the requisite number of shares of Acquiror Common Stock entitled to vote thereon, whether in person or by proxy at the Special Meeting (or any adjournment or postponement thereof), in accordance with the Acquiror Organizational Documents and applicable Law and the rules and regulations of NYSE.

“Acquiror Warrant” means each whole warrant exercisable for one share of Acquiror Class A Common Stock outstanding as of the date hereof and issued pursuant to the Warrant Agreement.

“Acquisition Proposal” has the meaning specified in Section 6.05(a)(i).

“Action” means any action, suit, litigation, assessment, audit, investigation, examination, arbitration or proceeding, in each case that is by or before any Governmental Authority.

“Additional Proposal” has the meaning specified in Section 8.03(c).

“Affiliate” means, with respect to any specified Person, any Person that, directly or indirectly, controls, is controlled by, or is under common control with, such specified Person, through one or more intermediaries or otherwise; provided, that for purposes of this Agreement, the Company, on the one hand, and Acquiror, on the other hand, shall not be deemed Affiliates prior to the Holdco Effective Time.

“Aggregate Merger Consideration” means 3,000,000 shares of Acquiror Class A Common Stock.

“Agreement” has the meaning specified in the preamble hereto.

“Amendment Proposal” has the meaning specified in Section 8.03(c).

“Ancillary Agreements” means the Letter of Transmittal, Registration Rights Agreement, the Subscription Agreements and any other agreement entered into by a party hereto in connection with the Transactions.

“Antitrust Law” means the HSR Act, the Federal Trade Commission Act, the Sherman Act, the Clayton Act, and any applicable foreign antitrust, competition or merger control Laws and all other applicable Laws that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade or lessening of competition through merger or acquisition.

“Asset Acquisition” has the meaning specified in the Recitals hereto.

“Assets” has the meaning specified in the Recitals hereto.

“Benefit Plan” means any employee benefit or compensation arrangement, plan, policy, practice, or program, in each case, whether or not written, including (i) any “employee benefit plan” described in Section 3(3) of ERISA (whether or not subject to ERISA), and (ii) any other compensation, employment, consulting, severance, vacation, incentive, change of control, perquisite or fringe benefit program, policy, practice, agreement or arrangement.

“BOEM” shall mean the United State Bureau of Ocean Energy Management.

“Bracewell” has the meaning specified in Section 11.17(b).

“Bracewell Privileged Communications” has the meaning specified in Section 11.17(b).

“Business Combination” has the meaning ascribed to such term in the Existing Acquiror Charter.

“Business Combination Proposal” has the meaning specified in Section 7.09.

“Business Day” means a day other than a Saturday, Sunday or other day on which commercial banks in New York, New York or Houston, Texas, are authorized or required by Law to close.

“Canceled Holdco Equity” has the meaning specified in Section 3.01(a)(ii).

“Change in Control” means any transaction, or series of transactions (a) resulting in any one Person, or more than one Person that are Affiliates or that are acting as a “group” (as such term is used in sections 13(d) or 14(d) of the Exchange Act), acquiring ownership of (i) equity securities of either the Holdco or SOC which, together with the equity securities held by one or more such Person, or such Person and its

 

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Affiliates or such group, constitutes more than 50% of the total voting power or economic rights of the equity securities of either the Holdco or SOC; or (ii) at least 50% of the consolidated assets of the Company; (b) that results in the stockholders or members, as applicable, of either the Holdco or SOC as of immediately prior to such transaction holding, in the aggregate, directly or indirectly, less than 50% of the total voting power or economic rights of the equity securities of such Person immediately after the consummation of such transaction (in each case of clauses (a) and (b), whether by merger, consolidation, tender offer, recapitalization, purchase or issuance of equity securities, tender offer or otherwise) or (c) the result of which is a sale of all or substantially all of the assets of the Company to any Person.

“Class B Conversion Ratio” means the ratio at which Acquiror Class B Common Stock are automatically convertible into Acquiror Class A Common Stock pursuant to the Existing Acquiror Charter.

“Closing” has the meaning specified in Section 2.03.

“Closing Date” has the meaning specified in Section 2.03.

“Code” means the Internal Revenue Code of 1986, as amended.

“Company” has the meaning specified in the preamble hereto.

“Company Cure Period” has the meaning specified in Section 10.01(b).

“Company Organizational Documents” means (i) in respect of the Holdco, the Holdco’s certificate of formation and the limited liability company agreement of the Holdco, dated October 26, 2022, in each case as may be amended from time to time in accordance with the terms of this Agreement, and (ii) in respect of SOC, SOC’s certificate of formation and bylaws, in each case as may be amended from time to time in accordance with the terms of this Agreement.

“Company Representations” means the representations and warranties of the Company expressly and specifically set forth in Article IV of this Agreement, as qualified by the Schedules, any certificate delivered in accordance with Section 9.02(d) and the Ancillary Agreements. For the avoidance of doubt, the Company Representations are solely made by the Company and not any other Person.

“Confidential Information” has the meaning specified in Section 8.05(a).

“Contract” means any contracts, agreements, subcontracts or leases (including oral contracts or agreements).

“Conversion” has the meaning specified in Section 2.06.

“COVID-19” means the novel coronavirus, SARS-CoV-2 or COVID-19 or any mutation of the same, including any resulting epidemics, pandemics, disease outbreaks or public health emergencies.

“COVID-19 Measures” means any quarantine, isolation, “shelter in place,” “stay at home,” workforce reduction, social distancing, shut down, closure, sequester or any other Law, decree, judgment, injunction or other order, directive or guidelines by any Governmental Authority or industry group in connection with or in response to COVID-19, including, the Coronavirus Aid, Relief, and Economic Security Act (CARES).

“DGCL” means the General Corporation Law of the State of Delaware.

“Effective Time” has the meaning specified in Section 2.01(b).

“Enforceability Exceptions” has the meaning specified in Section 4.02(a).

“ERISA” means the U.S. Employee Retirement Income Security Act of 1974, as amended.

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

“Exchange Agent” has the meaning specified in Section 3.02(a).

“Exchange Fund” has the meaning specified in Section 3.02(a).

“Existing Acquiror Charter” has the meaning specified in the definition of Acquiror Organizational Documents.

 

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“Exxon” has the meaning specified in the Recitals hereto.

“Financial Derivative/Hedging Arrangement” means any transaction (including any Contract with respect thereto) which is a rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any combination of these transactions.

“Flame SPAC Parties” has the meaning specified in Section 11.17(a).

“Fraud” means, with respect to a Person, common law fraud, as defined under the Laws of the State of Delaware, with respect to the making of the Company Representations or the Acquiror Representations, as applicable; provided that, for the avoidance of doubt, “Fraud” does not include any fraud claim based on constructive knowledge, negligent misrepresentation or recklessness.

“GAAP” means generally accepted accounting principles in the United States, consistently applied.

“Governmental Authority” means any federal, state, provincial, municipal, local or foreign government, governmental authority, regulatory or administrative agency, governmental commission, department, legislature, board, bureau, agency or instrumentality, arbitrator, court or tribunal.

“Governmental Order” means any order, judgment, injunction, decree, writ, stipulation, decision, determination or award, in each case, entered by or with any Governmental Authority.

“Holdco” has the meaning specified in the preamble hereto.

“Holdco Certificate of Merger” has the meaning specified in Section 2.01(a).

“Holdco Effective Time” has the meaning specified in Section 2.01(a).

“Holdco Equity” means uncertificated limited liability company membership interests in the Holdco designated as voting Class A shares.

“Holdco Equityholder” means a holder of Holdco Equity.

“Holdco Equityholder Expenses” has the meaning specified in Section 3.04(a).

“Holdco Merger” has the meaning specified in the Recitals hereto.

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

“Indebtedness” means, with respect to any Person, without duplication, any obligations (whether or not contingent) consisting of (a) the outstanding principal amount of and accrued and unpaid interest on, and other payment obligations for, borrowed money, or payment obligations issued or incurred in substitution or exchange for payment obligations for borrowed money, (b) amounts owing as deferred purchase price for property or services, including “earnout” payments, (c) payment obligations evidenced by any promissory note, bond, debenture, mortgage or other debt instrument or debt security, (d) contingent reimbursement obligations with respect to letters of credit, bankers’ acceptance or similar facilities (in each case to the extent drawn), (e) payment obligations of a third party secured by (or for which the holder of such payment obligations has an existing right, contingent or otherwise, to be secured by) any Lien, other than a Permitted Lien, on assets or properties of such Person, whether or not the obligations secured thereby have been assumed, (f) obligations under capitalized leases or finance leases, (g) obligations under any financial derivative or hedging arrangement, (h) any other indebtedness or obligation reflected or required to be reflected as indebtedness in a consolidated balance sheet, in accordance with GAAP, (i) guarantees, make-whole agreements, hold harmless agreements or other similar arrangements with respect to any amounts of a type described in clauses (a) through (h) above and (j) with respect to each of the foregoing, any unpaid interest, breakage costs, prepayment or redemption penalties or premiums, or other unpaid fees or obligations (including unreimbursed expenses or indemnification obligations for which a claim has been

 

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made); provided, however, that Indebtedness shall not include accounts payable to trade creditors that are not past due and accrued expenses arising in the ordinary course of business consistent with past practice. For the avoidance of doubt, Indebtedness of Acquiror shall not include any and all promissory notes between Acquiror and the Sponsor, including any promissory notes issued in order to finance transaction costs or other working capital purposes of Acquiror.

“Insider Letter” means that certain letter agreement delivered in accordance with the Underwriting Agreement (as defined in the letter agreement) by and between Acquiror, the Sponsor and certain other parties thereto.

“Interim Period” has the meaning specified in Section 6.01.

“Intervening Event” means any of the following events, facts, developments, circumstances or occurrences occurring after the date of this Agreement that materially and adversely affects the business, assets, operations or prospects of either SOC or Holdco: (a) issuance of a final, non-appealable Governmental Order denying an application filed by the Company or Acquiror for any material Permit that is necessary for the construction, maintenance or operation of any of the Assets; (b) issuance by a court of a final, non-appealable order vacating or enjoining the effectiveness of any material Permit issued by a Governmental Authority that is necessary for the construction, maintenance or operation of any of the Assets; or (c) passage, enactment, enrollment, adoption, issuance or promulgation of any Law by a Governmental Authority that materially inhibits, wholly or partially, the construction, maintenance or operation of any of the Assets.

“Knowledge” shall mean the actual knowledge of (i) in the case of the Company, the individuals set forth on Schedule 1.1(k) of the Company’s Schedule and (ii) in the case of Acquiror, the individuals set forth on Schedule 1.1(k) of the Acquiror’s Schedule.

“L&W” has the meaning specified in Section 11.17(a).

“L&W Privileged Communications” has the meaning specified in Section 11.17(a).

“Law” means any statute, law (including common law), act, code, ordinance, rule, regulation or Governmental Order, in each case, of any Governmental Authority.

“Letter of Transmittal” means a letter of transmittal substantially in the form attached as Exhibit F hereto, with such changes as may be required by the Exchange Agent for uncertificated shares and reasonably acceptable to the Company and Acquiror.

“Lien” means any mortgage, deed of trust, pledge, hypothecation, easement, right of way, purchase option, right of first refusal, covenant, restriction, security interest, title defect, encroachment or other survey defect, or other lien or encumbrance of any kind, except for (a) any restrictions or other matters arising under or pursuant to any applicable Securities Laws, and (b) immaterial easements, rights of way, covenants, encumbrances or restrictions that do not materially detract the value of the underlying asset or the use of the asset.

“Material Adverse Effect” means any event, change, circumstance or development that has a material adverse effect on (i) the assets, business, results of operations or financial condition of the Company and its Affiliates or (ii) the ability of the Company to consummate the Transactions; provided, however, that in no event would any of the following (or the effect of any of the following), alone or in combination, be deemed to constitute, or be taken into account in determining whether there has been or will be, a “Material Adverse Effect” pursuant to clause (i) above: (a) any change or development in applicable Laws (including COVID-19 Measures) or GAAP or any official interpretation thereof, in each case, after the date hereof, (b) any change or development in interest rates or economic, political, legislative, regulatory, business, financial, commodity, currency or market conditions generally affecting the economy or the industry in which the Company operates, (c) any change generally affecting any of the industries or markets in which the Company operates or the economy as a whole, (d) the compliance with the terms of this Agreement or the taking of any action required by this Agreement (provided, that the exceptions in this clause (d) shall not

 

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be deemed to apply to references to “Material Adverse Effect” in the representations and warranties set forth in Section 4.02(b) and, to the extent related thereto, the condition in Section 9.02(a)), (e) any earthquake, hurricane, tsunami, tornado, flood, mudslide, wild fire or other natural disaster, epidemic, disease outbreak, pandemic (including COVID-19 (or any mutation or variation thereof or related health condition)), weather condition, explosion fire, act of God or other force majeure event, (f) any national or international political or social conditions in countries in which, or in the proximate geographic region of which, the Company operates, including the engagement by the United States or such other countries in hostilities or the escalation thereof, whether or not pursuant to the declaration of a national emergency or war, or the occurrence or the escalation of any military or terrorist attack upon the United States or such other country, or any territories, possessions, or diplomatic or consular offices of the United States or such other countries or upon any United States or such other country military installation, equipment or personnel, or (g) any failure of the Company to meet any projections, forecasts or budgets; provided, that clause (g) shall not prevent or otherwise affect a determination that any change or effect underlying such failure to meet projections or forecasts has resulted in, or contributed to, or would reasonably be expected to result in or contribute to, a Material Adverse Effect (to the extent such change or effect is not otherwise excluded from this definition of Material Adverse Effect), except in the case of clause (a), (b), (c), (e), and (f) to the extent that such change has a disproportionate impact on the Company, as compared to other industry participants.

“Material Contract” means the PSA, the Subscription Agreements, and all other documents, exhibits and schedules contemplated thereby, including the Senior Secured Term Loan Agreement and the Senior Secured Term Loan Agreement Collateral Documents.

“Mergers” has the meaning specified in the Recitals hereto.

“NYSE” means the New York Stock Exchange.

“NYSE Proposal” has the meaning specified in Section 8.03(c).

“Offer” has the meaning specified in the Recitals hereto.

“Outstanding Acquiror Expenses” has the meaning specified in Section 3.04(b).

“Outstanding Company Expenses” has the meaning specified in Section 3.04(a).

“Per Share Merger Consideration” mean the quotient of (i) the Aggregate Merger Consideration divided by (ii) the total number of shares of Holdco Equity outstanding immediately prior to the Holdco Merger.

“Permit” means any approvals, licenses, consents, registrations, franchises, permits, certificates, qualifications, variances, waivers, exemptions or other authorizations issued by, obtained from, or filed with a Governmental Authority.

“Permitted Liens” means (i) statutory or common law Liens of mechanics, materialmen, warehousemen, landlords, carriers, repairmen, construction contractors and other similar Liens (A) that arise in the ordinary course of business, or (B) relate to amounts not yet delinquent, (ii) Liens arising under original purchase price conditional sales contracts and equipment leases with third parties entered into in the ordinary course of business, (iii) non-monetary Liens, encumbrances and restrictions on real property (including easements, covenants, rights of way and similar restrictions of record) that do not, individually or in the aggregate, materially interfere with the present uses of such real property, (iv) requirements and restrictions of zoning, building and other applicable Laws and municipal by-laws, and development, site plan, subdivision or other agreements with municipalities, which do not materially interfere with the current use or occupancy of any real property leased by the Company, and (v) Liens described on Schedule 1.01(a).

“Person” means any individual, firm, corporation, partnership, limited liability company, incorporated or unincorporated association, joint venture, joint stock company, Governmental Authority or other entity of any kind.

 

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“Pre-Signing Subscription Agreements” has the meaning specified in Section 4.13.

“Private Placement” has the meaning specified in the Recitals hereto.

“Proposals” has the meaning specified in Section 8.03(c).

“Proxy Statement” has the meaning specified in Section 8.03(a).

“PSA” has the meaning specified in the Recitals hereto.

“Redeeming Stockholder” means an Acquiror Stockholder who demands that Acquiror redeem its Acquiror Common Stock for cash in connection with the Transactions and in accordance with the Acquiror Organizational Documents.

“Registration Rights Agreement” has the meaning specified in the Recitals hereto.

“Representative” means, as to any Person, any of the officers, directors, managers, employees, counsel, accountants, financial advisors, debt financing sources (in such capacity) and consultants of such Person.

“Sable Group” has the meaning specified in Section 11.17(b).

“Schedules” means the disclosure schedules of the Company or Acquiror, as applicable.

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

“SEC Clearance” has the meaning specified in Section 8.03(a).

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

“Securities Laws” means the securities Laws of any state, federal or foreign entity and the rules and regulations promulgated thereunder.

“Senior Secured Term Loan Agreement” has the meaning ascribed to such term in the PSA.

“Senior Secured Term Loan Agreement Collateral Documents” has the meaning ascribed to the term “Collateral Documents” in the PSA.

“SOC” has the meaning specified in the preamble hereto.

“SOC Certificate of Merger” has the meaning specified in Section 2.01(b).

“SOC Common Stock” means the common stock, par value $0.01 per share, of SOC.

“SOC Equityholder” means a holder of SOC Common Stock.

“SOC Merger” has the meaning specified in the Recitals hereto.

“Special Meeting” means a meeting of the holders of Acquiror Common Stock to be held for the purpose of voting on the Proposals.

“Sponsor” means Flame Acquisition Sponsor, LLC.

“Subscribers” has the meaning specified in the Recitals hereto.

“Subscription Agreements” has the meaning specified in the Recitals hereto.

“Subscription Fees” has the meaning specified in Section 4.13.

“Subsidiary” means, with respect to a Person, any corporation or other organization (including a limited liability company or a partnership), whether incorporated or unincorporated, of which such Person directly or indirectly owns or controls a majority of the securities or other interests having by their terms ordinary voting power to elect a majority of the board of directors or others performing similar functions with respect to such corporation or other organization or any organization of which such Person or any of its Subsidiaries is, directly or indirectly, a general partner or managing member.

“Surviving Company” has the meaning specified in Section 2.01(b).

 

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“Surviving Provisions” has the meaning specified in Section 10.02.

“SYU” has the meaning specified in Section 6.04(a).

“Tax” means any federal, state, provincial, territorial, local, foreign and other net income, alternative or add-on minimum, franchise, gross income, adjusted gross income or gross receipts, employment, unemployment, compensation, utility, social security (or similar), withholding, payroll, ad valorem, transfer, windfall profits, branch profits, franchise, license, branch, excise, severance, production, stamp, occupation, premium, personal property, real property, capital stock, profits, disability, registration, value added, capital gains, goods and services, estimated, alternative minimum, sales, use, or other tax, escheat or unclaimed property obligation, governmental fee or other like assessment, together with any interest, penalty, fine, levy, impost, duty, charge, addition to tax or additional amount imposed with respect thereto, and including any obligation to assume or succeed to or pay the Tax liability of another Person by Law, Contract or otherwise.

“Tax Authority” means any Governmental Authority with jurisdiction or authority to impose, administer, levy, assess or collect Tax.

“Tax Return” means any return, report, statement, refund, claim, election, disclosure, declaration, information report or return, statement, estimate or other document filed or required to be filed with a Tax Authority with respect to Taxes, including any schedule or attachment thereto and including any amendments thereof.

“Terminating Acquiror Breach” has the meaning specified in Section 10.01(c).

“Terminating Company Breach” has the meaning specified in Section 10.01(b).

“Termination Date” has the meaning specified in Section 10.01(b).

“Transaction Proposal” has the meaning specified in Section 8.03(c).

“Transactions” means the transactions contemplated by this Agreement to occur at or immediately prior to the Closing, including the Mergers.

“Transfer Taxes” has the meaning specified in Section 8.04(a).

“Treasury Regulations” means the final, temporary and proposed United States Department of the Treasury regulations promulgated under the Code, as such regulations may be amended from time to time.

“Trust Account” has the meaning specified in Section 5.06(a).

“Trust Agreement” has the meaning specified in Section 5.06(a).

“Trustee” has the meaning specified in Section 5.06(a).

“Warrant Agreement” means that certain Warrant Agreement, dated as of February 24, 2021, by and between Flame and American Stock Transfer & Trust Company, LLC, as warrant agent.

“Willful Breach” means, with respect to this Agreement, a party’s knowing and intentional material breach of any of its representations or warranties as set forth in this Agreement, or such party’s material breach of any of its covenants or other agreements set forth in this Agreement, which material breach constitutes, or is a consequence of, a purposeful act or failure to act by such party with the knowledge that the taking of such act or failure to take such act would cause a material breach of this Agreement.

1.02 Construction.

(a) Unless the context of this Agreement otherwise requires, (i) words of any gender include each other gender, (ii) words using the singular or plural number also include the plural or singular number, respectively, (iii) the terms “hereof,” “herein,” “hereby,” “hereto” and derivative or similar words refer to this entire Agreement, (iv) the terms “Article”, “Section”, “Schedule”, “Exhibit” and “Annex” refer to the specified Article,

 

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Section, Schedule, Exhibit or Annex of or to this Agreement unless otherwise specified, (v) the word “including” shall mean “including without limitation”, (vi) the word “or” shall be disjunctive but not exclusive and (vii) any reference to a Law shall mean such Law as amended.

(b) Unless the context of this Agreement otherwise requires, references to agreements and other documents shall be deemed to include all subsequent amendments and other modifications thereto.

(c) Unless the context of this Agreement otherwise requires, references to statutes shall include all regulations promulgated thereunder and references to statutes or regulations shall be construed as including all statutory and regulatory provisions consolidating, amending or replacing the statute or regulation.

(d) The language used in this Agreement shall be deemed to be the language chosen by the parties to express their mutual intent and no rule of strict construction shall be applied against any party.

(e) Whenever this Agreement refers to a number of days, such number shall refer to calendar days unless Business Days are specified. If any action is to be taken or given on or by a particular calendar day, and such calendar day is not a Business Day, then such action may be deferred until the next Business Day.

(f) All accounting terms used herein and not expressly defined herein shall have the meanings given to them under GAAP.

(g) The use of the terms “ordinary course” and “ordinary course of business” shall mean ordinary course of business consistent with past practice.

(h) Each representation and warranty and covenant in this Agreement is given independent effect.

(i) The phrases “delivered,” “provided to,” “furnished to,” “made available” and phrases of similar import when used herein, unless the context otherwise requires, means that a copy of the information or material referred to has been provided no later than two (2) Business Days prior to the date of this Agreement to the party to which such information or material is to be provided or furnished in the virtual “data room” set up by the Company or made accessible to Acquiror in connection with this Agreement.

ARTICLE II

THE MERGERS; CLOSING

2.01 The Mergers.

(a) Upon the terms and subject to the conditions set forth in this Agreement and the Delaware Limited Liability Company Act and the DGCL, at the Holdco Effective Time, Holdco shall merge with and into Acquiror, with Acquiror surviving such merger. The Holdco Merger shall be consummated in accordance with this Agreement, the Delaware Limited Liability Company Act and the DGCL and evidenced by a certificate of merger (the “Holdco Certificate of Merger”), such Merger to be consummated upon filing of the Holdco Certificate of Merger or at such later time as may be agreed by Acquiror and Holdco in writing and specified in the Holdco Certificate of Merger (the “Holdco Effective Time”). Following the Holdco Effective Time, the separate corporate existence of Holdco shall cease.

(b) Upon the terms and subject to the conditions set forth in this Agreement and the DGCL and the Texas Business Organizations Code, immediately following the Holdco Effective Time, SOC shall merge with and into Acquiror, with Acquiror surviving such merger (Acquiror, in such capacity, hereinafter referred to for the periods at and after the Effective Time as the “Surviving Company”). The SOC Merger shall be consummated in accordance with this Agreement, the DGCL and the Texas Business Organizations Code and

 

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evidenced by a certificate of merger (the “SOC Certificate of Merger”), such Merger to be consummated upon filing of the SOC Certificate of Merger or at such later time as may be agreed by Acquiror and SOC in writing and specified in the SOC Certificate of Merger (the time the SOC Merger becomes effective being the “Effective Time”). Following the Effective Time, the separate corporate existence of SOC shall cease.

2.02 Effects of the Mergers.

(a) The Holdco Merger shall have the effects set forth in this Agreement and the Delaware Limited Liability Company Act and the DGCL. Without limiting the generality of the foregoing and subject thereto, by virtue of the Holdco Merger and without further act or deed, at the Holdco Effective Time, all of the property, rights, privileges, powers and franchises of the Holdco and Acquiror shall vest in the Surviving Company and all of the debts, liabilities and duties of the Holdco and Acquiror shall become the debts, liabilities and duties of the Surviving Company.

(b) The SOC Merger shall have the effects set forth in this Agreement and the DGCL and the Texas Business Organizations Code. Without limiting the generality of the foregoing and subject thereto, by virtue of the SOC Merger and without further act or deed, at the Effective Time, all of the property, rights, privileges, powers and franchises of the SOC and Acquiror shall vest in the Surviving Company and all of the debts, liabilities and duties of the SOC and Acquiror shall become the debts, liabilities and duties of the Surviving Company.

2.03 Closing. Subject to the terms and conditions of this Agreement, the closing of the Mergers (the “Closing”) shall take place electronically through the exchange of documents via e-mail or facsimile on the date which is three (3) Business Days after the date on which all conditions set forth in Article IX shall have been satisfied or waived (other than those conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or waiver thereof) or such other time and place as Acquiror, the Holdco and SOC may mutually agree in writing. The date on which the Closing actually occurs is referred to in this Agreement as the “Closing Date.” Subject to the satisfaction or waiver of all of the conditions set forth in Article IX of this Agreement, and provided this Agreement has not theretofore been terminated pursuant to its terms, (a) on the Closing Date, Acquiror shall cause the Holdco Certificate of Merger to be executed, acknowledged and filed with the Secretary of State of the State of Delaware as provided in applicable provisions of the DGCL and the Delaware Limited Liability Company Act, and (b) on the Closing Date, Acquiror shall cause the SOC Certificate of Merger to be executed, acknowledged and filed with the Secretary of State of the State of Delaware as provided in applicable provisions of the DGCL and filed with the Secretary of State of the State of Texas as provided in applicable provisions of the Texas Business Organizations Code (provided that SOC and Acquiror shall take such actions as may be necessary to cause the SOC Certificate of Merger not to take effect until immediately following the Holdco Effective Time). At the Effective Time, Acquiror shall be renamed “Sable Offshore Corp.” as provided in the Acquiror Charter and shall trade publicly on the NYSE under a new ticker symbol mutually selected by Acquiror, the Holdco and SOC.

2.04 Organizational Documents; Officers and Directors – Holdco Merger.

(a) At the Holdco Effective Time, the Acquiror Organizational Documents shall remain unchanged and shall be the certificate of incorporation and bylaws of the surviving company in the Holdco Merger, until thereafter supplemented or amended in accordance with their respective terms and the DGCL.

(b) Persons constituting the officers and directors of the Acquiror prior to the Holdco Effective Time shall continue to be the officers and directors of the surviving company in the Holdco Merger immediately following the Holdco Effective Time. Each such officer and director of Acquiror shall remain in office as an officer or director, as applicable, of Acquiror until his or her successor is elected and qualified or until his or her earlier death, resignation or removal.

 

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2.05 Organizational Document; Officers and Directors – SOC Merger.

(a) At the Effective Time, the Acquiror Charter shall be the certificate of incorporation of Acquiror, until thereafter supplemented or amended in accordance with its terms and the DGCL.

(b) At the Effective Time, the Acquiror Bylaws shall be the bylaws of Acquiror, until thereafter supplemented or amended in accordance with its terms, the Acquiror Bylaws and the DGCL.

(c) Persons constituting the officers of Acquiror prior to the Effective Time shall continue to be the officers of the Surviving Company until the earlier of their death, resignation or removal or until their respective successors are duly appointed.

(d) Except as otherwise agreed in writing by Holdco, SOC and Acquiror prior to the Closing, each director of Acquiror in office immediately prior to the Effective Time shall continue to be a director immediately following the Effective Time. Each director of Acquiror shall remain in office as a director of Acquiror until his or her successor is elected and qualified or until his or her earlier death, resignation or removal. If any of Acquiror’s current directors shall be unable or unwilling to serve at the Closing, the Holdco, SOC and Acquiror shall promptly designate a replacement director.

2.06 Acquiror Class B Common Stock Conversion. Immediately prior to the Holdco Effective Time, each share of Acquiror Class B Common Stock issued and outstanding immediately prior to the Holdco Effective Time shall automatically be converted into and exchanged for a number of validly issued, fully paid and nonassessable shares of Acquiror Class A Common Stock equal to the Class B Conversion Ratio, and such Acquiror Class B Common Stock shall thereafter cease to be outstanding, shall be canceled and shall cease to exist (collectively, the “Conversion”).

ARTICLE III

EFFECTS OF THE MERGERS

3.01 Effect on Capital Stock and Units.

(a) At the Holdco Effective Time, by virtue of the Holdco Merger and without any action on the part of the Holdco or Acquiror, or the holder of any equity thereof:

(i) Acquiror Common Stock. At and after the Holdco Effective Time, each share of Acquiror Common Stock issued and outstanding immediately prior to the Holdco Effective Time, including the Acquiror Class A Common Stock issued in connection with the Conversion, shall not be affected by the Holdco Merger.

(ii) Cancellation of Certain Holdco Equity. Each share of Holdco Equity issued and outstanding immediately prior to the Holdco Effective Time that is held by Holdco in treasury or owned by Acquiror shall no longer be outstanding and shall be automatically canceled and shall cease to exist (the “Canceled Holdco Equity”), and no consideration shall be delivered in exchange therefor.

(iii) Conversion of All Other Holdco Equity. Each share of Holdco Equity issued and outstanding immediately prior to the Holdco Effective Time, other than any Canceled Holdco Equity, shall, at the Holdco Effective Time, automatically, and without any further action required on the part of any Person, be irrevocably canceled and extinguished and converted into, and the Holdco Equityholder thereof shall cease to have any rights with respect thereto except for, subject to Section 3.02, the right to receive the Per Share Merger Consideration.

 

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(b) At the Effective Time, by virtue of the SOC Merger and without any action on the part of SOC or Acquiror, or the holder of any equity thereof:

(i) Acquiror Common Stock. At and after the Effective Time, each share of Acquiror Common Stock issued and outstanding immediately prior to the Effective Time, including the Acquiror Class A Common Stock issued in connection with the Conversion and the Acquiror Class A Common Stock issued pursuant to Section 3.01(a)(iii), shall not be affected by the SOC Merger.

(ii) Cancellation of SOC Common Stock. Each share of SOC Common Stock issued and outstanding immediately prior to the Effective Time shall no longer be outstanding and shall be automatically canceled and shall cease to exist, and no consideration shall be delivered in exchange therefor.

3.02 Exchange of Holdco Equity.

(a) Exchange Agent. At or prior to the Holdco Effective Time, Acquiror shall deposit (or cause to be deposited) with American Stock Transfer & Trust Company, LLC (the “Exchange Agent”) the number of shares of Acquiror Common Stock comprising the Aggregate Merger Consideration in respect of the Holdco Equity, other than any Canceled Holdco Equity, for exchange in accordance with this Section 3.02 through the Exchange Agent (the “Exchange Fund”). The Exchange Agent shall, pursuant to irrevocable instructions, deliver the Aggregate Merger Consideration contemplated to be issued pursuant to Section 3.01(a)(iii) out of the Exchange Fund in the manner directed by the Acquiror in accordance with the terms of this Agreement. The Exchange Fund shall not be used for any other purpose.

(b) Exchange Procedures.

(i) At least five (5) days prior to the Closing, Acquiror shall send or shall cause the Exchange Agent to send, to each Holdco Equityholder at the physical address or email address on record with the Holdco, (A) a notice advising such Holdco Equityholder of the proposed effectiveness of the Holdco Merger, (B) the Letter of Transmittal, and (C) notice of the procedures for surrendering to the Acquiror such Holdco Equityholder’s duly executed Letter of Transmittal (with all other documentation required to be delivered pursuant to the Letter of Transmittal or the Exchange Agent in respect of uncertificated shares), and instructions for transferring such Holdco Equityholder’s shares of Holdco Equity, in exchange for the aggregate share of the Aggregate Merger Consideration payable to such Holdco Equityholder pursuant to Section 3.01(a)(iii). Upon delivery of a Letter of Transmittal by such Holdco Equityholder, duly executed and in proper form with all enclosures and attachments required thereby, such Holdco Equityholder shall be entitled to receive the aggregate share of the Aggregate Merger Consideration payable to such Holdco Equityholder in exchange for the shares of Holdco Equity so surrendered. Until surrendered as contemplated hereby, each share of Holdco Equity shall be deemed at any time after the Effective Time to represent only the right to receive the applicable Per Share Merger Consideration in respect thereof.

(ii) Following the Closing, within two (2) Business Days of receipt of all required documentation from a Holdco Equityholder required by this Agreement and the Exchange Agent in respect of uncertificated shares, including the Letter of Transmittal and an IRS Form W-9, the Acquiror shall issue (or cause the Exchange Agent to issue) to such Holdco Equityholder, in accordance with the terms of this Agreement, the aggregate share of the Aggregate Merger Consideration payable to such Holdco Equityholder in exchange for such Person’s Holdco Equity; provided, however, that to the extent that all such required documentation was provided to the Acquiror at least two (2) Business Days before the Closing Date by a Holdco Equityholder, then the Acquiror shall issue (or cause the Exchange Agent to issue) to such Holdco Equityholder, in accordance with the terms of this Agreement, the aggregate share of the Aggregate Merger Consideration payable to such Holdco Equityholder in exchange for such Person’s Holdco Equity on the Closing Date. Notwithstanding anything to the contrary in this Agreement or any knowledge possessed or acquired by or on behalf of Acquiror or any of its Affiliates, Acquiror, the Exchange Agent and their Affiliates shall be entitled to conclusively and definitively rely on,

 

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without any obligation to investigate or verify the accuracy, inaccuracy or correctness thereof, and without any liability, the documentation provided by each Holdco Equityholder (including wire instructions, account information or addresses), which shall be binding on and enforceable against such Holdco Equityholder.

(iii) If payment of any Per Share Merger Consideration is to be made to a Person other than the Person in whose name any surrendered share of Holdco Equity is registered, it shall be a condition precedent to payment that the share of Holdco Equity so surrendered shall be in proper form for transfer, and the Person requesting such payment shall have paid any transfer and other similar Taxes required by reason of the delivery of the applicable Per Share Merger Consideration in respect thereof, as applicable, to a Person other than the registered holder of the share of Holdco Equity so surrendered and shall have established to the satisfaction of Acquiror that such Taxes either have been paid or are not required to be paid.

(c) No Interest; Transfer Books. No interest shall accrue or be paid on any amounts payable to any Holdco Equityholder pursuant to this Agreement. From and after the respective effective time of the Mergers, the share ownership ledger and stock ledger, as applicable, of each of the Holdco and SOC shall be closed and there shall be no further registration of transfers on the ledgers of the Company or the Acquiror of any shares, common stock or other equity of the Holdco or SOC that were outstanding immediately prior to the applicable effective time of such Merger.

(d) Termination of Exchange Fund; Abandoned Property At any time following the date that is one (1) year after the Closing Date, Acquiror shall be entitled to require the Exchange Agent to deliver to it any shares of Acquiror Common Stock remaining in the Exchange Fund made available to the Exchange Agent and not delivered to Holdco Equityholders, and thereafter such Holdco Equityholders shall be entitled to look only to Acquiror (subject to abandoned property, escheat or other similar Laws) as general creditors thereof with respect to the aggregate share of the Aggregate Merger Consideration payable to such Holdco Equityholder in exchange for such shares of Holdco Equity pursuant to this Agreement and upon the terms and conditions set forth in this Section 3.02. Neither the Surviving Company nor the Exchange Agent shall be liable to any Holdco Equityholder for any amounts delivered to a public official pursuant to any applicable abandoned property, escheat or similar Law.

3.03 Withholding. Each of Acquiror, the Holdco, SOC the Surviving Company and their respective withholding agents (without duplication) shall be entitled to deduct and withhold (or cause to be deducted and withheld) from the consideration or any amounts otherwise payable in connection with this Agreement such amounts that any such Persons are required to deduct and withhold (or cause to be deducted and withheld) with respect to any payments contemplated by this Agreement under the Code or any other applicable Law. To the extent that Acquiror, the Holdco, SOC the Surviving Company or their respective withholding agents withholds or deducts such amounts with respect to any Person and properly remits such withheld or deducted amounts to the applicable Governmental Authority when due, such withheld or deducted amounts shall be treated as having been paid to or on behalf of such Person in respect of which such withholding or deduction was made for all purposes.

3.04 Payment of Expenses.

(a) On the Closing Date, Acquiror shall (i) pay or cause to be paid (to the extent unpaid on the Closing Date), by wire transfer of immediately available funds all documented and out-of-pocket (a) fees and disbursements of outside counsel incurred by or on behalf of the Company in connection with the Transactions or the Asset Acquisition and fees and expenses of the Company for any other agents, advisors, consultants, experts, independent contractors and financial advisors engaged by or on behalf of the Company and incurred in connection with the Transactions or the Asset Acquisition, in each case, that are paid or accrued and unpaid as of the Closing and (b) the Subscription Fees (foregoing clauses (a) and (b), collectively, the “Outstanding Company Expenses”); and (ii) reimburse or cause to be reimbursed via the transfer of immediately available funds all reasonable, documented and out-of-pocket fees and expenses of any Holdco Equityholder, for any agents,

 

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advisors, consultants, experts, independent contractors and financial advisors engaged on behalf of the Company and incurred in connection with the Transactions or the Asset Acquisition, in each case, that are paid as of the Closing (the “Holdco Equityholder Expenses”); provided, however, that in no event shall the total Holdco Equityholder Expenses exceed $1,500,000 without the prior written consent of Acquiror; provided further, that if any fee or expense is classified as an Holdco Equityholder Expense it shall not also be an Outstanding Company Expense, or vice versa.

(b) On the Closing Date following the Closing, Acquiror shall pay or cause to be paid by wire transfer of immediately available funds all reasonable, documented out-of-pocket fees and disbursements of Acquiror or the Sponsor for outside counsel and fees and expenses of Acquiror or the Sponsor or for any other agents, advisors, consultants, experts and financial advisors engaged by or on behalf of Acquiror or the Sponsor and incurred in connection with the Transactions and the Asset Acquisition, in each case, that are accrued and unpaid as of the Closing (collectively, the “Outstanding Acquiror Expenses”).

(c) Notwithstanding anything to the contrary in this Section 3.04, neither the Company, nor the Sponsor, nor any Holdco Equityholder shall be entitled to payment or reimbursement under this Section 3.04 of any amounts in respect of which Acquiror issued a promissory note to, or entered into an instrument of indebtedness with or other a contractual right of repayment benefitting, the Company, the Sponsor or such Holdco Equityholder, as applicable, which is satisfied in full in accordance with its terms in connection with the Closing.

3.05 No Appraisal Rights. No Holdco Equityholder or SOC Equityholder shall have any appraisal, quasi-appraisal, dissenters’ or any other similar rights under this Agreement or any other circumstances with respect to any Holdco Equity or SOC Common Stock in connection with the Mergers.

3.06 No Fractional Shares. No certificate, book-entry share or scrip representing fractional shares of Acquiror Class A Common Stock shall be issued upon the surrender for exchange of Holdco Equity, no dividend or distribution of Acquiror shall be payable on or with respect to any such fractional share interests, and such fractional share interests will not entitle the owner thereof to vote or to any other rights of a shareholder of Acquiror. Notwithstanding any other provision of this Agreement, all fractional shares of Acquiror Class A Common Stock that a Holdco Equityholder would otherwise have been entitled to receive pursuant to Section 3.01(a)(iii) will be aggregated and then, if a fractional share of Acquiror Class A Common Stock results from that aggregation, be rounded down to the nearest whole share of Acquiror Class A Common Stock.

3.07 Anti-Dilution Provisions. Without limiting the other provisions of this Agreement and subject to Section 7.02(a)(ii) and Section 7.02(a)(x), if at any time during the period between the date of this Agreement and the Holdco Effective Time, the issued and outstanding shares of Acquiror Common Stock shall have been changed into a different number of shares or a different class by reasons of any reclassification, stock split (including reverse stock split), stock dividend or distribution, reorganization, readjustment, recapitalization, redenomination, merger, issuer tender or exchange offer or other similar transaction, then, the Aggregate Merger Consideration shall be equitably and proportionately adjusted, if necessary and without duplication, to reflect fully the effect of any such change to provide the Holders of Holdco Equity the same economic effect as contemplated by this Agreement.

 

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as set forth in the Schedules to this Agreement (each of which qualifies (a) the correspondingly numbered representation, warranty or covenant if specified therein and (b) such other representations, warranties or covenants where its relevance as an exception to (or disclosure for purposes of) such other representation, warranty or covenant is reasonably apparent on its face), the Company hereby represents and warrants to Acquiror as follows:

4.01 Organization, Standing and Corporate Power. The Holdco is a limited liability company duly organized, validly existing and in good standing under the Laws of the State of Delaware and has all requisite legal entity power and authority to carry on its business as now being conducted. SOC is a corporation duly organized, validly existing and in good standing under the Laws of the State of Texas and has all requisite legal entity power and authority to carry on its business as now being conducted. Each of the Holdco and SOC is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the nature of its business or the ownership, leasing or operation of its properties makes such qualification or licensing necessary, except as would not, individually or in the aggregate, reasonably be expected to prevent, materially delay or materially impair the ability of such Person to consummate the Transactions or result in material liability to the Company. The Company Organizational Documents that have been made available to Acquiror are true, correct and complete and are in effect as of the date of the Agreement and neither the Holdco nor SOC is in default under or in violation of any provision thereunder, as applicable.

4.02 Corporate Authority; Approval; Non-Contravention.

(a) Each of the Holdco and SOC has all requisite corporate or other legal entity power and authority, and has taken all corporate or other legal entity action necessary in order to execute, deliver and perform its obligations under this Agreement and the Ancillary Agreements to which it is a party and, subject to satisfaction of the conditions to Closing contemplated hereby, to consummate the Transactions. The execution, delivery and performance by each of the Holdco and SOC of this Agreement and the Ancillary Agreements to which it is a party, and the consummation by it of the Transactions, have been duly and validly authorized by all necessary corporate or other legal entity consents and authorizations on the part of such Person, and no other corporate or other legal entity actions on the part of such Person are necessary to authorize the execution and delivery by such Person of this Agreement, the Ancillary Agreements to which it is a party and the consummation by it of the Transactions. This Agreement has been duly executed and delivered by each of the Holdco and SOC and, assuming due authorization, execution and delivery hereof by the other parties, is a legal, valid and binding obligation of such Person, enforceable against such Person in accordance with its terms (subject to applicable bankruptcy, solvency, fraudulent transfer, reorganization, moratorium and other Laws affecting creditors’ rights generally from time to time in effect and by general principles of equity (the “Enforceability Exceptions”)).

(b) The execution, delivery and performance of this Agreement and the Ancillary Agreements to which each of the Holdco and SOC is a party, and the consummation of the Transactions, do not, and will not, constitute or result in (i) a breach or violation of, or a default under, the applicable Company Organizational Documents or (ii) with or without notice, lapse of time or both, a breach or violation of, a termination (or right of termination) of or default or change of control under, the creation or acceleration of any obligations under or the creation of a Lien (without regard to any Lien on a deposit in favor of Seller pending the closing of the PSA and the Senior Secured Term Loan Agreement) on any of the assets of the Company or any of its Affiliates pursuant to, any Material Contract to which the Company or any of its Affiliates is a party or, assuming (solely with respect to performance of this Agreement and consummation of the Transactions) compliance with the matters referred to in Section 4.02(a), under any Law to which the Company or any of its Affiliates is subject (except Laws that are applicable due to the Company’s business, or the Contracts or licenses of the Company), except (in the case of clause (ii) above) for such violations, breaches, defaults or changes of control which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

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4.03 Governmental Approvals. No consent, clearance or approval of, or registration, declaration, notice or filing with, any Governmental Authority is required by or with respect to the Company in connection with the execution and delivery by the Company of this Agreement or the consummation by the Company of the Transactions, except for (i) any applicable requirements of the HSR Act, (ii) such other consents, registrations, declarations, notices and filings which, if not obtained or made, would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, and (iii) the filing of the Holdco Certificate of Merger and the SOC Certificate of Merger with the Secretary of State of the State of Delaware and with regard to the SOC Certificate of Merger, the Secretary of State of the State of Texas.

4.04 Capitalization.

(a) The authorized equity of the Holdco consists of 6,575,000 shares of Holdco Equity, 3,000,000 of which are outstanding, and 40,000,000 shares of limited liability company membership interests in the Holdco designated as non-voting Class B shares. The authorized equity of SOC consists of 1,000 shares of SOC Common Stock, all of which are outstanding and held by Holdco. Set forth on Schedule 4.04(a) is a true, correct and complete list of each holder of issued and outstanding capital stock or other equity securities (including notes and other securities convertible into equity securities) of each of the Holdco and SOC and the number of shares or other equity interests held by each such holder. All of the outstanding Holdco Equity and SOC Common Stock (i) are duly authorized, validly issued, fully paid and, to the extent applicable, nonassessable, (ii) were issued in compliance in all material respects with applicable Laws, (iii) were not issued in breach or violation of any preemptive rights or Contract to which the Holdco or SOC, as applicable, is a party, and (iv) are owned free and clear of any Lien.

(b) Except for the Subscription Agreements and as set forth in Schedule 4.04(b), there are no preemptive or other outstanding rights, options, warrants, phantom interests, conversion rights, equity appreciation rights, redemption rights, repurchase rights, agreements, arrangements, calls, commitments or rights of any kind that obligate either the Holdco or SOC to issue or to sell any shares of its capital stock or other equity securities, or any securities or obligations convertible or exchangeable into or exercisable for, valued by reference to or giving any Person a right to subscribe for or acquire, any such capital stock or other equity securities or to vote with the Holdco Equityholders or SOC Equityholders on any matter, and no securities or obligations evidencing such rights are authorized, issued or outstanding. Except for the Subscription Agreements and as set forth in Schedule 4.04(b), neither the Holdco nor SOC is party to any stockholders agreement, voting agreement or registration rights agreement relating to its equity interests. No Holdco Equityholder or SOC Equityholder shall have any appraisal, quasi-appraisal, dissenters’ or any other similar rights under this Agreement or any other circumstances with respect to any Holdco Equity or SOC Common Stock in connection with the Mergers.

4.05 Subsidiaries. Except as set forth on Schedule 4.05, neither the Holdco nor SOC owns or controls, directly or indirectly, any equity interests in any other Person or is a participant in any joint venture, partnership or similar arrangement.

4.06 Information Supplied. The information supplied in writing by the Company for inclusion in the Proxy Statement (including any financial information) will not, as of the date the Proxy Statement is filed with the SEC and at the time of any meeting of the Acquiror Stockholders to be held in connection with the Transactions, contain any untrue statement of a material fact, or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not false or misleading. Notwithstanding the foregoing sentence, the Company makes no representation or warranty or covenant with respect to: (a) statements made or incorporated by reference therein in the Proxy Statement based on information supplied by Acquiror for inclusion therein or (b) any projections or forecasts or forward looking statements included in the Proxy Statement.

 

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4.07 Brokers. No broker, investment banker, financial advisor or other Person, other than those set out in Schedule 4.07, the fees and expenses of which will be paid by the Company pursuant to an engagement letter entered into therewith, is entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission in connection with the Transactions based upon arrangements made by or on behalf of the Company or any of its Affiliates.

4.08 Affiliate Agreements. Except as set forth on Schedule 4.08, neither the Holdco nor SOC is a party to any transaction, agreement, arrangement or understanding with any (a) present or former executive officer or director of Acquiror, the Holdco or SOC, (b) beneficial owner (within the meaning of Section 13(d) of the Exchange Act) of 5% or more of the capital stock or equity interests of Acquiror, the Holdco or SOC or (c) Affiliate, “associate” or member of the “immediate family” (as such terms are respectively defined in Rules 12b-2 and 16a-1 of the Exchange Act) of any of the foregoing.

4.09 PSA. The representations and warranties of the Seller and Purchaser (each, as defined in the PSA) in the PSA are incorporated by reference herein mutatis mutandis as if fully set forth in this Agreement as of the date hereof and as of the Closing Date, and are for the benefit of the Acquiror; provided, that (a) any references to “date of this Agreement,” “date hereof,” or similar phrases shall hereby refer to the date of this Agreement, (b) any reference of the PSA to “Closing Date” shall hereby refer to the Closing Date of this Agreement, and (c) any reference to “Schedules” and to any section thereof shall hereby refer to the Schedules and to such section as set forth in Schedule 4.09 of the Schedules, respectively, in each case unless the context dictates otherwise and any other capitalized terms used therein shall have the meanings ascribed to such terms in the PSA. To the Knowledge of the Company, the Company has no reason to believe that the conditions precedent to the financing contemplated by the PSA and the Senior Secured Term Loan Agreement will not be satisfied on a timely basis, that the Seller financing contemplated in the Senior Secured Term Loan Agreement will not be available in order to contemporaneously complete the Asset Acquisition with the Closing and that any default or event of default under the Senior Secured Term Loan Agreement will occur upon closing of the Senior Secured Term Loan Agreement.

4.10 Company Operations. Prior to the Closing, other than as set forth on Schedule 4.10 of the Schedules and other than the Subscription Agreements and the PSA, the Company and its Subsidiaries do not have any assets, liabilities, employees, Benefit Plans, or operating history.

4.11 Taxes.

(a) Each of the Holdco and SOC has timely filed with the appropriate Tax Authority, or has caused to be timely filed on its behalf (taking into account any valid extension of time within which to file), all material Tax Returns required to be filed by or on behalf of it, and all such Tax Returns are true, correct and complete in all material respects. Each of the Holdco and SOC has timely paid all material Taxes due and payable.

(b) Each of the Holdco and SOC has (i) withheld all material amounts of Taxes required to have been withheld by it in connection with amounts paid to any employee, independent contractor, creditor, stockholder or any other party, and (ii) timely remitted such amounts required to have been remitted to the appropriate Tax Authority.

(c) For U.S. federal income Tax purposes, (i) the Holdco is, and has been since formation, properly classified as a disregarded entity and (ii) SOC is, and has been since formation, properly classified as a corporation.

4.12 No Outside Reliance. Notwithstanding anything contained in this Agreement, the Company and its Affiliates and any of its and their respective directors, officers, employees, partners, stockholders, members or Representatives, acknowledge and agree that the Company has made its own investigation of the Acquiror and that neither Acquiror nor any of its Affiliates or any of their respective directors, officers, employees, partners,

 

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stockholders, members, agents or Representatives is making any representation or warranty whatsoever, express or implied, beyond the Acquiror Representations, including any implied warranty or representation as to condition, merchantability, suitability or fitness for a particular purpose or trade as to any equity interest in Acquiror or any assets of Acquiror, and the Company, on its own behalf and on behalf of its Affiliates and its and their directors, officers, employees, partners, stockholders, members or Representatives, disclaim reliance on any representations and warranties, express or implied, other than the Acquiror Representations. Without limiting the generality of the foregoing, it is understood that any cost or other estimates, financial or other projections or other predictions, as well as any information, documents or other materials (including any such materials contained in any “data room” (whether or not accessed by the Company or its Representatives) or reviewed by the Company) or management presentations that have been or shall hereafter be provided to the Company or any of its Affiliates, agents or Representatives are not and will not be deemed to be representations or warranties of the Acquiror, and no representation or warranty is made as to the accuracy or completeness of any of the foregoing except as may be expressly set forth in an Acquiror Representation.

4.13 Subscriptions. The Company has delivered to Acquiror true, correct and complete copies of each of the fully executed Subscription Agreements entered into on or prior to the execution of this Agreement (the “Pre-Signing Subscription Agreements”), pursuant to which the Subscribers have committed, subject to the terms and conditions therein, to purchase 7,150,000 shares of Acquiror Class A Common Stock in the aggregate for an aggregate amount equal to $71,500,000. Each of the Pre-Signing Subscription Agreements is in full force and effect and is legal, valid and binding upon the Company and, to the Knowledge of the Company, the applicable Subscribers, enforceable in accordance with its terms. None of the Pre-Signing Subscription Agreements has been withdrawn, terminated, amended or modified since the date of delivery hereunder and prior to the execution of this Agreement, and, to the Knowledge of the Company, as of the date of this Agreement no such withdrawal, termination, amendment or modification is contemplated, and as of the date of this Agreement the commitments contained in the Pre-Signing Subscription Agreements have not been withdrawn, terminated or rescinded by the applicable Subscribers in any respect. As of the date hereof, there are no side letters or Contracts to which the Company is a party related to the provision or funding, as applicable, of the purchases contemplated by the Pre-Signing Subscription Agreements or the transactions contemplated hereby other than as expressly set forth in this Agreement or the Pre-Signing Subscription Agreements. The Company has fully paid any and all commitment fees or other fees required in connection with the Pre-Signing Subscription Agreements that are payable on or prior to the date hereof and will pay any and all such fees when and as the same become due and payable after the date hereof and prior to the Holdco Effective Time pursuant to the Pre-Signing Subscription Agreements (such reasonable commitment fees or other reasonable fees paid by the Company prior to the Holdco Effective Time, the “Subscription Fees”). The Company has, and to the Knowledge of the Company, each Subscriber has, complied with all of its obligations under the Pre-Signing Subscription Agreements. There are no conditions precedent or other contingencies related to the consummation of the purchases set forth in the Pre-Signing Subscription Agreements, other than as expressly set forth in the Pre-Signing Subscription Agreements. The Pre-Signing Subscription Agreements are freely assignable by operation of law from the Company to Acquiror in connection with the Transactions. To the Knowledge of the Company on the date hereof, no event has occurred which, with or without notice, lapse of time or both, would or would reasonably be expected to (i) constitute a default or breach on the part of the Company or the Subscribers that are party to the Pre-Signing Subscription Agreements, (ii) assuming the conditions set forth in Section 9.01 and Section 9.03 will be satisfied, constitute a failure to satisfy a condition on the part of the Company or such Subscribers or (iii) assuming the conditions set forth in Section 9.01 and Section 9.03 will be satisfied result in any portion of the amounts to be paid by such Subscribers in accordance with the Pre-Signing Subscription Agreements being unavailable on the Closing Date. As of the date hereof, assuming the conditions set forth in Section 9.01 and Section 9.03 will be satisfied, the Company does not have Knowledge of any reason that any of the conditions to the consummation of the purchases under the Pre-Signing Subscription Agreements will not be satisfied, and, as of the date hereof, the Company does not have Knowledge of any fact or event that would or would reasonably be expected to cause such conditions not to be satisfied.

 

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4.14 No Other Representations or Warranties. The Company Representations are the exclusive representations and warranties made by the Company. Except for the Company Representations neither the Company nor any of its Affiliates or Representatives or any other Person has made or makes any other express or implied representation or warranty, either written or oral, on behalf of the Company, to the accuracy or completeness of any information regarding the Company or the Assets available to the other parties or their respective Representatives and expressly disclaims any such other representations or warranties. In particular, without limiting the foregoing, neither the Company nor any other Person makes or has made any representation or warranty to the other parties hereto with respect to, and shall have no liability in respect of, (a) any financial projection, forecast, estimate, budget or prospect information relating to the Company or the Asset Acquisition or (b) any oral or, written information made available to the other parties hereto in the course of their evaluation of the Company or the Asset Acquisition and the negotiation of this Agreement or in the course of the Transactions, except in each case, for the Company Representations.

ARTICLE V

REPRESENTATIONS AND WARRANTIES

OF ACQUIROR

Except as set forth in the Schedules to this Agreement (each of which qualifies (a) the correspondingly numbered representation, warranty or covenant if specified therein and (b) such other representations, warranties or covenants where its relevance as an exception to (or disclosure for purposes of) such other representation, warranty or covenant is reasonably apparent on its face), as it relates to the PSA, any Subscription Agreement or the transactions contemplated thereby, or the transactions contemplated by the Asset Acquisition, or in the Acquiror SEC Reports filed or furnished by Acquiror on or after February 24, 2021 (excluding (x) any disclosures in such Acquiror SEC Reports under the headings “Risk Factors,” “Forward-Looking Statements” or “Qualitative Disclosures About Market Risk” and other disclosures that are predictive, cautionary or forward looking in nature and (y) any exhibits or other documents appended thereto), Acquiror represents and warrants to the Company as follows:

5.01 Organization, Standing and Corporate Power. Acquiror is an entity duly incorporated, validly existing and in good standing under the Laws of the State of Delaware, and has all requisite legal entity power and authority to carry on its business as now being conducted. Acquiror is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the nature of its business or the ownership, leasing or operation of its properties makes such qualification or licensing necessary, except as would not, individually or in the aggregate, reasonably be expected to prevent, materially delay or materially impair the ability of Acquiror to consummate the Transactions or be material and adverse to Acquiror.

5.02 Corporate Authority; Approval; Non-Contravention.

(a) Acquiror has all requisite corporate or other legal entity power and authority, and has taken all corporate or other legal entity action necessary in order to execute, deliver and perform its obligations under this Agreement and the Ancillary Agreements to which it is a party and, subject to satisfaction of the conditions to Closing contemplated hereby, to consummate the Transactions. The execution, delivery and performance by Acquiror of this Agreement and the Ancillary Agreements to which it is a party, and the consummation by it of the Transactions, have been duly and validly authorized by all necessary corporate consents and authorizations on the part of Acquiror, and no other corporate or other actions on the part of Acquiror are necessary to authorize the execution and delivery by Acquiror of this Agreement, the Ancillary Agreements to which it is a party and the consummation by it of the Transactions, in each case, subject to the satisfaction of the conditions set forth in Section 9.01. This Agreement and each other Ancillary Agreement to which it is a party has been duly executed and delivered by Acquiror and, assuming due authorization, execution and delivery hereof and thereof by the other parties, is a legal, valid and binding obligation of Acquiror, enforceable against Acquiror in accordance with its terms (subject to the Enforceability Exceptions).

 

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(b) The execution, delivery, and performance of this Agreement and the Ancillary Agreements to which Acquiror is a party, and the consummation of the Transactions, and subject to the satisfaction of the conditions set forth in Section 9.01 and Section 9.02, do not, and will not, constitute or result in (i) a breach or violation of, or a default under, the Acquiror Organizational Documents or (ii) with or without notice, lapse of time or both, a breach or violation of, a termination (or right of termination) of or default under, the creation or acceleration of any obligations under or the creation of a Lien (without regard to any Lien contemplated by the Senior Secured Term Loan Agreement and the Senior Secured Term Loan Agreement Collateral Documents) on any of the assets of Acquiror or any of its Affiliates pursuant to, any Contract to which Acquiror or any of its Affiliates is a party or, assuming (solely with respect to performance of this Agreement and consummation of the Transactions) compliance with the matters referred to in Section 5.02(a), under any Law to which Acquiror or any of its Affiliates is subject, except (in the case of clause (ii) above) for such violations, breaches or defaults which has not had or would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of Acquiror to enter into and perform its obligations under this Agreement and consummate the Transactions.

5.03 Litigation.

(a) Neither Acquiror nor, to the Knowledge of Acquiror, any of its officers, in their capacities as such, is the subject of or engaged in any material Action before a Governmental Authority, arbitration or other dispute resolution process before a third party unrelated to the dispute, whether as claimant, defendant or otherwise, and no such litigation, arbitration or dispute resolution process is pending or, to the Knowledge of Acquiror, threatened in writing on the date hereof, in each case, that would, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of Acquiror to enter into and perform its obligations under this Agreement and consummate the Transactions. As of the date hereof, Acquiror is not, nor to the Knowledge of Acquiror is any of its officers, in their capacities as such, subject to any settlement agreements or arrangements, whether written or oral, or is in discussions for a settlement or arrangement, regarding any material disputes or material claims pursuant to which Acquiror has any material outstanding obligations or which provides for any injunctive relief.

(b) As of the date of this Agreement, Acquiror is not a party to or subject to the provisions of any outstanding judgment, order, writ, injunction, decree or award of any Governmental Authority (except if generally applicable without Acquiror being named therein) that would, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of Acquiror to enter into and perform its obligations under this Agreement and consummate the Transactions.

5.04 Compliance with Laws. Acquiror is, and since its date of incorporation, has been, operating in all material respects in a manner that is customary for businesses similar to Acquiror, and Acquiror is conducting and, since its date of incorporation, has conducted its business in compliance in all material respects with all Laws applicable to it.

5.05 Employee Benefit Plans. Except as may be contemplated by the Acquiror Equity Plan Proposal, Acquiror does not maintain, contribute to or have any obligation or liability, or could reasonably be expected to have any obligation or liability, under, any Benefit Plan with respect to which Acquiror has any outstanding obligations or liabilities.

5.06 Financial Ability; Trust Account.

(a) As of October 26, 2022, there is (i) at least $288,811,476.52 invested in a trust account at J.P. Morgan Chase Bank (the “Trust Account”), maintained by American Stock Transfer & Trust Company acting as trustee (the “Trustee”), pursuant to the Investment Management Trust Agreement, dated February 24, 2021 by and between Acquiror and the Trustee (the “Trust Agreement”) and (ii) at least $104,000 held by Acquiror outside of the Trust Account. The Trust Agreement is in full force and effect and is a legal, valid and

 

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binding obligation of Acquiror and, to the Knowledge of Acquiror, the Trustee, enforceable in accordance with its terms, subject to the Enforceability Exceptions. The Trust Agreement has not been terminated, repudiated, rescinded, amended or supplemented or modified, in any respect, and, to the Knowledge of Acquiror, no such termination, repudiation, rescission, amendment, supplement or modification is contemplated. To the Knowledge of Acquiror, there are no side letters and there are no agreements, Contracts, arrangements or understandings, whether written or oral, with the Trustee or any other Person that would (A) cause the description of the Trust Agreement in the Acquiror SEC Reports to be inaccurate or (B) entitle any Person (other than (x) any Acquiror Stockholder who is a Redeeming Stockholder, (y) the underwriters referred to in the Trust Agreement and (z) the Acquiror), to any portion of the proceeds in the Trust Account. Prior to the Closing, none of the funds held in the Trust Account may be released except in accordance with the Trust Agreement, Acquiror Organizational Documents and Acquiror’s final prospectus dated February 24, 2021, as amended. Amounts in the Trust Account are invested in United States government securities or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act of 1940. Acquiror has performed all material obligations required to be performed by it to date under, and is not in material default, breach or delinquent in performance or any other respect (claimed or actual) in connection with, the Trust Agreement, and no event has occurred which, with due notice or lapse of time or both, would constitute such a default or breach thereunder. There are no Actions pending or, to the Knowledge of Acquiror, threatened with respect to the Trust Account. Acquiror has not released any money from the Trust Account (other than interest income earned on the principal held in the Trust Account as permitted by the Trust Agreement). As of the Effective Time, the obligations of Acquiror to dissolve or liquidate pursuant to the Acquiror Organizational Documents shall terminate, and, as of the Effective Time, Acquiror shall have no obligation whatsoever pursuant to the Acquiror Organizational Documents to dissolve and liquidate the assets of Acquiror by reason of the consummation of the Transactions. Following the Effective Time, no Acquiror Stockholder shall be entitled to receive any amount from the Trust Account except to the extent such Acquiror Stockholder is a Redeeming Stockholder.

(b) As of the date hereof, assuming the accuracy of the representations and warranties of the Company herein and the compliance by the Company with its respective obligations hereunder, Acquiror has no reason to believe that any of the conditions to the use of funds in the Trust Account will not be satisfied or funds available in the Trust Account (net of the required disbursements to other Persons in accordance with the Trust Agreement and the Acquiror Organizational Documents) will not be available to Acquiror on the Closing Date.

(c) Except as set forth on Schedule 5.06(c), Acquiror does not have, or have any present intention, agreement, arrangement or understanding to enter into or incur, any obligations with respect to or under any Indebtedness.

5.07 Taxes.

(a) Acquiror has timely filed with the appropriate Tax Authority, or has caused to be timely filed on its behalf (taking into account any valid extension of time within which to file), all material Tax Returns required to be filed by or on behalf of it, and all such Tax Returns are true, correct and complete in all material respects. Acquiror has timely paid all material Taxes due and payable.

(b) Acquiror has (i) withheld all material amounts of Taxes required to have been withheld by it in connection with amounts paid to any employee, independent contractor, creditor, stockholder or any other party, and (ii) timely remitted such amounts required to have been remitted to the appropriate Tax Authority.

(c) Acquiror is not subject to any material Tax liability that has not been paid or fully reserved for in the audited financial statements (including, in each case, the notes and schedules thereto) included in the Acquiror SEC Reports in accordance with GAAP.

(d) No claim, assessment, deficiency or proposed adjustment for any material Taxes for which Acquiror is liable has been asserted or assessed by any Tax Authority that remains unresolved or unpaid except

 

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for claims, assessments, deficiencies or proposed adjustments being contested in good faith and for which adequate reserves have been established in accordance with GAAP. There is no material Tax audit or other examination or proceeding with respect to Taxes of Acquiror presently in progress, and there are no waivers, extensions or requests for any waivers or extensions of any statute of limitations currently in effect with respect to any material Taxes or Tax Returns of Acquiror.

(e) Acquiror is not (i) a party to any Tax sharing, indemnification, allocation or similar agreement or arrangement (excluding any commercial contract entered into in the ordinary course of business and not primarily related to Taxes), (ii) a member of an affiliated, consolidated, combined, unitary or similar Tax group (other than any such Tax group the common parent of which was Acquiror, as applicable), or (iii) a party to any “listed transaction” under Treasury Regulations Section 1.6011-4(b)(2) (or any corresponding or similar provision of state, local or foreign Law).

(f) Acquiror has no material liability for Taxes of any other Person as a result of Treasury Regulations Section 1.1502-6, as a transferee or successor, by contract or by operation of Law (other than pursuant to customary commercial contracts entered into in the ordinary course of business and not primarily related to Taxes).

(g) Acquiror will not be required to include any material item of income in, or exclude any material deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any: (i) change in method of accounting, or use of an improper method of accounting, for a taxable period (or portion thereof) ending on or prior to the Closing Date; (ii) “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign Law) executed on or prior to the Closing Date; (iii) installment sale or open transaction disposition made on or prior to the Closing Date; or (iv) prepaid amount or deferred revenue received or accrued on or prior to the Closing Date outside of the ordinary course of business.

(h) Acquiror has not distributed stock of another Person, or had its stock distributed by another Person, in a transaction that was purported or intended to be governed in whole or in part by Section 355 of the Code (or so much of Section 356 of the Code as relates to Section 355 of the Code).

(i) There are no material Liens for Taxes upon any property or asset of Acquiror.

5.08 Brokers. No broker, investment banker, financial advisor or other Person, other than those set out in Schedule 5.08, the fees and expenses of which will be paid by Acquiror pursuant to an engagement letter entered into therewith, is entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission in connection with the Transactions based upon arrangements made by or on behalf of Acquiror or any of its Affiliates.

5.09 Acquiror SEC Reports; Financial Statements; Sarbanes-Oxley Act.

(a) Acquiror has filed in a timely manner all required registration statements, reports, schedules, forms, statements and other documents required to be filed by it with the SEC since February 24, 2021 (collectively, as they have been amended since the time of their filing and including all exhibits thereto, the “Acquiror SEC Reports”) in accordance with applicable Law and NYSE requirements. None of the Acquiror SEC Reports, as of their respective dates (or if amended or superseded by a filing prior to the date of this Agreement or the Closing Date, then on the date of such filing), contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. The audited financial statements and unaudited interim financial statements (including, in each case, the notes and schedules thereto) included in the Acquiror SEC Reports complied as to form in all material respects with the published rules and regulations of the SEC with respect thereto, were prepared in accordance with GAAP applied on a consistent basis during the periods

 

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involved (except as may be indicated therein or in the notes thereto and except with respect to unaudited statements as permitted by Form 10-Q of the SEC), and fairly present (subject, in the case of the unaudited interim financial statements included therein, to normal year-end adjustments and the absence of complete footnotes) in all material respects the financial position of Acquiror as of the respective dates thereof and the results of their operations and cash flows for the respective periods then ended.

(b) Acquiror has established and maintains disclosure controls and procedures (as defined in Rule 13a-15 under the Exchange Act). Such disclosure controls and procedures are designed to ensure that material information relating to Acquiror and other material information required to be disclosed by Acquiror in the reports and other documents that it files or furnishes under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that all such material information is accumulated and communicated to Acquiror’s principal executive officer and its principal financial officer as appropriate to allow timely decisions regarding required disclosure and to make the certifications required pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act. Such disclosure controls and procedures are effective in timely alerting Acquiror’s principal executive officer and principal financial officer to material information required to be included in Acquiror’s periodic reports required under the Exchange Act.

(c) Acquiror has established and maintained a system of internal controls. Such internal controls are sufficient to provide reasonable assurance regarding the reliability of Acquiror’s financial reporting and the preparation of Acquiror’s financial statements for external purposes in accordance with GAAP.

(d) There are no outstanding loans or other extensions of credit made by Acquiror to any executive officer (as defined in Rule 3b-7 under the Exchange Act) or director of Acquiror. Acquiror has not taken any action prohibited by Section 402 of the Sarbanes-Oxley Act.

(e) Neither Acquiror (including any employee thereof) nor Acquiror’s independent auditors has identified or been made aware of (i) any significant deficiency or material weakness in the system of internal accounting controls utilized by Acquiror, (ii) any fraud, whether or not material, that involves Acquiror’s management or other employees who have a role in the preparation of financial statements or the internal accounting controls utilized by Acquiror or (iii) any claim or allegation regarding any of the foregoing.

(f) There are no outstanding SEC comments from the SEC with respect to the Acquiror SEC Reports and none of the Acquiror SEC Reports filed on or prior to the date hereof is subject to ongoing SEC review or investigation.

5.10 Business Activities; Absence of Changes.

(a) Since its incorporation, Acquiror has not conducted any business activities other than activities directed toward the accomplishment of a Business Combination. Except as set forth in the Acquiror Organizational Documents, there is no agreement, commitment or Governmental Order binding upon Acquiror or to which Acquiror is a party which has had or would reasonably be expected to have the effect of prohibiting or impairing any business practice of Acquiror or any acquisition of property by Acquiror or the conduct of business by Acquiror as currently conducted or as contemplated to be conducted as of the Closing other than such effects, individually or in the aggregate, which have not had and would not reasonably be expected to have a material adverse effect on the ability of Acquiror to enter into and perform its obligations under this Agreement and consummate the Transactions.

(b) Acquiror does not own or have a right to acquire, directly or indirectly, any interest or investment (whether equity or debt) in any corporation, partnership, joint venture, business, trust or other entity. Except for this Agreement and the Transactions, Acquiror has no interests, rights, obligations or liabilities with respect to, and is not party to, bound by or has its assets or property subject to, in each case whether directly or indirectly, any Contract or transaction which is, or could reasonably be interpreted as constituting, a Business Combination.

 

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(c) Except for (i) this Agreement and the agreements expressly contemplated hereby (including any agreements permitted by Section 7.02), (ii) as set forth on Schedule 5.10(c) and (iii) with respect to fees and expenses of Acquiror’s legal, financial and other advisors, Acquiror is not party to any Contract with any other Person.

(d) There is no Indebtedness or other liability or obligation, contingent or otherwise, against Acquiror, except for liabilities and obligations (i) reflected or reserved for on Acquiror’s consolidated balance sheet for the quarterly period ended June 30, 2022 or disclosed in the notes thereto (other than any such liabilities not reflected, reserved or disclosed as are not and would not be, in the aggregate, material to Acquiror), (ii) that have arisen since the date of Acquiror’s consolidated balance sheet for the quarterly period ended June 30, 2022 in the ordinary course of the operation of business of Acquiror (other than any such liabilities as are not and would not be, in the aggregate, material to Acquiror) or (iii) disclosed in Schedule 5.10(d).

(e) (i) Since the date of Acquiror’s incorporation, there has not been any change, development, condition, occurrence, event or effect relating to Acquiror that, individually or in the aggregate, resulted in, or would reasonably be expected to result in, a material adverse effect on the ability of Acquiror to enter into and perform its obligations under this Agreement and consummate the Transactions and (ii) from June 30, 2022 through the date of this Agreement, Acquiror has not taken any action that would require the consent of the Company pursuant to Section 7.02 if such action had been taken after the date hereof.

5.11 Proxy Statement. As of the time the definitive Proxy Statement is filed with the SEC, the Proxy Statement (together with any amendments or supplements thereto) will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that Acquiror makes no representations or warranties as to the information contained in or omitted from the Proxy Statement in reliance upon and in conformity with information furnished in writing to Acquiror by or on behalf of the Company specifically for inclusion in the Proxy Statement.

5.12 No Outside Reliance. Notwithstanding anything contained in this Article V or any other provision of this Agreement, Acquiror and its Affiliates and any of its and their respective directors, officers, employees, partners, stockholders, members or Representatives, acknowledge and agree that Acquiror has made its own investigation of the Company and that neither the Company nor any of its Affiliates or any of their respective directors, officers, employees, partners, stockholders, members, agents or Representatives is making any representation or warranty whatsoever, express or implied, beyond the Company Representations, including any implied warranty or representation as to condition, merchantability, suitability or fitness for a particular purpose or trade as to any of the assets of the Company or the Assets, and Acquiror, on its own behalf and on behalf of its Affiliates and its and their directors, officers, employees, partners, stockholders, members or Representatives, disclaim reliance on any representations and warranties, express or implied, other than the Company Representations. Without limiting the generality of the foregoing, it is understood that any cost or other estimates, financial or other projections or other predictions that may be contained or referred to in the Schedules or elsewhere, as well as any information, documents or other materials (including any such materials contained in any “data room” (whether or not accessed by Acquiror or its Representatives) or reviewed by Acquiror) or management presentations that have been or shall hereafter be provided to Acquiror or any of its Affiliates, agents or Representatives are not and will not be deemed to be representations or warranties of the Company, and no representation or warranty is made as to the accuracy or completeness of any of the foregoing except as may be expressly set forth in a Company Representation. Except as otherwise expressly set forth in any Company Representation, Acquiror understands and agrees that the Assets and any assets, properties and business of the Company are furnished “as is”, “where is” and subject to all faults and without any other representation or warranty of any nature whatsoever.

 

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5.13 Capitalization.

(a) The authorized capital stock of Acquiror consists of (i) 220,000,000 shares of Acquiror Common Stock, of which (A) 200,000,000 shares of Acquiror Class A Common Stock are authorized, and 28,750,000 shares of Acquiror Class A Common Stock are issued and outstanding as of the date of this Agreement, (B) 20,000,000 shares of Acquiror Class B Common Stock are authorized, and 7,187,500 shares of Acquiror Class B Common Stock are issued and outstanding as of the date of this Agreement, and (C) 22,125,000 Acquiror Warrants are issued and outstanding as of the date of this Agreement and (ii) 1,000,000 shares of Preferred Stock of Acquiror, par value $0.0001 (“Acquiror Preferred Stock”), of which no shares are issued and outstanding. All of the issued and outstanding shares of Acquiror Common Stock and Acquiror Warrants (w) have been duly authorized and validly issued and are fully paid and nonassessable, (x) were issued in compliance in all material respects with applicable Law, (y) were not issued in breach or violation of any preemptive rights or Contract and (z) are fully vested and not otherwise subject to a substantial risk of forfeiture within the meaning of Section 83 of the Code, except as disclosed in the Acquiror SEC Reports with respect to certain Acquiror Common Stock held by the Sponsor.

(b) Except for this Agreement, the Acquiror Warrants and the Subscription Agreements, as of the date hereof, there are (i) no subscriptions, calls, options, warrants, rights or other securities convertible into or exchangeable or exercisable for shares of Acquiror Common Stock or the equity interests of Acquiror, or any other Contracts to which Acquiror is a party or by which Acquiror is bound obligating Acquiror to issue or sell any shares of capital stock of, other equity interests in or debt securities of, Acquiror, and (ii) no equity equivalents, stock appreciation rights, phantom stock ownership interests or similar rights in Acquiror. Except as disclosed in the Acquiror SEC Reports or the Acquiror Organizational Documents, there are no outstanding contractual obligations of Acquiror to repurchase, redeem or otherwise acquire any securities or equity interests of Acquiror. There are no outstanding bonds, debentures, notes or other indebtedness of Acquiror having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matter for which Acquiror Stockholders may vote. Except as disclosed in the Acquiror SEC Reports, there are no registration rights, and Acquiror is not a party to any stockholders agreement, voting agreement or registration rights agreement, rights plan, anti-takeover plan or similar agreements relating to Acquiror Common Stock or any other equity interests of Acquiror. Acquiror does not own any capital stock or any other equity interests in any other Person or have any right, option, warrant, conversion right, stock appreciation right, redemption right, repurchase right, agreement, arrangement or commitment of any character under which a Person is or may become obligated to issue or sell, or give any right to subscribe for or acquire, or in any way dispose of, any shares of the capital stock or other equity interests, or any securities or obligations exercisable or exchangeable for or convertible into any shares of the capital stock or other equity interests, of such Person.

5.14 NYSE Stock Market Quotation. The issued and outstanding shares of Acquiror Common Stock are registered pursuant to Section 12(b) of the Exchange Act and are listed for trading on NYSE under the symbol “FLME.” Acquiror is in compliance in all material respects with the rules of NYSE and there is no Action pending or, to the Knowledge of Acquiror, threatened against Acquiror by NYSE, the Financial Industry Regulatory Authority or the SEC with respect to any intention by such entity to deregister the Acquiror Common Stock or terminate the listing of Acquiror Common Stock on NYSE. None of Acquiror or its Affiliates has taken any action in an attempt to terminate the registration of the Acquiror Common Stock or Acquiror Warrants under the Exchange Act except as contemplated by this Agreement.

5.15 Contracts; No Defaults.

(a) The Acquiror SEC Reports disclose every “material contract” (as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC) (other than confidentiality and non-disclosure agreements and this Agreement) to which, as of the date of this Agreement, Acquiror is a party or by which its assets are bound (together with the Contracts identified in Schedule 5.10(c), the “Acquiror Material Contracts”).

 

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(b) Acquiror is not, and it has not received written notice that any other party to any such Acquiror Material Contract is, in material violation or material breach of or material default (immediately or upon notice or lapse of time) under any such Acquiror Material Contract to which it is a party or any of its properties or other assets is subject. No such Acquiror Material Contract is the subject of a notice to terminate, except for any expiration of the term of such Contract following the date of this Agreement in accordance with its terms. Each Acquiror Material Contract is in full force and effect and, subject to the Enforceability Exceptions, is legal, valid and binding on Acquiror and, to the Knowledge of Acquiror, each other party thereto, except as would not be material and adverse to Acquiror. There is no default under any such Acquiror Material Contract by Acquiror, or, to the Knowledge of Acquiror, any other party thereto, and no event has occurred that with the lapse of time or the giving of notice or both would constitute a default thereunder by Acquiror, or, to the Knowledge of Acquiror, any other party thereto, in each case, except as would not be material and adverse to Acquiror.

5.16 Title to Property. Except as set forth on Schedule 5.16, Acquiror (a) does not own or lease any real or personal property and (b) is not a party to any agreement or option to purchase any real property, personal property or other material interest therein.

5.17 Investment Company Act. Acquiror is not an “investment company” within the meaning of the Investment Company Act of 1940.

5.18 Affiliate Agreements. Except as set forth on Schedule 5.18, Acquiror is not a party to any transaction, agreement, arrangement or understanding with any (a) present or former executive officer or director of Acquiror, (b) beneficial owner (within the meaning of Section 13(d) of the Exchange Act) of 5% or more of the capital stock or equity interests of Acquiror or (c) Affiliate, “associate” or member of the “immediate family” (as such terms are respectively defined in Rules 12b-2 and 16a-1 of the Exchange Act) of any of the foregoing (each of the foregoing, an “Acquiror Affiliate Agreement”).

5.19 Takeover Statutes and Charter Provisions. As of the date of this Agreement and through the Effective Time, no “fair price,” “moratorium,” “control share acquisition” or other anti-takeover statute or similar domestic or foreign Law applies with respect to Acquiror in connection with this Agreement, the Mergers, the issuance of the Aggregate Merger Consideration or any of the other Transactions. As of the date of this Agreement and through the Effective Time, there is no stockholder rights plan, “poison pill” or similar anti-takeover agreement or plan in effect to which Acquiror is subject, party or otherwise bound.

5.20 No Other Representations or Warranties. The Acquiror Representations are the exclusive representations and warranties made by Acquiror. Except for the Acquiror Representations, neither Acquiror nor any of its Affiliates or Representatives or any other Person has made or makes any other express or implied representation or warranty, either written or oral, on behalf of Acquiror, to the accuracy or completeness of any information regarding Acquiror available to the other parties or their respective Representatives and expressly disclaims any such other representations or warranties. Without limiting the foregoing, neither Acquiror nor any other Person makes or has made any representation or warranty to the other parties hereto with respect to, and shall have no liability in respect of, (a) any financial projection, forecast, estimate, budget or prospect information relating to Acquiror or (b) any oral or written information made available to the other parties hereto in the course of their evaluation of Acquiror and the negotiation of this Agreement or in the course of the Transactions, except in each case, for the Acquiror Representations.

ARTICLE VI

COVENANTS OF THE COMPANY

6.01 Conduct of Business. From the date of this Agreement until the earlier of the Closing Date or the termination of this Agreement in accordance with its terms (the “Interim Period”), the Company shall, except as set forth on Schedule 6.01, as expressly contemplated by this Agreement or as consented to by Acquiror in writing (which consent shall not be unreasonably conditioned, withheld or delayed), or as may be required by Law: (i) use its commercially reasonable efforts to conduct and operate its business in the ordinary course

 

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consistent with past practice in all material respects, and (ii) use commercially reasonable efforts to keep available the services of its present officers. Without limiting the generality of the foregoing, except as set forth on Schedule 6.01, as expressly contemplated by this Agreement or as consented to by Acquiror in writing (which consent shall not be unreasonably conditioned, withheld or delayed, except with respect to Section 6.01(c) or Section 6.01(d), in which event Acquiror may withhold or grant its consent in its sole discretion), or as may be required by Law, the Company shall not during the Interim Period:

(a) change or amend the Company Organizational Documents, or enter into or change or amend any other organizational type documents of the Company;

(b) declare, make or pay any dividend or other distribution (whether in cash, equity or property) to any equityholder of the Company or repurchase or redeem any equity interests of the Company;

(c) create, allot, issue, redeem or repurchase or agree to create, allot, issue, redeem or repurchase any equity or other securities of whatsoever nature convertible into equity (or any option to subscribe for the same) of the Company;

(d) terminate, amend, supplement or otherwise modify in any manner, or terminate, amend, supplement, modify, waive or release any liabilities, obligations, rights, claims or benefits under or pursuant to any Material Contract, or consent or agree to do any of the foregoing, or consummate the transactions contemplated under the PSA other than with Acquiror;

(e) sell, transfer, lease, pledge or otherwise encumber or subject to any Lien, abandon, cancel, let lapse or convey or dispose of any assets, properties or business of the Company or the assets to be acquired pursuant to the PSA, other than in the ordinary course of business;

(f) (i) fail to maintain its existence or acquire by merger or consolidation with, or merge or consolidate with, or purchase a material portion of the assets or equity of, any corporation, partnership, limited liability company, association, joint venture or other business organization or division thereof; or (ii) adopt or enter into a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of the Company (other than the Transactions);

(g) make any capital expenditures (or commitment to make any capital expenditures), other than in the ordinary course of business;

(h) make any loans, advances or capital contributions to, or investments in, any other Person (including to any of its officers, directors, agents or consultants), make any material change in its existing borrowing or lending arrangements for or on behalf of such Persons, or enter into any “keep well” or similar agreement to maintain the financial condition of any other Person;

(i) (A) adopt or amend any Benefit Plan, or enter into any employment contract or collective bargaining agreement, (B) hire any employee or any other individual to provide services to the Company or its Subsidiaries, other than in the ordinary course of business or (C) enter into any agreement to pay compensation to any of its officers or directors;

(j) make, revoke or change any material Tax election, adopt or change any material Tax accounting method or period, file any amendment to a material Tax Return, enter into any agreement with a Tax Authority with respect to a material amount of Taxes, settle or compromise any examination, audit or other Action with a Tax Authority of or relating to any material Taxes or settle or compromise any claim or assessment by a Tax Authority in respect of material Taxes, consent to any extension or waiver of the statutory period of limitations applicable to any claim or assessment in respect of Taxes, or enter into any Tax sharing, indemnification, allocation or similar agreement (excluding any commercial contract entered into in the ordinary course of business and not primarily related to Taxes);

 

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(k) incur, issue, assume, guarantee or otherwise become liable for any Indebtedness, or in any material respect, modify any Indebtedness, other than in the ordinary course of business;

(l) enter into any material new line of business outside of the business currently conducted by the Company as of the date of this Agreement or take any actions that if taken prior to the signing, would be required to be disclosed on Schedule 4.10;

(m) make any material change in financial accounting methods, principles or practices, except insofar as may have been required by a change in GAAP (including pursuant to standards, guidelines and interpretations of the Financial Accounting Standards Board or any similar organization) or applicable Law; or

(n) enter into any agreement or undertaking to do any action prohibited under this Section 6.01;

provided, however, that notwithstanding anything in this Agreement to the contrary, if the PSA obligates SOC to take or refrain from taking an action, SOC shall be entitled to take or refrain from taking such action solely to the extent so required.

6.02 Inspection. Subject to confidentiality obligations and similar restrictions that may be applicable to information furnished to the Company by third parties that may be in the Company’s possession from time to time, and except for any information which (a) relates to interactions with prospective buyers of the Company or the negotiation of this Agreement and the Transactions or (b) in the judgment of legal counsel (including in-house counsel) of the Company would result in the loss of attorney-client privilege or other privilege from disclosure or would conflict with any applicable Law or confidentiality obligations to which the Company is bound, the Company shall afford to Acquiror and its Representatives reasonable access during the Interim Period, during normal business hours and with reasonable advance notice, in such manner as to not interfere with the normal operation of the Company, to all of its properties, books, projections, plans, systems, Contracts, commitments, Tax Returns, records, commitments, analyses and appropriate officers and employees of the Company, and shall furnish such Representatives with all financial and operating data and other information concerning the affairs of the Company and that are in the possession of the Company as such Representatives may reasonably request; provided, that such access shall not include any unreasonably invasive or intrusive investigations or other testing, sampling or analysis of any properties, facilities or equipment of the Company without the prior written consent of the Company. The parties shall use commercially reasonable efforts to make alternative arrangements for such disclosure where the restrictions in the preceding sentence apply. All information obtained by Acquiror and its Representatives under this Agreement shall be subject to Section  8.05(a) prior to the Effective Time.

6.03 No Claim Against the Trust Account. The Company acknowledges that Acquiror is a blank check company with the power and privileges to effect a merger, asset acquisition, reorganization or similar business combination involving the Company and one or more businesses or assets, and the Company has read Acquiror’s final prospectus, dated February 24, 2021 and other Acquiror SEC Reports, the Acquiror Organizational Documents, and the Trust Agreement and understands that Acquiror has established the Trust Account described therein for the benefit of Acquiror’s public stockholders and that disbursements from the Trust Account are available only in the limited circumstances set forth therein. The Company further acknowledges and agrees that Acquiror’s sole assets consist of the cash proceeds of Acquiror’s initial public offering and private placements of its securities, and that substantially all of these proceeds have been deposited in the Trust Account for the benefit of its public stockholders. The Company further acknowledges that, if the Transactions or, in the event of termination of this Agreement, another Business Combination, are or is not consummated by March 1, 2023 or such later date as approved by the stockholders of Acquiror to complete a Business Combination, Acquiror will be obligated to return to its stockholders the amounts being held in the Trust Account. Accordingly, the Company (on behalf of itself and its Affiliates) hereby waives any past, present or future claim of any kind against, and any right to access, the Trust Account, any trustee of the Trust Account and Acquiror to collect from the Trust Account any monies that may be owed to them by Acquiror or any of its Affiliates for any reason whatsoever,

 

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and will not seek recourse against the Trust Account at any time for any reason whatsoever, including, without limitation, for any Willful Breach of this Agreement; provided, that (i) nothing herein shall serve to limit or prohibit the Company’s right to pursue a claim against Acquiror for legal relief against assets held outside the Trust Account, for specific performance or other equitable relief, and (ii) nothing herein shall serve to limit or prohibit any claims that the Company may have in the future against Acquiror’s assets or funds that are not held in the Trust Account (including any funds that have been released from the Trust Account (other than in payment to Redeeming Stockholders) and any assets that have been purchased or acquired with any such funds). This Section 6.03 shall survive the termination of this Agreement for any reason.

6.04 Proxy Solicitation; Other Actions.

(a) The Company agrees to use reasonable best efforts to provide Acquiror, as soon as reasonably practicable after the date hereof (i) audited carve-out financial statements, including combined balance sheets, statements of operations, statements of cash flows, and statements of changes in parent net investment, of Exxon’s interests in certain oil and gas properties located offshore in the Santa Ynez Unit and the Las Flores Canyon processing facilities (“SYU”) as of and for the years ended December 31, 2021 and 2020, in each case, prepared in accordance with GAAP and Regulation S-X and audited in accordance with the standards of the Public Company Accounting Oversight Board and (ii) unaudited interim period financial statements of SYU as of and for the periods required by Regulation S-X and prepared in accordance with GAAP and Regulation S-X. The Company further agrees to use reasonable best efforts to provide any additional financial information required pursuant to the rules and regulations of the SEC and applicable Law as promptly as reasonably practicable following any staleness dates or periods (as determined in accordance with the rules and regulations of the SEC and applicable Law).

(b) The Company shall use reasonable best efforts to make its officers and employees reasonably available, in each case, during normal business hours and upon reasonable advance notice, to Acquiror and its counsel in connection with (A) the drafting of the Proxy Statement and (B) responding in a timely manner to comments on the Proxy Statement from the SEC. Without limiting the generality of the foregoing, the Company shall reasonably cooperate with Acquiror in connection with Acquiror’s preparation for inclusion in the Proxy Statement of pro forma financial statements that comply with the requirements of Regulation S-X under the rules and regulations of the SEC (as interpreted by the staff of the SEC).

(c) From and after the date on which the Proxy Statement has been filed with the SEC in definitive form until the Closing Date, the Company will give Acquiror prompt written notice of any action taken or not taken by the Company or of any development regarding the Company, in any such case which is known by the Company, that would cause the Proxy Statement to contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements, in light of the circumstances under which they were made, not misleading; provided, that, if any such action shall be taken or fail to be taken or such development shall otherwise occur, Acquiror and the Company shall cooperate fully to cause an amendment or supplement to be made promptly to the Proxy Statement, such that the Proxy Statement no longer contains an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements, in light of the circumstances under which they were made, not misleading; provided, further, however, that no information received by Acquiror pursuant to this Section 6.04 shall operate as a waiver or otherwise affect any representation, warranty or agreement given or made by the party who disclosed such information, and no such information shall be deemed to change, supplement or amend the Schedules. Notwithstanding the foregoing, the Company makes no representation, warranty or covenant with respect to any statements made in the Proxy Statement based on information supplied by or on behalf of Acquiror or its Affiliates for inclusion therein.

 

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6.05 Non-Solicitation; Acquisition Proposals.

(a) From the date of this Agreement until the Effective Time or, if earlier, the valid termination of this Agreement in accordance with Section 10.01, the Company shall not, and shall cause its Representatives not to, directly or indirectly:

(i) intentionally initiate or solicit any inquiries that would be reasonably likely to lead to an offer or proposal regarding any transaction with any Person (other than Acquiror or its Affiliates) that would result in a Change in Control (“Acquisition Proposal”);

(ii) engage in, continue or otherwise participate in any negotiations or discussions concerning, or provide access to its properties, books and records or any confidential information or data to, any Person relating to any Acquisition Proposal;

(iii) approve, endorse or recommend, or propose publicly to approve, endorse or recommend, any Acquisition Proposal;

(iv) execute or enter into, any letter of intent, memorandum of understanding, agreement in principle, confidentiality agreement, merger agreement, acquisition agreement, exchange agreement, joint venture agreement, partnership agreement, option agreement or other similar agreement for or relating to any Acquisition Proposal; or

(v) resolve or agree to do any of the foregoing.

The Company also agrees that immediately following the execution of this Agreement it shall, and shall cause its Representatives to, cease any solicitations, discussions or negotiations with any Person (other than the parties hereto and their respective Representatives) conducted heretofore in connection with an Acquisition Proposal. The Company also agrees that within three (3) Business Days of the execution of this Agreement, the Company shall request each Person (other than the parties hereto and their respective Representatives) that has prior to the date hereof executed a confidentiality agreement in connection with its consideration of acquiring the Company (and with whom the Company has had contact in twelve (12) months prior to the date of this Agreement regarding the acquisition of the Company) to return or destroy all confidential information furnished to such Person by or on behalf of it prior to the date hereof and within 24 hours of execution and delivery of this Agreement terminate access to any physical or electronic data room maintained by or on behalf of the Company. The Company shall promptly (and in any event within two (2) Business Days) notify, in writing, Acquiror of the receipt of any inquiry, proposal, offer or request for information received after the date hereof that constitutes, or would reasonably be expected to result in or lead to, any Acquisition Proposal, which notice shall include a summary of the material terms of, and the identity of the Person or group of Persons making, such inquiry, proposal, offer or request for information and an unredacted copy of any Acquisition Proposal or inquiry, proposal or offer made in writing or, if not in writing, a written description of the material terms and conditions of such inquiry, proposal or offer. The Company shall promptly (and in any event within two (2) Business Days) keep Acquiror informed of any material developments with respect to any such inquiry, proposal, offer, request for information or Acquisition Proposal (including any material changes thereto and copies of any additional written materials received by the Company or its Representatives). Without limiting the foregoing, it is understood that any violation of the restrictions contained in this Section 6.05 by any of the Company’s Representatives acting on the Company’s behalf, shall be deemed to be a breach of this Section 6.05 by the Company.

 

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ARTICLE VII

COVENANTS OF ACQUIROR

7.01 Indemnification and Insurance.

(a) From and after the Effective Time, Acquiror and the Surviving Company agree that they shall indemnify and hold harmless each present and former director and officer of the Company against any costs or expenses (including reasonable attorneys’ fees), judgments, fines, losses, claims, damages or liabilities incurred in connection with any Action, whether civil, criminal, administrative or investigative, arising out of or pertaining to matters existing or occurring at or prior to the Effective Time, whether asserted or claimed prior to, at or after the Effective Time, to the fullest extent that the Company would have been permitted under applicable Law and the Company Organizational Documents and indemnification agreements in effect on the date of this Agreement to indemnify such Person (including the advancing of expenses as incurred to the fullest extent permitted under applicable Law). Without limiting the foregoing, Acquiror shall, and shall cause the Surviving Company to, (i) maintain for a period of not less than six (6) years from the Effective Time provisions in its certificate of incorporation, bylaws, and any such indemnification agreements, to the extent applicable, concerning the indemnification and exoneration (including provisions relating to expense advancement) of officers and directors that are no less favorable to those Persons than the provisions of the Company Organizational Documents and indemnification agreements listed on Schedule 7.01, to the extent applicable, as of the date of this Agreement and (ii) not amend, repeal or otherwise modify such provisions in any respect that would adversely affect the rights of those Persons thereunder, in each case, except as required by Law. Acquiror shall assume, and be liable for, and shall cause the Surviving Company and their respective Subsidiaries to honor, each of the covenants in this Section 7.01.

(b) For a period of six (6) years from the Effective Time, Acquiror shall, or shall cause one or more of its Subsidiaries to, maintain in effect directors’ and officers’ liability insurance covering those Persons who are currently covered by the Company’s directors’ and officers’ liability insurance policies (true, correct and complete copies of which have been heretofore made available to Acquiror or its agents or representatives) on terms not less favorable than the terms of such current insurance coverage; provided, however, that (i) Acquiror may cause coverage to be extended under the current directors’ and officers’ liability insurance by obtaining a six (6)-year “tail” policy containing terms not less favorable than the terms of such current insurance coverage with respect to claims existing or occurring at or prior to the Effective Time and (ii) if any claim is asserted or made within such six (6)-year period, any insurance required to be maintained under this Section 7.01 shall be continued in respect of such claim until the final disposition thereof.

(c) Notwithstanding anything contained in this Agreement to the contrary, this Section 7.01 shall survive the consummation of the Mergers indefinitely and shall be binding, jointly and severally, on Acquiror and the Surviving Company and all successors and assigns of Acquiror and the Surviving Company. In the event that Acquiror, the Surviving Company or any of their respective successors or assigns consolidates with or merges into any other Person and shall not be the continuing or Surviving Company or entity of such consolidation or merger or transfers or conveys all or substantially all of its properties and assets to any Person, then, and in each such case, Acquiror and the Surviving Company shall ensure that proper provision shall be made so that the successors and assigns of Acquiror or the Surviving Company, as the case may be, shall succeed to the obligations set forth in this Section 7.01. The obligations of Acquiror and the Surviving Company under this Section 7.01 shall not be terminated or modified in such a manner as to materially and adversely affect any present and former director and officer of the Company without the consent of the affected Person.

7.02 Conduct of Acquiror During the Interim Period.

(a) During the Interim Period, Acquiror shall carry on its business in the ordinary course of business and in accordance with applicable Law. During the Interim Period, except as set forth on Schedule 7.02 or as

 

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expressly contemplated by this Agreement or as consented to by the Company in writing (which consent shall not be unreasonably conditioned, withheld or delayed), or as may be required by Law, Acquiror shall not:

(i) change, modify or amend the Trust Agreement or the Acquiror Organizational Documents;

(ii) (A) make, declare, set aside or pay any dividends on, or make any other distribution (whether in cash, stock or property) in respect of any of its outstanding capital stock or other equity interests; (B) split, combine, reclassify or otherwise change any of its capital stock or other equity interests; or (C) other than the redemption of any shares of Acquiror Common Stock required by the Offer or as otherwise required by Acquiror’s Organizational Documents in order to consummate the Transactions, repurchase, redeem or otherwise acquire, or offer to repurchase, redeem or otherwise acquire, any capital stock of, or other equity interests in, Acquiror;

(iii) make, revoke or change any material Tax election, adopt or change any material Tax accounting method or period, file any material Tax Return in a manner inconsistent with past practices in any material respect, file any amendment to a material Tax Return, enter into any agreement with a Governmental Authority with respect to a material amount of Taxes, settle or compromise any examination, audit or other Action with a Governmental Authority of or relating to any material Taxes or settle or compromise any claim or assessment by a Governmental Authority in respect of material Taxes, consent to any extension or waiver of the statutory period of limitations applicable to any claim or assessment in respect of Taxes, incur any liability for Taxes outside the ordinary course of business, or enter into any Tax sharing, indemnification, allocation or similar agreement or arrangement (excluding any commercial contract entered into in the ordinary course of business and not primarily related to Taxes);

(iv) other than as set forth on Schedule 7.02(a)(iv), enter into, renew or amend in any material respect, any Acquiror Affiliate Agreement (or any Contract, that if existing on the date hereof, would have constitute an Acquiror Affiliate Agreement);

(v) enter into, or amend or modify any material term of, terminate (excluding any expiration in accordance with its terms), or waive or release any material rights, claims or benefits under, any Contract of a type required to be listed on Schedule 5.15(a) (or any Contract, that if existing on the date hereof, would have been required to be listed on Schedule 5.15(a)) or any collective bargaining or similar agreement (including agreements with works councils and trade unions and side letters) to which Acquiror is a party or by which it is bound;

(vi) waive, release, compromise, settle or satisfy any pending or threatened claim (which shall include, but not be limited to, any pending or threatened Action) or compromise or settle any material liability, other than in the ordinary course of business consistent with past practice;

(vii) incur, create, assume, refinance, guarantee or otherwise become liable for (whether directly, contingently or otherwise) any material Indebtedness;

(viii) (A) offer, issue, deliver, grant or sell, or authorize or propose to offer, issue, deliver, grant or sell, any capital stock of, or other equity interests in, Acquiror or any securities convertible into, or any rights, warrants or options to acquire, any such capital stock or equity interests, other than (i) in connection with the exercise of any Acquiror Warrants outstanding on the date hereof or (ii) the Transactions or (B) amend, modify or waive any of the terms or rights set forth in, any Acquiror Warrant or the Warrant Agreement, including any amendment, modification or reduction of the warrant price set forth therein;

(ix) (A) adopt or amend any Benefit Plan, or enter into any employment contract or collective bargaining agreement other than the Acquiror Equity Incentive Plan or as otherwise contemplated by this Agreement, or (B) enter into any agreement to pay compensation to any of its officers or directors;

 

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(x) (A) fail to maintain its existence or acquire by merger or consolidation with, or merge or consolidate with, or purchase a material portion of the assets or equity of, any corporation, partnership, limited liability company, association, joint venture or other business organization or division thereof, or otherwise acquire any material assets; or (B) adopt or enter into a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of Acquiror (other than the Transactions);

(xi) make any capital expenditures;

(xii) make any loans, advances or capital contributions to, or investments in, any other Person (including to any of its officers, directors, agents or consultants), make any change in its existing borrowing or lending arrangements for or on behalf of such Persons, or enter into any “keep well” or similar agreement to maintain the financial condition of any other Person;

(xiii) enter into any new line of business outside of the business currently conducted by Acquiror as of the date of this Agreement;

(xiv) make any change in financial accounting methods, principles or practices, except insofar as may have been required by a change in GAAP (including pursuant to standards, guidelines and interpretations of the Financial Accounting Standards Board or any similar organization) or applicable Law;

(xv) voluntarily fail to maintain, cancel or materially change coverage under any insurance policy in form and amount equivalent in all material respects to the insurance coverage currently maintained with respect to Acquiror and its assets and properties;

(xvi) enter into any agreement, understanding or arrangement with respect to the voting of Acquiror Common Stock (other than any agreement with an Acquiror Stockholder consistent with the terms of the Insider Letter); or

(xvii) enter into any agreement or undertaking to do any action prohibited under this Section 7.02.

(b) During the Interim Period, Acquiror shall comply with, and continue performing under, as applicable, the Acquiror Organizational Documents, the Trust Agreement and all other Contracts to which Acquiror may be a party in accordance with their terms and shall not agree to any amendment or waiver of any rights or remedies of Acquiror under any such Contracts.

7.03 Trust Account. Prior to or at the Closing (subject to the satisfaction or waiver of the conditions set forth in Article IX), Acquiror shall deliver the instructions to cause the funds in the Trust Account to be disbursed in accordance with the Trust Agreement and the Acquiror Organizational Documents for the payment of: (a) the redemption of any shares of Acquiror Common Stock validly redeemed by any Acquiror Stockholder in connection with the Offer upon acceptance by the Acquiror of such shares of Acquiror Common Stock; (b) the payment of the Outstanding Company Expenses and Outstanding Acquiror Expenses pursuant to Section 3.04; and (c) the balance of the assets in the Trust Account, if any, after payment of the amounts required under the foregoing clauses (a) and (b), to be disbursed to Acquiror.

7.04 Inspection. Subject to confidentiality obligations and similar restrictions that may be applicable to information furnished to Acquiror by third parties that may be in Acquiror’s possession from time to time, and except for any information which in the opinion of legal counsel (including in-house counsel) of Acquiror would result in the loss of attorney-client privilege or other privilege from disclosure or would conflict with any applicable Law or confidentiality obligations to which Acquiror is bound, Acquiror shall afford to the Company, its Affiliates and their respective Representatives reasonable access during the Interim Period, during normal business hours and with reasonable advance notice, to all of their respective properties, books, projections, plans,

 

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systems, Contracts, commitments, Tax Returns, records, commitments, analyses and appropriate officers and employees of Acquiror, and shall furnish such Representatives with all financial and operating data and other information concerning the affairs of Acquiror that are in the possession of Acquiror as such Representatives may reasonably request. The parties shall use commercially reasonable efforts to make alternative arrangements for such disclosure where the restrictions in the preceding sentence apply. All information obtained by the Company, its Affiliates and their respective Representatives under this Agreement shall be subject to Section 8.05(a) prior to the Effective Time.

7.05 Acquiror NYSE Listing.

(a) From the date hereof through the Closing, Acquiror shall use reasonable best efforts to ensure Acquiror remains listed as a public company on, and for shares of Acquiror Common Stock to be listed on, NYSE.

(b) Acquiror shall use reasonable best efforts to cause the Acquiror Common Stock to be issued in connection with the Transactions or otherwise reserved for issuance to be approved for listing on NYSE as promptly as practicable following the issuance thereof, subject to official notice of issuance, on or prior to the Closing Date.

7.06 Acquiror Public Filings. From the date hereof through the Closing, Acquiror will keep current and timely file all reports required to be filed or furnished with the SEC and otherwise comply in all material respects with its reporting and other obligations under applicable Securities Laws.

7.07 Additional Insurance Matters. Prior to the Closing and subject in all cases to Section 7.01, Acquiror shall obtain directors’ and officers’ liability insurance that shall be effective as of Closing and will cover those Persons who will be the directors and officers of Acquiror and its Subsidiaries (including the directors and officers of the Company) at and after the Closing on terms customary for a typical directors’ and officers’ liability insurance policy for a company whose equity is listed on NYSE which policy has a scope and amount of coverage that is reasonably appropriate for a company of similar characteristics (including the line of business and revenues) as Acquiror and its Subsidiaries (including the Company).

7.08 Section 16 Matters. Prior to the Closing, the board of directors of Acquiror, or an appropriate committee of “non-employee directors” (as defined in Rule 16b-3 of the Exchange Act) thereof, shall adopt a resolution consistent with the interpretive guidance of the SEC so that the acquisition of Acquiror Common Stock pursuant to this Agreement and the other agreements contemplated hereby, by any person owning securities of the Company who is expected to become a director or officer (as defined under Rule 16a-1(f) under the Exchange Act) of Acquiror following the Closing shall be an exempt transaction for purposes of Section 16(b) of the Exchange Act pursuant to Rule 16b-3 thereunder.

7.09 Exclusivity(a) . From the date of this Agreement until the Effective Time or, if earlier, the valid termination of this Agreement in accordance with Section 10.01, Acquiror shall not, and shall cause its Representatives not to, directly or indirectly:

(a) intentionally initiate or solicit any inquiries that would be reasonably likely to lead to an offer or proposal regarding a Business Combination;

(b) engage in, continue or otherwise participate in any negotiations or discussions concerning, or provide access to its properties, books and records or any confidential information or data to, any Person relating to any Business Combination;

(c) approve, endorse or recommend, or propose publicly to approve, endorse or recommend, any proposal or offering relating to any Business Combination;

 

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(d) execute or enter into, any letter of intent, memorandum of understanding, agreement in principle, confidentiality agreement, merger agreement, acquisition agreement, exchange agreement, joint venture agreement, partnership agreement, option agreement or other similar agreement for or relating to any proposal or offer for any Business Combination; or

(e) resolve or agree to do any of the foregoing.

Acquiror agrees that immediately following the execution of this Agreement it shall, and shall use its reasonable best efforts to cause its Representatives to, cease any solicitations, discussions or negotiations with any Person (other than the parties hereto and their respective Representatives) conducted heretofore in connection with Business Combination or any inquiry or request for information that would reasonably be expected to lead to, or result in, a Business Combination. Acquiror shall promptly (and in any event within two (2) Business Days) notify, in writing, the Company of the receipt of any inquiry, proposal, offer or request for information received after the date hereof that constitutes, or would reasonably be expected to result in or lead to, any Business Combination other than with the Company, which notice shall include a summary of the material terms of, and the identity of the Person or group of Persons making, such inquiry, proposal, offer or request for information and an unredacted copy of proposal or indication of interest, written or oral relating to any Business Combination (a “Business Combination Proposal”). Acquiror shall promptly (and in any event within two (2) Business Days) keep the Company reasonably informed of any material developments with respect to any such Business Combination Proposal.

7.10 Acquiror Equity Incentive Plan. Subject to obtaining the Acquiror Stockholder Approvals, Acquiror shall adopt the Acquiror Equity Incentive Plan, in such form as shall be agreed between the Company and Acquiror.

7.11 Termination of Acquiror Affiliate Agreements. Prior to or concurrently with the Closing, Acquiror shall (a) terminate or cause to be terminated each Acquiror Affiliate Agreement set forth on Schedule 7.11 and (b) satisfy or cause to be satisfied in favor of, or pay or cause to be paid to, the Sponsor or any of its Affiliates all outstanding Indebtedness owed by Acquiror to the Sponsor or any such Affiliate.

ARTICLE VIII

JOINT COVENANTS

8.01 Support of Transaction. Without limiting any covenant contained in Article VI or Article VII, including the obligations of the Company and Acquiror with respect to the matters described in Section 8.02, which shall control with respect to Antitrust Laws and related matters to the extent of any conflict with the succeeding provisions of this Section 8.01, Acquiror and the Company shall each: (a) use commercially reasonable efforts to assemble, prepare and file any information (and, as needed, to supplement such information) as may be reasonably necessary to obtain as promptly as practicable all governmental and regulatory consents required to be obtained in connection with the Transactions, (b) use commercially reasonable efforts to obtain all material consents and approvals of third parties that any of Acquiror, the Company, or their respective Affiliates are required to obtain in order to consummate the Transactions, including any required approvals of parties to Material Contracts with the Company, and (c) use commercially reasonable efforts to take such other action as may reasonably be necessary or as another party may reasonably request to satisfy the conditions of Article IX or otherwise to comply with this Agreement and to consummate the Transactions as promptly as practicable. Notwithstanding the foregoing, in no event shall Acquiror or the Company be obligated to bear any expense or pay any fee or grant any concession in connection with obtaining any consents, authorizations or approvals pursuant to the terms of any Contract to which the Company is a party or otherwise in connection with the consummation of the Transactions.

 

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8.02 HSR Act and Regulatory Approvals.

(a) Acquiror and the Company shall, and shall cause their respective Affiliates to, comply as promptly as practicable, but in no event later than ten (10) Business Days after the date hereof, with the notification and reporting requirements of the HSR Act with respect to the Transactions and the Asset Acquisition. Acquiror and the Company shall use their commercially reasonable efforts to (i) furnish to the other party as promptly as practicable all information reasonably required for any application or filing required to be made in connection with the Transactions and the Asset Acquisition pursuant to any Antitrust Law, (ii) substantially comply with any requests for information, documents or testimony from any Governmental Authority in connection with the Transactions and Asset Acquisition and (iii) obtain the termination or expiration of all waiting periods under the HSR Act applicable to the Transactions and Asset Acquisition.

(b) Acquiror and the Company shall use their commercially reasonable efforts to complete lawfully the Transactions and the Asset Acquisition as promptly as practicable and to avoid any impediment under any Antitrust Law to the consummation of the Transactions and the Asset Acquisition; provided that, notwithstanding anything in this Agreement to the contrary, nothing in this Section 8.02 or otherwise in this Agreement shall require or obligate Acquiror, the Company or any of their respective Affiliates to offer, propose, negotiate, agree to, consent to, or effect (i) the sale, divestiture, transfer, license or other disposal of, or hold separate with respect to, any entities, assets, businesses or interests of any Person, (ii) the creation, termination, amendment or assignment of commercial relationships, agreements, licenses or contractual rights or obligations, (iii) conduct of business restrictions, including restrictions on any Person’s or its Affiliates’ ability to manage, operate or own any entities, assets, businesses or interests, (iv) any other change or restructuring of any entities, assets, businesses or interests, or of any Person or (v) any other remedy, condition, undertaking or commitment of any kind; and further provided, that, notwithstanding anything in this Agreement to the contrary, nothing in this Section 8.02 or any other provision of this Agreement shall require or obligate Acquiror or any other Person to take any actions with respect to Acquiror’s Affiliates, the Sponsor, any Subscriber, their respective Affiliates or any investment funds or investment vehicles affiliated with, or managed or advised by, Acquiror’s Affiliates, the Sponsor, any Subscriber or any portfolio company (as such this term is commonly understood in the private equity industry) or investment of Acquiror’s Affiliates, Sponsor, any Subscriber or of any such investment fund or investment vehicle. Acquiror and the Company shall not, and shall not permit their respective Affiliates to, take any of the actions described in the foregoing sentence without the other party’s prior written consent. None of Acquiror, the Company or any of their respective Affiliates shall be required to contest, resist, defend against or appeal any Action, whether judicial or administrative, challenging or seeking to prevent, prohibit, delay or declare unlawful this Agreement or any of the Transactions or the Asset Acquisition.

(c) Acquiror and the Company shall each promptly notify the other party of any substantive communication with, and furnish to the other party copies of any notices or written communications received from, any third party or Governmental Authority with respect to the Transactions or the Asset Acquisition, and Acquiror and the Company shall permit counsel to the other party an opportunity to review in advance, and shall consider in good faith the views of such counsel in connection with, any proposed communications to any Governmental Authority concerning the Transactions or the Asset Acquisition. Acquiror and the Company agree to provide, to the extent permitted by the applicable Governmental Authority, the other party and its counsel the opportunity, on reasonable advance notice, to participate in any substantive meetings, teleconferences or discussions with any Governmental Authority in connection with the Transactions or the Asset Acquisition. Acquiror shall bear all filing fees payable pursuant to the HSR Act and other Antitrust Laws in connection with the Transactions or the Asset Acquisition.

(d) Acquiror and the Company shall not take any action that would reasonably be expected to materially adversely affect or materially delay the clearance, approval or authorization by any Governmental Authority of the Transactions or the Asset Acquisition.

 

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8.03 Preparation of Proxy Statement; Special Meeting.

(a) As promptly as practicable following the execution and delivery of this Agreement, Acquiror shall prepare, with the assistance of the Company, and cause to be filed with the SEC a preliminary proxy statement (as amended or supplemented from time to time, the “Proxy Statement”) for purposes of soliciting the approval by the Acquiror Stockholders of each of the Proposals. The Proxy Statement and any other SEC filings shall be in a form mutually agreed by Acquiror and the Company. Each of Acquiror and the Company shall use its reasonable best efforts to cause the Proxy Statement to comply with the rules and regulations promulgated by the SEC, to have the SEC confirm, orally or in writing, as promptly as practicable after filing the Proxy Statement, that it does not have any further comments (or that it does not intend to review) the Proxy Statement (“SEC Clearance”). Each of Acquiror and the Company shall furnish all information concerning it as may reasonably be requested by the other party in connection with such actions and the preparation of the Proxy Statement. Promptly after the Proxy Statement has been cleared by the SEC, Acquiror will cause the Proxy Statement (substantially in the form last filed or cleared following SEC Clearance) to be filed with the SEC in definitive form and then mailed to stockholders of Acquiror.

(b) Each of Acquiror and the Company shall cooperate and mutually agree upon (such agreement not to be unreasonably withheld or delayed), any response to comments of the SEC or its staff with respect to the Proxy Statement and any amendment to the Proxy Statement filed in response thereto. If Acquiror or the Company becomes aware that any information contained in the Proxy Statement shall have become false or misleading in any material respect or that the Proxy Statement is required to be amended in order to comply with applicable Law, then (i) such party shall promptly inform the other party and (ii) Acquiror, on the one hand, and the Company, on the other hand, shall cooperate and mutually agree upon (such agreement not to be unreasonably withheld or delayed) an amendment or supplement to the Proxy Statement. Acquiror and the Company shall use reasonable best efforts to cause the Proxy Statement as so amended or supplemented, to be filed with the SEC and to be disseminated to the holders of shares of Acquiror Common Stock, as applicable, in each case pursuant to applicable Law and subject to the terms and conditions of this Agreement and the Acquiror Organizational Documents. Each of the Company and Acquiror shall promptly provide the other party with copies of any written comments, and shall inform such other parties of any oral comments, that Acquiror receives from the SEC or its staff with respect to the Proxy Statement promptly after the receipt of such comments and shall give the other party a reasonable opportunity to review and comment on any proposed written or oral responses to such comments prior to responding to the SEC or its staff.

(c) Acquiror agrees to include provisions in the Proxy Statement and to take reasonable action related thereto, with respect to (i) approval of the Transactions, including the Business Combination (as defined in the Existing Acquiror Charter), and the adoption and approval of this Agreement (the “Transaction Proposal”), (ii) approval of the Acquiror Charter (the “Amendment Proposal”) and each change to the Acquiror Charter that is required to be separately approved, (iii) approval of the issuance of the Acquiror Common Stock in connection with the Transactions in accordance with the rules of NYSE (the “NYSE Proposal”), (iv) the approval and adoption of the Acquiror Equity Incentive Plan (the “Acquiror Equity Plan Proposal”), (v) adjournment of the Special Meeting, if necessary, to permit further solicitation of proxies because there are not sufficient votes to approve and adopt any of the foregoing proposals, and (vi) approval of any other proposals reasonably agreed by Acquiror and the Company to be necessary or appropriate in connection with the Transactions contemplated hereby (the “Additional Proposal” and together with the Transaction Proposal, the Amendment Proposal, the NYSE Proposal, and the Acquiror Equity Plan Proposal, the “Proposals”). Without the prior written consent of the Company, the Proposals shall be the only matters (other than procedural matters) which Acquiror shall propose to be acted on by Acquiror Stockholders at the Special Meeting.

(d) Prior to the filing of a definitive Proxy Statement with the SEC, Acquiror shall establish a record date for the Special Meeting and, as promptly as reasonably practicable following the filing of the definitive Proxy Statement, duly call, give notice of, convene and hold the Special Meeting. Acquiror shall use reasonable best efforts to, as promptly as practicable after the Proxy Statement is cleared by the SEC, (i) cause the Proxy

 

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Statement to be disseminated to Acquiror Stockholders in compliance with applicable Law and (ii) solicit proxies from the holders of Acquiror Common Stock to vote in favor of each of the Proposals. Acquiror shall, through the Acquiror Board, recommend to its stockholders that they approve the Proposals (the “Acquiror Board Recommendation”) and shall include the Acquiror Board Recommendation in the Proxy Statement. The Acquiror Board shall not (and no committee or subgroup thereof shall) change, withdraw, withhold, qualify or modify, or publicly propose to change, withdraw, withhold, qualify or modify, the Acquiror Board Recommendation (an “Acquiror Board Change in Recommendation”); provided, that if at any time prior to obtaining the Acquiror Stockholder Approvals, the Acquiror Board determines in good faith after consultation with outside legal counsel, in response to an Intervening Event, that the failure to make an Acquiror Board Change in Recommendation would be inconsistent with its fiduciary duties under applicable Law, the Acquiror Board (or any committee or subgroup thereof) may make an Acquiror Board Change in Recommendation. Acquiror shall consult with the Company regarding the record date and the date of the Special Meeting and shall not, unless required by Law, adjourn or postpone the Special Meeting without the prior written consent of the Company (which consent shall not be unreasonably conditioned, withheld or delayed). Notwithstanding the foregoing provisions of this Section 8.03(d), if on a date for which the Special Meeting is scheduled, Acquiror has not received proxies representing a sufficient number of shares of Acquiror Common Stock to obtain the Acquiror Stockholder Approvals, as applicable, whether or not a quorum is present, Acquiror shall have the right to make one or more successive postponements or adjournments of the Special Meeting; provided, that the Special Meeting, without the prior written consent of the Company, (x) may not be adjourned to a date that is more than ten (10) Business Days after the date for which the Special Meeting was originally scheduled or the most recently adjourned Special Meeting (excluding any adjournments required by applicable Law) and (y) is held no later than four (4) Business Days prior to the Termination Date.

8.04 Tax Matters.

(a) Notwithstanding anything to the contrary contained herein, all transfer, documentary, sales, use, stamp, registration, value added or other similar Taxes incurred by Acquiror or the Company in connection with the Transactions (excluding any transactions contemplated by the PSA) (“Transfer Taxes”) shall be paid one hundred percent (100%) by Acquiror. The Company and Acquiror further agree to reasonably cooperate to reduce or eliminate the amount of any such Transfer Taxes.

(b) On the Closing Date, the Holdco and SOC shall each deliver to Acquiror a certificate of non-foreign status as contemplated under Treasury Regulations Section 1.1445-2(b) certifying, respectively, that the Holdco (or, if the Holdco is classified as a disregarded entity for U.S. federal income Tax purposes, the Holdco’s regarded owner for such purposes) is not a foreign Person and that SOC is not a foreign Person, dated as of the Closing Date and duly signed by a responsible corporate officer of the Holdco or SOC, as applicable. Each certificate shall be provided in form and substance reasonably satisfactory to Acquiror.

8.05 Confidentiality; Publicity.

(a) The parties hereto acknowledge that they have and will receive information from or regarding the other parties or any of their respective Subsidiaries in the nature of trade secrets or that otherwise is confidential information or proprietary information (as further defined below, “Confidential Information”), the release of which would be damaging to such other party. Each party hereto shall hold in strict confidence any Confidential Information in such party’s possession, and each such party shall not disclose such Confidential Information to any Person (including any Affiliates) other than another party hereto or a Representative of such party with a need to know such Confidential Information in connection with the Transactions or the Asset Acquisition, or otherwise use such Confidential Information for any purpose other than to evaluate, analyze, and keep apprised of the Assets or the other parties’ and their respective Subsidiaries’ businesses and assets and, except for disclosures (i) to comply with any Laws (including applicable stock exchange or quotation system requirements), provided, that a party hereto must notify the other parties hereto promptly of any disclosure of Confidential Information which is required by Law, and any such disclosure of Confidential Information shall be to the

 

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minimum extent required by Law, (ii) of information that a party hereto has also received from a source independent of the other parties hereto and that such party reasonably believes such source obtained without breach of any obligation of confidentiality to the other parties hereto, (iii) that have been or become independently developed by a party hereto or its Affiliates or on their behalf without using any of the Confidential Information of the other parties hereto, or (iv) that are or become generally available to the public (other than as a result of a prohibited disclosure by a party hereto or its Representatives). The term “Confidential Information” shall include any information pertaining to a party’s or any of its Subsidiaries’ business which is not available to the public, whether written, oral, electronic, visual form or in any other media.

(b) The parties agree that the initial press release to be issued with respect to the Transactions shall be in the form previously agreed by the parties. None of Acquiror, the Company or any of their respective Affiliates shall make any public announcement or issue any public communication regarding this Agreement or the Transactions, or any matter related to the foregoing, without first obtaining the prior consent of the Company or Acquiror, as applicable (which consent shall not be unreasonably withheld, conditioned or delayed), except if such announcement or other communication is required by applicable Law or legal process (including pursuant to the Securities Law or the rules of any national securities exchange), in which case Acquiror or the Company, as applicable, shall use their commercially reasonable efforts to coordinate such announcement or communication with the other party, prior to announcement or issuance and allow the other party a reasonable opportunity to comment thereon (which shall be considered by Acquiror or the Company, as applicable, in good faith); provided, however, that, notwithstanding anything contained in this Agreement to the contrary, (i) each party and its Affiliates may make announcements and may provide information regarding this Agreement and the Transactions to their Affiliates and its and their respective directors, officers, employees, managers and advisors and, solely in the case of the Company, its direct and indirect investors and prospective investors, in each case, without the consent of any other party hereto and (ii) the Company may exercise its rights and communicate with third parties as contemplated by Section 6.05; and provided, further, that subject to Section 6.02 and this Section 8.05(b), the foregoing shall not prohibit any party hereto from communicating with third parties to the extent necessary for the purpose of seeking any third party consent.

8.06 Purchase and Sale Agreement. Each party shall use its reasonable best efforts to (a) cause the Asset Acquisition to be completed contemporaneously with the Closing and following the Effective Time in strict accordance with, and pursuant to, the terms of this Agreement, the PSA and the documents contemplated by the PSA and (b) ensure the availability of the financing contemplated by the PSA and Senior Secured Term Loan Agreement and cause the conditions precedent to the financing contemplated by the PSA and the Senior Secured Term Loan Agreement to be satisfied on a timely basis to contemporaneously complete the Asset Acquisition with the Closing.

8.07 Financing. Each party shall use its reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, as promptly as practicable after the date hereof, all things necessary (including enforcing its rights (if any) under the Subscription Agreements), to consummate the purchases contemplated by the Subscription Agreements on the terms and conditions described or contemplated therein, including enforcing its rights (if any) under the Subscription Agreements to cause the Subscribers to pay to (or as directed by) Acquiror the applicable purchase price under each Subscriber’s applicable Subscription Agreement in accordance with its terms.

8.08 Post-Closing Cooperation; Further Assurances. Following the Closing, each party shall, on the request of any other party, execute such further documents, and perform such further acts, as may be reasonably necessary or appropriate to give full effect to the allocation of rights, benefits, obligations and liabilities contemplated by this Agreement and the Transactions.

 

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ARTICLE IX

CONDITIONS TO OBLIGATIONS

9.01 Conditions to Obligations of All Parties. The obligations of the parties hereto to consummate, or cause to be consummated, the Mergers are subject to the satisfaction of the following conditions, any one or more of which may be waived (if legally permitted) in writing by all of such parties:

(a) HSR Act. All waiting periods (and any extensions thereof) applicable to the Transactions under the HSR Act, and any commitments or agreements (including timing agreements) with any Governmental Authority not to consummate the Transactions before a certain date, shall have expired or been terminated.

(b) No Prohibition. No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any Law, judgment, decree, executive order or award which is then in effect and has the effect of making the Transactions, including the Mergers, illegal or otherwise prohibiting, preventing or enjoining consummation of the Transactions, including the Mergers.

(c) Offer Completion. The Offer shall have been completed in accordance with the terms hereof and the Proxy Statement.

(d) Proxy Statement. The Proxy Statement shall have received SEC Clearance.

(e) Acquiror Stockholder Approvals. The Acquiror Stockholder Approvals shall have been obtained in accordance with the Proxy Statement, the DGCL, the Acquiror Organizational Documents and the rules and regulations of NYSE.

(f) Purchase and Sale Agreement. The transactions contemplated under the PSA (including the Transactions as defined in the Senior Secured Term Loan Agreement) shall be completed contemporaneously with the Closing in accordance with, and pursuant to, the terms of this Agreement and the PSA (except as previously consented to in writing by Acquiror, without waiver, modification or amendment to the PSA).

(g) Net Tangible Assets. Acquiror shall have at least $5,000,001 of net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act) remaining after giving effect to redemption of any shares of Acquiror Common Stock pursuant to the Offer and after Acquiror’s receipt of the proceeds under the Subscription Agreements.

9.02 Additional Conditions to Obligations of Acquiror. The obligations of Acquiror to consummate, or cause to be consummated, the Mergers are subject to the satisfaction of the following additional conditions, any one or more of which may be waived in writing by Acquiror:

(a) Representations and Warranties. The representations and warranties of the Company contained in Section 4.01 (Organization, Standing and Corporate Power), Section 4.02(a) (Corporate Authority; Approval; Non-Contravention), Section 4.04 (Capitalization), Section 4.05 (Subsidiaries), Section 4.07 (Brokers) and Section 4.10 (Holdco) shall each be true and correct in all material respects as of the Closing as though made at the Closing, except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date. All other representations and warranties of the Company contained in this Agreement shall be true and correct (without giving any effect to any limitation as to “materiality” or “Material Adverse Effect” or any similar limitation set forth therein) as of the Closing, as though made on and as of the Closing, except (i) to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date and (ii) where the failure of such representations and warranties to be true and correct (whether as of the Closing Date or such earlier date), taken as a whole, does not result in a Material Adverse Effect.

 

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(b) Agreements and Covenants. Each of the covenants and agreements of the Company to be performed or complied with as of or prior to the Closing shall have been performed or complied with in all material respects.

(c) No Material Adverse Effect. Since the date of this Agreement, there shall not have occurred any Material Adverse Effect.

(d) Officer’s Certificate. The Company shall have delivered to Acquiror a certificate signed by an officer of the Company, dated the Closing Date, certifying that, to the knowledge and belief of such officer, the conditions specified in Section 9.02(a), Section 9.02(b), Section 9.02(c) and Section 9.01(f) have been fulfilled.

(e) Ancillary Agreements. The Company shall have delivered to Acquiror executed counterparts to all of the Ancillary Agreements to which the Company, or any Holdco Equityholder, is party, each of which shall be in full force and effect as of the Closing and shall not have been repudiated or rescinded in any respect.

(f) Required Consents. The Company shall have provided Acquiror with evidence reasonably satisfactory to Acquiror of the receipt of the documents or consents set forth on Section 9.02(f) of the Company’s Schedules.

(g) Closing Deliverables. The Company shall have provided Acquiror evidence reasonably satisfactory to Acquiror of the satisfaction of the conditions precedent under Section 9.9 of the PSA and Article IV items (i) and (p) of the Senior Secured Term Loan Agreement.

(h) BOEM Certification. Acquiror shall have obtained certification from BOEM that Acquiror is qualified to hold offshore oil and gas leases and rights-of-way pursuant to the Outer Continental Shelf Lands Act and BOEM’s regulations promulgated thereunder.

9.03 Additional Conditions to the Obligations of the Company. The obligation of the Company to consummate the Mergers is subject to the satisfaction of the following additional conditions, any one or more of which may be waived in writing by the Company:

(a) Representations and Warranties. The representations and warranties of Acquiror contained in Section 5.01 (Organization, Standing and Corporate Power), Section 5.02(a) (Corporate Authority; Approval; Non-Contravention), Section 5.13 (Capitalization) and Section 5.08 (Brokers) shall each be true and correct in all material respects as of the Closing as though made at the Closing, except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date. All other representations and warranties of Acquiror contained in this Agreement shall be true and correct (without giving any effect to any limitation as to “materiality” or “material adverse effect” or any similar limitation set forth therein) as of the Closing, as though made on and as of the Closing, except (i) to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date and (ii) where the failure of such representations and warranties to be true and correct (whether as of the Closing Date or such earlier date), taken as a whole, does not result in a material adverse effect on Acquiror.

(b) Agreements and Covenants. Each of the covenants of Acquiror to be performed or complied with as of or prior to the Closing shall have been performed or complied with in all material respects.

(c) Officer’s Certificate. Acquiror shall have delivered to the Company a certificate signed by an officer of Acquiror, dated the Closing Date, certifying that, to the knowledge and belief of such officer, the conditions specified in Section 9.03(a) and Section 9.03(b) have been fulfilled.

(d) NYSE. The Acquiror Common Stock to be issued in connection with the Transactions shall have been approved for listing on NYSE, subject only to official notice of issuance thereof and the requirement to have a sufficient number of round lot holders.

 

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(e) Ancillary Agreements. Acquiror shall have delivered to the Company executed counterparts to all of the Ancillary Agreements to which Acquiror or Sponsor is party, each of which shall be in full force and effect as of the Closing and shall not have been repudiated or rescinded in any respect.

ARTICLE X

TERMINATION/EFFECTIVENESS

10.01 Termination. This Agreement may be terminated, and the Transactions abandoned:

(a) by mutual written consent of the Company and Acquiror;

(b) prior to the Closing, by written notice to the Company from Acquiror if (i) there is any breach of any representation, warranty, covenant or agreement on the part of the Company set forth in this Agreement, such that any condition specified in Section 9.02(a), Section 9.02(b), or Section 9.02(c) would not be satisfied at the Closing (a “Terminating Company Breach”), except that, if any such Terminating Company Breach is curable by the Company through the exercise of its commercially reasonable efforts, then, for a period of up to thirty (30) days (or any shorter period of the time that remains between the date Acquiror provides written notice of such violation or breach and the Termination Date) after receipt by the Company of notice from Acquiror of such breach, but only as long as the Company continues to use its commercially reasonable efforts to cure such Terminating Company Breach (the “Company Cure Period”), such termination shall not be effective, and such termination shall become effective only if the Terminating Company Breach is not cured within the Company Cure Period, (ii) the Closing has not occurred on or before March 1, 2024 (the “Termination Date”), or (iii) the consummation of the Mergers is permanently enjoined, prevented, prohibited or made illegal by the terms of a final, non-appealable Governmental Order or other Law; provided, that the right to terminate this Agreement under Section 10.01(b)(ii) shall not be available if Acquiror’s failure to fulfill any obligation under this Agreement has been the primary cause of, or primarily resulted in, the failure of the Closing to occur on or before such date; provided, further, that the right to terminate this Agreement under Section 10.01(b)(ii) shall not be available if Acquiror is in breach of this Agreement on such date, which breach would give rise to a right of the Company to terminate this Agreement;

(c) prior to the Closing, by written notice to Acquiror from the Company if (i) there is any breach of any representation, warranty, covenant or agreement on the part of Acquiror set forth in this Agreement, such that any condition specified in Section 9.03(a) or Section 9.03(b) would not be satisfied at the Closing (a “Terminating Acquiror Breach”), except that, if any such Terminating Acquiror Breach is curable by Acquiror through the exercise of its commercially reasonable efforts, then, for a period of up to thirty (30) days (or any shorter period of the time that remains between the date the Company provides written notice of such violation or breach and the Termination Date) after receipt by Acquiror of notice from the Company of such breach, but only as long as Acquiror continues to use its commercially reasonable efforts to cure such Terminating Acquiror Breach (the “Acquiror Cure Period”), such termination shall not be effective, and such termination shall become effective only if the Terminating Acquiror Breach is not cured within the Acquiror Cure Period, (ii) the Closing has not occurred on or before the Termination Date, or (iii) the consummation of the Mergers is permanently enjoined, prevented, prohibited or made illegal by the terms of a final, non-appealable Governmental Order or other Law; provided, that the right to terminate this Agreement under Section 10.01(c)(ii) shall not be available if the Company’s failure to fulfill any obligation under this Agreement has been the primary cause of, or primarily resulted in, the failure of the Closing to occur on or before such date; provided, further, that the right to terminate this Agreement under Section 10.01(c)(ii) shall not be available if the Company is in breach of this Agreement on such date, which breach would give rise to a right of Acquiror to terminate this Agreement; or

(d) by written notice from either the Company or Acquiror to the other if either Acquiror Stockholder Approvals is not obtained at the Special Meeting (subject to any adjournment or recess of the meeting).

 

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10.02 Effect of Termination. Except as otherwise set forth in this Section 10.02, in the event of the termination of this Agreement pursuant to Section 10.01, this Agreement shall forthwith become void and have no effect, without any liability on the part of any party hereto or its respective Affiliates, officers, directors, employees or stockholders, other than liability of any party hereto for any Fraud or Willful Breach of this Agreement by such party occurring prior to such termination. The provisions of Sections 6.03, 8.05, 10.02 and Article XI (collectively, the “Surviving Provisions”), and any other Section or Article of this Agreement referenced in the Surviving Provisions, to the extent required to survive in order to give appropriate effect to the Surviving Provisions, shall in each case survive any termination of this Agreement.

ARTICLE XI

MISCELLANEOUS

11.01 Waiver. Any party to this Agreement may, at any time prior to the Closing, by action taken by its board of directors, members or officers thereunto duly authorized, waive any of the terms or conditions of this Agreement, or agree to an amendment or modification to this Agreement in the manner contemplated by Section 11.10 and by an agreement in writing executed in the same manner (but not necessarily by the same natural persons) as this Agreement.

11.02 Notices. All notices and other communications among the parties shall be in writing and shall be deemed to have been duly given (i) when delivered in person, (ii) when delivered after posting in the United States mail having been sent registered or certified mail return receipt requested, postage prepaid, (iii) when delivered by FedEx or other nationally recognized overnight delivery service or (iv) when e-mailed during normal business hours (and otherwise as of the immediately following Business Day), addressed as follows:

 

  (a)

If to Acquiror, to:

Flame Acquisition Corp.

700 Milam Street, Suite 3300

Houston, Texas 77002

Attn: James C. Flores

E-mail: jflores@flameacq.com.

with a copy to:

Latham & Watkins LLP

811 Main St., Suite 3700

Houston, TX 77002

Attn: Ryan Maierson

E-mail: ryan.maierson@lw.com

If to the Company to:

Sable Offshore Corp.

700 Milam Street, Suite 3300, Houston, Texas 77002

Attention: Anthony C. Duenner

Phone: 713-579-8023

Email: aduenner@sableminerals.com

with a copy to:

Bracewell LLP

711 Louisiana Street, Suite 2300

Houston, TX 77002-2770

Attn: Jason Jean and Troy Harder

Email: jason.jean@bracewell.com and troy.harder@bracewell.com

or to such other address or addresses as the parties may from time to time designate in writing.

 

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11.03 Assignment. No party hereto shall assign this Agreement or any part hereof without the prior written consent of the other parties. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective permitted successors and assigns. Any attempted assignment in violation of the terms of this Section 11.03 shall be null and void, ab initio.

11.04 Rights of Third Parties. Nothing expressed or implied in this Agreement is intended or shall be construed to confer upon or give any Person, other than the parties hereto, any right or remedies under or by reason of this Agreement; provided, however, that, notwithstanding the foregoing (a) in the event the Closing occurs, the present and former officers and directors of the Company and Acquiror (and their successors and representatives) are intended third-party beneficiaries of, and may enforce, Section 7.01 and Section 7.07 and (b) the past, present and future directors, officers, employees, incorporators, members, partners, stockholders, Affiliates, agents, attorneys, advisors and representatives of the parties, and any Affiliate of any of the foregoing (and their successors, heirs and representatives), are intended third-party beneficiaries of, and may enforce, Sections 11.14 and 11.16.

11.05 Expenses. Except as otherwise provided herein (including Section 3.04 and Section 8.02(c)), each party hereto shall bear its own expenses incurred in connection with this Agreement and the transactions herein contemplated whether or not such transactions shall be consummated, including all fees of its legal counsel, financial advisers and accountants.

11.06 Governing Law. This Agreement, and all claims or causes of action based upon, arising out of, or related to this Agreement or the transactions contemplated hereby, shall be governed by, and construed in accordance with, the Laws of the State of Delaware, without giving effect to principles or rules of conflict of Laws to the extent such principles or rules would require or permit the application of Laws of another jurisdiction.

11.07 Captions; Counterparts. The captions in this Agreement are for convenience only and shall not be considered a part of or affect the construction or interpretation of any provision of this Agreement. This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

11.08 Schedules and Exhibits. The Schedules and Exhibits referenced herein are a part of this Agreement as if fully set forth herein. All references herein to Schedules and Exhibits shall be deemed references to such parts of this Agreement, unless the context shall otherwise require. Any disclosure made by a party in the Schedules with reference to any section in Article IV or Article V (as applicable) of this Agreement shall be deemed to be a disclosure with respect to all other sections in Article IV or Article V (as applicable) to which such disclosure may apply solely to the extent the relevance of such disclosure is reasonably apparent on the face of the disclosure in such Schedule.

11.09 Entire Agreement. This Agreement (together with the Schedules and Exhibits to this Agreement) and the Ancillary Agreements constitute the entire agreement among the parties relating to the Transactions and supersede any other agreements, whether written or oral, that may have been made or entered into by or among any of the parties hereto or any of their respective Subsidiaries relating to the Transactions. No representations, warranties, covenants, understandings, agreements, oral or otherwise, relating to the Transactions exist between the parties except as expressly set forth or referenced in this Agreement.

11.10 Amendments. This Agreement may be amended or modified in whole or in part, only by a duly authorized agreement in writing executed in the same manner as this Agreement (but not necessarily by the same natural persons who executed this Agreement) and which makes reference to this Agreement. The approval of this Agreement by the stockholders of any of the parties shall not restrict the ability of the board of directors of any of the parties to terminate this Agreement in accordance with Section 10.01 or to cause such party to enter into an amendment to this Agreement pursuant to this Section 11.10.

 

45

11.11 Severability. If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement shall remain in full force and effect. The parties further agree that if any provision contained herein is, to any extent, held invalid or unenforceable in any respect under the Laws governing this Agreement, they shall take any actions necessary to render the remaining provisions of this Agreement valid and enforceable to the fullest extent permitted by Law and shall amend or otherwise modify this Agreement to replace any provision contained herein that is held invalid or unenforceable with a valid and enforceable provision giving effect to the intent of the parties.

11.12 Jurisdiction; WAIVER OF TRIAL BY JURY(a) . Any Action based upon, arising out of or related to this Agreement or the transactions contemplated hereby must be brought in the Court of Chancery of the State of Delaware (or, to the extent such court does not have subject matter jurisdiction, the Superior Court of the State of Delaware), or, if it has or can acquire jurisdiction, in the United States District Court for the District of Delaware, and each of the parties irrevocably and unconditionally (i) consents and submits to the exclusive jurisdiction of each such court in any such Action, (ii) waives any objection it may now or hereafter have to personal jurisdiction, venue or to convenience of forum, (iii) agrees that all claims in respect of the Action shall be heard and determined only in any such court, and (iv) agrees not to bring any Action arising out of or relating to this Agreement or the transactions contemplated hereby in any other court. Nothing herein contained shall be deemed to affect the right of any party to serve process in any manner permitted by Law or to commence any Action or otherwise proceed against any other party in any other jurisdiction, in each case, to enforce judgments obtained in any Action brought pursuant to this Section 11.12. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION BASED UPON, ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH OF THE PARTIES HERETO CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS IN THIS SECTION 11.12.

11.13 Enforcement. The parties agree that irreparable damage for which monetary damages, even if available, would not be an adequate remedy, would occur in the event that the parties do not perform their obligations under the provisions of this Agreement (including failing to take such actions as are required of them hereunder to consummate this Agreement) in accordance with its specified terms or otherwise breach such provisions. The parties acknowledge and agree that (a) the parties shall be entitled to an injunction, specific performance, or other equitable relief, to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof, without proof of damages, prior to the valid termination of this Agreement in accordance with Section 10.01, this being in addition to any other remedy to which they are entitled under this Agreement; (b) the Acquiror shall be entitled to cause the Company to enforce specifically the terms and provisions of the Subscription Agreements, including with respect to causing the Company to cause the counterparties to the Subscription Agreements to fund their Purchase Price (as defined in the Subscription Agreements) in connection with Closing, in each case, subject to the terms and conditions of the Subscription Agreements, and (c) the right of specific enforcement is an integral part of the Transactions and without that right, none of the parties would have entered into this Agreement. Each party agrees that it will not oppose the granting of specific performance and other equitable relief on the basis that the other parties have an adequate remedy at Law or that an award of specific performance is not an appropriate remedy for any reason at Law or equity. The parties acknowledge and agree that any party seeking an injunction to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in accordance with this Section 11.13 shall not be required to provide any bond or other security in connection with any such injunction.

 

46

11.14 Non-Recourse. This Agreement may only be enforced against, and any claim or cause of action based upon, arising out of, or related to this Agreement or the Transactions may only be brought against, the entities that are expressly named as parties hereto, and then only with respect to the specific obligations set forth herein with respect to such party. Except to the extent a named party to this Agreement (and then only to the extent of the specific obligations undertaken by such named party in this Agreement), (a) no past, present or future director, officer, employee, incorporator, member, partner, stockholder, Affiliate, agent, attorney, advisor or representative or Affiliate of any named party to this Agreement and (b) no past, present or future director, officer, employee, incorporator, member, partner, stockholder, Affiliate, agent, attorney, advisor or representative or Affiliate of any of the foregoing shall have any liability (whether in contract, tort, equity or otherwise) for any one or more of the representations, warranties, covenants, agreements or other obligations or liabilities of any one or more of the Company or Acquiror under this Agreement of or for any claim based on, arising out of, or related to this Agreement or the Transactions.

11.15 Non-survival of Representations, Warranties and Covenants. None of the representations, warranties, covenants, obligations or other agreements in this Agreement or in any certificate, statement or instrument delivered pursuant to this Agreement, including any rights arising out of any breach of such representations, warranties, covenants, obligations, agreements and other provisions, shall survive the Closing and such representations, warranties, covenants, obligations and other agreements shall terminate and expire upon the occurrence of the Effective Time (and there shall be no liability after the Closing in respect thereof), except for (a) those covenants and agreements contained herein that by their terms expressly apply in whole or in part after the Closing and then only with respect to any breaches occurring after the Closing, (b) Section 4.12, Section 4.14, Section 5.12 and Section 5.20 and (c) this Article XI. Notwithstanding anything to the contrary in this Agreement, nothing in this Agreement shall limit any claim for Fraud.

11.16 Acknowledgements. Each of the parties acknowledges and agrees (on its own behalf and on behalf of its respective Affiliates and its and their respective Representatives) that: (i) it has conducted its own independent investigation of the financial condition, results of operations, assets, liabilities, properties and projected operations of the other parties (and their respective Subsidiaries) and has been afforded satisfactory access to the books and records, facilities and personnel of the other parties (and their respective Subsidiaries) for purposes of conducting such investigation; (ii) the Company Representations constitute the sole and exclusive representations and warranties of the Company in connection with the Transactions and the Asset Acquisition; (iii) the Acquiror Representations constitute the sole and exclusive representations and warranties of Acquiror; (iv) except for the Company Representations by the Company and the Acquiror Representations by Acquiror, respectively, none of the parties hereto or any other Person makes, or has made, any other express or implied representation or warranty with respect to any party hereto (or any party’s Affiliates), the Transactions or the Asset Acquisition and all other representations and warranties of any kind or nature expressed or implied (including (x) regarding the completeness or accuracy of, or any omission to state or to disclose, any information, including in the estimates, projections or forecasts or any other information, document or material provided to or made available to any party hereto or their respective Affiliates or Representatives in certain “data rooms,” management presentations or in any other form in expectation of the Transactions or the Asset Acquisition, including meetings, calls or correspondence with management of any party hereto (or any party’s Subsidiaries), and (y) any relating to the future or historical business, condition (financial or otherwise), results of operations, prospects, assets or liabilities of any party hereto (or its Subsidiaries), or the quality, quantity or condition of any party’s or its Subsidiaries’ assets) are specifically disclaimed by all parties hereto and their respective Subsidiaries and all other Persons (including the Representatives and Affiliates of any party hereto or its Subsidiaries); and (v) each party hereto and its respective Affiliates are not relying on any representations and warranties in connection with the Transactions or the Asset Acquisition except the Company Representations by the Company and the Acquiror Representations by Acquiror.

 

47

11.17 Conflicts and Privilege

(a) Acquiror and the Company, on behalf of their respective successors and assigns (including, after the Closing, the Surviving Company), hereby agree that, in the event a dispute with respect to this Agreement or the transactions contemplated hereby arises after the Closing between or among (x) the Sponsor, the stockholders or holders of other equity interests of Acquiror or the Sponsor and/or any of their respective directors, members, partners, officers, employees or Affiliates (other than the Surviving Company) (collectively, the “Flame SPAC Parties”), on the one hand, and (y) the Surviving Company and/or any member of the Sable Group, on the other hand, any legal counsel, including Latham & Watkins LLP (“L&W”), that represented Acquiror and/or the Sponsor prior to the Closing may represent the Sponsor and/or any other member of the Flame SPAC Parties, in such dispute even though the interests of such Persons may be directly adverse to the Surviving Company, and even though such counsel may have represented Acquiror in a matter substantially related to such dispute, or may be handling ongoing matters for the Surviving Company and/or the Sponsor. Acquiror and the Company, on behalf of their respective successors and assigns (including, after the Closing, the Surviving Company), further agree that, as to all legally privileged communications prior to the Closing (made in connection with the negotiation, preparation, execution, delivery and performance under, or any dispute or Action arising out of or relating to, this Agreement, any Ancillary Agreements or the transactions contemplated hereby or thereby) between or among Acquiror, the Sponsor and/or any other member of the Flame SPAC Parties, on the one hand, and L&W, on the other hand (the “L&W Privileged Communications”), the attorney/client privilege and the expectation of client confidence shall survive the Mergers and belong to the Flame SPAC Parties after the Closing, and shall not pass to or be claimed or controlled by the Surviving Company. Notwithstanding the foregoing, any privileged communications or information shared by the Company prior to the Closing with Acquiror or the Sponsor under a common interest agreement shall remain the privileged communications or information of the Surviving Company. Acquiror and the Company, together with any of their respective Affiliates, Subsidiaries, successors or assigns, agree that no Person may use or rely on any of the L&W Privileged Communications, whether located in the records or email server of the Acquiror, Surviving Company or their respective Subsidiaries, in any Action against or involving any of the parties after the Closing, and Acquiror and the Company agree not to assert that any privilege has been waived as to the L&W Privileged Communications, by virtue of the Mergers.

(b) Acquiror and the Company, on behalf of their respective successors and assigns (including, after the Closing, the Surviving Company), hereby agree that, in the event a dispute with respect to this Agreement or the transactions contemplated hereby arises after the Closing between or among (x) the stockholders or holders of other equity interests of the Company and any of their respective directors, members, partners, officers, employees or Affiliates (other than the Surviving Company) (collectively, the “Sable Group”), on the one hand, and (y) the Surviving Company and/or any member of the Flame SPAC Parties, on the other hand, any legal counsel, including Bracewell LLP (“Bracewell”) that represented the Company prior to the Closing may represent any member of the Sable Group in such dispute even though the interests of such Persons may be directly adverse to the Surviving Company, and even though such counsel may have represented Acquiror and/or the Company in a matter substantially related to such dispute, or may be handling ongoing matters for the Surviving Company, further agree that, as to all legally privileged communications prior to the Closing (made in connection with the negotiation, preparation, execution, delivery and performance under, or any dispute or Action arising out of or relating to, this Agreement, any Ancillary Agreements or the transactions contemplated hereby or thereby) between or among the Company and/or any member of the Sable Group, on the one hand, and Bracewell, on the other hand (the “Bracewell Privileged Communications”), the attorney/client privilege and the expectation of client confidence shall survive the Mergers and belong to the Sable Group after the Closing, and shall not pass to or be claimed or controlled by the Surviving Company. Notwithstanding the foregoing, any privileged communications or information shared by Acquiror prior to the Closing with the Company under a common interest agreement shall remain the privileged communications or information of the Surviving Company. Acquiror and the Company, together with any of their respective Affiliates, Subsidiaries, successors or assigns, agree that no Person may use or rely on any of the Bracewell Privileged Communications, whether located in the records or email server of the Acquiror, Surviving Company or their respective Subsidiaries, in any

 

48

Action against or involving any of the parties after the Closing, and Acquiror and the Company agree not to assert that any privilege has been waived as to the Bracewell Privileged Communications, by virtue of the Mergers.

11.18 Action by Acquiror. Whenever a material determination, decision, action, approval, consent, waiver or agreement of Acquiror is required or may be given pursuant to this Agreement (including any determination to exercise or refrain from exercising any rights under Article X or to enforce the terms of this Agreement, which shall include any determination, decision, action, approval, consent, waiver or agreement with respect to Section 6.01(d)) or any Ancillary Agreement, such determination, decision, action, approval, consent, waiver or agreement must be authorized by the Acquiror Board acting reasonably promptly (which shall include for this purpose the affirmative approval of a majority of the independent directors serving on the Acquiror Board) and, unless otherwise required by the Acquiror Organizational Documents or applicable Law, such action shall not require approval of the holders of Acquiror Common Stock.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

49

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered as of the date first written above by their respective officers thereunto duly authorized.

 

FLAME ACQUISITION CORP.
By:   /s/ Gregory Patrinely
Name:   Gregory Patrinely
Title:   Chief Financial Officer

 

 

[Signature Page to Agreement and Plan of Merger]

SABLE OFFSHORE CORP.
By:   /s/ James C. Flores
Name:   James C. Flores
Title:   Chief Executive Officer

 

 

[Signature Page to Agreement and Plan of Merger]

SABLE OFFSHORE HOLDINGS LLC
By:   /s/ James C. Flores
Name:   James C. Flores
Title:   Chief Executive Officer

 

 

[Signature Page to Agreement and Plan of Merger]

Exhibit 3.1

SECOND AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

OF

FLAME ACQUISITION CORP.

Flame Acquisition Corp. (the “Corporation”), a corporation organized and existing under the General Corporation Law of the State of Delaware (the “DGCL”), does hereby certify as follows:

1. The name of the Corporation is Flame Acquisition Corp. The Corporation was incorporated under the name Flame Acquisition Corp. by the filing of its original Certificate of Incorporation with the Secretary of State of the State of Delaware on October 16, 2020 (the “Original Certificate”).

2. An Amended and Restated Certificate of Incorporation, which amended and restated the Original Certificate in its entirety, was filed with the Secretary of State of the State of Delaware on February 24, 2021 (as amended from time to time, the “Existing Certificate”).

3. This Second Amended and Restated Certificate of Incorporation (the “Second Amended and Restated Certificate”), which amends and restates the Existing Certificate in its entirety, has been approved by the Board of Directors of the Corporation (the “Board of Directors”) in accordance with Sections 242 and 245 of the DGCL and has been adopted by the stockholders of the Corporation at a meeting of the stockholders of the Corporation in accordance with the provisions of Section 211 of the DGCL.

4. The text of the Existing Certificate is hereby amended and restated by this Second Amended and Restated Certificate to read in its entirety as set forth in EXHIBIT A attached hereto.

5. This Second Amended and Restated Certificate shall become effective on the date of filing with the Secretary of State of the State of Delaware.

6. IN WITNESS WHEREOF, Flame Acquisition Corp. has caused this Second Amended and Restated Certificate to be signed by a duly authorized officer of the Corporation, on February 14, 2024.

 

FLAME ACQUISITION CORP.
By:  

/s/ James C. Flores

Name:   James C. Flores
Title:   Chairman of the Board of Directors

EXHIBIT A

ARTICLE I

NAME

The name of the corporation is Sable Offshore Corp. (the “Corporation”).

ARTICLE II

REGISTERED OFFICE AND AGENT

The address of the Corporation’s registered office in the State of Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle, 19801, and the name of its registered agent at such address is The Corporation Trust Company.

ARTICLE III

PURPOSE

The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware (the “DGCL”) as it now exists or may hereafter be amended and supplemented.

ARTICLE IV

CAPITAL STOCK

The Corporation is authorized to issue two classes of stock to be designated, respectively, “Common Stock” and “Preferred Stock.” The total number of shares of capital stock which the Corporation shall have authority to issue is 501,000,000 shares. The total number of shares of Common Stock that the Corporation is authorized to issue is 500,000,000 shares, having a par value of $0.0001 per share, and the total number of shares of Preferred Stock that the Corporation is authorized to issue is 1,000,000, having a par value of $0.0001 per share.

The Corporation has the authority to create and issue rights, warrants and options entitling the holders thereof to acquire from the Corporation any shares of its capital stock of any class or classes, with such rights, warrants and options to be evidenced by or in instrument(s) approved by the Board of Directors of the Corporation (the “Board of Directors”). The Board of Directors is empowered to set the exercise price, duration, times for exercise and other terms and conditions of such rights, warrants or options; provided, however, that the consideration to be received for any shares of capital stock issuable upon exercise thereof may not be less than the par value thereof.

The designations and the powers, privileges and rights, and the qualifications, limitations or restrictions thereof in respect of each class of capital stock of the Corporation are as follows:

 

  A.

COMMON STOCK.

1.  General. The voting, dividend, liquidation, and other rights and powers of the Common Stock are subject to and qualified by the rights, powers and preferences of any series of Preferred Stock as may be designated by the Board of Directors and outstanding from time to time.

 

2

2. Voting.

 

  a.

Except as otherwise provided herein (including any Certificate of Designation) or otherwise required by law, the holders of the shares of Common Stock shall exclusively possess all voting power with respect to the Corporation.

 

  b.

Except as otherwise provided herein or expressly required by law, each holder of Common Stock, as such, shall be entitled to vote on each matter submitted to a vote of stockholders and shall be entitled to one (1) vote for each share of Common Stock held of record by such holder as of the record date for determining stockholders entitled to vote on such matter.

 

  c.

Except as otherwise provided herein (including any Certificate of Designation) or otherwise required by law, at any annual or special meeting of the stockholders of the Corporation, holders of the Common Stock shall have the exclusive right to vote for the election of directors and on all other matters properly submitted to a vote of the stockholders.

 

  d.

Except as otherwise required by law, holders of Common Stock, as such, shall not be entitled to vote on any amendment to this Second Amended and Restated Certificate (including any Certificate of Designation (as defined below)) that relates solely to the rights, powers, preferences (or the qualifications, limitations or restrictions thereof) or other terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to this Second Amended and Restated Certificate (including any Certificate of Designation) or pursuant to the DGCL.

Subject to the rights of any holders of any outstanding series of Preferred Stock, the number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the then outstanding capital stock of the Corporation entitled to vote, irrespective of the provisions of Section 242(b)(2) of the DGCL.

3. Dividends. Subject to applicable law and the rights and preferences of any holders of any outstanding series of Preferred Stock, the holders of Common Stock, as such, shall be entitled to the payment of dividends on the Common Stock when, as and if declared by the Board of Directors in accordance with applicable law.

4. Liquidation. Subject to the rights and preferences of any holders of any shares of any outstanding series of Preferred Stock, in the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the funds and assets of the Corporation that may be legally distributed to the Corporation’s stockholders shall be distributed among the holders of the then outstanding Common Stock pro rata in accordance with the number of shares of Common Stock held by each such holder.

 

  B.

PREFERRED STOCK

Shares of Preferred Stock may be issued from time to time in one or more series, each of such series to have such terms as stated or expressed herein and in the resolution or resolutions providing for the creation and issuance of such series adopted by the Board of Directors as hereinafter provided.

Authority is hereby expressly granted to the Board of Directors from time to time to issue Preferred Stock in one or more series, and in connection with the creation of any such series, by adopting a resolution or resolutions providing for the issuance of the shares thereof and by filing a certificate of designation relating thereto in accordance with the DGCL (a “Certificate of Designation”), to determine and fix the number of shares of such series and such voting powers, full or limited, or no voting powers, and such designations, preferences and relative participating, optional or other special rights, and qualifications, limitations or restrictions thereof, including without limitation thereof, dividend rights, conversion rights, redemption privileges and liquidation

 

3

preferences, and to increase or decrease (but not below the number of shares of such series then outstanding) the number of shares of any series as shall be stated and expressed in such resolutions, all to the fullest extent now or hereafter permitted by the DGCL. Without limiting the generality of the foregoing, the resolution or resolutions providing for the creation and issuance of any series of Preferred Stock may provide that such series shall be superior or rank equally or be junior to any other series of Preferred Stock to the extent permitted by law and this Second Amended and Restated Certificate (including any Certificate of Designation). Except as otherwise required by law, holders of any series of Preferred Stock shall be entitled only to such voting rights, if any, as shall expressly be granted thereto by this Second Amended and Restated Certificate (including any Certificate of Designation).

The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the then outstanding capital stock of the Corporation entitled to vote, irrespective of the provisions of Section 242(b)(2) of the DGCL.

ARTICLE V

BOARD OF DIRECTORS

For the management of the business and for the conduct of the affairs of the Corporation it is further provided that:

A. Subject to the special rights of the holders of one or more outstanding series of Preferred Stock to elect directors, the directors of the Corporation shall be classified with respect to the time for which they severally hold office into three classes, as nearly equal in number as possible and designated as Class I, Class II and Class III. The initial Class I directors shall serve for a term expiring at the first annual meeting of the stockholders following the date of this Second Amended and Restated Certificate; the initial Class II directors shall serve for a term expiring at the second annual meeting of the stockholders following the date of this Second Amended and Restated Certificate; and the initial Class III directors shall serve for a term expiring at the third annual meeting following the date of this Second Amended and Restated Certificate. At each annual meeting of the stockholders of the Corporation beginning with the first annual meeting of the stockholders following the date of this Second Amended and Restated Certificate, subject to the special rights of the holders of one or more outstanding series of Preferred Stock to elect directors, the successors of the class of directors whose term expires at that meeting shall be elected to hold office for a term expiring at the annual meeting of the stockholders held in the third year following the year of their election. Each director shall hold office until his or her successor is duly elected and qualified or until his or her earlier death, resignation, disqualification or removal. No decrease in the number of directors shall shorten the term of any incumbent director. The Board of Directors is authorized to assign members of the Board of Directors already in office to Class I, Class II and Class III.

B. Except as otherwise expressly provided by the DGCL or this Second Amended and Restated Certificate, the business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. The number of directors which shall constitute the whole Board of Directors shall be fixed exclusively by one or more resolutions adopted from time to time by the Board of Directors. Directors shall be elected by a plurality of the votes cast by the stockholders present in person or represented by proxy at the meeting and entitled to vote thereon.

C. Subject to the special rights of the holders of one or more outstanding series of Preferred Stock to elect directors, the Board of Directors or any individual director may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of at least two-thirds (66 and 2/3%) of the voting power of all of the then outstanding shares of capital stock of the Corporation entitled to vote at an election of directors.

 

4

D. Subject to the special rights of the holders of one or more outstanding series of Preferred Stock to elect directors, except as otherwise provided by law, any vacancies on the Board of Directors resulting from death, resignation, disqualification, retirement, removal or other causes and any newly created directorships resulting from any increase in the number of directors shall be filled exclusively by the affirmative vote of a majority of the directors then in office, even though less than a quorum, or by a sole remaining director (other than any directors elected by the separate vote of one or more outstanding series of Preferred Stock), and shall not be filled by the stockholders. Any director appointed in accordance with the preceding sentence shall hold office until the expiration of the term of the class to which such director shall have been appointed or until his or her earlier death, resignation, retirement, disqualification, or removal.

E. Whenever the holders of any one or more series of Preferred Stock issued by the Corporation shall have the right, voting separately as a series or separately as a class with one or more such other series, to elect directors at an annual or special meeting of stockholders, the election, term of office, removal and other features of such directorships shall be governed by the terms of this Second Amended and Restated Certificate (including any Certificate of Designation). Notwithstanding anything to the contrary in this Article V, the number of directors that may be elected by the holders of any such series of Preferred Stock shall be in addition to the number fixed pursuant to paragraph B of this Article V, and the total number of directors constituting the whole Board of Directors shall be automatically adjusted accordingly. Except as otherwise provided in the Certificate of Designation(s) in respect of one or more series of Preferred Stock, whenever the holders of any series of Preferred Stock having such right to elect additional directors are divested of such right pursuant to the provisions of such Certificate of Designation(s), the terms of office of all such additional directors elected by the holders of such series of Preferred Stock, or elected to fill any vacancies resulting from the death, resignation, disqualification or removal of such additional directors, shall forthwith terminate (in which case each such director thereupon shall cease to be qualified as, and shall cease to be, a director) and the total authorized number of directors of the Corporation shall automatically be reduced accordingly.

F. In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to adopt, amend or repeal the Amended and Restated Bylaws of the Corporation (as amended and/or restated from time to time, the “Bylaws”). In addition to any vote of the holders of any class or series of stock of the Corporation required by applicable law or by this Second Amended and Restated Certificate (including any Certificate of Designation in respect of one or more series of Preferred Stock) or the Bylaws of the Corporation, the adoption, amendment or repeal of the Bylaws of the Corporation by the stockholders of the Corporation shall require the affirmative vote of the holders of at least two-thirds (66 and 2/3%) of the voting power of all of the then outstanding shares of capital stock of the Corporation entitled to vote generally in an election of directors.

G. The directors of the Corporation need not be elected by written ballot unless the Bylaws so provide.

ARTICLE VI

STOCKHOLDERS

A. Any action required or permitted to be taken by the stockholders of the Corporation must be effected at an annual or special meeting of the stockholders of the Corporation, and shall not be taken by written consent in lieu of a meeting. Notwithstanding the foregoing, any action required or permitted to be taken by the holders of any series of Preferred Stock, voting separately as a series or separately as a class with one or more other such series, may be taken without a meeting, without prior notice and without a vote, to the extent expressly so provided by the applicable Certificate of Designation relating to such series of Preferred Stock, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding shares of the relevant series of Preferred Stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation in accordance with the applicable provisions of the DGCL.

 

5

B. Subject to the special rights of the holders of one or more series of Preferred Stock, special meetings of the stockholders of the Corporation may be called, for any purpose or purposes, at any time only by or at the direction of the Board of Directors, the Chairperson of the Board of Directors, the Chief Executive Officer or the President, and shall not be called by any other person or persons.

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

ARTICLE VII

LIABILITY

No director or officer of the Corporation shall have any personal liability to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty as a director or officer, as applicable, except to the extent such exemption from liability or limitation thereof is not permitted under the DGCL as the same exists or hereafter may be amended. Any amendment, repeal or modification of this Article VII, or the adoption of any provision of the Second Amended and Restated Certificate inconsistent with this Article VII, shall not adversely affect any right or protection of a director or officer of the Corporation with respect to any act or omission occurring prior to such amendment, repeal, modification or adoption. If the DGCL is amended after approval by the stockholders of this Article VII to authorize corporate action further eliminating or limiting the personal liability of directors or officers, then the liability of a director or officer, as applicable, of the Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL as so amended.

ARTICLE VIII

INDEMNIFICATION

A. To the fullest extent permitted by the DGCL or any other applicable law, as it presently exists or may hereafter be amended, the Corporation shall indemnify and hold harmless each person who is or was made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “proceeding”) by reason of the fact that he or she or a person for whom he or she is the legal representative is or was a director or officer of the Corporation or, while serving as a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, other enterprise or nonprofit entity, including service with respect to an employee benefit plan (an “indemnitee”), whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent, or in any other capacity while serving as a director, officer, employee or agent, against all liability and loss suffered and expenses (including, attorneys’ fees, judgments, fines, ERISA excise taxes and penalties and amounts paid in settlement) reasonably incurred by such indemnitee in connection with such proceeding; provided that such indemnitee acted in good faith and in a manner such indemnitee reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such indemnitee’s conduct was unlawful. The Corporation shall to the fullest extent not prohibited by applicable law pay the expenses (including attorneys’ fees) incurred by an indemnitee in defending or otherwise participating in any proceeding in advance of its final disposition; provided, however, that, to the extent required by applicable law, such payment of expenses in advance of the final disposition of the proceeding shall be made only upon receipt of an undertaking, by or on behalf of the indemnitee, to repay all amounts so advanced if it shall ultimately be determined that the indemnitee is not entitled to be indemnified under this Article VIII or otherwise. The rights to indemnification and advancement of expenses conferred by this Article VIII shall be contract rights and such rights shall continue as to an indemnitee who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators. Notwithstanding the foregoing provisions of this Article VIII, except for proceedings to enforce rights to

 

6

indemnification and advancement of expenses, the Corporation shall indemnify and advance expenses to an indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board.

B. The rights to indemnification and advancement of expenses conferred on any indemnitee by this Article VIII shall not be exclusive of any other rights that any indemnitee may have or hereafter acquire under law, this Second Amended and Restated Certificate, the Bylaws, an agreement, vote of stockholders or disinterested directors, or otherwise.

C. Any repeal or amendment of this Article VIII by the stockholders of the Corporation or by changes in law, or the adoption of any other provision of this Second Amended and Restated Certificate inconsistent with this Article VIII, shall, unless otherwise required by law, be prospective only (except to the extent such amendment or change in law permits the Corporation to provide broader indemnification rights on a retroactive basis than permitted prior thereto), and shall not in any way diminish or adversely affect any right or protection existing at the time of such repeal or amendment or adoption of such inconsistent provision in respect of any proceeding (regardless of when such proceeding is first threatened, commenced or completed) arising out of, or related to, any act or omission occurring prior to such repeal or amendment or adoption of such inconsistent provision.

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

ARTICLE IX

FORUM SELECTION

A. Unless the Corporation consents in writing to the selection of an alternative forum, (a) the Court of Chancery (the “Chancery Court”) of the State of Delaware (or, in the event that the Chancery Court does not have jurisdiction, the federal district court for the District of Delaware or other state courts of the State of Delaware) shall, to the fullest extent permitted by law, be the sole and exclusive forum for (i) any derivative action, suit or proceeding brought on behalf of the Corporation, (ii) any action, suit or proceeding asserting a claim of breach of a fiduciary duty owed by any director, officer or stockholder of the Corporation to the Corporation or to the Corporation’s stockholders, (iii) any action, suit or proceeding arising pursuant to any provision of the DGCL or the bylaws of the Corporation or this Second Amended and Restated Certificate (as either may be amended from time to time) or (iv) any action, suit or proceeding asserting a claim against the Corporation governed by the internal affairs doctrine; and (b) subject to the preceding provisions of this Article IX, the federal district courts of the United States of America (the “Federal Courts”) shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended, except for, as to each of (a) and (b), any claim as to which the Chancery Court or the Federal Courts, as applicable, determines that there is an indispensable party not subject to the jurisdiction of the Chancery Court or the Federal Courts, as applicable (and the indispensable party does not consent to the personal jurisdiction of the Chancery Court or Federal Courts, as applicable, within ten days following such determination), which is vested in the exclusive jurisdiction of a court or forum other than the Chancery Court or the Federal Courts, as applicable, or for which the Chancery Court or Federal Courts, as applicable, does not have subject matter jurisdiction. If any action the subject matter of which is within the scope of clause (a) of the immediately preceding sentence is filed in a court other than the courts in the State of Delaware (a “Foreign Action”) in the name of any stockholder, such stockholder shall be deemed to have consented to (x) the personal jurisdiction of the state and federal courts in the State of Delaware in connection with any action brought in any such court to enforce the provisions of clause (a) of the immediately preceding sentence and (y) having service of process made upon such stockholder in any such action by service upon such stockholder’s counsel in the Foreign Action as agent for such stockholder.

 

7

B. Any person or entity purchasing or otherwise acquiring any interest in any security of the Corporation shall be deemed to have notice of and consented to this Article IX. This Article IX is intended to benefit and may be enforced by the Corporation, its officers and directors, the underwriters to any offering giving rise to such complaint, and any other professional or entity whose profession gives authority to a statement made by that person or entity and who has prepared or certified any part of the documents underlying the offering. Notwithstanding the foregoing, the provisions of this Article IX shall not apply to suits brought to enforce any liability or duty created by the Securities Exchange Act of 1934, as amended, or any other claim for which the federal courts of the United States have exclusive jurisdiction.

C. If any provision or provisions of this Article IX shall be held to be invalid, illegal or unenforceable as applied to any circumstance for any reason whatsoever, (a) the validity, legality and enforceability of such provisions in any other circumstance and of the remaining provisions of this Article X (including, without limitation, each portion of any paragraph of this Article X containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and (b) the application of such provision to other persons or entities and circumstances shall not in any way be affected or impaired thereby.

ARTICLE X

AMENDMENTS

A. Notwithstanding anything contained in this Second Amended and Restated Certificate to the contrary, in addition to any vote required by applicable law, the following provisions in this Second Amended and Restated Certificate may be amended, altered, repealed or rescinded, in whole or in part, or any provision inconsistent therewith or herewith may be adopted, only by the affirmative vote of the holders of at least two-thirds (66 and 2/3%) of the total voting power of all the then outstanding shares of capital stock of the Corporation entitled to vote thereon, voting together as a single class: Part B of Article IV, Article V, Article VI, Article VII, Article VIII, Article IX, and this Article X.

B. If any provision or provisions of this Second Amended and Restated Certificate shall be held to be invalid, illegal or unenforceable as applied to any person, entity, or circumstance for any reason whatsoever: (i) the validity, legality and enforceability of such provisions in any other circumstance and of the remaining provisions of this Second Amended and Restated Certificate (including, without limitation, each portion of any paragraph of this Second Amended and Restated Certificate containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) shall not, to the fullest extent permitted by applicable law, in any way be affected or impaired thereby and (ii) to the fullest extent permitted by applicable law, the provisions of this Second Amended and Restated Certificate (including, without limitation, each such portion of any paragraph of this Second Amended and Restated Certificate containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to permit the Corporation to protect its directors, officers, employees and agents from personal liability in respect of their good faith service to or for the benefit of the Corporation to the fullest extent permitted by law. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Second Amended and Restated Certificate.

 

8

Exhibit 3.2

 

 

 

Amended and Restated Bylaws of

Sable Offshore Corp.

(a Delaware corporation)

 

 

 

Table of Contents

 

             Page  

Article I - Corporate Offices

      1  
 

1.1

  

Registered Office

      1  
 

1.2

  

Other Offices

      1  

Article II - Meetings of Stockholders

      1  
 

2.1

  

Place of Meetings

      1  
 

2.2

  

Annual Meeting

      1  
 

2.3

  

Special Meeting

      1  
 

2.4

  

Notice of Business to be Brought before a Meeting.

      1  
 

2.5

  

Notice of Nominations for Election to the Board.

      4  
 

2.6

  

Notice of Stockholders’ Meetings

      8  
 

2.7

  

Quorum

      8  
 

2.8

  

Adjourned Meeting; Notice

      8  
 

2.9

  

Conduct of Business

      9  
 

2.10

  

Voting

      9  
 

2.11

  

Record Date for Stockholder Meetings and Other Purposes

      9  
 

2.12

  

Proxies

      10  
 

2.13

  

List of Stockholders Entitled to Vote

      10  
 

2.14

  

Inspectors of Election

      11  
 

2.15

  

Delivery to the Corporation.

      11  

Article III - Directors

      11  
 

3.1

  

Powers

      11  
 

3.2

  

Number of Directors

      12  
 

3.3

  

Election, Qualification and Term of Office of Directors

      12  
 

3.4

  

Resignation and Vacancies

      12  
 

3.5

  

Place of Meetings; Meetings by Telephone

      12  
 

3.6

  

Regular Meetings

      12  
 

3.7

  

Special Meetings; Notice

      12  
 

3.8

  

Quorum

      13  
 

3.9

  

Board Action without a Meeting

      13  
 

3.10

  

Fees and Compensation of Directors

      13  

Article IV - Committees

      13  
 

4.1

  

Committees of Directors

      13  
 

4.2

  

Committee Minutes

      14  
 

4.3

  

Meetings and Actions of Committees

      14  
 

4.4

  

Subcommittees.

      14  

Article V - Officers

      14  
 

5.1

  

Officers

      14  
 

5.2

  

Appointment of Officers

      15  
 

5.3

  

Subordinate Officers

      15  
 

5.4

  

Removal and Resignation of Officers

      15  
 

5.5

  

Vacancies in Offices

      15  
 

5.6

  

Representation of Shares of Other Corporations

      15  
 

5.7

  

Authority and Duties of Officers

      15  
 

5.8

  

Compensation.

      16  

 

i

             Page  

Article VI - Records

      16  

Article VII - General Matters

      16  
 

7.1

  

Execution of Corporate Contracts and Instruments

      16  
 

7.2

  

Stock Certificates

      16  
 

7.3

  

Special Designation of Certificates.

      17  
 

7.4

  

Lost Certificates

      17  
 

7.5

  

Shares Without Certificates

      17  
 

7.6

  

Construction; Definitions

      17  
 

7.7

  

Dividends

      17  
 

7.8

  

Fiscal Year

      17  
 

7.9

  

Seal

      18  
 

7.10

  

Transfer of Stock

      18  
 

7.11

  

Stock Transfer Agreements

      18  
 

7.12

  

Registered Stockholders

      18  
 

7.13

  

Waiver of Notice

      18  

Article VIII - Notice

      18  
 

8.1

  

Delivery of Notice; Notice by Electronic Transmission

      18  

Article IX - Indemnification

      19  
 

9.1

  

Indemnification of Directors and Officers

      19  
 

9.2

  

Indemnification of Others

      20  
 

9.3

  

Prepayment of Expenses

      20  
 

9.4

  

Determination; Claim

      20  
 

9.5

  

Non-Exclusivity of Rights

      20  
 

9.6

  

Insurance

      20  
 

9.7

  

Other Indemnification

      21  
 

9.8

  

Continuation of Indemnification

      21  
 

9.9

  

Amendment or Repeal; Interpretation

      21  

Article X - Amendments

      21  

Article XI - Forum Selection

      22  

Article XII - Definitions

      23  

 

ii

Amended and Restated Bylaws of

Sable Offshore Corp.

 

 

Article I - Corporate Offices

 

  1.1

Registered Office.

The address of the registered office of Sable Offshore Corp. (the “Corporation”) in the State of Delaware, and the name of its registered agent at such address, shall be as set forth in the Corporation’s certificate of incorporation, as the same may be amended and/or restated from time to time (the “Certificate of Incorporation”).

 

  1.2

Other Offices.

The Corporation may have additional offices at any place or places, within or outside the State of Delaware, as the Corporation’s board of directors (the “Board”) may from time to time establish or as the business and affairs of the Corporation may require.

Article II - Meetings of Stockholders

 

  2.1

Place of Meetings.

Meetings of stockholders shall be held at any place, within or outside the State of Delaware, designated by the Board. The Board may, in its sole discretion, determine that a meeting of stockholders shall not be held at any place, but may instead be held solely by means of remote communication as authorized by Section 211(a)(2) of the General Corporation Law of the State of Delaware (the “DGCL”). In the absence of any such designation or determination, stockholders’ meetings shall be held at the Corporation’s principal executive office, whether within or outside of the State of Delaware.

 

  2.2

Annual Meeting.

The Board shall designate the date and time of the annual meeting. At the annual meeting, the stockholders entitled to vote on such matters shall elect those directors of the Corporation to fill any term of a directorship that expires on the date of such annual meeting and may transact any other business as may properly be brought before the meeting in accordance with Section 2.4. The Board may postpone, reschedule or cancel any previously scheduled annual meeting of stockholders.

 

  2.3

Special Meeting.

Special meetings of the stockholders may be called only by such persons and only in such manner as set forth in the Certificate of Incorporation.

No business may be transacted at any special meeting of stockholders other than the business specified in the notice of such meeting. The Board may postpone, reschedule or cancel any previously scheduled special meeting of stockholders.

 

  2.4

Notice of Business to be Brought before a Meeting.

(a) At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be (i) specified in the Corporation’s notice of meeting (or any supplement thereto) given by or at the direction of the Board, (ii) if not specified in a notice of meeting, otherwise brought before the meeting by or at the direction of

 

1

the Board or the Chairperson of the Board or (iii) otherwise properly brought before the meeting by a stockholder present in person who (A) (1) was a record owner of shares of the Corporation both at the time of giving the notice provided for in this Section 2.4 and at the time of the meeting, (2) is entitled to vote at the meeting and (3) has complied with this Section 2.4 in all applicable respects or (B) properly made such proposal in accordance with Rule 14a-8 under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (as so amended and inclusive of such rules and regulations, the “Exchange Act”). The foregoing clause (iii) shall be the exclusive means for a stockholder to propose business to be brought before an annual meeting of the stockholders. The only matters that may be brought before a special meeting are the matters specified in the notice of meeting given by or at the direction of the person calling the meeting pursuant to Section 2.3, and stockholders shall not be permitted to propose business to be brought before a special meeting of the stockholders. For purposes of this Section 2.4, “present in person” shall mean that the stockholder proposing that the business be brought before the annual meeting of the Corporation, or a qualified representative of such proposing stockholder, appear at such annual meeting. A “qualified representative” of such proposing stockholder shall be a duly authorized officer, manager or partner of such stockholder or any other person authorized by a writing executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as proxy at the meeting of stockholders and such person must produce such writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission, at the meeting of stockholders. Stockholders seeking to nominate persons for election to the Board must comply with Section 2.5, and this Section 2.4 shall not be applicable to nominations except as expressly provided in Section 2.5.

(b) Without qualification, for business to be properly brought before an annual meeting by a stockholder, the stockholder must (i) provide Timely Notice (as defined below) thereof in writing and in proper form to the Secretary of the Corporation and (ii) provide any updates or supplements to such notice at the times and in the forms required by this Section 2.4. To be timely, a stockholder’s notice must be delivered to, or mailed and received at, the principal executive offices of the Corporation not less than ninety (90) days nor more than one hundred twenty (120) days prior to the one-year anniversary of the preceding year’s annual meeting; provided, however, that if no annual meeting was held in the preceding year, to be timely, a stockholder’s notice must be so delivered, or mailed and received, not earlier than the close of business on the one hundred and twentieth (120th) day prior to such annual meeting and not later than the close of business on the later of the ninetieth (90th) day prior to such annual meeting or, if later, the tenth (10th) day following the day on which public disclosure of the date of such annual meeting was first made by the Corporation; provided, further, that if the date of the annual meeting is more than thirty (30) days before or more than sixty (60) days after such anniversary date, to be timely, a stockholder’s notice must be so delivered, or mailed and received, not later than the ninetieth (90th) day prior to such annual meeting or, if later, the tenth (10th) day following the day on which public disclosure of the date of such annual meeting was first made by the Corporation (such notice within such time periods, “Timely Notice”). In no event shall any adjournment or postponement of an annual meeting or the announcement thereof commence a new time period for the giving of Timely Notice as described above.

(c) To be in proper form for purposes of this Section 2.4, a stockholder’s notice to the Secretary of the Corporation shall set forth:

(i) As to each Proposing Person (as defined below), (A) the name and address of such Proposing Person (including, if applicable, the name and address that appear on the Corporation’s books and records); and (B) the class or series and number of shares of the Corporation that are, directly or indirectly, owned of record or beneficially owned (within the meaning of Rule 13d-3 under the Exchange Act) by such Proposing Person, except that such Proposing Person shall in all events be deemed to beneficially own any shares of any class or series of the Corporation as to which such Proposing Person has a right to acquire beneficial ownership at any time in the future (the disclosures to be made pursuant to the foregoing clauses (A) and (B) are referred to as “Stockholder Information”);

(ii) As to each Proposing Person, (A) the full notional amount of any securities that, directly or indirectly, underlie any “derivative security” (as such term is defined in Rule 16a-1(c) under the Exchange Act)

 

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that constitutes a “call equivalent position” (as such term is defined in Rule 16a-1(b) under the Exchange Act) (“Synthetic Equity Position”) and that is, directly or indirectly, held or maintained by such Proposing Person with respect to any shares of any class or series of shares of the Corporation; provided that, for the purposes of the definition of “Synthetic Equity Position,” the term “derivative security” shall also include any security or instrument that would not otherwise constitute a “derivative security” as a result of any feature that would make any conversion, exercise or similar right or privilege of such security or instrument becoming determinable only at some future date or upon the happening of a future occurrence, in which case the determination of the amount of securities into which such security or instrument would be convertible or exercisable shall be made assuming that such security or instrument is immediately convertible or exercisable at the time of such determination; and, provided, further, that any Proposing Person satisfying the requirements of Rule 13d-1(b)(1) under the Exchange Act (other than a Proposing Person that so satisfies Rule 13d-1(b)(1) under the Exchange Act solely by reason of Rule 13d-1(b)(1)(ii)(E)) shall not be deemed to hold or maintain the notional amount of any securities that underlie a Synthetic Equity Position held by such Proposing Person as a hedge with respect to a bona fide derivatives trade or position of such Proposing Person arising in the ordinary course of such Proposing Person’s business as a derivatives dealer, (B) any rights to dividends on the shares of any class or series of shares of the Corporation owned beneficially by such Proposing Person that are separated or separable from the underlying shares of the Corporation, (C) any material pending or threatened legal proceeding in which such Proposing Person is a party or material participant involving the Corporation or any of its officers or directors, or any affiliate of the Corporation, (D) any other material relationship between such Proposing Person, on the one hand, and the Corporation or any affiliate of the Corporation, on the other hand, (E) any direct or indirect material interest in any material contract or agreement of such Proposing Person with the Corporation or any affiliate of the Corporation (including, in any such case, any employment agreement, collective bargaining agreement or consulting agreement), (F) a representation that such Proposing Person intends or is part of a group that intends to deliver a proxy statement or form of proxy to holders of at least the percentage of the Corporation’s outstanding capital stock required to approve or adopt the proposal or otherwise solicit proxies from stockholders in support of such proposal and (G) any other information relating to such Proposing Person that would be required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies or consents by such Proposing Person in support of the business proposed to be brought before the meeting pursuant to Section 14(a) of the Exchange Act (the disclosures to be made pursuant to the foregoing clauses (A) through (G) are referred to as “Disclosable Interests”); provided, however, that Disclosable Interests shall not include any such disclosures with respect to the ordinary course business activities of any broker, dealer, commercial bank, trust company or other nominee who is a Proposing Person solely as a result of being the stockholder directed to prepare and submit the notice required by these bylaws on behalf of a beneficial owner; and

(iii) As to each item of business that the stockholder proposes to bring before the annual meeting, (A) a brief description of the business desired to be brought before the annual meeting, the reasons for conducting such business at the annual meeting and any material interest in such business of each Proposing Person, (B) the text of the proposal or business (including the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend these bylaws, the language of the proposed amendment), and (C) a reasonably detailed description of all agreements, arrangements and understandings (x) between or among any of the Proposing Persons or (y) between or among any Proposing Person and any other person or entity (including their names) in connection with the proposal of such business by such stockholder; and (D) any other information relating to such item of business that would be required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies in support of the business proposed to be brought before the meeting pursuant to Section 14(a) of the Exchange Act; provided, however, that the disclosures required by this Section 2.4(c)(iii) shall not include any disclosures with respect to any broker, dealer, commercial bank, trust company or other nominee who is a Proposing Person solely as a result of being the stockholder directed to prepare and submit the notice required by these bylaws on behalf of a beneficial owner.

For purposes of this Section 2.4, the term “Proposing Person” shall mean (i) the stockholder providing the notice of business proposed to be brought before an annual meeting, (ii) the beneficial owner or beneficial

 

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owners, if different, on whose behalf the notice of the business proposed to be brought before the annual meeting is made, and (iii) any participant (as defined in paragraphs (a)(ii)-(vi) of Instruction 3 to Item 4 of Schedule 14A) with such stockholder in such solicitation.

(d) A Proposing Person shall update and supplement its notice to the Corporation of its intent to propose business at an annual meeting, if necessary, so that the information provided or required to be provided in such notice pursuant to this Section 2.4 shall be true and correct as of the record date for stockholders entitled to vote at the meeting and as of the date that is ten (10) business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to, or mailed and received by, the Secretary of the Corporation at the principal executive offices of the Corporation not later than five (5) business days after the record date for stockholders entitled to vote at the meeting (in the case of the update and supplement required to be made as of such record date), and not later than eight (8) business days prior to the date for the meeting or, if practicable, any adjournment or postponement thereof (and, if not practicable, on the first practicable date prior to the date to which the meeting has been adjourned or postponed) (in the case of the update and supplement required to be made as of ten (10) business days prior to the meeting or any adjournment or postponement thereof). For the avoidance of doubt, the obligation to update and supplement as set forth in this paragraph or any other Section of these bylaws shall not limit the Corporation’s rights with respect to any deficiencies in any notice provided by a stockholder, extend any applicable deadlines hereunder or enable or be deemed to permit a stockholder who has previously submitted notice hereunder to amend or update any proposal or to submit any new proposal, including by changing or adding matters, business or resolutions proposed to be brought before a meeting of the stockholders.

(e) Notwithstanding anything in these bylaws to the contrary, no business shall be conducted at an annual meeting that is not properly brought before the meeting in accordance with this Section 2.4. The presiding officer of the meeting shall, if the facts warrant, determine that the business was not properly brought before the meeting in accordance with this Section 2.4, and if he or she should so determine, he or she shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted.

(f) This Section 2.4 is expressly intended to apply to any business proposed to be brought before an annual meeting of stockholders other than any proposal made in accordance with Rule 14a-8 under the Exchange Act and included in the Corporation’s proxy statement. In addition to the requirements of this Section 2.4 with respect to any business proposed to be brought before an annual meeting, each Proposing Person shall comply with all applicable requirements of the Exchange Act with respect to any such business. Nothing in this Section 2.4 shall be deemed to affect the rights of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act.

(g) For purposes of these bylaws, “public disclosure” shall mean disclosure in a press release reported by a national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Exchange Act.

 

  2.5

Notice of Nominations for Election to the Board.

(a) Nominations of any person for election to the Board at an annual meeting or at a special meeting (but only if the election of directors is a matter specified in the notice of meeting given by or at the direction of the person calling such special meeting) may be made at such meeting only (i) by or at the direction of the Board, including by any committee or persons authorized to do so by the Board or these bylaws, or (ii) by a stockholder present in person (A) who was a record owner of shares of the Corporation both at the time of giving the notice provided for in this Section 2.5 and at the time of the meeting, (B) is entitled to vote at the meeting, and (C) has complied with this Section 2.5 as to such notice and nomination. For purposes of this Section 2.5, “present in person” shall mean that the stockholder proposing that the business be brought before the meeting of the Corporation, or a qualified representative of such stockholder, appear at such meeting. A “qualified representative” of such proposing stockholder shall be a duly authorized officer, manager or partner of such

 

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stockholder or any other person authorized by a writing executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as proxy at the meeting of stockholders and such person must produce such writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission, at the meeting of stockholders. The foregoing clause (ii) shall be the exclusive means for a stockholder to make any nomination of a person or persons for election to the Board at an annual meeting or special meeting.

(b) (i) Without qualification, for a stockholder to make any nomination of a person or persons for election to the Board at an annual meeting, the stockholder must (1) provide Timely Notice (as defined in Section 2.4) thereof in writing and in proper form to the Secretary of the Corporation, (2) provide the information, agreements and questionnaires with respect to such stockholder and its candidate for nomination as required to be set forth by this Section 2.5 and (3) provide any updates or supplements to such notice at the times and in the forms required by this Section 2.5.

(ii) Without qualification, if the election of directors is a matter specified in the notice of meeting given by or at the direction of the person calling a special meeting, then for a stockholder to make any nomination of a person or persons for election to the Board at a special meeting, the stockholder must (i) provide Timely Notice thereof in writing and in proper form to the Secretary of the Corporation at the principal executive offices of the Corporation, (ii) provide the information with respect to such stockholder and its candidate for nomination as required by this Section 2.5 and (iii) provide any updates or supplements to such notice at the times and in the forms required by this Section 2.5. To be timely, a stockholder’s notice for nominations to be made at a special meeting must be delivered to, or mailed and received at, the principal executive offices of the Corporation not earlier than the one hundred twentieth (120th) day prior to such special meeting and not later than the ninetieth (90th) day prior to such special meeting or, if later, the tenth (10th) day following the day on which public disclosure (as defined in Section 2.4) of the date of such special meeting was first made.

(iii) In no event shall any adjournment or postponement of an annual meeting or special meeting or the announcement thereof commence a new time period for the giving of a stockholder’s notice as described above.

(iv) In no event may a Nominating Person provide Timely Notice with respect to a greater number of director candidates than are subject to election by shareholders at the applicable meeting. If the Corporation shall, subsequent to such notice, increase the number of directors subject to election at the meeting, such notice as to any additional nominees shall be due on the later of (i) the conclusion of the time period for Timely Notice, (ii) the date set forth in Section 2.5(b)(ii) or (iii) the tenth day following the date of public disclosure (as defined in Section 2.4) of such increase.

(c) To be in proper form for purposes of this Section 2.5, a stockholder’s notice to the Secretary of the Corporation shall set forth:

(i) As to each Nominating Person (as defined below), the Stockholder Information (as defined in Section 2.4(c)(i), except that for purposes of this Section 2.5, the term “Nominating Person” shall be substituted for the term “Proposing Person” in all places it appears in Section 2.4(c)(i));

(ii) As to each Nominating Person, any Disclosable Interests (as defined in Section 2.4(c)(ii), except that for purposes of this Section 2.5, the term “Nominating Person” shall be substituted for the term “Proposing Person” in all places it appears in Section 2.4(c)(ii) and the disclosure with respect to the business to be brought before the meeting in Section 2.4(c)(ii) shall be made with respect to the election of directors at the meeting); and provided that, in lieu of including the information set forth in Section 2.4(c)(ii), the Nominating Person’s notice for purposes of this Section 2.4 shall include a representation as to whether the Nominating Person intends or is part of a group which intends to (x) deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation’s outstanding capital stock required to elect any nominee and (y) solicit the holders of shares representing at least 67% of

 

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the voting power of shares entitled to vote on the election of directors in support of director nominees other than the Corporation’s nominees in accordance with Rule 14a-19 promulgated under the Exchange Act; and

(iii) As to each candidate whom a Nominating Person proposes to nominate for election as a director, (A) all information with respect to such candidate for nomination that would be required to be set forth in a stockholder’s notice pursuant to this Section 2.5 if such candidate for nomination were a Nominating Person, (B) all information relating to such candidate for nomination that is required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors in a contested election pursuant to Section 14(a) under the Exchange Act (including such candidate’s written consent to being named in a proxy statement and accompanying proxy card relating to the Corporation’s next meeting of stockholders at which directors are to be elected and to serving as a director if elected), (C) a description of any direct or indirect material interest in any material contract or agreement between or among any Nominating Person, on the one hand, and each candidate for nomination or his or her respective associates or any other participants in such solicitation, on the other hand, including, without limitation, all information that would be required to be disclosed pursuant to Item 404 under Regulation S-K if such Nominating Person were the “registrant” for purposes of such rule and the candidate for nomination were a director or executive officer of such registrant and (D) a completed and signed questionnaire, representation and agreement as provided in Section 2.5(f).

For purposes of this Section 2.5, the term “Nominating Person” shall mean (i) the stockholder providing the notice of the nomination proposed to be made at the meeting, (ii) the beneficial owner or beneficial owners, if different, on whose behalf the notice of the nomination proposed to be made at the meeting is made, and (iii) any other participant in such solicitation.

(d) A stockholder providing notice of any nomination proposed to be made at a meeting shall further update and supplement such notice, if necessary, so that the information provided or required to be provided in such notice pursuant to this Section 2.5 shall be true and correct as of the record date for stockholders entitled to vote at the meeting and as of the date that is ten (10) business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to, or mailed and received by, the Secretary of the Corporation at the principal executive offices of the Corporation not later than five (5) business days after the record date for stockholders entitled to vote at the meeting (in the case of the update and supplement required to be made as of such record date), and not later than eight (8) business days prior to the date for the meeting or, if practicable, any adjournment or postponement thereof (and, if not practicable, on the first practicable date prior to the date to which the meeting has been adjourned or postponed) (in the case of the update and supplement required to be made as of ten (10) business days prior to the meeting or any adjournment or postponement thereof). For the avoidance of doubt, the obligation to update and supplement as set forth in this paragraph or any other Section of these bylaws shall not limit the Corporation’s rights with respect to any deficiencies in any notice provided by a stockholder, extend any applicable deadlines hereunder or enable or be deemed to permit a stockholder who has previously submitted notice hereunder to amend or update any nomination or to submit any new nomination.

(e) In addition to the requirements of this Section 2.5 with respect to any nomination proposed to be made at a meeting, each Nominating Person shall comply with all applicable requirements of the Exchange Act with respect to any such nominations. Notwithstanding the foregoing provisions of this Section 2.5, unless otherwise required by law, (i) no Nominating Person shall solicit proxies in support of director nominees other than the Corporation’s nominees unless such Nominating Person has complied with Rule 14a-19 promulgated under the Exchange Act in connection with the solicitation of such proxies, including the provision to the Corporation of notices required thereunder in a timely manner and (ii) if any Nominating Person (1) provides notice pursuant to Rule 14a-19(b) promulgated under the Exchange Act and (2) subsequently fails to comply with the requirements of Rule 14a-19(a)(2) and Rule 14a-19(a)(3) promulgated under the Exchange Act, including the provision to the Corporation of notices required thereunder in a timely manner, or fails to timely provide reasonable evidence sufficient to satisfy the Corporation that such Nominating Person has met the requirements of Rule 14a-19(a)(3) promulgated under the Exchange Act in accordance with the following sentence, then the Corporation shall

 

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disregard any proxies or votes solicited for the Nominating Person’s candidates. If any Nominating Person provides notice pursuant to Rule 14a-19(b) promulgated under the Exchange Act, such Nominating Person shall deliver to the Corporation, no later than seven (7) business days prior to the applicable meeting, reasonable evidence that it has met the requirements of Rule 14a-19(a)(3) promulgated under the Exchange Act.

(f) To be eligible to be a candidate for election as a director of the Corporation at an annual or special meeting, a candidate must be nominated in the manner prescribed in Section 2.5 and the candidate for nomination, whether nominated by the Board or by a stockholder of record, must have previously delivered (in accordance with the time period prescribed for delivery in a notice to such candidate given by or on behalf of the Board), to the Secretary of the Corporation at the principal executive offices of the Corporation, (i) a completed written questionnaire (in a form provided by the Corporation upon written request of any stockholder of record therefor) with respect to the background, qualifications, stock ownership and independence of such proposed nominee and (ii) a written representation and agreement (in form provided by the Corporation upon written request of any stockholder of record thereof) that such candidate for nomination (A) is not and, if elected as a director during his or her term of office, will not become a party to (1) any agreement, arrangement or understanding with, and has not given and will not give any commitment or assurance to, any person or entity as to how such proposed nominee, if elected as a director of the Corporation, will act or vote on any issue or question (a “Voting Commitment”) or (2) any Voting Commitment that could limit or interfere with such proposed nominee’s ability to comply, if elected as a director of the Corporation, with such proposed nominee’s fiduciary duties under applicable law, (B) is not, and will not become a party to, any agreement, arrangement or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation or reimbursement for service as a director that has not been disclosed to the Corporation, (C) if elected as a director of the Corporation, will comply with all applicable corporate governance, conflict of interest, confidentiality, stock ownership and trading and other policies and guidelines of the Corporation applicable to directors and in effect during such person’s term in office as a director (and, if requested by any candidate for nomination, the Secretary of the Corporation shall provide to such candidate for nomination all such policies and guidelines then in effect) and (D) if elected as director of the Corporation, intends to serve the entire term until the next meeting at which such candidate would face re-election.

(g) The Board may also require any proposed candidate for nomination as a Director to furnish such other information as may reasonably be requested by the Board in writing prior to the meeting of stockholders at which such candidate’s nomination is to be acted upon. Without limiting the generality of the foregoing, the Board may request such other information in order for the Board to determine the eligibility of such candidate for nomination to be an independent director of the Corporation or to comply with the director qualification standards and additional selection criteria in accordance with the Corporation’s corporate governance guidelines. Such other information shall be delivered to, or mailed and received by, the Secretary of the Corporation at the principal executive offices of the Corporation (or any other office specified by the Corporation in any public announcement) not later than five (5) business days after the request by the Board has been delivered to, or mailed and received by, the Nominating Person.

(h) A candidate for nomination as a director shall further update and supplement the materials delivered pursuant to this Section 2.5, if necessary, so that the information provided or required to be provided pursuant to this Section 2.5 shall be true and correct as of the record date for stockholders entitled to vote at the meeting and as of the date that is ten (10) business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to, or mailed and received by, the Secretary of the Corporation at the principal executive offices of the Corporation (or any other office specified by the Corporation in any public announcement) not later than five (5) business days after the record date for stockholders entitled to vote at the meeting (in the case of the update and supplement required to be made as of such record date), and not later than eight (8) business days prior to the date for the meeting or, if practicable, any adjournment or postponement thereof (and, if not practicable, on the first practicable date prior to the date to which the meeting has been adjourned or postponed) (in the case of the update and supplement required to be made as of ten (10) business days prior to the meeting or any adjournment or postponement thereof). For the avoidance of doubt, the

 

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obligation to update and supplement as set forth in this paragraph or any other Section of these bylaws shall not limit the Corporation’s rights with respect to any deficiencies in any notice provided by a stockholder, extend any applicable deadlines hereunder or enable or be deemed to permit a stockholder who has previously submitted notice hereunder to amend or update any proposal or to submit any new proposal, including by changing or adding nominees, matters, business or resolutions proposed to be brought before a meeting of the stockholders.

(i) No candidate shall be eligible for nomination as a director of the Corporation unless such candidate for nomination and the Nominating Person seeking to place such candidate’s name in nomination has complied with this Section 2.5. The presiding officer at the meeting shall, if the facts warrant, determine that a nomination was not properly made in accordance with Section 2.5, and if he or she should so determine, he or she shall so declare such determination to the meeting, the defective nomination shall be disregarded and any ballots cast for the candidate in question (but in the case of any form of ballot listing other qualified nominees, only the ballots cast for the nominee in question) shall be void and of no force or effect.

(j) Notwithstanding anything in these bylaws to the contrary, no candidate for nomination shall be eligible to be seated as a director of the Corporation unless nominated and elected in accordance with Section 2.5.

 

  2.6

Notice of Stockholders’ Meetings.

Unless otherwise provided by law, the Certificate of Incorporation or these bylaws, the notice of any meeting of stockholders shall be sent or otherwise given in accordance with Section 8.1 not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting. The notice shall specify the place, if any, date and time of the meeting, the means of remote communication, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called.

 

  2.7

Quorum.

Unless otherwise provided by law, the Certificate of Incorporation or these bylaws, the holders of a majority in voting power of the stock issued and outstanding and entitled to vote, present in person, or by remote communication, if applicable, or represented by proxy, shall constitute a quorum for the transaction of business at all meetings of the stockholders. A quorum, once established at a meeting, shall not be broken by the withdrawal of enough votes to leave less than a quorum. If, however, a quorum is not present or represented at any meeting of the stockholders, then either (i) the person presiding over the meeting or (ii) a majority in voting power of the stockholders entitled to vote at the meeting, present in person, or by remote communication, if applicable, or represented by proxy, shall have power to recess the meeting or adjourn the meeting from time to time in the manner provided in Section 2.8 until a quorum is present or represented. At any recessed or adjourned meeting at which a quorum is present or represented, any business may be transacted that might have been transacted at the meeting as originally noticed.

 

  2.8

Adjourned Meeting; Notice.

When a meeting is adjourned to another time or place, unless these bylaws otherwise require, notice need not be given of the adjourned meeting if the time, place, if any, thereof, and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken or are provided in any other manner permitted by the DGCL. At any adjourned meeting, the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. If after the adjournment a new record date for determination of stockholders entitled to vote is fixed for the adjourned meeting, the Board shall fix as the record date for determining stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote

 

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at the adjourned meeting, and shall give notice of the adjourned meeting to each stockholder of record entitled to vote at such meeting as of the record date so fixed for notice of such adjourned meeting.

 

  2.9

Conduct of Business.

The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting by the person presiding over the meeting. The Board may adopt by resolution such rules and regulations for the conduct of the meeting of stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the Board, the person presiding over any meeting of stockholders shall have the right and authority to convene and (for any or no reason) to recess and/or adjourn the meeting, to prescribe such rules, regulations and procedures (which need not be in writing) and to do all such acts as, in the judgment of such presiding person, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board or prescribed by the person presiding over the meeting, may include, without limitation, the following: (i) the establishment of an agenda or order of business for the meeting; (ii) rules and procedures for maintaining order at the meeting and the safety of those present (including, without limitation, rules and procedures for removal of disruptive persons from the meeting); (iii) limitations on attendance at or participation in the meeting to stockholders entitled to vote at the meeting, their duly authorized and constituted proxies or such other persons as the person presiding over the meeting shall determine; (iv) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (v) limitations on the time allotted to questions or comments by participants. The presiding person at any meeting of stockholders, in addition to making any other determinations that may be appropriate to the conduct of the meeting (including, without limitation, determinations with respect to the administration and/or interpretation of any of the rules, regulations or procedures of the meeting, whether adopted by the Board or prescribed by the person presiding over the meeting), shall, if the facts warrant, determine and declare to the meeting that a matter of business was not properly brought before the meeting and if such presiding person should so determine, such presiding person shall so declare to the meeting and any such matter or business not properly brought before the meeting shall not be transacted or considered. Unless and to the extent determined by the Board or the person presiding over the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.

 

  2.10

Voting.

Except as may be otherwise provided in the Certificate of Incorporation, these bylaws or the DGCL, each stockholder shall be entitled to one (1) vote for each share of capital stock held by such stockholder.

Except as otherwise provided by the Certificate of Incorporation, at all duly called or convened meetings of stockholders at which a quorum is present, for the election of directors, a plurality of the votes cast shall be sufficient to elect a director. Except as otherwise provided by the Certificate of Incorporation, these bylaws, the rules or regulations of any stock exchange applicable to the Corporation, or applicable law or pursuant to any regulation applicable to the Corporation or its securities, each other matter presented to the stockholders at a duly called or convened meeting at which a quorum is present shall be decided by the affirmative vote of the holders of a majority in voting power of the votes cast (excluding abstentions and broker non-votes) on such matter.

 

  2.11

Record Date for Stockholder Meetings and Other Purposes.

In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which record date shall, unless otherwise required by law, not be more than sixty (60) days nor less than ten (10) days before the date of such meeting. If the Board so fixes a date, such date shall also be the record date for determining the stockholders entitled to vote at such meeting unless the Board determines, at the time it fixes such record date, that a later date on or before the date of the meeting shall be the date for making such determination. If no record date is fixed by

 

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the Board, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be the close of business on the next day preceding the day on which notice is first given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for determination of stockholders entitled to vote at the adjourned meeting; and in such case shall also fix as the record date for stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote in accordance herewith at the adjourned meeting.

In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment or any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of capital stock, or for the purposes of any other lawful action, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty (60) days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto.

 

  2.12

Proxies.

Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for such stockholder by proxy authorized by an instrument in writing or by a transmission permitted by law, including Rule 14n-19 promulgated under the Exchange Act, filed in accordance with the procedure established for the meeting, but no such proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212 of the DGCL. A proxy may be in the form of an electronic transmission which sets forth or is submitted with information from which it can be determined that the transmission was authorized by the stockholder.

Any stockholder directly or indirectly soliciting proxies from other stockholders must use a proxy card color other than white, which shall be reserved for the exclusive use by the Board.

 

  2.13

List of Stockholders Entitled to Vote.

The Corporation shall prepare, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting (provided, however, that if the record date for determining the stockholders entitled to vote is less than ten (10) days before the date of the meeting, the list shall reflect the stockholders entitled to vote as of the tenth (10th) day before the meeting date), arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. The Corporation shall not be required to include electronic mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting for a period of at least ten (10) days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the Corporation’s principal executive office. In the event that the Corporation determines to make the list available on an electronic network, the Corporation may take reasonable steps to ensure that such information is available only to stockholders of the Corporation. If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting. Such list shall presumptively determine the identity of the stockholders entitled to vote at the meeting and the number of shares

 

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held by each of them. Except as otherwise provided by law, the stock ledger shall be the only evidence as to who are the stockholders entitled to examine the list of stockholders required by this Section 2.13 or to vote in person or by proxy at any meeting of stockholders.

 

  2.14

Inspectors of Election.

Before any meeting of stockholders, the Corporation shall appoint an inspector or inspectors of election to act at the meeting or its adjournment and make a written report thereof. The Corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If any person appointed as inspector or any alternate fails to appear or fails or refuses to act, then the person presiding over the meeting shall appoint a person to fill that vacancy.

Such inspectors shall:

(i) determine the number of shares outstanding and the voting power of each, the number of shares represented at the meeting and the validity of any proxies and ballots;

(ii) count all votes or ballots;

(iii) count and tabulate all votes;

(iv) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspector(s); and

(v) certify its or their determination of the number of shares represented at the meeting and its or their count of all votes and ballots.

Each inspector, before entering upon the discharge of the duties of inspector, shall take and sign an oath faithfully to execute the duties of inspection with strict impartiality and according to the best of such inspector’s ability. Any report or certificate made by the inspectors of election is prima facie evidence of the facts stated therein. The inspectors of election may appoint such persons to assist them in performing their duties as they determine.

 

  2.15

Delivery to the Corporation.

Whenever this Article II requires one or more persons (including a record or beneficial owner of stock) to deliver a document or information to the Corporation or any officer, employee or agent thereof (including any notice, request, questionnaire, revocation, representation or other document or agreement), such document or information shall be in writing exclusively (and not in an electronic transmission) and shall be delivered exclusively by hand (including, without limitation, overnight courier service) or by certified or registered mail, return receipt requested, and the Corporation shall not be required to accept delivery of any document not in such written form or so delivered. For the avoidance of doubt, the Corporation expressly opts out of Section 116 of the DGCL with respect to the delivery of information and documents to the Corporation required by this Article II.

Article III - Directors

 

  3.1

Powers.

Except as otherwise provided by the Certificate of Incorporation or the DGCL, the business and affairs of the Corporation shall be managed by or under the direction of the Board.

 

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  3.2

Number of Directors.

Subject to the Certificate of Incorporation, the total number of directors constituting the Board shall be determined from time to time by resolution of the Board. No reduction of the authorized number of directors shall have the effect of removing any director before that director’s term of office expires.

 

  3.3

Election, Qualification and Term of Office of Directors.

Except as provided in Section 3.4, and subject to the Certificate of Incorporation, each director, including a director elected to fill a vacancy or newly created directorship, shall hold office until the expiration of the term of the class, if any, for which elected and until such director’s successor is elected and qualified or until such director’s earlier death, resignation, disqualification or removal. Directors need not be stockholders or residents of the State of Delaware. The Certificate of Incorporation or these bylaws may prescribe qualifications for directors.

 

  3.4

Resignation and Vacancies.

Any director may resign at any time upon notice given in writing or by electronic transmission to the Corporation. The resignation shall take effect at the time specified therein or upon the happening of an event specified therein, and if no time or event is specified, at the time of its receipt. When one or more directors so resigns and the resignation is effective at a future date or upon the happening of an event to occur on a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office as provided in Section 3.3.

Unless otherwise provided in the Certificate of Incorporation or these bylaws, vacancies resulting from the death, resignation, disqualification or removal of any director, and newly created directorships resulting from any increase in the authorized number of directors shall be filled only by a majority of the directors then in office, although less than a quorum, or by a sole remaining director.

 

  3.5

Place of Meetings; Meetings by Telephone.

The Board may hold meetings, both regular and special, either within or outside the State of Delaware.

Unless otherwise restricted by the Certificate of Incorporation or these bylaws, members of the Board, or any committee designated by the Board, may participate in a meeting of the Board, or any committee, by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting pursuant to this bylaw shall constitute presence in person at the meeting.

 

  3.6

Regular Meetings.

Regular meetings of the Board may be held within or outside the State of Delaware and at such time and at such place as which has been designated by the Board and publicized among all directors, either orally or in writing, by telephone, including a voice-messaging system or other system designed to record and communicate messages, or facsimile, or by electronic mail or other means of electronic transmission. No further notice shall be required for regular meetings of the Board.

 

  3.7

Special Meetings; Notice.

Special meetings of the Board for any purpose or purposes may be called at any time by the Chairperson of the Board, the Chief Executive Officer, the President or the Secretary of the Corporation or a majority of the total number of directors constituting the Board.

 

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Notice of the time and place of special meetings shall be:

(i) delivered personally by hand, by courier or by telephone;

(ii) sent by United States first-class mail, postage prepaid;

(iii) sent by facsimile or electronic mail; or

(iv) sent by other means of electronic transmission,

directed to each director at that director’s address, telephone number, facsimile number or electronic mail address, or other address for electronic transmission, as the case may be, as shown on the Corporation’s records.

If the notice is (i) delivered personally by hand, by courier or by telephone, (ii) sent by facsimile or electronic mail, or (iii) sent by other means of electronic transmission, it shall be delivered or sent at least twenty-four (24) hours before the time of the holding of the meeting. If the notice is sent by U.S. mail, it shall be deposited in the U.S. mail at least four (4) days before the time of the holding of the meeting. The notice need not specify the place of the meeting (if the meeting is to be held at the Corporation’s principal executive office) nor the purpose of the meeting.

 

  3.8

Quorum.

At all meetings of the Board, unless otherwise provided by the Certificate of Incorporation, a majority of the total number of directors shall constitute a quorum for the transaction of business. The vote of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board, except as may be otherwise specifically provided by statute, the Certificate of Incorporation or these bylaws. If a quorum is not present at any meeting of the Board, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present.

 

  3.9

Board Action without a Meeting.

Unless otherwise restricted by the Certificate of Incorporation or these bylaws, any action required or permitted to be taken at any meeting of the Board, or of any committee thereof, may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing or by electronic transmission. After an action is taken, the consent or consents relating thereto shall be filed with the minutes of the proceedings of the Board, or the committee thereof, in the same paper or electronic form as the minutes are maintained. Such action by written consent or consent by electronic transmission shall have the same force and effect as a unanimous vote of the Board.

 

  3.10

Fees and Compensation of Directors.

Unless otherwise restricted by the Certificate of Incorporation or these bylaws, the Board shall have the authority to fix the compensation, including fees and reimbursement of expenses, of directors for services to the Corporation in any capacity.

Article IV - Committees

 

  4.1

Committees of Directors.

The Board may designate one (1) or more committees, each committee to consist, of one (1) or more of the directors of the Corporation. The Board may designate one (1) or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or

 

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disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board or in these bylaws, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority to (i) approve or adopt, or recommend to the stockholders, any action or matter expressly required by the DGCL to be submitted to stockholders for approval, or (ii) adopt, amend or repeal any bylaw of the Corporation.

 

  4.2

Committee Minutes.

Each committee shall keep regular minutes of its meetings and report the same to the Board when required.

 

  4.3

Meetings and Actions of Committees.

Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of:

 

  (i)

Section 3.5 (place of meetings; meetings by telephone);

 

  (ii)

Section 3.6 (regular meetings);

 

  (iii)

Section 3.7 (special meetings; notice);

 

  (iv)

Section 3.9 (board action without a meeting); and

 

  (v)

Section 7.13 (waiver of notice),

with such changes in the context of these bylaws as are necessary to substitute the committee and its members for the Board and its members; provided, however, that:

(i) the time of regular meetings of committees may be determined either by resolution of the Board or by resolution of the committee;

(ii) special meetings of committees may also be called by resolution of the Board or the chairperson of the applicable committee; and

(iii) the Board may adopt rules for the governance of any committee to override the provisions that would otherwise apply to the committee pursuant to this Section 4.3, provided that such rules do not violate the provisions of the Certificate of Incorporation or applicable law.

 

  4.4

Subcommittees.

Unless otherwise provided in the Certificate of Incorporation, these bylaws or the resolutions of the Board designating the committee, a committee may create one (1) or more subcommittees, each subcommittee to consist of one (1) or more members of the committee, and delegate to a subcommittee any or all of the powers and authority of the committee.

Article V - Officers

 

  5.1

Officers.

The officers of the Corporation shall include a Chief Executive Officer, a President, a Chief Financial Officer and a Secretary. The Corporation may also have, at the discretion of the Board, a Chairperson of the

 

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Board, a Vice Chairperson of the Board, a Chief Operating Officer, a Treasurer, one (1) or more Vice Presidents, one (1) or more Assistant Vice Presidents, one (1) or more Assistant Treasurers, one (1) or more Assistant Secretaries, and any such other officers as may be appointed in accordance with the provisions of these bylaws. Any number of offices may be held by the same person. No officer need be a stockholder or director of the Corporation.

 

  5.2

Appointment of Officers.

The Board shall appoint the officers of the Corporation, except such officers as may be appointed in accordance with the provisions of Section 5.3.

 

  5.3

Subordinate Officers.

The Board may appoint, or empower the Chief Executive Officer or, in the absence of a Chief Executive Officer, the President, to appoint, such other officers and agents as the business of the Corporation may require. Each of such officers and agents shall hold office for such period, have such authority, and perform such duties as are provided in these bylaws or as the Board may from time to time determine.

 

  5.4

Removal and Resignation of Officers.

Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by the Board or, except in the case of an officer chosen by the Board, by any officer upon whom such power of removal may be conferred by the Board.

Any officer may resign at any time by giving written notice to the Corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice. Unless otherwise specified in the notice of resignation, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the Corporation under any contract to which the officer is a party.

 

  5.5

Vacancies in Offices.

Any vacancy occurring in any office of the Corporation shall be filled by the Board or as provided in Section 5.2.

 

  5.6

Representation of Shares of Other Corporations.

The Chairperson of the Board, the Chief Executive Officer, or the President of this Corporation, or any other person authorized by the Board, the Chief Executive Officer or the President, is authorized to vote, represent and exercise on behalf of this Corporation all rights incident to any and all shares or voting securities of any other corporation or other person standing in the name of this Corporation. The authority granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority.

 

  5.7

Authority and Duties of Officers.

All officers of the Corporation shall respectively have such authority and perform such duties in the management of the business of the Corporation as may be provided herein or designated from time to time by the Board and, to the extent not so provided, as generally pertain to their respective offices, subject to the control of the Board.

 

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  5.8

Compensation.

The compensation of the officers of the Corporation for their services as such shall be fixed from time to time by or at the direction of the Board. An officer of the Corporation shall not be prevented from receiving compensation by reason of the fact that he or she is also a director of the Corporation.

Article VI - Records

A stock ledger consisting of one or more records in which the names of all of the Corporation’s stockholders of record, the address and number of shares registered in the name of each such stockholder, and all issuances and transfers of stock of the corporation are recorded in accordance with Section 224 of the DGCL shall be administered by or on behalf of the Corporation. Any records administered by or on behalf of the Corporation in the regular course of its business, including its stock ledger, books of account, and minute books, may be kept on, or by means of, or be in the form of, any information storage device, or method, or one or more electronic networks or databases (including one or more distributed electronic networks or databases), provided that the records so kept can be converted into clearly legible paper form within a reasonable time and, with respect to the stock ledger, that the records so kept (i) can be used to prepare the list of stockholders specified in Sections 219 and 220 of the DGCL, (ii) record the information specified in Sections 156, 159, 217(a) and 218 of the DGCL, and (iii) record transfers of stock as governed by Article 8 of the Uniform Commercial Code as adopted in the State of Delaware.

Article VII - General Matters

 

  7.1

Execution of Corporate Contracts and Instruments.

The Board, except as otherwise provided in these bylaws, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the Corporation; such authority may be general or confined to specific instances.

 

  7.2

Stock Certificates.

The shares of the Corporation shall be represented by certificates or shall be uncertificated, subject to the sole discretion of the Board and the requirements of the DGCL. Certificates for the shares of stock, if any, shall be in such form as is consistent with the Certificate of Incorporation and applicable law. Every holder of stock represented by a certificate shall be entitled to have a certificate signed by, or in the name of the Corporation by, any two officers authorized to sign stock certificates representing the number of shares registered in certificate form. The Chairperson or Vice Chairperson of the Board, the Chief Executive Officer, the President, Vice President, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of the Corporation shall be specifically authorized to sign stock certificates. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he or she were such officer, transfer agent or registrar at the date of issue.

The Corporation may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each stock certificate issued to represent any such partly paid shares, or upon the books and records of the Corporation in the case of uncertificated partly paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully paid shares, the Corporation shall declare a dividend upon partly paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon.

 

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  7.3

Special Designation of Certificates.

If the Corporation is authorized to issue more than one class of stock or more than one series of any class, then the powers, the designations, the preferences and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or on the back of the certificate that the Corporation shall issue to represent such class or series of stock (or, in the case of uncertificated shares, set forth in a notice provided pursuant to Section 151 of the DGCL); provided, however, that except as otherwise provided in Section 202 of the DGCL, in lieu of the foregoing requirements, there may be set forth on the face of back of the certificate that the Corporation shall issue to represent such class or series of stock (or, in the case of any uncertificated shares, included in the aforementioned notice) a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, the designations, the preferences and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.

 

  7.4

Lost Certificates.

Except as provided in this Section 7.4, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the Corporation and cancelled at the same time. The Corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or such owner’s legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.

 

  7.5

Shares Without Certificates

The Corporation may adopt a system of issuance, recordation and transfer of its shares of stock by electronic or other means not involving the issuance of certificates, provided the use of such system by the Corporation is permitted in accordance with applicable law.

 

  7.6

Construction; Definitions.

Unless the context requires otherwise, the general provisions, rules of construction and definitions in the DGCL shall govern the construction of these bylaws. Without limiting the generality of this provision, the singular number includes the plural and the plural number includes the singular.

 

  7.7

Dividends.

The Board, subject to any restrictions contained in either (i) the DGCL or (ii) the Certificate of Incorporation, may declare and pay dividends upon the shares of its capital stock. Dividends may be paid in cash, in property or in shares of the Corporation’s capital stock.

The Board may set apart out of any of the funds of the Corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve. Such purposes shall include but not be limited to equalizing dividends, repairing or maintaining any property of the Corporation, and meeting contingencies.

 

  7.8

Fiscal Year.

The fiscal year of the Corporation shall be fixed by resolution of the Board and may be changed by the Board.

 

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  7.9

Seal.

The Corporation may adopt a corporate seal, which shall be adopted and which may be altered by the Board. The Corporation may use the corporate seal by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.

 

  7.10

Transfer of Stock.

Shares of the stock of the Corporation shall be transferable in the manner prescribed by law and in these bylaws. Shares of stock of the Corporation shall be transferred on the books of the Corporation only by the holder of record thereof or by such holder’s attorney duly authorized in writing, upon surrender to the Corporation of the certificate or certificates representing such shares endorsed by the appropriate person or persons (or by delivery of duly executed instructions with respect to uncertificated shares), with such evidence of the authenticity of such endorsement or execution, transfer, authorization and other matters as the Corporation may reasonably require, and accompanied by all necessary stock transfer stamps. No transfer of stock shall be valid as against the Corporation for any purpose until it shall have been entered in the stock records of the Corporation by an entry showing the names of the persons from and to whom it was transferred.

 

  7.11

Stock Transfer Agreements.

The Corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes or series of stock of the Corporation to restrict the transfer of shares of stock of the Corporation of any one or more classes owned by such stockholders in any manner not prohibited by the DGCL.

 

  7.12

Registered Stockholders.

The Corporation:

(i) shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner; and

(ii) shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of another person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Delaware.

 

  7.13

Waiver of Notice.

Whenever notice is required to be given under any provision of the DGCL, the Certificate of Incorporation or these bylaws, a written waiver, signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time of the event for which notice is to be given, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice or any waiver by electronic transmission unless so required by the Certificate of Incorporation or these bylaws.

Article VIII - Notice

 

  8.1

Delivery of Notice; Notice by Electronic Transmission.

Without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders given by the Corporation under any provisions of the DGCL, the Certificate of Incorporation, or these bylaws may be given in writing directed to the stockholder’s mailing address (or by electronic transmission

 

18

directed to the stockholder’s electronic mail address, as applicable) as it appears on the records of the Corporation and shall be given (1) if mailed, when the notice is deposited in the U.S. mail, postage prepaid, (2) if delivered by courier service, the earlier of when the notice is received or left at such stockholder’s address or (3) if given by electronic mail, when directed to such stockholder’s electronic mail address unless the stockholder has notified the Corporation in writing or by electronic transmission of an objection to receiving notice by electronic mail. A notice by electronic mail must include a prominent legend that the communication is an important notice regarding the Corporation.

Without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders given by the Corporation under any provision of the DGCL, the Certificate of Incorporation or these bylaws shall be effective if given by a form of electronic transmission consented to by the stockholder to whom the notice is given. Any such consent shall be revocable by the stockholder by written notice or electronic transmission to the Corporation. Notwithstanding the provisions of this paragraph, the Corporation may give a notice by electronic mail in accordance with the first paragraph of this section without obtaining the consent required by this paragraph.

Any notice given pursuant to the preceding paragraph shall be deemed given:

 

  (i)

if by facsimile telecommunication, when directed to a number at which the stockholder has consented to receive notice;

 

  (ii)

if by a posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of (A) such posting and (B) the giving of such separate notice; and

 

  (iii)

if by any other form of electronic transmission, when directed to the stockholder.

Notwithstanding the foregoing, a notice may not be given by an electronic transmission from and after the time that (1) the Corporation is unable to deliver by such electronic transmission two (2) consecutive notices given by the Corporation and (2) such inability becomes known to the Secretary or an Assistant Secretary of the Corporation or to the transfer agent, or other person responsible for the giving of notice; provided, however, that the inadvertent failure to discover such inability shall not invalidate any meeting or other action.

An affidavit of the Secretary or an Assistant Secretary of the Corporation or of the transfer agent or other agent of the Corporation that the notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

Article IX - Indemnification

 

  9.1

Indemnification of Directors and Officers.

The Corporation shall indemnify and hold harmless, to the fullest extent permitted by the DGCL or any other applicable law, as it presently exists or may hereafter be amended, any person who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”) by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was a director or officer of the Corporation or, while serving as a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, other enterprise or non-profit entity, including service with respect to employee benefit plans (hereinafter, an “indemnitee”), whether the basis of such proceeding is alleged action in an official capacity as director, officer, employee, or agent, or in any other capacity while serving as director, officer, employee or agent, against all liability and loss suffered and expenses (including attorneys’ fees, judgments, fines ERISA excise taxes or penalties and amounts paid in settlement) reasonably incurred by such indemnitee in connection with any such Proceeding; provided that such indemnitee acted in good faith and in a manner such indemnitee reasonably believed to be in or not opposed to the best

 

19

interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such indemnitee’s conduct was unlawful. Notwithstanding the preceding sentence, except as otherwise provided in Section 9.4, the Corporation shall be required to indemnify a person in connection with a Proceeding initiated by such indemnitee only if the Proceeding was authorized in the specific case by the Board.

 

  9.2

Indemnification of Others.

The Corporation shall have the power to indemnify and hold harmless, to the fullest extent permitted by the DGCL or any other applicable law, as it presently exists or may hereafter be amended, any employee or agent of the Corporation who was or is made or is threatened to be made a party or is otherwise involved in any Proceeding by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was an employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or non-profit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses reasonably incurred by such person in connection with any such Proceeding.

 

  9.3

Prepayment of Expenses.

In addition to the obligation to indemnify conferred in Section 9.1, the Corporation shall to the fullest extent not prohibited by the DGCL or any other applicable law pay the expenses (including attorneys’ fees) incurred by any indemnitee, and may pay the expenses incurred by any employee or agent of the Corporation, in defending any Proceeding in advance of its final disposition; provided, however, that such payment of expenses in advance of the final disposition of the Proceeding shall be made only upon receipt of an undertaking by or on behalf of the person to repay all amounts advanced if it should be ultimately determined that the person is not entitled to be indemnified under this Article IX or otherwise.

 

  9.4

Determination; Claim.

If a claim for indemnification (following the final disposition of such Proceeding) under this Article IX is not paid in full within sixty (60) days, or a claim for advancement of expenses under this Article IX is not paid in full within thirty (30) days, after a written claim therefor has been received by the Corporation the indemnitee may thereafter (but not before) file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim to the fullest extent permitted by law. In any such action the Corporation shall have the burden of proving that the claimant was not entitled to the requested indemnification or payment of expenses under applicable law.

 

  9.5

Non-Exclusivity of Rights.

The rights conferred on any person by this Article IX shall not be exclusive of any other rights which such person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, these bylaws, agreement, vote of stockholders or disinterested directors or otherwise.

 

  9.6

Insurance.

The Corporation shall purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust enterprise or non-profit entity against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify him or her against such liability under the provisions of the DGCL.

 

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  9.7

Other Indemnification.

The Corporation’s obligation, if any, to indemnify or advance expenses to any person who was or is serving at its request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, enterprise or non-profit entity shall be reduced by any amount such person may collect as indemnification or advancement of expenses from such other corporation, partnership, joint venture, trust, enterprise or non-profit enterprise.

 

  9.8

Continuation of Indemnification.

The rights to indemnification and to prepayment of expenses provided by, or granted pursuant to, this Article IX shall continue notwithstanding that the person has ceased to be a director or officer of the Corporation and shall inure to the benefit of the estate, heirs, executors, administrators, legatees and distributees of such person.

 

  9.9

Amendment or Repeal; Interpretation.

The provisions of this Article IX shall constitute a contract between the Corporation, on the one hand, and, on the other hand, each individual who serves or has served as a director or officer of the Corporation (whether before or after the adoption of these bylaws), in consideration of such person’s performance of such services, and pursuant to this Article IX the Corporation intends to be legally bound to each such current or former director or officer of the Corporation. With respect to current and former directors and officers of the Corporation, the rights conferred under this Article IX are present contractual rights and such rights are fully vested, and shall be deemed to have vested fully, immediately upon adoption of theses bylaws. With respect to any directors or officers of the Corporation who commence service following adoption of these bylaws, the rights conferred under this provision shall be present contractual rights and such rights shall fully vest, and be deemed to have vested fully, immediately upon such director or officer commencing service as a director or officer of the Corporation. Any repeal or modification of the foregoing provisions of this Article IX shall not adversely affect any right or protection (i) hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification or (ii) under any agreement providing for indemnification or advancement of expenses to an officer or director of the Corporation in effect prior to the time of such repeal or modification.

Any reference to an officer of the Corporation in this Article IX shall be deemed to refer exclusively to the Chief Executive Officer, the President and the Secretary of the Corporation, or other officer of the Corporation appointed by (x) the Board pursuant to Article V or (y) an officer to whom the Board has delegated the power to appoint officers pursuant to Article V, and any reference to an officer of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise shall be deemed to refer exclusively to an officer appointed by the board of directors (or equivalent governing body) of such other entity pursuant to the certificate of incorporation and bylaws (or equivalent organizational documents) of such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise. The fact that any person who is or was an employee of the Corporation or an employee of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise has been given or has used the title of “Vice President” or any other title that could be construed to suggest or imply that such person is or may be an officer of the Corporation or of such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise shall not result in such person being constituted as, or being deemed to be, an officer of the Corporation or of such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise for purposes of this Article IX.

Article X - Amendments

The Board is expressly empowered to adopt, amend or repeal the bylaws of the Corporation. The stockholders also shall have power to adopt, amend or repeal the bylaws of the Corporation; provided, however, that such action by stockholders shall require, in addition to any other vote required by the Certificate of

 

21

Incorporation or applicable law, the affirmative vote of the holders of at least two-thirds of the voting power of all the then-outstanding shares of capital stock of the Corporation with the power to vote generally in an election of directors, voting together as a single class.

Article XI - Forum Selection

Unless the Corporation consents in writing to the selection of an alternative forum, (a) the Court of Chancery (the “Chancery Court”) of the State of Delaware (or, in the event that the Chancery Court does not have jurisdiction, the federal district court for the District of Delaware or other state courts of the State of Delaware) shall, to the fullest extent permitted by law, be the sole and exclusive forum for (i) any derivative Proceeding brought on behalf of the Corporation, (ii) any Proceeding asserting a claim of breach of a fiduciary duty owed by any director, officer or stockholder of the Corporation to the Corporation or to the Corporation’s stockholders, (iii) any Proceeding arising pursuant to any provision of the DGCL or the Certificate of Incorporation or these bylaws (as either may be amended from time to time) or (iv) any Proceeding asserting a claim against the Corporation governed by the internal affairs doctrine; and (b) subject to the preceding provisions of this Article XI, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended. If any action the subject matter of which is within the scope of clause (a) of the immediately preceding sentence is filed in a court other than the courts in the State of Delaware (a “Foreign Action”) in the name of any stockholder, such stockholder shall be deemed to have consented to (x) the personal jurisdiction of the state and federal courts in the State of Delaware in connection with any action brought in any such court to enforce the provisions of clause (a) of the immediately preceding sentence and (y) having service of process made upon such stockholder in any such action by service upon such stockholder’s counsel in the Foreign Action as agent for such stockholder. If any action the subject matter of which is within the scope of clause (b) of the immediately preceding sentence is filed in a court other than the federal district courts of the United States of America (a “Foreign Securities Act Action”) in the name of any stockholder, such stockholder shall be deemed to have consented to (i) the personal jurisdiction of the federal district courts of the United States of America in connection with any action brought in any such court to enforce clause (b) (a “Securities Act Enforcement Action”), and (ii) having service of process made upon such stockholder in any such Securities Act Enforcement Action by service upon such stockholder’s counsel in the Foreign Securities Act Action as agent for such stockholder.

Any person or entity purchasing or otherwise acquiring any interest in any security of the Corporation shall be deemed to have notice of and consented to this Article XI. This provision is intended to benefit and may be enforced by the Corporation, its officers and directors, the underwriters to any offering giving rise to such complaint, and any other professional or entity whose profession gives authority to a statement made by that person or entity and who has prepared or certified any part of the documents underlying the offering. Notwithstanding the foregoing, the provisions of this Article XI shall not apply to suits brought to enforce any liability or duty created by the Securities Exchange Act of 1934, as amended, or any other claim for which the federal courts of the United States have exclusive jurisdiction.

If any provision or provisions of this Article XI shall be held to be invalid, illegal or unenforceable as applied to any circumstance for any reason whatsoever, (a) the validity, legality and enforceability of such provisions in any other circumstance and of the remaining provisions of this Article XI (including, without limitation, each portion of any paragraph of this Article XI containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and (b) the application of such provision to other persons or entities and circumstances shall not in any way be affected or impaired thereby.

 

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Article XII - Definitions

As used in these bylaws, unless the context otherwise requires, the following terms shall have the following meanings:

An “electronic transmission” means any form of communication, not directly involving the physical transmission of paper, including the use of, or participation in, one or more electronic networks or databases (including one or more distributed electronic networks or databases), that creates a record that may be retained, retrieved and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process.

An “electronic mail” means an electronic transmission directed to a unique electronic mail address (which electronic mail shall be deemed to include any files attached thereto and any information hyperlinked to a website if such electronic mail includes the contact information of an officer or agent of the Corporation who is available to assist with accessing such files and information).

An “electronic mail address” means a destination, commonly expressed as a string of characters, consisting of a unique user name or mailbox (commonly referred to as the “local part” of the address) and a reference to an internet domain (commonly referred to as the “domain part” of the address), whether or not displayed, to which electronic mail can be sent or delivered.

The term “person” means any individual, general partnership, limited partnership, limited liability company, corporation, trust, business trust, joint stock company, joint venture, unincorporated association, cooperative or association or any other legal entity or organization of whatever nature, and shall include any successor (by merger or otherwise) of such entity.

 

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Sable Offshore Corp.

Certificate of Amendment and Restatement of Bylaws

 

 

The undersigned hereby certifies that he is the duly elected, qualified, and acting Secretary of Sable Offshore Corp., a Delaware corporation (the “Corporation”), and that the attached Bylaws are a true and correct copy of the Bylaws of the Corporation in effect as of the date of this certificate.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this February 14, 2024.

 

/s/ James C. Flores

Name: James C. Flores
Title: Chairman of the Board of Directors

 

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Certain portions of this Exhibit have been redacted pursuant to Item 601(b)(10) of Regulation S-K and, where applicable, have been marked with “[***]” to indicate where redactions have been made.

Exhibit 10.1

February 14, 2024

Senior Secured Term Loan Agreement

between

Sable Offshore Corp. (f/k/a Flame Acquisition Corp.)

as Borrower

Exxon Mobil Corporation

as Lender

Alter Domus Products Corp.

as Administrative Agent

Table of Contents

 

          Page  

ARTICLE I DEFINITIONS

      1  

Section 1.01

   

Defined Terms

      1  

Section 1.02

   

Terms Generally

      13  

Section 1.03

   

Accounting Terms; Changes in GAAP

      13  

ARTICLE II TERM LOAN

      13  

Section 2.01

   

Term Loan

      13  

Section 2.02

   

Prepayments

      14  

Section 2.03

   

Repayment of Loan

      15  

Section 2.04

   

Interest

      15  

Section 2.05

   

Evidence of Debt

      15  

Section 2.06

   

Payments Generally

      16  

ARTICLE III REPRESENTATIONS AND WARRANTIES

      16  

Section 3.01

   

Organization; Powers

      16  

Section 3.02

   

Authority; Enforceability

      16  

Section 3.03

   

Approvals; No Conflicts

      16  

Section 3.04

   

Financial Statements

      17  

Section 3.05

   

Litigation

      17  

Section 3.06

   

Restriction on Liens

      17  

Section 3.07

   

Compliance with the Laws and Agreements; PATRIOT ACT; No Defaults

      17  

Section 3.08

   

Investment Company Act

      17  

Section 3.09

   

Taxes

      17  

Section 3.10

   

Insurance

      18  

Section 3.11

   

Properties; Defensible Title, Etc.

      18  

Section 3.12

   

Solvency

      18  

Section 3.13

   

AntCorruption Laws; Sanctions

      18  

Section 3.14

   

Subsidiaries

      19  

Section 3.15

   

Burdensome Restrictions

      19  

ARTICLE IV CONDITIONS

      19  

ARTICLE V AFFIRMATIVE COVENANTS

      21  

Section 5.01

   

Financial Statements; Other Information

      21  

Section 5.02

   

Notices of Material Events

      23  

Section 5.03

   

Existence; Conduct of Business

      24  

Section 5.04

   

Payment of Obligations

      24  

Section 5.05

   

Performance of Obligations under Financing Documents

      24  

Section 5.06

   

Operation and Maintenance of Properties; Material Contracts

      24  

Section 5.07

   

Insurance

      25  

Section 5.08

   

Books and Records; Inspection Rights

      25  

Section 5.09

   

Compliance with Laws

      25  

Section 5.10

   

Environmental Matters

      25  

Section 5.11

   

ERISA Compliance

      26  

Section 5.12

   

Additional Collateral; Additional Guarantors

      26  

Section 5.13

   

Further Assurances

      27  

ARTICLE VI NEGATIVE COVENANTS

      28  

Section 6.01

   

Fundamental Changes

      28  

Section 6.02

   

Debt

      28  

Section 6.03

   

Liens

      29  

 

i

          Page  

Section 6.04

   

Restricted Payments

      29  

Section 6.05

   

Investments, Loans and Advances

      29  

Section 6.06

   

Sale or Discount of Receivables

      30  

Section 6.07

   

Sale of Properties

      30  

Section 6.08

   

Sales and Leasebacks

      30  

Section 6.09

   

Transactions with Affiliates

      30  

Section 6.10

   

Negative Pledge Agreements; Dividend Restrictions

      31  

Section 6.11

   

Other Prepayments

      31  

Section 6.12

   

Amendments to Organizational Documents and Material Contracts

      31  

Section 6.13

   

Changes in Fiscal Periods

      31  

Section 6.14

   

Additional Subsidiaries

      31  

Section 6.15

   

Changes to Nature of Business

      31  

ARTICLE VII EVENTS OF DEFAULT

      32  

Section 7.01

   

Events of Default

      32  

Section 7.02

   

Remedies Upon Event of Default

      34  

Section 7.03

   

Application of Payments

      34  

ARTICLE VIII AGENCY

      34  

Section 8.01

   

Appointment and Authority

      34  

Section 8.02

   

Exculpatory Provisions

      35  

Section 8.03

   

Reliance by Lender

      36  

Section 8.04

   

Resignation or Removal of Administrative Agent

      36  

Section 8.05

   

Non-Reliance

      37  

Section 8.06

   

Administrative Agent May File Proofs of Claim

      37  

Section 8.07

   

Collateral and Guaranty Matters

      37  

ARTICLE IX MISCELLANEOUS

      38  

Section 9.01

   

Notices

      38  

Section 9.02

   

Waivers; Amendments

      39  

Section 9.03

   

Expenses; Indemnity; Insurance; Damage Waiver

      40  

Section 9.04

   

Successors and Assigns

      41  

Section 9.05

   

Survival

      42  

Section 9.06

   

Counterparts; Integration; Effectiveness; Electronic Execution

      42  

Section 9.07

   

Severability

      43  

Section 9.08

   

Right of Setoff

      43  

Section 9.09

   

Governing Law; Jurisdiction; Etc.

      43  

Section 9.10

   

Waiver of Jury Trial

      44  

Section 9.11

   

Headings

      44  

Section 9.12

   

Interest Rate Limitation

      44  

Section 9.13

   

Payments Set Aside

      45  

Section 9.14

   

Treatment of Certain Information; Confidentiality

      45  

 

Exhibits
Exhibit A   –   Form of Guarantee and Collateral Agreement
Exhibit B   –   Form of Prepayment Notice
Exhibit C   –   Form of Solvency Certificate
Exhibit D   –   Form of Notice of Borrowing
Exhibit E   –   Form of Note

 

ii

Schedules
Schedule 1.02   –   Knowledge Persons
Schedule 3.16   –   Subsidiaries
Schedule 6.02   –   Existing Debt
Schedule 6.03   –   Existing Liens
Schedule 6.09   –   Transactions with Affiliates

 

iii

This Senior Secured Term Loan Agreement is dated as of February 14, 2024 (this “Agreement”), between Sable Offshore Corp. (formerly known as Flame Acquisition Corp.), a Delaware corporation, as borrower (together with its successors and permitted assigns, the “Borrower”), Exxon Mobil Corporation, a New Jersey corporation, as lender (together with its successors and permitted assigns, “Lender”), and Alter Domus Products Corp., a Delaware corporation, as administrative agent for the benefit of the Secured Parties (in such capacity, the “Administrative Agent”), each a “Party” and together, the “Parties”.

The Borrower and Lender have entered into that certain Purchase and Sale Agreement effective as of January 1, 2022 (amended, supplemented or otherwise modified from time to time, the “PSA”), between the Borrower, as purchaser, and the Lender, as seller.

The Borrower wishes to borrow, and the Lender wishes to lend, certain amounts to finance the acquisition by the Borrower from the Lender of certain oil and gas and midstream assets pursuant to the PSA.

NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

Section 1.01 Defined Terms. As used in this Agreement, the following terms have the meanings specified below:

“Administrative Agent” has the meaning specified in the introductory paragraph hereof.

“Administrative Agent Fee Letter” means that certain Fee Letter, dated as of the date hereof, by and between the Borrower and the Administrative Agent.

“Affiliate” means with respect to any Person, a Person that, directly or indirectly, through one or more entities, controls, is controlled by or is under common control with the Person specified. For the purpose of the immediately preceding sentence, the term “control” and its syntactical variants mean the power, direct or indirect, to direct or cause the direction of the management of such Person, whether through the ownership of voting securities, by contract, agency or otherwise.

“Agreement” has the meaning specified in introductory paragraph hereof.

“Anti-Corruption Laws” means the United States Foreign Corrupt Practices Act of 1977, as amended (“FCPA”), and any other applicable laws, rules and regulations of any jurisdiction applicable to the Borrower or any of its Subsidiaries from time to time concerning or relating to bribery or corruption.

“Anti-Money Laundering Laws” means the Bank Secrecy Act, as amended by the USA Patriot Act, and any other similar Applicable Laws concerning or relating to terrorism financing or money laundering of the jurisdictions in which any Credit Party or any of its Subsidiaries operates.

“Applicable Law” means, as to any Person, all applicable Laws binding upon such Person or to which such a Person is subject.

“Assets” has the meaning given to such term in the PSA.

“Assignment and Assumption” means an assignment and assumption entered into by the Lender and a new lender pursuant to Section 9.04.

“Assumed Obligations” has the meaning set forth in the PSA.

 

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“Beneficial Ownership Regulation” means 31 C.F.R. § 1010.230.

“Borrower” has the meaning specified in introductory paragraph hereof.

“Business Day” means any day that is not a Saturday, Sunday or other day that is a legal holiday under the laws of the State of Texas or New York or is a day on which banking institutions in such state are authorized or required by Law to close.

“Buyer” has the meaning assigned to such term in the PSA.

“Capital Lease” means, in respect of any Person, all leases that are or should be, in accordance with GAAP, recorded as finance leases on the balance sheet of the Person liable (whether contingent or otherwise) for the payment of rent thereunder. Any lease that was treated as an operating lease under GAAP at the time it was entered into that later becomes a capital lease as a result of a change in GAAP during the life of such lease, including any renewals, shall be treated as an operating lease for all purposes under this Agreement, and any lease that was treated as a capital lease under GAAP at the time it was entered into that later becomes an operating lease as a result of a change in GAAP during the life of such lease, including any renewals, shall be treated as a capital lease for all purposes under this Agreement.

“Cash Equivalent” means (a) marketable direct obligations issued by, or unconditionally guaranteed by, the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one (1) year from the date of acquisition, (b) commercial paper maturing within one (1) year from the date of acquisition thereof rated in one of the two highest grades by S&P or Moody’s, (c) Investments with average maturities of twelve (12) months or less from the date of acquisition in money market or similar funds with assets of at least One Billion Dollars ($1,000,000,000) and rated Aaa by Moody’s or AAA by S&P.

“Casualty Event” means (a) any loss, casualty or other insured damage to, or (b) final, unappealable nationalization, taking under power of eminent domain or by condemnation or similar proceeding of, any Property of any Credit Party; provided that, any such event generating net proceeds of One Million Dollars ($1,000,000) or less shall not constitute a Casualty Event hereunder.

“Change of Control” means (a) an event or series of events by which any “person” (as that term is used in Section 13(d)(3) of the Securities Exchange Act of 1934), except for a Permitted Holder, is or becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934), directly or indirectly, of more than 50% of the voting power of the Equity Interests in the Borrower or (b) the Key Employee ceasing to be directly and actively involved in the day-to-day management of the Borrower with a substantially similar level of duties, responsibilities and decision-making authority as such Person has as of the Closing Date, unless an interim or permanent replacement has been approved in writing by the Lender (such approval not to be unreasonably withheld) within forty-five (45) days of such cessation.

“Charges” has the meaning set forth in Section 9.12.

“Closing Date” means the date on which all conditions set forth in Article IV shall have been satisfied (or waived in accordance therewith).

“Code” means the Internal Revenue Code of 1986 as amended from time to time and any successor statute, and the regulations promulgated thereunder.

“Collateral” means all Property of the Credit Parties, now owned or hereafter acquired, upon which a Lien is purported to be created by any Collateral Document.

 

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“Collateral Documents” means the Mortgages, the Guarantee and Collateral Agreement, the Deeds of Trust and any other security agreements, deeds of trust, account control agreements and any and all other agreements, instruments, consents or certificates now or hereafter executed and delivered by the Borrower, the other Credit Parties or any other Person pursuant to the terms of, or as security for the payment or performance of the Obligations.

“Credit Parties” means the Borrower and the Guarantors, and “Credit Party” shall mean each of them.

“Debt” means, for any Person, the sum of the following (without duplication): (a) all obligations of such Person for borrowed money or evidenced by bonds, bankers’ acceptances, debentures, notes or other similar instruments; (b) all obligations of such Person (whether contingent or otherwise) in respect of letters of credit, surety or other bonds and similar instruments; (c) all accounts payable and all accrued expenses, liabilities or other obligations of such Person to pay the deferred purchase price of Property or services that are more than ninety (90) days past the due date other than those which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP; (d) all obligations of such Person under Capital Leases; (e) all obligations of such Person under Synthetic Leases; (f) all Debt (as defined in the other clauses of this definition) of others secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) a Lien on any Property of such Person, whether or not such Debt is assumed by such Person; (g) all Debt (as defined in the other clauses of this definition) of others guaranteed by such Person or in which such Person otherwise assures a creditor against loss of the Debt (howsoever such assurance shall be made) to the extent of the lesser of the amount of such Debt and the maximum stated amount of such guarantee or assurance against loss; (h) all obligations or undertakings of such Person to maintain or cause to be maintained the financial position or covenants of others and, to the extent entered into as a means of providing credit support for the debt payment obligations of others and not primarily to enable such Person to acquire any such Property, all obligations or undertakings of such Person to purchase the Debt or Property of others; (i) obligations to deliver commodities, goods or services, including Hydrocarbons, in consideration of one or more advance payments, made more than one month in advance of the month in which the commodities, goods or services are to be delivered other than gas balancing arrangements in the ordinary course of business; (j) any Debt of a partnership for which such Person is liable either by agreement, by operation of law or by a Governmental Requirement but only to the extent of such liability; (k) the obligation of such Person in respect of Disqualified Capital Stock; and (l) the undischarged balance of any production payment created by such Person or for the creation of which such Person directly or indirectly received payment. The Debt of any Person shall include all obligations of such Person of the character described above to the extent such Person remains legally liable in respect thereof notwithstanding that any such obligation is not included as a liability of such Person under GAAP. Debt shall not include liabilities resulting from endorsements of instruments for collection in the ordinary course of business.

“Debtor Relief Laws” means the Bankruptcy Code of the United States of America, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect.

“Deeds of Trust” means (i) that certain Deed of Trust, Fixture Filing, Assignment of As-Extracted Collateral, Security Agreement and Financing Statement, dated as of the Closing Date, made by the Borrower in favor of the Administrative Agent for the benefit of the Secured Parties and (ii) that certain Deed of Trust, Fixture Filing, Assignment of As-Extracted Collateral, Security Agreement and Financing Statement, dated as of the Closing Date, made by the Pacific Pipeline Company, a Delaware corporation, in favor of the Administrative Agent for the benefit of the Secured Parties, as the same may be amended, amended and restated, supplemented or otherwise modified from time to time; each, a “Deed of Trust”.

“Default” means any event or condition that constitutes an Event of Default or that, with the giving of any notice, the passage of time, or both, would be an Event of Default.

 

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“Default Rate” means an interest rate from and after Default at the rate of an additional two percent (2%) per month until the total amount is paid in full.

“Discharge of the Obligations” means (a) the payment in full in cash of all Obligations (other than any obligations that expressly survive under the Financing Documents by their terms) or (b) the exercise by the Lender of the Reassignment Option and the consummation thereof together with the corresponding deemed repayment in full of the Obligations (other than obligations that expressly survive under the Financing Documents by their terms).

“Disposition” or “Dispose” means the sale, transfer, license, lease or other disposition of any property by any Person (including any sale and leaseback transaction and any sale or issuance of Equity Interests in or by a Subsidiary of such Person (other than to the Borrower or any other Subsidiary of the Borrower)), including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith.

“Dispute Arbitration” has the meaning set forth in Section 9.09(c).

“Disputed Claim” has the meaning set forth in Section 9.09(b).

“Disqualified Capital Stock” means any Equity Interest that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable) or upon the happening of any event, matures or is mandatorily redeemable for any consideration other than other Equity Interests (which would not constitute Disqualified Capital Stock), pursuant to a sinking fund obligation or otherwise, or is convertible or exchangeable for Debt or redeemable for any consideration other than other Equity Interests (which would not constitute Disqualified Capital Stock) at the option of the holder thereof, in whole or in part, on or prior to the date that is one (1) year after the earlier of (a) the Maturity Date and (b) the date on which there are no Loans or other obligations hereunder outstanding.

“Dollar” and “$” mean lawful money of the United States.

“Effective Time” means 12:00:01 a.m. (Houston time) on January 1, 2022.

“Environmental Laws” means any Laws pertaining to safety, health or conservation or protection of the environment, wildlife, or natural resources in effect in any and all jurisdictions in which the Assets are located, or otherwise applicable to the Assets, including the Clean Air Act, as amended, the Federal Water Pollution Control Act, as amended, the Safe Drinking Water Act, as amended, the Comprehensive Environmental Response, Compensation and Liability Act, as amended (“CERCLA”), the Superfund Amendments and Reauthorization Act of 1986, as amended, the Resource Conservation and Recovery Act, as amended (“RCRA”), the Hazardous and Solid Waste Amendments Act of 1984, as amended, the Toxic Substances Control Act, as amended, the Occupational Safety and Health Act, as amended, the Emergency Planning and Community Right-to-Know Act, as amended, the Hazardous Materials Transportation Act, as amended, the National Environmental Policy Act, as amended, the Oil Pollution Act of 1990, as amended and any applicable state, tribal, or local counterparts, but shall not include any Law to the extent associated with plugging and abandonment of any well. The terms “hazardous substance”, “release”, and “threatened release” shall have the meanings specified in CERCLA; provided, however, that to the extent the Laws of the state in which the Assets are located have established a meaning for “hazardous substance”, “release”, “threatened release”, “solid waste”, “hazardous waste”, and “disposal” that is broader than that specified in CERCLA or RCRA, such broader meaning shall apply with respect to the matters covered by such Laws.

“Environmental Permits” means any permit, registration, license, notice, approval, consent, exemption, variance, or other authorization required under or issued pursuant to applicable Environmental Laws.

 

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“Equity Interest” means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such Equity Interest.

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

“ERISA Affiliate” means each trade or business (whether or not incorporated) which together with any Credit Party would be deemed to be a “single employer” within the meaning of Section 4001(b)(1) of ERISA or subsections (b), (c), (m) or (o) of Section 414 of the Code.

“ERISA Event” means (a) a Reportable Event with respect to any Plan, (b) the withdrawal of the Borrower or any of its Subsidiaries or ERISA Affiliates from a Plan during a plan year in which it was a “substantial employer” (as defined in Section 4001(a)(2) of ERISA), (c) the filing by the applicable Credit Party with the PBGC of a notice of intent under Section 4041(a)(2) of ERISA to terminate a Plan or the treatment of an amendment to such a Plan as a termination under Section 4041(c) of ERISA, or the filing of a notice of intent to terminate any Plan, if such termination would require material additional contributions in order to be considered a standard termination within the meaning of Section 4041(b) of ERISA, (d) the institution by the PBGC of proceedings to terminate a Plan under Section 4042 of ERISA, (e) any event or condition (i) that provides a basis under Section 4042(a)(1), (2), or (3) of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or (ii) that could reasonably be expected to constitute a termination of a Multiemployer Plan pursuant to Section 4041A of ERISA, (f) the incurrence by the Borrower or any of its Subsidiaries or ERISA Affiliates of any liability with respect to the partial or complete withdrawal within the meaning of Sections 4203 and 4205 of ERISA, of the Borrower or any of its Subsidiaries or ERISA Affiliates from a Multiemployer Plan, (g) the failure to make a required contribution to any Plan that would result in the imposition of a lien or other encumbrance under Section 430 of the Code or Section 303 or 4068 of ERISA, or the arising of such a lien or encumbrance; the failure to satisfy the minimum funding standard under Section 412 of the Code or Section 302 of ERISA, whether or not waived, with respect to any Plan; or the filing of any request for or receipt of a minimum funding waiver under Section 412 of the Code with respect to any Plan, or that such filing may be made; or a determination that any Plan is, or is expected to be, considered an at-risk plan within the meaning of Section 430 of the Code or Section 303 of ERISA; the Borrower, any Subsidiary or any ERISA Affiliate incurring any liability under Section 436 of the Code, or a violation of Section 436 of the Code with respect to a Plan; or the failure to make any required contribution to a Multiemployer Plan, (h) the insolvency under Title IV of ERISA of any Multiemployer Plan; or the receipt by any Borrower, any Subsidiary or any ERISA Affiliate, of any notice, or the receipt by any Multiemployer Plan from any Borrower, Subsidiary or any ERISA Affiliate of any notice, that a Multiemployer Plan is in endangered or critical status under Section 432 of the Code or Section 305 of ERISA, (i) the Borrower, a Subsidiary or an ERISA Affiliate incurring any liability under Title IV of ERISA with respect to any Plan (other than premiums due and not delinquent under Section 4007 of ERISA), or (j) the Borrower, a Subsidiary or ERISA Affiliate engaging in a non-exempt prohibited transaction within the meaning of Section 4975 of the Code or Section 406 of ERISA with respect to a Plan.

“Event of Default” has the meaning specified in Article VII.

“Excepted Liens” means:

(a) Liens for Taxes, assessments or other governmental charges or levies which are not delinquent or which are being contested in good faith by appropriate action and, in each case, for which adequate reserves have been maintained in accordance with GAAP;

(b) Liens in connection with workers’ compensation, unemployment insurance or other social security, old age pension or public liability obligations (other than Liens imposed pursuant to ERISA) which are not delinquent for a period of more than thirty (30) days or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP;

 

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(c) landlord’s liens, operators’, vendors’, carriers’, warehousemen’s, repairmen’s, mechanics’, suppliers’, workers’, materialmen’s, construction or other like Liens arising by operation of law or otherwise in the ordinary course of business or incident to the exploration, development, operation and maintenance of Oil and Gas Properties each of which is in respect of obligations that are not delinquent for a period of more than thirty (30) days or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP;

(d) contractual Liens which arise in the ordinary course of business under operating agreements, joint venture agreements, oil and gas partnership agreements, oil and gas leases, farm out agreements, division orders, contracts for the sale, transportation or exchange of oil and natural gas, unitization and pooling declarations and agreements, area of mutual interest agreements, overriding royalty agreements, marketing agreements, processing agreements, net profits agreements, development agreements, gas balancing or deferred production agreements, injection, repressuring and recycling agreements, salt water or other disposal agreements, seismic or other geophysical permits or agreements, and other agreements which are usual and customary in the oil and gas business and are for claims which are not delinquent or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP; provided that, any such Lien referred to in this clause does not materially impair the use of the Property covered by such Lien for the purposes for which such Property is held by any Credit Party or materially impair the value of such Property subject thereto;

(e) Liens arising solely by virtue of any statutory or common law provision or customary deposit account terms relating to banker’s liens, rights of set off or similar rights and remedies and burdening only deposit accounts or other funds maintained with a creditor depository institution; provided that, no such deposit account is a dedicated cash collateral account or is subject to restrictions against access by the depositor in excess of those set forth by regulations promulgated by the Federal Reserve Board and no such deposit account is intended by any Credit Party to provide collateral to the depository institution (other than pursuant to the Financing Documents);

(f) zoning and land use requirements, easements, restrictions, servitudes, permits, conditions, covenants, exceptions or reservations in any Property of any Credit Party for the purpose of roads, pipelines, transmission lines, transportation lines, distribution lines for the removal of gas, oil, coal or other minerals or timber, and other like purposes, or for the joint or common use of real estate, rights of way, facilities and equipment, that do not secure any monetary obligations and which in the aggregate do not materially impair the use of such Property for the purposes of which such Property is held by any Credit Party or materially impair the value of such Property subject thereto;

(g) Liens on cash or securities pledged to secure performance of tenders, surety and appeal bonds, government contracts, performance and return of money bonds, bids, trade contracts, asset sale agreements, leases, statutory obligations, regulatory obligations and other obligations of a like nature incurred in the ordinary course of business and not in connection with the borrowing of money;

(h) Liens on cash, securities, or other property agreed by Lender pledged to secure any bonds, letters of credit, or other financial security provided pursuant to the PSA;

(i) judgment and attachment Liens not giving rise to an Event of Default; provided that, any appropriate legal proceedings which may have been duly initiated for the review of such judgment shall not have been finally terminated or the period within which such proceeding may be initiated shall not have expired and no action to enforce such Lien has been commenced;

(j) royalties, overriding royalties, reversionary interests, production payments and similar lease burdens which (i) are customarily granted in the ordinary course of business in the oil and gas industry, (ii) with respect to each Oil and Gas Property, do not operate to reduce any Credit Party’s net revenue interest in production for such Oil and Gas Property (if any) below such interests reflected in the PSA or increase the working interest for such Oil and Gas Property (if any) as reflected or warranted in the PSA without a corresponding increase in the corresponding net revenue interest;

 

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(k) Liens to secure plugging and abandonment obligations;

(l) Liens arising from precautionary UCC financing statement filings regarding operating leases entered into in the ordinary course of business covering only the Property under such lease and proceeds thereof; and

(m) Permitted Encumbrances;

provided further, that Liens described in clauses (a) through (d) shall remain “Excepted Liens” only for so long as no action to enforce such Lien has been commenced, and no intention to subordinate the first priority Lien granted in favor of the Lender is to be hereby implied or expressed by the permitted existence of such Excepted Liens.

“Financing Documents” means, collectively, this Agreement, any promissory notes issued in connection hereto, the Guarantee and Collateral Agreement, the other Collateral Documents and any other documents entered into in connection herewith (it being understood and agreed that “Financing Documents” shall not include the PSA or the Plains PSA).

“GAAP” means, subject to Section 1.03, generally accepted accounting principles in the United States, consistently applied.

“Governmental Authority” means the government of the United States of America or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

“Governmental Requirement” means any law, statute, code, ordinance, order, determination, rule, regulation, judgment, decree, injunction, franchise, permit, certificate, license, rules of common law, authorization or other directive or requirement, whether now or hereinafter in effect, of any Governmental Authority.

“Guarantee and Collateral Agreement” means that certain Guarantee and Collateral Agreement dated as of the Closing Date, in favor of the Administrative Agent for the benefit of the Secured Parties, in the form attached hereto as Exhibit A (or such other form reasonably acceptable to the Lender), covering, among other things, the rights and interests of the Credit Parties in all or substantially all of the assets of such Credit Parties and unconditionally guaranteeing on a joint and several basis, payment of the Obligations as the same may be amended, amended and restated, supplemented or otherwise modified from time to time.

“Guarantors” means each Subsidiary of the Borrower from time to time.

“Hazardous Materials” means any (a) chemical, compound, material, product, byproduct, substance or waste defined as or included in the definition or meaning of “hazardous substance,” “hazardous material,” “hazardous waste,” “toxic waste,” “extremely hazardous substance,” “toxic substance,” or words of similar meaning or import found in any applicable Environmental Law; (b) Hydrocarbons, petroleum products, petroleum substances, natural gas, oil, oil and gas waste (including drilling fluids and any produced water), crude oil, and any components, fractions, or derivatives thereof; and (c) radioactive materials, explosives, asbestos or asbestos containing materials, polychlorinated biphenyls, radon, infectious materials or medical wastes.

“Hydrocarbon Interests” means all rights, titles, interests and estates now or hereafter acquired in and to oil and gas leases, oil, gas and mineral leases, or other liquid or gaseous hydrocarbon leases, mineral fee interests, overriding royalty and royalty interests, net profit interests and production payment interests, including any reserved or residual interests of whatever nature. Unless otherwise indicated herein, each reference to the term “Hydrocarbon Interests” shall mean Hydrocarbon Interests of the Borrower or any other Credit Party, as the context may require.

 

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“Hydrocarbons” means all of the oil, liquid hydrocarbons, gas and any and all other liquid or gaseous hydrocarbons, as well as their respective constituent products (including condensate, casinghead gas, distillate, and natural gas liquids), and any other minerals produced or processed in association therewith (including elemental sulfur, helium, carbon dioxide, and other non-hydrocarbon substances produced in association with any of the above described items).

“Indemnified Person” has the meaning specified in Section 9.03(b).

“Interest Payment Date” has the meaning given to such term in Section 2.04(c).

“Interest Rate” means ten percent (10.0%) compounded annually during the term of this Agreement in accordance with the terms hereof.

“Investment” means, for any Person: (a) the acquisition (whether for cash, Property, services or securities or otherwise) of Equity Interests of any other Person (including any “short sale” or any sale of any securities at a time when such securities are not owned by the Person entering into such short sale); (b) the making of any advance, loan or capital contribution to, assumption of Debt of, purchase or other acquisition of any other Debt of or equity participation or interest in, or other extension of credit to, any other Person (including the purchase of Property from another Person subject to an understanding or agreement, contingent or otherwise, to resell such Property to such Person, but excluding any such advance, loan or extension of credit having a term not exceeding ninety (90) days representing the purchase price of goods or services sold by such Person in the ordinary course of business); (c) the purchase or acquisition (in one or a series of transactions) of Property of another Person that constitutes a business unit; (d) the entering into of any guarantee of, or other contingent obligation (including the deposit of any Equity Interests to be sold) with respect to, Debt or other liability of any other Person and (without duplication) any amount committed to be advanced, lent or extended to such Person; or (e) the purchase or acquisition of Oil and Gas Properties.

“Key Employee” means James Flores, Chief Executive Officer of the Borrower, or any interim or permanent replacement of the Chief Executive Officer (or functionally equivalent title) of the Borrower approved by the Lender in accordance with the definition of “Change of Control”.

“Knowledge” means the actual knowledge of the Persons set forth on Schedule 1.02.

“Laws” means any applicable law, statute, regulation, ordinance, order, code, ruling, writ, injunction, decree or other act of or by any governmental authority (including any administrative, executive, judicial, legislative, regulatory or taxing authority).

“Lien” means any interest in Property securing an obligation owed to, or a claim by, a Person other than the owner of the Property, whether such interest is based on the common law, statute or contract, and whether such obligation or claim is fixed or contingent, and including but not limited to (a) the lien or security interest arising from a mortgage, encumbrance, pledge, security agreement, conditional sale or trust receipt or a lease, consignment or bailment for security purposes or (b) production payments and the like payable out of Oil and Gas Properties. The term “Lien” shall include easements, restrictions, servitudes, permits, conditions, covenants, exceptions or reservations that burden Property to the extent they secure an obligation owed to a Person other than the owner of the Property. For the purposes of this Agreement, the Credit Parties shall be deemed to be the owner of any Property which they have acquired or hold subject to a conditional sale agreement, or leases under a financing lease or other arrangement pursuant to which title to the Property has been retained by or vested in some other Person in a transaction intended to create a financing.

“Loan” means the term loan deemed made by the Lender to the Borrower on the Closing Date pursuant to this Agreement.

 

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“Material Adverse Effect” means (a) a material adverse change in, or a material adverse effect on, the operations, business, properties, liabilities or financial condition of the Borrower and its Subsidiaries taken as a whole; or (b) a material adverse effect on (i) the ability of the Credit Parties to perform the Obligations, (ii) the legality, validity, binding effect or enforceability against the Borrower of any Financing Document to which it is a party or (iii) the rights, remedies and benefits available to, or conferred upon, the Lender under any Financing Documents.

“Maturity Date” means the earliest to occur of (a) the fifth (5th) anniversary of the Effective Time, (b) ninety (90) days after Restart Production and (c) the acceleration of the Loan in accordance with Section 7.01; provided that if any such day is not a Business Day, then the Maturity Date shall be the immediately preceding Business Day.

“Maximum Debt Threshold” means an amount equal to Two Hundred and Fifty Million Dollars ($250,000,000).

“Maximum Rate” has the meaning specified in Section 9.12.

“Midstream Properties” means all tangible and intangible property owned or leased by any Credit Party used in (a) gathering, compressing, treating, processing and transporting Hydrocarbons, fresh water and produced water; (b) fractionating and transporting Hydrocarbons; or (c) marketing Hydrocarbons, including, without limitation, processing plants, gathering systems, pipelines, storage facilities, surface leases, easements and rights of way related to each of the foregoing.

“Mortgages” means, collectively, the Deeds of Trust and any other mortgage or deed of trust executed by one or more Credit Parties for the benefit of the Secured Parties as security for the Obligations.

“Multiemployer Plan” means a multiemployer plan, as defined in Section 3(37) or 4001(a)(3) of ERISA, that is subject to Title IV of ERISA and to which the Borrower, a Subsidiary or an ERISA Affiliate is making or accruing an obligation to make contributions or was obligated to make contributions within the last six (6) years.

“Notice of Borrowing” shall mean a written notice of a Borrowing in the form of Exhibit D.

“Obligations” means (a) all advances to, and debts, liabilities, obligations, covenants and duties of, the Borrower or any other Credit Party arising under any Financing Document or otherwise with respect to the Loan, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against the Borrower or any Credit Party of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding and (b) all indemnity obligations (contingent and otherwise) owing by the Borrower as “Purchaser” under the PSA to the Lender as “Seller” under the PSA in respect of any of the Assumed Obligations, including Plugging and Abandonment Obligations. Without limiting the foregoing, the Obligations include (i) the obligation to pay principal, interest, charges, expenses, fees, indemnities and other amounts payable by the Borrower under any Financing Document and (ii) the obligation of the Borrower to reimburse any amount in respect of any of the foregoing that the Lender, in each case in its sole discretion, may elect to pay or advance on behalf of the Borrower or any Credit Party.

“Oil and Gas Properties” means: (a) Hydrocarbon Interests; (b) the Properties now or hereafter pooled or unitized with Hydrocarbon Interests; (c) all presently existing or future unitization agreements, pooling agreements and declarations of pooled units and the units created thereby (including all units created under orders, regulations and rules of any Governmental Authority) which may affect all or any portion of the Hydrocarbon Interests; (d) all operating agreements, contracts and other agreements, including production sharing contracts and agreements, which relate to any of the Hydrocarbon Interests or the production, sale, transportation, purchase, exchange or processing of Hydrocarbons from or attributable to such Hydrocarbon

 

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Interests; (e) all Hydrocarbons in and under and which may be produced and saved or attributable to the Hydrocarbon Interests, including all oil in tanks, and all rents, issues, profits, proceeds, products, revenues and other incomes from or attributable to the Hydrocarbon Interests; (f) all tenements, hereditaments, appurtenances and Properties in any manner appertaining, belonging, affixed or incidental to the Hydrocarbon Interests; and (g) all Properties, rights, titles, interests and estates described or referred to above, including any and all Property, real or personal, now owned or hereafter acquired and situated upon, used, held for use or useful in connection with the operating, working or development of any of such Hydrocarbon Interests or Property (excluding drilling rigs, automotive equipment, rental equipment or other personal Property which may be on such premises for the purpose of drilling a well or for other similar temporary uses) and including any and all oil wells, gas wells, injection wells or other wells, buildings, structures, fuel separators, liquid extraction plants, plant compressors, pumps, pumping units, field gathering systems, gas processing plants and pipeline systems and any related infrastructure to any thereof, tanks and tank batteries, fixtures, valves, fittings, machinery and parts, engines, boilers, meters, apparatus, equipment, appliances, tools, implements, cables, wires, towers, casing, tubing and rods, surface leases, rights of way, easements and servitudes together with all additions, substitutions, replacements, accessions and attachments to any and all of the foregoing. Unless otherwise indicated herein, each reference to the term “Oil and Gas Properties” means Oil and Gas Properties of the Borrower or any other Credit Party, as the context may require.

“Organizational Documents” means (a) as to any corporation, the charter or certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction), (b) as to any limited liability company, the certificate or articles of formation or organization and operating or limited liability agreement and (c) as to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity.

“Plains PSA” has meaning set forth in the PSA.

“Participant” has the meaning specified in Section 9.04(f).

“Participant Register” has the meaning specified in Section 9.04(f).

“PBGC” means the Pension Benefit Guaranty Corporation as defined in Title IV of ERISA, or any successor thereto.

“Permitted Encumbrances” has the meaning set forth in the PSA.

“Permitted Holder” means James Flores or his spouse and any direct descendent (including any trust organized for the benefit of such spouse or direct descendent) or any funds controlled or managed by James Flores or any such spouse, direct descendent or trust organized for the benefit of such spouse or direct descendent.

“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

“PIK Interest” has the meaning specified in Section 2.04(c).

“Plains” means Plains Pipeline LP.

“Plan” means any employee pension benefit plan, as defined in Section 3(2) of ERISA that is subject to Title IV of ERISA but excluding any Multiemployer Plan, which (a) is currently or hereafter sponsored, maintained or contributed to by the Borrower a Subsidiary or an ERISA Affiliate or (b) was at any time during the six (6) calendar years preceding the date hereof, sponsored, maintained or contributed to by the Borrower, or a Subsidiary or an ERISA Affiliate.

 

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“Plugging and Abandonment Obligations” has the meaning set forth in the PSA.

“Prepayment Notice” means a notice by the Borrower to prepay the Loan, which shall meet the requirements of Section 2.02(b) and otherwise be in the form attached hereto as Exhibit B.

“Prohibited Transaction” has the meaning assigned to such term in Section 406 of ERISA and Section 4975(c) of the Code.

“Property” or “Properties” means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible, including cash, securities, accounts and contract rights.

“PSA” has the meaning specified in the second introductory paragraph hereof.

“Purchase Money Security Interest” means Liens upon tangible personal property and proceeds thereof securing loans to any Credit Party or deferred payments by such Credit Party for the purchase of such tangible personal property.

“Purchase Price” has the meaning set forth in the PSA.

“Reassignment Option” has the meaning set forth in the PSA.

“Register” has the meaning specified in Section 9.04(d).

“Related Parties” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents, trustees, administrators, managers, advisors and representatives of such Person and of such Person’s Affiliates.

“Release” or “Released” means any depositing, spilling, leaking, pumping, pouring, placing, emitting, discarding, abandoning, emptying, discharging, migrating, injecting, escaping, leaching, dumping, or disposing.

“Remedial Work” has the meaning set forth in Section 5.10(a)(iii).

“Reportable Event” means any of the events described in Section 4043(c) of ERISA and the regulations issued thereunder with respect to a Plan other than a Reportable Event as to which the provision of thirty (30) days’ notice to the PBGC has been waived.

“Resignation Effective Date” has the meaning specified in Section 8.04(a).

“Responsible Officer” means the chief executive officer, president, executive vice president, vice president, chief financial officer or treasurer of the Borrower. Any document delivered hereunder that is signed by a Responsible Officer of the Borrower shall be conclusively presumed to have been authorized by all necessary corporate or other action on the part of the Borrower and such Responsible Officer shall be conclusively presumed to have acted on behalf of the Borrower.

“Restart Production” means the date of “Restart Production” as set out in the PSA. Borrower shall notify the Administrative Agent of the occurrence of Restart Production as soon as reasonably possible.

“Restricted Payment” means (a) any dividend or other distribution or return of capital (whether in cash, securities or other Property) with respect to any Equity Interests in any Person, or any payment (whether in cash, securities or other Property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, conversion to cash, cancellation or termination of any such Equity Interests and (b) the payment of management fees.

 

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“Sanctioned Country” means, at any time, a country, region or territory which is itself the subject or target of any Sanctions.

“Sanctioned Person” means, at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury or the U.S. Department of State, (b) any Person operating, organized or resident in a Sanctioned Country, or (c) any Person owned or controlled by any such Person or Persons described in the foregoing clauses (a) or (b).

“Sanctions” means all economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by the U.S. government, including those administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury or the U.S. Department of State.

“SEC” means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.

“Secured Parties” means, collectively, the Administrative Agent, the Lender, each Indemnified Person and any other Person owed Obligations and “Secured Party” means any of them individually.

“Seller” has the meaning assigned to such term in the PSA.

“Solvency Certificate” means a certificate in the form attached hereto as Exhibit C certifying as to the solvency of the Borrower and its Subsidiaries after giving effect to the Transactions.

“Subsidiary” of a Person means a corporation, partnership, limited liability company, association or joint venture or other business entity of which a majority of the equity interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time owned or the management of which is controlled, directly, or indirectly through one or more intermediaries, by such Person. Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or the Subsidiaries of the Borrower.

“Synthetic Lease” means, in respect of any Person, all leases which shall have been, or should have been, in accordance with GAAP, treated as operating leases on the financial statements of the Person liable (whether contingently or otherwise) for the payment of rent thereunder and which were properly treated as indebtedness for borrowed money for purposes of U.S. federal income taxes, if the lessee in respect thereof is obligated to either purchase for an amount in excess of, or pay upon early termination an amount in excess of, eighty percent (80%) of the residual value of the Property subject to such operating lease upon expiration or early termination of such lease.

“Tax” or “Taxes” means all taxes, assessments, charges, duties, fees, levies, imposts or other similar charges imposed by a governmental authority, including all income, franchise, profits, capital gains, capital stock, transfer, gross receipts, sales, use, service, occupation, ad valorem, property, excise, severance, windfall profits, premium, stamp, license, payroll, employment, social security, unemployment, disability, environmental, alternative minimum, add-on, value-added, withholding and other taxes, assessments, charges, duties, fees, levies, imposts or other similar charges of any kind, and all estimated taxes, deficiency assessments, additions to tax, penalties and interest.

“Transactions” means, collectively, (a) the execution, delivery and performance by the Borrower of this Agreement, each other Financing Document to which it is a party, the borrowing of the Loan, the use of the proceeds thereof, the Borrower’s grant of the security interests and provision of collateral under the Collateral Documents, and Borrower’s grant of Liens on its Properties (including the Assets) pursuant to the Collateral Documents, (b) the execution, delivery and performance by each other Credit Party of each Financing Document to which it is a party, the guaranteeing of the Obligations and the other obligations under the Guarantee and Collateral Agreement by such Credit Party and such Credit Party’s grant of the security interests and provision of

 

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collateral under the Collateral Documents, and the grant of Liens by such Credit Party on its Properties (including the Assets) pursuant to the Collateral Documents, (c) the consummation of the transaction contemplated by the PSA (including the acquisition of the Assets by the Borrower from the Lender) and (d) the payment of all fees and expenses in connection with the foregoing.

“UCC” or “Uniform Commercial Code” means the Uniform Commercial Code (or any similar or equivalent legislation) as in effect in any applicable jurisdiction.

“United States” and “U.S.” mean the United States of America.

Section 1.02 Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation” The word “will” shall be construed to have the same meaning and effect as the word “shall” The word “or” is not exclusive. Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (c) the words “herein,” “hereof” and “hereunder,” and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement, (e) any reference to any law or regulation herein shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, and (f) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

Section 1.03 Accounting Terms; Changes in GAAP.

(a) Accounting Terms. Except as otherwise expressly provided herein, all accounting terms not otherwise defined herein shall be construed in conformity with GAAP.

(b) Changes in GAAP. If the Borrower notifies the Lender that the Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (or if the Lender notifies the Borrower that it requests an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied without giving effect to such change until such notice shall have been withdrawn or such provision amended in accordance herewith.

ARTICLE II

TERM LOAN

Section 2.01 Term Loan. Subject to the terms and conditions set forth herein, the Lender agrees to make a Loan to the Borrower on the Closing Date in an aggregate principal amount equal to Six Hundred Twenty Two Million Eight Hundred Eighty Six Thousand Nine Hundred Eighty Two Dollars ($622,886,982.00) and shall be deemed funded in full on the Closing Date (without further action by the Borrower or the Lender) on the consummation of the PSA and the Borrower’s acquisition of the Assets pursuant thereto.

 

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Section 2.02 Prepayments.

(a) Optional Prepayments. The Borrower may, upon notice to the Lender, at any time and from time to time prior to the Maturity Date, prepay in whole or in part, the Loan, without premium or penalty, subject to the other requirements of this Section.

(b) Notices of Optional Prepayment. Each such notice for an optional prepayment to be made pursuant to clause (a) of this Section shall be in the form of a written Prepayment Notice, appropriately completed and signed by a Responsible Officer of the Borrower, or may be given by telephone to the Lender (if promptly confirmed by a written Prepayment Notice consistent with such telephonic notice) and must be received by the Lender not later than 12:00 noon (Houston, Texas time) one (1) Business Day before the date of such prepayment. Each Prepayment Notice shall specify (x) the prepayment date (which shall be a Business Day), (y) the principal amount of the Loan or portion thereof to be prepaid, which shall not be less than the lesser of (x) the outstanding Loan amount or (y) Five Million Dollars ($5,000,000) and integral multiples of One Million Dollars ($1,000,000) in excess of that amount and (z) accrued but unpaid interest to be paid in connection with the principal payment described in clause (y) above. Each Prepayment Notice shall be irrevocable once delivered to the Lender.

(c) Mandatory Prepayments.

(i) Dispositions. Upon any Disposition by any Credit Party (other than a Disposition expressly permitted by Section 6.07) of any of its Properties resulting in net cash proceeds in excess of One Million Dollars ($1,000,000) in a single transaction or series of related transactions, the Borrower shall prepay the Loan in cash in an aggregate amount equal to one hundred percent (100%) of such net cash proceeds; provided, however, that, with respect to any net cash proceeds realized under a Disposition described in this Section 2.02(c)(i), at the election of the Borrower (and as approved by the Lender, such approval not be unreasonably withheld or delayed), and so long as no Event of Default shall have occurred and be continuing, the applicable Credit Party may reinvest all or any portion of such net cash proceeds in assets useful in the business of the Credit Parties so long as within one hundred eighty (180) days after the receipt of such net cash proceeds, such purchase shall have been consummated (as certified by the Borrower in writing to the Lender); and provided further, however, that any net cash proceeds not so reinvested within such one hundred eighty (180)-day period shall be immediately applied to the prepayment of the Loans as set forth in this Section 2.02(c)(i).

(ii) Insurance Proceeds. Upon receipt of insurance proceeds following a Casualty Event to the extent that the aggregate amount of net cash proceeds received by any Credit Party in respect of such Casualty Event are in excess of One Million Dollars ($1,000,000), the Borrower shall prepay the Loan in cash in an aggregate amount equal to one hundred percent (100%) of such net cash proceeds; provided, however, that, with respect to any insurance proceeds received following a Casualty Event described in this Section 2.02(c)(ii), at the election of the Borrower (and as approved by the Lender, such approval not be unreasonably withheld or delayed), and so long as no Event of Default shall have occurred and be continuing, the applicable Credit Party may reinvest all or any portion of such insurance proceeds to replace or repair the assets in respect of which such insurance proceeds were received so long as such proceeds shall be applied as described above within one hundred eighty (180) days after the receipt of such insurance proceeds (as certified by the Borrower in writing to the Lender); and provided further, however, that any net cash proceeds not so applied within such one hundred eighty (180)-day period shall be immediately applied to the prepayment of the Loans as set forth in this Section 2.02(c)(ii).

(iii) Debt. Promptly upon receipt, the Borrower shall prepay the Loan in an amount equal to one hundred percent (100%) of the net proceeds received by any Credit Party from the incurrence or issuance of any Debt other than Debt expressly permitted by Section 6.02; provided that, the foregoing shall in no event be deemed to imply consent to any incurrence or issuance of Debt not otherwise permitted under the Financing Documents.

(d) Application. All prepayments of the Loan shall be accompanied by accrued and unpaid interest thereon. All prepayments of the Loan shall be applied in a manner determined by the Lender in its sole discretion.

 

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(e) Reborrowing. The amounts borrowed under this Agreement which are repaid or prepaid may not be reborrowed.

Section 2.03 Repayment of Loan; Post-Closing Purchase Pricing Adjustments.

(a) The Borrower shall repay to the Lender the aggregate outstanding principal amount of the Loan (including PIK Interest added thereto from time to time pursuant to Section 2.04) and all accrued but unpaid interest thereon on the Maturity Date.

(b) If Seller exercises the Reassignment Option, upon the consummation thereof in accordance with the PSA together with the reassignment of the Assets and any other rights conveyed under the PSA to Seller or its designated representative, the aggregate outstanding principal amount of the Loan (including PIK Interest added thereto from time to time pursuant to Section 2.04) and all accrued but unpaid interest thereon shall be deemed to be repaid in full. Lender shall inform the Administrative Agent of the consummation of the Reassignment Option as soon as reasonably possible.

Section 2.04 Interest.

(a) Interest Rates. Subject to paragraph (b) of this Section, the Loan shall bear interest at a rate per annum equal to the Interest Rate.

(b) Default Interest. Upon the occurrence and during the continuance of (i) any Event of Default under Section 7.01(a), (g), (h) or (i) or (ii) at the election of the Lender, any other Event of Default, all amounts payable by the Borrower under this Agreement or any other Financing Document (including principal of any Loan, interest, fees and other amount) shall thereafter bear interest at a rate equal to the Default Rate.

(c) Payment Dates; PIK Interest. Accrued interest on the Loan shall be payable in arrears on each anniversary of the Effective Time (“Interest Payment Date”) and at such other times as may be specified herein; provided that, unless the Borrower elects in writing prior to an Interest Payment Date to pay any accrued but unpaid interest in cash, all such accrued and unpaid interest shall be deemed paid on each Interest Payment Date by adding the amount thereof to the then outstanding principal amount of the Loan (any such interest, “PIK Interest”), which PIK Interest shall be deemed outstanding principal hereunder and accrue interest at the Interest Rate as provided herein and (ii) interest accrued pursuant to paragraph (b) of this Section shall be payable on demand.

(d) Interest Computation. All interest hereunder shall be computed on the basis of a year of three hundred and sixty (360) days and the actual number of days elapsed (including the first day but excluding the last day).

Section 2.05 Evidence of Debt.

(a) Maintenance of Records. The Lender shall maintain in accordance with its usual records evidencing the indebtedness of the Borrower to the Lender resulting from the Loan made by the Lender. The entries made in the records maintained pursuant to this paragraph (a) shall be prima facie evidence absent manifest error of the existence and amounts of the obligations recorded therein. Any failure of the Lender to maintain such records or make any entry therein or any error therein shall not in any manner affect the obligations of the Borrower under this Agreement and the other Financing Documents. In the event of any conflict between the records maintained by the Borrower and the records maintained by the Lender in such matters, the records of the Lender shall control in the absence of manifest error.

(b) Promissory Notes. Upon the request of the Lender, in addition to the records maintained by the Lender as provided in Section 2.05(a) above, the Borrower shall prepare, execute and deliver a promissory note of the Borrower payable to the Lender in the form of Exhibit E, which shall evidence the Lender’s Loan in addition to such records.

 

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Section 2.06 Payments Generally.

(a) Payments by Borrower. All payments to be made by the Borrower hereunder and the other Financing Documents shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff. Except as otherwise expressly provided herein, all such payments shall be made to the Lender, in immediately available funds not later than 12:00 p.m. (Houston, Texas time) on the date specified herein. All amounts received by the Lender after such time on any date shall be deemed to have been received on the next succeeding Business Day and any applicable interest or fees shall continue to accrue. If any payment to be made by the Borrower shall fall due on a day that is not a Business Day, payment shall be made on the next succeeding Business Day and such extension of time shall be reflected in computing interest fees or other premium amounts, as the case may be; provided that, if such next succeeding Business Day would fall after the Maturity Date, payment shall be made on the immediately preceding Business Day. All payments hereunder or under any other Financing Document shall be made in Dollars.

(b) Application of Insufficient Payments. Subject to Section 7.03, if at any time insufficient funds are received by and available to the Lender to pay fully all amounts of principal, interest, fees and other amounts then due hereunder, such funds shall be applied (i) first, to the Administrative Agent, for its fees, costs and expenses and any other amounts then due to the Administrative Agent hereunder or under the Administrative Agent Fee Letter, (ii) second, to pay interest, fees and other amounts then due hereunder to the Lender, and (ii) third, to pay principal then due hereunder.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

The Borrower represents and warrants to the Lender that:

Section 3.01 Organization; Powers. Each Credit Party (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has all requisite power and authority to own its assets and to carry on its business as now conducted, and (c) has all governmental licenses, authorizations, consents and approvals necessary to own its assets and to carry on its business as now conducted and is qualified to do business in, and is in good standing in, every foreign jurisdiction where such qualification is required, except, in the case of this clause (c) where failure to have such licenses, authorizations, consents, approvals and foreign qualifications could not reasonably be expected to have a Material Adverse Effect.

Section 3.02 Authority; Enforceability. The Transactions are within each Credit Party’s corporate powers and have been duly authorized by all corporate or other action and, if required, member or direct or indirect equityholder action. Each Financing Document to which a Credit Party is a party has been duly executed and delivered by it and constitutes its legal, valid and binding obligation, as applicable, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.

Section 3.03 Approvals; No Conflicts. The Transactions (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority or any manager, member, equityholder, shareholder or other third Person, nor is any such consent, approval, registration, filing or other action necessary for the validity or enforceability of any Financing Document or the consummation of the transactions contemplated thereby, except such as have been obtained or made and are in full force and effect other than (i) the recording and filing of financing statements and the Collateral Documents as required by this Agreement and (ii) those approvals or consents from third parties (other than managers, members, equityholders or shareholders) which, if not made or obtained, would not cause a Default hereunder, could not reasonably be

 

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expected to have a Material Adverse Effect, or do not have an adverse effect on the enforceability of the Financing Documents, (b) will not violate (i) in any material respect, any applicable law or regulation or any order of any Governmental Authority or (ii) the Organizational Documents of any Credit Party, (c) will not violate or result in a default under any indenture, note, credit agreement or other agreement binding upon any Credit Party or its Properties, or give rise to a right thereunder to require any payment to be made by any Credit Party, and (d) will not result in the creation or imposition of any Lien on any Property of any Credit Party (other than the Liens created by the Financing Documents).

Section 3.04 Financial Statements. The Borrower’s pro forma financial statements delivered pursuant to this Agreement fairly present in all material respects its pro forma consolidated financial condition as of the date thereof (subject to normal year end audit adjustments and the absence of footnotes). Such pro forma financial statements have been prepared in accordance with GAAP. No Credit Party has any material liabilities, direct or contingent, unusual forward or long-term commitments or unrealized or anticipated losses from any unfavorable commitments, except as have been disclosed in such financial statements as of the date of such statement or otherwise disclosed in writing to the Lender prior to the date hereof.

Section 3.05 Litigation. There are no actions, suits, investigations or proceedings by or before any arbitrator or Governmental Authority pending against or, to the knowledge of the Borrower, threatened in writing against any Credit Party that (a) are not fully covered by insurance (except for normal deductibles) as to which there is a reasonable possibility of an adverse determination that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect or (b) purport to affect or pertain to Financing Document or the Transactions.

Section 3.06 Restriction on Liens. Neither the Borrower nor any Credit Party is a party to any agreement or subject to any order, judgment, writ or decree, which either restricts or purports to restrict its ability to grant Liens to the Lender on or in respect of their Properties to secure the Obligations and the Financing Documents.

Section 3.07 Compliance with the Laws and Agreements; PATRIOT ACT; No Defaults.

(a) Each Credit Party is in compliance in all material respects with all Governmental Requirements applicable to it or its Property and all agreements and other instruments binding upon it or its Property, and possesses all licenses, permits, franchises, exemptions, approvals and other governmental authorizations necessary for the ownership of its Property and the conduct of its business.

(b) Each Credit Party is in compliance in all material respects with the material provisions of the Patriot Act, and the Borrower has provided to the Lender all information related to the Credit Parties (including but not limited to names, addresses and tax identification numbers (if applicable)) reasonably requested in writing by the Lender.

(c) No Default has occurred and is continuing.

Section 3.08 Investment Company Act. No Credit Party is an “investment company” or a company “controlled” by an “investment company,” within the meaning of, or subject to regulation under, the Investment Company Act of 1940, as amended.

Section 3.09 Taxes. Each Credit Party has timely filed or caused to be filed all material Tax returns and material reports required to have been filed and has paid or caused to be paid all material Taxes required to have been paid by it, except Taxes that are being contested in good faith by appropriate proceedings and for which the applicable Credit Party has set aside on its books adequate reserves in accordance with GAAP. No claim has been asserted by any Governmental Authority with respect to the Tax of any Credit Party except any such claim relating to Taxes that are being contested in good faith by appropriate proceedings and for which the applicable Credit Party has set aside on its books adequate reserves in accordance with GAAP.

 

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Section 3.10 Insurance. For the benefit of each Credit Party, the Borrower has (a) all insurance policies sufficient for the compliance by the Credit Parties with all material Governmental Requirements and all material agreements and (b) insurance coverage, or self-insurance, in at least such amounts and against such risk (including public liability) that are usually insured against by companies similarly situated and engaged in the same or a similar business for the assets and operations of the Credit Parties. The Administrative Agent and the Lender has been named as additional insureds in respect of such liability insurance policies and the Administrative Agent and the Lender, has been named as lender loss payee with respect to Property loss insurance.

Section 3.11 Properties; Defensible Title, Etc.

(a) Each Credit Party has good and defensible title to the Oil and Gas Properties and good title to all its personal Properties other than Properties sold or Disposed of in compliance with Section 6.07 from time to time, in each case, free and clear of all Liens except Liens permitted by Section 6.03.

(b) All material leases and agreements necessary for the conduct of the business of the Credit Parties are valid and subsisting, in full force and effect, and there exists no default or event or circumstance which with the giving of notice or the passage of time or both would give rise to a default under any such lease or leases.

(c) The rights and Properties presently owned, leased or licensed by the Credit Parties including all easements and rights of way, include all rights and Properties necessary to permit the Credit Parties to conduct their business in all material respects in the same manner as its business is conducted on the date hereof.

(d) Each Credit Party owns, or is licensed to use, all trademarks, trade names, copyrights, patents and other intellectual Property material to its business, and the use thereof by the Credit Party does not infringe upon the rights of any other Person, except for any such infringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. The Credit Parties either own or have valid licenses or other rights to use all databases, geological data, geophysical data, engineering data, seismic data, maps, interpretations and other technical information used in their businesses as presently conducted, subject to the limitations contained in the agreements governing the use of the same, which limitations are customary for companies engaged in the business of the exploration and production of Hydrocarbons, with such exceptions as could not reasonably be expected to have a Material Adverse Effect.

Section 3.12 Solvency. After giving effect to the Transactions, (a) the aggregate assets (after giving effect to amounts that could reasonably be received by reason of indemnity, offset, insurance or any similar arrangement), at a fair valuation, of the Credit Parties, taken as a whole, will exceed the aggregate Debt of the Credit Parties on a consolidated basis, as the Debt becomes absolute and matures, (b) each Credit Party will not have incurred or intended to incur, and will not believe that it will incur, Debt beyond its ability to pay such Debt (after taking into account the timing and amounts of cash to be received by it and the amounts to be payable on or in respect of its liabilities, and giving effect to amounts that could reasonably be received by reason of indemnity, offset, insurance or any similar arrangement) as such Debt becomes absolute and matures, and (c) each Credit Party will not have (and will have no reason to believe that it will have thereafter) unreasonably small capital for the conduct of its business.

Section 3.13 Anti-Corruption Laws; Sanctions.

(a) No Credit Party will directly or indirectly use the proceeds of the Loan, or lend, contribute, or otherwise make available such proceeds: (i) to fund or facilitate any activities or business of, with or involving any Sanctioned Person, in violation of applicable Sanctions; or (ii) in any other manner that would constitute or give rise to a violation of Sanctions by the Lender.

(b) No Credit Party, their respective subsidiaries nor the directors or officers nor, to any Credit Party’s knowledge, its employees or authorized agents acting for or on behalf of it: (i) is a Sanctioned Person or (ii) is

 

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currently or has, in the past two (2) years, engaged in any dealings or transactions with any Sanctioned Person. Each Credit Party has conducted its business at all times in compliance with applicable Anti-Money Laundering Laws.

(c) Each Credit Party has complied, and has caused its directors, officers, agents and employees and any other Person acting for or on behalf of it to comply with Anti-Corruption Laws, and it has not made, offered, promised or authorized, whether directly or indirectly, any payment or anything else of value to a Governmental Authority while knowing or having a firm belief of a high probability that all or some portion will be used for the purpose of: (i) influencing any act or decision of a Governmental Authority in his or her official capacity; (ii) inducing a Governmental Authority to do or omit to do an act in violation of the lawful duty of such official; (iii) inducing a Governmental Authority to use his or her influence with a government or instrumentality to affect any act or decision of such government or entity; or (iv) securing an improper advantage, in order to assist any Credit Party in obtaining or retaining business for or with, or directing business to, any Person, as such terms are used and defined in the FCPA.

(d) Each Credit Party has established, implemented and will maintain in place processes and procedures reasonably designed to promote and achieve compliance by each Credit Party and their respective directors, officers, employees and authorized agents acting on their behalf with the Anti-Corruption Laws, Anti-Money Laundering Laws and applicable Sanctions.

(e) Neither Credit Party nor any of their respective subsidiaries or the directors or officers or, to any Credit Party’s knowledge, its employees or authorized agents acting for or on behalf of any such Person in any capacity in connection with or directly benefitting from the Loan hereunder is engaged in any transactions that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Sanctions, Anti-Corruption Laws and Anti-Money Laundering Laws.

Section 3.14 Subsidiaries. Except as set forth on Schedule 3.14, the Borrower does not have any Subsidiaries on the Closing Date.

Section 3.15 Burdensome Restrictions. No Credit Party is a party or subject to any contract, agreement or charter restriction that prohibits this Agreement or any other Financing Document, the making of the Loan or the granting of the Liens by the Credit Parties pursuant to the Collateral Documents.

To the extent any of the foregoing representations and warranties in this Article III apply or relate to any of the Assets, Pacific Offshore Pipeline Company, a corporation formed under the laws of California, or Pacific Pipeline Company, a corporation formed under the laws of Delaware, such representations and warranties are made to the Borrower’s Knowledge. Furthermore, as used in this Article III (except for purposes of Section 3.12), “Transactions” does not include clause (c) of the definition thereof (or the payment of all fees and expenses in connection therewith).

ARTICLE IV

CONDITIONS

The effectiveness of this Agreement (including the obligation of the Lender to make the Loan) is subject to the satisfaction of the following conditions (and, in the case of each document specified in this Section to be received by the Lender, such document shall be in form and substance satisfactory to the Lender in its sole discretion):

(a) The Administrative Agent and the Lender shall have received from each party hereto counterparts (in such number as may be requested by the Administrative Agent or the Lender, as applicable) of this Agreement signed on behalf of such party.

 

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(b) The Administrative Agent and the Lender shall have received from each party thereto duly executed counterparts (in such number as may be requested by the Administrative Agent or the Lender, as applicable) of the Collateral Documents and, except in cases where no signature is required, the other Collateral Documents together with any other documents, and instruments required to perfect or evidence the Lender’s first priority security interest in and liens on the Collateral (including, without limitation, all applicable certificates evidencing pledged capital stock, as applicable, with accompanying executed stock powers, all UCC financing statements to be filed in the applicable government UCC filing offices, all real property (including oil and gas property) mortgages to be filed in the applicable government mortgage filing offices, all intellectual property security agreements to be filed with the United States Copyright Office or the United States Patent and Trademark Office, as applicable, and all deposit account and securities account control agreements) will have been executed and/or delivered and, to the extent applicable, be in proper form for filing. In connection with the execution and delivery of the Collateral Documents and other documents described above, the Lender shall be reasonably satisfied that the Collateral Documents create first priority Liens that may be perfected upon recordation of properly completed financing statements and the Collateral Documents in the appropriate filing offices therefor (except Liens permitted by Section 6.03 may exist).

(c) The Administrative Agent and the Lender shall have received copies of all material regulatory, governmental, third party and other approvals, acknowledgements, directions, consents and agreements required as of the Closing Date hereof in order for each Credit Party to enter into the Financing Documents to which it is a party and perform their respective obligations thereunder and for the consummation of the transactions contemplated under the Financing Documents.

(d) The Administrative Agent and the Lender shall have received a certificate of a Responsible Officer of each Credit Party setting forth (i) resolutions of its board of directors or other appropriate governing body with respect to the authorization of such Credit Party, as applicable, to execute and deliver the Financing Documents to which it is a party and to enter into the Transactions, (ii) the officers of such Credit Party, as applicable, (x) who are authorized to sign the Financing Documents to which such Credit Party, as applicable, is a party and (y) who will, until replaced by another officer or officers duly authorized for that purpose, act as its representative for the purposes of signing documents and giving notices and other communications in connection with this Agreement and the transactions contemplated hereby, (iii) specimen or genuine signatures of such authorized officers, and (iv) the articles or certificate of incorporation and by-laws or other applicable Organizational Documents of such Credit Party, as applicable, certified as being true and complete.

(e) The Administrative Agent and the Lender shall have received certificates of the appropriate state agencies, as requested by the Lender, with respect to the existence, qualification and good standing of each Credit Party in each jurisdiction where any such Credit Party is organized or qualified to do business.

(f) The Lender shall have received a Solvency Certificate from the Borrower in form and substance reasonably satisfactory to the Lender.

(g) The Administrative Agent and the Lender shall have received a certificate of a Responsible Officer of the Borrower in form and substance reasonably satisfactory to the Lender certifying that (i) all representations and warranties of the Credit Parties set forth in this Agreement are true and correct in all material respects (unless already qualified by materiality in which case such applicable representation and warranty shall be true and correct in all respects) and (ii) no Default or Event of Default exists.

(h) The Administrative Agent and the Lender shall have received a Notice of Borrowing.

(i) The Lender shall have received a pro forma balance sheet of the Borrower after giving effect to the Transactions (it being understood and agreed that this clause (i) shall be deemed satisfied by the inclusion in a registration statement on Form S-4 or a proxy statement for Flame Acquisition Corp. filed with the SEC).

 

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(j) No later five (5) Business Days prior to the Closing Date, each of the Administrative Agent and the Lender shall have received all documentation and other information required by regulatory authorities under applicable “know your customer” and anti-money-laundering rules and regulations, including, without limitation, the PATRIOT Act.

(k) (i) The PSA is in full force and effect and the “Closing” thereunder shall be consummated simultaneously with the Closing Date in accordance with the terms described in the PSA, and (ii) the Plains PSA is in full force and effect and the “Closing” thereunder shall be consummated prior to, or substantially simultaneously with, the Closing Date in accordance with the terms described in the Plains PSA.

(l) All fees, costs and expenses (including legal fees) payable to or on behalf of the Lender or the Administrative Agent that are due and payable on the Closing Date to the extent invoiced at least two (2) Business Days prior to the Closing Date, shall have been received.

(m) The Administrative Agent, for the benefit of the Secured Parties, shall have received customary legal opinions from Bracewell LLP as New York special legal counsel for the Borrower and (ii) Stoel Rives LLP, as California special legal counsel for the Borrower.

(n) No Default or Event of Default shall have occurred and be continuing.

(o) All representations and warranties made by any Credit Party contained herein or in the other Financing Documents shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on and as of the Closing Date (except where such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects as of such earlier date).

(p) The Lender shall have received evidence reasonably satisfactory to it that the Borrower and its Subsidiaries have cash and Cash Equivalents that would not appear as “restricted” on a consolidated balance sheet of the Borrower of not less than One Hundred Fifty Million Dollars ($150,000,000).

(q) The Lender shall have received such other documents as the Lender may request in its sole discretion.

ARTICLE V

AFFIRMATIVE COVENANTS

Until the Loan and all other Obligations shall have been paid in full, the Borrower covenants and agrees with the Lender that:

Section 5.01 Financial Statements; Other Information. The Borrower will promptly deliver to the Lender and the Administrative Agent:

(a) Annual Financial Statements. As soon as available, but in any event in accordance with then applicable law and not later than one hundred and twenty (120) days after the end of each fiscal year of the Borrower (or such later date corresponding with any applicable filing extension granted by SEC), commencing with the fiscal year ending December 31, 2022, the audited consolidated balance sheet for the Borrower and its Subsidiaries and related statements of operations, members’ equity, as applicable, and cash flows as of the end of and for such year, setting forth, to the extent available, in comparative form the figures for the previous fiscal year, all reported on by independent public accountants of recognized national standing (without a “going concern” or like qualification or exception and without any qualification or exception as to the scope of such audit other than any consistency qualification that may result from a change in the method used to prepare the financial statements as

 

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to which such accountants concur) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of the Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP consistently applied.

(b) Quarterly Financial Statements. As soon as available, but in any event in accordance with then applicable law and not later than forty-five (45) days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower (or such later date corresponding with any applicable filing extension granted by SEC), commencing with the first such full fiscal quarter ending after the date of this Agreement, the unaudited consolidated balance sheet for the Borrower and its Subsidiaries and related statements of operations, members’ equity, as applicable, and cash flows as of the end of and for such fiscal quarter and the then elapsed portion of such fiscal year, setting forth, to the extent available, in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous fiscal year, all certified by a Responsible Officer of the Borrower as presenting fairly in all material respects the financial condition and results of operations of the Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year end audit adjustments and the absence of footnotes.

(c) Certificate of Insurer – Insurance Coverage. Concurrently with any delivery of financial statements under Section 5.01(a), and within ten (10) Business Days following each change in the insurance maintained in accordance with Section 5.07, certificates of insurance coverage with respect to the insurance required by Section 5.07, in form and substance satisfactory to the Lender, and, if requested by the Lender, all copies of the applicable policies.

(d) Other Accounting Reports. A copy of any interim or special audit submitted to any Credit Party made by independent accountants of the books of any such Person.

(e) Restart Production Reporting.

(i) Borrower shall use all commercially reasonable effort to provide Lender and Administrative Agent written updates regarding the progress of the Restart Production, including the status of all Governmental Requirements (including any material permits) negotiations, developments with Plains or other third party hydrocarbon transportation service providers, as well as other material contracts necessary to achieve Restart Production.

(ii) Promptly upon becoming aware thereof, if any material permits are revoked or the relevant Governmental Authority indicates it is reasonably likely such Governmental Requirement will not be granted before the Restart Failure Date (as defined in the PSA), notice in writing of such development.

(iii) Promptly upon receipt thereof, copies of any official correspondence from governmental authorities relating to the issuance of requested permits for the Restart Production.

The parties agree and acknowledge that delivery by the Purchaser (as defined in the PSA) to the Seller of the periodic reporting pursuant to Section 7.12 of the PSA shall satisfy the foregoing requirements of this Section 5.01(e).

(f) Patriot Act. Promptly, following a request by the Lender, (i) all documentation and other information that the Lender reasonably requests in order to comply with its ongoing obligations under applicable “know your customer” and Anti-Money Laundering Laws, including the Patriot Act and (ii) information and documentation that the Lender reasonably requests for purposes of compliance with the Beneficial Ownership Regulation.

(g) The Borrower will furnish to Administrative Agent and the Lender written notice at least fifteen (15) days prior to the occurrence of any change (i) in any Credit Party’s legal name, (ii) in any Credit Party’s identity or organizational structure, or (iii) in any Credit Party’s federal taxpayer identification number. The

 

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Borrower agrees not to effect or permit any change referred to in the preceding sentence unless all filings have been made, or will be made substantially contemporaneously with any such change, under the UCC or other applicable law or otherwise that are required in order for the Administrative Agent to continue at all times following such change to have a valid, legal and perfected security interest in all the Collateral that can be perfected by the filing of a UCC financing statement. The Borrower will furnish to the Lender prompt written notice of any Liens or claims made or asserted in writing against a material portion of the Collateral or interest therein. The Borrower also agrees promptly to notify the Lender in writing if any material Collateral is lost, damaged or destroyed.

(h) Promptly upon receipt thereof, copies of any notice of the PBGC’s intention to terminate or to have a trustee appointed to administer any Plan.

(i) Promptly after the same are publicly available, copies of all annual, regular, periodic and special reports and registration statements which the Borrower files with the SEC or with any Governmental Authority that may be substituted therefor and not otherwise required to be delivered to the Lender pursuant hereto.

(j) Other Requested Information. Promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of the Borrower or any Subsidiary (including any Plan or Multiemployer Plan and any reports or other information required to be filed under ERISA (provided that, with respect to a Multiemployer Plan, only to the extent such reports or other information are reasonably available to Borrower) (including copies of any documents described in Sections 101(k) or 101(l) of ERISA that any Credit Party may request with respect to any Multiemployer Plan; provided that, if the Credit Parties have not requested such documents or notices from the administrator or sponsor of the applicable Multiemployer Plan, then, upon reasonable request of the Lender, the Credit Parties shall promptly make a request for such documents or notices from such administrator or sponsor and the Borrower shall provide copies of such documents and notices to the Lender promptly after receipt thereof)), or compliance with the terms of the PSA, this Agreement or any other Financing Document or in connection with the status of Restart Production, as the Lender may request.

Documents required to be delivered pursuant to Section 5.01(a) or (b) (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (x) on which the Borrower posts such documents, or provides a link thereto on the Borrower’s website; or (y) on which such documents are posted on the Borrower’s behalf on an internet or intranet website, if any, to which the Lender and the Administrative Agent have access (whether a commercial, third-party website or whether sponsored by the Administrative Agent).

Section 5.02 Notices of Material Events. The Borrower will promptly notify in writing the Administrative Agent and the Lender of the following:

(a) the occurrence of any Default;

(b) the filing or commencement of any materially adverse action, suit, investigation or proceeding by or before any arbitrator or Governmental Authority against the Borrower or any Subsidiary thereof not previously disclosed in writing to the Lender or any material adverse development in any action, suit, proceeding, investigation or arbitration (whether or not previously disclosed to the Lender);

(c) the occurrence of any ERISA Event; and

(d) any matter or development that has had or could reasonably be expected to have a Material Adverse Effect.

Each notice delivered under this Section 5.02 shall be accompanied by a statement of a Responsible Officer of the Borrower setting forth the details of the occurrence requiring such notice and stating what action the

 

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Borrower has taken and proposes to take with respect thereto, and, with respect to clause (c) hereof, when known to the Borrower, any action taken or proposed by the Internal Revenue Service, the Department of Labor or the PBGC with respect thereto.

Section 5.03 Existence; Conduct of Business. The Borrower will, and will cause each Credit Party to, do or cause to be done all things necessary to (a) preserve, renew and keep in full force and effect its legal existence and good standing under the laws of its jurisdiction of organization and (b) preserve, renew and keep in full force and effect the governmental licenses, authorizations, consents and approvals necessary to own its assets and to carry on its business and maintain its qualification to do business in each other jurisdiction where such qualification is required, except, in the case of this clause (b) where failure to have such licenses, authorizations, consents, approvals and foreign qualifications could not reasonably be expected to have a Material Adverse Effect.

Section 5.04 Payment of Obligations. The Borrower will, and will cause each other Credit Party to, pay its material obligations, including tax liabilities of the Borrower and all of the other Credit Parties before the same shall become delinquent or in default, except where the validity or amount thereof is being contested in good faith by appropriate proceedings and the Borrower or such other Credit Party has set aside on its books adequate reserves with respect thereto in accordance with GAAP.

Section 5.05 Performance of Obligations under Financing Documents. The Borrower will pay the Loans according to the terms hereof, and cause each other Credit Party to, do and perform every act and discharge all of the obligations to be performed and discharged by them under the Financing Documents, including this Agreement, at the time or times and in the manner specified and after giving to all materiality qualifiers and grace and/or cure periods, if any, therefor.

Section 5.06 Operation and Maintenance of Properties; Material Contracts. The Borrower, at its own expense, will, and will cause each other Credit Party to:

(a) operate its Oil and Gas Properties and other material Properties or cause such Oil and Gas Properties and other material Properties to be operated in a manner expected to be encountered in the area involved and is usual and customarily acceptable to reasonable and prudent operators, interest owners, and/or purchasers engaged in the business of ownership, operation and development of oil and gas properties with knowledge of such facts and appreciation of their legal significance, in compliance with all applicable contracts and agreements and in compliance with all applicable Governmental Requirements, including applicable pro ration requirements and Environmental Laws, and all applicable laws, rules and regulations of every other Governmental Authority from time to time constituted to regulate the development and operation of its Oil and Gas Properties and the production and sale of Hydrocarbons and other minerals therefrom, except, in each case, where the failure to comply could not reasonably be expected to have a Material Adverse Effect;

(b) maintain and keep in good repair, working order and efficiency (ordinary wear and tear excepted) all of its material Oil and Gas Properties and other Properties necessary to the conduct of its business, including all equipment, machinery and facilities, in at least the same manner as maintained by the Seller in the twelve (12) months immediately prior to the Closing Date and otherwise, in each case, as would a reasonably prudent operator;

(c) promptly pay and discharge, or use commercially reasonable efforts to cause to be paid and discharged, all material delay rentals, royalties, expenses and indebtedness accruing under the leases or other agreements affecting or pertaining to its Oil and Gas Properties and will do all other things necessary, in accordance with industry standards, to keep unimpaired their rights with respect thereto and prevent any forfeiture thereof or default thereunder;

(d) promptly perform or use commercially reasonable efforts to cause to be performed, in accordance with industry standards, the obligations required by each and all of the assignments, deeds, leases, sub leases, contracts and agreements affecting its interests in its Oil and Gas Properties and other material Properties;

 

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(e) promptly perform or use commercially reasonable efforts to cause to be performed, the obligations required by each and all of the material contracts and agreements affecting the Borrower and its subsidiaries; and

(f) promptly deliver, within thirty (30) days after the receipt thereof, any renewal, material amendment, supplement or other modification to any applicable Governmental Requirement received by such Credit Party after the date of this Agreement, together with a description of each material change in the status of such Governmental Requirement, to the Lender.

Section 5.07 Insurance. The Borrower will maintain, with financially sound and reputable insurance companies carrying a minimum long term debt rating of at least ‘A-’ by Standard & Poor’s or Fitch Ratings, or ‘A3’ by Moody’s Investor’s Service, insurance covering all Credit Parties, in such amounts and against such risks as are customarily maintained by companies engaged in the same or similar businesses operating in the same or similar locations. The lender loss payable clauses or provisions in the applicable insurance policy or policies insuring any of the collateral for the Loans shall be endorsed in favor of and made payable to the Administrative Agent and Lender as a “lender loss payee” or other formulation acceptable to the Lender and such liability policies shall name the Administrative Agent and the Lender as “additional insured.” The Borrower shall cause such policies to also provide that the insurer will endeavor to give at least thirty (30) days prior notice of any cancellation to the Lender (or ten (10) days in the case of non-payment).

Section 5.08 Books and Records; Inspection Rights. The Borrower will, and will cause each other Credit Party to, keep proper books of record and account in accordance with GAAP. The Borrower will, and will cause each other Credit Party to, permit any representatives designated by the Lender or the Lender to visit and inspect its Properties, to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with its officers and independent accountants, all at such reasonable times during normal business hours and as often as reasonably requested; provided that the Lender shall provide the Borrower with reasonable notice prior to any visit or inspection (but in any event no shorter than ten (10) Business Days’ notice prior to any visit or inspection). In the event the Lender desires to conduct an audit of any Credit Party, the Lender shall make a reasonable effort to conduct such audit contemporaneously with any audit to be performed on behalf of the Borrower. The Borrower shall reimburse the Lender for the costs incurred in connection with one such visitation and inspection per year (unless an Event of Default has occurred and is continuing, in which case the Borrower shall reimburse the Lender for the costs incurred in connection with all such visitations and inspections).

Section 5.09 Compliance with Laws. The Borrower will, and will cause each Credit Party to, comply in all material respects with all laws, rules, regulations and orders of any Governmental Authority applicable to it or its Property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. The Borrower will maintain in effect and enforce policies and procedures designed to ensure compliance by the Credit Parties and their respective directors, officers, employees and agents with applicable Anti-Corruption Laws and applicable Sanctions.

Section 5.10 Environmental Matters.

(a) Except as could not reasonably be expected to result in a Material Adverse Effect, the Borrower shall: (i) comply, and shall cause its Properties and operations and each other Credit Party and each other Credit Party’s Properties and operations to comply with all applicable Environmental Laws; (ii) timely obtain or file, and shall cause each other Credit Party to timely obtain or file, all notices, and Environmental Permits, if any, required under applicable Environmental Laws to be obtained or filed in connection with the operation or use of the Borrower’s or the other Credit Parties’ Properties; (iii) promptly commence and diligently prosecute to completion, and shall cause each of other Credit Party to promptly commence and diligently prosecute to completion, any assessment, evaluation, investigation, monitoring, containment, cleanup, removal, repair, restoration, remediation or other remedial obligations (collectively, the “Remedial Work”) in the event any Remedial Work is required under applicable Environmental Laws because of or in connection with the actual or suspected past, present or future disposal or other Release of any Hazardous Materials on, under, about or from

 

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any of the Borrower’s or the other Credit Parties’ Properties; and (iv) establish and implement, and shall cause each other Credit Party to establish and implement, such procedures as may be necessary to continuously determine and assure that the Borrower’s and the other Credit Parties’ obligations under this Section 5.10(a) are timely and fully satisfied.

(b) The Borrower will promptly, but in no event later than five (5) Business Days of the Borrower becoming aware thereof, notify the Lender in writing of any threatened action, investigation or inquiry by any Governmental Authority or any demand or lawsuit by any landowner or other third party threatened in writing against the Borrower or the other Credit Parties or their Properties of which the Borrower has knowledge in connection with any Environmental Laws (excluding routine testing and corrective action) if the Borrower reasonably anticipates that such action will result in liability (whether individually or in the aggregate) in excess of One Million Dollars ($1,000,000), not fully covered by insurance, subject to normal deductibles.

(c) If an Event of Default has occurred and is continuing, the Lender may (but shall not be obligated to), at the expense of the Borrower and to the extent that the Borrower has the right to do so, conduct such Remedial Work as it deems appropriate to determine the nature and extent of any noncompliance with applicable Environmental Laws, the nature and extent of the presence of any Hazardous Material and the nature and extent of any other environmental conditions that may exist at or affect any of the Properties, and the Credit Parties shall cooperate with the Lender in conducting such Remedial Work. Such Remedial Work may include a detailed visual inspection of the Properties, including all storage areas, storage tanks, drains and dry wells and other structures and locations, as well as the taking of soil samples, surface water samples, and ground water samples and such other investigations or analyses as the Lender deems appropriate for such Remedial Work and to the extent the Borrower has the right to do so. The Lender and its officers, employees, agents and contractors shall have and are hereby granted the right to enter upon the Properties for the foregoing purposes to the extent the Borrower has the right to do so; provided that, any such representative of the Lender shall comply with the Borrower’s safety, health and environmental policies and shall carry and maintain adequate insurance coverages appropriate or customary for the tasks to be performed.

Section 5.11 ERISA Compliance. The Borrower will promptly furnish and will cause its Subsidiaries and any ERISA Affiliate to promptly furnish to the Lender (a) upon becoming aware of the occurrence of any ERISA Event or of any Prohibited Transaction, in each case, that could reasonably be expected to result in a Material Adverse Effect, in connection with any Plan or any trust created thereunder, a written notice of the Borrower or Subsidiary of the Borrower, as the case may be, specifying the nature thereof, what action such Person is taking or proposes to take with respect thereto, and, when known, any action taken or proposed by the Internal Revenue Service, the Department of Labor or the PBGC with respect thereto, and (b) upon receipt thereof, copies of any notice of the PBGC’s intention to terminate or to have a trustee appointed to administer any Plan. Promptly following receipt of a reasonable request by the Lender, the Borrower will furnish and will cause each Subsidiary to promptly furnish to the Lender copies of any documents described in Sections 101(k) or 101(l) of ERISA that any Credit Party may request with respect to any Multiemployer Plan; provided that, if the Credit Parties have not requested such documents or notices from the administrator or sponsor of the applicable Multiemployer Plan, then, upon reasonable request of the Lender, the Credit Parties shall promptly make a request for such documents or notices from such administrator or sponsor and the Borrower shall provide copies of such documents and notices to the Lender promptly after receipt thereof.

Section 5.12 Additional Collateral; Additional Guarantors.

(a) On the Closing Date, the Borrower shall grant to the Administrative Agent, for the benefit of the Secured Parties, a perfected Lien (subject only to Liens permitted pursuant to Section 6.03) in substantially all of its assets pursuant to the Guarantee and Collateral Agreement and Mortgages.

(b) If the Borrower shall form, acquire or otherwise own a Subsidiary after the Closing Date, the Borrower shall promptly (but, in any event, within thirty (30) days of formation or acquisition (or such later date agreed to

 

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by the Lender)) cause such Subsidiary to (i) guarantee the payment and performance of the Obligations pursuant to the Guarantee and Collateral Agreement (or supplements or joinders thereto) and (ii) grant to the Lender, for the benefit of the Secured Parties, a perfected Lien (subject only to Liens permitted pursuant to Section 6.03) in substantially all of its assets pursuant to the Guarantee and Collateral Agreement (or supplements or joinders thereto) and any Mortgages. In connection with any such guaranty, the Borrower shall execute and deliver (or cause the applicable Person to execute and deliver) such other additional closing documents, legal opinions and certificates as shall reasonably be requested by the Lender.

(c) In the event that any Credit Party becomes the owner of a Subsidiary, then the Credit Party shall (i) pledge one hundred percent (100%) of all the Equity Interests of such Subsidiary, in each case, that are owned by such Credit Party and to the extent such pledge does not occur automatically under the Guarantee and Collateral Agreement (including, in each case, delivery of original stock certificates, if any, evidencing such Equity Interests, together with appropriate stock powers for each certificate duly executed in blank by the registered owner thereof) and (ii) execute and deliver (or cause the applicable Person to execute and deliver) such other additional closing documents, legal opinions and certificates as shall reasonably be requested by the Lender.

(d) The Borrower will, and will cause each Guarantor to, by no later than the date that is thirty (30) days following the acquisition thereof (or such later date acceptable to the Lender in its sole discretion) execute and deliver to the Administrative Agent such mortgages, documents, title information, instruments, agreements, opinions and certificates with respect to any real Property acquired by the Borrower or the Guarantors after the Closing Date, including but not limited to any Midstream Properties and Oil and Gas Properties, that the Lender shall reasonably request to create in favor of the Administrative Agent for the benefit of the Secured Parties, a valid and, subject to any filing and/or recording referred to herein, perfected first priority security interest in such Property (subject only to Excepted Liens).

(e) Subject to any express exceptions, time periods and other terms as are set forth herein or in the Collateral Documents, the Borrower will, and will cause each Guarantor to, at all times cause all personal property of the Borrower or any such Guarantor, as applicable, that constitute Collateral to be subject to a first priority Lien (subject only to Excepted Liens) in favor of the Administrative Agent pursuant to the Collateral Documents.

Section 5.13 Further Assurances.

(a) The Borrower, at its sole expense, will, and will cause each other Credit Party to, promptly execute and deliver to the Lender all such other documents, agreements and instruments reasonably requested by the Lender to comply with, cure any defects or accomplish the conditions precedent, covenants and agreements of any Credit Party, as the case may be, in the Financing Documents or to further evidence and more fully describe the collateral intended as security for the Obligations, or to correct any omissions in this Agreement, any Collateral Document, or to state more fully the obligations secured therein, or to perfect, protect or preserve any Liens created pursuant to this Agreement or any Collateral Document or the priority thereof, or to make any recordings or re-recordings, file or re-file any notices or obtain any consents, all as may be reasonably necessary or appropriate, in the sole discretion of the Lender, in connection therewith.

(b) The Borrower hereby authorizes the Lender to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral without the signature of the Borrower or any other Credit Party where permitted by law. A carbon, photographic or other reproduction of the Guarantee and Collateral Agreement, any Mortgage or any financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement where permitted by law.

 

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ARTICLE VI

NEGATIVE COVENANTS

Until the Loan and all other Obligations have been paid in full, the Borrower covenants and agrees with the Lender that:

Section 6.01 Fundamental Changes. The Borrower will not, nor will it permit any Credit Party to, merge, dissolve, liquidate, consolidate with or into another Person, or Dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any Person, except that, so long as no Default exists or would result therefrom:

(a) any Subsidiary may merge with (i) the Borrower, provided that, the Borrower shall be the continuing or surviving Person or (ii) any one or more other Credit Party;

(b) any Subsidiary may Dispose of all or substantially all of its assets (upon voluntary liquidation or otherwise) to the Borrower or to another Subsidiary; and

(c) any Subsidiary may dissolve, liquidate or wind up its affairs if it owns no material assets, engages in no business and otherwise has no activities other than activities related to the maintenance of its existence and good standing.

Section 6.02 Debt. The Borrower will not, and will not permit any other Credit Party to create, incur, assume or permit to exist any Debt, except:

(a) the Obligations arising under the Financing Documents;

(b) Debt outstanding on the date hereof and listed on Schedule 6.02 and any refinancings, refundings, renewals or extensions thereof; provided that the amount of such Debt is not increased at the time of such refinancing, refunding, renewal or extension except by an amount equal to a reasonable premium or other reasonable amount paid, and fees and expenses reasonably incurred, in connection with such refinancing and by an amount equal to any existing commitments unutilized thereunder and the direct or any contingent obligor with respect thereto is not changed, as a result of or in connection with such refinancing, refunding, renewal or extension;

(c) subject to the Maximum Debt Threshold, Debt in respect of (i) any office lease of the Credit Parties (to the extent such lease constitutes a Capital Lease) in an aggregate amount not to exceed Five Million Dollars ($5,000,000) owing for any fiscal year; and (ii) any other Capital Leases and purchase money obligations for fixed or capital assets; provided that the aggregate amount of all such Debt at any one time outstanding under this clause (ii) shall not exceed Five Million Dollars ($5,000,000);

(d) Debt associated with worker’s compensation claims, bonds or surety obligations required by Governmental Requirements in the ordinary course of business in connection with the operation of, or provision for the abandonment and remediation of, the Oil and Gas Properties;

(e) Debt between or among the Credit Parties; provided that (i) such Debt is not held, assigned, transferred, negotiated or pledged to any Person other than a Credit Party and (ii) any such Debt shall be subordinated to the Obligations on terms set forth in the Guarantee and Collateral Agreement;

(f) obligations to royalty, overriding and working interest owners, joint interest obligations, trade payables and other lease operating expenses incurred in the ordinary course of business which are not more than ninety (90) days past due;

 

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(g) Debt associated with (i) appeal bonds and bonds or sureties or (ii) letters of credit as provided in accordance with the PSA, in each case, provided to any Governmental Authority or to any other Person (including Seller) in connection with the operation of the Oil and Gas Properties, including with respect to plugging, facility removal and abandonment of the Oil and Gas Properties and Midstream Properties;

(h) subject to the Maximum Debt Threshold, unsecured Debt subordinated in a manner satisfactory to the Lender in its sole discretion;

(i) other Debt not otherwise permitted by this Section 6.02 in an aggregate amount not to exceed One Million Dollars ($1,000,000) at any time outstanding; and

(j) any guarantee of any other Debt permitted to be incurred hereunder.

Section 6.03 Liens. The Borrower will not, and will not permit any other Credit Party to create, incur, assume or permit to exist any Lien on any of its Properties (now owned or hereafter acquired), except:

(a) Liens securing the payment of any Obligations;

(b) Liens existing on the date hereof and listed on Schedule 6.03 and any renewals or extensions thereof; provided that (i) the property covered thereby is not changed, (ii) the amount secured or benefited thereby is not increased except as contemplated by Section 6.02(b), (iii) the direct or any contingent obligor with respect thereto is not changed, and (iv) any renewal or extension of the obligations secured or benefited thereby is permitted by Section 6.02(b);

(c) Liens securing Debt permitted under Section 6.02(c); provided that (i) such Liens do not at any time encumber any property other than the property financed by such Debt and (ii) the Debt secured thereby does not exceed the cost or fair market value, whichever is lower, of the property being acquired on the date of acquisition;

(d) Excepted Liens; and

(e) Liens not otherwise permitted under this Section 6.03 securing obligations in an aggregate amount not to exceed One Million Dollars ($1,000,000) at any time outstanding; provided that no such Liens shall attach to any of the Assets.

Section 6.04 Restricted Payments. The Borrower will not, and will not permit any other Credit Party to declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment, except:

(a) the Borrower may make Restricted Payments with respect to its Equity Interests payable solely in additional shares of its Equity Interests (other than Disqualified Capital Stock);

(b) Subsidiaries may declare and pay dividends and other Restricted Payments to the Borrower and any other Credit Party; and

(c) the Borrower may purchase, redeem or otherwise acquire Equity Interests issued by it in connection with any employee stock option agreement, employee warrant agreement or stock award or stock-based award agreement, severance agreement, employee benefit or long-term incentive plan or agreement or similar agreement, in an aggregate amount not to exceed Two Million Five Hundred Thousand Dollars ($2,500,000) in any fiscal year or Ten Million Dollars ($10,000,000) in aggregate prior to Discharge of the Obligations.

Section 6.05 Investments, Loans and Advances. The Borrower will not, and will not permit any other Credit Party to, make or permit to remain outstanding any Investments in or to any Person, except that the foregoing restriction shall not apply to:

(a) accounts receivable arising in the ordinary course of business;

 

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(b) Cash Equivalents;

(c) Investments between or among the Credit Parties; provided that, as a condition thereto, the applicable Credit Parties have taken all such actions necessary to maintain the Lender’s perfected first priority lien on the Property subject to such Investment;

(d) Investments constituting deposits made in connection with the purchase of goods or services in the ordinary course of business;

(e) guaranties permitted by Section 6.02(a) and (j); and

(f) subject to compliance with Section 5.12, Investments not otherwise permitted by this Section 6.05 in an aggregate amount not to exceed Five Million Dollars ($5,000,000).

Section 6.06 Sale or Discount of Receivables. Except for receivables obtained by the Credit Parties out of the ordinary course of business or the settlement of joint interest billing accounts in the ordinary course of business or discounts granted to settle collection of accounts receivable or the sale of defaulted accounts arising in the ordinary course of business in connection with the compromise or collection thereof and not in connection with any financing transaction, the Borrower will not, and will not permit any other Credit Party to, discount or sell (with or without recourse) any of its notes receivable or accounts receivable.

Section 6.07 Sale of Properties. The Borrower will not, and will not permit any other Credit Party to, sell, assign, farm-out, convey or otherwise Dispose (including by division) any Property (subject to Section 6.01), except for:

(a) the sale of inventory (including Hydrocarbons) in the ordinary course of business;

(b) the sale or transfer of equipment that is no longer necessary for the business of the Borrower or such other Credit Party or is replaced by equipment of at least comparable value and use;

(c) Casualty Events;

(d) Dispositions of Properties from any Credit Party to the Borrower or any other Credit Party; provided that, as a condition thereto, the Borrower and the Credit Parties have taken all such actions necessary to maintain the Lender’s perfected first lien on the Property subject to such transfer; and

(e) Dispositions by the Credit Parties not otherwise permitted under this Section 6.07; provided that the aggregate fair market value of all property Disposed of in reliance on this clause (e) shall not exceed Five Million Dollars ($5,000,000) from and after the Closing Date.

Section 6.08 Sales and Leasebacks. The Borrower will not, and will not permit any other Credit Party to enter into any arrangement with any Person providing for the leasing by any Credit Party of real or personal property that has been or is to be sold or transferred by such Credit Party to such Person or to any other Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of such Credit Party.

Section 6.09 Transactions with Affiliates. The Borrower will not, and will not permit any other Credit Party to, enter into any transaction, including any purchase, sale, lease or exchange of Property or the rendering of any service, with any Affiliate unless such transactions are otherwise permitted under this Agreement and are upon fair and reasonable terms no less favorable to it than it would obtain in a comparable arm’s length transaction with a Person not an Affiliate; provided that, the foregoing shall not apply to (a) transactions between the Borrower and other Credit Parties, (b) Restricted Payments permitted pursuant to Section 6.04, and (c) the transactions existing on the date hereof and described on Schedule 6.09.

 

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Section 6.10 Negative Pledge Agreements; Dividend Restrictions. The Borrower will not, and will not permit any other Credit Party to, create, incur, assume or suffer to exist any contract or agreement, which in any way prohibits or restricts:

(b) the granting, conveying, creation or imposition of any Lien on any of its Property to secure the Obligations or which requires the consent of other Persons in connection therewith or

(c) (i) the Borrower receiving Restricted Payments from any Credit Party or (ii) the Borrower or any other Credit Party receiving any money in respect of Debt owed to it, or which requires the consent of or notice to other Persons in connection therewith;

provided that, (A) the foregoing shall not apply to restrictions and conditions under the Financing Documents, (B) the foregoing shall not apply to customary restrictions and conditions contained in agreements relating to the sale of any asset or another Credit Party pending such sale; provided that, such restrictions and conditions apply only to the asset or other Credit Party that is to be sold and such sale is permitted hereunder, and (C) clause (a) of the foregoing shall not apply to (1) restrictions or conditions imposed by any agreement relating to purchase money Liens or Capital Leases permitted by this Agreement if such restrictions or conditions apply only to the property or assets securing such purchase money Liens or Capital Leases, (2) customary provisions in leases restricting the assignment thereof, or (3) customary provisions restricting assignment of any licensing agreement (in which a Credit Party is the licensee) with respect to a contract entered into by a Credit Party in the ordinary course of business.

Section 6.11 Other Prepayments. The Borrower will not, and will not permit any other Credit Party to, allow take or pay or other prepayments, or purchase any subordinated Debt, with respect to the Oil and Gas Properties of the Borrower or any other Credit Party that would require the Borrower or such other Credit Party to deliver Hydrocarbons at some future time without then or thereafter receiving full payment therefor to exceed One Million Dollars ($1,000,000) in the aggregate.

Section 6.12 Amendments to Organizational Documents and Material Contracts. The Borrower shall not, and shall not permit any other Credit Party to, (a) amend, supplement or otherwise modify (or permit to be amended, supplemented or modified) its Organizational Documents, in a manner that could reasonably be expected to be adverse to the interests of the Lender in any material respect without the consent of the Lender (not to be unreasonably withheld or delayed) or (b) (i) amend, supplement or otherwise modify (or permit to be amended, supplemented or modified) any agreement to which it is a party, (ii) terminate, replace or assign any of the Credit Party’s interests in any agreement, or (iii) permit any agreement not to be in full force and effect and binding upon and enforceable against the parties thereto, in each case if such occurrence could be reasonably expected to result in a Material Adverse Effect.

Section 6.13 Changes in Fiscal Periods. The Borrower shall not, and shall not permit any other Credit Party to have its fiscal year end on a date other than December 31 or change its method of determining fiscal quarters.

Section 6.14 Additional Subsidiaries. The Borrower will not, and will not permit any Subsidiary to, create or acquire any additional Subsidiary or purchase or otherwise acquire any equity interests of any entity unless the Borrower gives written notice to the Administrative Agent and the Lender of such creation or acquisition and complies with Section 5.12.

Section 6.15 Changes to Nature of Business. The Borrower shall not change the nature of its business from being the ownership and operation of Oil and Gas Properties as currently conducted on the Closing Date.

 

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ARTICLE VII

EVENTS OF DEFAULT

Section 7.01 Events of Default. One or more of the following events shall constitute an “Event of Default”:

(a) the Borrower fails to pay any principal of any Loan when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise;

(b) the Borrower fails to pay any interest on any Loan, or any fee or any other amount (other than an amount referred to in clause (a) of this Section) payable under this Agreement or under any other Financing Document, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of three (3) or more Business Days;

(c) any representation or warranty made or deemed made by or on behalf of the Borrower or any Credit Party in or in connection with this Agreement or any other Financing Document or any amendment or modification hereof or thereof, or any waiver hereunder or thereunder, or in any report, certificate, financial statement or other document furnished pursuant to or in connection with this Agreement or any other Financing Document or any amendment or modification hereof or thereof, or any waiver hereunder or thereunder, shall prove to have been incorrect in any material respect (or, in the case of any such representation or warranty under this Agreement or any other Financing Document already qualified by materiality, such representation or warranty shall prove to have been incorrect) when made or deemed made;

(d) the Borrower fails to observe or perform any covenant, condition or agreement contained in Section 5.01(a), (b), and (e), Section 5.02(a), Section 5.03 (with respect to the existence of the Borrower), Section 5.04, Section 5.12 or in Article VI;

(e) the Borrower fails to observe or perform any covenant, condition or agreement contained in this Agreement or any other Financing Document (other than those specified in clause (a), (b) or (d) of this Section) and such failure shall continue unremedied for a period of thirty (30) or more days after the occurrence thereof;

(f) (i) the Borrower or any Subsidiary fails to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of any Debt (other than Debt under the Financing Documents and Debt owed to Borrower or any of its Subsidiaries) having an aggregate principal amount of more than Five Million Dollars ($5,000,000), in each case beyond the applicable grace period with respect thereto, if any; or (ii) the Borrower or any Subsidiary shall fail to observe or perform any other agreement or condition relating to any such Debt or contained in any instrument or agreement evidencing, securing or relating thereto, the effect of which default is to cause, or to permit the holder or holders or beneficiary or beneficiaries of such Debt (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Debt to become due or to be repurchased, prepaid, defeased or redeemed (automatically or otherwise), or an offer to repurchase, prepay, defease or redeem such Debt to be made, prior to its stated maturity;

(g) an involuntary proceeding commences or an involuntary petition is filed seeking (i) liquidation, reorganization or other relief in respect of the Borrower or any of its Subsidiaries or its debts, or of a substantial part of its assets, under any Debtor Relief Law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any of its Subsidiaries or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for a period of sixty (60) or more days or an order or decree approving or ordering any of the foregoing shall be entered;

(h) the Borrower or any of its Subsidiaries (i) voluntarily commences any proceeding or files any petition seeking liquidation, reorganization or other relief under any Debtor Relief Law now or hereafter in effect, (ii) consents to the institution of, or fails to contest in a timely and appropriate manner, any proceeding or

 

32

petition described in clause (g) of this Section, (iii) applies for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any of its Subsidiaries or for a substantial part of its assets, (iv) files an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) makes a general assignment for the benefit of creditors or (vi) takes any action for the purpose of effecting any of the foregoing;

(i) the Borrower or any of its Subsidiaries becomes unable, admits in writing its inability or fails generally to pay its debts as they become due;

(j) there is entered against the Borrower or any Subsidiary (i) a final judgment or order for the payment of money in an aggregate amount (as to all such judgments and orders) exceeding Five Million Dollars ($5,000,000) (to the extent not covered by independent third-party insurance (except for any deductibles) as to which the insurer has been notified of such judgment or order and has not denied coverage), or (ii) a non-monetary final judgment or order that, either individually or in the aggregate, has or could reasonably be expected to have a Material Adverse Effect and, in either case, (A) enforcement proceedings are commenced by any creditor upon such judgment or order, or (B) there is a period of thirty (30) consecutive days during which a stay of enforcement of such judgment, by reason of a pending appeal or otherwise, is not in effect;

(k) the Borrower or any of its Subsidiaries suffers a Casualty Event in value exceeding Twenty Million Dollars ($20,000,000) (to the extent not covered by independent third party insurance (except for any deductibles) as to which the insurer has been notified of such Casualty Event and has not denied such coverage or a condemnation award, as applicable); (l) any material provision of any Financing Document, at any time after its execution and delivery and for any reason other than as expressly permitted hereunder or thereunder or satisfaction in full of all Obligations, ceases to be in full force and effect and valid, binding and enforceable in accordance with their terms against the Borrower or any Credit Party thereto, or shall be repudiated by any of them in writing, or ceases to create valid and perfected Liens of the priority required thereby on the Collateral purported to be covered thereby, except to the extent permitted by this Agreement, or the Borrower or any other Credit Party or any of their Affiliates shall so state in writing;

(m) any Collateral Document that purports to grant a security interest on any material Collateral ceases to provide a valid and perfected first priority security interest on such material Collateral (other than by any failure by the Administrative Agent or the Lender to record, submit or register any financing statements and the Collateral Documents in the appropriate filing offices therefor, and subject to Liens permitted pursuant to Section 6.03 and any releases of Liens permitted under this Agreement) and the Lender determines its security position (or the security position of the Administrative Agent for the benefit of the Secured Parties) is affected, and the relevant Credit Party has failed to remedy such Default within ten (10) Business Days of the relevant Credit Party receiving notice from the Lender or Administrative Agent, acting at the direction of the Lender, of such Default (it being understood that the Administrative Agent shall also receive a copy of such notice; provided that any failure to provide such notice to the Administrative Agent shall not affect the existence of an Event of Default pursuant to this paragraph (m));

(n) a Change of Control occurs;

(o) one or more ERISA Events occurs which, individually or in the aggregate, has resulted in a Material Adverse Effect; and

(p) any Credit Party breaches or defaults under any material term, condition, provision, covenant, representation or warranty contained in the PSA (including Section 7.3 thereof) and any applicable grace period has expired

 

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Section 7.02 Remedies Upon Event of Default. Upon the occurrence of any Event of Default (other than an event with respect to the Borrower described in clause(g) or (h) or (i) of Section 7.01), and at any time thereafter during the continuance of such Event of Default, the Lender may, by notice to the Borrower, take any or all of the following actions, at the same or different times:

(i) declare the Loan then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loan so declared to be due and payable, together with accrued interest thereon and all fees and other Obligations of the Borrower accrued hereunder, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; and

(ii) exercise on behalf of itself and the Lender all rights and remedies available to it and the Lender under the Financing Documents and Applicable Law;

provided that, in case of any event with respect to the Borrower described in clause (g) or (h) or (i) of Section 7.01, the principal of the Loan then outstanding, together with accrued interest thereon and all fees and other Obligations accrued hereunder, shall automatically become due and payable, in each case without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower.

Section 7.03 Application of Payments. Notwithstanding anything herein to the contrary, following the occurrence and during the continuance of an Event of Default, and notice thereof to the Administrative and the Lender by the Borrower, all payments received on account of the Obligations shall be applied by the Lender as follows:

(i) first, to payment of that portion of the Obligations constituting fees, indemnities, expenses and other amounts (including fees and disbursements and other charges of counsel payable under Section 9.03) payable to the Administrative Agent in its capacity as such;

(ii) second, to payment of that portion of the Obligations constituting fees, indemnities and other amounts (other than principal and interest) payable to the Lender (including fees and disbursements and other charges of counsel payable under Section 9.03) arising under the Financing Documents, ratably among them in proportion to the respective amounts described in this clause (ii) payable to them;

(iii) third, to payment of that portion of the Obligations constituting accrued and unpaid interest on the Loan, ratably among the Lender in proportion to the respective amounts described in this clause (iii) payable to them;

(iv) fourth, to payment of that portion of the Obligations constituting unpaid principal of the Loan ratably among the Lender in proportion to the respective amounts described in this clause (iv) payable to them;

(v) fifth, to the payment in full of all other Obligations, in each case ratably among the Lender based upon the respective aggregate amounts of all such Obligations owing to them in accordance with the respective amounts thereof then due and payable; and

(vi) finally, the balance, if any, after all Obligations have been indefeasibly paid in full, to the Borrower or as otherwise required by Applicable Law.

ARTICLE VIII

AGENCY

Section 8.01 Appointment and Authority. The Lender hereby irrevocably appoints Alter Domus Products Corp. to act on its behalf as the Administrative Agent hereunder and under the other Financing Documents and

 

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authorizes Alter Domus Products Corp. to take such actions on its behalf and to exercise such powers as are specifically delegated to or required of Alter Domus Products Corp. by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto. Alter Domus Products Corp. hereby accepts such appointment to act as Administrative Agent for the Lender hereto in accordance with the terms of this Agreement. The provisions of this Article are solely for the benefit of the Administrative Agent and the Lender, and the Borrower shall not have rights as a third-party beneficiary of any such provisions. It is understood and agreed that the use of the term “agent” herein or in any other Financing Documents (or any other similar term) with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any Applicable Law. Instead, such term is used as a matter of market custom, and is intended to create or reflect only an administrative relationship between contracting parties. The Administrative Agent may employ agents and attorneys-in-fact to perform any and all of its duties and exercise its rights and powers under the Financing Documents, as applicable, and shall not be responsible for the negligence nor misconduct of any such agents or attorneys-in-fact selected by it with due care. The Administrative Agent and any such agent employed thereby may perform any and all of its duties through their respective Related Parties. The exculpatory provisions of this Article shall apply to any such agent and their respective Related Parties, as applicable. For the avoidance of doubt, the Administrative Agent shall not have any responsibility nor liability for the actions and omissions of the Lender.

Section 8.02 Exculpatory Provisions. The duties of the Administrative Agent hereunder shall be strictly administrative in nature. Without limiting the generality of the foregoing, the Person serving as the Administrative Agent hereunder shall not:

(a) have duties nor responsibilities except those expressly set forth in the Financing Documents to which the Administrative Agent is or becomes a party, and no duties, responsibilities, covenants, or obligations shall be inferred or implied against any Administrative Agent, and the Administrative Agent shall not be subject to any fiduciary duties or be a trustee for any Secured Party, regardless whether a Default has occurred and is continuing;

(b) have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Financing Documents that the Administrative Agent is required to exercise as directed in writing by the Lender; provided that the Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Administrative Agent to liability or that is contrary to any Financing Document or Applicable Law, including for the avoidance of doubt any action that may be in violation of the automatic stay under any Debtor Relief Law.

(c) be responsible for the contents or accuracy of any statement, representation, warranty, certificate, report or other document referred to or provided for in, or received under, any Financing Document,

(d) be responsible for the value, validity, effectiveness, genuineness, enforceability or sufficiency of the Collateral or any Financing Document or any other document referred to or provided for in any Financing Document;

(e) be responsible for any failure by the Credit Parties or any other Person to perform or observe any of its obligations, covenants, agreements or other terms and conditions under any Financing Document;

(f) be required to initiate or conduct any, remedial, litigation, or collection proceedings under any Financing Document;

(g) be responsible for any action taken or omitted to be taken by it under any Financing Document or under any other document or instrument referred to or provided for in any Financing Document, except for its own gross negligence or willful misconduct, each as determined by a final, non-appealable judgment by a court of competent jurisdiction;

 

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(h) be deemed to have knowledge of any Default unless and until notice describing such Default is given to the Administrative Agent in writing by the Borrower or the Lender;

(i) except as expressly set forth herein or in the other Financing Documents, have any duty to disclose or be liable for the failure to disclose any information relating to the Borrower or any of its Affiliates that is communicated to or obtained by the Person serving as the Administrative Agent or any of its branches or Affiliates in any capacity;

(j) be liable under or in connection with any Financing Document for indirect, special, incidental, punitive, or consequential losses or damages of any kind whatsoever, including but not limited to lost profits, whether or not foreseeable, even if the Administrative Agent has been advised of the possibility thereof and regardless of the form of action; or

(k) be responsible for the validity, perfection, priority, or enforceability of any Lien or security interest created, or purported to be created, by the Guarantee and Collateral Agreement or any filing, registration, or recording related thereto.

Section 8.03 Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of the Loan that by its terms must be fulfilled to the satisfaction of the Lender, the Administrative Agent may presume that such condition is satisfactory to the Lender unless the Administrative Agent shall have received notice to the contrary from the Lender prior to the making of such Loan. The Administrative Agent may consult with legal counsel, independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

Section 8.04 Resignation or Removal of Administrative Agent.

(a) Subject to the appointment and acceptance of a successor Administrative Agent as provided below, the Administrative Agent may at any time give notice of its resignation to the Lender and the Borrower. Upon receipt of any such notice of resignation, the Lender shall have the right to appoint a successor. At any time, the Administrative Agent may be removed with or without cause by the Lender. If no such successor is so appointed by the Lender and shall have accepted such appointment within thirty (30) days after the retiring Administrative Agent gives notice of its resignation (or such earlier day as shall be agreed by the Lender) (the “Resignation Effective Date”), then the retiring Administrative Agent may (but shall not be obligated to), on behalf of the Lender, appoint a successor Administrative Agent. Whether or not a successor has been appointed, such resignation shall become effective in accordance with such notice on the Resignation Effective Date.

(b) With effect from the Resignation Effective Date (i) the retiring or removed Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Financing Documents and (ii) except for any indemnity payments owed to the retiring or removed Administrative Agent, all payments, communications and determinations provided to be made by, to or through the Administrative Agent shall instead be made by or to the Lender directly, until such time, if any, as the Lender appoints a successor Administrative Agent as provided for above. Upon the acceptance of a successor’s appointment as Administrative Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring or removed Administrative Agent (other than any rights to indemnity payments owed to the retiring or removed Administrative Agent), and the retiring or removed Administrative Agent shall be discharged from all of its duties and obligations hereunder or under the other Financing

 

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Documents. The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the retiring or removed Administrative Agent’s resignation or removal hereunder and under the other Financing Documents, the provisions of this Article and Section 9.03 shall continue in effect for the benefit of such retiring or removed Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring or removed Administrative Agent was acting as Administrative Agent.

Section 8.05 Non-Reliance. The Administrative Agent acknowledges that it has, independently and without reliance upon the Lender or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. The Administrative Agent also acknowledges that it will, independently and without reliance upon the Lender or any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Financing Document or any related agreement or any document furnished hereunder or thereunder. The Administrative Agent shall not be required to keep informed as to the performance or observance by the Credit Parties or any other Person of this Agreement or any other Financing Document or to inspect the Properties or books of the Credit Parties or such other Person. Except for notices, reports and other documents and information expressly required to be furnished to the Lender or Secured Parties by the Administrative Agent under this Agreement and the other Financing Documents to which the Administrative Agent is a party, the Administrative Agent shall have no duty nor responsibility to provide the Lender, or any Secured Party, with any credit or other information concerning the affairs, financial condition or business of the Credit Parties (or any Affiliates) which may come into the possession of the Administrative Agent or any of its Affiliates.

Section 8.06 Administrative Agent May File Proofs of Claim. In case of the pendency of any proceeding under any Debtor Relief Law or any other judicial proceeding relative to the Borrower, the Administrative Agent (irrespective of whether the principal of any Loan shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Lender shall have made any demand on the Borrower) shall be entitled and empowered (but not obligated) by intervention in such proceeding or otherwise:

(a) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loan and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lender (including any claim for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its respective agents and counsel and all other amounts due the Lender and the Administrative Agent under Section 9.03) allowed in such judicial proceeding; and

(b) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by the Lender to make such payments to the Administrative Agent and, in the event that the Lender shall consent to the making of such payments directly to the Administrative Agent, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Section 9.03.

Section 8.07 Collateral and Guaranty Matters. The Lender agrees, and hereby irrevocably authorizes the Administrative Agent,

(a) to release any Lien on any property granted to or held by the Administrative Agent under any Financing Document (i) upon the Discharge of the Obligations (ii) that is sold or otherwise disposed of or to be sold or

 

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otherwise disposed of as part of or in connection with any sale or other disposition expressly permitted hereunder or under any other Financing Document, or (iii) if approved, authorized or ratified in writing by the Lender in accordance with Section 9.02(b);

(b) to subordinate any Lien on any property granted to or held by the Administrative Agent under any Financing Document to the holder of any Lien on such property that is permitted by Section 6.03(c); and

(c) to release any Guarantor from its obligations under the Guarantee and Collateral Agreement if such Person ceases to be a Subsidiary as a result of a transaction expressly permitted under the Financing Documents.

In each case as specified above, the Administrative Agent will, at the Borrower’s expense, execute and deliver to the applicable Credit Party such documents as such Credit Party may reasonably request to evidence the release of such item of Collateral from the assignment and security interest granted under the Collateral Documents or to subordinate its interest in such item, or to release such Guarantor from its obligations under the Guarantee and Collateral Agreement, in each case in accordance with the terms of the Financing Documents and this Section 8.07.

ARTICLE IX

MISCELLANEOUS

Section 9.01 Notices.

(a) Notices Generally. Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in paragraph (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by email as follows:

 

  (i)

if to the Borrower, to it at:

Sable Offshore Corp.

700 Milam Street, Suite 3300

Houston, Texas 77002

Attention: Anthony C. Duenner

Phone: 713-579-8023

Email: aduenner@sableoffshore.com

With a copy to (which shall not constitute notice to the Borrower):

Bracewell LLP

711 Louisiana Street, Suite 2300

Houston, Texas 77002

Attention: Alan Rafte

Phone: 713-221-1411

Email: alan.rafte@bracewell.com

 

  (ii)

if to the Administrative Agent, to it at:

(1)   Attention: Steve Lendard

(2)   Email: CPCAgency@alterdomus.com

(3)

 

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  (iii)

if to the Lender, to it at:

ExxonMobil Upstream Company

22777 Springwoods Village Parkway, Spring, TX 77389

Attention: Mickey Johnson, Divestments Manager

Phone: 346-467-9353

Email: mickey.d.johnson@exxonmobil.com

Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received. Notices delivered through electronic communications, to the extent provided in paragraph (b) below, shall be effective as provided in said paragraph (b).

(b) Electronic Communications. Notices and other communications to the Administrative Agent or the Lender hereunder may be delivered or furnished by electronic communication (including email) pursuant to procedures approved by the Administrative Agent or the Lender, as applicable. The Administrative Agent, the Lender or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications.

Unless the Administrative Agent or the Lender, as applicable, otherwise prescribes, (i) notices and other communications sent to an email address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return email or other written acknowledgement), and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient, at its email address as described in the foregoing clause (i), of notification that such notice or communication is available and identifying the website address therefor; provided that, for both clauses (i) and (ii) above, if such notice, email or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next Business Day for the recipient.

(c) Change of Address, etc. Any party hereto may change its address or email address for notices and other communications hereunder by written notice to the other parties hereto.

Section 9.02 Waivers; Amendments.

(a) No Waiver; Remedies Cumulative; Enforcement. No failure or delay by the Lender or Administrative Agent in exercising any right, remedy, power or privilege hereunder or under any other Financing Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, remedy, power or privilege, or any abandonment or discontinuance of steps to enforce such a right remedy, power or privilege, preclude any other or further exercise thereof or the exercise of any other right remedy, power or privilege. The rights, remedies, powers and privileges of the Lender and Administrative Agent hereunder and under the Financing Documents are cumulative and are not exclusive of any rights, remedies, powers or privileges that any such Person would otherwise have.

Notwithstanding anything to the contrary contained herein or in any other Financing Document, the authority to enforce rights and remedies hereunder and under the other Financing Documents against the Borrower shall be vested exclusively in, and all actions and proceedings at law in connection with such enforcement shall be instituted and maintained exclusively by, the Administrative Agent in accordance with Section 7.01 for the benefit of the Secured Parties; provided that the foregoing shall not prohibit (i) the Lender from exercising on its own behalf the rights and remedies that inure to its benefit (solely in its capacity as Lender) hereunder and under the other Financing Documents, (ii) the Lender from exercising setoff rights in accordance with Section 9.08 or (iii) the Lender from filing proofs of claim or appearing and filing pleadings on its own behalf during the pendency of a proceeding relative to the Borrower under any Debtor Relief Law.

 

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(b) Amendments, Etc. Except as otherwise expressly set forth in this Agreement, no amendment or waiver of any provision of this Agreement or any other Financing Document, and no consent to any departure by the Borrower therefrom, shall be effective unless in writing executed by the Borrower, and the Lender and, solely in the case of any amendment, waiver or consent affecting the rights or duties of the Administrative Agent, the Administrative Agent.

Section 9.03 Expenses; Indemnity; Insurance; Damage Waiver.

(a) Costs and Expenses. The Borrower shall pay promptly, on written demand, (i) all reasonable out-of-pocket expenses incurred by the Lender and Administrative Agent and their respective Affiliates (including the reasonable fees, charges and disbursements of counsel for the Lender and the Administrative Agent) in connection with the preparation, negotiation, execution, delivery and administration of this Agreement and the other Financing Documents, or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), and (ii) all out-of-pocket expenses incurred by the Administrative Agent or the Lender (including the fees, charges and disbursements of any counsel for the Administrative Agent or the Lender, as applicable) in connection with the enforcement or protection of its rights (A) in connection with this Agreement and the other Financing Documents, including its rights under this Section, or (B) in connection with the Loan made hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loan.

(b) Indemnification by the Borrower. The Borrower hereby defends, indemnifies and holds harmless the Lender and the Administrative Agent (and any sub-agent thereof) and each of their respective Affiliates, partners, directors, officers, agents and advisors (each an “Indemnified Person”) from and against any and all losses (including, for the avoidance of doubt, reasonable fees, disbursements, settlement costs and other charges of counsel) arising out of, attributable to, based upon or related to any breach of any representation or warranty made by Borrower in Article III of this Agreement, any covenant or agreement of Borrower contained in this Agreement or any Financing Document and the Borrower’s use of the Loan provided that no Indemnified Person (excluding, for purposes of clause (b) below, the Administrative Agent and any of its Affiliates, partners, directors, officers, agents and advisors) shall have any right to indemnification for any of the foregoing to the extent (a) resulting from such Indemnified Person’s own gross negligence or willful misconduct as determined by a court of competent jurisdiction in a final and non-appealable judgment or (b) arising out of, attributable to, based upon, or related to any representation or warranty, covenant, agreement or other obligation of the Buyer under or with respect to the PSA or the Plains PSA.

(c) Reimbursement by the Lender. To the extent that the Borrower for any reason fails to indefeasibly pay any amount required under paragraph (a) or (b) of this Section to be paid by it to the Administrative Agent (or any sub-agent thereof) or any Related Party of the Administrative Agent, the Lender agrees to pay to the Administrative Agent (or any such sub-agent) or such Related Party, as the case may be, such unpaid amount (including any such unpaid amount in respect of a claim asserted by the Lender); provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent (or any such sub-agent) or against any Related Party of any of the foregoing acting for the Administrative Agent (or any such sub-agent) in connection with such capacity.

(d) Non-Compensatory Damages. No Indemnified Person shall be entitled to recover from an indemnifying party or its Affiliates any indirect, special, incidental, consequential, punitive, exemplary, remote or speculative damages or damages for lost profits of any kind arising under or in connection with this Agreement or the transactions contemplated hereby, except to the extent any such Indemnified Person suffers such damages to a third party, which damages (including costs of defense and reasonable attorneys’ fees incurred in connection with defending against such damages) shall not be excluded by this provision as to recovery hereunder.

(e) Waiver of Consequential Damages, Etc. To the fullest extent permitted by Applicable Law, the Borrower shall not assert, and hereby waives, any claim against any Indemnified Person, on any theory of liability, for

 

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special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Financing Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Loan, or the use of the proceeds thereof. No Indemnified Person referred to in paragraph (b) above shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Financing Documents or the transactions contemplated hereby or thereby.

(f) Payments. All amounts due under this Section shall be payable promptly after demand therefor.

(g) Survival. Each party’s obligations under this Section shall survive the termination of the Financing Documents and payment of the obligations hereunder.

Section 9.04 Successors and Assigns.

(a) Successors and Assigns Generally. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder or under any other Financing Document without the prior written consent of the Lender (and any other attempted assignment or transfer by any party hereto shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in paragraph (f) of this Section and, to the extent expressly contemplated hereby, the Related Parties of each of the Lender) any legal or equitable right, remedy or claim under or by reason of this Agreement.

(b) Assignments by Lender. The Lender may at any time assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of the Loan at the time owing to it); provided that each partial assignment shall be made as an assignment of a proportionate part of the Lender’s rights and obligations under this Agreement with respect to the Loan assigned; provided further, that (i) consent of the Administrative Agent shall be required for assignments to any Person that is not a Lender or an Affiliate of a Lender (such consent not to be unreasonably withheld); (ii) the assignee, if it is not a Lender hereunder, shall deliver to the Administrative Agent an administrative questionnaire in form and substance satisfactory to the Administrative Agent together with any other documentation and information as the Administrative Agent may reasonably request, and (iii) the parties to such assignment shall deliver a processing fee of $3,500 to the Administrative Agent at the time of such assignment (it being understood that the Administrative Agent, in its sole discretion, may elect to waive such fee).

(c) Assignment and Assumption. The parties to each assignment shall execute and deliver to the Administrative Agent, the Lender and the Borrower an Assignment and Assumption. From and after the effective date specified in each Assignment and Assumption, the assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of the Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, the Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Section 9.03 with respect to facts and circumstances occurring prior to the effective date of such assignment. Any assignment or transfer by the Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (f) of this Section.

(d) Register. The Lender, shall maintain at one of its offices in the United States a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lender and

 

41

any additional lenders (if any), and principal amounts (and stated interest) of the Loan owing to, the Lender(s) pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive absent manifest error, and the Borrower, the Lender and any additional lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as the Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower and the Lender, at any reasonable time and from time to time upon reasonable prior notice.

(e) Certain Pledges. The Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of the Lender; provided that no such pledge or assignment shall release the Lender from any of its obligations hereunder or substitute any such pledgee or assignee for the Lender as a party hereto.

(f) Participations. The Lender may at any time, without the consent of, or notice to, the Borrower, sell participations to any Person (each, a “Participant”) in all or a portion of the its rights and/or obligations under this Agreement (including all or a portion of the Loans owing to it); provided that (i) its obligations under this Agreement shall remain unchanged, (ii) it shall remain solely responsible to the other parties hereto for the performance of such obligations, and (iii) the Borrower and the Administrative Agent shall continue to deal solely and directly with the Lender in connection with its Lender’s rights and obligations under this Agreement. Any agreement or instrument pursuant to which the Lender sells such a participation shall provide that the Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that the Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver that directly and materially affects such Participant. If the Lender sells a participation, it shall, acting solely for this purpose as a non-fiduciary agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Loans or other obligations under the Financing Documents (the “Participant Register”); provided that the Lender shall not have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in any commitments, loans or its other obligations under any Financing Document) to any Person except to the extent that such disclosure is necessary to establish that such commitment, loan or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and the Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary.

Section 9.05 Survival. All covenants, agreements, representations and warranties made by the Borrower herein and in any Financing Document or other documents delivered in connection herewith or therewith or pursuant hereto or thereto shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery hereof and thereof and the making of the Loan hereunder, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Lender may have had notice or knowledge of any Default on the Closing Date, and shall continue in full force and effect as long as any Loan or any other Obligation hereunder shall remain unpaid or unsatisfied and so long as the Loan has not expired or been terminated. The provisions of Sections 9.03, 9.13 and Article VIII shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the payment in full of the Obligations or the termination of this Agreement or any provision hereof.

Section 9.06 Counterparts; Integration; Effectiveness; Electronic Execution.

(a) Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and the other Financing Documents constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided

 

42

in Article IV, this Agreement shall become effective when it shall have been executed by the Lender and when the Lender shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto. Delivery of an executed counterpart of a signature page of this Agreement in electronic (e.g., “pdf” or “tif”) format shall be effective as delivery of a manually executed counterpart of this Agreement.

(b) Electronic Execution of Assignments. The words “execution,” “signed,” “signature,” and words of like import in any Assignment and Assumption shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any Applicable Law, including the Federal Electronic Signatures in Global and National Commerce Act or any other similar state laws based on the Uniform Electronic Transactions Act.

Section 9.07 Severability. If any provision of this Agreement or the other Financing Documents is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Agreement and the other Financing Documents shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

Section 9.08 Right of Setoff. If an Event of Default shall have occurred and be continuing, the Lender and each of their respective Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by Applicable Law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held, and other obligations (in whatever currency) at any time owing, by the Lender or any such Affiliate, to or for the credit or the account of the Borrower against any and all of the obligations of the Borrower now or hereafter existing under this Agreement or any other Financing Document to the Lender or its respective Affiliates, irrespective of whether or not the Lender or Affiliate shall have made any demand under this Agreement or any other Financing Document and although such obligations of the Borrower may be contingent or unmatured or are owed to a branch office or Affiliate of the Lender different from the branch office or Affiliate holding such deposit or obligated on such indebtedness. The rights of the Lender and their respective Affiliates under this Section are in addition to other rights and remedies (including other rights of setoff) that the Lender or its respective Affiliates may have. The Lender agrees to notify the Borrower and the Lender promptly after any such setoff and application; provided that the failure to give such notice shall not affect the validity of such setoff and application.

Section 9.09 Governing Law; Jurisdiction; Etc.

(a) Governing Law. This Agreement and the other Financing Documents and any claims, controversy, dispute or cause of action (whether in contract or tort or otherwise) based upon, arising out of or relating to this Agreement or any other Financing Document (except, as to any other Financing Document, as expressly set forth therein) and the transactions contemplated hereby and thereby shall be governed by, and construed in accordance with, the law of the State of New York.

(b) Disputed Claims. As to the disputes subject to this Section 9.09, any action or controversy of whatever nature, including an action in tort or contract or a statutory action (“Disputed Claim”), or the arbitrability of a Disputed Claim, will be resolved under the terms, conditions and procedures set forth in this Section 9.09 and will be binding on all Parties and their respective successors and assigns. No Party may prosecute or commence any suit or action against any other Party relating to any matters that are subject to this Section 9.09, except as provided for in this Section 9.09.

(c) Dispute Resolution. The Parties agree to attempt to resolve any Disputed Claim arising out of or relating to this Agreement through negotiation. Within thirty (30) days after one Party gives the other Party written notice describing the dispute and requesting negotiations, representatives of the Parties with authority to resolve the

 

43

dispute shall meet at a mutually-agreed upon location to attempt to resolve the dispute. Negotiations shall continue until the Parties have resolved the Disputed Claim or until one of the Parties gives written notice that it will no longer continue to negotiate. If, for any reason, the Parties’ representatives fail to meet within the thirty (30) day deadline or if a Party gives written notice that it is no longer willing to continue negotiations, either Party may commence binding arbitration of the Disputed Claim pursuant to Section 9.09(d) (“Dispute Arbitration”).

(d) Arbitration. Any Disputed Claim arising out of or relating to this Agreement that the Parties fail to resolve by negotiation as set forth in this Section 9.09 shall be resolved by arbitration before three (3) arbitrators pursuant to the Commercial Arbitration Rules of the American Arbitration Association as modified herein. Each Party shall appoint one (1) neutral arbitrator within fifteen (15) days after commencement of Dispute Arbitration, and the two (2) arbitrators so appointed shall appoint the third arbitrator within thirty (30) days after the appointment of the second arbitrator, or in default of such agreement, by the American Arbitration Association, who shall chair the tribunal. The place of arbitration shall be Houston, Texas. The arbitrators shall apply the substantive law of Texas to the merits of the Disputed Claim, except that the arbitrators shall not apply any choice of law rules that would call for the application of the substantive law of any other jurisdiction. The Federal Arbitration Act shall apply to the Dispute Arbitration. The arbitrators’ award shall be final and binding on the Parties. Judgment on the award may be entered in any court of competent jurisdiction. Except as may be required by Applicable Law, neither Party nor the arbitrators may disclose the existence, content (including any and all documents and testimony exchanged or introduced in the arbitral proceeding), or results of any arbitration without the prior written consent of both Parties, unless such disclosure is necessary to protect or pursue a legal right, including enforcement of an arbitral award.

(e) Service of Process. Each party hereto irrevocably consents to service of process in the manner provided for notices in Section 9.01. Nothing in this Agreement will affect the right of any party hereto to serve process in any other manner permitted by Applicable Law.

Section 9.10 Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER FINANCING DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER FINANCING DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

Section 9.11 Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.

Section 9.12 Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts that are treated as interest on such Loan under Applicable Law (collectively, “Charges”), shall exceed the maximum lawful rate (the “Maximum Rate”) that may be contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance with Applicable Law, the rate of interest payable in respect of such Loan hereunder, together with all charges payable in respect thereof, shall be limited to the Maximum Rate. To the extent lawful, the interest and Charges that would have been paid in respect of such Loan but were not paid as a result of the operation of this Section shall be cumulated and the interest and charges payable to the Lender in respect of other

 

44

Loan or periods shall be increased (but not above the amount collectible at the Maximum Rate therefor) until such cumulated amount, together with interest thereon at a rate determined by the Lender in its reasonable discretion for each day to the date of repayment, shall have been received by the Lender. Any amount collected by the Lender that exceeds the maximum amount collectible at the Maximum Rate shall be applied to the reduction of the principal balance of such Loan or refunded to the Borrower so that at no time shall the interest and charges paid or payable in respect of such Loan exceed the maximum amount collectible at the Maximum Rate.

Section 9.13 Payments Set Aside. To the extent that any payment by or on behalf of the Borrower is made to the Lender, or the Lender exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred, and (b) the Lender severally agrees to pay to the Lender upon demand its applicable share (without duplication) of any amount so recovered from or repaid by the Lender, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum determined by the Lender in its reasonable discretion.

Section 9.14 Treatment of Certain Information; Confidentiality. Each of the Administrative Agent and the Lender agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Affiliates, its auditors and its Related Parties (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent required or requested by any regulatory authority purporting to have jurisdiction over such Person or its Related Parties (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (c) to the extent required by Applicable Law or regulations or by any subpoena or similar legal process, (d) to any other party hereto, (e) in connection with the exercise of any remedies hereunder or under any other Financing Document or any action or proceeding relating to this Agreement or any other Financing Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section 9.14, to any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights and obligations under this Agreement, (g) on a confidential basis to (i) any rating agency in connection with rating the Borrower or its Subsidiaries or the credit facilities provided hereunder or (ii) the CUSIP Service Bureau or any similar agency in connection with the application, issuance, publishing and monitoring of CUSIP numbers or other market identifiers with respect to the credit facilities provided hereunder, (h) with the consent of the Borrower or (i) to the extent such Information (x) becomes publicly available other than as a result of a breach of this Section 9.14, (y) becomes available to the Administrative Agent or the Lender or any of their respective Affiliates on a nonconfidential basis from a source other than the Borrower or (z) is independently discovered or developed by a party hereto without utilizing any Information received from the Borrower or violating the terms of this Section 9.14. In addition, the Administrative Agent and the Lender may disclose the existence of this Agreement and information about this Agreement to market data collectors, similar service providers to the lending industry and service providers to the Administrative Agent and the Lender in connection with the administration of this Agreement and the other Financing Documents.

For purposes of this Section 9.14, “Information” means all information received from the Borrower or any Subsidiary relating to the Borrower or any Subsidiary or any of their respective businesses, other than any such information that is available to the Administrative Agent or the Lender on a nonconfidential basis prior to disclosure by the Borrower or any Subsidiary. Any Person required to maintain the confidentiality of Information as provided in this Section 9.14 shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

[Signature Pages Follow]

 

45

IN WITNESS WHEREOF, the Parties hereto have executed and delivered this Agreement by their respective authorized officers as of the day and year first above written.

Lender

 Exxon Mobil Corporation:

 

By:  

/s/ Mickey D. Johnson

Name:   Mickey D. Johnson
Title:   Agent and Attorney-In-Fact

 

Signature Page to Loan Agreement

46

Borrower

 Sable Offshore Corp.

 (f/k/a Flame Acquisition Corp.)

 

By:  

/s/ James C. Flores

Name:   James C. Flores
Title:   Chairman and Chief Executive Officer

 

Signature Page to Loan Agreement

47

Administrative Agent

 Alter Domus Products Corp.

 

By:  

/s/ Winnalyn N. Kantaris

Name:   Winnalyn N. Kantaris
Title:   Associate General Counsel

 

Signature Page to Loan Agreement

48

Exhibit A

Form of Guarantee and Collateral Agreement

[***]

Exhibit B

Form of Prepayment Notice

[***]

Exhibit C

Form of Solvency Certificate

[***]

Exhibit D

Form of Notice of Borrowing

[***]

Exhibit E

Form of Note

[***]

Schedule 1.02

Knowledge Persons

[***]

Schedule 3.16

Subsidiaries

[***]

Schedule 6.02

Existing Debt

[***]

Schedule 6.03

Existing Liens

[***]

Schedule 6.09

Transactions with Affiliates

[***]

Exhibit 10.27

PURCHASE AND SALE AGREEMENT

BETWEEN

EXXON MOBIL CORPORATION

MOBIL PACIFIC PIPELINE COMPANY

AND

SABLE OFFSHORE CORP.

EFFECTIVE TIME: JANUARY 1, 2022

as amended by

FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT

dated as of June 13, 2023

as amended by

SECOND AMENDMENT TO PURCHASE AND SALE AGREEMENT

dated as of December 15, 2023

TABLE OF CONTENTS

 

         Page  
ARTICLE I DEFINITIONS      1  
Section 1.1  

Certain Defined Terms

      1  
ARTICLE II PURCHASE AND SALE      1  
Section 2.1  

Agreement to Purchase and Sell

      1  
Section 2.2  

The Assets

      1  
Section 2.3  

Excluded Assets

      2  
Section 2.4  

Effective Time; Property Expenses and Revenues

      4  
ARTICLE III PURCHASE PRICE      5  
Section 3.1  

Purchase Price

      5  
Section 3.2  

Upward Settlement Adjustments

      5  
Section 3.3  

Downward Settlement Adjustments

      5  
Section 3.4  

Payment of the Purchase Price

      6  
Section 3.5  

Intercompany Balances

      6  
ARTICLE IV TITLE AND ENVIRONMENTAL MATTERS AND CASUALTY LOSSES      7  
Section 4.1  

Title Examination

      7  
Section 4.2  

Seller’s Title

      7  
Section 4.3  

Notice of Title Defects

      8  
Section 4.4  

Remedies for Title Defects

      8  
Section 4.5  

Title Defect Amounts

      9  
Section 4.6  

Title Limitations

      9  
Section 4.7  

Title Benefits

      10  
Section 4.8  

Consents to Assign

      10  
Section 4.9  

Environmental Assessment

      10  
Section 4.10  

Environmental Defect Notice

      12  
Section 4.11  

Remedies for Environmental Defects

      13  
Section 4.12  

Environmental Limitations

      13  
Section 4.13  

Casualty and Condemnation

      13  
ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER      15  
Section 5.1  

Organization, Existence and Qualification

      15  
Section 5.2  

Authority, Approval and Enforceability

      15  
Section 5.3  

No Conflicts

      15  
Section 5.4  

Asset Taxes

      15  
Section 5.5  

Bankruptcy

      15  
Section 5.6  

Foreign Person

      15  
Section 5.7  

Brokers

      15  
Section 5.8  

Litigation

      16  
Section 5.9  

Payment of Royalties

      16  
Section 5.10  

Required Consents

      16  
Section 5.11  

Transferred Shares

      16  
Section 5.12  

Material Contracts

      17  
Section 5.13  

Imbalances

      18  
Section 5.14  

Suspense Funds

      18  
Section 5.15  

Current Commitments

      18  
Section 5.16  

Compliance with Laws

      18  
Section 5.17  

Environmental Matters

      18  
Section 5.18  

Preferential Rights

      18  

         Page  
Section 5.19  

Leases

      18  
Section 5.20  

Credit Support

      18  
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PURCHASER      19  
Section 6.1  

Organization, Existence and Qualification

      19  
Section 6.2  

BOEM Qualification

      19  
Section 6.3  

Authority, Approval and Enforceability

      19  
Section 6.4  

No Conflicts

      19  
Section 6.5  

Bankruptcy

      19  
Section 6.6  

Brokers

      20  
Section 6.7  

Consents

      20  
Section 6.8  

No Distribution

      20  
Section 6.9  

Knowledge and Experience

      20  
Section 6.10  

Regulatory

      20  
Section 6.11  

Funds

      20  
Section 6.12  

No Prior Liens or Financial Commitments Affecting the Assets

      20  
ARTICLE VII PRE-CLOSING COVENANTS OF THE PARTIES      21  
Section 7.1  

Operations

      21  
Section 7.2  

Performance Bonds

      22  
Section 7.3  

Transfers and Assignments; Reassignment

      22  
Section 7.4  

Amendment of Schedules

      23  
Section 7.5  

Indemnity Regarding Access

      23  
Section 7.6  

First Lien Security to Seller

      24  
Section 7.7  

Reserved

      24  
Section 7.8  

HSR Filings

      24  
Section 7.9  

No Other Liens

      25  
Section 7.10  

Audits and Filings

      26  
Section 7.11  

No Liens or Financial Commitments Affecting the Assets

      27  
Section 7.12  

Periodic Reporting

      27  
Section 7.13  

Financing Transaction Reporting

      27  
Section 7.14  

Continuing Qualifications

      28  
ARTICLE VIII PURCHASER’S CONDITIONS TO CLOSING      29  
Section 8.1  

Representations

      29  
Section 8.2  

Performance

      29  
Section 8.3  

No Legal Proceedings

      29  
Section 8.4  

Title Defects, Environmental Defects, Casualty Loss and Transfer Restrictions

      29  
Section 8.5  

HSR

      29  
Section 8.6  

Closing Deliverables

      29  
Section 8.7  

Financing Transaction

      29  
Section 8.8  

Senior Secured Term Loan Agreement

      29  
ARTICLE IX SELLER’S CONDITIONS TO CLOSING      30  
Section 9.1  

Representations

      30  
Section 9.2  

Performance

      30  
Section 9.3  

No Legal Proceedings

      30  
Section 9.4  

Title Defects, Environmental Defects, Casualty Loss and Transfer Restrictions

      30  
Section 9.5  

HSR

      30  

 

ii

         Page  
Section 9.6  

Closing Deliverables

      30  
Section 9.7  

Financing Transaction

      30  
Section 9.8  

Net Tangible Assets

      30  
Section 9.9  

Minimum Available Cash

      30  
Section 9.10  

Senior Secured Term Loan Agreement

      30  
ARTICLE X CLOSING      31  
Section 10.1  

Time and Place of Closing

      31  
Section 10.2  

Calculation of Preliminary Settlement Statement

      31  
Section 10.3  

Closing Obligations

      31  
ARTICLE XI POST-CLOSING OBLIGATIONS      33  
Section 11.1  

Assumed Obligations

      33  
Section 11.2  

Purchaser’s Indemnity

      34  
Section 11.3  

Seller’s Indemnity

      34  
Section 11.4  

Regardless of Fault

      34  
Section 11.5  

Limitation on Liability

      35  
Section 11.6  

Exclusive Remedy

      35  
Section 11.7  

Indemnification Procedures

      35  
Section 11.8  

Survival

      37  
Section 11.9  

Waiver of Right to Rescission

      37  
Section 11.10  

Non-Compensatory Damages

      37  
Section 11.11  

Insurance

      37  
Section 11.12  

ExxonMobil Insurance

      38  
Section 11.13  

Governmental Bonding

      38  
Section 11.14  

Change of POPCO and PPC Names

      38  
Section 11.15  

Restrictions on Use

      39  
Section 11.16  

Engineering Controls

      39  
Section 11.17  

Covenants Running with the Land

      40  
Section 11.18  

Financial Security in Favor of Seller

      40  
Section 11.19  

Tax Treatment

      42  
ARTICLE XII CERTAIN ADDITIONAL AGREEMENTS      43  
Section 12.1  

Post-Closing Settlement Statement

      43  
Section 12.2  

Receipts and Credits

      43  
Section 12.3  

Records; Retention

      43  
Section 12.4  

Recording

      44  
Section 12.5  

Operatorship Matters, Filing for Approvals

      44  
Section 12.6  

Further Cooperation

      45  
ARTICLE XIII TAXES      46  
Section 13.1  

Apportionment of Ad Valorem and Property Taxes

      46  
Section 13.2  

Sales and Transfer Taxes

      46  
Section 13.3  

Severance and Production Taxes

      46  
Section 13.4  

Cooperation

      46  
Section 13.5  

Like-Kind Exchange

      46  
Section 13.6  

IRS Form 8594

      47  
ARTICLE XIV DISCLAIMERS AND WAIVERS      48  
Section 14.1  

Condition of the Assets

      48  
Section 14.2  

Other Disclaimers by Seller

      49  

 

iii

         Page  
Section 14.3  

Waiver of Consumer Rights

      50  
ARTICLE XV TERMINATION      51  
Section 15.1  

Right of Termination

      51  
Section 15.2  

Effect of Termination

      51  
Section 15.3  

Return of Documentation and Confidentiality

      52  
ARTICLE XVI EMPLOYEES AND BENEFITS      53  
Section 16.1  

Employees

      53  
ARTICLE XVII MISCELLANEOUS      54  
Section 17.1  

Entire Agreement

      54  
Section 17.2  

References and Rules of Construction

      54  
Section 17.3  

Assignment

      54  
Section 17.4  

Waiver

      54  
Section 17.5  

Conflict of Law, Jurisdiction, Venue, Arbitration

      54  
Section 17.6  

Notices

      55  
Section 17.7  

Timing

      56  
Section 17.8  

Confidentiality

      56  
Section 17.9  

Publicity

      56  
Section 17.10  

Use of Seller’s Names

      57  
Section 17.11  

Severability

      57  
Section 17.12  

Parties in Interest

      57  
Section 17.13  

Conspicuousness

      57  
Section 17.14  

Execution in Counterparts

      57  
Section 17.15  

Recourse Only Against Parties

      57  

 

iv

APPENDIX  
Appendix A  

Defined Terms

EXHIBITS  
Exhibit A-1  

Description of the Onshore and Offshore (Interests / Parcels / Leases / Units / Facilities)

Exhibit A-2  

Description of Working Interest and Net Revenue Interest

Exhibit A-3  

Description of POPCO Shares

Exhibit A-4  

Description of PPC Shares

Exhibit A-5  

Description of 901/903 Pipeline

Exhibit B  

Rights-of-Way, Permits and Other Rights

Exhibit C  

Allocated Values

Exhibit D  

Form of Assignment and Bill of Sale

Exhibit E  

Purchaser’s Officer’s Certificate

Exhibit F  

Seller’s Officer’s Certificate

Exhibit G  

Form of Non-Foreign Affidavit

Exhibit H  

Form of Financial Security

Exhibit I  

Form of Deed

Exhibit J  

Senior Secured Term Loan Agreement

Exhibit K  

Deed of Trust - Assets

Exhibit K-1  

Deed of Trust – 901/903 Assets

Exhibit L  

Employees

Exhibit M  

Facility Licensing Agreement

Exhibit N  

Transition Services Agreement

Exhibit O  

Power of Attorney

Exhibit P  

Reserved

Exhibit Q  

IT System Transition Plan

Exhibit R  

Form of Assignment and Bill of Sale (Reassignment)

Exhibit S  

Form of Deed (Reassignment)

Exhibit T  

Form of Letter of Credit

SCHEDULES  
Schedule 1.1  

Seller Knowledge Persons

Schedule 1.2  

Purchaser Knowledge Persons

Schedule 2.2(m)  

Motorized Vehicles

Schedule 2.3(k)  

Scheduled Bonds

Schedule 2.3(q)  

Excluded Permits

Schedule 2.3(u)  

Excluded Matters

Schedule 3.2(d)  

Imbalances

Schedule 3.2(f)  

Inventory

Schedule 3.2(i)  

901/903 Pipeline Approvals

Schedule 3.5  

Intercompany Balances

Schedule 5.4  

Asset Taxes

Schedule 5.8  

Litigation

Schedule 5.10  

Required Consents

Schedule 5.12(a)  

Material Contracts

Schedule 5.12(b)  

Material Defaults

Schedule 5.13  

Imbalances

Schedule 5.14  

Suspense Funds

Schedule 5.15  

Current Commitments

Schedule 5.17  

Environmental Matters

Schedule 5.19  

Leases

Schedule 5.20  

Credit Support

 

v

Schedule 7.1(b)  

Operations / AFEs

Schedule 11.3(b)  

Retained Litigation

Schedule 11.18  

Financial Institutions

Schedule 12.3(a)  

Seismic Data

 

vi

PURCHASE AND SALE AGREEMENT

This Purchase and Sale Agreement (this “Agreement”) is made as of November 1, 2022 (the “Execution Date”), by and between Exxon Mobil Corporation (“EMC”), a New Jersey corporation with an address of 22777 Springwoods Village Parkway, Spring, Texas 77389 and Mobil Pacific Pipeline Company, a Delaware corporation, with an address of 22777 Springwoods Village Parkway, Spring, Texas 77389 (“MPPC”) (each a “Seller”), and Sable Offshore Corp., a Texas corporation, with an address of 700 Milam Street, Suite 3300, Houston, Texas 77002 (“Purchaser”). Seller and Purchaser are sometimes referred to in this Agreement collectively as the “Parties” and individually as a “Party.” EMC and MPPC may from time to time hereinafter be referred to collectively as “ExxonMobil”, “Seller” or “Sellers” solely for convenience and simplicity; such reference is not intended to in any way affect the corporate separateness of these separate legal entities.

WITNESSETH

WHEREAS, EMC owns (i) certain of the Assets, as described herein, and (ii) one hundred percent (100%) of the POPCO Shares (as defined hereafter);

WHEREAS, MPPC owns one hundred percent (100%) of the PPC Shares (as defined hereafter); and

WHEREAS, each Seller desires to sell to Purchaser all of such Seller’s interest in the Assets and Purchaser is willing to purchase the Assets from Seller, upon the terms and conditions set forth in this Agreement.

NOW THEREFORE, in consideration of the mutual promises of the Parties contained in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1 Certain Defined Terms. Capitalized terms used in this Agreement shall have the meanings given such terms as set forth in Appendix A attached to this Agreement.

ARTICLE II

PURCHASE AND SALE

Section 2.1 Agreement to Purchase and Sell. At the Closing, and subject to the terms and conditions of this Agreement, Purchaser agrees to purchase the Assets from Sellers, and Sellers agree to sell, transfer and assign the Assets to Purchaser, effective as of the Effective Time.

Section 2.2 The Assets. The term “Assets” shall mean all of such Seller’s right, title and interest in and to the following, less and except for the Excluded Assets:

As to EMC:

(a) the oil and gas leases described in Exhibit A-1, and all rights incident thereto and derived therefrom, including overriding royalty interests, net profits interests, and other revenue interests therein, to the extent and only to the extent relating to such lands described in Exhibit A-1 (the “Leases”);

(b) the real property described in Exhibit A-1 (the “LFC Property”);

(c) all wellbores attributable to the Leases and the LFC Property, both abandoned and unabandoned, including oil wells, gas wells, injection wells, disposal wells, and water wells, including, without limitation, wells drilled from the Leases, or Units conveyed pursuant to this Agreement that cross or bottomhole on leases not conveyed under this Agreement (including, but not limited to, the wells listed on Exhibit A-1, the “Wells”);

(d) all rights and interests in, under or derived from all unitization or pooling agreements in effect with respect to any of the Leases or the Wells and the units created thereby (the “Units”);

(e) all Rights-of-Way that are used or held for use in connection with the ownership or operation of any of the Leases, the LFC Property, the Wells, the Units or other Assets, including the Rights-of-Way set forth in Exhibit B;

(f) all platforms, facilities, equipment, machinery, structures and other improvements, storage tanks, fixtures and other real, personal and mixed property, operational and nonoperational, known or unknown, located on any of the Leases, the LFC Property, the Wells, the Units or other Assets, including the inventory set forth on Schedule 3.2(f) and, platforms, pipelines, gathering systems, well equipment, casing, rods, tanks, boilers, tubing, pumps, motors, fixtures, machinery, compression equipment, flow lines, pipelines, processing and separation facilities, structures, spars, materials and other items, including any of the forgoing described on Exhibit A-1 (collectively the “Facilities”);

(g) all Permits that are used in connection with the ownership or operation of the Assets (except for such Permits as set forth on Schedule 2.3(q), which pursuant to their terms may not be assigned (the “Excluded Permits”));

(h) to the extent they may be assigned without the payment of any fee or obligation on the assignor, the Existing Contracts;

(i) all Hydrocarbons attributable to the Leases, the LFC Property, the Wells and/or the Units to the extent such Hydrocarbons were produced from and after the Effective Time (subject to the Purchase Price adjustments set forth herein and all Imbalances relating to the Assets as of the Effective Time);

(j) information technology as detailed in Exhibit Q;

(k) the Records;

(l) all geophysical and other seismic data relating to the Assets as detailed on Schedule 12.3(a);

(m) those motorized vehicles listed on Schedule 2.2(m); and

(n) the POPCO Shares; and

As to MPPC, the PPC Shares.

Section 2.3 Excluded Assets. Notwithstanding anything to the contrary in this Agreement, the following are specifically excluded from the Assets and are reserved by each Seller (collectively, “Excluded Assets”):

(a) all of Seller’s corporate minute books, financial records and other business records that relate to Seller’s business generally (including the ownership and operation of the Assets);

(b) all accounts, trade credits, accounts receivable, and all other proceeds, income or revenues attributable to the Assets with respect to any period of time prior to the Effective Time;

(c) all claims and causes of action, manufacturer’s and contractor’s warranties and other rights of Seller arising under or with respect to any Existing Contracts that are attributable to periods of time prior to the Effective Time (including claims for adjustments or refunds), except to the extent any of the foregoing relates to any of the Assumed Obligations;

 

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(d) all rights and interests of Seller (i) under any policy or agreement of insurance or (ii) to any insurance or condemnation proceeds or awards arising, in each case, to the extent not related to the Assumed Obligations;

(e) all Hydrocarbons produced and sold from the Assets with respect to all periods prior to the Effective Time;

(f) any claim, right or interest of Seller in or to any refunds or loss carry forwards, together with any interest due thereon or penalty rebate arising therefrom, with respect to (i) any and all Taxes based on net income imposed on Seller or any of its Affiliates, (ii) any Property Taxes allocable to Seller pursuant to Section 13.1 or (iii) any Property Taxes attributable to the Excluded Assets;

(g) all documents and instruments of Seller that may be protected by an attorney-client or other privilege;

(h) all data that cannot be disclosed to Purchaser as a result of confidentiality arrangements under agreements with third parties (provided that Seller has used its commercially reasonable efforts to cause such confidentiality restrictions to be waived);

(i) all audit rights arising under any of the Existing Contracts or otherwise with respect to any period prior to the Effective Time or to any of the Excluded Assets, except with respect to any Imbalances;

(j) all geophysical and other seismic and related technical data and information relating to the Assets that cannot be transferred due to restrictions with third parties without payment of a fee or other penalty (unless Purchaser agrees to, and does, pay such fees and penalties), and geophysical or geological interpretations that Seller reasonably deems to be proprietary;

(k) any and all escrow accounts or bonds filed with or delivered or payable to any governmental authority or other third party by or on behalf of Seller or any of its Affiliates and any letters of credit, certificates of deposit, guarantees or similar security instruments on behalf of Seller or any of its Affiliates set forth on Schedule 2.3(k) (the “Scheduled Bonds”);

(l) any master service agreements, blanket agreements or similar contracts and any ExxonMobil inter-Affiliate service agreements;

(m) overhead paid or payable by third parties to Seller or its Affiliates in connection with the operation of the Assets and related properties prior to the Effective Time;

(n) any ExxonMobil intellectual property or proprietary technology, except for such rights granted to Purchaser as set forth in the Facility Licensing Agreement;

(o) any information technology or information technology applications, except as expressly set forth on Exhibit Q;

(p) any Intercompany Balances which are not settled, paid or forgiven by Seller in accordance with Section 3.5;

(q) the Excluded Permits;

(r) employee records (other than records related to Employees who commence employment with Purchaser that are required to be transferred pursuant to applicable Law, if any);

(s) all Seller Benefit Plans and the assets thereof;

(t) all motorized vehicles, other than those listed on Schedule 2.2(m); and

(u) any claim, right or interest of Seller or its Affiliates in or to the matters listed on Schedule 2.3(u).

 

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Section 2.4 Effective Time; Property Expenses and Revenues. Subject to the terms hereof, ownership and possession of the Assets shall be transferred from each Seller to Purchaser at the Closing but shall be effective as of the Effective Time. Except to the extent accounted for in the Adjustments to the Purchase Price made under Section 3.2 or Section 3.3 and without duplication of any such amounts: (a) Seller shall remain entitled to all of the rights of ownership (including the right to all production, proceeds of production and other proceeds) and shall remain responsible for all Property Expenses (in each case) attributable to the Assets for the period of time prior to the Effective Time; and (b) from and after the occurrence of Closing, Purchaser shall be entitled to all of the rights of ownership (including the right to all production, proceeds of production and other proceeds) and shall be responsible for all Property Expenses (in each case) attributable to the Assets for the period of time from and after the Effective Time. Should Purchaser receive after Closing any income, proceeds revenue or other amounts to which Seller is entitled under subpart (a) of this Section 2.4, Purchaser shall fully disclose, account for and promptly remit the same to Seller. If, after Closing, Seller receives any income, proceeds revenue or other amounts with respect to the Assets to which Seller is not entitled to pursuant to subpart (b) of this Section 2.4, Seller shall fully disclose, account for, and promptly remit the same to Purchaser.

 

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ARTICLE III

PURCHASE PRICE

Section 3.1 Purchase Price. The purchase price for the Assets shall be Six Hundred and Twenty Five Million Dollars ($625,000,000) (the “Purchase Price”). The Purchase Price (i) shall be paid as provided in Section 3.4, (ii) shall bear Interest compounded annually up to (and including) the Actual Payment Date as provided in Section 3.4 of this Agreement and as further provided in the Senior Secured Term Loan Agreement and (iii) shall be guaranteed and secured by the Collateral Documents. The Purchase Price shall be allocated among the Assets as set forth in Exhibit C (the “Allocated Values”).

Section 3.2 Upward Settlement Adjustments. The Purchase Price shall be adjusted upward as follows (without duplication):

(a) the amount of all Property Expenses paid or payable by Seller that are attributable to the Assets and which were incurred on and after the Effective Time and all prepaid Property Expenses allocable to periods from and after the Effective Time which were paid by Seller;

(b) an amount equal to the value of (i) all Hydrocarbons attributable to the Assets in pipelines, in tanks or otherwise in storage (including inventory) above the pipeline sales connection as of the Effective Time, plus (ii) line fill, in each case, such value to be based upon the contract price in effect as of the Effective Time (or if no such contract is in effect, the market value in the area as of the Effective Time), less applicable Taxes and gravity adjustments;

(c) the amount of any Property Taxes prorated to Purchaser under Section 13.1, but paid or payable by Seller;

(d) an amount equal to the aggregate volume owed to Seller for each of the Imbalances set forth on Schedule 3.2(d), multiplied by the applicable dollar amount set forth on Schedule 3.2(d) for such Imbalances;

(e) Overhead Costs attributable to the period from the Effective Time to the Closing (pro-rated on a daily basis for any partial months);

(f) an amount equal to the value of the materials and supply inventory set forth in Schedule 3.2(f), which is unsold as of the Closing;

(g) an amount equal to the value of all Title Benefits in accordance with Section 4.7;

(h) an amount equal to costs paid by Seller after the Effective Time and attributable to the plugging and abandonment of any well(s) or decommissioning of any facilities in accordance with Section 11.1(b);

(i) an additional Seventy-Five Million Dollars ($75,000,000.00) if, on or prior to the Closing Date, (i) Seller has filed an AB 864 plan with the California Office of the State Fire Marshal (OFSM) and such plan has been approved by the OSFM, and (ii) such OSFM approval is not subject, in material part, to further appeal or reconsideration, or the time period for further appeal or reconsideration, as to the material part of the decision, has expired; and

(j) any other upward adjustment agreed upon by Seller and Purchaser in a separate written agreement.

Section 3.3 Downward Settlement Adjustments. The Purchase Price shall be adjusted downward as follows (without duplication):

(a) the amount of all proceeds and revenues received by Seller, if any, from and after the Effective Time up to the Closing that are attributable to the Assets from and after the Effective Time (net of any royalties, overriding royalties, marketing and transportation or other post-production, severance, sales, income or other similar Taxes not reimbursed to Sellers by the purchaser of production, and excluding proceeds from the sale of materials and supply inventory);

 

5

(b) an amount equal to the Allocated Value of each of the Assets that have been excluded from the transactions contemplated by this Agreement pursuant to Section 4.8, Section 4.9(b) or Section 4.11(a);

(c) subject to Section 4.6, if Seller makes the election under Section 4.4(b) with respect to any Title Defect, the Title Defect Amount with respect to such Title Defect;

(d) subject to Section 4.12, the Remediation Amount with respect to any such Environmental Defects determined in accordance with Section 4.11(b);

(e) the amount of all Property Taxes prorated to Seller in accordance with Section 13.1, but paid or payable by Purchaser;

(f) an amount equal to the aggregate volumes owed by Seller for each of the Imbalances set forth on Schedule 3.2(d), multiplied by the applicable dollar amount set forth on Schedule 3.2(d) for such Imbalances;

(g) an amount determined in accordance with Section 4.13 with respect to the sum of all Casualty Loss Amounts; and

(h) any other downward adjustment provided for in this Agreement or otherwise agreed upon by Seller and Purchaser in a separate written agreement.

Section 3.4 Payment of the Purchase Price. The Purchase Price, the adjustments described in Section 3.2 and Section 3.3 above (the “Adjustments to the Purchase Price”), and accrued Interest shall be paid as follows:

(a) At Closing, Purchaser shall pay to Sellers, by wire transfer of immediately available funds to an account designated by Sellers, the Down Payment, which Down Payment shall not bear Interest;

(b) At Closing, Purchaser shall execute and deliver the Collateral Documents to Sellers. The Senior Secured Term Loan Agreement shall provide that Purchaser shall pay to Sellers, on or before the Payment Due Date, an amount (the “Principal Amount”) equal to the Purchase Price, less the Down Payment, plus the amounts specified in Section 3.2(f) and Section 3.2(i) (if applicable). Notwithstanding the foregoing, Purchaser may pre-pay the Principal Amount, in whole or in part, at any time prior to the Payment Due Date without penalty as provided in the Senior Secured Term Loan Agreement;

(c) The Senior Secured Term Loan Agreement shall also provide that (i) Interest shall accrue and be payable on the Principal Amount from the Effective Time up to (and including) the Actual Payment Date and (ii) in the event that Purchaser fails to pay the Principal Amount and accrued Interest as and when due, Purchaser shall pay default interest from and after the default date at the rate of an additional two percent (2%) per month until the total amount due is paid in full, in each case, as provided for in the Senior Secured Term Loan Agreement; and

(d) At Closing, Sellers shall provide a Preliminary Settlement Statement reflecting Adjustments to the Purchase Price. All Adjustments to the Purchase Price except for Section 3.2(f) and Section 3.2(i) shall be settled in cash at Closing between the Parties, as provided in Section 10.2, and subject to final adjustments as provided in Section 12.1. All payments from either Purchaser or Sellers shall be by bank wire transfer of immediately available funds to an account designated by the other Party in the Preliminary Settlement Statement or in another written notice delivered at five (5) Business Days before such payment is due.

Section 3.5 Intercompany Balances. On or before Closing, Sellers shall settle, pay, forgive, or otherwise release all amounts due comprising the Intercompany Balances. For the avoidance of doubt, such transactions are excluded from all Adjustments to the Purchase Price. The Intercompany Balances as of the Effective Time are set forth in Schedule 3.5.

 

6

ARTICLE IV

TITLE AND ENVIRONMENTAL MATTERS

AND CASUALTY LOSSES

Section 4.1 Title Examination. Subject to the indemnity provisions of Section 7.5 and subject to obtaining any consents or waivers from third parties that are required pursuant to the terms of the Leases, Rights-of-Way and/or Existing Contracts (including any restrictions therein related to access during hunting seasons), including any third party operators of the Assets (which, in each case, from and after the Execution Date until the Closing, Seller shall use commercially reasonable efforts to obtain), during Seller’s normal business hours and without unreasonable disruption of Seller’s normal and usual operations, Seller shall make available to Purchaser electronically (to the extent available electronically) or otherwise at Seller’s offices, all Records (including title data) in Seller’s or its Affiliates’ possession relating to the Assets, including title opinions, abstracts of title, title status reports, division order files, and curative matters, lease files, well files, contract files, the Existing Contracts, and records relating to the payment of rentals, royalties, overriding royalties, shut-in gas royalties, and other payments due under any Lease or Existing Contract; provided, however, that those items referenced above in this Section 4.1 that are subject to a valid legal privilege or to unwaived disclosure restrictions shall be excluded (provided Seller uses commercially reasonable efforts to obtain waivers of such disclosure restrictions). Purchaser shall be permitted, at its expense, to make copies of any of such Records and other documents. Purchaser shall be entitled to perform or cause to be performed, at Purchaser’s expense, such additional title examination as Purchaser deems necessary or appropriate.

Section 4.2 Seller’s Title.

(a) General Disclaimer of Title Warranties and Representations. Without limiting Purchaser’s remedies for Title Defects set forth in this ARTICLE IV, or Seller’s special warranty of Defensible Title in Section 4.2(b) and in the Assignment and the Deed, and subject to Section 5.11 with respect to the Transferred Shares only, Seller makes no warranty or representation, express, implied, statutory or otherwise, with respect to title to any of the Assets and, Purchaser acknowledges and agrees that Purchaser’s sole remedy for any defect of title, including any Title Defect, with respect to any of the Assets (i) before Closing, shall be as set forth in Section 4.4 and (ii) after Closing, shall be pursuant to the special warranty of Defensible Title to the Scheduled Properties contained in the Assignment and Deed in accordance with Section 4.2(b), subject to the provisions of Section 4.2(c), and Purchaser waives all other remedies.

(b) Special Warranty of Defensible Title. Upon Closing, subject to Section 4.2(c), Seller hereby warrants and agrees to defend Defensible Title to the Scheduled Properties by, through or under Seller, but not otherwise, subject, however, to the Permitted Encumbrances. Such special warranty of Defensible Title to the Scheduled Properties shall be subject to the further limitations and provisions of Section 4.2(c).

(c) Recovery on Special Warranty.

(i) Purchaser’s Assertion of Title Warranty Breaches. Purchaser shall furnish Seller a Title Defect Notice meeting the requirements of Section 4.3 setting forth any matters which Purchaser intends to assert as a breach of the special warranty of Defensible Title to the Scheduled Properties contained in Section 4.2(b). Seller shall have a reasonable opportunity, but not the obligation, to cure any Title Defect asserted by Purchaser pursuant to this Section 4.2(c). Purchaser agrees to reasonably cooperate with any attempt by Seller to cure any such breach of the special warranty of Defensible Title.

(ii) Limitations on Special Warranty. For purposes of the special warranty of Defensible Title to the Scheduled Properties contained in Section 4.2(b), the value of the Assets set forth in Exhibit C shall be deemed to be the Allocated Value thereof, as adjusted pursuant to this Agreement. Recovery on the special warranty of Defensible Title to the Scheduled Properties contained in Section 4.2(b)

 

7

shall be limited to an amount (without any interest accruing thereon) equal to the reduction in the Purchase Price to which Purchaser would have been entitled had Purchaser asserted the Title Defect giving rise to such breach of the special warranty of Defensible Title, as a Title Defect prior to Closing pursuant to Section 4.3.

(iii) Purchaser shall not be entitled to protection under Seller’s special warranty of Defensible Title to the Scheduled Properties in Section 4.2(b), with respect to (A) any matter of which Purchaser or any of its Affiliates had Knowledge prior to the Defect Notice Date, or (B) any matter reported to Seller after the two (2) year anniversary of the Closing Date.

Section 4.3 Notice of Title Defects. Purchaser shall notify Seller in writing of any Title Defect (each a “Title Defect Notice”) on or before forty-five (45) days following the Execution Date (“Defect Notice Date”). For all purposes of this Agreement and notwithstanding anything herein to the contrary (except for the special warranty of Defensible Title to the Scheduled Properties contained in Section 4.2(b) and in the Assignment and the Deed), Purchaser shall be deemed to have waived, and Seller shall have no liability for, any Title Defect that Purchaser fails to assert as a Title Defect by a Title Defect Notice received by Seller on or before the Defect Notice Date. To be effective, each Title Defect Notice shall include (a) a reasonably detailed description of the alleged Title Defect, (b) the Scheduled Property affected by such Title Defect (each a “Title Defect Property”), (c) the Allocated Value of each such Title Defect Property, (d) supporting documents reasonably necessary for Seller to verify the existence of the alleged Title Defect, and (e) the amount by which Purchaser reasonably believes the Allocated Value of such Title Defect Property is reduced by the alleged Title Defect. Seller shall have the right, but not the obligation, to elect to attempt to cure any Title Defect set forth in a Title Defect Notice by written notice to Purchaser prior to Closing and, if Seller so elects, then Seller shall have ninety (90) days following Closing in which to cure (the “Cure Period”), at Seller’s cost, the Title Defect. No adjustment to the Purchase Price will be made at Closing for any Title Defect that Seller elects to attempt to cure pursuant to this Section 4.3 and the affected Scheduled Property shall be assigned to Purchaser. If any such uncured Title Defect remains uncured at the end of the Cure Period, then (except as provided in Section 4.4(a)) an adjustment to the Purchase Price in an amount equal to the applicable Title Defect Amount will be made as part of the Final Settlement Statement. To give Seller an opportunity to commence reviewing and curing Title Defects, Purchaser shall use its reasonable efforts to give Seller weekly written notice of all Title Defects discovered by Purchaser (together with any Title Benefits discovered by Purchaser). Any dispute relating to the existence, nature, Title Defect Amount, or whether or to what extent a Title Defect has been cured shall be resolved pursuant to Section 17.5.

Section 4.4 Remedies for Title Defects. Subject to Seller’s continuing right to dispute the existence of a Title Defect and/or the Title Defect Amount asserted with respect thereto and subject to the Individual Title Defect Threshold and the Aggregate Title Defect Deductible, with respect to any Title Defect that (i) Seller does not elect to attempt to cure or (ii) Seller elects to attempt to cure and Seller fails to cure such Title Defect within the Cure Period:

(a) if such Title Defect is not of a nature that would prevent Purchaser from receiving the full Net Revenue Interest share of proceeds of production for a particular Scheduled Property as such interest is set forth on Exhibit A-2, Seller shall have the right, but not the obligation, to elect to indemnify Purchaser against all Losses resulting from such Title Defect pursuant to an indemnity agreement in a form mutually agreeable to the Parties, in which event the Purchase Price shall not be reduced and the affected Title Defect Property shall be transferred to (or if after Closing, retained by) Purchaser notwithstanding and subject to such Title Defect; or

(b) if Section 4.4(a) above is not applicable, the affected Title Defect Property shall be transferred to (or if after Closing, retained by) Purchaser notwithstanding and subject to the Title Defect and the Purchase Price shall be reduced by the Title Defect Amount of such Title Defect Property as determined in accordance with Section 4.5 below.

Except for Purchaser’s (i) rights under the special warranty of Defensible Title to the Scheduled Properties contained in Section 4.2(b) and in the Assignment and the Deed and (ii) rights to terminate this Agreement

 

8

pursuant to Section 15.1(d), the provisions set forth in this Section 4.4 shall be the sole and exclusive right and remedy of Purchaser with respect to any Title Defect or any other title matter with respect to any Asset and Purchaser hereby waives all other rights and remedies for Title Defects.

Section 4.5 Title Defect Amounts. Subject to the other provisions of this ARTICLE IV, the amount by which the Purchase Price may be adjusted due to the existence of a Title Defect shall be the “Title Defect Amount” and shall be determined in accordance with the following:

(a) if the Title Defect results in complete failure of title to a Title Defect Property with the effect that Seller has no ownership interest in that Title Defect Property to which an individual Allocated Value is assigned, then the Purchase Price shall be decreased by the Allocated Value for that Title Defect Property;

(b) if the Title Defect is a decrease in Seller’s Net Revenue Interest in a Title Defect Property from the Net Revenue Interest set forth in Exhibit A-2 for such Title Defect Property, and for which there is not a corresponding change in Seller’s Working Interest for such Title Defect Property, then the Title Defect Amount shall be equal to the product of the Allocated Value of that Title Defect Property multiplied by a fraction, the numerator of which is the amount of Net Revenue Interest set forth in Exhibit A-2 for that Title Defect Property, less the actual amount of Seller’s Net Revenue Interest for such Title Defect Property and the denominator of which is the Net Revenue Interest set forth in Exhibit A-2, as applicable, for that Title Defect Property;

(c) if the Title Defect is a lien, Encumbrance or other charge on the Assets that is undisputed and liquidated in amount, then the Title Defect Amount shall be the amount necessary to be paid to remove the Title Defect (but never more than the Allocated Value of the affected Title Defect Property);

(d) if Purchaser and Seller agree on the Title Defect Amount, then that amount shall be the Title Defect Amount;

(e) if the Title Defect represents an obligation, Encumbrance upon or other defect in title to the Title Defect Property of a type not described above, then the Title Defect Amount shall be determined by taking into account the Allocated Value of the Title Defect Property, the portion of the Title Defect Property affected by the Title Defect, the legal effect of the Title Defect, the potential economic effect of the Title Defect over the life of the Title Defect Property, the values placed upon the Title Defect by Purchaser and Seller and such other reasonable factors as are necessary to make a proper evaluation; provided, however, that if such Title Defect is reasonably capable of being cured, then the Title Defect Amount shall not be greater than the reasonable cost and expense of curing such Title Defect;

(f) the Title Defect Amount with respect to a Title Defect Property shall be determined without duplication of any costs or Losses included in another Title Defect Amount hereunder;

(g) if a Title Defect does not affect a Title Defect Property throughout the entire remaining productive life of such Title Defect Property, such fact shall be taken into account in determining the Title Defect Amount; and

(h) notwithstanding anything to the contrary herein, the aggregate Title Defect Amounts attributable to the effects of all Title Defects upon any single Title Defect Property shall not exceed the Allocated Value of such Title Defect Property.

Section 4.6 Title Limitations. Notwithstanding anything to the contrary, (a) in no event shall there be any adjustments to the Purchase Price or other remedies provided by Seller pursuant to this ARTICLE IV for any individual Title Defect for which the Title Defect Amount does not exceed Two Million Dollars ($2,000,000) (the “Individual Title Defect Threshold”); and (b) in no event shall there be any adjustments to the Purchase Price or other remedies provided by Seller pursuant to this ARTICLE IV for any Title Defect that exceeds the Individual Title Defect Threshold unless the sum of the Title Defect Amounts of all such Title Defects that exceed the Individual Title Defect Threshold (excluding any Title Defects cured by Seller) exceeds Ten Million

 

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Dollars ($10,000,000) (the “Aggregate Title Defect Deductible”), after which point Purchaser shall be entitled to adjustments to the Purchase Price or other remedies only with respect to such Title Defects in excess of such Aggregate Title Defect Deductible. For the avoidance of doubt, if Seller elects to indemnify Purchaser with respect to any Title Defect pursuant to the remedy set forth in Section 4.4(a), then, after such election, the Title Defect Amount relating to such Assets for which Seller has provided an indemnity to Purchaser will not be counted towards the Aggregate Title Defect Deductible or for purposes of Section 8.4 and Section 9.4.

Section 4.7 Title Benefits. If Seller’s ownership of any Scheduled Property entitles Seller to a larger Net Revenue Interest (without a greater than proportionate increase in Seller’s Working Interest in such Scheduled Property) or a smaller Working Interest (without causing a proportionate or greater than proportionate decrease in Seller’s Net Revenue Interest in such Scheduled Property) than that set forth on Exhibit A-2, (a “Title Benefit”), then Seller shall notify Purchaser of such alleged Title Benefit in writing on or before the Defect Notice Date, describing in such notice with reasonable detail each alleged Title Benefit so discovered, a reasonable estimate of the value attributable to the applicable Title Benefit, and providing the other types of information described in subsections (b) through (e) of Section 4.3 with respect to such alleged Title Benefit mutatis mutandis. Purchaser shall also promptly furnish Seller with written notice of any Title Benefit that is discovered prior to the Defect Notice Date by any of Purchaser’s or any of its Affiliate’s employees, title attorneys, landmen or other title examiners while conducting Purchaser’s due diligence with respect to the Assets. The amount of any such Title Benefit (each, a “Title Benefit Amount”), shall be determined in the same manner as provided in Section 4.5 with respect to Title Defects, in each case taking into account the Individual Title Defect Threshold (but not the Aggregate Title Defect Deductible). From and after Closing, Seller shall be deemed to have waived, and neither Party shall have any Losses for, any Title Benefit that has not been asserted pursuant to the provisions of this Section 4.7. Any dispute relating to the existence, nature, or Title Benefit Amount shall be resolved pursuant to Section 17.5.

Section 4.8 Consents to Assign.

(a) If the Parties are unable to obtain all Required Consents prior to Closing (other than Customary Post-Closing Consents), then Seller may, by written notice to Purchaser, elect to either:

(i) delay Closing as to any or all of the Assets, with no charge to either Party for the delay;

(ii) with Purchaser’s written consent, close without such Required Consents (except for those consents required under the HSR Act);

(iii) with Purchaser’s written consent, remove the affected Assets from this Agreement and adjust the Purchase Price by the Allocated Value of that Asset.

(b) If, prior to Closing, the Parties fail to obtain a consent to assign and such consent to assign is not a Required Consent, then the Assets subject to such un-obtained consent shall be assigned by Seller to Purchaser at Closing as part of the Assets and Purchaser shall have no claim against Seller. Purchaser hereby releases and indemnifies the Seller Group from any Losses relating to the failure to obtain such consent, and Purchaser shall be solely responsible for any and all Losses arising from the failure to obtain such consent.

Section 4.9 Environmental Assessment.

(a) Prior to the Defect Notice Date, and upon reasonable prior notice to Seller (and notice and consent of the operator(s) of any of the Assets not operated by Seller or its Affiliates, which consent, from and after the Execution Date, Seller shall use commercially reasonable efforts to obtain), and subject to the other provisions of this Section 4.9 and the indemnity provisions of Section 7.5 below, Purchaser and Purchaser’s Representatives shall have the right to enter upon the Assets, inspect the same and conduct such non-intrusive tests, examinations, investigations and studies as may be necessary or appropriate to assess the environmental condition of the Assets, provided that such access does not unreasonably interfere with the ownership or operation of the Assets (“Purchaser’s

 

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Environmental Assessment”). Any such entry onto the Assets is subject to all third-party restrictions, if any, and to Seller’s safety, health and environmental policies and procedures of which Purchaser has received written copies reasonably in advance of such entry onto the Assets, including drug, alcohol and firearms restrictions, and shall be at Purchaser’s sole risk and expense. Purchaser shall coordinate its access rights, environmental property assessments and physical inspections of the Assets with Seller and all third party operators, as applicable, to minimize any unreasonable inconvenience to or interruption of the conduct of business by Seller or any such third party operator.

(b) Except as expressly provided in this Section 4.9, Purchaser’s Environmental Assessment shall be limited to conducting a Phase I Environmental Site Assessment in accordance with the American Society for Testing and Materials (A.S.T.M.) Standard Practice E1527 – 13 for Environmental Site Assessments: Phase I Environmental Site Assessment Process and a review of compliance with Environmental Laws (each, a “Site Assessment”). In the event that Purchaser’s Site Assessment identifies actual “recognized environmental conditions” with respect to any such Scheduled Property, then Purchaser may request in writing Seller’s permission to conduct Phase II Environmental Assessments to further assess such conditions (each a “Phase II Request”). Each Phase II Request will state with reasonable specificity (i) the actual “recognized environmental condition(s)” identified, (ii) the proposed scope of the Phase II Environmental Assessment and Phase II Environmental Assessment plan, including a description of the activities to be conducted, and a description of the approximate location and expected timing of such activities; and (iii) the Asset (or portion thereof) affected by actual the “recognized environmental condition(s).” Seller may, in its sole discretion, approve said Phase II Environmental Assessment plan, in whole or in part, and Purchaser shall not have the right to conduct any activities set forth in such Phase II Environmental Assessment plan until such time that Seller has approved such plan in writing or has otherwise provided permission in writing to Purchaser. If said Phase II Request is consented to by Seller, Seller shall have the right to have its representatives witness all on-site activities set forth in the applicable Phase II Environmental Assessment plan and split any samples collected in connection therewith. If prior to the Defect Notice Date, Seller does not provide its full consent to any Phase II Request delivered in accordance with the above terms within ten (10) Business Days of Purchaser’s delivery of the applicable Phase II Request, Purchaser may elect to submit the actual “recognized environmental condition(s)” identified in the Site Assessment as the basis of an Environmental Defect pursuant to Section 4.10. Seller may, in its sole discretion, elect to accept the actual “recognized environmental conditions” identified in the Site Assessment as an Environmental Defect pursuant to Section 4.10 or terminate this Agreement. Any Site Assessment and/or Phase II Environmental Assessment will be (1) at Purchaser’s sole cost and expense; (2) performed by a qualified engineering professional and/or drilling contractor appropriately licensed and experienced in such work; (3) pre-approved by Seller; and (4) subject to all site safety and safe drilling protocols required by Seller.

(c) In conducting any assessment or inspection of the Assets, Purchaser shall not operate any equipment or (except with the prior written consent of Seller, which consent may be withheld in Seller’s sole discretion, and any third party operator’s consent) conduct any testing or sampling of soil, groundwater or other materials (including any testing or sampling for hazardous substances or NORM) that are outside the scope of any Phase II Environmental Assessment plan approved by Seller. If, subject to the terms of this Section 4.9, Purchaser takes samples then Seller shall have the right to require a splitting of each such sample for Seller’s own testing.

(d) Seller or Seller’s designee shall have the right to be present during any stage of any inspection or assessment by Purchaser on the Assets. All visits to the Assets on Purchaser’s behalf will be scheduled during normal business hours, subject to Purchaser providing Seller at least five (5) Business Days’ written notice of the locations that it wishes to visit and the proposed times and further subject to Seller’s right to delay such visit for safety or operational reasons. Entry onto the Assets and facilities will be subject to third-party restrictions, if any, and to Seller’s safety, security, industrial hygiene, and drug and alcohol requirements and at Purchaser’s sole risk and expense. Each representative of

 

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Purchaser shall, if requested by Seller, execute Seller’s standard-form release and waiver for individuals visiting Assets sites; provided, however that any release and waiver shall be subject to Section 7.5 of this Agreement.

(e) During all periods prior to Closing that Purchaser or Purchaser’s Representatives (including Purchaser’s environmental consulting or engineering firm) are on the Assets, Purchaser shall maintain, at its sole cost and expense, and with insurers reasonably satisfactory to Seller, policies of insurance of the types and in the amounts reasonably requested by Seller. Coverage under all insurance required to be carried by Purchaser hereunder will be primary insurance. Upon request by Seller, Purchaser shall provide evidence of such insurance to Seller prior to entering the Assets.

(f) Within five (5) Business Days of Purchaser’s receipt (if performed by a third party) or completion thereof (if performed by Purchaser), Purchaser shall deliver to Seller copies of all draft reports, results, data and analyses of Purchaser’s Environmental Assessment. Seller shall have no confidentiality obligation with regard to such information so provided and Seller shall not be deemed (by Seller’s receipt of said documents or otherwise) to have made any representation or warranty, express, implied or statutory, as to the condition of the Assets or to the accuracy of said documents or the information contained therein.

(g) Upon completion of Purchaser’s due diligence, Purchaser shall at its sole cost and expense and without any cost or expense to Seller or its Affiliates, (i) repair all damage done to the Assets (including the real property and other assets associated therewith) resulting from Purchaser’s due diligence investigation in order to restore the Assets (including the real property and other assets associated therewith) to at least the approximate same condition than they were prior to commencement of Purchaser’s due diligence investigation, and (ii) remove all equipment, tools or other property brought onto the Assets in connection with such due diligence investigation. Any disturbance to the Assets (including the real property and other assets associated therewith) resulting from the due diligence investigation conducted by or on behalf of Purchaser will be promptly corrected by Purchaser.

Section 4.10 Environmental Defect Notice. If Purchaser determines, as a result of Purchaser’s Environmental Assessment or otherwise that there exists an Environmental Defect, Purchaser shall notify Seller thereof in writing as soon as practicable after Purchaser has Knowledge thereof, but in any event prior to the Defect Notice Date (each an “Environmental Defect Notice”). Without limiting Purchaser’s rights to terminate this Agreement pursuant to Section 15.1(d), for all purposes of this Agreement and notwithstanding anything herein to the contrary, Purchaser shall be deemed to have waived, and Seller shall have no liability for, any Environmental Defect that Purchaser fails to assert as an Environmental Defect by an Environmental Defect Notice received by Seller on or before the Defect Notice Date. To be effective, each Environmental Defect Notice shall include: (a) a detailed description of the alleged Environmental Defect, (b) the Well or other Asset affected by such Environmental Defect (each an “Environmental Defect Property”), (c) the Allocated Value of such Environmental Defect Property, (d) supporting documents reasonably necessary for Seller to verify the existence of the asserted Environmental Defect, (e) the specific Environmental Law that is applicable to the Environmental Defect and the violation of such Environmental Law, (f) Purchaser’s good faith estimate of the Remediation Amount, and (g) a description the Remediation of the alleged Environmental Defect anticipated by Purchaser. Purchaser’s calculation of the Remediation Amount included in the Environmental Defect Notice for any alleged Environmental Defect must describe in reasonable detail the Remediation proposed for such Environmental Defect and identify all assumptions used by Purchaser in calculating the Remediation Amount with respect thereto, including any standards that Purchaser asserts must be met to comply with Environmental Laws. Seller shall have the right but not the obligation to attempt to Remediate any Environmental Defect Property and, if Seller so elects, then Seller shall have until the end of the Cure Period to Remediate, at Seller’s cost, the Environmental Defect. No adjustment to the Purchase Price will be made at Closing for any Environmental Defect that Seller elects to Remediate pursuant to this Section 4.10 and such affected Environmental Defect Property shall be assigned to Purchaser. If such Environmental Defect Property has not

 

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been Remediated at the end of the Cure Period, then an adjustment to the Purchase Price in an amount equal to the applicable Remediation Amount will be made as part of the Final Settlement Statement. Any dispute relating to the existence, nature, Remediation Amount, or whether and to what extent an Environmental Defect has been Remediated shall be resolved pursuant to Section 17.5.

Section 4.11 Remedies for Environmental Defects. Subject to Seller’s continuing right to dispute the existence of an Environmental Defect and/or the Remediation Amount asserted with respect thereto and subject to the Individual Environmental Defect Threshold and the Aggregate Environmental Defect Deductible, with respect to any Environmental Defect asserted by Purchaser that (i) Seller does not elect to attempt to Remediate or (ii) Seller elects to attempt to Remediate and fails to Remediate within the Cure Period:

(a) at or prior to the Closing, Seller shall have the right, but not the obligation, to elect to exclude the Asset subject to the Environmental Defect from the transactions contemplated hereby, in which event such Asset and all Assets directly relating thereto (but only to the extent relating thereto) shall be excluded from the transactions contemplated hereby and the Purchase Price shall be reduced by the Allocated Value of such Asset and related Assets; or

(b) if Section 4.11(a) above is not applicable, the affected Environmental Defect Property shall be transferred to (or if after Closing, retained by) Purchaser notwithstanding and subject to the Environmental Defect, and the Purchase Price shall be reduced by an amount equal to the Remediation Amount for the affected Environmental Defect Property.

Except for Purchaser’s rights to terminate this Agreement pursuant to Section 15.1(d), the provisions set forth in this Section 4.11 shall be the exclusive right and remedy of Purchaser with respect to any Environmental Defect or the environmental condition of any Asset and Purchaser hereby waives all other rights and remedies for Environmental Defects.

Section 4.12 Environmental Limitations. Notwithstanding anything to the contrary, (a) in no event shall there be any adjustments to the Purchase Price or other remedies provided by Seller pursuant to this ARTICLE IV for any individual Environmental Defect for which the Remediation Amount does not exceed Two Million Dollars ($2,000,000) (the “Individual Environmental Defect Threshold”); and (b) in no event shall there be any adjustments to the Purchase Price or other remedies provided by Seller pursuant to this ARTICLE IV for any Environmental Defect that exceeds the Individual Environmental Defect Threshold unless the sum of all Remediation Amounts of all Environmental Defects that exceed the Individual Environmental Defect Threshold (excluding any Environmental Defects Remediated by Seller) exceeds Ten Million Dollars ($10,000,000) (the “Aggregate Environmental Defect Deductible”), after which point Purchaser shall be entitled to adjustments to the Purchase Price or other remedies only with respect to such Environmental Defects in excess of such Aggregate Environmental Defect Deductible. For the avoidance of doubt, if Seller elects to exclude an Asset affected by an Environmental Defect from the transactions contemplated hereby pursuant to the remedy set forth in Section 4.11(a), then, after such election, the Remediation Amount for such Environmental Defect and related Purchase Price adjustment relating to such Excluded Assets to Purchaser will not be counted towards the Aggregate Environmental Defect Deductible but will be counted for purposes of Section 8.4 and Section 9.4.

Section 4.13 Casualty and Condemnation. If, after the Execution Date but prior to the Closing Date, any portion of the Assets is destroyed by fire, hurricanes, storms, winds, damage, or other severe weather events or other casualty, or is expropriated or taken in condemnation or under right of eminent domain (each, a “Casualty Loss”), the Parties shall, subject to the other terms and conditions of this Agreement, nevertheless proceed to Closing (unless otherwise provided in Section 8.4 or Section 9.4) and with respect to any such Casualty Loss in excess of Twenty Million Dollars ($20,000,000), the Purchase Price shall be reduced by the amount that the Parties agree (acting reasonably and in good faith, and if the Parties cannot agree, the amount finally determined by an independent arbitrator pursuant to Section 17.5) would be reasonably required to repair or replace the affected Assets to the condition of such Assets prior to the occurrence of such Casualty Loss;

 

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provided, however, that any reduction in Purchase Price attributable to a Casualty Loss to the 901/903 Assets and/or PPC Shares shall not exceed Eight Million Five Hundred Thirty Nine Thousand Three Hundred and Two Dollars ($8,539,302) (the “Casualty Loss Amount”). In each case, Seller shall retain all rights to insurance, condemnation awards and other claims against third parties with respect to such Casualty Loss.

 

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ARTICLE V

REPRESENTATIONS AND WARRANTIES OF SELLER

Each Seller represents and warrants to Purchaser as of the Execution Date and as of the Closing Date as follows (other than representations and warranties that refer to a specified date, which need only be true and correct on and as of such specified date), except that where a representation or warranty is expressly ascribed to EMC or MPPC (as the case may be), such representation and warranty shall only be made by EMC or MPPC, as indicated:

Section 5.1 Organization, Existence and Qualification. Seller is an entity duly formed and validly existing and in good standing and has all requisite power and authority to own and operate the Assets and to carry on its business with respect thereto as currently conducted. Seller is duly licensed or qualified to do business in all jurisdictions in which the Assets are located, except where the failure to be so qualified would not reasonably be expected to have a Material Adverse Effect.

Section 5.2 Authority, Approval and Enforceability. Seller has the power and authority to enter into and perform this Agreement and all Transaction Documents to be delivered at Closing by Seller and the transactions contemplated hereby and thereby. The execution, delivery and performance by Seller of this Agreement have been, and the Transaction Documents to which Seller is a party will be at Closing, duly and validly authorized and approved by all necessary action on the part of Seller. This Agreement is, and the Transaction Documents to which Seller is a party when executed and delivered by Seller will be, the valid and binding obligation of Seller and enforceable against Seller in accordance with their respective terms, subject to the effects of bankruptcy, insolvency, reorganization, moratorium and similar Laws, as well as to principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at Law).

Section 5.3 No Conflicts. Assuming the receipt of all applicable consents and approvals in connection with the transactions contemplated hereby, the execution, delivery and performance of this Agreement, and the Transaction Documents to be delivered by Seller at Closing, and the consummation by Seller of the transactions contemplated hereby and thereby, will not (a) violate any provision of the organizational documents of Seller, (b) violate, or result in the creation of any Encumbrance under, any material agreement or instrument to which Seller is a party or by which Seller or any of the Assets are bound, (c) violate any judgment, order, ruling, or decree applicable to Seller as a party in interest, or (d) violate any Law applicable to Seller relating to the Assets, except in the case of subsection (b), (c) or (d) where such violation would not reasonably be expected to have a Material Adverse Effect.

Section 5.4 Asset Taxes. To Seller’s Knowledge, except as set forth on Schedule 5.4, (a) all Tax Returns relating to or prepared in connection with material Asset Taxes that are required to be filed by Seller have been timely filed and all such Tax Returns prepared by the Seller are correct and complete in all material respects and, (b) all material Asset Taxes that are or have become due have been timely paid in full, and Seller is not delinquent in the payment of any such Asset Taxes, or, in either case, such Asset Taxes are currently being contested in good faith by Seller.

Section 5.5 Bankruptcy. There are no bankruptcy or receivership proceedings pending, being contemplated by or, to Seller’s Knowledge, threatened in writing against Seller.

Section 5.6 Foreign Person. Seller is not a “foreign person” within the meaning of Section 1445 of the Code.

Section 5.7 Brokers. Neither Seller nor any of its Affiliates has incurred any obligation or liability for brokers’ or finders’ fees relating to the transactions contemplated hereby for which Purchaser or any of its Affiliates will be liable or have any responsibility.

 

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Section 5.8 Litigation. Except as set forth in Schedule 5.8, there is no suit, action or litigation by or before any governmental authority, and no arbitration proceedings, (in each case) pending and served on Seller, or, to Seller’s Knowledge, threatened in writing, against Seller (in each case) with respect to the Assets.

Section 5.9 Payment of Royalties. To Seller’s Knowledge, Seller has in all material respects properly and timely paid, or caused to be paid, all royalties, overriding royalties, net profits interests, production payments and other similar burdens measured by or payable out of production of Hydrocarbons due with respect the Assets.

Section 5.10 Required Consents. Except as set forth on Schedule 5.10, there are no Required Consents which may be applicable to the sale of the Assets as contemplated by this Agreement.

Section 5.11 Transferred Shares.

(a) EMC represents and warrants with respect to POPCO:

(i) POPCO is a corporation duly formed, validly existing and in good standing under the Laws of the State of California. POPCO has all requisite power and authority to own and operate its property and to carry on its business with respect thereto. POPCO is duly licensed or qualified to do business in all jurisdictions in which it operates. The POPCO Shares constitute the whole of the allotted and issued share capital of POPCO and are duly authorized, validly issued, fully paid and nonassessable and free from all Encumbrances or commitments to create any Encumbrances (other than Permitted Encumbrances);

(ii) EMC is the sole legal and beneficial owner of the POPCO Shares and is entitled to transfer and assign full legal and beneficial ownership of the POPCO Shares on the terms set out in this Agreement, and no Person has the right to call for the allotment, conversion, issue, sale, or transfer of any share or loan capital, or any other security of any kind giving rise to a right over the capital of POPCO;

(iii) There is no action, suit, investigation, or proceeding pending against, or to the Knowledge of Seller, threatened against or affecting it, before any court, arbitrator, governmental authority, or governmental official, which in any manner challenges or seeks to prevent, enjoin, or materially delay the transaction contemplated by this Agreement;

(iv) The information regarding POPCO set forth in Exhibit A-3 is true and accurate in all material respects;

(v) The copies of the memorandum and articles of association of POPCO, which have been disclosed to Purchaser, are true, accurate, and complete in all material respects;

(vi) POPCO does not own, directly or indirectly, any equity of any corporation, partnership, limited liability company, association, or other entity;

(vii) The accounts of each of POPCO have been prepared in accordance with applicable Law and GAAP accounting standards as of the Effective Time and of its profit or loss for the period then-ended;

(viii) Since the Effective Time, POPCO has:

1) operated its business in the ordinary course and so as to maintain itself as a going concern;

2) not acquired, disposed of, or created any Encumbrances, other than Permitted Encumbrances, over, or agreed to acquire, dispose of, or create any Encumbrances, other than Permitted Encumbrances, over, any material asset, other than materials, supplies, spare parts, equipment, or other tangible property in the ordinary course of business;

 

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3) not entered into any Material Contracts or commitments, other than in the ordinary course of business; or

4) not incurred any Indebtedness that will remain outstanding following the Closing, other than Intercompany Balances to be addressed as provided in Section 3.5; and

(ix) POPCO does not currently have any employees. To Seller’s Knowledge, there are no employee benefit plans or arrangements of any type (including plans described in Section 3(3) of the Employee Retirement Income Security Act of 1974) under which POPCO has or in the future could have directly, or indirectly through a commonly controlled entity (within the meaning of Sections 414(b), (c), (m) and (o) of the Code), any liability with respect to POPCO or such commonly controlled entity’s current or former employees.

(b) MPPC represents and warrants with respect to PPC:

(i) PPC is a corporation duly formed, validly existing and in good standing under the Laws of the State of Delaware. PPC has all requisite power and authority to own and operate its property and to carry on its business with respect thereto. PPC is duly licensed or qualified to do business in all jurisdictions in which it operates. The PPC Shares constitute the whole of the allotted and issued share capital of PPC and are duly authorized, validly issued, fully paid and nonassessable and free from all Encumbrances or commitments to create any Encumbrances (other than Permitted Encumbrances);

(ii) MPPC is the sole legal and beneficial owner of the PPC Shares and is entitled to transfer and assign full legal and beneficial ownership of the PPC Shares on the terms set out in this Agreement, and no Person has the right to call for the allotment, conversion, issue, sale, or transfer of any share or loan capital, or any other security of any kind giving rise to a right over the capital of PPC;

(iii) The copies of the memorandum and articles of association of PPC, which have been disclosed to Purchaser, are true, accurate, and complete in all material respects;

(iv) The information regarding PPC set forth in Exhibit A-4 is true and accurate in all material respects;

(v) PPC does not own, directly or indirectly, any equity of any corporation, partnership, limited liability company, association, or other entity;

(vi) PPC does not currently have any employees. To Seller’s Knowledge, there are no employee benefit plans or arrangements of any type (including plans described in Section 3(3) of the Employee Retirement Income Security Act of 1974) under which PPC has or in the future could have directly, or indirectly through a commonly controlled entity (within the meaning of Sections 414(b), (c), (m) and (o) of the Code), any liability with respect to PPC or such commonly controlled entity’s current or former employees; and

(vii) Since the Effective Time, PPC has:

1) operated its business in the ordinary course and so as to maintain itself as a going concern; and

2) not incurred any Indebtedness that will remain outstanding following the Closing, other than Intercompany Balances to be addressed as provided in Section 3.5.

Section 5.12 Material Contracts.

(a) Schedule 5.12(a) contains a complete and accurate list of all Material Contracts.

(b) Except as set forth in Schedule 5.12(b), there exists no material default under any Material Contract by Seller or, to Seller’s Knowledge, by any other Person that is a party to such Material Contract, and no event has occurred that with notice or lapse of time or both would constitute any material default under any Material Contract by Seller or, to Seller’s Knowledge, any other Person who

 

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is a party to such Material Contract. The Material Contracts are, to Seller’s Knowledge, in full force and effect, and Seller has not given or received a written notice of any action to terminate, rescind, procure a judicial reformation of, or amend any of the Material Contracts in a manner materially adverse to Seller’s interests thereunder. Prior to the Execution Date, Seller has made available to Purchaser true, correct and complete copies of all Material Contracts (including any and all amendments thereto).

Section 5.13 Imbalances. Schedule 5.13 sets forth Imbalances associated with the Assets as of the dates set forth on such Schedule.

Section 5.14 Suspense Funds. Schedule 5.14 sets forth, as of the dates set forth on such Schedule, all funds held in suspense by Seller or its Affiliates that are attributable to the Assets.

Section 5.15 Current Commitments. Except as set forth on Schedule 5.15, as of the Execution Date, there are no outstanding AFEs or other commitments for capital expenditures which are binding on any of the Assets, the cost of which exceeds One Million Dollars ($1,000,000).

Section 5.16 Compliance with Laws. Except for matters with respect to Environmental Laws (which are addressed exclusively in Section 5.17) each of Seller and its Affiliates has complied and is in compliance, in all material respects, with any and all applicable Laws with respect to its ownership, use and operation of the Assets.

Section 5.17 Environmental Matters. To Seller’s Knowledge and except as set forth on Schedule 5.17:

(a) Seller is not subject to any order with any governmental authority based on any Environmental Law (which, for clarification, does not include any terms or conditions of any Permits) that relates to the current or future use of any of the Assets or that requires any change in the present condition of the Assets; and

(b) Seller has made available to Purchaser all written notices received by Seller from governmental authorities within the two (2) years preceding the Execution Date, and all material reports and studies in response to such governmental notices, in each case, specifically addressing environmental matters related to Seller’s ownership of the Assets and in Seller’s possession.

Section 5.18 Preferential Rights. There are no preferential purchase rights, rights of first refusal, or similar rights that are applicable to the transfer of the Assets in connection with the transactions contemplated in this Agreement.

Section 5.19 Leases. Except as set forth on Schedule 5.19, to Seller’s Knowledge, (a) there are no written requests or written notices or demands from BOEM or BSEE that have been received by Seller or any of its Affiliates alleging (i) that any payment required under the Leases has not been paid or Seller or any of its Affiliates has failed to perform any of its material obligations under any of the Leases and (ii) as a result thereof, the applicable Lease has terminated or is terminable, and (b) neither Seller nor any Affiliate of Seller has received from BOEM or BSEE any written notice stating (i) a basis to terminate, forfeit or unilaterally modify such Lease or (ii) that an event has occurred which constitutes (or with notice or lapse of time, or both, would constitute) a material breach under any Lease.

Section 5.20 Credit Support. Schedule 5.20 sets forth all bonds, guarantees, letters of credit, and other credit support posted, provided, or maintained by or on behalf of Seller, POPCO or PPC with respect to the Assets.

Notwithstanding the foregoing, to the extent that Seller has made any representations or warranties in this ARTICLE V in connection with matters relating to any Assets not operated by Seller, each and every such representation and warranty shall be deemed to be qualified by the phrase “To Seller’s Knowledge” to the extent such individual representations or warranties does not already contain such qualification.

 

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ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF PURCHASER

Purchaser represents and warrants to Seller as of the Execution Date and as of the Closing Date (other than representations and warranties that refer to a specified date, which need only be true and correct on and as of such specified date) as follows:

Section 6.1 Organization, Existence and Qualification. Purchaser is a corporation duly formed and validly existing under the Laws of the State of Texas and in good standing under the Laws of the State of Texas. Purchaser has all requisite power and authority to own and operate its property (including its ownership interests in the Assets following Closing) and to carry on its business with respect thereto. Purchaser is duly licensed or qualified to do business in all jurisdictions in which the Assets are located, except where the failure to be so qualified would not reasonably be expected to have a material adverse effect on Purchaser’s ability to consummate the transactions contemplated by this Agreement and perform its obligations hereunder.

Section 6.2 BOEM Qualification. Purchaser will be as of Closing, properly registered or qualified with the California Secretary of State to carry on its business in the State of California and duly qualified and registered with the Bureau of Ocean Energy Management (the “BOEM”) to own and operate oil and gas leases and rights of way on the OCS, except where the failure to be so qualified would not reasonably be expected to have a material adverse effect on Purchaser’s ability to consummate the transactions contemplated by this Agreement and perform its obligations hereunder. Purchaser’s California OCS Number with the BOEM is 3679. To the extent required by the applicable state and federal government, Purchaser currently has, or will have at Closing, lease bonds, area-wide bonds or any other surety bonds as may be required by, and in accordance with, such state or federal regulations governing the ownership and operation of the Leases and has filed any and all required reports necessary for such operations with all governmental authorities having jurisdiction over such operations.

Section 6.3 Authority, Approval and Enforceability. Purchaser has the power and authority to enter into and perform this Agreement and all Transaction Documents to be delivered at Closing by Purchaser and the transactions contemplated hereby and thereby. The execution, delivery and performance by Purchaser of this Agreement have been, and the Transaction Documents to which Purchaser is a party will be at Closing, duly and validly authorized and approved by all necessary action on the part of Purchaser. This Agreement is, and the Transaction Documents to which Purchaser is a party when executed and delivered by Purchaser will be, the valid and binding obligation of Purchaser and enforceable against Purchaser in accordance with their respective terms, subject to the effects of bankruptcy, insolvency, reorganization, moratorium and similar Laws, as well as to principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at Law).

Section 6.4 No Conflicts. Assuming compliance with the HSR Act, if applicable, the execution, delivery and performance of this Agreement, and the Transaction Documents to be delivered by Purchaser at Closing, by Purchaser, and the consummation by Purchaser of the transactions contemplated hereby and thereby, will not (a) conflict with or violate any provision of the organizational documents of Purchaser, (b) conflict with, violate or result in the creation of any Encumbrance or breach under any material agreement or instrument to which Purchaser is a party or by which its assets are subject, (c) violate any judgment, order, ruling, or decree applicable to Purchaser as a party in interest, or (d) violate any Law applicable to Purchaser, except in the case of subsection (b), (c) or (d) where such violation would not reasonably be expected to have a material adverse effect on Purchaser’s ability to consummate the transaction contemplated by this Agreement and perform its obligations hereunder.

Section 6.5 Bankruptcy. There are no bankruptcy or receivership proceedings pending, being contemplated by or, to Purchaser’s Knowledge, threatened in writing against Purchaser or any of its Affiliates.

 

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Section 6.6 Brokers. Neither Purchaser nor any of its Affiliates has incurred any obligation or liability for brokers’ or finders’ fees relating to the transactions contemplated hereby for which Seller or any of its Affiliates will be liable or have any responsibility.

Section 6.7 Consents. Except for compliance with the HSR Act, if applicable, and for Customary Post-Closing Consents, there are no requirements for consents or approvals from third parties in connection with the consummation by Purchaser of the transactions contemplated by this Agreement.

Section 6.8 No Distribution. Purchaser is acquiring the Assets for its own account and not with the intent to make a distribution in violation of the Securities Act of 1933, as amended (and the rules and regulations pertaining thereto), or in violation of any other applicable securities Laws.

Section 6.9 Knowledge and Experience. Purchaser is sophisticated in the evaluation, purchase, ownership and operation of oil and gas properties and related facilities. Purchaser is not a “consumer” as defined in California Civil Code, Division 3, Part 4, Title 4, Title 1.5, § 1761 or within the meaning of any other similar Law or regulation. In making its decision to enter into this Agreement and to consummate the transactions contemplated hereby, Purchaser has solely relied (a) on the representations and warranties of Seller set forth in ARTICLE V and (b) on its own independent investigation and evaluation of the Assets and the advice of its own legal, Tax, economic, environmental, engineering, geological and geophysical advisors and not on any comments, statements, projections or other material made or given by any representative, consultant or advisor of Seller. Purchaser hereby acknowledges that, other than the representations and warranties made by Seller in ARTICLE V and the special warranty of Defensible Title with respect to the Scheduled Properties, neither Seller nor any representatives, consultants or advisors of Seller or its Affiliates will make or have made any representation or warranty, express or implied, at Law or in equity, with respect to the Assets. Purchaser has satisfied or shall satisfy itself as to the environmental and physical condition of and contractual arrangements of the Assets. Purchaser is able to bear the risks of the acquisition of the Assets, and assumption of the obligations, in accordance with and as set forth in this Agreement, and understands the risks of, and other considerations relating to, a purchase of the Assets. Purchaser has no Knowledge of any fact that results in the breach of any representations, warranty or covenant of Seller made hereunder.

Section 6.10 Regulatory. No later than five (5) Business Days prior to the Scheduled Closing Date and continually thereafter Purchaser shall be qualified to own and assume operatorship of oil, gas and mineral leases in all jurisdictions where the Assets are located, and the consummation of the transactions contemplated by this Agreement will not cause Purchaser to be disqualified as such an owner or operator. To the extent required by any applicable Laws, Purchaser shall, as of the Scheduled Closing Date, (a) hold all lease bonds and any other surety or similar bonds as may be required by, and in accordance with, all applicable Laws governing the ownership and operation of the Assets and (b) have filed any and all required reports necessary for such ownership and operation with all governmental authorities having jurisdiction over such ownership and operation.

Section 6.11 Funds. Subject to consummation of the Financing Transaction, Purchaser has or will have access to funds to restart and operate the Assets.

Section 6.12 No Prior Liens or Financial Commitments Affecting the Assets. Purchaser has not entered into any prior financial commitments or lending agreements with regard to this Agreement, the transaction contemplated by this Agreement or the Assets that attach to or otherwise encumber the Assets or otherwise impede, limit or prohibit Seller’s first lien priority, security interest and lien in and to the Assets.

 

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ARTICLE VII

PRE-CLOSING COVENANTS OF THE PARTIES

Section 7.1 Operations. For the purposes of Section 7.1(a), Section 7.1(b)(iv), Section 7.1(b)(vi), and Section 7.1(c), PPC and the 901/903 Pipeline shall be excluded.

(a) Except (x) for the operations covered by the AFEs listed on Schedule 5.15, (y) as required in the event of an emergency to protect life, property or the environment, and (z) as expressly contemplated by this Agreement or as expressly consented to in writing by Purchaser (which consent shall not be unreasonably delayed, withheld or conditioned), Seller shall (and shall use reasonable efforts to cause POPCO to), during the Interim Period:

(i) operate or, use its commercially reasonable efforts to cause to be operated, the Assets in the usual, regular and ordinary manner consistent with past practice, subject to (A) Seller’s right to comply with the terms of the Leases, Existing Contracts, applicable Laws and requirements of governmental authorities and (B) interruptions resulting from force majeure, mechanical breakdown and planned maintenance;

(ii) maintain all Scheduled Bonds;

(iii) notify Purchaser if any Lease terminates promptly upon learning of such termination; and

(iv) maintain, or cause to be maintained, the books of account and Records relating to the Assets in the usual, regular and ordinary manner and in accordance with the past practices of Seller.

(b) Except (w) as set forth in Schedule 7.1(b), (x) for the operations covered by the AFEs listed, (y) as required in the event of an emergency to protect life, property or the environment, and (z) as expressly contemplated by this Agreement or as expressly consented to in writing by Purchaser (which consent shall not be unreasonably delayed, withheld or conditioned), EMC shall not (and shall use reasonable efforts to cause POPCO not to) and MPPC shall not (and shall use reasonable efforts to cause PPC (except for Section 7.1(b)(iv) and Section 7.1(b)(vi)) not to), during the Interim Period:

(i) terminate (unless the term thereof expires pursuant to the provisions existing therein), materially amend, extend or surrender any rights under any Lease or Right-of-Way; provided that Seller shall be permitted to amend any Lease to increase its pooling authority;

(ii) transfer, sell, mortgage, pledge or dispose of any material portion of the Assets other than the (A) sale and/or disposal of Hydrocarbons in the ordinary course of business and (B) sales of equipment that is no longer necessary in the operation of the Assets or for which replacement equipment has been obtained;

(iii) create any lien on any of the Assets other than those arising in the ordinary course of operations and maintenance;

(iv) other than with respect to matters described in Schedule 5.8, institute, waive, compromise or settle any material claim with respect to the Assets;

(v) (a) except in the course of ordinary business, enter into any contract that would constitute a Material Contract, or (b) terminate, materially amend, surrender any rights under any Material Contract;

(vi) other than operations undertaken to perpetuate the Assets, not propose any operation with respect to the Assets, the cost of which exceeds One Million Dollars ($1,000,000);

(vii) grant any Person any right to, or interest in, the Assets; or

(viii) take any affirmative action to release or relinquish a material Permit that is valid and in effect as of the Execution Date; provided, however, that Seller shall not be required to maintain any

 

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Permit that expires or terminates in accordance with its terms, or pursuant to applicable Law, regulation or governmental order. Notwithstanding anything in this Agreement to the contrary, Sellers shall have no obligation to obtain any permits or authorizations that may be required for Purchaser to operate the Assets (or any of them) and Purchaser acknowledges that it shall be solely responsible for obtaining such permits or authorizations.

(c) With respect to any AFE or similar expenditure that is estimated to cost in excess of Three Million Dollars ($3,000,000), Seller shall forward such AFE to Purchaser as soon as is reasonably practicable and thereafter the Parties shall consult with each other regarding whether or not Seller should elect to participate in such operation. Purchaser agrees that it will timely respond to any written request for consent pursuant to this Section 7.1(c). In the event the Parties are unable to agree within ten (10) days (unless a shorter time, not to be less than twenty four (24) hours, is reasonably required by the circumstances and the applicable joint operating agreement and such shorter time is specified in Seller’s request for consent) of Purchaser’s receipt of any consent request as to whether or not Seller should elect to participate in such operation, Seller’s decision shall control and such operation shall be deemed to have been consented to by Purchaser.

Section 7.2 Performance Bonds. Purchaser acknowledges that none of the bonds, letters of credit and guarantees, if any, posted by Seller or its Affiliates relating to the Assets are transferable to Purchaser. Except with respect to any supplemental bonds required by the BOEM or other governmental authority (which are addressed in Section 11.13) that are identified on Schedule 5.20 on or before the Closing Date, Purchaser shall obtain replacements for all such bonds, letters of credit and guarantees to the extent such replacements are necessary for Purchaser’s ownership and/or operation of the Assets. Purchaser shall use commercially reasonable efforts to assist Seller in its efforts to cause the cancellation or return of the bonds, letters of credit and guarantees posted by Seller or its Affiliates with respect to the Assets. Notwithstanding the foregoing, but subject to Section 11.13, in the event that any counterparty to any Scheduled Bonds (including the BOEM or other governmental authority) does not release Seller or cancel the applicable Scheduled Bond as it relates to the Assets as of the Closing, then, from and after Closing, Purchaser shall indemnify Seller from and against any and all Losses asserted against, resulting from, imposed upon or incurred by Seller or any of its Affiliates as a result of, arising out of, or with respect to the Assets acquired by Purchaser under such Scheduled Bond until such time as a full release is obtained to the satisfaction of Seller.

Section 7.3 Transfers and Assignments; Reassignment.

(a) Purchaser shall be responsible for obtaining, at its cost and expense, and shall use its reasonable efforts to obtain (with Seller’s commercially reasonable assistance), all other Required Consents and Customary Post-Closing Consents, including but not limited to approval for transfer of interests in the Leases and federal OCS rights-of-way and rights-of-use for the Leases, federal OCS rights-of-way and rights-of-use, and the Units. Purchaser will (with Seller’s commercially reasonable assistance) prepare and submit these instruments to the applicable governmental authority promptly after Closing, but in no event later than five (5) Business Days after Closing.

(b) If any governmental authority having a right to approve or reject assignment of any Lease by Seller to Purchaser in order for title to transfer affirmatively rejects the assignment because Purchaser does not meet the conditions imposed for approval of the assignment, after Seller and Purchaser have both made a good faith effort (provided, however, that Seller shall not be required to incur any cost) to obtain such approval, then Seller may, after the first (1st) anniversary of the Closing Date, require reassignment of the Assets.

(c) If Purchaser fails to Restart Production from the Leases within a period of four (4) years from and after the Effective Time (the “Restart Failure Date”), then for a period of one hundred and eighty (180) days from the Restart Failure Date, Seller shall have the exclusive right, but not the obligation, to require Purchaser to reassign the Assets and any other rights conveyed under this Agreement to Seller or its designated representative, free and clear of all Encumbrances other than Seller’s security

 

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interests, upon written demand, without reimbursement of any Purchaser costs or expenditures (collectively with Seller’s reassignment option under Section 7.3(b), the “Reassignment Option”). If Purchaser acquires or has acquired any additional rights, assets or has developed additional improvements, records or benefits arising out of or related to the Assets between the Closing and the Restart Failure Date, on Seller’s request, such rights, assets, improvements, records, or benefits shall also be assigned and delivered to Seller together with the reassignment of the Assets.

(d) If the Reassignment Option is exercised, Purchaser shall obtain any requisite approvals for the reassignment of the Assets at its sole cost and expense.

(e) From the Closing until the Restart Failure Date, Purchaser shall maintain the Assets free and clear of all Encumbrances, except those which would qualify under the definition of Permitted Encumbrances, and shall continue to comply with all covenants in this Agreement relating to the ownership and operation of the Assets.

(f) Upon reassignment due to the exercise of the Reassignment Option, Purchaser will promptly (but in any event within thirty (30) days) execute and deliver to Seller a reassignment by special warranty, substantially similar to the form of Assignment and Bill of Sale attached hereto as Exhibit R, and Deed substantially in the form of Exhibit S, but sufficient to place Seller in the same position it occupied prior to the assignment to Purchaser, less reasonable wear and tear. At Seller’s option, as an alternative to or in addition with Purchaser’s execution of reassignment documentation, (i) Seller may sign and deliver reassignment documents on behalf of Purchaser in accordance with the Power of Attorney, which shall contain, among other provisions, a relinquishment of operatorship to Seller or its designated assign and a relinquishment of any right, title or interest in any Asset. Purchaser’s Assumed Obligations shall apply to the reassigned Assets for the period of Purchaser’s ownership and shall be re-stated in the reassignment instruments, and (ii) Seller will deliver to Purchaser a release of the Senior Secured Term Loan Agreement and a release and termination of the Collateral Documents and all obligations thereunder shall terminate (other than obligations that expressly survive by their terms).

(g) After reassignment of the Assets in accordance with this Section 7.3, and subject to Purchaser’s Assumed Obligations for the period of Purchaser’s ownership, Seller shall cause the P&A Financial Security to be released.

(h) It is the intent of the Parties that if the Reassignment Option is exercised by Seller, Purchaser shall be deemed to have reassigned any and all rights or equitable interest it may have acquired in or to the Assets under this Agreement. The Parties agree and acknowledge that the Reassignment Option is an integral part of the consideration to Seller under this Agreement and that such option is not a penalty, but rather a reasonable remedy in light of the exposure of Purchaser at the time such remedy can be invoked, the potential risks and substantial Losses to be incurred by Seller upon the failure of the Restart Failure Date, and Seller’s need to promptly pursue other option with respect to the Assets.

Section 7.4 Amendment of Schedules. Purchaser agrees that, with respect to the representations and warranties of Seller contained in this Agreement, Seller shall have the continuing right until the Closing to add, supplement or amend the Schedules to its representations and warranties with respect to any matter hereafter arising or discovered which, if existing or known at the Execution Date thereafter, would have been required to be set forth or described in such Schedules. For purposes of determining whether the conditions set forth in ARTICLE VIII have been fulfilled, the Schedules to Seller’s representations and warranties contained in this Agreement shall be deemed to include only that information contained therein on the Execution Date and shall be deemed to exclude all information contained in any addition, supplement or amendment thereto; provided, however, that if the Closing shall occur, then all matters disclosed pursuant to any such addition, supplement or amendment at or prior to the Closing shall be waived and Purchaser shall not be entitled to make a claim with respect thereto pursuant to the terms of this Agreement or otherwise.

Section 7.5 Indemnity Regarding Access. Purchaser hereby agrees to defend, indemnify and holds harmless Seller as operator of the Assets and the Seller Group from and against any and all Losses arising out of,

 

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resulting from or relating to, any field visit, environmental property assessment, or other due diligence activity conducted by Purchaser or any Purchaser’s Affiliates or Purchaser’s Representatives (including any environmental consultant or landman) with respect to the Assets, EVEN IF SUCH LOSSES ARISE OUT OF OR RESULT FROM, SOLELY OR IN PART, THE SOLE, ACTIVE, PASSIVE, CONCURRENT OR COMPARATIVE NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OR VIOLATION OF LAW OF OR BY A MEMBER OF THE SELLER GROUP EXCEPTING ONLY IN THE CASE OF THIS SECTION 7.5 LOSSES ACTUALLY RESULTING ON THE ACCOUNT OF (I) THE DISCOVERY OF ANY EXISTING CONDITIONS PRESENT BY PURCHASER OR PURCHASER’S REPRESENTATIVES (AS OPPOSED TO ANY DAMAGES CAUSED BY OR ATTRIBUTABLE TO PURCHASER, PURCHASER’S AFFILIATE OR PURCHASER’S REPRESENTATIVES) ON THE ASSETS AS OF THE EFFECTIVE TIME, OR (II) THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF A MEMBER OF THE SELLER GROUP. For the avoidance of doubt, this indemnity shall survive any termination of this Agreement, if applicable, and the Closing.

Section 7.6 First Lien Security to Seller.

(a) Purchaser shall grant to Seller (or its designee), and Seller (or its designee) shall have a first-priority lien and security interest on the Assets to secure Purchaser’s obligations under the Senior Secured Term Loan Agreement, and this Agreement, in each case as provided for in the Senior Secured Term Loan Agreement and Collateral Documents.

(b) At Closing, Purchaser shall execute and deliver the Senior Secured Term Loan Agreement and Collateral Documents.

(c) At Closing, if there is an entity that controls Purchaser (as the term “control” is used in the definition of “Affiliate”), Purchaser shall also deliver to Seller a guarantee, in agreed form, duly executed by Purchaser’s ultimate parent company, in relation to the prompt payment of any sum which Purchaser may become liable to pay, and the timely performance by Purchaser of all its obligations, under this Agreement and the Senior Secured Term Loan Agreement (the “Ultimate Parent Company Guarantee”). The exercise by Seller of the Ultimate Parent Company Guarantee shall be in addition to, and not in lieu of, any other rights and remedies Seller may have under Law or in equity for Purchaser’s failure to perform as provided herein, including but not limited to, Seller’s rights to exercise the P&A Financial Security.

(d) The provisions of this Section 7.6 are (i) binding on all successors and assigns of Purchaser with respect to any of the Assets and (ii) covenants running with the Assets. For the avoidance of doubt, in the event Purchaser sells, assigns or otherwise transfers less than all of the Wells to a transferee, the transferee shall be required to (A) satisfy the Senior Secured Term Loan Agreement and Collateral Documents (to the extent, and only to the extent such transfer occurs prior to the Actual Payment Date) and (B) obtain an Ultimate Parent Company Guarantee and P&A Financial Security in a form and manner reasonably acceptable to Seller as set forth herein with respect to such Assets so sold, assigned or otherwise transferred. Such transfer shall not relieve Purchaser’s obligation to maintain the Senior Secured Term Loan Agreement and Collateral Documents, its Ultimate Parent Company Guarantee and P&A Financial Security as to any Assets it retains.

Section 7.7 Reserved.

Section 7.8 HSR Filings.

(a) Each Party shall make all necessary filings for which it is responsible pursuant to the HSR Act and any other Law that requires a mandatory merger control filing with respect to the transaction covered by this Agreement, if applicable, within fifteen (15) Business Days of the Execution Date and shall supply promptly all additional information and documentary material requested by any government entity in connection with such filings or as otherwise required under the HSR Act or other applicable Law.

 

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(b) Each Party shall be responsible for and shall timely pay all filing fees required of such Party in connection with HSR Act filings and any other antitrust, trade or competition Law filings required in any other jurisdiction.

(c) Each Party shall promptly notify the other Parties of any communication it or any of its Affiliates receives from any governmental entity relating to the matters that are the subject of this Agreement and permit the other Parties to review in advance, to the extent permitted by Law, any proposed communication by such Party to any governmental entity. No Party to this Agreement shall agree to participate in any meeting with any governmental entity in respect of any filings, investigation or other inquiry unless it consults with the other Parties in advance and, to the extent permitted by such governmental authority, gives the other Parties the opportunity to attend and participate at such meeting. The Parties will coordinate and cooperate fully and promptly with each other in exchanging such information and providing such assistance as the other Parties may reasonably request in connection with the foregoing and in seeking early termination of any applicable waiting periods, including those under the HSR Act.

(d) Purchaser shall use commercially reasonable efforts to avoid or eliminate any impediment under any antitrust, competition, or trade regulation Law that may be asserted by any governmental entity or any other Person with respect to the transaction contemplated by this Agreement so as to enable the Closing to occur expeditiously, but in no case later than the Scheduled Closing Date, including providing information, proposing, negotiating, committing to and/or effecting, by consent decree, hold separate orders, or otherwise, sale, divestiture or disposition of, or holding separate (through the establishment of a trust or otherwise) such portion of the Assets to be acquired by it under this Agreement as are required to be divested in order to avoid the entry of, or to effect the dissolution of, any decree, order, judgment, injunction, temporary restraining order or other order in any suit or proceeding, which would otherwise have the effect of materially delaying or preventing the consummation of the transaction or that would make the consummation of the transaction in accordance with the terms of this Agreement unlawful. In addition, Purchaser shall use commercially reasonable efforts to defend, through litigation on the merits, any claim asserted in court by any party in order to avoid entry of, or to have vacated or terminated, any decree, order or judgment (whether temporary, preliminary or permanent) that would restrain or prevent the Closing by Scheduled Closing Date.

(e) Purchaser shall be responsible for making any settlement offers and negotiating any consent decree or consent order with any governmental entity in order to permit the transaction under this Agreement to be consummated prior to the Scheduled Closing Date. Purchaser agrees that, at any time in an investigation, if a governmental entity suggests or proffers a settlement of the investigation to permit the transactions contemplated by this Agreement to close, Purchaser shall promptly (and in any event within five (5) Business Days) communicate the terms of the offer to Seller. Purchaser, in its sole discretion, may accept or reject any settlement of the investigation proposed by any governmental entity, provided that Purchaser uses all commercially reasonable efforts to permit the transaction to be consummated prior to the Scheduled Closing Date.

(f) The Parties agree, pursuant to Section 8.5 and Section 9.5, that receipt of all required competition Law or merger control consents or clearances, or expiration of applicable waiting periods under or in connection with the HSR Act or any other applicable competition Laws, is a condition precedent to Closing. In the event that all such consents or clearances required under this Section 7.8 are not obtained, or any such waiting periods have not expired, prior to the Scheduled Closing Date, then subject to each Party’s Longstop Date termination rights under Section 15.1, the Closing Date will be extended until all such consents and clearances are received or all applicable waiting periods have expired.

Section 7.9 No Other Liens. Purchaser shall not (and Purchaser shall not allow its Affiliates, including POPCO and PPC, to) grant any lien, mortgage or other Encumbrance on the Assets until (i) the Senior Secured

 

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Term Loan Agreement has been paid in full, (ii) Purchaser has provided the P&A Financial Security pursuant to Section 11.18, and (iii) the Collateral Documents have been released by Seller; provided that Purchaser shall be entitled to grant any such lien, mortgage or other Encumbrance so long as they are subordinate to the Senior Secured Term Loan Agreement and the Collateral Documents, and do not exceed in aggregate the Maximum Debt Threshold unless consented to by Seller.

Section 7.10 Audits and Filings.

(a) From Execution Date to Closing Date, EMC will use its commercially reasonable efforts to cause its Affiliates (excluding MPPC and PPC) and its and their respective managers, employees, agents and representatives to, cooperate with Purchaser, its Affiliates and their respective agents and representatives in connection with compliance with Purchaser’s and its Affiliates’ Tax, financial, or other reporting requirements and audits, including (i) any filings with any governmental authority and (ii) any filings that may be required by the U.S. Securities and Exchange Commission (the “Commission”), under securities Laws applicable to Purchaser or the Financing Party, including the filing by the Financing Party with the Commission of one or more registration statements to register any securities of the Financing Party under the Securities Act of 1933 (the “Securities Act”) or of any report required to be filed by the Financing Party under the Securities Exchange Act of 1934 (together with the Securities Act and the rules and regulations promulgated under such acts, the “Securities Laws”) (collectively, the “Filings”). Further, from and after the Execution Date to Closing Date, EMC will use its commercially reasonable efforts to cause its Affiliates (excluding MPPC and PPC) to, make available to Purchaser and its Affiliates and their agents and representatives any books, records, information and documents that are readily available and attributable to the Assets for the period of three (3) years prior to Effective Time through the day immediately preceding Effective Time, in EMC’s possession or control reasonably required by Purchaser, its Affiliates and their agents and representatives in order for Purchaser or the Financing Party to prepare at their own cost, if required, in connection with such Filings, financial statements relating to the Assets or to EMC or its Affiliates (excluding MPPC and PPC) meeting the requirements of Regulation S-X under the Securities Act, along with any documentation attributable to the Assets or otherwise relating to Seller or its Affiliates (excluding MPPC and PPC) required to complete any audit associated with such financial statements.

(b) Subject to Section 7.10(a), EMC will use its commercially reasonable efforts to cause its Affiliates (excluding MPPC and PPC) to, cooperate with the independent auditors chosen by Purchaser (“Purchaser’s Auditor”) in connection with any audit by Purchaser’s Auditor of any financial statements of the Assets prepared by the Purchaser, or its Affiliates and their agents and representatives, or their contracted accounting firm, for the Assets that Purchaser or the Financing Party requires to comply with the requirements of the Securities Laws or other Tax, financial or reporting requirements or in connection with the Filings. Such cooperation will include (i) reasonable access to Seller’s employees, representatives and any other agent of Seller who are responsible for preparing or maintaining the financial records for the Assets provided that support regarding such records is required by Purchaser’s Auditor to perform an audit or conduct a review in accordance with generally accepted auditing standards. Purchaser will reimburse Seller, within ten (10) Business Days after demand in writing therefor and proof of payment, for any reasonable out-of-pocket costs incurred and paid by Seller or its Affiliates (excluding MPPC and PPC) in complying with the provisions of Section 7.10(a) and this Section 7.10(b). Notwithstanding the foregoing, nothing herein shall expand Seller’s representations, warranties, covenants, or agreements set forth in this Agreement or give Purchaser, its Affiliates, or any third Person any rights to which it is not entitled hereunder.

(c) For a period of two (2) years following the Closing, EMC will cause its Affiliates (excluding MPPC and PPC) to, retain books, records, information and documents in its or its Affiliates’ (excluding MPPC and PPC) possession that are necessary to prepare and audit financial statements with respect to the Assets, except to the extent copies thereof are transferred to Purchaser in connection with Section 12.3.

 

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Section 7.11 No Liens or Financial Commitments Affecting the Assets. From Closing until the date (i) the Senior Secured Term Loan Agreement is paid in full; (ii) Purchaser has provided the P&A Financial Security pursuant to Section 11.18, and (iii) the Collateral Documents have been released, Purchaser shall not directly or indirectly enter into any financial commitments or lending agreements (and Purchaser shall not allow its Affiliates, including POPCO and PPC to undertake any such action) that attach to or otherwise encumber the Assets or otherwise impede, limit or prohibit Seller’s first lien priority security interest and lien in and to the Assets and the other assets of Purchaser; provided that Purchaser shall be entitled to enter into financial commitments or lending agreements that attach to or otherwise encumber the Assets so long as such commitments or agreements are subordinated to the Senior Secured Term Loan Agreement and the Collateral Documents, and do not exceed in aggregate the Maximum Debt Threshold unless consented to by Seller.

Section 7.12 Periodic Reporting. Purchaser shall use all commercially reasonable efforts to Restart Production. In connection with this process, Purchaser agrees to keep Seller reasonably apprised of the progress of its work, and any material developments or setbacks. In connection with such obligation, Purchaser shall provide Seller with quarterly written updates regarding the progress of the Restart Production, including the status of all material Permit negotiations, developments with Plains or other third party hydrocarbon transportation service providers, as well as other material contracts necessary to achieve Restart Production. If any material Permits are revoked or the relevant governmental authority indicates it is reasonably likely such Permit will not be granted before the Restart Failure Date, Purchaser shall promptly notify Seller in writing of such development. In addition to the foregoing, Purchaser will provide Seller copies of any official correspondence from governmental authorities relating to the issuance of requested permits for the Restart Production.

Section 7.13 Financing Transaction Reporting.

(a) Purchaser shall not amend or modify the terms or conditions of the Financing Transaction in any manner that would reasonably be expected to have a material adverse effect upon Seller.

(b) To the extent permitted by applicable Law, Purchaser shall advise Seller, reasonably promptly after Purchaser receives written notice thereof from the Financing Party, of (i) the time when the proxy statement of the Financing Party related to the Financing Transaction and/or the registration statement to register any securities of the Financing Party have become effective or any supplement or amendment has been filed, (ii) the issuance of any stop order or the suspension of the qualification of the shares of the Financing Party for offering or sale in any jurisdiction, or (iii) the written threat of any proceeding to prevent the consummation of the Financing Transactions, or of any request by the Commission for the amendment or supplement of the foregoing proxy statement/registration statement or for additional information. To the extent permitted by applicable Law and reasonably promptly after Purchaser’s written receipt thereof from the Financing Party, Purchaser shall provide Seller with any comments or other communications, whether written or oral, that the Financing Party or its counsel may receive from time to time from the Commission or its staff with respect to the foregoing proxy statement/registration statement or offer documents promptly.

(c) Reasonably promptly after Purchaser receives notice thereof from the Financing Party, and in each case to the extent related to the Financing Transaction, Purchaser shall provide Seller with written notice of the following: (A) of any breach or default (or any event or circumstance that, with or without notice, lapse of time or both, would reasonably be expected to give rise to any breach or default) by any party to any subscription agreement between any Private Investment in Public Equity investor (“PIPE Investor”) that has executed an agreement for the subscription of equity in connection with the Financing Transaction in his, her or its capacity as a PIPE Investor (a “Subscription Agreement”) and the Financing Party, to the extent known to the Financing Party; or (B) the receipt of any written notice or other written communication from any party to any Subscription Agreement with respect to any actual, potential or claimed expiration, lapse, withdrawal, breach, default, termination or repudiation by any party to any Subscription Agreement or any provisions of any Subscription Agreement.

 

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Section 7.14 Continuing Qualifications. Following Closing, Purchaser shall continue to be, for so long as it owns the Assets, properly registered or qualified with the California Secretary of State to carry on its business in the State of California and duly qualified and registered with BOEM to own and operate oil and gas leases and rights of way on the OCS. Following Closing, to the extent required by the state and federal government, Purchaser will continue to maintain, so long as it owns the Assets, lease bonds, area-wide bonds or any other surety bonds as may be required by, and in accordance with, such state or federal regulations governing the ownership and operation of the Leases.

 

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ARTICLE VIII

PURCHASER’S CONDITIONS TO CLOSING

The obligations of Purchaser to consummate the transactions provided for herein are subject to the fulfillment by Seller or, at the option of Purchaser, waiver by Purchaser, on or prior to Closing of each of the following conditions:

Section 8.1 Representations. Each of the representations and warranties of Seller set forth in ARTICLE V shall be true and correct in all material respects on and as of the Execution Date and as of the Closing Date, with the same force and as though such representations and warranties had been made or given on and as of the Closing Date (other than representations and warranties that refer to a specified date, which need only be true and correct on and as of such specified date).

Section 8.2 Performance. Seller shall have performed or complied in all material respects with all obligations, agreements, and covenants contained in this Agreement as to which performance or compliance by Seller is required prior to or at the Closing Date.

Section 8.3 No Legal Proceedings. No suit, action, or other proceeding by any third party unaffiliated with Purchaser shall be pending by or before any governmental authority seeking to restrain, prohibit, enjoin, or declare illegal, or seeking substantial damages in connection with, the transactions contemplated by this Agreement.

Section 8.4 Title Defects, Environmental Defects, Casualty Loss and Transfer Restrictions. The sum of (a) the Title Defect Amounts of all uncured Title Defects exceeding the Individual Title Defect Threshold and the Aggregate Title Defect Deductible, plus (b) all Remediation Amounts for uncured Environmental Defects (exceeding the Individual Environmental Defect Threshold and the Aggregate Environmental Defect Deductible), plus (c) the aggregate amount of all Casualty Loss Amounts, plus (d) the Allocated Value of any Asset excluded from the Assets to be conveyed to Purchaser pursuant to Section 4.8 or Section 4.11(a), minus (e) the aggregate Title Benefit Amounts of all Title Benefits (exceeding the Individual Title Defect Threshold and the Aggregate Title Defect Deductible), shall be less than Seventy-Five Million Dollars ($75,000,000).

Section 8.5 HSR. If applicable, (i) the waiting period under the HSR Act (and any extensions thereof) applicable to the consummation of the transactions contemplated hereby shall have expired, (ii) notice of early termination shall have been received, or (iii) a consent order shall have been issued (in form and substance satisfactory to Seller) by or from applicable governmental authorities.

Section 8.6 Closing Deliverables. Seller shall have delivered (or be ready, willing and able to deliver at Closing) to Purchaser the documents required to be delivered by Seller at Closing.

Section 8.7 Financing Transaction. The Financing Transaction shall have been consummated or shall be consummated concurrently with Closing.

Section 8.8 Senior Secured Term Loan Agreement. All conditions precedent set forth in the Senior Secured Term Loan Agreement shall have been satisfied in a manner acceptable to Purchaser or waived by Purchaser.

 

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ARTICLE IX

SELLER’S CONDITIONS TO CLOSING

The obligations of Seller to consummate the transactions provided for herein are subject to the fulfillment by Purchaser or, at the option of Seller, waiver by Seller on or prior to Closing of each of the following conditions:

Section 9.1 Representations. Each of the representations and warranties of Purchaser set forth in ARTICLE VI shall be true and correct in all material respects on and as of the Execution Date and Closing Date, with the same force and effect as though such representations and warranties had been made or given on and as of the Closing Date (other than representations and warranties that refer to a specified date, which need only be true and correct on and as of such specified date).

Section 9.2 Performance. Purchaser shall have performed or complied in all material respects with all obligations, agreements, and covenants contained in this Agreement as to which performance or compliance by Purchaser is required prior to or at the Closing Date.

Section 9.3 No Legal Proceedings. No suit, action, or other proceeding by any third party unaffiliated with Seller shall be pending by or before any governmental authority seeking to restrain, prohibit, or declare illegal, or seeking substantial damages in connection with, the transactions contemplated by this Agreement.

Section 9.4 Title Defects, Environmental Defects, Casualty Loss and Transfer Restrictions. The sum of (a) the Title Defect Amounts of all uncured Title Defects (subject to the Individual Title Defect Threshold and the Aggregate Title Defect Deductible), plus (b) all Remediation Amounts for uncured Environmental Defects (subject to the Individual Environmental Defect Threshold and the Aggregate Environmental Defect Deductible), plus (c) the aggregate amount of all Casualty Loss Amounts, plus (d) the Allocated Value of any Asset excluded from the Assets to be conveyed to Purchaser pursuant to Section 4.8 or Section 4.11(a), minus (e) the aggregate Title Benefit Amounts of all Title Benefits (subject to the Individual Title Defect Threshold and the Aggregate Title Defect Deductible), shall be less than Seventy-Five Million Dollars ($75,000,000).

Section 9.5 HSR. If applicable (i) the waiting period under the HSR Act (and any extensions thereof) applicable to the consummation of the transactions contemplated hereby shall have expired, (ii) notice of early termination shall have been received, or (iii) a consent order shall have been issued (in form and substance satisfactory to Seller) by or from applicable governmental authorities.

Section 9.6 Closing Deliverables. Purchaser shall have delivered (or be ready, willing and able to deliver at Closing) to Seller the documents and other items required to be delivered by Purchaser at Closing.

Section 9.7 Financing Transaction. The Financing Transaction shall have been consummated or shall be consummated concurrently with Closing.

Section 9.8 Net Tangible Assets. Purchaser shall have minimum net tangible assets of not less than Five Million and One Dollars ($5,000,001) (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act) remaining after consummation of the Financing Transaction and the transactions contemplated by the Subscription Agreements.

Section 9.9 Minimum Available Cash. The amount of Available Cash shall not be less than the Minimum Cash Threshold.

Section 9.10 Senior Secured Term Loan Agreement. All conditions precedent set forth in the Senior Secured Term Loan Agreement shall have been satisfied in a manner acceptable to Seller or waived by Seller.

 

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ARTICLE X

CLOSING

Section 10.1 Time and Place of Closing. The consummation of the transactions contemplated by this Agreement (the “Closing”) shall be held on February 1, 2024 (the “Scheduled Closing Date”), at Seller’s offices at 22777 Springwoods Village Parkway, Spring, Texas 77389; provided that (i) if agreed to in writing by all Parties, Closing shall occur on a date prior to the Scheduled Closing Date, if all of the conditions to Closing have been satisfied (or waived) prior to such date (except those conditions that can only be satisfied upon Closing) and (ii) if not all of the conditions to that Closing are satisfied (or waived) as of the Scheduled Closing Date, then Closing shall be held three (3) Business Days after all such conditions have been satisfied or waived, or such other date as the Parties may mutually agree in writing, but in no event later than February 29, 2024 (the “Longstop Date”).

Section 10.2 Calculation of Preliminary Settlement Statement. Not less than five (5) Business Days prior to the Closing, Seller shall prepare in good faith and submit to Purchaser for review a draft settlement statement (the “Preliminary Settlement Statement”) that shall set forth the Adjustments to the Purchase Price, reflecting each adjustment made in accordance with this Agreement as of the date of preparation of such Preliminary Settlement Statement and the itemized calculation. Within three (3) Business Days of receipt of the Preliminary Settlement Statement, Purchaser will deliver to Seller a written report containing all changes with the explanation therefor that Purchaser proposes to be made to the Preliminary Settlement Statement. The Preliminary Settlement Statement, as agreed upon by the Parties, will be used to calculate the Adjustments to the Purchase Price due at Closing; provided that if the Parties do not agree upon an adjustment set forth in the Preliminary Settlement Statement, then for purposes of Closing but subject to Section 12.1, the amount of such adjustments shall be that amount set forth in the draft Preliminary Settlement Statement delivered by Seller to Purchaser pursuant to this Section 10.2. Final adjustments to the Purchase Price shall be calculated and payable as provided in Section 12.1 below.

Section 10.3 Closing Obligations. At the Closing:

(a) Seller and Purchaser shall execute, acknowledge and deliver to each other the Assignment in the form of Exhibit D in sufficient duplicate originals to allow recording in all appropriate counties and parishes;

(b) Seller shall execute and deliver to Purchaser the Deed to the LFC Property in the form of Exhibit I;

(c) Seller and Purchaser shall execute and deliver to each other assignments, on appropriate forms, of state, federal, tribal and other Leases of governmental authorities included in the Assets in sufficient counterparts to facilitate filing with the BOEM or any other applicable governmental authorities;

(d) Seller and Purchaser shall execute and deliver to each other the Preliminary Settlement Statement;

(e) Seller shall deliver to Purchaser an executed non-foreign entity affidavit meeting the requirements set forth in Section 1.1445-2(b)(2) of the Treasury Regulations and substantially in the form of Exhibit G;

(f) Seller, if and as applicable, shall deliver all appropriate or required forms, applications, notices, permit transfers, declarations, to be filed with the appropriate governmental authorities having jurisdiction with respect to the transfer of operatorship to Purchaser of the Assets that are operated by Seller immediately prior to the Closing; provided, that, if the operator of a Well must be elected or designated after Closing, the applicable instruments will be executed after the election or designation, as applicable;

(g) Purchaser shall execute and deliver to Seller an officer’s certificate, dated as of the Closing Date and substantially in the form of Exhibit E, certifying that the conditions set forth in Section 9.1

 

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and Section 9.2 have been fulfilled and, if applicable, any exceptions to such conditions that have been waived by Seller;

(h) Seller shall execute and deliver to Purchaser an officer’s certificate, dated as of the Closing Date and substantially in the form of Exhibit F, certifying that the conditions set forth in Section 8.1 and Section 8.2 have been fulfilled and, if applicable, any exceptions to such conditions that have been waived by Purchaser;

(i) Seller and Purchaser shall execute, acknowledge and deliver transfer orders or letters-in-lieu thereof in customary form prepared by Seller directing all purchasers of production to make payment to Purchaser of proceeds attributable to production from the Assets from and after the Closing Date;

(j) Seller and Purchaser shall execute and deliver the Senior Secured Term Loan Agreement;

(k) Reserved;

(l) Purchaser shall furnish evidence that all requirements to own and/or operate the Assets, including bonds and permits, from any governmental authority having jurisdiction or as required by any Existing Contract have been satisfied;

(m) Purchaser shall execute and deliver a duly executed Power of Attorney in the form of Exhibit O;

(n) Purchaser shall execute and deliver the Deeds of Trust and other Collateral Documents;

(o) Seller shall deliver transfer documents in respect of the Transferred Shares in form reasonably acceptable to Purchaser, duly executed by the relevant owner of such equity in favor of Purchaser;

(p) Seller shall ensure the resignation of each director, company secretary, and auditor of POPCO and PPC, such resignations to take effect on and from Closing;

(q) Seller and Purchaser shall execute and deliver to each other the Facility Licensing Agreement in the form set forth as Exhibit M;

(r) Seller and Purchaser shall execute and deliver to each other the Transition Services Agreement in the form set forth as Exhibit N;

(s) (i) Sellers shall obtain and deliver to Purchaser an assignment agreement whereby EMOC assigns to Purchaser all of EMOC’s rights, obligations and interests in, to and under the Facilities Dedication Agreement and (ii) Purchaser shall execute such agreement and accept and assume all such rights, obligations and interests; and

(t) Seller and Purchaser shall execute such other instruments and take such other actions as may be necessary to carry out their respective obligations under this Agreement.

 

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ARTICLE XI

POST-CLOSING OBLIGATIONS

Section 11.1 Assumed Obligations. Without limiting Purchaser’s rights to indemnity under Section 11.3 (if applicable), if the Closing occurs, from and after Closing, Purchaser hereby assumes and agrees to fulfill, perform, pay and discharge all liabilities, obligations and Losses, known or unknown, with respect to the Assets or the ownership, use or operation thereof, regardless of whether such liabilities, obligations or Losses arose prior to, on or after the Effective Time, including obligations and Losses relating to the following (all of the aforementioned and following obligations and Losses being the “Assumed Obligations”):

(a) the payment of owners of Working Interests, royalties, overriding royalties and other interests all revenues attributable thereto;

(b) fully performing all Plugging and Abandonment Obligations, regardless of whether such obligations are attributable to the ownership or operation of the Assets prior to, on, or after the Effective Time, in a good and workmanlike manner and in compliance with all Laws, including:

(i) the necessary and proper plugging, replugging, and abandonment of all wells on the Assets or comprising a part of the Assets, whether the BOEM, the California Office of Conservation or any other governmental authority reflects such well as having been plugged, abandoned or remediated for regulatory purposes or otherwise, prior to, on, or after the Effective Time;

(ii) the necessary and proper removal, abandonment, decommissioning, and disposal of all structures, pipelines, facilities, equipment, abandoned property, and junk located on or comprising part of the Assets;

(iii) the necessary and proper capping and burying of all flow lines and pipelines associated with the Assets or located on or comprising part of the Assets; and

(iv) the necessary and proper restoration of the offshore and onshore sites and property, both surface and subsurface, as may be required by Laws or contract;

(c) furnishing make-up gas and dead oil according to the terms of applicable Existing Contracts, and to satisfy all other Imbalances, if any;

(d) the environmental and physical condition of the Assets, whether such condition existed prior to, on or after the Effective Time, including Environmental Defects, if any, with respect to the Assets, whether or not asserted by Purchaser in accordance with this Agreement, including the clean-up, restoration and remediation of the Assets in accordance with applicable Law, including all Environmental Laws;

(e) obligations or Losses under or imposed on the lessee, owner, Assets or operator under the Leases, the Existing Contracts and applicable Laws;

(f) storing, handling, transporting and disposing of or discharging all materials, substances and wastes from the Assets (including produced water, drilling fluids, NORM, and other wastes), whether present prior to, on or after the Effective Time, in accordance with applicable Laws and contracts; and

(g) obligations or Losses arising out of our related to the 901/903 Pipeline, including any Assumed Liabilities (as such term is defined in the Plains PSA), provided that with respect to any pending litigation or regulatory actions relating to any Assumed Liabilities, including item 7 on Schedule 3.4 of the Plains PSA, (i) Sellers shall have the right (but not the obligation) to participate in the defense of any claims that directly or indirectly could be Assumed Liabilities, including any claims impacting the rights of way for the 901/903 Pipeline (each an “Existing Pipeline Claim”). If Sellers elect not to control or conduct the defense or prosecution of any such Existing Pipeline Claim, Sellers nevertheless shall have the right to participate in the defense or prosecution of any such claim and, at their own expense, to employ counsel of their own choosing for such purpose; (ii) the Parties shall

 

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cooperate in the defense or prosecution of any Existing Pipeline Claim, with such cooperation to include (A) the retention and the provision of Purchaser records and information that are reasonably relevant to the defense or prosecution of such claim, and (B) making employees, consultants and agents available on a mutually convenient basis to provide additional information; and (iii) Purchaser shall not consent to the entry of any judgment or enter into any settlement that could reasonably impact Seller without the prior express written consent of Seller.

Section 11.2 Purchaser’s Indemnity. Effective upon Closing, REGARDLESS OF FAULT, Purchaser hereby defends, indemnifies and holds harmless the Seller Group from and against any and all Losses arising out of, attributable to, based upon or related to:

(a) any breach of (i) any representation or warranty made by Purchaser in ARTICLE VI of this Agreement or in the certificate delivered by Purchaser pursuant to Section 10.3(g), or (ii) any covenant or agreement of Purchaser contained in this Agreement or any Transaction Document; or

(b) any of the Assumed Obligations.

Section 11.3 Seller’s Indemnity. Effective upon Closing, subject to the limitations in Section 11.5 and Section 11.8 below, REGARDLESS OF FAULT, Seller shall protect, defend, indemnify and hold harmless the Purchaser Group from and against any and all Losses arising out of, attributable to, based upon or related to:

(a) any breach of (i) any representation or warranty made by Seller in ARTICLE V of this Agreement or in any Transaction Document, in the certificate delivered by Seller pursuant to Section 10.3(h), or (ii) any covenant or agreement of Seller contained in this Agreement;

(b) the litigation and/or administrative proceedings set forth on Schedule 11.3(b);

(c) matters related to Taxes accruing prior to the Effective Time and more fully set forth in ARTICLE XIII;

(d) failure to pay any royalties, overriding royalties or other burdens on production to the extent relating to the production of Hydrocarbons from the Assets prior to the Effective Time;

(e) any personal injury or death on or about the Assets attributable to the time period prior to the Effective Time for which Purchaser’s indemnity in Section 7.5 does not apply;

(f) any civil and/or criminal fines or penalties imposed or assessed related to or arising out of the ownership or use of the Assets or POPCO prior to the Effective Time, other than any such fines or penalties relating to the Environmental Law or which relate to any matter which was or could have been raised as an Environmental Defect, other than any such liability arising out of or related to the Plains PSA or the 901/903 Pipeline; or

(g) any obligations of Seller or any Affiliate thereof related to the Seller Benefit Plans (each of the foregoing items (b) through (g), the “Retained Obligations”).

In no event shall Seller have any obligation to provide indemnification for any matters to the extent accounted for in the Preliminary Settlement Statement or the Final Settlement Statement.

Section 11.4 Regardless of Fault. The phrase “REGARDLESS OF FAULT” means WITHOUT REGARD TO THE CAUSE OR CAUSES OF ANY CLAIM, INCLUDING WHETHER OR NOT A CLAIM IS CAUSED IN WHOLE OR IN PART BY:

(a) THE NEGLIGENCE (WHETHER SOLE, JOINT, CONCURRENT, COMPARATIVE, CONTRIBUTORY, ACTIVE, PASSIVE, GROSS OR OTHERWISE), WILLFUL MISCONDUCT, STRICT LIABILITY, OR OTHER FAULT OF ANY OF THE INDEMNIFIED PARTIES; AND/OR

 

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(b) A PRE-EXISTING DEFECT, WHETHER PATENT OR LATENT, WITH RESPECT TO THE PROPERTY OF ANY OF THE PARTIES, THEIR AFFILIATES OR THEIR RESPECTIVE REPRESENTATIVES; AND/OR THE UNSEAWORTHINESS OF ANY VESSEL OR UNAIRWORTHINESS OF ANY AIRCRAFT OR MECHANICAL FAILURE OF ANY VEHICLE OF A PARTY, ITS AFFILIATES OR ANY OF THEIR RESPECTIVE REPRESENTATIVES, WHETHER CHARTERED, LEASED, OWNED, OR FURNISHED OR PROVIDED BY ANY OF THE PARTIES, THEIR AFFILIATES OR ANY OF THEIR RESPECTIVE REPRESENTATIVES.

Section 11.5 Limitation on Liability.

(a) Seller shall not have any liability for any indemnification under Section 11.3(a)(i) for any individual Loss (other than Losses attributable to a breach of the representations and warranties in Section 5.1, Section 5.2, Section 5.3, Section 5.4, Section 5.5, Section 5.6, Section 5.7, and Section 5.11(a)-(b)) (the “Seller Fundamental Representations”), unless and until (i) the amount of such individual Loss exceeds Two Million Five Hundred Thousand Dollars ($2,500,000) and (ii) until and unless the aggregate amount of all such Losses for which Claim Notices are delivered by Purchaser exceeds Ten Million Dollars ($10,000,000) (the “Indemnity Deductible”) and then only to the extent such Losses exceed the Indemnity Deductible.

(b) Notwithstanding anything to the contrary contained in this Agreement, Seller shall not be required to indemnify the Purchaser Group (i) under Section 11.3(a) for aggregate Losses (other than Losses attributable to a breach of the Seller Fundamental Representations) in excess of One Hundred Million Dollars ($100,000,000), and (ii) under the terms of this Agreement, for aggregate Losses in excess of one hundred percent (100%) of the Purchase Price (including those attributable to a breach of the Seller Fundamental Representations).

Section 11.6 Exclusive Remedy. Notwithstanding anything to the contrary contained in this Agreement, without limitation of the special warranty of Defensible Title in the Assignment and Deed, except with respect to any breach by Purchaser of its obligations (a) to maintain the P&A Financial Security and (b) to fully comply with the terms of the Senior Secured Term Loan Agreement and the Collateral Documents from and after Closing, including the Reassignment Option (in which event, Seller shall have all remedies at law or in equity or as provided therein on account of such breach), from and after the Closing, Section 4.8 (Consents to Assign), Section 7.5 (Indemnity Regarding Access), Section 11.2 (Purchaser’s Indemnity), Section 11.3 (Sellers Indemnity), Section 11.12 (ExxonMobil Insurance) and Section 12.2 (Receipts and Credits) contain the Parties’ exclusive remedy against each other with respect to the transactions contemplated hereby and the sale of the Assets, including breaches of the representations, warranties, covenants and agreements of the Parties contained in this Agreement or in any Transaction Documents.

Section 11.7 Indemnification Procedures. All claims for indemnification under Section 4.8 (Consent to Assign), Section 7.2 (Performance Bonds), Section 7.5 (Indemnity Regarding Access), Section 11.2 (Purchaser’s Indemnity), Section 11.3 (Seller’s Indemnity), Section 11.12 (ExxonMobil Insurance) and Section 12.2 (Receipts and Credits) shall be asserted and resolved as follows:

(a) For purposes of this ARTICLE XI, Section 4.8, Section 7.5 and Section 12.2, the term “Indemnifying Party” when used in connection with particular Losses shall mean the Party or Parties having an obligation to indemnify another Party or Parties with respect to such Losses pursuant to such sections, and the term “Indemnified Party” when used in connection with particular Losses shall mean the Party or Parties having the right to be indemnified with respect to such Losses by another Party or Parties pursuant to such sections.

(b) To make claim for indemnification under this ARTICLE XI, Section 4.8, Section 7.5 or Section 12.2, an Indemnified Party shall notify the Indemnifying Party of its claim under this Section 11.7, including the specific details of and specific basis under this Agreement for its claim

 

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(the “Claim Notice”). In the event that the claim for indemnification is based upon a claim by an unaffiliated third party against the Indemnified Party (a “Third Party Claim”), the Indemnified Party shall provide its Claim Notice promptly after the Indemnified Party has actual knowledge of the Third Party Claim and shall enclose a copy of all papers (if any) served with respect to the Third Party Claim; provided that the failure of any Indemnified Party to give notice of a Third Party Claim as provided in this Section 11.7 shall not relieve the Indemnifying Party of its indemnification obligations under this Agreement, except to the extent (and then only to the extent) such failure materially prejudices the Indemnifying Party’s ability to defend against the Third Party Claim. In the event that the claim for indemnification is based upon an inaccuracy or breach of a representation, warranty, covenant or agreement, the Claim Notice shall specify the representation, warranty, covenant or agreement that was inaccurate or breached.

(c) In the case of a claim for indemnification based upon a Third Party Claim, the Indemnifying Party shall have thirty (30) days from its receipt of the Claim Notice to notify the Indemnified Party whether it admits or denies its liability to defend the Indemnified Party against such Third Party Claim at the sole cost and expense of the Indemnifying Party. The Indemnified Party is authorized, prior to and during such thirty (30) day period, to file any motion, answer or other pleading that it shall deem necessary or appropriate to protect its interests or those of the Indemnifying Party and that is not prejudicial to the Indemnifying Party.

(d) If the Indemnifying Party admits its liability, it shall have the right and obligation to diligently defend, at its sole cost and expense, the Third Party Claim. The Indemnifying Party shall have full control of such defense and proceedings, including any compromise or settlement thereof unless the compromise or settlement includes the payment of any amount by (because of the Indemnity Deductible or otherwise), the performance of any obligation by or the limitation of any right or benefit of, the Indemnified Party, in which event such settlement or compromise shall not be effective without the consent of the Indemnified Party, which shall not be unreasonably conditioned, withheld or delayed. If requested by the Indemnifying Party, the Indemnified Party agrees to cooperate in contesting any Third Party Claim which the Indemnifying Party elects to contest, the costs of which shall be included in the Losses covered by the indemnity obligation of the Indemnifying Party hereunder. The Indemnified Party may participate in, but not control, at its own expense, any defense or settlement of any Third Party Claim controlled by the Indemnifying Party pursuant to this Section 11.7. An Indemnifying Party shall not, without the written consent of the Indemnified Party, (i) settle any Third Party Claim or consent to the entry of any judgment with respect thereto which does not include an unconditional written release of the Indemnified Party from all liability in respect of such Third Party Claim or (ii) settle any Third Party Claim or consent to the entry of any judgment with respect thereto in any manner that may materially and adversely affect the Indemnified Party (other than as a result of money damages covered by the indemnity).

(e) If the Indemnifying Party does not admit its liability (which it will be deemed to have so done if it fails to timely respond) or admits its liability but fails to diligently prosecute or settle the Third Party Claim, then the Indemnified Party shall have the right to defend against the Third Party Claim at the sole cost and expense of the Indemnifying Party, with counsel of the Indemnified Party’s choosing, subject to the right of the Indemnifying Party to admit its liability and assume the defense of the Third Party Claim at any time prior to settlement or final determination thereof. If the Indemnifying Party has not yet admitted its liability for a Third Party Claim, the Indemnified Party shall send written notice to the Indemnifying Party of any proposed settlement and the Indemnifying Party shall have the option for ten (10) days following receipt of such notice to (i) admit in writing its liability for the Third Party Claim and (ii) if liability is so admitted, reject, in its reasonable judgment, the proposed settlement.

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

 

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has cured the Losses or that it disputes the claim for such Losses, then the Indemnifying Party shall be deemed to be not disputing the claim for such Losses.

Section 11.8 Survival.

(a) The (i) representations and warranties of Seller in ARTICLE V and in the certificate delivered at Closing by Seller pursuant to Section 10.3(h) (other than Section 5.4 and the Seller Fundamental Representations), and (ii) the covenants and agreements of Seller contained herein to be performed prior to Closing shall, in each case, survive the Closing for a period of twelve (12) months after the Closing Date. The representations and warranties in Section 5.4 and the Tax covenants in ARTICLE XIII shall in each case survive until the expiration of the statute of limitations applicable to the items covered thereunder plus sixty (60) days. The representations, warranties, covenants and agreements of Purchaser and Seller Fundamental Representations (other than the representations and warranties in Section 5.4 and the Tax covenants in ARTICLE XIII) contained herein shall survive without time limit.

(b) Subject to Section 11.8(a) and except as set forth in Section 11.8(c), the remainder of this Agreement shall survive the Closing without time limit. Representations, warranties, covenants and agreements shall be of no further force and effect after the date of their expiration; provided that there shall be no termination of any bona fide claim asserted pursuant to this Agreement with respect to such a representation, warranty, covenant or agreement prior to its expiration date.

(c) The indemnities in Section 11.2(a) and Section 11.3(a) shall terminate as of the termination date of each respective representation, warranty, covenant or agreement that is subject to indemnification, except, in each case, as to matters for which a specific written claim for indemnity has been delivered to the Indemnifying Party on or before such termination date. The indemnities for the Retained Obligations (other than those described in Section 11.3(c), Section 11.3(d), and Section 11.3(g)) shall survive the Closing for a period of two (2) years after the Closing Date. The indemnities in Section 11.3(c) and Section 11.3(d) shall survive the Closing for the statute of limitations applicable to the items covered thereunder plus sixty (60) days. The indemnities in Section 11.2(b) and Section 11.3(g) shall survive the Closing without time limit. Each Retained Obligation shall, upon expiration of the applicable survival period become part of the Assumed Obligations under Section 11.2; provided, that notwithstanding the foregoing, in no event shall the Retained Obligations set forth in Section 11.3(c) or Section 11.3(g), or any Losses related to such matters, become part of the Assumed Obligations.

Section 11.9 Waiver of Right to Rescission. Subject to any rights in connection with the exercise of the Reassignment Option, Seller and Purchaser acknowledge that, following the Closing, the payment of money, as limited by the terms of this Agreement, shall be adequate compensation for breach of any representation, warranty, covenant or agreement contained herein or for any other claim arising in connection with or with respect to the transactions contemplated by this Agreement. As the payment of money, as secured by the Senior Secured Term Loan Agreement, as applicable, shall be adequate compensation, following the Closing, Purchaser and Seller waive any right to rescind this Agreement or any of the transactions contemplated hereby, subject to any rights in connection with the exercise of the Reassignment Option.

Section 11.10 Non-Compensatory Damages. No Indemnified Parties shall be entitled to recover from an Indemnifying Party or its Affiliates any indirect, special, incidental, consequential, punitive, exemplary, remote or speculative damages or damages for lost profits of any kind arising under or in connection with this Agreement or the transactions contemplated hereby, except to the extent any such Party suffers such damages to a third party, which damages (including costs of defense and reasonable attorneys’ fees incurred in connection with defending against such damages) shall not be excluded by this provision as to recovery hereunder.

Section 11.11 Insurance. The amount of any Losses for which any of the Purchaser Group or Seller Group is entitled to indemnification under this Agreement or in connection with or with respect to the

 

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transactions contemplated by this Agreement shall be reduced by any corresponding insurance proceeds actually received by any such Indemnified Party under any third party insurance arrangements.

Section 11.12 ExxonMobil Insurance.

(a) ExxonMobil, along with its predecessors and Affiliates, may have or have had coverage under various insurance policies (the “ExxonMobil Policies”) covering their interests.

(b) Purchaser agrees that:

(i) No insurance coverage shall be provided under the ExxonMobil Policies to Purchaser, including any policies insured or reinsured by Ancon Insurance Company, Inc. or Petroleum Casualty Company (the “Captives”);

(ii) From and after Closing, Purchaser assumes any and all responsibilities for effecting and maintaining insurance in respect of the Assets and replacing Captives, where applicable; and

(iii) Purchaser shall indemnify and defend Seller and its Affiliates (including Captives) against, and shall hold them harmless from, any claim made after the Closing against any of the ExxonMobil Policies with respect to the Assets including all costs and expenses (including attorneys’ fees) related thereto.

(c) Notwithstanding any provision of this agreement to the contrary, for a period of six (6) years after the Closing, Purchaser shall maintain in place one or more asset-level insurance policy(ies) having liability coverage totaling no less than One Hundred Million Dollars ($100,000,000.00) which shall: (1) cover Seller and their Affiliates as additional insureds for liabilities arising from or assumed under this Agreement; and (2) be primary as to all other policies (including any deductibles or self-insured retentions); provided, this Section 11.12(c) shall in no way apply to Purchaser’s general corporate insurance policies. It is further agreed that Purchaser and its insurer(s) providing coverage shall waive all rights of subrogation and/or contribution against Seller and its Affiliates to the extent liabilities are assumed by Purchaser.

Section 11.13 Governmental Bonding. Within sixty (60) days of the BOEM notifying Purchaser or Seller of any plugging, supplemental or other bonding requirements necessary for Purchaser to have the applicable assignments with respect to the Assets approved by the BOEM or any other applicable governmental authority, Purchaser shall have such bonds or other financial security posted with the applicable governmental authority to have such assignments approved. During the period extending from the Closing until such time as such bonds or other financial security are posted with the applicable governmental authority, Purchaser agrees to name Seller as an additional insured on Purchaser’s insurance policies.

Section 11.14 Change of POPCO and PPC Corporate Matters. As promptly as practicable following Closing, and in any event, no later than ninety (90) days after Closing unless otherwise provided for in this Section 11.14, Purchaser shall procure that, with respect to each of POPCO and PPC:

(a) the register of shareholders of each of POPCO and PPC is updated, evidencing the transfer of the Transferred Shares from Seller to Purchaser;

(b) there is a shareholder meeting of each of POPCO and PPC at which:

(i) the name of POPCO will be changed and the article of association of POPCO will be amended to include such name change; and

(ii) the registered addresses of POPCO and PPC will be changed;

(c) the records maintained by the State of California and State of Delaware are updated to evidence that:

(i) Purchaser is the sole shareholder of the entire issued share capital in POPCO and PPC;

 

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(ii) the resignations of the existing directors, company secretary, and auditors of POPCO and PPC and the appointments of the directors, company secretary, and auditors of POPCO and PPC nominated by Purchaser have been registered; and

(iii) the name of POPCO and registered addresses of POPCO and PPC have been changed to that nominated by Purchaser;

(d) neither POPCO, PPC, nor Purchaser or its Affiliates:

(i) uses or asserts any right to use Seller Group names or trademarks or any material using or comprising Seller Group names or trademarks; or

(ii) holds itself out as being part of, or in any way connected or associated with, Seller or its Affiliates; and

(e) at its own cost and expense, de-brand POPCO and PPC by procuring that:

(i) each of POPCO and PPC promptly (and, in any event, within one hundred and twenty (120) days following the Closing Date) undertakes all legal, regulatory, and administrative formalities to record and give effect to the change of POPCO’s and PPC’s corporate, trade, company, fictitious, and all other business names, and to cease use of any domain names or URLs which incorporate or reference POPCO, Seller or its Affiliates names or trademarks; provided that, for the avoidance of doubt, nothing in this Section 11.14 shall prohibit or restrict PPC from using the name of “Pacific Pipeline Company”;

(f) within one hundred and twenty (120) days of the Closing Date, all names and references to POPCO, any predecessor in interest to the 901/903 Pipeline, or Seller or its Affiliates are removed from all facilities, signage, and other related items of POPCO and PPC as they relate to the Seller or its Affiliates; and

(g) each of POPCO and PPC ceases to make use of any stationery, invoices, forms, seals, logos, or other similar articles showing or referencing POPCO, any predecessor in interest to the 901/903 Pipeline, Seller or Seller’s Affiliates.

Section 11.15 Restrictions on Use. Where any of the Assets include a fee simple interest in real property that has been used for oil, gas, or other mineral operations or transportation, or any industrial or commercial use, the following uses of the affected land, or any portion thereof, are expressly prohibited and forbidden:

(a) any “residential” construction, development, use or purpose, which shall, without limitation, be interpreted to mean and include a prohibition against use for single or multi-family residences, residences for children, the elderly or the infirm, churches and places of worship, schools, nurseries and other pre-school facilities, nursing or convalescent homes, hospitals, health clinics, or other medical facilities, day care facilities, playgrounds, recreational parks, hotels, motels, bed and breakfasts, parks and in addition to the above, and other “residential land use” restrictions or limitations set forth or described in any and all building, zoning and land use ordinances, Laws, regulations and restrictions by municipal or other governmental authorities applicable to the property;

(b) any purpose that would constitute a “Permitted Use” under any of the residential zones, districts, or classifications set forth in any applicable municipal, county or state zoning Laws in effect at the Effective Time,

(c) any agricultural use;

(d) construction or installation of any basements, parking structures or other sub-surface areas; or

(e) any additional water wells for irrigation or drinking purposes.

Section 11.16 Engineering Controls. Purchaser agrees to adopt and use all engineering and related technical assistance available to the industry and in accordance with best practice or required by Environmental

 

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Laws to protect the health and safety of persons and that Purchaser will use and implement engineering controls to prevent the migration of vapors and/or liquids containing contamination into any buildings, underground utilities / spaces and / or storm water retention / detention ponds, including without limitation, vapor installation systems, vapor barriers, sealed sumps and storm pond liners as determined to be necessary by a professional engineer licensed in the state with substantial experience in the field. Purchaser shall take measure(s) to isolate building occupants from identified contamination as may be required by Environmental Laws to protect the health of occupants / public.

Section 11.17 Covenants Running with the Land. The covenants contained in Section 11.15 and Section 11.16 of this Agreement shall be covenants running with the land, shall be set out in the Deed and the Assignment and recorded in the real property records, and shall be binding on Purchaser and its successors and assigns.

Section 11.18 Financial Security in Favor of Seller.

(a) From and after the Closing, Seller shall have the right to enforce any security interest or credit support provided by Purchaser pursuant to this Agreement, the Collateral Documents, or otherwise, in accordance with the terms thereof to protect its interests in the payment of the Purchase Price and the viability of the Reassignment Option, and to ensure Seller’s compliance with its post-closing obligations, including funding the Penal Sum, hereunder.

(b) The exercise by Seller of the Ultimate Parent Company Guarantee or rights under any Collateral Document shall be in addition to, and not in lieu of, any other rights and remedies Seller may have under Law or in equity for Purchaser’s failure to perform as provided herein, including but not limited to, Seller’s rights to exercise the P&A Financial Security.

(c) Subject to Section 11.18(d) and (e), at or prior to Purchaser achieving Restart Production, Purchaser shall provide Seller with a performance bond substantially in the form attached as Exhibit H, in the amount of Three Hundred Fifty Million Dollars ($350,000,000.00) (the “Penal Sum”) in favor of Seller as sole beneficiary, as security for Purchaser’s obligations as provided in Section 11.1(b) (the “P&A Financial Security”); provided, however, that if Purchaser has used commercially reasonable efforts to seek P&A Financial Security in the form of Exhibit H from the financial institutions set forth on Schedule 11.18, and no such financial institution will accept Exhibit H, Purchaser shall provide Seller with a performance bond in a form acceptable to Seller. The P&A Financial Security shall be issued by a financial institution acceptable to Seller.

(i) Upon occurrence of any of the following and after prior notice to Purchaser of at least ten (10) Business Days, Seller may draw on the P&A Financial Security, in whole or in part and without prejudice to Seller’s other rights or remedies under this Agreement or the Ultimate Parent Company Guarantee (but any such a draw on the P&A Financial Security will not release or discharge (1) Purchaser from its obligations under this Agreement or (2) Purchaser’s ultimate parent company under the Ultimate Parent Company Guarantee):

1) Seller is required in any manner to perform obligations under Section 11.1(b), whether pursuant to an order or directive issued by a governmental body or regulatory agency or otherwise; or

2) Purchaser defaults on any of its obligations under Section 11.1(b) and Seller has opted to perform any or all such obligations of Purchaser (provided, however, that nothing herein shall be construed as imposing an obligation upon Seller to so perform).

(ii) If the provider of P&A Financial Security becomes unacceptable to Seller or its issuer rating by Standard & Poor’s drops below A with a stable outlook or its issuer rating by Moody’s drops below A2 with a stable outlook, within forty five (45) days of ExxonMobil providing notice to Purchaser of such occurrence, Purchaser will replace the P&A Financial Security with another security in a form substantially similar to the form attached as Exhibit H issued by a financial institution

 

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acceptable to ExxonMobil, (the “Replacement P&A Financial Security”). If Purchaser has used commercially reasonable efforts to seek Replacement P&A Financial Security using Exhibit H with financial institutions set forth on Schedule 11.18 and no such financial institution will accept Exhibit H, Purchaser shall provide Seller with a performance bond in a form acceptable to Seller. Upon Purchaser’s timely compliance with the obligation to provide Replacement P&A Financial Security, Seller: (1) shall accept such Replacement P&A Financial Security within fifteen (15) days after it is provided to Seller by Purchaser and the replacement financial institution, and (2) release and return the P&A Financial Security instrument to Purchaser for cancellation.

(d) Subject to Section 11.18(e), at any time after January 1, 2026, but no more often than once every thirty six (36) months thereafter, each of Purchaser and Seller shall have the right to request a review of the then-uncompleted Plugging and Abandonment Obligations and potential adjustment of the Penal Sum (each a “Redetermination Review”). Notwithstanding the foregoing or anything herein to the contrary (i) at the first Redetermination Review, Seller shall have the right to require, and Purchaser shall provide if requested, an increase in the Penal Sum to an Adjusted Penal Sum (as defined below) amount of no less than Five Hundred Million Dollars ($500,000,000.00) and (ii) Seller shall have the right to call for a Redetermination Review at any time an event occurs with respect to the Assets or Purchaser’s operations that (a) constitutes a material violation of Environmental Laws, or (b) constitutes a physical condition that requires reporting to a governmental authority, investigation, monitoring, removal, cleanup, Remediation, restoration, repair or correction under Environmental Laws. The Party requesting the Redetermination Review must submit a written request to the other Party for each Redetermination Review, which shall take place at a time and place mutually convenient to the Parties, but in any event, shall take place no later than ninety (90) days after the non-requesting Party’s receipt of such written notice. At the Redetermination Review, the Parties shall attempt in good faith to agree on whether the Penal Sum should be increased or decreased based upon then current estimates of the costs and expenses to satisfy the Plugging and Abandonment Obligations which remain uncompleted at the time of the Redetermination Review. If the Parties cannot reach agreement on any adjustments to the Penal Sum within fifteen (15) days of the Redetermination Review, either Party may refer the remaining issues in dispute for review and final determination to a nationally-recognized independent engineering firm experienced in performing offshore plugging, abandonment and decommissioning operations and mutually agreeable to both Seller and Purchaser, or if the Parties cannot agree, selected by the American Arbitration Association (such firm, the “Referee”). The Referee shall act as an expert for the limited purposes of determining the disputed elements in the Parties’ Redetermination Review and resulting adjustment, if any, to the Penal Sum (and may not award any party damages or assess any fees or penalties). The Referee’s determination shall be made within fifteen (15) days after submission of the matters in dispute and shall be final and binding on the Parties without right of appeal. Seller and Purchaser shall each bear (i) their own legal fees and other costs associated with the proceeding and (ii) one-half of the fees, costs and expenses of the Referee (unless the Redetermination Review arises as a result of the conditions in the second sentence of this subsection (d), in which case they shall be for Purchaser’s account).

(e) On or before the date that is thirty (30) days after (i) the date the Parties reach final agreement on the adjustment to the Penal Sum addressed at each Redetermination Review or (ii) the date any dispute regarding adjustments to the Penal Sum is resolved pursuant to Section 11.18(d), (x) if the adjustment results in a new Penal Sum (the “Adjusted Penal Sum”) that is less than the amount of the Penal Sum immediately before such Redetermination Review (the “Unadjusted Penal Sum”), Seller shall execute a release of an amount of the then-current Penal Sum equal to the difference between the Unadjusted Penal Sum less the Adjusted Penal Sum, or (y) if the adjustment to the Penal Sum results in an Adjusted Penal Sum that is greater than the Unadjusted Penal Sum, Purchaser shall increase the amount of the then-current Penal Sum by an amount equal to the difference between the Adjusted Penal Sum less the Unadjusted Penal Sum. The Parties shall execute any reduction riders or amendments to the P&A Financial Security, as necessary, to adjust the amount of the Penal Sum in accordance with the Parties’ final agreement or the Referee’s decision, as applicable.

 

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(f) If for any reason Purchaser fails to timely obtain a performance bond in the amount of the Penal Sum required under Section 11.18(c) or the Adjusted Penal Sum required under Section 11.18(e), then Seller shall have the right to require Purchaser to provide alternative P&A Financial Security or supplemental P&A Financial Security in the form of a letter (or letters) of credit in form substantially similar to Exhibit T to be issued by JPMorgan Chase Bank, N.A. or another bank of similar reputation that is acceptable to Seller. In the event Purchaser is not able to provide such letter or letters of credit as described in this Section 11.18(f) in an amount that, together with any bonds required under Section 11.18(c) or Section 11.18(e), equals or exceeds the amount of the Penal Sum required under Section 11.18(c) or the Adjusted Penal Sum required under Section 11.18(e), then in such case, Purchaser shall have a period of thirty-six (36) months from the date Purchaser determines that it cannot obtain a letter or letters of credit in the required amount in which to pay the required amounts into an abandonment escrow account, pursuant to an escrow agreement acceptable to Seller and on a payment schedule acceptable to Seller, until the total amount of all P&A Financial Security provided by Purchaser under this Agreement is equal to the then required Penal Sum or Adjusted Penal Sum, as the case may be.

(g) If, after Restart Production is achieved, (i) BOEM or any other governmental authority requires Purchaser to post supplemental bonds for all or any of the Assets approved by BOEM or any other applicable governmental authority as set forth in Section 11.13, (ii) such supplemental bonds cover Plugging and Abandonment Obligations, (iii) Purchaser satisfies such governmental authority’s requirements and posts such supplemental bonds from a qualified surety as specified Section 11.18(c), and (iv) Seller is listed as a co-obligee on such supplemental bonds, then the Parties shall decrease the amount of the Penal Sum or Adjusted Penal Sum, as applicable, on a dollar for dollar basis by the amount of such supplemental bonds.

(h) The provisions of this Section 11.18 are (i) binding on all successors and assigns of Purchaser with respect to any of the Assets and (ii) covenants running with the Assets. For the avoidance of doubt, if Purchaser sells, assigns or otherwise transfers less than all of the Assets to a transferee, the transferee shall be required to (A) satisfy the Senior Secured Term Loan Agreement and Collateral Documents (to the extent, and only to the extent such transfer occurs prior to the Actual Payment Date) and (B) obtain an Ultimate Parent Company Guarantee and P&A Financial Security in a form and manner reasonably acceptable to Seller as set forth herein with respect to such Assets so sold, assigned or otherwise transferred. Such transfer shall not relieve Purchaser’s obligation to maintain the Senior Secured Term Loan Agreement and Collateral Documents, its Ultimate Parent Company Guarantee and P&A Financial Security as to any Assets it retains.

Section 11.19 Tax Treatment. The Parties shall treat any indemnification payment made under this ARTICLE XI as an adjustment to the Purchase Price for U.S. federal and applicable state Income Tax purposes, unless otherwise required by applicable Law.

 

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ARTICLE XII

CERTAIN ADDITIONAL AGREEMENTS

Section 12.1 Post-Closing Settlement Statement.

(a) As soon as reasonably practicable after the Closing Date, but in no event longer than one hundred fifty (150) days after the Closing Date, Seller shall prepare in good faith, in accordance with this Agreement, and deliver to Purchaser, a final statement (the “Final Settlement Statement”) setting forth the final Adjustment to the Purchase Price in accordance with Section 3.2 and Section 3.3. The Final . Settlement Statement also will include any adjustments necessary because Seller chose to attempt to cure a Title Defect under Section 4.3 or Remediate an Environmental Defect under Section 4.10 of this Agreement. As soon as reasonably practicable, but in any event within thirty (30) days after receipt of the Final Settlement Statement, Purchaser shall return to Seller a written report containing any proposed changes or disputed items to the Final Settlement Statement and an explanation of any such changes or disputed items and the reasons therefor (the “Dispute Notice”). Purchaser’s failure to deliver to Seller a Dispute Notice detailing proposed changes or disputed items to the Final Settlement Statement by such date shall be deemed to be an acceptance by Purchaser of the Final Settlement Statement delivered by Seller, and Seller’s determinations with respect to all such adjustments in the Final Settlement Statement that are not addressed in the Dispute Notice shall prevail. The Parties shall undertake to agree on the Final Settlement Statement no later than two hundred ten (210) days after the Closing Date (the “Target Settlement Date”). If the final adjustments to Purchase Price set forth in the Final Settlement Statement are mutually agreed upon by Seller and Purchaser prior to the Target Settlement Date or are deemed agreed pursuant to the foregoing or determined pursuant to Section 12.1(b), the Final Settlement Statement shall be final and binding on the Parties. All amounts paid or transferred pursuant to this Section 12.1(a) shall be delivered in United States currency by wire transfer of immediately available funds to the account specified in writing by the relevant Party.

(b) If Seller and Purchaser cannot reach agreement on the Final Settlement Statement within ninety (90) days after the Target Settlement Date, either Party may refer the remaining issues for dispute resolution under Section 17.5.

Section 12.2 Receipts and Credits. Subject to Section 2.4 and the following sentence, after the Parties’ agreement (or deemed agreement) upon the Final Settlement Statement, to the extent not accounted for in the Final Settlement Statement, if (i) any Party receives monies belonging to the other, including proceeds of production, then such amount shall, within thirty (30) Business Days after the end of the month in which such amounts were received, be paid over to the proper Party, (ii) any Party pays monies for Property Expenses which are the obligation of the other Party hereto, then such other Party shall, within thirty (30) Business Days after the end of the month in which the applicable invoice and proof of payment of such invoice were received, reimburse the Party which paid such Property Expenses, (iii) a Party receives an invoice of an expense or obligation which is owed by the other Party, such Party receiving the invoice shall promptly forward such invoice to the Party obligated to pay the same, and (iv) an invoice or other evidence of an obligation is received by a Party, which is partially an obligation of both Seller and Purchaser, then the Parties shall consult with each other, and each shall promptly pay its portion of such obligation to the obligee. Notwithstanding anything herein to the contrary, from and after one hundred and fifty (150) days of the Closing Date, Seller shall have no liabilities or obligations with respect to pre-Effective Time Property Expenses.

Section 12.3 Records; Retention.

(a) Within sixty (60) days after Closing, Seller will make available to Purchaser, at Purchaser’s cost and request, copies of books, files, records, maps, and data relating to the Assets (the “Records”) including Seller’s non-proprietary title records (including externally-prepared abstracts of title, title opinions and title reports, and title curative documents), the Existing Contracts, correspondence and all related matters in the possession of Seller (but excluding corporate, financial, Tax, and general

 

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accounting records, internal title reports or analyses, all internal management systems, plans, policies, standards and procedures, including, without limitation, any health, safety and environment management systems, plans, policies, standards and procedures, any document subject to the attorney-client or other privilege, and any document, data, or other information where disclosure is restricted by agreement with a third party). Purchaser must advise Seller before Closing which such files, records, production records, environmental records, and engineering data and reports it requests access to, which may not include any Excluded Records. For any of the seismic data listed on Schedule 12.3(a) related to the Assets, Seller shall grant to Purchaser a license for any Seller proprietary seismic data. Seller shall not provide a copy of such third party seismic data unless Purchaser, on or prior to Closing, demonstrates to Seller’s reasonable satisfaction that Purchaser has obtained the appropriate license from such third party seismic owner. For all purposes of this Agreement, the Records shall be deemed to be a part of, and included in, the Assets; provided, however, that copies of hardcopy files shall be provided at Purchaser’s cost and expense and shall not be considered as part of the Purchase Price.

(b) Purchaser, for a period of seven (7) years following the Closing, will (i) retain the Records, (ii) provide Seller, its Affiliates and its and their officers, employees and representatives with access to the Records (to the extent that Seller has not retained the original or a copy) during normal business hours for review and copying at Seller’s expense, and (iii) provide Seller, its Affiliates and its and their officers, employees and representatives with access, during normal business hours, to materials received or produced after the Closing relating to any indemnity claim made under Section 11.3 for review and copying at Seller’s expense.

(c) With respect to the Leases, to extent requested by Purchaser and required by applicable Law or regulation, Seller will sign and deliver to Purchaser, a list of the copies of Records delivered to Purchaser (with omissions noted and explained for records required under federal regulations, but which are not available). Purchaser will sign the list and submit it to BOEM or BSEE in accordance with applicable regulations.

Section 12.4 Recording. As soon as practicable but no later than sixty (60) days after Closing, Purchaser, at its sole cost, shall record the Assignment in the appropriate counties and provide Seller with copies of the recorded Assignment. Purchaser shall be responsible for recording and filing documents associated with the transfer of the Assets to it and for all costs and fees associated therewith, including filing the Assignment with appropriate federal, state and local governmental authorities as required by applicable Law or to ensure the validity and enforceability of such document. Seller shall be authorized, at Purchaser’s sole cost and expense, to file the applicable Collateral Documents with appropriate federal, state and local governmental authorities as required by applicable Law or to ensure the validity and enforceability of such document and the liens and security interests granted thereunder. As soon as practicable after recording or filing, Purchaser shall furnish Seller with all recording data and evidence of all required filings including (with respect to Leases covering any offshore acreage) filings with the appropriate state counties. Purchaser shall also be responsible for obtaining Customary Post-Closing Consents applicable to the transaction contemplated hereunder and all costs and fees associated therewith.

Section 12.5 Operatorship Matters, Filing for Approvals. Notwithstanding anything to the contrary contained in this Agreement, but subject to the terms of the Transaction Documents, all applicable Existing Contracts and Schedules and all applicable Laws, from and after Closing:

(a) To the extent that from or after Closing Seller is the operator of or the designated applicant under Oil Spill Financial Responsibility (OSFR) for any Asset, the Parties shall designate and vote to appoint Purchaser as the operator and, as applicable, the designated applicant under OSFR for such Asset as to record title and/or operating rights interests, as applicable; and

 

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(b) Purchaser and Seller, at Purchaser’s sole cost, shall no later than thirty (30) days after Closing:

(i) execute, acknowledge (if necessary), and exchange, as applicable, any applications necessary to transfer to Purchaser any transferable Permits to which the Assets are subject, and which Seller has agreed to transfer under this Agreement;

(ii) file all appropriate forms, declarations, transfer of operatorship and bonds (or other authorized forms of security) with all applicable governmental authorities and third parties relative to Purchaser’s assumption of operations or the transfer of the Assets; and

(iii) prepare, execute and submit appropriate change of operator notices and third-party ballots required under applicable operating agreements.

Parties further agree to take all other actions required of it by governmental authorities having jurisdiction to obtain all requisite regulatory approval with respect to this transaction, and to use their commercially reasonable efforts to obtain unconditional approval by such authorities of any transfer documents requiring governmental approval in order for Purchaser to be recognized as owner and operator of the Assets. Each Party agrees to provide the other Party with approved copies of the documents contemplated by this Section 12.5, as soon as they are available.

Section 12.6 Further Cooperation. After Closing, Seller and Purchaser agree to take such further actions and to execute, acknowledge and deliver all such further documents that are reasonably necessary or useful in carrying out the purposes of this Agreement or of any document delivered pursuant to this Agreement.

 

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ARTICLE XIII

TAXES

Section 13.1 Apportionment of Ad Valorem and Property Taxes. All Property Taxes with respect to the Tax period in which the Effective Time occurs shall be apportioned as of the Effective Time between Seller and Purchaser. The Parties will make final settlement of all Property Taxes by estimating the Property Taxes to be due for the Tax period in which the Effective Time occurs based on the Property Taxes assessed and paid for the immediately prior Tax period. Such settlement of Property Taxes shall be part of the Final Settlement Statement between the Parties. If Property Taxes have not been paid before Closing, Purchaser shall pay the Property Taxes and shall be credited for Seller’s portion of the Property Taxes under Section 3.3(e). If Property Taxes have been paid before Closing, Seller shall be credited for Purchaser’s portion of the Property Taxes under Section 3.2(c). Purchaser shall be responsible for all subsequent Property Taxes and interest that are applied to the Assets for the periods or portions thereof after the Effective Time.

Section 13.2 Sales and Transfer Taxes. The Purchase Price is exclusive of any sales, use, transfer or other similar Taxes in connection with the sale of the Assets pursuant to this Agreement (“Transfer Taxes”). If any Transfer Taxes are assessed, Purchaser shall be solely responsible for the payment of such Taxes. Purchaser shall be responsible for any applicable conveyance, transfer and recording fees, and real estate transfer stamps or Taxes imposed on the transfer of the Assets pursuant to this Agreement. If Seller is required to pay any such Taxes, then Purchaser shall reimburse Seller for such amounts. Any sales, use, transfer or other similar Taxes arising with respect to the Assets (other than Transfer Taxes) shall be apportioned as of the Effective Time between Seller and Purchaser based on an interim “closing-of-the-books” as of such time.

Section 13.3 Severance and Production Taxes. Seller shall bear and pay all Severance Taxes to the extent attributable to production from the Assets before the Effective Time. Purchaser shall bear and pay all such Severance Taxes on production from the Assets on and after the Effective Time. Seller shall withhold and pay on behalf of Purchaser all such Severance Taxes on production from the Assets between the Effective Time and the Closing Date, if the Closing Date follows the Effective Time, and the amount of any such payment shall be reimbursed to Seller as a Closing adjustment to the Purchase Price pursuant to Section 12.1. If either Party pays Severance Taxes owed by the other under this Agreement, upon receipt of evidence of payment the nonpaying Party shall reimburse the paying Party promptly for its proportionate share of such Taxes.

Section 13.4 Cooperation. Each Party shall provide the other Party with reasonable information which may be required by the other Party for the purpose of meeting reporting obligations (including preparation of respective BOE Form 100-B), preparing Tax Return and responding to any audit by any taxing jurisdiction. Each Party shall cooperate with all reasonable requests of the other Party made in connection with contesting the imposition of Taxes. Notwithstanding anything to the contrary in this Agreement, neither Party shall be required at any time to disclose to the other Party any Tax Returns or other confidential Tax information. In the event that Purchaser receives any refund for Taxes arising from, or attributable to, any Tax period ending on or before the Effective Time, Purchaser shall pay Seller an amount equal to such Tax refund, which amount shall be due and payable as soon as is reasonably practicable and, in any event, within five (5) Business Days of Purchaser’s receipt of such Tax refund. Purchaser shall, upon request of Seller, provide to Seller such information, as Seller may reasonably request, to verify the calculation of the amount of any refund pursuant to this Clause.

Section 13.5 Like-Kind Exchange. Each Party consents to the other Party’s assignment of its rights and obligations under this Agreement to its Affiliate or its Qualified Intermediary and/or to its Exchange Accommodation Titleholder under the terms of a Qualified Exchange Accommodation Arrangement in connection with the effectuation of a Like-Kind Exchange Transaction. However, Seller and Purchaser acknowledge and agree that any assignment of this Agreement to its Affiliate or a Qualified Intermediary and/or to an Exchange Accommodation Titleholder under the terms of a Qualified Exchange Accommodation Arrangement in connection with the effectuation of a Like-Kind Exchange Transaction does not release either Party from any of its respective liabilities and obligations to the other Party under this Agreement. If requested

 

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by the other Party, each Party agrees to cooperate with the other Party (to the extent reasonable) to attempt to structure the transaction as a Like-Kind Exchange Transaction. If a Like-Kind Exchange Transaction occurs, the Parties recognize that IRS Form 8824, Like-Kind Exchanges, will be required to be filed, and each Party consents to the filing of such form and will fully cooperate, to the extent necessary, with the other Party in filing such form.

Section 13.6 IRS Form 8594. The Parties will confer and cooperate in the preparation and filing of their respective IRS Form 8594, Asset Acquisition Statement Under Section 1060, to reflect consistent reporting of the agreed upon allocation of the value of the Assets.

 

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ARTICLE XIV

DISCLAIMERS AND WAIVERS

Section 14.1 Condition of the Assets. PURCHASER ACKNOWLEDGES AND AGREES THAT, SUBJECT TO THE PROVISIONS OF ARTICLE IV, THE SPECIAL WARRANTY OF DEFENSIBLE TITLE IN THE ASSIGNMENT AND DEED, AND PURCHASER’S RIGHTS UPON A BREACH BY SELLER OF ANY OF ITS REPRESENTATIONS OR WARRANTIES CONTAINED IN ARTICLE V (AS LIMITED BY ARTICLE XI), PURCHASER SHALL ACQUIRE THE ASSETS (INCLUDING ASSETS FOR WHICH A DEFECT NOTICE IS GIVEN UNDER ARTICLE IV) IN AN “AS IS, WHERE IS” CONDITION AND SHALL ASSUME ALL RISKS THAT THE ASSETS MAY CONTAIN WASTE MATERIALS (WHETHER TOXIC, HAZARDOUS, EXTREMELY HAZARDOUS OR OTHERWISE) OR OTHER ADVERSE PHYSICAL CONDITIONS, INCLUDING THE PRESENCE OF UNKNOWN ABANDONED WELLS, PUMPS, PITS, PIPELINES OR OTHER WASTE OR SPILL SITES WHICH MAY NOT HAVE BEEN REVEALED BY PURCHASER’S ENVIRONMENTAL ASSESSMENT. UPON THE OCCURRENCE OF CLOSING, BUT SUBJECT TO THE SPECIAL WARRANTY OF DEFENSIBLE TITLE IN THE ASSIGNMENT AND DEED, AND PURCHASER’S RIGHTS UPON A BREACH BY SELLER OF ANY OF ITS REPRESENTATIONS OR WARRANTIES CONTAINED IN ARTICLE V (AS LIMITED BY ARTICLE XI), IF APPLICABLE, ALL RESPONSIBILITY AND LIABILITY RELATED TO SUCH CONDITIONS, WHETHER KNOWN OR UNKNOWN, FIXED OR CONTINGENT, SHALL BE TRANSFERRED FROM SELLER TO PURCHASER WITHOUT RECOURSE AGAINST SELLER. WITHOUT LIMITING THE FOREGOING BUT SUBJECT TO THE PROVISIONS OF ARTICLE XI, THE SPECIAL WARRANTY OF DEFENSIBLE TITLE IN THE ASSIGNMENT AND DEED, AND PURCHASER’S RIGHTS UPON A BREACH BY SELLER OF ANY OF ITS REPRESENTATIONS OR WARRANTIES CONTAINED IN ARTICLE V (AS LIMITED BY ARTICLE XI), IF APPLICABLE, EFFECTIVE AS OF CLOSING, PURCHASER WAIVES ITS RIGHT TO RECOVER FROM SELLER AND FOREVER RELEASES AND DISCHARGES THE SELLER GROUP FROM ANY AND ALL LOSSES, WHETHER DIRECT OR INDIRECT, KNOWN OR UNKNOWN, FORESEEN OR UNFORESEEN, THAT MAY ARISE OR MAY HAVE ARISEN PRIOR TO, ON OR AFTER THE EFFECTIVE TIME ON ACCOUNT OF OR IN ANY WAY CONNECTED WITH THE ENVIRONMENTAL OR OTHER PHYSICAL CONDITION OF THE ASSETS OR ANY VIOLATION BY SELLER, PURCHASER OR ANY OTHER PARTY OF ANY APPLICABLE LEASE, CONTRACT OR OTHER INSTRUMENT (BUT ONLY TO THE EXTENT SUCH RELATES TO THE ENVIRONMENTAL OR PHYSICAL CONDITION OF THE PROPERTY) OR OF ANY APPLICABLE EXISTING OR FUTURE ENVIRONMENTAL LAW, REGULATION, ORDER OR OTHER DIRECTIVE OF ANY GOVERNMENTAL AUTHORITY HAVING JURISDICTION APPLICABLE THERETO, INCLUDING WITHOUT LIMITATION, ALL ENVIRONMENTAL LAWS. PURCHASER IS AWARE THAT THE ASSETS HAVE BEEN USED FOR EXPLORATION, DEVELOPMENT, PROCESSING, TRANSPORTATION, STORAGE AND PRODUCTION OF OIL AND GAS AND OTHER CHEMICALS AND THAT THERE MAY BE IMPACTS BY PETROLEUM, PRODUCED WATER, WASTES OR OTHER MATERIALS LOCATED ON, UNDER OR EMANATING FROM THE ASSETS AND LANDS COVERED BY THE LEASES (OR LANDS POOLED OR ASSOCIATED THEREWITH). EQUIPMENT AND SITES INCLUDED IN THE ASSETS MAY CONTAIN ASBESTOS, HAZARDOUS SUBSTANCES OR NORM. NORM MAY AFFIX OR ATTACH ITSELF TO THE INSIDE OF WELLS, MATERIALS AND EQUIPMENT AS SCALE, OR IN OTHER FORMS. THE WELLS, MATERIALS AND EQUIPMENT LOCATED ON THE LEASES OR LANDS POOLED OR ASSOCIATED THEREWITH MAY CONTAIN NORM AND OTHER WASTES OR HAZARDOUS SUBSTANCES, AND NORM-CONTAINING MATERIAL AND OTHER WASTES MAY HAVE BEEN BURIED, COME IN CONTACT WITH THE SOIL, OR OTHERWISE BEEN DISPOSED OF ON OR UNDER THE LANDS COVERED BY THE LEASES OR LANDS POOLED OR ASSOCIATED THEREWITH. SPECIAL PROCEDURES MAY BE REQUIRED FOR THE REMEDIATION, REMOVAL, TRANSPORTATION OR DISPOSAL OF WASTES, ASBESTOS, HAZARDOUS SUBSTANCES AND NORM FROM THE ASSETS.

 

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Section 14.2 Other Disclaimers by Seller.

(a) EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED FOR IN Section 4.2(b) AND IN ARTICLE V OF THIS AGREEMENT OR IN THE SPECIAL WARRANTY OF DEFENSIBLE TITLE IN THE ASSIGNMENT AND DEED, PURCHASER ACKNOWLEDGES AND AGREES THAT SELLER EXPRESSLY DISCLAIMS AND NEGATES ANY REPRESENTATION OR WARRANTY, EXPRESS, STATUTORY OR IMPLIED, AS TO (A) TITLE TO ANY OF THE ASSETS, (B) 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 ASSETS, (C) THE QUANTITY, QUALITY OR RECOVERABILITY OF HYDROCARBONS IN OR FROM THE ASSETS, (D) ANY ESTIMATES OF THE VALUE OF THE ASSETS OR FUTURE REVENUES GENERATED BY THE ASSETS, (E) THE ABILITY TO PRODUCE HYDROCARBONS FROM THE ASSETS, (F) THE MAINTENANCE, REPAIR, CONDITION, QUALITY, SUITABILITY, DESIGN OR MARKETABILITY OF THE ASSETS, (G) THE CONTENT, CHARACTER OR NATURE OF ANY INFORMATION MEMORANDUM, REPORTS, BROCHURES, CHARTS OR STATEMENTS PREPARED BY SELLER OR THIRD PARTIES WITH RESPECT TO THE ASSETS, (H) ANY OTHER MATERIALS OR INFORMATION THAT MAY HAVE BEEN MADE AVAILABLE TO PURCHASER OR ITS AFFILIATES, OR ITS OR THEIR EMPLOYEES, AGENTS, CONSULTANTS, REPRESENTATIVES OR ADVISORS IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY DISCUSSION OR PRESENTATION RELATING THERETO AND (I) ANY IMPLIED OR EXPRESS WARRANTY OF FREEDOM FROM PATENT OR TRADEMARK INFRINGEMENT. EXCEPT AS AND TO THE LIMITED EXTENT EXPRESSLY REPRESENTED OTHERWISE IN Section 4.2(b) AND IN ARTICLE V OF THIS AGREEMENT OR IN THE SPECIAL WARRANTY OF DEFENSIBLE TITLE IN THE ASSIGNMENT AND DEED, SELLER 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 ASSETS, RIGHTS OF A PURCHASER UNDER APPROPRIATE STATUTES TO CLAIM DIMINUTION OF CONSIDERATION OR RETURN OF THE PURCHASE PRICE, OR RIGHTS OF A PURCHASER UNDER DECEPTIVE TRADE PRACTICE STATUTES, CONSUMER PROTECTION STATUTES OR OTHER SIMILAR STATUTES, IT BEING EXPRESSLY UNDERSTOOD AND AGREED BY THE PARTIES THAT, WITHOUT LIMITATION OF THE PROVISIONS OF THIS AGREEMENT OR ANY TRANSACTION DOCUMENT, PURCHASER SHALL BE DEEMED TO BE OBTAINING THE ASSETS 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 PURCHASER HAS MADE OR CAUSED TO BE MADE SUCH INSPECTIONS AS PURCHASER DEEMS APPROPRIATE.

(b) Without limiting the generality of Section 14.1 and Section 14.2(a) and except as expressly provided in the special warranty of Defensible Title provided in Section 4.2(b) of this Agreement and without limitation of Purchaser’s rights under ARTICLE XI, the special warranty of Defensible Title in the Assignment and Deed or with respect to breaches of Sellers representations and warranties in ARTICLE V, Purchaser’s remedies therefor, these negations and disclaimers by Seller and these waivers and releases by Purchaser relate to the following:

(i) TITLE, OWNERSHIP, PEACEABLE POSSESSION, EVICTION OR NON-DECLARED ENCUMBRANCES UNDER ANY APPLICABLE LAW;

 

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(ii) EXCEPT AS OTHERWISE SET FORTH IN THIS AGREEMENT, RETURN OR REDUCTION OF THE PURCHASE PRICE OR THE ADJUSTED PURCHASE PRICE;

(iii) THE COSTS, EXPENSES, LIABILITIES, STATUS, REVENUES, RECEIPTS OR ECONOMIC VALUE ASSOCIATED WITH, THE CONTINUED PRODUCTIVITY OR FINANCIAL VIABILITY OF, THE CONTRACTUAL, ECONOMIC OR FINANCIAL DATA ASSOCIATED WITH OR THE RIGHTS OR OBLIGATIONS (INCLUDING THE FEDERAL, STATE OR LOCAL INCOME OR OTHER TAX CONSEQUENCES) ASSOCIATED WITH THIS AGREEMENT, ANY OR ALL PORTIONS OF THE ASSETS OR ANY AGREEMENT TO WHICH ANY ASSET IS SUBJECT;

(iv) THE COST, EXPENSE OR ABILITY TO COPY, TRANSMIT OR USE ANY ELECTRONIC DATA;

(v) THE OPERATORSHIP OF ANY OR ALL PORTIONS OF THE ASSETS OR ANY OTHER WELLS, UNITS OR PROPERTY;

(vi) FITNESS FOR PURCHASER’S INTENDED USE OR PURPOSE, FOR ANY OTHER PARTICULAR USE OR PURPOSE OR FOR ORDINARY USE; MERCHANTABILITY; OR CONFORMITY WITH MODELS OR SAMPLES OF MATERIALS;

(vii) FREEDOM FROM, DIMINUTION IN VALUE BECAUSE OF OR THE PRESENCE OR ABSENCE OF REDHIBITORY OR OTHER DEFECTS OR VICES, WHETHER KNOWN OR UNKNOWN AND WHETHER APPARENT, PATENT, LATENT, HIDDEN OR OTHERWISE;

(viii) THE GEOGRAPHIC, GEOLOGIC OR GEOPHYSICAL CHARACTERISTICS ASSOCIATED WITH ANY OR ALL OF THE ASSETS, INCLUDING THE EXISTENCE, QUALITY, QUANTITY OR RECOVERABILITY OF PROSPECTS OR HYDROCARBON RESERVES; AND

(ix) PURCHASER’S REMEDIES THEREFOR, THE COSTS, REQUIREMENT OR NEED (UNDER ANY ENVIRONMENTAL LAWS OR OTHERWISE) FOR PLUGGING AND ABANDONMENT OR ANY INVESTIGATION, STUDY, ASSESSMENT, REPAIR, CLEAN-UP, DECOMMISSIONING, DETOXIFICATION, REMEDIATION, REMOVAL, TRANSPORTATION OR DISPOSAL (INCLUDING FOR ANY SUCH MATERIALS, ANY WASTE DISPOSAL OR HYDROCARBON FACILITY OR ANY OR ALL PORTIONS OF THE ASSETS OR OTHER WELLS, LANDS OR PROPERTY), OR THE PROTECTION OF THE ENVIRONMENT OR OF HUMAN HEALTH OR SAFETY.

Section 14.3 Waiver of Consumer Rights. AS PARTIAL CONSIDERATION FOR AGREEING TO ENTER INTO THIS AGREEMENT, THE PARTIES EACH CAN AND DO EXPRESSLY WAIVE THOSE PROVISIONS, IF ANY, OF ANY APPLICABLE UNFAIR TRADE PRACTICES AND CONSUMER PROTECTION LAW, INCLUDING BUT NOT LIMITED TO, THE CALIFORNIA UNFAIR PRACTICES ACT, THE TEXAS DECEPTIVE TRADE PRACTICES-CONSUMER PROTECTION ACT, TEXAS BUSINESS AND COMMERCE CODE ARTICLE 17.41 ET SEQ., (AND ANY SIMILAR LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND PROTECTION) THAT APPLY TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY AND MAY BE WAIVED BY THE PARTIES. IT IS NOT THE INTENT OF THE PARTIES TO WAIVE, AND THE PARTIES SHALL NOT WAIVE, ANY APPLICABLE PROVISION THEREOF THAT IS PROHIBITED BY LAW FROM BEING WAIVED.

 

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ARTICLE XV

TERMINATION

Section 15.1 Right of Termination. This Agreement and the transactions contemplated herein may be terminated at any time prior to the Closing:

(a) by the mutual written agreement of the Parties;

(b) by delivery of written notice from Purchaser to Seller if any of the conditions set forth in ARTICLE VIII (other than the conditions set forth in Section 8.3, Section 8.4, Section 8.5, Section 8.7, and Section 8.8) have not been satisfied by Seller (or waived by Purchaser) by the Longstop Date;

(c) by delivery of written notice from Seller to Purchaser if any of the conditions set forth in ARTICLE IX (other than the conditions set forth in Section 9.3, Section 9.4, Section 9.5, Section 9.7, Section 9.8, and Section 9.10) have not been satisfied by Purchaser (or waived by Seller) by the Longstop Date;

(d) by either Party delivering written notice to the other Party if any of the conditions set forth in Section 8.3, Section 8.4, Section 8.5, Section 8.7, Section 8.8, Section 9.3, Section 9.4, Section 9.5, Section 9.7, Section 9.8, and Section 9.10 are not satisfied or waived by the applicable Party on or before the Longstop Date;

(e) by either Party at any time after the Scheduled Closing Date during which (i) the conditions set forth in ARTICLE VIII and ARTICLE IX (other than those conditions that by their terms are to be satisfied at Closing) have been satisfied or waived in accordance with this Agreement, (ii) such Party has indicated in writing to the other Party that it is ready, willing and able to consummate the Closing, and (iii) the other Party shall have failed to consummate the Closing by the close of business on earlier of the Longstop Date or the third (3rd) Business Day following the other Party’s receipt of such written notification; and

(f) by delivery of written notice from Seller to Purchaser pursuant to Section 4.9;

provided however, that no Party shall have the right to terminate this Agreement pursuant to clause (b), (c), (d), (e) or (f) above if such Party is at such time in material breach of any provision of this Agreement.

Section 15.2 Effect of Termination. If this Agreement is terminated pursuant to any provision of Section 15.1, then, except as provided in this Section 15.2 (and except for the provisions of Section 4.2(a), Section 7.2, Section 7.5, Section 11.11, Section 11.12, ARTICLE XIV, this ARTICLE XV, and ARTICLE XVII), this Agreement shall forthwith become void and of no further force or effect and the Parties shall have no liability or obligation hereunder.

(a) If Seller has the right to terminate this Agreement pursuant to Section 15.1(c) or Section 15.1(e) above, then Seller shall be entitled, as its sole and exclusive remedy, to elect in writing to terminate this Agreement and seek to recover from Purchaser all reasonable and documented out of pocket costs and expenses paid or incurred by Seller in the negotiation of this Agreement and the Transaction Documents up to an amount not to exceed Five Million Dollars ($5,000,000).

(b) If Purchaser has the right to terminate this Agreement pursuant to Section 15.1(b) because of the Willful Breach by Seller of this Agreement or Section 15.1(e) above, then Purchaser shall be entitled, as its sole and exclusive remedy, to elect in writing to terminate this Agreement and seek to recover from Seller all reasonable and documented out of pocket costs and expenses paid or incurred by Purchaser in the negotiation of this Agreement, the Transaction Documents and the Financing Transaction up to Five Million Dollars ($5,000,000).

(c) If this Agreement is terminated for any reason other than as set forth in Section 15.2(a) or Section 15.2(b), then the Parties shall have no liability or obligation hereunder as a result of such

 

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termination, and Seller shall be free to all the rights and benefits associated with the ownership of the Assets, including the right to sell the Assets at Seller’s discretion, without any claim by Purchaser with respect thereto.

Section 15.3 Return of Documentation and Confidentiality. Upon any termination of this Agreement, Purchaser shall within ten (10) Business Days (or any other period agreed by the Parties in writing) after direction by Seller return to Seller or destroy all title, engineering, geological and geophysical data, environmental assessments and/or reports, maps, documents and other information furnished by Seller to Purchaser or prepared by or on behalf of Purchaser in connection with its due diligence investigation of the Assets and an officer of Purchaser shall certify same to Seller in writing.

 

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ARTICLE XVI

EMPLOYEES AND BENEFITS

Section 16.1 Employees. Purchaser shall offer employment to the Employees responsible for the operation of the Assets based on the provisions detailed in Exhibit L.

 

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ARTICLE XVII

MISCELLANEOUS

Section 17.1 Entire Agreement. This Agreement, and the Transaction Documents, including all Schedules and Exhibits attached hereto and thereto, constitutes the entire agreement between the Parties as to the subject matter of this Agreement and supersedes all prior agreements, understandings, negotiations and discussions of the Parties, whether oral or written. No supplement, amendment, alteration, modification or waiver of this Agreement shall be binding unless executed in writing by the Parties.

Section 17.2 References and Rules of Construction. All references in this Agreement to Exhibits, Schedules, Articles, Appendixes, Sections and other subdivisions refer to the corresponding Exhibits, Schedules, Articles, Appendixes, Sections and other subdivisions of or to this Agreement unless expressly provided otherwise. Titles appearing at the beginning of any such subdivisions are for convenience only and shall be disregarded in construing the language hereof. The words “this Agreement,” “herein,” “hereby,” “hereunder” and “hereof,” and words of similar import, refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited. Pronouns in masculine, feminine, and neuter genders shall be construed to include any other gender, and words in the singular form shall be construed to include the plural and vice versa, unless the context otherwise requires. Derivatives and other forms of the terms defined in this Agreement shall have meanings consistent with the definitions herein provided and any term expressly defined herein or in any Transaction Document appearing in all capitalized letters shall have a meaning consistent with the definition provided for such term herein or therein. The term “including” (or “included”) shall be deemed to be followed by the phrase “but not limited to.” Unless otherwise expressly provided herein, any reference herein to a “day” shall refer to a calendar day. All references to “$” or “dollars” shall be deemed references to United States dollars. The words “shall” and “will” are used interchangeably throughout this Agreement and shall accordingly be given the same meaning, regardless of which word is used.

Section 17.3 Assignment. This Agreement may not be transferred or assigned by Purchaser without the prior written consent of Seller. In the event that Seller consents to any such transfer or assignment, such assignment shall not relieve Purchaser of any of its obligations and responsibilities hereunder. Any assignment or other transfer by Purchaser or its successors and assigns of any of the Assets shall not relieve Purchaser or its successors or assigns of any of their obligations (including indemnity obligations) hereunder, as to the Assets so assigned or transferred. Notwithstanding the foregoing, Seller acknowledges that the resultant combination between Purchaser and the Financing Party, pursuant to the Financing Transaction, shall not be considered as a transfer or assignment for which Seller’s consent is required; provided, that the surviving entity of such combination expressly confirms in writing that it has assumed and succeeded to all obligations of Purchaser under this Agreement and documentation of such assumption and succession is provided to Seller promptly upon the consummation of the Financing Transaction.

Section 17.4 Waiver. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions of this Agreement (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided.

Section 17.5 Conflict of Law, Jurisdiction, Venue, Arbitration.

(a) THIS AGREEMENT, ANY CLAIMS, OBLIGATIONS, LIABILITIES, LOSSES, OR CAUSES OF ACTION (WHETHER IN CONTRACT OR IN TORT, IN LAW, IN EQUITY, OR GRANTED BY STATUTE) THAT MAY BE BASED UPON, ARE IN RESPECT OF, ARISE UNDER, ARISE OUT OR BY REASON OF, ARE CONNECTED WITH, OR RELATED IN ANY MANNER TO THIS AGREEMENT, EXECUTION OR PERFORMANCE OF THIS AGREEMENT, ANY TRANSACTION CONTEMPLATED BY THIS AGREEMENT, OR THE LEGAL RELATIONS AMONG SELLER AND PURCHASER THAT ARE BASED ON, RELATE TO, OR ARISE OUT OF THIS AGREEMENT OR ANY TRANSACTION

 

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CONTEMPLATED BY THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, EXCLUDING ANY CONFLICTS OF LAW RULE OR PRINCIPLE THAT WOULD REQUIRE THE APPLICATION OF ANY OTHER LAW.

(b) Section 17.5(b) through (e) apply to any dispute between the Parties arising at any time under or relating to this Agreement.

(c) As to the disputes subject to this Section 17.5, any action or controversy of whatever nature, including an action in tort or contract, in Law, in equity, or a statutory action (“Disputed Claim”), the interpretation or validity of the agreement to arbitration as provided in this Section 17.5, or the arbitrability of a Disputed Claim, will be resolved under the terms, conditions, and procedures of set forth in this Section 17.5 and will be binding on all Parties and their respective successors and assigns. No Party may prosecute or commence any suit or action against any other Party relating to any matters that are subject to this Section 17.5, except as provided in this Section 17.5.

(d) The Parties agree to attempt to resolve any dispute arising out of or relating to this Agreement through negotiation. Within thirty (30) days after one Party gives the other Parties written notice describing the dispute and requesting negotiations, representatives of the Parties with authority to resolve the dispute shall meet at a mutually agreed upon location to attempt to resolve the dispute. Negotiations shall continue until the Parties have resolved the dispute or until one of the Parties gives written notice that it will no longer continue to negotiate. If for any reason, the Parties’ representatives fail to meet within the thirty (30) day deadline or if a Party gives written notice that it is no longer willing to continue negotiations, either Party may commence binding arbitration of the dispute pursuant to Section 17.5(e).

(e) Any dispute arising out of or relating to this Agreement that the Parties fail to resolve by negotiation as set forth in this Section 17.5 shall be resolved by arbitration before three (3) arbitrators pursuant to the Commercial Arbitration Rules of the American Arbitration Association as modified herein. Each Party shall appoint one (1) neutral arbitrator within fifteen (15) days after commencement of arbitration, and the two (2) arbitrators so appointed shall appoint the third within thirty (30) days after the appointment of the second arbitrator, or in default of such agreement, by the American Arbitration Association, who shall (a) chair the tribunal and (b) be an oil and gas attorney with not less than ten (10) years’ experience if the dispute arises out of a Title Defect or Environmental Defect. The place of arbitration shall be Houston, Texas. The arbitrators shall apply the substantive law of Texas to the merits of the dispute, except that the arbitrators shall not apply any choice of law rules that would call for the application of the substantive law of any other jurisdiction. The Federal Arbitration Act shall apply to the arbitration. The arbitrators’ award shall be final and binding on the Parties. Judgment on the award may be entered in any court of competent jurisdiction. Except as may be required by law, neither Party nor the arbitrators may disclose the existence, content (including any and all documents and testimony exchanged or introduced in the arbitral proceeding), or results of any arbitration without the prior written consent of both Parties, unless such disclosure is necessary to protect or pursue a legal right, including enforcement of an arbitral award.

(f) Nothing in this Section 17.5 shall divest a court of competent jurisdiction of the right and power to grant a temporary restraining order, to grant temporary injunctive relief, or to compel specific performance of any decision of an arbitral tribunal made pursuant to this Section 17.5.

Section 17.6 Notices. All notices and communications required or permitted to be given hereunder shall be in writing and shall be delivered personally, by email (provided that confirmation of receipt of such email is requested and received, which confirmation shall be provided reasonably promptly following receipt) or sent by bonded overnight courier, or mailed by U.S. Express Mail or by certified or registered United States Mail with all postage fully prepaid, addressed to Seller or Purchaser, as appropriate, at the address for such Person

 

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shown below or at such other address as Seller or Purchaser shall have theretofore designated by written notice delivered to the other Parties:

If to Seller:

ExxonMobil Upstream Company

22777 Springwoods Village Parkway, Spring, TX 77389

Attention: Mickey Johnson, Divestments Manager

Phone: 346-467-9353

Email: mickey.d.johnson@exxonmobil.com

If to Purchaser:

Sable Offshore Corp.

700 Milam Street, Suite 3300, Houston, Texas 77002

Attention: Anthony C. Duenner

Phone: 713-579-8023

Email: aduenner@sableminerals.com

With a copy to (which shall not constitute notice to Purchaser):

Bracewell LLP

711 Louisiana Street, Suite 2300

Houston, Texas 77002

Attention: Alan Rafte

Phone: 713-221-1411

Email: alan.rafte@bracewell.com

Any notice given in accordance herewith shall be deemed to have been given been given as of the date of receipt by the intended Party.

Section 17.7 Timing. Timing is of the essence for performance of the Parties’ respective obligations hereunder; provided that if the date specified in this Agreement for giving any notice or taking any action under this Agreement is not a Business Day (or if the period during which any notice is required to be given or any action taken expires on a date which is not a Business Day), then the date for giving such notice or taking such action (or the expiration date of such period during which notice is required to be given or action taken) shall be the next day which is a Business Day.

Section 17.8 Confidentiality. Any information concerning the Assets (including any information discovered as a result of Purchaser’s Environmental Assessment) or any aspect of the transactions contemplated by this Agreement shall be subject to the terms of the Confidentiality Agreement. This obligation shall terminate on the earlier to occur of (a) the Closing, or (b) pursuant to the terms thereof. Notwithstanding this Section 17.8 or anything in the Confidentiality Agreement to the contrary, Purchaser shall be permitted to disclose to the Financing Party any and all information reasonably requested by the Financing Party; provided, however, that the Financing Party shall have agreed in writing to maintain such information in confidence except to the extent that the Financing Party is required to disclose such information pursuant to applicable Law, including the applicable rules or regulations of any governmental authority or stock exchange.

Section 17.9 Publicity. Neither Seller nor Purchaser shall issue any media or other similar releases concerning this Agreement and the transactions contemplated hereby without the prior written consent of the other Party, except as required to be issued by a Party or the Financing Party pursuant to applicable Law including the applicable rules or regulations of any governmental authority or stock exchange.

 

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Section 17.10 Use of Seller’s Names. Purchaser agrees that, as soon as practicable after the Closing, but in no event longer than sixty (60) days after Closing, it will remove or cause to be removed the names and marks used by Seller and all variations and derivatives thereof and logos relating thereto from the Assets, including all signage on the Assets, and Purchaser will not make any use whatsoever of such names, marks and logos. For one hundred eighty (180) days after Closing, Seller shall have a right of access to such Assets at its sole risk, cost and expense and solely for the purpose of removing its signs and name from all Wells and Facilities, or confirming that Purchaser has done so for such Asset.

Section 17.11 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the contemplated transactions is not affected in any material adverse manner to either Party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties 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 to the end that the contemplated transactions are fulfilled to the extent possible.

Section 17.12 Parties in Interest. The terms and provisions of this Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns. Notwithstanding anything contained in this Agreement to the contrary, nothing in this Agreement, expressed or implied, is intended to confer on any Person other than Seller and Purchaser and their respective successors and permitted assigns, or the Parties’ respective related Indemnified Parties hereunder, any rights, remedies, obligations or liabilities under or by reason of this Agreement, provided that only a Party and its respective successors and permitted assigns will have the right to enforce the provisions of this Agreement on its own behalf or on behalf of any of its related Indemnified Parties.

Section 17.13 Conspicuousness. SELLER AND PURCHASER EACH ACKNOWLEDGES THAT THE PROVISIONS OF THIS AGREEMENT THAT ARE PRINTED IN THE SAME MANNER AS THIS SECTION ARE CONSPICUOUS.

Section 17.14 Execution in Counterparts. This Agreement may be executed in counterparts, and each such counterpart shall be deemed to be an original instrument, but all such counterparts together shall constitute for all purposes one agreement. Facsimiles or other electronic copies (e.g., PDFs) of executed counterparts shall be deemed to be original instruments.

Section 17.15 Recourse Only Against Parties. Subject to the remainder of this Section 17.15, all claims, obligations, liabilities, or causes of action (whether in contract or in tort, in Law or in equity, or granted by statute) that may be based upon, are in respect of, arise under, arise out or by reason of, are connected with, or relate in any manner to this Agreement, the negotiation, execution, or the performance of this Agreement (including any representation or warranty made in, in connection with, or as an inducement to, this Agreement) or the transaction contemplated hereby and thereby, may be made only against (and are expressly limited to) the entities that are expressly identified as “Parties” in the preamble to this Agreement, any Collateral Document, or any successor or permitted assign of any such Parties specifically including the Financing Party (collectively, with any recipient or transferee of any Asset, the “Contracting Parties”). No Person who is not a Contracting Party, including without limitation any trustee, director, officer, employee, incorporator, member, partner, manager, stockholder, agent, attorney, or representative of, and any financial advisor, lender, investor or equity provider (whether actual or prospective) of, any Contracting Party, or any trustee, director, officer, employee, incorporator, member, partner, manager, stockholder, agent, attorney, or representative of, and any financial advisor, lender, investor or equity provider (whether actual or prospective but not including any Financing Party) of, any of the foregoing (“Nonparty Affiliates”), shall have any liability (whether in tort, in Law or in equity, or granted by statute) to any Contracting Party with which it is not engaged or does not have a contractual relationship with (outside of this Agreement or as a recipient assignee or transferee of any Assets) for any claims, causes of action, obligations, or liabilities arising under this Agreement. Without limiting the foregoing, to the

 

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maximum extent permitted by Law, (a) each Contracting Party hereby waives and releases any and all rights, claims, demands, or causes of action that may otherwise be available at Law or in equity, or granted by statute, to avoid or disregard the entity form of a Contracting Party or to otherwise impose liability of the other Contracting Party on any of its Nonparty Affiliates, whether granted by statute or based on theories of equity, agency, control, instrumentality, alter ego, domination, single business enterprise, piercing the veil, unfairness, undercapitalization, or otherwise; and (b) each Contracting Party disclaims any reliance upon any of the other Contracting Party’s Nonparty Affiliates with respect to the performance of this Agreement or any representation or warranty made in, in connection with, or as an inducement to this Agreement. Notwithstanding anything in this Section 17.15 to the contrary, this Section 17.15 does not provide (and shall in no event be interpreted to provide) for any waiver, release or relinquishment by any Contracting Party of any claims, obligations, liabilities, or causes of action (whether in contract or in tort, in Law or in equity, or granted by statute) of any sort which such Contracting Party may have against any of its own Nonparty Affiliates (being those that such Contracting Party has engaged or has a contractual relationship with outside of this Agreement).

[Signature Pages Follow]

 

58

IN WITNESS WHEREOF, Purchaser and Seller have executed and delivered this Agreement effective as of the Effective Time.

 

EXXON MOBIL CORPORATION
By:  

/s/ Mickey D. Johnson

Name: Mickey D. Johnson
Title: Agent & Attorney-In-Fact

 

MOBIL PACIFIC PIPELINE COMPANY
By:  

/s/ Harry Janke

Name: Harry Janke
Title: Vice President

 

Signature Page to Purchase and Sale Agreement

SABLE OFFSHORE CORP.
By:  

/s/ James C. Flores

Name: James C. Flores
Title: Chairman and Chief Executive Officer

 

Signature Page to Purchase and Sale Agreement

Appendix A

Defined Terms

Capitalized terms used in this Agreement have the following meanings:

“901/903 Assets” means the assets transferred by Plains pursuant to the Plains PSA which are held by PPC, including:

 

(i)

the 901/903 Pipeline;

 

(ii)

included equipment, tanks, tubing, pumps, motors, compression equipment, flow lines, processing and separation facilities, materials and other real, personal and mixed property, operational and nonoperational, located in, on or connected to the 901/903 Pipeline;

 

(iii)

to the extent existing, such Rights-of-Way that used or held for use in connection with the ownership or operation of any of the 901/903 Pipeline;

 

(iv)

to the extent that they may be assigned, all Permits that are used or held for use in connection with the ownership or operation of the 901/903 Pipeline;

 

(v)

all line fill and contents in the 901/903 Pipeline;

 

(vi)

to the extent they may be assigned, Plains PSA; and

 

(vii)

all other assets, interests and rights acquired by MPPC pursuant to the Plains PSA.

“901/903 Pipeline” means Pipeline Segments 901/903 as described on Exhibit A-5 and as more particularly described in the Plains PSA.

“Actual Payment Date” means the date on which the amount secured under the Senior Secured Term Loan Agreement, including accrued Interest, is paid in full.

“Adjusted Penal Sum” has the meaning set forth in Section 11.18(e).

“Adjustments to the Purchase Price” has the meaning set forth in Section 3.4.

“AFE” means an authorization for expenditure.

“Affiliate” means with respect to any Person, a Person that, directly or indirectly, through one or more entities, controls, is controlled by or is under common control with the Person specified. For the purpose of the immediately preceding sentence, the term “control” and its syntactical variants mean the power, direct or indirect, to direct or cause the direction of the management of such Person, whether through the ownership of voting securities, by contract, agency or otherwise.

“Aggregate Environmental Defect Deductible” has the meaning set forth in Section 4.12.

“Aggregate Title Defect Deductible” has the meaning set forth in Section 4.6.

“Agreement” has the meaning set forth in the Preamble.

“Allocated Value” has the meaning set forth in Section 3.1.

“Asset Taxes” means all Property Taxes, all Severance Taxes and all sales, use, transfer other similar Taxes arising with respect to the Assets, but excluding, for the avoidance of doubt, Income Taxes and Transfer Taxes.

“Assets” has the meaning set forth in Section 2.2, which for purposes of this Agreement other than Article II, Section 4.9, Section 4.10, Article V, Section 7.10 and Article XIII, shall include the 901/903 Assets.

 

Appendix A-1

“Assignment” means the Assignment and Bill of Sale from Seller to Purchaser pertaining to the Assets and substantially in the form of Exhibit D or subject to Reassignment Option, the Assignment and Bill of Sale from Purchaser to Seller pertaining to the Assets substantially in the form of Exhibit R.

“Assumed Obligations” has the meaning set forth in Section 11.1.

“Available Cash” at the Closing, shall be equal to the amount of funds contained in the Trust Account (net of Financing Party Stockholder Redemption Amount and the payment of any Deferred Underwriting Fees), plus the amount of Available Financing Proceeds, minus the payments of the Adjustments to the Purchase Price.

“Available Financing Proceeds” means any net cash proceeds to the Financing Party in connection with Subscription Agreements entered into with the Financing Party and PIPE Investor.

“BOE” means the California State Board of Equalization.

“BOEM” has the meaning set forth in Section 6.2.

“BSEE” means the Bureau of Safety and Environmental Enforcement.

“Business Day” means a day (other than a Saturday or Sunday) on which commercial banks in Texas are generally open for business.

“Captives” has the meaning set forth in Section 11.12.

“Casualty Loss” has the meaning set forth in Section 4.13.

“Casualty Loss Amount” has the meaning set forth in Section 4.13.

“Claim Notice” has the meaning set forth in Section 11.7(b).

“Closing” has the meaning set forth in Section 10.1.

“Closing Date” means the date upon which Closing occurs.

“Code” means the United States Internal Revenue Code of 1986, as amended. All references herein to sections of the Code shall include any corresponding provision or provisions of succeeding Law.

“Collateral Documents” means (a) the Deeds of Trust, (b) the Ultimate Parent Company Guarantee, (c) the Senior Secured Term Loan Agreement, and (d) any other security agreements, deeds of trust, account control agreements and other agreements, instruments or certificates requested by Seller as collateral security for the payment or performance of the Senior Secured Term Loan Agreement and this Agreement.

“Commission” has the meaning set forth in Section 7.10(a).

“Confidentiality Agreement” means the Confidentiality Agreement, dated as of April 30, 2021, between Seller and Purchaser.

“Contracting Parties” has the meaning set forth in Section 17.15.

“CSLC Lease Amendment and Extension” means the amendment and extension of each of (i) lease No. 0817503-001 dated 21 January 1988 (State of California 7163.1) between the California State Lands Commission (“CSLC”) and EMC and (ii) lease No. 1010207-001 dated 1 January 1989 (State of California 4977.1) between CSLC and POPCO, approved by the California State Lands Commission on December 5, 2023.

 

Appendix A-2

“CSLC Leases” means each of Lease No. 0817503-001 dated 21 January 1988 (State of California 7163.1), Lease No. 0817324-002 dated 23 April 2015 (State of California PRC 5515.1), Lease No. 0817363-003 dated 19 October 2022 (State of California 6371.1), and Lease No. 1010207-001 dated 1 January 1989 (State of California 4977.1), as amended, extended or renewed from time to time, including but not limited to, the CSLC Lease Amendment and Extension.

“Cure Period” has the meaning set forth in Section 4.3.

“Customary Post-Closing Consents” means those consents and approvals from governmental authorities for the assignment of the Assets to Purchaser that are customarily obtained after such assignment of properties similar to the Assets.

“Deed” means a deed to the LFC Property in the form attached as Exhibit I or subject to Reassignment Option, a deed to the LFC Property in the form attached as Exhibit S.

“Deeds of Trust” means (i) the Deed of Trust, Fixture Filing, Assignment of As-Extracted Collateral, Security Agreement and Financing Statement attached hereto as Exhibit K and (ii) the Deed of Trust, Fixture Filing, Assignment of As-Extracted Collateral, Security Agreement and Financing Statement attached hereto as Exhibit K-1.

“Defect Notice Date” has the meaning set forth in Section 4.3.

“Defensible Title” means such record and beneficial title of Seller to the Scheduled Properties that, as of the Defect Notice Date and subject to Permitted Encumbrances:

 

(a)

for a Scheduled Property, entitles Seller to receive during the entirety of the productive life of such Scheduled Property not less than the Net Revenue Interest for such Scheduled Property as set forth in Exhibit A-2, except for (i) decreases in connection with those operations in which Seller or its successors or assigns may from and after the Execution Date be a non-consenting co-owner in compliance with this Agreement, (ii) decreases resulting from the establishment or amendment from and after the Execution Date of pools or units in compliance with this Agreement, (iii) decreases required to allow other Working Interest owners to make up past underproduction or pipelines to make up past under deliveries, and (iv) as otherwise expressly set forth in Exhibit A-1 or Exhibit B, as applicable;

 

(b)

for a Scheduled Property, obligates Seller to bear during the entirety of the productive life of such Scheduled Property not more than the Working Interest for such Scheduled Property as set forth in Exhibit A-2, except (i) increases resulting from contribution requirements with respect to defaulting co-owners under applicable operating agreements, (ii) increases to the extent that they are accompanied by a proportionate increase in Seller’s Net Revenue Interest in such Scheduled Property, (iii) increases resulting from the establishment or amendment from and after the Execution Date of pools or units in compliance with this Agreement, and (iv) as otherwise expressly set forth in Exhibit A-2;

 

(c)

is free and clear of all Encumbrances; and

 

(d)

in evaluating the significance of any fact, circumstance or condition for the purpose of determining Defensible Title or a Title Defect, due consideration shall be given to the length of time that the particular Scheduled Property (including any well or unit attributable thereto) has been producing Hydrocarbons and whether such fact, circumstance or condition is of the type expected to be encountered in the area involved and is usual and customarily acceptable to reasonable and prudent operators, interest owners, and/or purchasers engaged in the business of ownership, operation and development of oil and gas properties with knowledge of such facts and appreciation of their legal significance. Unless a lower working interest is set forth on Exhibit A-2, the official records maintained by BOEM regarding the ownership of working interests in any federal lease shall be dispositive of the ownership of such leases, and any potential defects to Defensible Title to the contrary, shall not be allowed unless they arise out of Seller’s actions or were otherwise caused by Seller.

 

Appendix A-3

“Deferred Underwriting Fees” means the amount of deferred underwriting fees held in the Trust Account in connection with the Financing Party’s initial public offering payable to the underwriters upon consummation of the Financing Transaction.

“Dispute Notice” has the meaning set forth in Section 12.1(a).

“Disputed Claim” has the meaning set forth in Section 17.5(c).

“Down Payment” means an amount equal to three percent (3%) of the Purchase Price.

“Effective Time” means 12:00:01 a.m. (Houston time) on January 1, 2022.

“EMC” has the meaning set forth in the Preamble.

“EMOC” means ExxonMobil Oil Corporation, a corporation formed under the laws of New York.

“Employees” means all employees listed on Exhibit L.

“Employment Liabilities” means all claims, actions, proceedings, demands or suits, salary, pension, insurance and benefits payments, judgements, settlements, awards (including back pay awards granted retroactively for accrued but uncollected salary), severance, redundancy, or termination payments, wages and/or fringe benefits, unused, accrued paid time off (PTO), reinstatement, damages (including damages for unfair dismissal and termination), losses, compensation, charges, liabilities, fines, penalties, interest claims (including Taxes and all related interest and penalties incurred directly with respect thereto) and all other amounts, however described or denominated, and all related reasonable costs, expenses and other charges, including all attorneys’ fees and reasonable costs of litigation, hearings, proceedings, internal and external investigations, document and data productions and discovery, settlement, judgements, awards, awards of attorneys’ fees, interest and penalties, however described or denominated, known or unknown, direct or indirect, arising out of, or related to, or in any way connected with the employment or termination of the Employees.

“Encumbrance” means any lien, security interest, pledge, charge, defect or similar encumbrance.

“Environmental Defect” means a condition with respect to the air, land, soil, surface, subsurface strata, surface water, ground water or sediments that (a) constitutes a violation of Environmental Laws in effect as of the Effective Time in the jurisdiction to which the affected Assets are subject, (b) constitutes a physical condition that requires reporting to a governmental authority, investigation, monitoring, removal, cleanup, Remediation, restoration, repair or correction under Environmental Laws, or (c) is designated in accordance with Section 4.9 or Section 4.10. For the avoidance of doubt, (i) the fact that a Well is no longer capable of producing sufficient quantities of oil or gas to continue to be classified as a “producing well” or that such a Well should be temporarily abandoned or permanently plugged and abandoned shall not, in each case, form the basis of an Environmental Defect, (ii) the fact that a pipe is temporarily not in use shall not form the basis of an Environmental Defect, (iii) except with respect to equipment (A) that causes or has caused any environmental pollution, contamination or degradation where Remediation is presently required (or if known or confirmed, would be presently required) under Environmental Laws or (B) the use or condition of which is a violation of, or requires repair or correction in order to comply with, Environmental Law in effect as of the Effective Time, the physical condition of any surface or subsurface production equipment, including water or oil tanks, separators or other ancillary equipment, shall not form the basis of an Environmental Defect, and (iv) there should be no Environmental Defect with respect to the 901/903 Assets.

“Environmental Defect Notice” has the meaning set forth in Section 4.10.

“Environmental Defect Property” has the meaning set forth in Section 4.10.

 

Appendix A-4

“Environmental Law” means any Laws pertaining to safety, health or conservation or protection of the environment, wildlife, or natural resources in effect in any and all jurisdictions in which the Assets are located, or otherwise applicable to the Assets, including the Clean Air Act, as amended, the Federal Water Pollution Control Act, as amended, the Safe Drinking Water Act, as amended, the Comprehensive Environmental Response, Compensation and Liability Act, as amended (“CERCLA”), the Superfund Amendments and Reauthorization Act of 1986, as amended, the Resource Conservation and Recovery Act, as amended (“RCRA”), the Hazardous and Solid Waste Amendments Act of 1984, as amended, the Toxic Substances Control Act, as amended, the Occupational Safety and Health Act, as amended, the Emergency Planning and Community Right-to-Know Act, as amended, the Hazardous Materials Transportation Act, as amended, the National Environmental Policy Act, as amended, the Oil Pollution Act of 1990, as amended and any applicable state, tribal, or local counterparts, but shall not include any applicable Law to the extent associated with plugging and abandonment of any well. The terms “hazardous substance”, “release”, and “threatened release” shall have the meanings specified in CERCLA; provided, however, that to the extent the Laws of the state in which the Assets are located are applicable and have established a meaning for “hazardous substance”, “release”, “threatened release”, “solid waste”, “hazardous waste”, and “disposal” that is broader than that specified in CERCLA or RCRA, such broader meaning shall apply with respect to the matters covered by such Laws.

“Exchange Accommodation Titleholder” means an exchange accommodation titleholder as such term is used in Rev. Proc. 2000-37, 2000-2 C.B. 308 (Sept. 18, 2000), as modified by Rev. Proc. 2004-51, 2004-2 C.B. 294 (July 20, 2004).

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Excluded Assets” has the meaning set forth in Section 2.3.

“Excluded Permits” has the meaning set forth in Section 2.2(g).

“Excluded Records” means (a) any internal valuations, price forecasts and interpretative data or documentation; (b) attorney-client privileged communications, other than externally-prepared title reports (including externally-prepared title opinions) in respect of the Assets; (c) confidential information and information or records to the extent, in each case, (i) they are subject to any third party license, secrecy or other similar agreement that restricts Seller’s ability to disclose, (ii) direct or indirect transfer of such information or records to Purchaser, pursuant to such agreement, is restricted or is subject to payment of an additional fee or other consideration and (iii) the necessary third party consents or approvals to transfer have not been obtained following commercially reasonable efforts by Seller and, for those that require a payment to transfer, Purchaser has declined to pay the fee or other consideration, as applicable; (d) all internal management systems, plans, policies, standards and procedures, including, without limitation, any health, safety and environment management systems, plans, policies, standards and procedures, (e) documents that relate solely to any Excluded Assets, and (f) documents reflecting proprietary methodologies, analytics, techniques, software or trade secrets.

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

“Existing Contracts” means, except for any Excluded Asset, all contracts, agreements and instruments by which any of the Leases, Wells or other Assets are bound, or to which any of the Leases, Wells or other Assets are subject (but in each case only to the extent applicable to such Leases, Wells or other Assets and not to other properties of Seller or its Affiliates not included in the Assets), including operating agreements, unitization, pooling and communitization agreements, declarations and orders, joint venture agreements, farmin and farmout agreements, water rights agreements, exploration agreements, area of mutual interest agreements, participation agreements, exchange agreements, transportation or gathering agreements, agreements for the sale and purchase of Hydrocarbons, processing agreements, indentures, notes, bonds, loans, leases, mortgages, franchises, commitments, and letters of credit; provided, that “Existing Contracts” shall exclude (a) any master service agreements, blanket agreements and similar contracts and (b) all of the instruments constituting the Leases, Rights-of-Way or creating or assigning any real property interest.

 

Appendix A-5

“Existing Pipeline Claim” has the meaning set forth in Section 11.1(g).

“ExxonMobil Policies” has the meaning set forth in Section 11.12.

“Facilities” has the meaning set forth in Section 2.2(f).

“Facilities Dedication Agreement” means that facilities dedication agreement relating to the Plains PSA by and between Plains, EMC and EMOC, dated October 13, 2022.

“Facility Licensing Agreement” means a licensing agreement between Seller’s Affiliate and Purchaser for facilities operated on the LFC Property in the form attached as Exhibit M.

“Filings” has the meaning set forth in Section 7.10(a).

“Final Settlement Statement” has the meaning set forth in Section 12.1(a).

“Financing Party” means Flame Acquisition Corp., a Delaware corporation.

“Financing Party Stockholder Redemption” means the right of the stockholders of Financing Party to redeem all or a portion of their Financing Party Class A Common Stock in connection with the consummation of Financing Transaction, pursuant to and in accordance with the terms and conditions set forth in the prospectus of the Financing Party.

“Financing Party Stockholder Redemption Amount” means the aggregate amount of cash proceeds required to satisfy any exercise by stockholders of Financing Party of the Financing Party Stockholder Redemption.

“Financing Transaction” means the transactions contemplated by that certain business combination agreement by and between Purchaser and the Financing Party to be entered into following the Execution Date and before or concurrently with the Closing Date.

“GAAP” means generally accepted accounting principles in the United States, consistently applied.

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

“Hydrocarbons” means all of the oil, liquid hydrocarbons, gas and any and all other liquid or gaseous hydrocarbons, as well as their respective constituent products (including condensate, casinghead gas, distillate, and natural gas liquids), and any other minerals produced or processed in association therewith (including elemental sulfur, helium, carbon dioxide, and other non-hydrocarbon substances produced in association with any of the above described items).

“Imbalance” means any Pipeline Imbalance or Well Imbalance.

“Income Taxes” means any income, capital gains, franchise and similar Taxes.

“Indebtedness” means any indebtedness for or in respect of (a) monies borrowed, (b) any amount raised by acceptance under any acceptance credit facility or dematerialized equivalent, (c) any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument, (d) the amount of any liability in respect of any lease or hire purchase contract, which would, in accordance with GAAP accounting standards, be treated as a finance or capital lease, and (e) any amount raised under any other transaction (including any forward sale or purchase, sale and sale back, or sale and leaseback agreement) having the commercial effect of a borrowing.

 

Appendix A-6

“Indemnified Party” has the meaning set forth in Section 11.7.

“Indemnifying Party” has the meaning set forth in Section 11.7.

“Indemnity Deductible” has the meaning set forth in Section 11.5(a).

“Individual Environmental Defect Threshold” has the meaning set forth in Section 4.12.

“Individual Title Defect Threshold” has the meaning set forth in Section 4.6.

“Intercompany Balances” means the sums owed or due from POPCO or PPC to or from other ExxonMobil Affiliates.

“Interest” means an interest rate of ten percent (10%) compounded annually during the term of the Senior Secured Term Loan Agreement. The total amount of Interest accrued shall be due and payable on the Actual Payment Date.

“Interim Period” means the period from and after the Execution Date up until the Closing.

“Knowledge” means with respect to (a) Seller, the actual knowledge (without investigation) of the Persons set forth on Schedule 1.1 and (b) Purchaser, the actual knowledge of the Persons set forth on Schedule 1.2.

“Law” means any applicable law, statute, regulation, ordinance, order, code, ruling, writ, injunction, decree or other act of or by any governmental authority (including any administrative, executive, judicial, legislative, regulatory or taxing authority).

“Leases” has the meaning set forth in Section 2.2(a).

“LFC Property” has the meaning set forth in Section 2.2(b).

“Like-Kind Exchange Transaction” means a like-kind exchange, in whole or in part, as provided in Section 1031 of the Internal Revenue Code and the Treasury Regulations thereto, and if applicable, Rev. Proc. 2000-37, 2000-2 C.B. 308 (Sept. 18, 2000), as modified by Rev. Proc. 2004-51, 2004-2 CB. 294 (Jul. 20, 2004).

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

“Losses” means any and all claims, causes of action, proceedings, hearings, payments, charges, judgments, injunctions, orders, decrees, assessments, liabilities (including Employment Liabilities), losses, damages, penalties, fines, obligations, deficiencies, debts or costs and expenses, including any attorneys’ fees, legal or other expenses incurred in connection therewith and including liabilities, costs, losses and damages for personal injury or death or property damage or environmental damage or Remediation.

“Material Adverse Effect” means any event, result, occurrence, condition or circumstance that, individually or in the aggregate (whether foreseeable or not and whether covered by insurance or not), results in a material adverse effect on the (a) ownership, operation or value of the Assets, taken as a whole and as currently operated as of the Execution Date, or (b) ability of Seller to consummate the transactions contemplated by this Agreement and perform its obligations hereunder; provided, however, that a Material Adverse Effect shall not (in the case of the foregoing clause (a)) include any material adverse effects resulting from: (i) entering into this Agreement or the announcement of the transactions contemplated by this Agreement; (ii) changes in general market, economic, financial or political conditions (including changes in commodity prices (including Hydrocarbons), fuel supply or transportation markets, interest or rates) in the area in which the Assets are located, the United States or worldwide; (iii) conditions (or changes in such conditions) generally affecting the oil and gas and/or gathering,

 

Appendix A-7

processing or transportation industry whether as a whole or specifically in any area or areas where the Assets are located; (iv) acts of God, including storms or meteorological events; (v) orders, actions or failures to act of governmental authorities; (vi) civil unrest or similar disorder, the outbreak of hostilities, terrorist acts or war; (vii) any actions taken or omitted to be taken (A) by or at the written request or with the prior written consent of Purchaser or (B) as expressly permitted or prescribed hereunder; (viii) matters that are cured or no longer exist by the earlier of the Closing and the termination of this Agreement; (ix) any Casualty Loss; (x) a change in Laws or in GAAP interpretation from and after the Execution Date; (xi) reclassification or recalculation of reserves in the ordinary course of business; and (xii) natural declines in well performance.

“Material Contract” means any Existing Contracts of the type described below, including all amendments thereto:

 

(a)

that can reasonably be expected to result in aggregate payments by Seller of more than One Million Dollars ($1,000,000) per year during the current or any subsequent fiscal year (based solely on the terms thereof and without regard to any expected increase in volumes or revenues);

 

(b)

that can reasonably be expected to result in aggregate revenues to Seller of more than One Million Dollars ($1,000,000) per year during the current or any subsequent fiscal year (based solely on the terms thereof and without regard to any expected increase in volumes or revenues);

 

(c)

to the extent the same will not be released or terminated at or prior to the Closing, any indenture, mortgage, loan, note, credit, sale-leaseback or similar contract evidencing any Indebtedness for borrowed money (or guarantee of any such Indebtedness) binding on any of the Assets or granting any Encumbrance (other than Permitted Encumbrances) on any of the Assets and all related security or similar agreements associated therewith;

 

(d)

that constitutes a lease (other than the Leases) under which Seller is the lessor or lessee of real or personal property, which lease (A) cannot be terminated by Seller without penalty upon sixty (60) days or less notice and (B) involves annual base rental of more than One Hundred Fifty Thousand Dollars ($150,000);

 

(e)

Existing Contracts creating or representing Indebtedness for borrowed money or that are otherwise binding on the Assets or any guaranty by Seller of any other Person’s Indebtedness for borrowed money;

 

(f)

Hydrocarbon purchase and sale, exchange, handling, transportation, gathering, treating, processing, storing or similar Existing Contracts or any Existing Contract containing an acreage dedication, take-or-pay volume commitment or similar provision that, in each case, is not terminable without penalty upon sixty (60) days’ or less notice;

 

(g)

any purchase agreement, exchange agreement, farmout agreement, participation agreement, exploration agreement, development agreement, joint operating agreement, unit agreement, communitization agreements pooling agreement, agreement for the use of drilling rigs, seismic and other data license agreements, or any similar Existing Contract;

 

(h)

containing any area of mutual interest agreements, drag along rights, tag along rights, rights of first refusal, rights or first offer or similar provisions, or with any remaining drilling or development obligations of Seller;

 

(i)

containing a non-compete or non-solicit agreement or otherwise purporting to limit or prohibit the manner in which Seller may conduct its business in relation to the Assets;

 

(j)

providing for any call upon, option to purchase or similar rights with respect to the Assets or to the production therefrom or the processing thereof;

 

(k)

constituting or requiring cash deposits, escrow accounts, sinking funds, guarantees, letters of credit, treasury securities, surety bonds and other forms of credit assurances or credit support provided by or on behalf of Seller or any of its Affiliates (or that will require Purchaser or would require any other third person to provide the same upon its acquisition of the Assets) in support of the obligations of Seller or any of its

 

Appendix A-8

  Affiliates (or of Purchaser or any other third person upon its acquisition of the Assets) to any governmental authority, contract counterparty or other Person, in each case, related to the ownership or operation of the Assets;

 

(l)

with any Affiliate of Seller that will not be terminated prior to Closing;

 

(m)

the Facilities Dedication Agreement; and

 

(n)

the Plains PSA.

“Maximum Debt Threshold” means an amount equal to Two Hundred and Fifty Million Dollars ($250,000,000).

“Minimum Cash Threshold” means an amount equal to One Hundred Fifty Million Dollars ($150,000,000).

“MPPC” has the meaning set forth in the Preamble.

“Net Revenue Interest” means with respect to any Scheduled Property, the interest in and to all Hydrocarbons produced, saved and sold from or allocated to such Scheduled Property, after giving effect to all royalties, overriding royalties, production payments, carried interests, net profits interests, reversionary interests and other burdens upon, measured by or payable out of production therefrom.

“Nonparty Affiliates” has the meaning set forth in Section 17.15.

“NORM” means naturally occurring radioactive material.

“OCS” means the Outer Continental Shelf.

“Oil” means the crude and condensate produced from the Assets.

“Oil Spill Financial Responsibility” (OSFR) means the capability and means by which a responsible party for a covered offshore facility will meet removal costs and damages for which it is liable under the Title I of the Oil Pollution Act of 1990, as amended (33 CFR 2701 et seq.), with respect to both oil spill discharges and substantial threats of discharge of oil.

“Overhead Costs” means an amount equal to Three Hundred Twenty Thousand Dollars ($320,000) per month.

“P&A Financial Security” has the meaning set forth in Section 11.18(c).

“Parties” and “Party” has the meaning set forth in the Preamble.

“Payment Due Date” is ninety (90) days after Restart Production but no later than 5 years from the Effective Time.

“Penal Sum” has the meaning set forth in Section 11.18(c).

“Permits” means all permits, licenses, authorizations, registrations, consents or approvals (in each case) granted or issued by any governmental authority applicable to the Assets, other than Rights-of-Way.

“Permitted Encumbrances” means with respect to any Asset, any of the following:

 

(a)

the terms and conditions of all Leases and all lessor’s royalties, non-participating royalties, overriding royalties, reversionary interests and similar burdens upon, measured by or payable out of production if the net cumulative effect of such Leases and burdens does not operate to reduce the Net Revenue Interest of

 

Appendix A-9

  Seller in any Scheduled Property below the Net Revenue Interest as set forth in Exhibit A-2 for such Scheduled Property and does not operate to increase the Working Interest of Seller in such Scheduled Property (as to the applicable formation) above the Working Interest for such Scheduled Property as set forth in Exhibit A-2 for such Scheduled Property (unless the Net Revenue Interest for such Scheduled Property is greater than the Net Revenue Interest for such Scheduled Property as set forth in Exhibit A-2, in the same proportion as any increase in such Working Interest);

 

(b)

consents (including Required Consents) to assignment and similar transfer restrictions or requirements;

 

(c)

liens for Taxes or assessments not yet delinquent or, if delinquent, that are being contested in good faith in the normal course of business;

 

(d)

materialman’s, mechanic’s, repairman’s, employee’s, contractor’s, operator’s, and other similar liens or charges arising in the ordinary course of business (i) if they have not been filed pursuant to Law, or (ii) if filed, they have not yet become due and payable;

 

(e)

Encumbrances in the form of a judgment secured by a supersedes bond or other security approved by the court issuing the order;

 

(f)

the loss of lease acreage between the Effective Time and Closing because the lease term expires set forth on Schedule 5.19;

 

(g)

Customary Post-Closing Consents and any required notices to, or filings with, governmental authorities in connection with the consummation of the transactions contemplated by this Agreement;

 

(h)

irrespective of clause (g) above, all necessary consents and approvals by and notices to any federal governmental authority, the State of California or any political subdivision thereof with respect to the transfer to Purchaser of interests in a right of way, servitude or lease issued by or on behalf of the United States of America, the State of California or a political subdivision thereof to the extent customarily made or received after the Closing of a sale or other transfer of title, operatorship or control of assets similar to the Assets;

 

(i)

to the extent not triggered, rights of reassignment arising upon final intention to abandon or release the Assets, or any of them;

 

(j)

the Rights-of-Way and, to the extent that they do not materially interfere with the operation of the Assets (as currently operated), all other easements, rights-of-way, servitudes, Permits, surface leases and other rights relating to surface operations, facilities, pipelines, transmission lines, transportation lines, distribution lines and other like purposes;

 

(k)

all other Encumbrances, contracts, agreements, instruments, obligations, defects and irregularities affecting the Assets which individually or in the aggregate are not such as to materially interfere with the ownership, operation or use of any of the Assets (as currently owned, operated and used), do not reduce the Net Revenue Interest of Seller in any Scheduled Property below the Net Revenue Interest set forth on Exhibit A-2 for such Scheduled Property, and do not increase the Working Interest of Seller in such Scheduled Property (as to the applicable formation) above the Working Interest set forth in Exhibit A-2 for such Scheduled Property (unless the Net Revenue Interest for such Scheduled Property is greater than the Net Revenue Interest for such Scheduled Property as set forth in Exhibit A-2, in the same proportion as any increase in such Working Interest);

 

(l)

all rights reserved to or vested in any governmental authority to control or regulate any of the Assets in any manner, and all applicable Permits and Laws;

 

(m)

to the extent that they do not materially interfere with the operation of the Assets (as currently operated) or otherwise create a Material Adverse Effect, rights of a common owner of any interest in Rights-of-Way or Permits held by Seller and such common owner as tenants in common or through common ownership;

 

(n)

liens created under Leases or Rights-of-Way included in the Assets and/or operating agreements or production sales contracts or by operation of Law in respect of obligations that are not yet due or delinquent or, if delinquent, which are being contested in good faith by appropriate procedures by or on behalf of Seller;

 

Appendix A-10

(o)

any Encumbrance affecting the Assets that is discharged by Seller at or prior to Closing;

 

(p)

any Title Defects that Purchaser may have expressly waived in writing or which are deemed to have been waived under Section 4.4, or that do not meet the Individual Title Defect Threshold or Aggregate Title Defect Deductible as set forth in Section 4.6;

 

(q)

the terms and conditions of the Existing Contracts to the extent that they do not, individually or in the aggregate (i) reduce the Net Revenue Interest of Seller in any Scheduled Property below the Net Revenue Interest as set forth in Exhibit A-2 (as to the applicable formation) for such Scheduled Property, (ii) operate to increase the Working Interest of Seller in such Scheduled Property (as to the applicable formation) above the Working Interest for such Scheduled Property as set forth in Exhibit A-2 (as to the applicable formation) for such Scheduled Property (unless the Net Revenue Interest for such Scheduled Property is greater than the Net Revenue Interest for such Scheduled Property as set forth in Exhibit A-2, in the same proportion as any increase in such Working Interest) or (iii) impair in any material respect the ownership and/or operation of any of the Assets by Seller (or by Purchaser as Seller’s successor-in-interest from and after Closing);

 

(r)

all unit, pooling, communitization and spacing orders (as well as any other orders, whether of a similar or dissimilar kind) issued by any governmental authority that (i) do not operate to increase the Working Interest of Seller in such Scheduled Property (as to the applicable formation) above the Working Interest for such Scheduled Property as set forth in Exhibit A-2 (as to the applicable formation) for such Scheduled Property (without a corresponding increase in the Net Revenue Interest) or reduce the Net Revenue Interest of Seller in any Scheduled Property below the Net Revenue Interest as set forth in Exhibit A-2 (as to the applicable formation) for such Scheduled Property and (ii) are not such as will interfere materially with the ability to own or operate the Assets substantially in the manner they were operated at the Effective Time;

 

(s)

such defects or irregularities in the working interests or net revenue interests in the Assets resulting from the failure to file any assignment or other transfer instrument in Seller’s chain of title in the records of any adjoining county or parish, so long as the instrument in question is required to be and is filed with the BOEM;

 

(t)

all subsidence, erosion, dereliction or accretion of, or tidal influences on, any Assets or other lands;

 

(u)

the terms and conditions of this Agreement;

 

(v)

all Imbalances, regardless of whether such over-production or under-production or over-deliveries or under-deliveries arise at a platform, wellhead, pipeline, gathering system, plant, transportation, receipt point, delivery point or other location;

 

(w)

the litigation, suits and proceedings set forth in Schedule 5.8; and

 

(x)

any matter that would not constitute a Title Defect under the terms of this Agreement, including any Title Defects waived by Purchaser.

“Person” means an individual, corporation, partnership, association, trust, limited liability company or any other entity or organization, including government or political subdivisions or an agency, unit or instrumentality thereof.

“Phase II Environmental Assessment” means an intrusive investigation which collects original samples of soil, groundwater, other environmental media, air or building materials to analyze for quantitative values of contaminants of concern for purposes of identifying any Recognized Environmental Condition or any Historical Recognized Environmental Condition (as such terms are defined in ASTM Standard Practice E1903-11 for Environmental Site Assessments: Phase II Environmental Site Assessment Process).

“Phase II Request” has the meaning set forth in Section 4.9(b).

“PIPE Investor” has the meaning set forth in Section 7.13(c).

 

Appendix A-11

“Pipeline Imbalance” means any marketing imbalance between the quantity of Hydrocarbons attributable to the Assets required to be delivered by Seller under any contract or Law relating to the purchase and sale, gathering, transportation, storage, processing or marketing of such Hydrocarbons and the quantity of Hydrocarbons attributable to the Assets actually delivered by Seller pursuant to the relevant contract or at Law, together with any appurtenant rights and obligations concerning production balancing at the delivery point into the relevant sale, gathering, transportation, storage or processing facility.

“Plains” means Plains Pipeline LP.

“Plains PSA” means that purchase and sale agreement relating to the 901/903 Pipeline by and between Plains and MPPC, dated October 10, 2022.

“Plugging and Abandonment Obligations” and its derivatives mean (a) with respect to a well, whether drilled, plugged and abandoned before or after the Effective Time, the plugging (and as necessary replugging) and abandonment of the well, the salvage and removal of all associated well collars, tubing, well structures, platforms, tank batteries, compressors, injectors, equipment and other movable property (whether drilled or placed on the Assets before or after the Effective Time), the closure, filling-in and Remediation of the associated wellsite, the disposal and clean-up of all related waste materials, the restoration of the associated surface, subsurface and water bottoms to the condition they were in before commencement of operations on the Leases, to the extent required by and in compliance with the terms of the Leases, Permits, applicable Laws, regulations, orders and/or contracts, the proper decommissioning, removal, abandonment, and disposal of all structures, pipelines, facilities, equipment, abandoned Assets, junk and other personal property located on or comprising any part of the Assets and all obligations arising from the Assets, contractual requirements and demands made by governmental authorities or parties claiming a vested interest in any part of the Assets with respect to the foregoing; and (b) with respect to any Asset, the plugging and abandonment (within the meaning of clause (a) above) of all wells on, under or associated with such Asset, the flushing, burying and capping (or, to the extent required, the removal) of all flowlines, pipelines, gathering lines and field transmission lines across or associated with such land or equipment, the salvage and removal of platforms, equipment and underwater or underground obstructions, the closure and Remediation of all wellsites on, under or associated with such Asset, the disposal of all waste materials on, under or associated with such Asset and the restoration of all surface, subsurface and water bottoms on, under or associated with such Asset; and (c) obtaining and maintaining all bonds and securities, including supplemental or additional bonds or other securities, that may be required by a Lease, Permit, contract or by governmental authorities.

“POPCO”means the Pacific Offshore Pipeline Company, a corporation formed under the laws of California.

“POPCO Shares” means one hundred percent (100%) of the issued equity of POPCO, as described on Exhibit A-3.

“Power of Attorney” means a power of attorney substantially similar to the form attached as Exhibit O.

“PPC” means the Pacific Pipeline Company, a corporation formed under the laws of Delaware.

“PPC Shares” means one hundred percent (100%) of the issued equity of PPC, as described on Exhibit A-4.

“Preliminary Settlement Statement” has the meaning set forth in Section 10.2.

“Principal Amount” has the meaning ascribed to it in Section 3.4(b).

“Property Expenses” means all operating expenses (including but not limited to salary, wages, and benefits for the employees, and all insurance premiums or any other costs of insurance attributable to Seller’s and/or its Affiliates’ insurance and to coverage periods from and after the Effective Time but excluding in all cases, all

 

Appendix A-12

costs and expenses of bonds, letters of credit or other surety instruments) and all capital expenditures (in each case) incurred in the ownership and operation of the Assets in the ordinary course of business and, where applicable, in accordance with the relevant operating or unit agreement, if any, and overhead costs charged to the Assets under the relevant operating agreement or unit agreement, if any, but excluding (A) all costs paid by Seller to cure and/or Remediate, as applicable, any Title Defects, Environmental Defects or Casualty Losses, or to obtain any Required Consents, and (B) all Losses attributable to (i) personal injury or death, property damage or violation of any Law, (ii) Plugging and Abandonment Obligations, (iii) the Remediation of any environmental condition under applicable Environmental Laws, (iv) obligations with respect to Imbalances, (v) Taxes, or (vi) obligations to pay Working Interests, royalties, overriding royalties or other interest owners revenues or proceeds attributable to sales of Hydrocarbons relating to the Assets.

“Property Taxes” means all ad valorem Taxes, real property Taxes, personal property Taxes, and similar obligations relating to the Assets, but excluding, for the avoidance of doubt, Income Taxes and Transfer Taxes.

“Purchase Price” has the meaning set forth in Section 3.1.

“Purchaser” has the meaning set forth in the Preamble.

“Purchaser Group” means Purchaser and its Affiliates and each of their respective officers, directors, employees, agents, consultants, advisors and representatives.

“Purchaser’s Auditor” has the meaning set forth in Section 7.10(b).

“Purchaser’s Environmental Assessment” has the meaning set forth in Section 4.9(a).

“Purchaser’s Representatives” means Purchaser’s Affiliates and Purchaser’s and its Affiliates’ respective employees, consultants, agents and other authorized representatives.

“Qualified Exchange Accommodation Arrangement” means a qualified exchange accommodation arrangement as such term is defined in Section 4.02 of Rev. Proc. 2000-37, 2000-2 C.B. 308 (Sept. 18, 2000), as modified by Rev. Proc. 2004-51, 2004-2 C.B. 294 (July 20, 2004).

“Qualified Intermediary” means a qualified intermediary as such term is defined in Section 1.1031(k)-1(g)(4)(iii) of the Treasury Regulations.

“RCRA” means Resource Conservation and Recovery Act of 1976 (as amended).

“Reassignment Option” has the meaning ascribed to it in Section 7.3(c).

“Records” has the meaning set forth in Section 12.3(a).

“Redetermination Review” has the meaning set forth in Section 11.18(d).

“Referee” has the meaning set forth in Section 11.18(d).

“Regardless of Fault” has the meaning set forth in Section 11.4.

“Remediate” and “Remediation” mean with respect to an environmental condition or Environmental Defect, the response required or allowed under Environmental Laws that completely addresses (for current and future use in the same manner as being currently used) the identified environmental condition or Environmental Defect in the most cost-effective manner (considered as a whole taking into account all considerations, including any material negative impact such response may have on the operations of the relevant Assets and any potential material

 

Appendix A-13

additional costs or liabilities that may likely arise as a result of such response) as compared to any other response that is required or allowed under Environmental Laws. “Remediation” may consist of or include taking no action, leaving the condition unaddressed, periodic monitoring, the use of institutional controls or the recording of notices in lieu of remediation, in each case, if such response is allowed under Environmental Laws and completely addresses and resolves (for current and future use in the same manner as being currently used) the identified environmental condition or Environmental Defect.

“Remediation Amount” means with respect to an environmental condition or Environmental Defect, the present value as of the Closing Date of the cost (net to Seller’s interest) of the Remediation of such condition or defect; provided, however, that “Remediation Amount” shall not include (a) the costs of Purchaser’s and/or its Affiliate’s employees, or, if Seller is conducting the Remediation, Purchaser’s project manager(s) or attorneys, (b) expenses for matters that are ordinary costs of doing business regardless of the presence of an environmental condition (e.g., those costs that would ordinarily be incurred in the day-to-day operations of the Assets or in connection with Permit renewal/amendment activities), (c) overhead costs of Purchaser and/or its Affiliates, (d) costs and expenses that would not have been required under Environmental Laws as they exist on the Closing Date or, if prior to the Closing Date, the date on which the Remediation action is being undertaken, or (e) any costs or expenses relating to the assessment, Remediation, removal, abatement, transportation and disposal of any asbestos, asbestos-containing materials or NORM unless required to address a violation of Environmental Law. Notwithstanding anything to the contrary in this Agreement, the aggregate Remediation Amounts attributable to the effects of all Environmental Defects upon any Environmental Defect Property shall not exceed fifty percent (50%) of the Allocated Value of such Environmental Defect Property and shall not include (a) the costs of Purchaser’s or any of its Affiliate’s employees, project manager(s) or attorneys without Seller’s written consent, (b) expenses for matters that are costs of doing business, e.g., those costs that would ordinarily be incurred in the day-to-day operations of the Assets such as maintaining oil spill financial assurance and oil spill response plans in accordance with BSEE’s regulations at 30 Code of Federal Regulations Chapter II, or in connection with leasing or permit renewal/amendment activities, maintenance on active RCRA management units, compliance with environmental-related requirements under a lease issued by BOEM and operation and oversight of active RCRA management units, (c) overhead costs of Purchaser or its Affiliates, (d) costs and expenses that would not have been required under Environmental Laws as they exist on the Execution Date, (e) costs or expenses incurred in connection with responding to releases of hazardous materials or remedial or corrective actions that are designed to achieve standards that are more stringent than those required for similar facilities or that fail to reasonably take advantage of applicable risk reduction or risk assessment principles allowed under applicable Environmental Laws, and/or (f) any costs or expenses relating to the assessment, Remediation, removal, abatement, transportation and disposal of any asbestos, asbestos containing materials or NORM.

“Replacement P&A Financial Security” has the meaning set forth in Section 11.18(c)(ii).

“Required Consent” means any consent or approval where the failure to obtain such consent or approval would cause (or give the lessor, grantor or applicable counterparty the right to cause) (a) the assignment of the Assets (other than any 901/903 Asset) affected thereby to Purchaser to be void or voidable, or (b) the termination of or the right to terminate a Lease, Material Contract, Right-of-Way, or a material right in the Assets subject to such consent under the express terms thereof.

“Restart Failure Date” has the meaning set forth in Section 7.3(c).

“Restart Production” means ninety (90) days after the resumption of actual production from Wells on the Leases.

“Retained Litigation” means each of the proceedings set forth on Schedule 11.3(b) (or that should have been set forth on Schedule 11.3(b) in order for such representation and warranty of Seller to be true and correct). Retained Litigation expressly excludes any Existing Pipeline Claim, which shall be Assumed Obligations of Purchaser in accordance herewith.

 

Appendix A-14

“Retained Obligations” has the meaning set forth in Section 11.3(g).

“Rights-of-Way” means, except for any Excluded Asset, all permits, licenses, servitudes, easements, fee surface, surface leases and rights-of-way primarily used or held for use in connection with the ownership or operation of the Assets, other than Permits.

“Scheduled Bonds” has the meaning set forth in Section 2.3(k).

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

“Scheduled Property” means a Lease or Asset (as to the specified if provided, or, if not specified, the producing or producible formation, sand, or unit) or other property interest specifically identified on Exhibit A-1, Exhibit A-2, Exhibit A-3, or Exhibit B (other than the CSLC Leases), if applicable. For the avoidance of doubt, the 901/903 Pipeline and any 901/903 Asset are not Scheduled Properties.

“Securities Act” has the meaning set forth in Section 7.10(a).

“Securities Laws” has the meaning set forth in Section 7.10(a).

“Seller” has the meaning set forth in the Preamble.

“Seller Benefit Plans” means the group retirement, pension, medical, dental, accident and death insurance and other employer sponsored plans.

“Seller Fundamental Representations” has the meaning set forth in Section 11.5(a).

“Seller Group” means Seller and its Affiliates and each of their respective directors, officers, employees, agents, consultants, advisors and representatives.

“Senior Secured Term Loan Agreement” means the term loan agreement in the form attached as Exhibit J.

“Severance Taxes” means all severance, production or other Taxes measured by Hydrocarbon production from the Assets, or the receipt of proceeds therefrom, but excluding, for the avoidance of doubt, Income Taxes and Transfer Taxes.

“Site Assessment” has the meaning set forth in Section 4.9(b).

“Subscription Agreement” has the meaning set forth in Section 7.13(c).

“Target Settlement Date” has the meaning set forth in Section 12.1(a).

“Tax” or “Taxes” means all taxes, assessments, charges, duties, fees, levies, imposts or other similar charges imposed by a governmental authority, including all income, franchise, profits, capital gains, capital stock, transfer, gross receipts, sales, use, service, occupation, ad valorem, property, excise, severance, windfall profits, premium, stamp, license, payroll, employment, social security, unemployment, disability, environmental, alternative minimum, add-on, value-added, withholding and other taxes, assessments, charges, duties, fees, levies, imposts or other similar charges of any kind, and all estimated taxes, deficiency assessments, additions to tax, penalties and interest.

“Tax Return” means any report, return, election, document, estimated tax filing, declaration, or other filing provided to any governmental authority including any attachments thereto and any amendments thereof.

 

Appendix A-15

“Third Party Claim” has the meaning set forth in Section 11.7(b).

“Title Benefit” has the meaning set forth in Section 4.7.

“Title Benefit Amount” has the meaning set forth in Section 4.7.

“Title Defect” means any Encumbrance, defect or other matter that causes Seller not to have Defensible Title in or to the Scheduled Properties; provided that the following shall not be considered Title Defects:

 

(a)

defects arising out of lack of corporate or other entity authorization or defects consisting of the failure to recite marital status in a document or omissions of successions of heirship or estate proceedings, (in each case) unless Purchaser provides affirmative evidence that such corporate or other entity action was not authorized and has resulted, or such failure or omission (in either case) has resulted, in another Person’s superior claim of title to the relevant Asset;

 

(b)

defects or irregularities in the Working Interests or Net Revenue Interests in the Assets resulting from the failure to file any assignment or other transfer instrument in Seller’s chain of title in the records of any adjoining county or parish, so long as the instrument in question is required to be and is filed with the BOEM;

 

(c)

defects in the chain of title which occurred as a result of an ineffective assignment of the Scheduled Property, the easements or the Rights-of-Way filed with BOEM or BSEE, for which Seller provides Purchaser with evidence of the filing of a corrected assignment of such affected Scheduled Property prior to the Closing Date;

 

(d)

defects based on a gap in Seller’s chain of title in the BOEM or BSEE records, as such chain of title is reflected in transfers approved by the BOEM or BSEE;

 

(e)

defects based upon the failure to record any federal, state or tribal Lease or Right-of-Way included in the Assets, or any assignments of interests in such Leases or Rights-of-Way included in the Assets, in the applicable county records, unless such failure has resulted in another Person’s superior claim of title to the relevant Asset;

 

(f)

defects arising from any prior oil and gas lease relating to the lands covered by the Leases or Units not being surrendered of record, unless Purchaser provides affirmative evidence that such prior oil and gas lease is still in effect and has resulted in another Person’s actual and superior claim of title to the relevant Lease or Well;

 

(g)

defects that affect only which Person has the right to receive payments of royalties or other burdens on production and that do not affect the validity of the underlying Lease;

 

(h)

defects based solely on: (i) lack of information in Seller’s files, (ii) references to an unrecorded document to which neither Seller nor any Affiliate of Seller is a party and which document is dated earlier than January 1, 1960; or (iii) any Tax assessment, Tax payment or similar records or the absence of such activities or records;

 

(i)

any Encumbrance or loss of title resulting from Seller’s conduct of business in compliance with this Agreement;

 

(j)

defects as a consequence of cessation of production, insufficient production or failure to conduct operations during any period after the completion of a well capable of production in paying quantities on any of the Leases held by production, or lands pooled or unitized therewith, except to the extent a claim is pending with respect thereto or the cessation of production is affirmatively shown to have occurred within the past five (5) years and it will give rise to a right of the lessor or other third party to terminate the underlying Lease, which documentation shall be provided by Purchaser to Seller in a Title Defect Notice;

 

(k)

Encumbrances created under deeds of trust, mortgages and similar instruments by the lessor under a Lease covering the lessor’s interests in the land covered thereby that would customarily be accepted in taking or

 

Appendix A-16

  purchasing such and for which a reasonably prudent lessee would not customarily seek a subordination of such Encumbrance to the oil and gas leasehold estate prior to conducting drilling activities on the Lease;

 

(l)

all defects or irregularities that have been cured or remedied by applicable statutes of limitation or statutes of prescription

 

(m)

all defects or irregularities resulting from lack of survey unless such survey is required by applicable Law;

 

(n)

the navigability or non-navigability of any waters;

 

(o)

all defects or irregularities resulting from the failure to record releases of liens, production payments or mortgages that have expired on their own terms or the enforcement of which are barred by applicable statute of limitations;

 

(p)

Encumbrances created under deeds of trust, mortgages and similar instruments by the grantor under a Right-of-Way that would customarily be accepted by a reasonably prudent oil and gas operator or reasonably prudent pipeline owner in taking or purchasing such Rights-of-Way;

 

(q)

defects arising as a result of actions taken by Purchaser or Purchaser’s failure to consent to any action pursuant to Section 7.1; and

 

(r)

any Encumbrance or loss of title affecting ownership interests in formations other than the applicable formation for the affected Scheduled Property set forth in Exhibit A-1, Exhibit A-2 or Exhibit B, as applicable.

In evaluating whether a matter constitutes a Title Defect, the principles set forth in the last sentence of the definition of “Defensible Title” shall be applied. In addition, evidence that Seller is receiving its full share of proceeds from a purchaser or third party operator attributable to its Net Revenue Interest for any Scheduled Property listed on Exhibit A-2,

“Title Defect Amount” has the meaning set forth in Section 4.5.

“Title Defect Notice” has the meaning set forth in Section 4.3.

“Title Defect Property” has the meaning set forth in Section 4.3.

“Transaction Documents” means those documents executed and delivered pursuant to or in connection with this Agreement.

“Transfer Taxes” has the meaning set forth in Section 13.2.

“Transferred Shares” means the POPCO Shares and the PPC Shares.

“Transition Services Agreement” means the agreement between Seller Group and Purchaser for post-Closing services in the form of Exhibit N.

“Treasury Regulations” means the final or temporary regulations promulgated by the U.S. Department of the Treasury under the Code.

“Trust Account” has the meaning set forth in the Trust Agreement.

“Trust Agreement” means that certain Investment Management Trust Agreement dated as of February 24, 2021 by and between the Financing Party and Trustee.

“Trustee” means American Stock Transfer & Trust Company, LLC.

 

Appendix A-17

“Ultimate Parent Company Guarantee” has the meaning set forth in Section 7.6(c).

“Unadjusted Penal Sum” has the meaning set forth in Section 11.18(e).

“Units” has the meaning set forth in Section 2.2(d).

“URL” means uniform resource locator.

“Well Imbalance” means any imbalance at the wellhead between the amount of Hydrocarbons produced from a Well and allocable to the interests of Seller therein and the shares of production from the relevant Well to which Seller is entitled, together with any appurtenant rights and obligations concerning future in kind and/or cash balancing at the wellhead.

“Wells” has the meaning set forth in Section 2.2(c).

“Willful Breach” means with respect to any Party, such Party knowingly and intentionally breaches in any material respect (by refusing to perform or taking an action prohibited or knowingly breaching a representation or warranty) any material covenant, representation or warranty applicable to such Party.

“Working Interest” means with respect to any Scheduled Property, the interest in and to such Scheduled Property that is burdened with the obligation to bear and pay costs and expenses of maintenance, development and operations on or in connection with such Scheduled Property, but without regard to the effect of any royalties, overriding royalties, production payments, net profits interests and other similar burdens upon, measured by or payable out of production therefrom.

 

Appendix A-18

Exhibit 10.31

REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of February 14, 2024, is made and entered into by and between Sable Offshore Corp. (f/k/a Flame Acquisition Corp.), a Delaware corporation (the “Company”) and the undersigned party listed under Holder on the signature page hereto (the “Holder”).

RECITALS

WHEREAS, on October 26, 2022, the Holder was issued 3,000,000 shares representing membership interests in Sable Offshore Holdings LLC, a Delaware limited liability company (“Holdco”), designated as voting Class A shares (the “Holdco Equity”);

WHEREAS, Holdco entered into that certain Agreement and Plan of Merger (the “Merger Agreement”), dated as of November 2, 2022, with the Company and Sable Offshore Corp., a Texas corporation (“Sable”), pursuant to which (i) Holdco merged with and into the Company, with the Company surviving such merger (the “Holdco Merger,” and the effective time of such merger, the “Holdco Effective Time”) and (ii) immediately following the Holdco Effective Time, Sable merged with and into the Company, with the Company surviving such merger (the “Sable Merger,” and together with the Holdco Merger, the “Mergers”);

WHEREAS, pursuant to the terms of the Merger Agreement, at the Holdco Effective Time, each share of Holdco Equity issued and outstanding immediately prior to the Holdco Effective Time, other than any share of Holdco Equity held by Holdco in treasury or owned by the Company, automatically converted into the right to receive 3,000,000 shares of Common Stock (the “Company Shares”); and

WHEREAS, pursuant to the terms of the Merger Agreement, Company and the Holder desire to enter into this Agreement, pursuant to which (a) the Company shall grant the Holder certain registration rights with respect to the Company Shares and (b) Holder will agree to certain restrictions on transfer of the Company Shares, in each case, as set forth in this Agreement.

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

ARTICLE I

DEFINITIONS

1.1 Definitions. The terms defined in this Article I shall, for all purposes of this Agreement, have the respective meanings set forth below:

“Adverse Disclosure” shall mean any public disclosure of material non-public information, which disclosure, in the good faith judgment of the Board or principal financial officer of the Company, after consultation with counsel to the Company, (i) would be required to be made in any Registration Statement or Prospectus in order for the applicable Registration Statement or Prospectus not to contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein (in the case of any prospectus and any preliminary prospectus, in the light of the circumstances under which they were made) not misleading, (ii) would not be required to be made at such time if the Registration Statement were not being filed, and (iii) the Company has a bona fide business purpose for not making such information public.

“Agreement” shall have the meaning given in the Preamble.

“Board” shall mean the Board of Directors of the Company.

“Closing Date” shall have the meaning given in the Merger Agreement.

“Commission” shall mean the Securities and Exchange Commission.

“Common Stock” shall mean shares of Class A common stock, par value $0.0001 per share, of the Company.

“Company” shall have the meaning given in the Preamble.

“Company Shares” shall have the meaning given in the Recitals.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as it may be amended from time to time.

“Form S-1 Shelf” shall have the meaning given in Section 2.1(a).

“Form S-3 Shelf” shall have the meaning given in Section 2.1(a).

“Holdco” shall have the meaning given in the Recitals.

“Holdco Effective Time” shall have the meaning given in the Recitals.

“Holdco Equity” shall have the meaning given in the Recitals.

“Holdco Merger” shall have the meaning given in the Recitals.

“Holder” shall have the meaning given in the Preamble.

“IPO Registration Rights Agreement” shall mean that certain Registration Rights Agreement, dated as of February 24, 2021, by and among the Company, Flame Acquisition Sponsor, LLC, FL-Co-Investment, LLC, Intrepid Financial Partners, L.L.C., and the other parties named therein, as may be amended, modified, supplemented or restated from time to time.  

“Lock-up” shall have the meaning given in Section 5.1.

“Lock-up Period” shall mean the period beginning on the Closing Date and ending on the third (3rd) anniversary of the Closing Date.

“Lock-up Shares” shall mean the Company Shares and any other equity security of the Company issued or issuable with respect to any Company Shares by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or reorganization.

“Maximum Number of Securities” shall have the meaning given in Section 2.1(e).

“Merger Agreement” shall have the meaning given in the Recitals.

“Mergers” shall have the meaning given in the Recitals.

“Misstatement” shall mean an untrue statement of a material fact or an omission to state a material fact required to be stated in a Registration Statement or Prospectus, or necessary to make the statements in a Registration Statement or Prospectus in the light of the circumstances under which they were made not misleading.

 

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“Permitted Transferees” shall mean, with respect to the Holder, any person or entity to whom the Holder is permitted to Transfer Registrable Securities, including prior to the expiration of the Lock-up Period, under this Agreement and any other applicable agreement between the Holder and the Company, and to any other Permitted Transferee thereafter.

“Person” shall mean any individual, firm, corporation, partnership, limited liability company, incorporated or unincorporated association, joint venture, joint stock company, governmental authority or instrumentality or other entity of any kind.

“Piggyback Registration” shall have the meaning given in Section 2.2(a).

“Prospectus” shall mean the prospectus included in any Registration Statement, as supplemented by any and all prospectus supplements and as amended by any and all post-effective amendments and including all material incorporated by reference in such prospectus.

“Registrable Security” shall mean (a) the Company Shares issued and outstanding and held by the Holder immediately following the consummation of the Mergers and (b) any other equity security of the Company issued or issuable with respect to any such Company Shares by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or reorganization; provided, however, that, as to any particular Registrable Security, such securities shall cease to be Registrable Securities when: (A) a Registration Statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been sold, transferred, disposed of or exchanged in accordance with such Registration Statement; (B) such securities shall have been otherwise transferred, new certificates for such securities not bearing a legend restricting further transfer shall have been delivered by the Company and subsequent public distribution of such securities shall not require registration under the Securities Act; (C) such securities shall have ceased to be outstanding; or (D) such securities have been sold to, or through, a broker, dealer or underwriter in a public distribution or other public securities transaction.

“Registration” shall mean a registration, including any related Shelf Takedown, effected by preparing and filing a registration statement, Prospectus or similar document in compliance with the requirements of the Securities Act, and the applicable rules and regulations promulgated thereunder, and such registration statement becoming effective.

“Registration Expenses” shall mean the out-of-pocket expenses of a Registration, including, without limitation, the following:

(a) all registration and filing fees (including fees with respect to filings required to be made with the Financial Industry Regulatory Authority, Inc.) and any national securities exchange on which Common Stock is then listed;

(b) fees and expenses of compliance with securities or blue sky laws (including reasonable and customary fees and disbursements of outside counsel for the Underwriters in connection with blue sky qualifications of Registrable Securities);

(c) printing, messenger, telephone and delivery;

(d) reasonable fees and disbursements of counsel for the Company;

(e) reasonable fees and disbursements of the independent registered public accounting firm of the Company incurred specifically in connection with such Registration; and

(f) in an Underwritten Offering, reasonable fees and expenses of one (1) legal counsel selected by the Holder.

 

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“Registration Statement” shall mean any registration statement under the Securities Act that covers the Registrable Securities pursuant to the provisions of this Agreement, including the Prospectus included in such registration statement, amendments (including post-effective amendments) and supplements to such registration statement, and all exhibits to and all material incorporated by reference in such registration statement.

“Sable” shall have the meaning given in the Recitals.

“Sable Merger” shall have the meaning given in the Recitals.

“Securities Act” shall mean the Securities Act of 1933, as amended from time to time.

“Shelf” shall have the meaning given in Section 2.1(a).

“Shelf Registration” shall mean a registration of securities pursuant to a registration statement filed with the Commission in accordance with and pursuant to Rule 415 promulgated under the Securities Act (or any successor rule then in effect).

“Shelf Takedown” shall mean any proposed transfer or sale using a Registration Statement, including a Piggyback Registration.

“Transfer” shall mean to, directly or indirectly, sell, transfer, assign, pledge, encumber, hypothecate or similarly dispose of, either voluntarily or involuntarily, or to enter into any contract, option or other arrangement or understanding with respect to the sale, transfer, assignment, pledge, encumbrance, hypothecation or similar disposition of, any interest owned by a Person or any interest (including a beneficial interest or an economic entitlement) in, or the ownership, control or possession of, any interest owned by a Person.

“Underwriter” shall mean a securities dealer who purchases any Registrable Securities as principal in an Underwritten Offering and not as part of such dealer’s market-making activities.

“Underwritten Registration” or “Underwritten Offering” shall mean a Registration in which securities of the Company are sold to an Underwriter in a firm commitment underwriting for distribution to the public.

ARTICLE II

REGISTRATIONS

2.1 Shelf Registration.

(a) Filing. The Company shall use commercially reasonable efforts to submit or file with the Commission a Registration Statement for a Shelf Registration on Form S-1 (the “Form S-1 Shelf”) within thirty (30) calendar days after the date hereof, covering the public resale of all the Registrable Securities (determined as of two (2) business days prior to such submission or filing) on a delayed or continuous basis and shall use its commercially reasonable efforts to have such Form S-1 Shelf declared effective as soon as practicable after the filing thereof, but no later than the earlier of (a) the 90th calendar day after the filing date thereof (or the 120th calendar day following the filing date thereof if the Commission notifies the Company that it will “review” the Registration Statement) and (b) the tenth business day after the date Company is notified (orally or in writing whichever is earlier) by the Commission that the Registration Statement will not be “reviewed” or will not be subject to further review. The Company shall use commercially reasonable efforts to convert the Form S-1 (and any subsequent Registration Statement) to a shelf registration statement on Form S-3 (a “Form S-3 Shelf,” and together with the Form S-1 and any subsequent Registration Statement, the “Shelf”) as promptly as practicable after the Company is eligible to use a Form S-3 Shelf. The Company shall use commercially reasonable efforts to cause a Shelf to remain effective, and to be supplemented and amended to the extent necessary to ensure that such Shelf is continuously effective, available for use to permit the Holder to sell his Registrable Securities included therein and in compliance with the provisions of the Securities Act until such time as there are no longer any Registrable Securities. The Company’s obligation under this Section 2.1(a), shall, for the avoidance of doubt, be subject to Section 3.4.

 

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(b) Subsequent Shelf Registration. If any Shelf ceases to be effective under the Securities Act for any reason at any time while Registrable Securities are still outstanding, the Company shall, subject to Section 3.4, use its commercially reasonable efforts to as promptly as is reasonably practicable cause such Shelf to again become effective and to comply with the provisions of the Securities Act with respect to the disposition of all the Registrable Securities (including using its commercially reasonable efforts to obtain the prompt withdrawal of any order suspending the effectiveness of such Shelf), and shall use its commercially reasonable efforts to as promptly as is reasonably practicable amend such Shelf in a manner reasonably expected to result in the withdrawal of any order suspending the effectiveness of such Shelf or file an additional registration statement as a Shelf Registration (a “Subsequent Shelf Registration Statement”) registering the resale of all Registrable Securities (determined as of two (2) business days prior to such filing). If a Subsequent Shelf Registration Statement is filed, the Company shall use its commercially reasonable efforts to (i) cause such Subsequent Shelf Registration Statement to become effective under the Securities Act as promptly as is reasonably practicable after the filing thereof (it being agreed that the Subsequent Shelf Registration Statement shall be an automatic shelf registration statement (as defined in Rule 405 promulgated under the Securities Act) if the Company is a well-known seasoned issuer at the time of filing (as defined in Rule 405 promulgated under the Securities Act) at the most recent applicable eligibility determination date) and (ii) keep such Subsequent Shelf Registration Statement continuously effective, available for use to permit the Holder to sell his Registrable Securities included therein and in compliance with the provisions of the Securities Act until such time as there are no longer any Registrable Securities. Any such Subsequent Shelf Registration Statement shall be on Form S-3 to the extent that the Company is eligible to use such form at the time of filing. Otherwise, such Subsequent Shelf Registration Statement shall be on another appropriate form. Company’s obligation under this Section 2.1(b), shall, for the avoidance of doubt, be subject to Section 3.4.

(c) Additional Registrable Securities. Subject to Section 3.4, in the event that the Holder holds Registrable Securities that are not registered for resale on a delayed or continuous basis, the Company, upon written request of the Holder, shall promptly use its commercially reasonable efforts to cause the resale of such Registrable Securities to be covered by either, at the Company’s option, any then available Shelf (including by means of a post-effective amendment) or by filing a Subsequent Shelf Registration Statement and cause the same to become effective as soon as practicable after such filing, and such Shelf or Subsequent Shelf Registration Statement shall be subject to the terms hereof; provided, however, that the Company shall only be required to cause such additional Registrable Securities to be so covered once per calendar year for the Holder.

(d) Requests for Underwritten Shelf Takedowns. Subject to Section 3.4, at any time and from time to time after the expiration of any Lock-up Period to which the Holder’s shares are subject, if any, and when an effective Shelf is on file with the Commission, the Holder may request to sell all or any portion of his Registrable Securities in an Underwritten Offering that is registered pursuant to the Shelf (each, an “Underwritten Shelf Takedown”); provided that the Company shall be obligated to effect an Underwritten Shelf Takedown only if such offering shall include Registrable Securities proposed to be sold by the Holder, either individually or together with Permitted Transferees, with a total offering price reasonably expected to exceed, in the aggregate, $25 million. All requests for Underwritten Shelf Takedowns shall be made by giving written notice to the Company, which shall specify the approximate number of Registrable Securities proposed to be sold in the Underwritten Shelf Takedown. The Company shall have the right to select the managing Underwriter or Underwriters for such offering (which shall consist of one or more reputable nationally recognized investment banks), subject to the Holder’s prior approval (which shall not be unreasonably withheld, conditioned or delayed). The Holder may demand not more than one (1) Underwritten Shelf Takedown, pursuant to this Section 2.1(d), in any twelve (12) month period. Notwithstanding anything to the contrary in this Agreement, the Company may effect any Underwritten Offering pursuant to any then effective Registration Statement, including a Form S-3, that is then available for such offering.

(e) Reduction of Underwritten Offering. If the managing Underwriter or Underwriters in an Underwritten Shelf Takedown, advises the Company and the Holder in writing that the dollar amount or number of Registrable Securities that the Holder and any Permitted Transferees desire to sell, taken together with all other Common

 

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Stock or other equity securities, if any, that the Company desires to sell and all other Common Stock or other equity securities, if any, that have been requested to be sold in such Underwritten Offering pursuant to separate written contractual piggy-back registration rights held by any other stockholders, exceeds the maximum dollar amount or maximum number of equity securities that can be sold in such Underwritten Offering without adversely affecting the proposed offering price, the timing, the distribution method, or the probability of success of such offering (such maximum dollar amount or maximum number of such securities, as applicable, the “Maximum Number of Securities”), then the Company shall include in such Underwritten Offering, before including any Common Stock or other equity securities proposed to be sold by Company or by other holders of Common Stock or other equity securities, (A) first, the Registrable Securities of the Holder and any Permitted Transferees that can be sold without exceeding the Maximum Number of Securities, (B) second, to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (A), Common Stock, if any, as to which “Holders” (as defined in the IPO Registration Rights Agreement) have exercised their piggyback registration rights pursuant to the IPO Registration Rights Agreement, pro rata based on the number of “Registrable Securities” (as defined in the IPO Registration Rights Agreement) that each such “Holder” has requested to be included in such registration and the aggregate number of “Registrable Securities” that such “Holders” have requested to be included in such registration, which can be sold without exceeding the Maximum Number of Securities; (C) third, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (A) and (B), Common Stock or other equity securities that the Company desires to sell, which can be sold without exceeding the Maximum Number of Securities; and (D) fourth, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (A), (B), and (C), Common Stock or other equity securities for the account of other Persons that the Company is obligated to register pursuant to separate written contractual arrangements with such persons or entities, which can be sold without exceeding the Maximum Number of Securities.

(f) Withdrawal. Prior to the filing of the applicable “red herring” prospectus or prospectus supplement used for marketing such Underwritten Shelf Takedown, the Holder shall have the right to withdraw from such Underwritten Shelf Takedown for any or no reason whatsoever upon written notification to the Company and the Underwriter or Underwriters (if any) of his intention to withdraw from such Underwritten Shelf Takedown. If withdrawn, a demand for an Underwritten Shelf Takedown shall constitute a demand for an Underwritten Shelf Takedown by the Holder for purposes of Section 2.1(d). Notwithstanding anything to the contrary in this Agreement, the Company shall be responsible for the Registration Expenses incurred in connection with a Shelf Takedown prior to its withdrawal under this Section 2.1(f).

2.2 Piggyback Registration.

(a) Piggyback Rights. If, at any time after the end of the Lock-up Period, the Company proposes to file a Registration Statement under the Securities Act with respect to an offering of equity securities, or securities or other obligations exercisable or exchangeable for, or convertible into equity securities, for its own account or for the account of stockholders of the Company (or by the Company and by the stockholders of the Company including, without limitation, pursuant to Section 2.1 hereof), other than a Registration Statement (i) filed in connection with any employee stock option or other benefit plan, (ii) for an exchange offer or offering of securities solely to the Company’s existing stockholders, (iii) for an offering of debt that is convertible into equity securities of the Company or (iv) for a dividend reinvestment plan, then the Company shall give written notice of such proposed filing to the Holder as soon as practicable but not less than ten (10) days before the anticipated filing date of such Registration Statement, which notice shall (A) describe the amount and type of securities to be included in such offering, the intended method(s) of distribution, and the name of the proposed managing Underwriter or Underwriters, if any, in such offering, and (B) offer to the Holder the opportunity to register the sale of such number of Registrable Securities as such Holder may request in writing within five (5) days after receipt of such written notice (such Registration a “Piggyback Registration”). The Company shall, in good faith, cause such Registrable Securities to be included in such Piggyback Registration and shall use its best efforts to cause the managing Underwriter or Underwriters of a proposed Underwritten Offering to permit the Registrable Securities requested by the Holder pursuant to this Section 2.2(a) to be included in a Piggyback

 

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Registration on the same terms and conditions as any similar securities of the Company included in such Registration and to permit the sale or other disposition of such Registrable Securities in accordance with the intended method(s) of distribution thereof. The Holder proposing to distribute his Registrable Securities through an Underwritten Offering under this Section 2.2(a) shall enter into an underwriting agreement in customary form with the Underwriter(s) selected for such Underwritten Offering by the Company.

(b) Reduction of Piggyback Registration. If the managing Underwriter or Underwriters in an Underwritten Registration that is to be a Piggyback Registration, in good faith, advises the Company and the Holder in writing that the dollar amount or number of shares of Common Stock that the Company desires to sell, taken together with (i) the shares of Common Stock, if any, as to which Registration has been demanded pursuant to separate written contractual arrangements with persons or entities other than the Holder hereunder, (ii) the Registrable Securities as to which registration has been requested pursuant to Section 2.2 hereof, and (iii) the shares of Common Stock, if any, as to which Registration has been requested pursuant to separate written contractual piggy-back registration rights of other stockholders of the Company (including, for the avoidance of doubt, and without limitation, the IPO Registration Rights Agreement), exceeds the Maximum Number of Securities, then:

(1) If the Registration is undertaken for the Company’s account, the Company shall include in any such Registration (A) first, Common Stock or other equity securities that the Company desires to sell, which can be sold without exceeding the Maximum Number of Securities; (B) second, to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (A), Common Stock, if any, as to which Registration has been requested pursuant to the IPO Registration Rights Agreement, which can be sold without exceeding the Maximum Number of Securities ; and (C) third, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (A) and (B), the Registrable Securities of the Holder exercising his rights to register his Registrable Securities pursuant to Section 2.2(a) hereof which can be sold without exceeding the Maximum Number of Securities; and (D) fourth, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (A), (B) and (C), Common Stock, if any, as to which Registration has been requested pursuant to written contractual piggyback registration rights of other stockholders of the Company, which can be sold without exceeding the Maximum Number of Securities; and

(2) If the Registration is pursuant to a request by persons or entities other than the Holder, then the Company shall include in any such Registration (A) first, Common Stock or other equity securities, if any, of such requesting persons or entities, other than the Holder, which can be sold without exceeding the Maximum Number of Securities; (B) second, to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (A), Common Stock, if any, as to which “Holders” (as defined in the IPO Registration Rights Agreement) have exercised their piggyback registration rights pursuant to IPO Registration Rights Agreement, pro rata based on the number of “Registrable Securities” (as defined in the IPO Registration Rights Agreement) that each such “Holder” has requested to be included in such registration and the aggregate number of “Registrable Securities” that such “Holders” have requested to be included in such registration, which can be sold without exceeding the Maximum Number of Securities; and (C) third, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (A) and (B), the Registrable Securities of the Holder exercising his rights to register his Registrable Securities pursuant to Section 2.2(a) which can be sold without exceeding the Maximum Number of Securities; (D) fourth, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (A), (B) and (C), Common Stock or other equity securities that the Company desires to sell, which can be sold without exceeding the Maximum Number of Securities; and (E) fifth, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (A), (B), (C) and (D), Common Stock or other equity securities for the account of other persons or entities that the Company is obligated to register pursuant to separate written contractual arrangements with such persons or entities, which can be sold without exceeding the Maximum Number of Securities.

 

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(c) Piggyback Registration Withdrawal. The Holder shall have the right to withdraw from a Piggyback Registration for any or no reason whatsoever upon written notification to the Company and the Underwriter or Underwriters (if any) of his intention to withdraw from such Piggyback Registration prior to the effectiveness of the Registration Statement filed with the Commission with respect to such Piggyback Registration. The Company (whether on its own good faith determination or as the result of a request for withdrawal by persons pursuant to separate written contractual obligations) may withdraw a Registration Statement filed with the Commission in connection with a Piggyback Registration at any time prior to the effectiveness of such Registration Statement. Notwithstanding anything to the contrary in this Agreement, the Company shall be responsible for the Registration Expenses incurred in connection with the Piggyback Registration prior to its withdrawal under this subsection 2.2(c).

(d) Unlimited Piggyback Registration Rights. For purposes of clarity, subject to Section 2.1(f), any Piggyback Registration effected pursuant to Section 2.2 hereof shall not be counted as an Underwritten Shelf Takedown under Section 2.1(d) hereof.

ARTICLE III

COMPANY PROCEDURES

3.1 General Procedures. If at any time the Company is required to effect the Registration of Registrable Securities hereunder, the Company shall use its commercially reasonable efforts to effect such Registration to permit the sale of such Registrable Securities in accordance with the intended plan of distribution thereof, and pursuant thereto the Company shall:

(a) prepare and file with the Commission as soon as practicable a Registration Statement with respect to such Registrable Securities and use its reasonable best efforts to cause such Registration Statement to become effective and remain effective until all Registrable Securities covered by such Registration Statement have been sold;

(b) prepare and file with the Commission such amendments and post-effective amendments to the Registration Statement, and such supplements to the Prospectus, as may be requested by the Holder or any Underwriter of Registrable Securities or as may be required by the rules, regulations or instructions applicable to the registration form used by the Company or by the Securities Act or rules and regulations thereunder to keep the Registration Statement effective until all Registrable Securities covered by such Registration Statement are sold in accordance with the intended plan of distribution set forth in such Registration Statement or supplement to the Prospectus or are no longer outstanding;

(c) prior to filing a Registration Statement or Prospectus, or any amendment or supplement thereto, furnish without charge to the Underwriters, if any, and the Holder and the Holder’s legal counsel, copies of such Registration Statement as proposed to be filed, each amendment and supplement to such Registration Statement (in each case including all exhibits thereto and documents incorporated by reference therein), the Prospectus included in such Registration Statement (including each preliminary Prospectus), and such other documents as the Underwriters and the Holder or the legal counsel for the Holder may reasonably request in order to facilitate the disposition of the Registrable Securities owned by the Holder; provided, that the Company will not have any obligation to provide any document pursuant to this clause that is available on the Commission’s EDGAR system;

(d) prior to any public offering of Registrable Securities, use its reasonable best efforts to (i) register or qualify the Registrable Securities covered by the Registration Statement under such securities or “blue sky” laws of such jurisdictions in the United States as the Holder included in such Registration Statement (in light of their intended plan of distribution) may request and (ii) take such action necessary to cause such Registrable Securities covered by the Registration Statement to be registered with or approved by such other governmental authorities

 

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as may be necessary by virtue of the business and operations of the Company and do any and all other acts and things that may be necessary or advisable to enable the Holder included in such Registration Statement to consummate the disposition of such Registrable Securities in such jurisdictions; provided, however, that the Company shall not be required to qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify or take any action to which it would be subject to general service of process or taxation in any such jurisdiction where it is not then otherwise so subject;

(e) cause all such Registrable Securities to be listed on each securities exchange or automated quotation system on which similar securities issued by the Company are then listed;

(f) provide a transfer agent or warrant agent, as applicable, and registrar for all such Registrable Securities no later than the effective date of such Registration Statement;

(g) advise each seller of such Registrable Securities, promptly after it shall receive notice or obtain knowledge thereof, of the issuance of any stop order by the Commission suspending the effectiveness of such Registration Statement or the initiation or threatening of any proceeding for such purpose and promptly use its reasonable best efforts to prevent the issuance of any stop order or to obtain its withdrawal if such stop order should be issued;

(h) at least five (5) days prior to the filing of any Registration Statement or Prospectus or any amendment or supplement to such Registration Statement or Prospectus or any document that is to be incorporated by reference into such Registration Statement or Prospectus, furnish a copy thereof to each seller of such Registrable Securities or its counsel;

(i) notify the Holder at any time when a Prospectus relating to such Registration Statement is required to be delivered under the Securities Act, of the happening of any event as a result of which the Prospectus included in such Registration Statement, as then in effect, includes a Misstatement, and then to correct such Misstatement as set forth in Section 3.4 hereof;

(j) permit a representative of the Holder, the Underwriters, if any, and any attorney or accountant retained by the Holder or Underwriter to participate, at each such person’s own expense, in the preparation of the Registration Statement, and cause the Company’s officers, directors and employees to supply all information reasonably requested by any such representative, Underwriter, attorney or accountant in connection with the Registration; provided, however, that such representatives or Underwriters enter into a confidentiality agreement, in form and substance reasonably satisfactory to the Company, prior to the release or disclosure of any such information;

(k) obtain a “cold comfort” letter from the Company’s independent registered public accountants in the event of an Underwritten Registration, in customary form and covering such matters of the type customarily covered by “cold comfort” letters as the managing Underwriter may reasonably request, and reasonably satisfactory the participating Holder;

(l) on the date the Registrable Securities are delivered for sale pursuant to such Registration, obtain an opinion, dated such date, of counsel representing the Company for the purposes of such Registration, addressed to the Holder, the placement agent or sales agent, if any, and the Underwriters, if any, covering such legal matters with respect to the Registration in respect of which such opinion is being given as the Holder, placement agent, sales agent, or Underwriter may reasonably request and as are customarily included in such opinions and negative assurance letters, and reasonably satisfactory to the participating Holder;

(m) in the event of any Underwritten Offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing Underwriter of such Underwritten Offering;

 

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(n) make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve (12) months beginning with the first day of the Company’s first full calendar quarter after the effective date of the Registration Statement which satisfies the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any successor rule promulgated thereafter by the Commission);

(o) if the Registration involves the Registration of Registrable Securities involving gross proceeds in excess of $50,000,000, use its reasonable best efforts to make available senior executives of the Company to participate in customary “road show” presentations that may be reasonably requested by the Underwriter in any Underwritten Offering; and

(p) otherwise, in good faith, cooperate reasonably with, and take such customary actions as may reasonably be requested by the Holder, in connection with such Registration.

Notwithstanding the foregoing, the Company shall not be required to provide any documents or information to an Underwriter, broker, sales agent or placement agent if such Underwriter, broker, sales agent or placement agent has not then been named with respect to the applicable Underwritten Offering or other offering involving a registration as an Underwriter, broker, sales agent or placement agent, as applicable.

3.2 Registration Expenses. The Registration Expenses of all Registrations shall be borne by the Company. It is acknowledged by the Holder that the Holder shall bear all incremental selling expenses relating to the sale of Registrable Securities, such as Underwriters’ commissions and discounts, brokerage fees, Underwriter marketing costs and, other than as set forth in the definition of “Registration Expenses,” all reasonable fees and expenses of any legal counsel representing the Holder.

3.3 Requirements for Participation in Underwritten Offerings. No person may participate in any Underwritten Offering for equity securities of the Company pursuant to a Registration initiated by the Company hereunder unless such person (a) agrees to sell such person’s securities on the basis provided in any underwriting arrangements approved by the Company and (b) completes and executes all customary questionnaires, powers of attorney, indemnities, lock-up agreements, underwriting agreements and other customary documents as may be reasonably required under the terms of such underwriting arrangements.

3.4 Suspension of Sales; Adverse Disclosure. Upon receipt of written notice from the Company that a Registration Statement or Prospectus contains a Misstatement, the Holder shall forthwith discontinue disposition of Registrable Securities until it has received copies of a supplemented or amended Prospectus correcting the Misstatement (it being understood that the Company hereby covenants to prepare and file such supplement or amendment as soon as practicable after the time of such notice), or until it is advised in writing by the Company that the use of the Prospectus may be resumed. If the filing, initial effectiveness or continued use of a Registration Statement in respect of any Registration at any time would require the Company to make an Adverse Disclosure or would require the inclusion in such Registration Statement of financial statements that are unavailable to the Company for reasons beyond the Company’s control, the Company may, upon giving prompt written notice of such action to the Holder, delay the filing or initial effectiveness of, or suspend use of, such Registration Statement for the shortest period of time, but in no event more than thirty (30) days, determined in good faith by the Company to be necessary for such purpose. In the event the Company exercises its rights under the preceding sentence, the Holder agrees to suspend, immediately upon his receipt of the notice referred to above, his use of the Prospectus relating to any Registration in connection with any sale or offer to sell Registrable Securities. The Company shall immediately notify the Holder of the expiration of any period during which it exercised its rights under this Section 3.4.

3.5 Reporting Obligations. As long as the Holder or Permitted Transferees shall own Registrable Securities, the Company, at all times while it shall be a reporting company under the Exchange Act, covenants to file timely (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to Sections 13(a) or 15(d) of the Exchange Act and to

 

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promptly furnish the Holder with true and complete copies of all such filings. The Company further covenants that it shall take such further action as the Holder may reasonably request, all to the extent required from time to time to enable the Holder to sell shares of Common Stock held by the Holder without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 promulgated under the Securities Act (or any successor rule promulgated thereafter by the Commission), including providing any legal opinions. Upon the request of the Holder, the Company shall deliver to the Holder a written certification of a duly authorized officer as to whether it has complied with such requirements.

ARTICLE IV

INDEMNIFICATION AND CONTRIBUTION

4.1 Indemnification.

(a) The Company agrees to indemnify, to the extent permitted by law, the Holder against all losses, claims, damages, liabilities and expenses (including, without limitation, reasonable attorneys’ fees) caused by any untrue or alleged untrue statement of material fact contained in any Registration Statement, Prospectus or preliminary Prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same are caused by or contained in any information furnished in writing to the Company by the Holder expressly for use therein. The Company shall indemnify the Underwriters, their officers and directors and each person who controls such Underwriters (within the meaning of the Securities Act) to the same extent as provided in the foregoing with respect to the indemnification of the Holder.

(b) In connection with any Registration Statement in which the Holder is participating, the Holder shall furnish to the Company in writing such information and affidavits as the Company reasonably requests for use in connection with any such Registration Statement or Prospectus and, to the extent permitted by law, shall indemnify the Company, its directors and officers and agents and each person who controls the Company (within the meaning of the Securities Act) against any losses, claims, damages, liabilities and expenses (including without limitation reasonable attorneys’ fees) resulting from any untrue statement of material fact contained in the Registration Statement, Prospectus or preliminary Prospectus or any amendment thereof or supplement thereto or any omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, but only to the extent that such untrue statement or omission is contained in any information or affidavit so furnished in writing by the Holder expressly for use therein. The Holder shall indemnify the Underwriters, their officers, directors and each person who controls such Underwriters (within the meaning of the Securities Act) to the same extent as provided in the foregoing with respect to indemnification of the Company. For the avoidance of doubt, the total indemnification liability of the Holder under this Section 4.1(b) shall be in proportion to and limited to the net proceeds received by the Holder from the sale of Registrable Securities pursuant to such Registration Statement.

(c) Any person entitled to indemnification herein shall (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification (provided that the failure to give prompt notice shall not impair any person’s right to indemnification hereunder to the extent such failure has not materially prejudiced the indemnifying party) and (ii) unless in such indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. If such defense is assumed, the indemnifying party shall not be subject to any liability for any settlement made by the indemnified party without its consent (but such consent shall not be unreasonably withheld). An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim shall not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim. No indemnifying party shall, without the consent of the indemnified party, consent

 

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to the entry of any judgment or enter into any settlement which cannot be settled in all respects by the payment of money (and such money is so paid by the indemnifying party pursuant to the terms of such settlement) or which settlement does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation.

(d) The indemnification provided for under this Agreement shall remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer, director or controlling person of such indemnified party and shall survive the transfer of securities.

(e) If the indemnification provided under Section 4.1 hereof from the indemnifying party is unavailable or insufficient to hold harmless an indemnified party in respect of any losses, claims, damages, liabilities and expenses referred to herein, then the indemnifying party, in lieu of indemnifying the indemnified party, shall contribute to the amount paid or payable by the indemnified party as a result of such losses, claims, damages, liabilities and expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and the indemnified party, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and indemnified party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, was made by, or relates to information supplied by, such indemnifying party or indemnified party, and the indemnifying party’s and indemnified party’s relative intent, knowledge, access to information and opportunity to correct or prevent such action; provided, however, that the liability of the Holder under this Section 4.1(e) shall be limited to the amount of the net proceeds received by the Holder in such offering giving rise to such liability. The amount paid or payable by a party as a result of the losses or other liabilities referred to above shall be deemed to include, subject to the limitations set forth in Sections 4.1(a), 4.1(b) and 4.1(c) above, any legal or other fees, charges or expenses reasonably incurred by such party in connection with any investigation or proceeding. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 4.1(e) were determined by pro rata allocation or by any other method of allocation, which does not take account of the equitable considerations referred to in this Section 4.1(e). No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution pursuant to this Section 4.1(e) from any person who was not guilty of such fraudulent misrepresentation.

ARTICLE V

LOCK-UP

5.1 Lock-Up. Subject to Section 5.2, the Holder agrees that it shall not Transfer any Lock-up Shares prior to the end of the Lock-up Period (the “Lock-up”).

5.2 Permitted Transferees. Notwithstanding the provisions set forth in Section 5.1, the Holder may Transfer the Lock-up Shares during the Lock-up Period (a) by gift to a member of the Holder’s immediate family or to a trust, the beneficiary of which is a member of the Holder’s immediate family or an affiliate of such person or entity, or to a charitable organization, (b) by virtue of laws of descent and distribution upon death of the Holder, (c) pursuant to a qualified domestic relations order or (d) in connection with a liquidation, merger, stock exchange, reorganization, or tender offer approved by the Board or a duly authorized committee thereof or other similar transaction which results in all of the Company’s stockholders having the right to exchange his, her or its Common Stock for cash, securities or other property subsequent to the consummation of the Mergers; provided, that each Permitted Transferee must enter into a written agreement agreeing to be bound by the terms hereof as if such Permitted Transferee was the Holder. The parties acknowledge and agree that any Permitted Transferee of the Holder shall be subject to the Transfer restrictions set forth in this ARTICLE V with respect to the Lock-Up Shares upon and after acquiring such Lock-Up Shares.

 

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ARTICLE VI

MISCELLANEOUS

6.1 Notices. Any notice or communication under this Agreement must be in writing and given by (a) deposit in the United States mail, addressed to the party to be notified, postage prepaid and registered or certified with return receipt requested, (b) delivery in person or by courier service providing evidence of delivery, or (c) transmission by electronic mail or facsimile. Each notice or communication that is mailed, delivered, or transmitted in the manner described above shall be deemed sufficiently given, served, sent, and received, in the case of mailed notices, on the third business day following the date on which it is mailed and, in the case of notices delivered by courier service, hand delivery, electronic mail or facsimile, at such time as it is delivered to the addressee (with the delivery receipt or the affidavit of messenger) or at such time as delivery is refused by the addressee upon presentation. Any notice or communication under this Agreement must be addressed, if to the Company, to: 700 Milam Street Suite 3300, Houston, TX, 77002, Attention: Gregory D. Patrinely, and, if to the Holder, at the Holder’s address or facsimile number as set forth in the Company’s books and records. Any party may change its address for notice at any time and from time to time by written notice to the other parties hereto, and such change of address shall become effective thirty (30) days after delivery of such notice as provided in this Section 6.1.

6.2 Assignment; No Third Party Beneficiaries.

(a) This Agreement and the rights, duties and obligations of the Company hereunder may not be assigned or delegated by the Company in whole or in part.

(b) Prior to the expiration of the Lock-up Period, the Holder may not assign or delegate his rights, duties or obligations under this Agreement, in whole or in part, except in connection with a Transfer of Registrable Securities by the Holder to a Permitted Transferee.

(c) This Agreement and the provisions hereof shall be binding upon and shall inure to the benefit of each of the parties and its successors and the permitted assigns of the Holder, which shall include Permitted Transferees.

(d) This Agreement shall not confer any rights or benefits on any persons that are not parties hereto, other than as expressly set forth in this Agreement and Section 6.2 hereof.

(e) No assignment by any party hereto of such party’s rights, duties and obligations hereunder shall be binding upon or obligate the Company unless and until the Company shall have received (i) written notice of such assignment as provided in Section 6.1 hereof and (ii) the written agreement of the assignee, in a form reasonably satisfactory to the Company, to be bound by the terms and provisions of this Agreement (which may be accomplished by an addendum or certificate of joinder to this Agreement). Any transfer, assignment or delegation made other than as provided in this Section 6.2 shall be null and void.

6.3 Counterparts. This Agreement may be executed in multiple counterparts (including facsimile or PDF counterparts), each of which shall be deemed an original, and all of which together shall constitute the same instrument, but only one of which need be produced.

6.4 Governing Law; Venue. This Agreement, and any claim or cause of action hereunder based upon, arising out of or related to this Agreement (whether based on law, in equity, in contract, in tort or any other theory) or the negotiation, execution, performance or enforcement of this Agreement, shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to the principles of conflicts of laws thereof.

 

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THE PARTIES HERETO IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE, AND, IF SUCH FEDERAL COURT DOES NOT HAVE JURISDICTION, THE COURTS OF THE STATE OF DELAWARE SOLELY IN RESPECT OF THE INTERPRETATION AND ENFORCEMENT OF THE PROVISIONS OF THIS AGREEMENT AND THE DOCUMENTS REFERRED TO IN THIS AGREEMENT AND IN RESPECT OF THE TRANSACTIONS CONTEMPLATED HEREBY, AND HEREBY WAIVE, AND AGREE NOT TO ASSERT, AS A DEFENSE IN ANY ACTION, SUIT OR PROCEEDING FOR INTERPRETATION OR ENFORCEMENT HEREOF OR ANY SUCH DOCUMENT THAT IS NOT SUBJECT THERETO OR THAT SUCH ACTION, SUIT OR PROCEEDING MAY NOT BE BROUGHT OR IS NOT MAINTAINABLE IN SAID COURTS OR THAT VENUE THEREOF MAY NOT BE APPROPRIATE OR THAT THIS AGREEMENT OR ANY SUCH DOCUMENT MAY NOT BE ENFORCED IN OR BY SUCH COURTS, AND THE PARTIES HERETO IRREVOCABLY AGREE THAT ALL CLAIMS WITH RESPECT TO SUCH ACTION, SUIT OR PROCEEDING SHALL BE HEARD AND DETERMINED BY SUCH FEDERAL OR DELAWARE STATE COURT. THE PARTIES HEREBY CONSENT TO AND GRANT ANY SUCH COURT JURISDICTION OVER THE PERSON OF SUCH PARTIES AND OVER THE SUBJECT MATTER OF SUCH DISPUTE AND AGREE THAT MAILING OF PROCESS OR OTHER PAPERS IN CONNECTION WITH SUCH ACTION, SUIT OR PROCEEDING IN THE MANNER PROVIDED IN SECTION 6.1 OR IN SUCH OTHER MANNER AS MAY BE PERMITTED BY LAW SHALL BE VALID AND SUFFICIENT SERVICE THEREOF.

EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND, THEREFORE, EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY ACTION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.

6.5 Amendments and Modifications. Upon the written consent of the Company and the Holder, compliance with any of the provisions, covenants and conditions set forth in this Agreement may be waived, or any of such provisions, covenants or conditions may be amended or modified. No course of dealing between the Holder or the Company and any other party hereto or any failure or delay on the part of the Holder or the Company in exercising any rights or remedies under this Agreement shall operate as a waiver of any rights or remedies of the Holder or the Company. No single or partial exercise of any rights or remedies under this Agreement by a party shall operate as a waiver or preclude the exercise of any other rights or remedies hereunder or thereunder by such party.

6.6 Term. This Agreement shall terminate upon the earlier of (a) the tenth anniversary of the date of this Agreement or (b) the first date following the end of the Lock-Up Period as of which (x) all of the Registrable Securities have been sold pursuant to a Registration Statement (but in no event prior to the applicable period referred to in Section 4(a)(3) of the Securities Act and Rule 174 thereunder (or any successor rule promulgated thereafter by the Commission)) or (y) the Holder is permitted to sell the Registrable Securities under Rule 144 (or any similar provision) under the Securities Act without limitation on the amount of securities sold or the manner of sale. The provisions of Section 3.5, Article IV and Article VI shall survive any termination.

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed as of the date first written above.

 

COMPANY:
SABLE OFFSHORE CORP.
By:  

/s/ Gregory D. Patrinely

Name:   Gregory D. Patrinely
Title:   Executive Vice President and Chief Financial Officer

 

[Signature Page to Registration Rights Agreement]

HOLDER:

/s/ James C. Flores

James C. Flores

 

[Signature Page to Registration Rights Agreement]

Exhibit 10.32

 

SABLE OFFSHORE CORP.

2023 INCENTIVE AWARD PLAN

ARTICLE I.

PURPOSE

The Plan’s purpose is to enhance the Company’s ability to attract, retain and motivate persons who make (or are expected to make) important contributions to the Company by providing these individuals with equity ownership opportunities and/or equity-linked compensatory opportunities. Capitalized terms used in the Plan are defined in Article XI.

ARTICLE II.

ELIGIBILITY

Service Providers are eligible to be granted Awards under the Plan, subject to the limitations described herein.

ARTICLE III.

ADMINISTRATION AND DELEGATION

3.1 Administration. The Plan is administered by the Administrator. The Administrator shall have the authority in its sole discretion, subject to and not inconsistent with the express provisions of the Plan, to administer the Plan and to exercise all the powers and authorities either specifically granted to it under the Plan or necessary or advisable in the administration of the Plan, including, without limitation, the authority (i) to the extent not inconsistent with the Plan, prescribe, amend and rescind rules and regulations relating to the Plan including rules governing its own operations, (ii) make all determinations necessary or advisable in administering the Plan, (iii) correct any defect, supply any omission, reconcile any inconsistency in the Plan, and construe and interpret the Plan and Award Agreements, (iv) determine the Fair Market Value of Awards, (v) approve forms of Award Agreements for use under the Plan, (vi) grant Awards and determine who will receive Awards, when such Awards will be granted and the terms of such Awards, including, as applicable, vesting, forfeiture and Performance Criteria, (vii) determine whether an Option will be an Incentive Stock Option or a Nonqualified Option, (viii) accelerate the time or times at which an Award becomes vested, unrestricted or may be exercised, (ix) waive or amend any goals, restrictions or conditions set forth in an Award Agreement, unless otherwise provided in the Award Agreement, (x) amend the terms of any outstanding Award Agreement or Award, including the discretionary authority to extend the post-termination exercise period of Awards, provided that any amendment that would adversely affect the Participant’s rights under an outstanding Award shall not be made without the Participant’s written consent (provided, that an amendment shall not be treated as adversely affecting the rights of the Participant if the amendment causes an Incentive Stock Option to become a Nonqualified Option or if the amendment is made to the minimum extent necessary to avoid the adverse tax consequences of Section 409A of the Code), (xi) allow Participants to satisfy withholding tax obligations by electing to have the Company withhold from the Shares or cash to be issued upon exercise or vesting of an Award up to the number of Shares or cash having a Fair Market Value equal to the amount required to be withheld based on any amount up to the minimum supplemental income tax rate in the applicable jurisdiction, (xii) allow a Participant to defer the receipt of the payment of cash or the delivery of Shares that would otherwise be due to the Participant under an Award, and (xiii) impose such restrictions, conditions or limitations as it determines appropriate as to the

timing and manner of any resales by a Participant or other subsequent transfers by the Participant of any Shares issued as a result of or under an Award, including without limitation, (A) restrictions under an insider trading policy, and (B) restrictions as to the use of a specified brokerage firm for such resales or other transfers. The Administrator’s determinations under the Plan are in its sole discretion and will be final and binding on all persons having or claiming any interest in the Plan or any Award.

3.2 Appointment of Committees. To the extent Applicable Laws permit, the Board or the Administrator may delegate any or all of its powers under the Plan to one or more Committees or committees of officers of the Company or any of its Subsidiaries; provided, that, any such officer delegation shall exclude the power to grant Awards to non-employee Directors or Section 16 Persons. The Board or the Administrator, as applicable, may rescind any such delegation, abolish any such committee or Committee and/or re-vest in itself any previously delegated authority at any time.

ARTICLE IV.

STOCK AVAILABLE FOR AWARDS

4.1 Number of Shares. Subject to adjustment under Article VIII and the terms of this Article IV, Awards may be made under the Plan covering up to the Overall Share Limit. Shares issued under the Plan may consist of authorized but unissued Shares, Shares purchased on the open market or treasury Shares

4.2 Share Recycling. If all or any part of an Award expires, lapses or is terminated, exchanged for or settled in cash, surrendered, repurchased, canceled without having been fully exercised or forfeited, in any case, in a manner that results in the Company acquiring Shares covered by the Award at a price not greater than the price (as adjusted to reflect any Equity Restructuring) paid by the Participant for such Shares or not issuing any Shares covered by the Award, the unused Shares covered by the Award will, as applicable, become or again be available for Award grants under the Plan. Further, Shares delivered (either by actual delivery or attestation) to the Company by a Participant to satisfy the applicable exercise or purchase price of an Award and/or to satisfy any applicable tax withholding obligation with respect to an Award (including Shares retained by the Company from the Award being exercised or purchased and/or creating the tax obligation) will again be available for Award grants under the Plan. The payment of Dividend Equivalents in cash in conjunction with any outstanding Awards shall not count against the Overall Share Limit.

4.3 Incentive Stock Option Limitations. Notwithstanding anything to the contrary herein, no more than 10,000,000 Shares may be issued pursuant to the exercise of Incentive Stock Options.

4.4 Substitute Awards. In connection with an entity’s merger or consolidation with the Company or the Company’s acquisition of an entity’s property or stock, the Administrator may grant Awards in substitution for any options or other stock or stock-based awards granted before such merger or consolidation by such entity or its affiliate. Substitute Awards may be granted on such terms as the Administrator deems appropriate, notwithstanding limitations on Awards in the Plan. Substitute Awards will not count against the Overall Share Limit (nor shall Shares subject to a Substitute Award be added to the Shares available for Awards under the Plan as provided above), except that Shares acquired by exercise of substitute Incentive Stock Options will count against the maximum number of Shares that may be issued pursuant to the exercise of Incentive Stock Options under the Plan. Additionally, in the event that an entity acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines has shares available under a pre-existing plan approved by stockholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the Shares authorized for grant under the Plan (and Shares subject to such Awards shall not be added to the Shares available for Awards under the Plan as provided

 

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above); provided that Awards using such available shares shall not be made after the last date awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and shall only be made to individuals who were employees, consultants or directors of such company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines immediately prior to such acquisition or combination.

4.5 Non-Employee Director Compensation. Notwithstanding any provision to the contrary in the Plan, the Administrator may establish compensation for non-employee Directors from time to time, subject to the limitations in the Plan. The Administrator will from time to time determine the terms, conditions and amounts of all such non-employee Director compensation in its discretion and pursuant to the exercise of its business judgment, taking into account such factors, circumstances and considerations as it shall deem relevant from time to time; provided that the sum of any cash compensation, or other compensation, and the value (determined as of the grant date in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, or any successor thereto) of Awards granted to a non-employee Director as compensation for services as a non-employee Director during any fiscal year of the Company may not exceed $750,000, increased to $1,000,000 in the fiscal year of a non-employee Director’s initial service as a non-employee Director. The Administrator may make exceptions to this limit for individual non-employee Directors in extraordinary circumstances, as the Administrator may determine in its discretion; provided that the non-employee Director receiving such additional compensation may not participate in the decision to award such compensation or in other contemporaneous compensation decisions involving non-employee Directors.

ARTICLE V.

STOCK OPTIONS AND STOCK APPRECIATION RIGHTS

5.1 General. The Administrator may grant Options or Stock Appreciation Rights to Service Providers subject to the limitations in the Plan, including any limitations in the Plan that apply to Incentive Stock Options. The Administrator will determine the number of Shares covered by each Option and Stock Appreciation Right, the exercise price of each Option and Stock Appreciation Right and the conditions and limitations applicable to the exercise of each Option and Stock Appreciation Right. A Stock Appreciation Right will entitle the Participant (or other person entitled to exercise the Stock Appreciation Right) to receive from the Company upon exercise of the exercisable portion of the Stock Appreciation Right an amount determined by multiplying the excess, if any, of the Fair Market Value of one Share on the date of exercise over the exercise price per Share of the Stock Appreciation Right by the number of Shares with respect to which the Stock Appreciation Right is exercised, subject to any limitations of the Plan or that the Administrator may impose and shall be payable in cash, Shares valued at Fair Market Value or a combination of the two as the Administrator may determine or provide in the Award Agreement.

5.2 Exercise Price. The Administrator will establish each Option’s and Stock Appreciation Right’s exercise price and specify the exercise price in the Award Agreement. Unless otherwise determined by the Administrator, the exercise price will not be less than 100% of the Fair Market Value on the grant date of the Option (subject to Section 5.6) or Stock Appreciation Right. Notwithstanding the foregoing, in the case of an Option or a Stock Appreciation Right that is a Substitute Award, the exercise price per share of the Shares subject to such Option or Stock Appreciation Right, as applicable, may be less than the Fair Market Value per share on the date of grant; provided that the exercise price of any Substitute Award shall be determined in accordance with the applicable requirements of Sections 424 and 409A of the Code.

5.3 Duration. Each Option or Stock Appreciation Right will be exercisable at such times and as specified in the Award Agreement, provided that, unless otherwise determined by the Administrator, the term of an Option or Stock Appreciation Right will not exceed ten years. Notwithstanding the foregoing and unless determined otherwise by the Company, in the event that on the last business day of the term of an Option (other than an Incentive Stock Option) or Stock Appreciation Right (a) the exercise of the Option or Stock Appreciation Right

 

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is prohibited by Applicable Law, as determined by the Company, or (b) Shares may not be purchased or sold by the applicable Participant due to any Company insider trading policy (including blackout periods) or a “lock-up” agreement undertaken in connection with an issuance of securities by the Company, and, in either case the exercise price of such Award is the less than the Fair Market Value of the Shares as of such date, then the term of the Option or Stock Appreciation Right shall be extended, except to the extent that such extension would violate Section 409A, until the date that is 30 days after the end of the legal prohibition, black-out period or lock-up agreement, as determined by the Company; provided, however, that in no event shall the extension last beyond the ten year term of the applicable Option or Stock Appreciation Right. Notwithstanding the foregoing, to the extent permitted under Applicable Laws, if the Participant, prior to the end of the term of an Option or Stock Appreciation Right, violates in any material respect the non-competition, non-solicitation, confidentiality or other similar restrictive covenant provisions of any employment contract, confidentiality and nondisclosure agreement or other agreement between the Participant and the Company or any of its Subsidiaries (and such violation is not cured within 30 days following receipt by the Participant of written notice from the Company of such violation), the right of the Participant and the Participant’s transferees to exercise any Option or Stock Appreciation Right issued to the Participant shall terminate immediately upon such violation, unless the Company otherwise determines. In addition, if, prior to the end of the term of an Option or Stock Appreciation Right, the Participant is given notice by the Company or any of its Subsidiaries of the Participant’s Termination of Service by the Company or any of its Subsidiaries for Cause, and the effective date of such Termination of Service is subsequent to the date of the delivery of such notice, the right of the Participant and the Participant’s transferees to exercise any Option or Stock Appreciation Right issued to the Participant shall be suspended from the time of the delivery of such notice until the earlier of (i) such time as it is determined or otherwise agreed that the Participant’s service as a Service Provider will not be terminated for Cause as provided in such notice or (ii) the effective date of the Participant’s Termination of Service by the Company or any of its Subsidiaries for Cause (in which case the right of the Participant and the Participant’s transferees to exercise any Option or Stock Appreciation Right issued to the Participant will terminate immediately upon the effective date of such Termination of Service).

5.4 Exercise. Options and Stock Appreciation Rights may be exercised by delivering to the Company a written notice of exercise, in a form the Administrator approves (which may be electronic), signed by the person authorized to exercise the Option or Stock Appreciation Right, together with, as applicable, payment in full (a) as specified in Section 5.5 for the number of Shares for which the Award is exercised and (b) as specified in Section 9.5 for any applicable taxes. Unless the Administrator otherwise determines, an Option or Stock Appreciation Right may not be exercised for a fraction of a Share.

5.5 Payment Upon Exercise. Subject to Section 10.8, any Company insider trading policy (including blackout periods) and Applicable Laws, the exercise price of an Option must be paid by:

(a) cash, wire transfer of immediately available funds or by check acceptable to and payable to the order of the Company, provided that the Company may limit the use of one of the foregoing payment forms if one or more of the payment forms below is permitted;

(b) if there is a public market for Shares at the time of exercise, unless the Company otherwise determines, (i) delivery (including electronically or telephonically to the extent permitted by the Company) of an irrevocable and unconditional undertaking by a broker acceptable to the Company to deliver promptly to the Company sufficient funds to pay the exercise price, or (ii) the Participant’s delivery to the Company of a copy of irrevocable and unconditional instructions to a broker acceptable to the Company to deliver promptly to the Company cash or a check sufficient to pay the exercise price; provided that such amount is paid to the Company at such time as may be required by the Administrator;

(c) to the extent permitted by the Administrator, delivery (either by actual delivery or attestation) of Shares owned by the Participant valued at their fair market value;

 

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(d) to the extent permitted by the Administrator at its discretion, surrendering Shares then issuable upon the Option’s exercise valued at their fair market value on the exercise date;

(e) to the extent permitted by the Administrator, delivery of a promissory note or any other property that the Administrator determines is good and valuable consideration; or

(f) to the extent permitted by the Company, any combination of the above payment forms approved by the Administrator.

5.6 Additional Terms of Incentive Stock Options. The Administrator may grant Incentive Stock Options only to employees of the Company, any of its parent or subsidiary corporations, as defined in Sections 424(e) or (f) of the Code, respectively, and any other entities the employees of which are eligible to receive Incentive Stock Options under the Code. If an Incentive Stock Option is granted to a Greater Than 10% Stockholder, the exercise price will not be less than 110% of the Fair Market Value on the Option’s grant date, and the term of the Option will not exceed five years. All Incentive Stock Options will be subject to and construed consistently with Section 422 of the Code. By accepting an Incentive Stock Option, the Participant agrees to give prompt written notice to the Company of dispositions or other transfers (other than in connection with a Change in Control) of Shares acquired under the Option made within (a) two years from the grant date of the Option or (b) one year after the transfer of such Shares to the Participant, specifying the date of the disposition or other transfer and the amount the Participant realized, in cash, other property, assumption of indebtedness or other consideration, in such disposition or other transfer. Neither the Company nor the Administrator will be liable to a Participant, or any other party, if an Incentive Stock Option fails or ceases to qualify as an “incentive stock option” under Section 422 of the Code. Any Incentive Stock Option or portion thereof that fails to qualify as an “incentive stock option” under Section 422 of the Code for any reason, including becoming exercisable with respect to Shares having a fair market value exceeding the $100,000 limitation under Treasury Regulations Section 1.422-4, will be a Non-Qualified Stock Option.

ARTICLE VI.

RESTRICTED STOCK; RESTRICTED STOCK UNITS

6.1 General. The Administrator may grant Restricted Stock, or the right to purchase Restricted Stock, to any Service Provider, subject to the Company’s right to repurchase all or part of such Shares at their issue price or other stated or formula price from the Participant (or to require forfeiture of such Shares) if conditions the Administrator specifies in the Award Agreement are not satisfied before the end of the applicable restriction period or periods that the Administrator establishes for such Award. In addition, the Administrator may grant to Service Providers Restricted Stock Units, which may be subject to vesting and forfeiture conditions during the applicable restriction period or periods, as set forth in an Award Agreement. The Administrator will determine and set forth in the Award Agreement the terms and conditions for each Restricted Stock and Restricted Stock Unit Award, subject to the conditions and limitations contained in the Plan.

6.2 Restricted Stock.

(a) Dividends. Participants holding Shares of Restricted Stock will be entitled to all ordinary cash dividends paid with respect to such Shares, unless the Administrator provides otherwise in the Award Agreement. In addition, unless the Administrator provides otherwise, if any dividends or distributions are paid in Shares, or consist of a dividend or distribution to holders of Common Stock of property other than an ordinary cash dividend, the Shares or other property will be subject to the same restrictions on transferability and forfeitability as the Shares of Restricted Stock with respect to which they were paid. Notwithstanding anything to the contrary herein, with respect to any award of Restricted Stock, dividends which are paid to holders of Common Stock prior to vesting shall only be paid out to the Participant holding such Restricted Stock to the

 

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extent that the vesting conditions are subsequently satisfied. All such dividend payments will be made (without interest) no later than March 15 of the calendar year following the calendar year in which the right to the dividend payment becomes nonforfeitable.

(b) Stock Certificates. The Company may require that the Participant deposit in escrow with the Company (or its designee) any stock certificates issued in respect of Shares of Restricted Stock, together with a stock power endorsed in blank.

6.3 Restricted Stock Units.

(a) Settlement. The Administrator may provide that settlement of Restricted Stock Units will occur upon or as soon as reasonably practicable after the Restricted Stock Units vest or will instead be deferred, on a mandatory basis or at the Participant’s election, in a manner intended to comply with Section 409A.

(b) Stockholder Rights. A Participant will have no rights of a stockholder with respect to Shares subject to any Restricted Stock Unit unless and until the Shares are delivered in settlement of the Restricted Stock Unit.

ARTICLE VII.

OTHER STOCK OR CASH BASED AWARDS; DIVIDEND EQUIVALENTS

7.1 Other Stock or Cash Based Awards. Other Stock or Cash Based Awards may be granted to any Service Provider, including Awards entitling Service Providers to receive Shares to be delivered in the future and including annual or other periodic or long-term cash bonus awards (whether based on specified Performance Criteria or otherwise), in each case subject to any conditions and limitations in the Plan. Such Other Stock or Cash Based Awards will also be available as a payment form in the settlement of other Awards, as standalone payments and as payment in lieu of compensation to which a Participant is otherwise entitled. Other Stock or Cash Based Awards may be paid in Shares, cash or other property, as the Administrator determines. Subject to the provisions of the Plan, the Administrator will determine the terms and conditions of each Other Stock or Cash Based Award, including any purchase price, performance goal (which may be based on the Performance Criteria), transfer restrictions, and vesting conditions, which will be set forth in the applicable Award Agreement.

7.2 Dividend Equivalents. A grant of Restricted Stock Units or Other Stock or Cash Based Award may provide a Participant with the right to receive Dividend Equivalents, and no Dividend Equivalents shall be payable with respect to Options or Stock Appreciation Rights. Dividend Equivalents may be paid currently or credited to an account for the Participant, settled in cash or Shares and subject to the same restrictions on transferability and forfeitability as the Award with to which the Dividend Equivalents are paid and subject to other terms and conditions as set forth in the Award Agreement. Notwithstanding anything to the contrary herein, Dividend Equivalents with respect to an Award shall only paid out to the Participant to the extent that the vesting conditions are subsequently satisfied. All such Dividend Equivalent payments will be made (without interest) no later than March 15 of the calendar year following calendar year in which the right to the Dividend Equivalent payment becomes nonforfeitable, unless determined otherwise by the Administrator or unless deferred in a manner intended to comply with Section 409A.

ARTICLE VIII.

ADJUSTMENTS FOR CHANGES IN COMMON STOCK

AND CERTAIN OTHER EVENTS

8.1 Equity Restructuring. In connection with any Equity Restructuring, notwithstanding anything to the contrary in this Article VIII, the Administrator will equitably adjust each outstanding Award as it reasonably and in good faith deems appropriate to reflect the Equity Restructuring, which may include adjusting the number and type of securities subject to each outstanding Award and/or the Award’s exercise price or grant price (if

 

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applicable), granting new Awards to Participants, and making a cash payment to Participants. The adjustments provided under this Section 8.1 will be nondiscretionary and final and binding on the affected Participant and the Company; provided that the Administrator will reasonably and in good faith determine whether an adjustment is equitable.

8.2 Corporate Transactions. In the event of any dividend (other than ordinary cash dividends) or other distribution (whether in the form of cash, Common Stock, other securities, or other property), reorganization, merger, consolidation, combination, amalgamation, repurchase, recapitalization, liquidation, dissolution, or sale, transfer, exchange or other disposition of all or substantially all of the assets of the Company, or sale or exchange of Common Stock or other securities of the Company, Change in Control, issuance of warrants or other rights to purchase Common Stock or other securities of the Company, other similar corporate transaction or event, other unusual or nonrecurring transaction or event affecting the Company or its financial statements or any change in any Applicable Laws or accounting principles, the Administrator, on such terms and conditions as it reasonably and in good faith deems appropriate, either by the terms of the Award or by action taken prior to the occurrence of such transaction or event (except that action to give effect to a change in Applicable Law or accounting principles may be made within a reasonable period of time after such change), is hereby authorized to take any one or more of the following actions whenever the Administrator reasonably and in good faith determines that such action is appropriate to (x) prevent dilution or enlargement of the benefits or potential benefits intended by the Company to be made available under the Plan or with respect to any Award granted or issued under the Plan, (y) to facilitate such transaction or event or (z) give effect to such changes in Applicable Laws or accounting principles:

(a) To provide for the cancellation of any such Award in exchange for either an amount of cash or other property with a fair market value equal to the amount that could have been obtained upon the exercise or settlement of the vested portion of such Award or realization of the Participant’s rights under the vested portion of such Award, as applicable; provided that, if the amount that could have been obtained upon the exercise or settlement of the vested portion of such Award or realization of the Participant’s rights, in any case, is equal to or less than zero, then the Award may be terminated without payment;

(b) To provide that such Award shall vest and, to the extent applicable, be exercisable as to all Shares covered thereby, notwithstanding anything to the contrary in the Plan or the provisions of such Award;

(c) To provide that such Award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and/or applicable exercise or purchase price, in all cases, as determined by the Administrator;

(d) To make adjustments in the number and type of Shares (or other securities or property) subject to outstanding Awards and/or with respect to which Awards may be granted under the Plan (including, but not limited to, adjustments of the limitations in Article IV on the maximum number and kind of shares which may be issued) and/or in the terms and conditions of (including the grant or exercise price or applicable performance goals), and the criteria included in, outstanding Awards;

(e) To replace such Award with other rights or property of equivalent value selected by the Administrator; and/or

(f) To provide that the Award will terminate and cannot vest, be exercised or become payable after the applicable event.

8.3 Administrative Stand Still. In the event of any pending stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution (other than normal cash dividends) of Company assets to stockholders, or any other extraordinary transaction or change affecting the Shares or the share price of

 

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Common Stock, including any Equity Restructuring or any securities offering or other similar transaction, for administrative convenience, the Administrator may refuse to permit the exercise of any Award for up to 60 days before or after such transaction.

8.4 General. Except as expressly provided in the Plan or the Administrator’s action under the Plan, no Participant will have any rights due to any subdivision or consolidation of Shares of any class, dividend payment, increase or decrease in the number of Shares of any class or dissolution, liquidation, merger, or consolidation of the Company or other corporation. Except as expressly provided with respect to an Equity Restructuring under Section 8.1 or the Administrator’s action under the Plan, no issuance by the Company of Shares of any class, or securities convertible into Shares of any class, will affect, and no adjustment will be made regarding, the number of Shares subject to an Award or the Award’s grant or exercise price. The existence of the Plan, any Award Agreements and the Awards granted hereunder will not affect or restrict in any way the Company’s right or power to make or authorize (a) any adjustment, recapitalization, reorganization or other change in the Company’s capital structure or its business, (b) any merger, consolidation dissolution or liquidation of the Company or sale of Company assets or (c) any sale or issuance of securities, including securities with rights superior to those of the Shares or securities convertible into or exchangeable for Shares. The Administrator may treat Participants and Awards (or portions thereof) differently under this Article VIII.

ARTICLE IX.

GENERAL PROVISIONS APPLICABLE TO AWARDS

9.1 Transferability. Except as the Administrator may determine or provide in an Award Agreement or otherwise for Awards other than Incentive Stock Options, Awards may not be sold, assigned, transferred, pledged or otherwise encumbered, either voluntarily or by operation of law, except by will or the laws of descent and distribution, or, subject to the Administrator’s consent, pursuant to a domestic relations order, and, during the life of the Participant, will be exercisable only by the Participant. References to a Participant, to the extent relevant in the context, will include references to a Participant’s authorized transferee that the Administrator specifically approves.

9.2 Documentation. Each Award will be evidenced in an Award Agreement, which may be written or electronic, as the Administrator determines. Each Award may contain terms and conditions in addition to those set forth in the Plan.

9.3 Discretion. Except as the Plan otherwise provides, each Award may be made alone or in addition or in relation to any other Award. The terms of each Award to a Participant need not be identical, and the Administrator need not treat Participants or Awards (or portions thereof) uniformly.

9.4 Termination of Status. The Administrator will determine how the disability, death, retirement or authorized leave of absence or any other change or purported change in a Participant’s Service Provider status affects an Award and the extent to which, and the period during which the Participant, the Participant’s legal representative, conservator, guardian or Designated Beneficiary may exercise rights under the Award, if applicable.

9.5 Withholding. Each Participant must pay the Company or make provision satisfactory to the Administrator for payment of any taxes required by Applicable Law to be withheld in connection with such Participant’s Awards by the date of the event creating the tax liability. The Company may deduct an amount sufficient to satisfy such tax obligations based on the applicable statutory withholding rates (or such other rate as may be determined by the Company reasonably and in good faith after considering any accounting consequences or costs) from any payment of any kind otherwise due to a Participant. Subject to Section 10.8 and any Company insider trading policy (including blackout periods), Participants may satisfy such tax obligations (a) in cash, by wire transfer of immediately available funds, by check made payable to the order of the Company, provided that

 

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the Company may limit the use of the foregoing payment forms if one or more of the payment forms below is permitted, (b) to the extent permitted by the Administrator, in whole or in part by delivery of Shares, including Shares delivered by attestation and Shares retained from the Award creating the tax obligation, valued at their Fair Market Value on the date of delivery, (c) if there is a public market for Shares at the time the tax obligations are satisfied, unless the Company otherwise determines, (i) delivery (including electronically or telephonically to the extent permitted by the Company) of an irrevocable and unconditional undertaking by a broker acceptable to the Company to deliver promptly to the Company sufficient funds to satisfy the tax obligations, or (ii) delivery by the Participant to the Company of a copy of irrevocable and unconditional instructions to a broker acceptable to the Company to deliver promptly to the Company cash or a check sufficient to satisfy the tax withholding; provided that such amount is paid to the Company at such time as may be required by the Administrator, or (d) to the extent permitted by the Company, any combination of the foregoing payment forms approved by the Administrator. If any tax withholding obligation will be satisfied under clause (b) above by the Company’s retention of Shares from the Award creating the tax obligation and there is a public market for Shares at the time the tax obligation is satisfied, the Company may elect to instruct any brokerage firm determined acceptable to the Company for such purpose to sell on the applicable Participant’s behalf some or all of the Shares retained and to remit the proceeds of the sale to the Company or its designee, and each Participant’s acceptance of an Award under the Plan will constitute the Participant’s authorization to the Company and instruction and authorization to such brokerage firm to complete the transactions described in this sentence.

9.6 Amendment of Award; Repricing. The Administrator may amend, modify or terminate any outstanding Award, including by substituting another Award of the same or a different type, changing the exercise or settlement date, and converting an Incentive Stock Option to a Non-Qualified Stock Option. The Participant’s consent to such action will be required unless (a) the action, taking into account any related action, does not materially and adversely affect the Participant’s rights under the Award, or (b) the change is permitted under Article VIII or pursuant to Section 10.6. Notwithstanding the foregoing or anything in the Plan to the contrary, the Administrator may, without the approval of the stockholders of the Company, reduce the exercise price per share of outstanding Options or Stock Appreciation Rights or cancel outstanding Options or Stock Appreciation Rights that have an exercise price that is greater than the then-current Fair Market Value of the Shares in exchange for cash, other Awards or Options or Stock Appreciation Rights with an exercise price per share that is less than the exercise price per share of the original Options or Stock Appreciation Rights.

9.7 Conditions on Delivery of Stock. The Company will not be obligated to deliver any Shares under the Plan or remove restrictions from Shares previously delivered under the Plan until (a) all Award conditions have been met or removed to the Company’s satisfaction, (b) as determined reasonably and in good faith by the Company, all other legal matters regarding the issuance and delivery of such Shares have been satisfied, including any applicable securities laws and stock exchange or stock market rules and regulations, and (c) the Participant has executed and delivered to the Company such representations or agreements as the Administrator deems reasonably necessary or appropriate to satisfy any Applicable Laws. The Company’s inability after commercially reasonable good faith effort to obtain authority from any regulatory body having jurisdiction, which the Administrator determines is necessary to the lawful issuance and sale of any securities, will relieve the Company of any liability for failing to issue or sell such Shares as to which such requisite authority has not been obtained.

9.8 Acceleration. The Administrator may at any time provide that any Award will become immediately vested and fully or partially exercisable, free of some or all restrictions or conditions, or otherwise fully or partially realizable.

9.9 Cash Settlement. Without limiting the generality of any other provision of the Plan, the Administrator may provide, in an Award Agreement or subsequent to the grant of an Award, in its discretion, that any Award may be settled in cash, Shares or a combination thereof.

9.10 Broker-Assisted Sales. In the event of a broker-assisted sale of Shares in connection with the payment of amounts owed by a Participant under or with respect to the Plan or Awards, including amounts to be paid

 

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under the final sentence of Section 9.5: (a) any Shares to be sold through the broker-assisted sale will be sold on the day the payment first becomes due, or as soon thereafter as practicable; (b) such Shares may be sold as part of a block trade with other Participants in the Plan in which all participants receive an average price; (c) if determined by the Administrator, the applicable Participant will be responsible for all broker’s fees and other costs of sale, and by accepting an Award, each Participant agrees to indemnify and hold the Company harmless from any losses, costs, damages, or expenses relating to any such sale; (d) to the extent the Company or its designee receives proceeds of such sale that exceed the amount owed, the Company will pay such excess in cash to the applicable Participant as soon as reasonably practicable; (e) the Company and its designees are under no obligation to arrange for such sale at any particular price; and (f) in the event the proceeds of such sale are insufficient to satisfy the Participant’s applicable obligation, the Participant may be required to pay immediately upon demand to the Company or its designee an amount in cash sufficient to satisfy any remaining portion of the Participant’s obligation.

ARTICLE X.

MISCELLANEOUS

10.1 No Right to Employment or Other Status. No person will have any claim or right to be granted an Award, and the grant of an Award will not be construed as giving a Participant the right to continued employment or any other relationship with the Company or any of its Subsidiaries. The Company and its Subsidiaries expressly reserve the right at any time to dismiss or otherwise terminate its relationship with a Participant free from any liability or claim under the Plan or any Award, except as expressly provided in an Award Agreement or in the Plan.

10.2 No Rights as Stockholder; Certificates. Subject to the Award Agreement, no Participant or Designated Beneficiary will have any rights as a stockholder with respect to any Shares to be distributed under an Award until becoming the record holder of such Shares. Notwithstanding any other provision of the Plan, unless the Administrator otherwise determines or Applicable Laws require, the Company will not be required to deliver to any Participant certificates evidencing Shares issued in connection with any Award and instead such Shares may be recorded in the books of the Company (or, as applicable, its transfer agent or stock plan administrator). The Company may place legends on stock certificates issued under the Plan that the Administrator deems necessary or appropriate to comply with Applicable Laws.

10.3 Effective Date and Term of Plan. Unless earlier terminated by the Board, the Plan will become effective upon the consummation of the transactions contemplated by that certain Agreement and Plan of Merger (the “Merger Agreement”) entered into on November 2, 2022, by and among Flame Acquisition Corp., a Delaware corporation, Sable Offshore Corp., a Texas corporation, and Sable Offshore Holdings LLC, a Delaware limited liability company (the “Initial Business Combination,” and the date that the Plan becomes effective, the “Effective Date”), subject to the approval of the Company’s stockholders, and will remain in effect until the tenth anniversary of the earlier of (a) the date the Board adopted the Plan and (b) the date the Company’s stockholders approved the Plan, provided that Awards previously granted may extend beyond that date in accordance with the Plan. If the Plan is not approved by the Company’s stockholders, the Plan will not become effective, and no Awards will be granted under the Plan (and any Awards previously granted shall be null and void ab initio).

10.4 Amendment of Plan. The Administrator may amend, suspend or terminate the Plan at any time; provided that no amendment, other than an increase to the Overall Share Limit, may materially and adversely affect the rights of a Participant with respect to any Award outstanding at the time of such amendment without the affected Participant’s consent. No Awards may be granted under the Plan during any suspension period or after the Plan’s termination. Awards outstanding at the time of any Plan suspension or termination will continue to be governed by the Plan and the Award Agreement, as in effect immediately before such suspension or termination. The Board will obtain stockholder approval of any Plan amendment to the extent necessary to comply with Applicable Laws.

 

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10.5 Unfunded Plan. The Plan shall be unfunded. None of the Company, the Board nor any Committee shall be required to establish any fund or to segregate any assets to assure the performance of its obligations under the Plan.

10.6 Non-Uniform Treatment. The Administrator’s (or Committee’s, as applicable) determinations under the Plan need not be uniform and may be made by it selectively among persons who are eligible to receive, or actually receive, Awards. Without limiting the generality of the foregoing, the Administrator (or Committee, as applicable) shall be entitled to make non-uniform and selective determinations, amendments and adjustments, and to enter into non-uniform and selective Award Agreements.

10.7 Provisions for Foreign Participants. The Administrator may modify Awards granted to Participants who are foreign nationals or employed outside the United States or establish subplans or procedures under the Plan to address differences in laws, rules, regulations or customs of such foreign jurisdictions with respect to tax, securities, currency, employee benefit or other matters.

10.8 Section 409A.

(a) General. The Company intends that all Awards be structured to comply with, or be exempt from, Section 409A, such that no adverse tax consequences, interest, or penalties under Section 409A apply, and the Plan shall be construed and interpreted in accordance with such intent. Each payment under an Award shall be treated as a separate payment for purposes of Section 409A. Notwithstanding anything in the Plan or any Award Agreement to the contrary, the Administrator may, without a Participant’s consent, amend this Plan or Awards, adopt policies and procedures, or take any other actions (including amendments, policies, procedures and retroactive actions) as are necessary or appropriate to preserve the intended tax treatment of Awards, including any such actions intended to (i) exempt this Plan or any Award from Section 409A, or (ii) comply with Section 409A, including regulations, guidance, compliance programs and other interpretative authority that may be issued after an Award’s grant date; provided, that, any such amendment or policies or procedures shall endeavor to maintain the intended economic impact of any outstanding Awards. The Company makes no representations or warranties as to an Award’s tax treatment under Section 409A or otherwise. The Company will have no obligation under this Section 10.6 or otherwise to avoid the taxes, penalties or interest under Section 409A with respect to any Award and will have no liability to any Participant or any other person if any Award, compensation or other benefits under the Plan are determined to constitute noncompliant “nonqualified deferred compensation” subject to taxes, penalties or interest under Section 409A.

(b) Separation from Service. If an Award constitutes “nonqualified deferred compensation” under Section 409A, any payment or settlement of such Award upon a termination of a Participant’s Service Provider relationship will, to the extent necessary to avoid taxes under Section 409A, be made only upon the Participant’s “separation from service” (within the meaning of Section 409A), whether such “separation from service” occurs upon or after the termination of the Participant’s Service Provider relationship. For purposes of this Plan or any Award Agreement relating to any such payments or benefits, references to a “termination,” “termination of employment” or like terms means a “separation from service.”

(c) Payments to Specified Employees. Notwithstanding any contrary provision in the Plan or any Award Agreement, any payment(s) of “nonqualified deferred compensation” required to be made under an Award to a “specified employee” (as defined under Section 409A and as the Administrator determines) due to his or her “separation from service” will, to the extent necessary to avoid taxes under Section 409A(a)(2)(B)(i) of the Code, be delayed for the six-month period immediately following such “separation from service” (or, if earlier, until the specified employee’s death) and will instead be paid (as set forth in the Award Agreement) on the day immediately following such six-month period or as soon as administratively practicable thereafter (without interest). Any payments of “nonqualified deferred compensation” under such Award payable more than six months following the Participant’s “separation from service” will be paid at the time or times the payments are otherwise scheduled to be made.

 

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10.9 Notification of Election Under Section 83(b) of the Code. If any Participant shall, in connection with the acquisition of Shares under the Plan, make the election permitted under Section 83(b) of the Code, such Participant shall notify the Company of such election within 10 days of filing notice of the election with the Internal Revenue Service and shall provide a copy of such filing notice to the Company.

10.10 Limitations on Liability. Notwithstanding any other provisions of the Plan, no individual acting as a director, officer, employee, representative or agent of the Company or any Subsidiary will be liable to any Participant, former Participant, spouse, beneficiary, or any other party for any claim, loss, liability, or expense incurred in connection with the Plan or any Award, and such individual will not be personally liable with respect to the Plan because of any contract or other instrument executed in his or her capacity as an Administrator, director, officer, employee, representative or agent of the Company or any Subsidiary. The Company will indemnify and hold harmless each director, officer, employee, representative and agent of the Company or any Subsidiary that has been or will be granted or delegated any duty or power relating to the Plan’s administration or interpretation, against any cost or expense (including attorneys’ fees) or liability (including any sum paid in settlement of a claim with the Administrator’s approval) arising from any act or omission concerning this Plan unless arising from such person’s own fraud or bad faith.

10.11 Lock-Up Period. The Company may, at the request of any underwriter representative or otherwise, in connection with registering the offering of any Company securities under the Securities Act, prohibit Participants from, directly or indirectly, selling or otherwise transferring any Shares or other Company securities during a period of up to 180 days following the effective date of a Company registration statement filed under the Securities Act, or such longer period as determined by the underwriter.

10.12 Data Privacy. As a condition for receiving any Award, each Participant explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of personal data as described in this section by and among the Company and its Subsidiaries and affiliates exclusively for implementing, administering and managing the Participant’s participation in the Plan. The Company and its Subsidiaries and affiliates may hold certain personal information about a Participant, including the Participant’s name, address and telephone number; birthdate; social security, insurance number or other identification number; salary; nationality; job title(s); any Shares held in the Company or its Subsidiaries and affiliates; and Award details, to implement, manage and administer the Plan and Awards (the “Data”). The Company and its Subsidiaries and affiliates may transfer the Data amongst themselves as necessary to implement, administer and manage a Participant’s participation in the Plan, and the Company and its Subsidiaries and affiliates may transfer the Data to third parties assisting the Company with Plan implementation, administration and management. These recipients may be located in the Participant’s country, or elsewhere, and the Participant’s country may have different data privacy laws and protections than the recipients’ country. By accepting an Award, each Participant authorizes such recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, to implement, administer and manage the Participant’s participation in the Plan, including any required Data transfer to a broker or other third party with whom the Company or the Participant may elect to deposit any Shares. The Data related to a Participant will be held only as long as necessary to implement, administer, and manage the Participant’s participation in the Plan. A Participant may, at any time, view the Data that the Company holds regarding such Participant, request additional information about the storage and processing of the Data regarding such Participant, recommend any necessary corrections to the Data regarding the Participant or refuse or withdraw the consents in this Section 10.9 in writing, without cost, by contacting the local human resources representative. If the Participant refuses or withdraws the consents in this Section 10.9, the Company may cancel Participant’s ability to participate in the Plan and, in the Administrator’s discretion, the Participant may forfeit any outstanding Awards for no consideration. For more information on the consequences of refusing or withdrawing consent, Participants may contact their local human resources representative.

10.13 Severability. If any portion of the Plan or any action taken under it is held illegal or invalid for any reason, the illegality or invalidity will not affect the remaining parts of the Plan, and the Plan will be construed and enforced as if the illegal or invalid provisions had been excluded, and the illegal or invalid action will be null and void.

 

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10.14 Governing Documents. If any contradiction occurs between the Plan and any Award Agreement or other written agreement between a Participant and the Company (or any Subsidiary) that the Administrator has approved, the Plan will govern, unless it is expressly specified in such Award Agreement or other written document that a specific provision of the Plan will not apply or that the Award Agreement or other written document will govern.

10.15 Governing Law. The Plan and all Awards will be governed by and interpreted in accordance with the laws of the State of Delaware, disregarding any state’s choice-of-law principles requiring the application of a jurisdiction’s laws other than the State of Delaware.

10.16 Claw-back Provisions. All Awards (including, without limitation, any proceeds, gains or other economic benefit actually or constructively received by Participant upon any receipt or exercise of any Award or upon the receipt or resale of any Shares underlying the Award) shall be subject to the provisions of any claw-back policy implemented by the Company, including, without limitation, any claw-back policy adopted to comply with Applicable Laws (including the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and any rules or regulations promulgated thereunder) as and to the extent set forth in such claw-back policy or the Award Agreement.

10.17 Titles and Headings. The titles and headings in the Plan are for convenience of reference only and, if any conflict, the Plan’s text, rather than such titles or headings, will control.

10.18 Conformity to Securities Laws. Participant acknowledges that the Plan is intended to conform to the extent necessary with Applicable Laws. Notwithstanding anything herein to the contrary, the Plan and all Awards will be administered only in conformance with Applicable Laws. To the extent Applicable Laws permit, the Plan and all Award Agreements will be deemed amended as necessary to conform to Applicable Laws.

10.19 Relationship to Other Benefits. No payment under the Plan will be taken into account in determining any benefits under any pension, retirement, savings, profit sharing, group insurance, welfare or other benefit plan of the Company or any Subsidiary except as expressly provided in writing in such other plan or an agreement thereunder.

ARTICLE XI.

DEFINITIONS

As used in the Plan, the following words and phrases will have the following meanings:

11.1 “Administrator” means the Board or a Committee to the extent that the Board’s powers or authority under the Plan have been delegated to such Committee.

11.2 “Applicable Laws” means the requirements relating to the administration of equity incentive plans under U.S. federal and state securities, tax and other applicable laws, rules and regulations, the applicable rules of any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws and rules of any foreign country or other jurisdiction where Awards are granted.

11.3 “Award” means, individually or collectively, a grant under the Plan of Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Dividend Equivalents, or Other Stock or Cash Based Awards.

11.4 “Award Agreement” means a written agreement evidencing an Award, which may be electronic, that contains such terms and conditions as the Administrator determines, consistent with and subject to the terms and conditions of the Plan.

11.5 “Board” means the Board of Directors of the Company.

 

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11.6 “Cause” means (a) if a Participant is a party to a written employment or consulting agreement with the Company or any of its Subsidiaries or an Award Agreement in which the term “Cause” is defined (a “Relevant Agreement”), “Cause” as defined in the Relevant Agreement, and (b) if no Relevant Agreement exists, (i) the Administrator’s determination that the Participant failed to substantially perform the Participant’s duties (other than a failure resulting from the Participant’s disability); (ii) the Administrator’s determination that the Participant failed to carry out, or comply with any lawful and reasonable directive of the Board or the Participant’s immediate supervisor; (iii) the occurrence of any act or omission by the Participant that could reasonably be expected to result in (or has resulted in) the Participant’s conviction, plea of no contest, plea of nolo contendere, or imposition of unadjudicated probation for any felony or any indictable offense or crime involving moral turpitude; (iv) the Participant’s unlawful use (including being under the influence) or possession of illegal drugs on the premises of the Company or any of its Subsidiaries or while performing the Participant’s duties and responsibilities for the Company or any of its Subsidiaries; (v) the Participant’s material breach of any agreement with the Company or a Subsidiary thereof (including, without limitation, any confidentiality, non-competition, non-solicitation or assignment of inventions agreement); (vi) the Participant’s material breach of any material policy or code of conduct established by a member of the Company or any of its Subsidiaries and applicable to the Participant, including any policy or code of conduct provision relating to discrimination, harassment or retaliation; or (vii) the Administrator’s reasonable and good faith determination that the Participant committed an act of fraud, embezzlement, misappropriation, or misconduct, or breached a fiduciary duty against the Company or any of its Subsidiaries. The Administrator shall reasonably and in good faith determine the effect of all matters and questions relating to whether a Participant has been discharged for Cause.

11.7 “Change in Control” means and includes each of the following:

(a) A transaction or series of transactions (other than an offering of Common Stock to the general public through a registration statement filed with the Securities and Exchange Commission or a transaction or series of transactions that meets the requirements of clauses (i) and (ii) of subsection (c) below) whereby any “person” or related “group” of “persons” (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act) (other than the Company, any of its Subsidiaries, an employee benefit plan maintained by the Company or any of its Subsidiaries or a “person” that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, the Company) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company possessing more than 50% of the total combined voting power of the Company’s securities outstanding immediately after such acquisition;

(b) During any period of two consecutive years, individuals who, at the beginning of such period, constitute the Board together with any new Director(s) (other than a Director designated by a person who shall have entered into an agreement with the Company to effect a transaction described in subsections (a) or (c)) whose election by the Board or nomination for election by the Company’s stockholders was approved (other than in connection with the settlement of an actual or threatened hostile proxy contest) by a vote of at least two-thirds of the Directors then still in office who either were Directors at the beginning of the two-year period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or

(c) The consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination, (y) a sale or other disposition of all or substantially all of the Company’s assets in any single transaction or series of related transactions or (z) the acquisition of assets or stock of another entity, in each case other than a transaction:

(i) that results in the Company’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company’s assets or otherwise succeeds to the business of the

 

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Company (the Company or such person, the “Successor Entity”)) directly or indirectly, at least a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction in substantially the same proportions as immediately prior to the transaction, and

(ii) after which no person or group beneficially owns voting securities representing 50% or more of the combined voting power of the Successor Entity; provided, however, that no person or group shall be treated for purposes of this clause (ii) as beneficially owning 50% or more of the combined voting power of the Successor Entity solely as a result of the voting power held in the Company prior to the consummation of the transaction.

Notwithstanding the foregoing, (i) in no event shall the Initial Business Combination or the transactions occurring in connection therewith constitute a Change in Control and (ii) if a Change in Control constitutes a payment event with respect to any Award (or portion of any Award) that provides for the deferral of compensation that is subject to Section 409A, to the extent required to avoid the imposition of additional taxes under Section 409A, the transaction or event described in subsection (a), (b) or (c) with respect to such Award (or portion thereof) shall only constitute a Change in Control for purposes of the payment timing of such Award if such transaction also constitutes a “change in control event,” as defined in Treasury Regulations Section 1.409A-3(i)(5).

The Administrator shall have full and final authority, which shall be exercised reasonably and in good faith, to determine conclusively whether a Change in Control has occurred pursuant to the above definition, the date of the occurrence of such Change in Control and any incidental matters relating thereto; provided that any exercise of authority in conjunction with a determination of whether a Change in Control is a “change in control event” as defined in Treasury Regulations Section 1.409A-3(i)(5) shall be consistent with such regulation.

11.8 “Code” means the Internal Revenue Code of 1986, as amended, and the regulations and administrative guidance issued thereunder.

11.9 “Committee” means one or more committees or subcommittees of the Board, which may include one or more Company directors or executive officers, to the extent Applicable Laws permit. To the extent required to comply with the provisions of Rule 16b-3, it is intended that each member of the Committee will be, at the time the Committee takes any action with respect to an Award that is subject to Rule 16b-3, a “non-employee director” within the meaning of Rule 16b-3; however, a Committee member’s failure to qualify as a “non-employee director” within the meaning of Rule 16b-3 will not invalidate any Award granted by the Committee that is otherwise validly granted under the Plan.

11.10 “Common Stock” means the Class A common stock, par value $0.0001, of the Company.

11.11 “Company” means Sable Offshore Corp., a Delaware corporation, or any successor.

11.12 “Consultant” means any person, including any adviser, engaged by the Company or any of its Subsidiaries to render services to such entity if the consultant or adviser: (a) renders bona fide services to the Company; (b) renders services not in connection with the offer or sale of securities in a capital-raising transaction and does not directly or indirectly promote or maintain a market for the Company’s securities; and (c) is a natural person.

11.13 “Designated Beneficiary” means the beneficiary or beneficiaries the Participant designates, in a manner the Administrator determines, to receive amounts due or exercise the Participant’s rights if the Participant dies or becomes incapacitated. Without a Participant’s effective designation, “Designated Beneficiary” will mean the Participant’s estate.

11.14 “Director” means a Board member.

 

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11.15 “Disability” means a permanent and total disability under Section 22(e)(3) of the Code, as amended.

11.16 “Dividend Equivalents” means a right granted to a Participant under the Plan to receive the equivalent value (in cash or Shares) of dividends paid on Shares.

11.17 “Employee” means any employee of the Company or its Subsidiaries.

11.18 “Equity Restructuring” means, as determined by the Administrator, a non-reciprocal transaction between the Company and its stockholders, such as a stock dividend, stock split, spin-off or recapitalization through a large, nonrecurring cash dividend, or other large, nonrecurring cash dividend, that affects the number or kind of Shares (or other securities of the Company) or the share price of Common Stock (or other securities of the Company) and causes a change in the per share value of the Common Stock underlying outstanding Awards.

11.19 “Exchange Act” means the Securities Exchange Act of 1934, as amended.

11.20 “Fair Market Value” means, as of any date, the value of a share of Common Stock determined as follows: (a) if the Common Stock is listed on any established stock exchange, its Fair Market Value will be the closing sales price for such Common Stock as quoted on such exchange for such date, or if no sale occurred on such date, the last day preceding such date during which a sale occurred, as reported in The Wall Street Journal or another source the Administrator deems reliable; (b) if the Common Stock is not traded on a stock exchange but is quoted on a national market or other quotation system, the closing sales price on such date, or if no sales occurred on such date, then on the last date preceding such date during which a sale occurred, as reported in The Wall Street Journal or another source the Administrator deems reliable; or (c) without an established market for the Common Stock, the Administrator will determine the Fair Market Value in its discretion.

11.21 “Greater Than 10% Stockholder” means an individual then owning (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company or its parent or subsidiary corporation, as defined in Section 424(e) and (f) of the Code, respectively.

11.22 “Incentive Stock Option” means an Option intended to qualify as an “incentive stock option” as defined in Section 422 of the Code.

11.23 “Non-Qualified Stock Option” means an Option, or portion thereof, not intended or not qualifying as an Incentive Stock Option.

11.24 “Option” means an option to purchase Shares, which will either be an Incentive Stock Option or a Non-Qualified Stock Option.

11.25 “Other Stock or Cash Based Awards” means cash awards, awards of Shares, and other awards valued wholly or partially by referring to, or are otherwise based on, Shares or other property awarded to a Participant under Article VII.

11.26 “Overall Share Limit” means the sum of (i) 15,621,569 Shares and (ii) an annual increase on the first day of each calendar year beginning January 1, 2024 and ending on and including January 1, 2033, equal to the lesser of (A) 5% of the aggregate number of Shares outstanding on the final day of the immediately preceding calendar year and (B) such smaller number of Shares as is determined by the Board.

11.27 “Participant” means a Service Provider who has been granted an Award.

 

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11.28 “Performance Criteria” mean the criteria (and adjustments) that the Administrator may select for an Award to establish performance goals for a performance period, including the following: net earnings or losses (either before or after one or more of interest, taxes, depreciation, amortization, and non-cash equity-based compensation expense); gross or net sales or revenue or sales or revenue growth; net income (either before or after taxes) or adjusted net income; profits (including but not limited to gross profits, net profits, profit growth, net operation profit or economic profit), profit return ratios or operating margin; budget or operating earnings (either before or after taxes or before or after allocation of corporate overhead and bonus); cash flow (including operating cash flow and free cash flow or cash flow return on capital); return on assets; return on capital or invested capital; cost of capital; return on stockholders’ equity; total stockholder return; return on sales; costs, reductions in costs and cost control measures; expenses; working capital; earnings or loss per share; adjusted earnings or loss per share; price per share or dividends per share (or appreciation in or maintenance of such price or dividends); regulatory achievements or compliance; implementation, completion or attainment of objectives relating to research, development, regulatory, commercial, or strategic milestones or developments; market share; economic value or economic value added models; division, group or corporate financial goals; customer satisfaction/growth; customer service; employee satisfaction; recruitment and maintenance of personnel; human resources management; supervision of litigation and other legal matters; strategic partnerships and transactions; financial ratios (including those measuring liquidity, activity, profitability or leverage); debt levels or reductions; sales-related goals; financing and other capital raising transactions; cash on hand; acquisition activity; investment sourcing activity; and marketing initiatives, any of which may be measured in absolute terms or as compared to any incremental increase or decrease. Such performance goals also may be based solely by reference to the Company’s performance or the performance of a Subsidiary, division, business segment or business unit of the Company or a Subsidiary or based upon performance relative to performance of other companies or upon comparisons of any of the indicators of performance relative to performance of other companies. The Committee may provide for exclusion of the impact of an event or occurrence which the Committee determines should appropriately be excluded, including (a) restructurings, discontinued operations, extraordinary items, and other unusual, infrequently occurring or non-recurring charges or events, (b) asset write-downs, (c) litigation or claim judgments or settlements, (d) acquisitions or divestitures, (e) reorganization or change in the corporate structure or capital structure of the Company, (f) an event either not directly related to the operations of the Company, Subsidiary, division, business segment or business unit or not within the reasonable control of management, (g) foreign exchange gains and losses, (h) a change in the fiscal year of the Company, (i) the refinancing or repurchase of bank loans or debt securities, (j) unbudgeted capital expenditures, (k) the issuance or repurchase of equity securities and other changes in the number of outstanding shares, (l) conversion of some or all of convertible securities to Common Stock, (m) any business interruption event (n) the cumulative effects of tax or accounting changes in accordance with U.S. generally accepted accounting principles, or (o) the effect of changes in other laws or regulatory rules affecting reported results.

11.29 “Plan” means this 2023 Incentive Award Plan, as amended from time to time.

11.30 “Restricted Stock” means Shares awarded to a Participant under Article VI subject to certain vesting conditions and other restrictions.

11.31 “Restricted Stock Unit” means an unfunded, unsecured right to receive, on the applicable settlement date, one Share or an amount in cash or other consideration determined by the Administrator to be of equal value as of such settlement date awarded to a Participant under Article VI subject to certain vesting conditions and other restrictions.

11.32 “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act.

11.33 “Section 409A” means Section 409A of the Code and all regulations, guidance, compliance programs and other interpretative authority thereunder.

11.34 “Section 16 Persons” means those officers, directors or other persons who are subject to Section 16 of the Exchange Act.

 

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11.35 “Securities Act” means the Securities Act of 1933, as amended.

11.36 “Service Provider” means an Employee, Consultant or Director.

11.37 “Shares” means shares of Common Stock.

11.38 “Stock Appreciation Right” means a stock appreciation right granted under Article V.

11.39 “Subsidiary” means any entity (other than the Company), whether domestic or foreign, in an unbroken chain of entities beginning with the Company if each of the entities other than the last entity in the unbroken chain beneficially owns, at the time of the determination, securities or interests representing at least 50% of the total combined voting power of all classes of securities or interests in one of the other entities in such chain.

11.40 “Substitute Awards” means Awards granted or Shares issued by the Company in assumption of, or in substitution or exchange for, awards previously granted, or the right or obligation to make future awards, in each case by a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines.

11.41 “Termination of Service” means the date the Participant ceases to be a Service Provider.

* * * * *

 

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Exhibit 10.33

INDEMNIFICATION AND ADVANCEMENT AGREEMENT

This Indemnification and Advancement Agreement (“Agreement”) is made as of     , 202 , by and between Sable Offshore Corp., a Delaware corporation (the “Company”), and ______________, [a member of the Board of Directors][an officer][an employee][an agent] of the Company (“Indemnitee”). This Agreement supersedes and replaces any and all previous Agreements between the Company and Indemnitee covering indemnification and advancement of expenses.

RECITALS

WHEREAS, the Board of Directors of the Company (the “Board”) believes that highly competent persons have become more reluctant to serve publicly-held corporations as directors, officers, or in other capacities unless they are provided with adequate protection through insurance or adequate indemnification and advancement of expenses against inordinate risks of claims and actions against them arising out of their service to and activities on behalf of the corporation;

WHEREAS, the Board has determined that, in order to attract and retain qualified individuals, the Company will attempt to maintain on an ongoing basis, at its sole expense, liability insurance to protect persons serving the Company and its subsidiaries from certain liabilities. Although the furnishing of such insurance has been a customary and widespread practice among United States-based corporations and other business enterprises, the Company believes that, given current market conditions and trends, such insurance may be available to it in the future only at higher premiums and with more exclusions. At the same time, directors, officers, and other persons in service to corporations or business enterprises are being increasingly subjected to expensive and time-consuming litigation relating to, among other things, matters that traditionally would have been brought only against the Company or business enterprise itself. The Amended and Restated Bylaws (the “Bylaws”) and Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”) of the Company require indemnification of the officers and directors of the Company. Indemnitee may also be entitled to indemnification pursuant to the General Corporation Law of the State of Delaware (the “DGCL”). The Bylaws, Certificate of Incorporation, and the DGCL expressly provide that the indemnification provisions set forth therein are not exclusive, and thereby contemplate that contracts may be entered into between the Company and its directors, officers and other persons with respect to indemnification and advancement of expenses;

WHEREAS, the uncertainties relating to such insurance, to indemnification, and to advancement of expenses may increase the difficulty of attracting and retaining such persons;

WHEREAS, the Board has determined that the increased difficulty in attracting and retaining such persons is detrimental to the best interests of the Company and its stockholders and that the Company should act to assure such persons that there will be increased certainty of such protection in the future;

WHEREAS, it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify, and to advance expenses on behalf of, such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern that they will not be so indemnified;

WHEREAS, this Agreement is a supplement to, and in furtherance of, the Bylaws, the Certificate of Incorporation and any resolutions adopted pursuant thereto, as well as any rights of Indemnitee under any directors’ and officers’ liability insurance policy, and is not a substitute therefor, and does not diminish or abrogate any rights of Indemnitee thereunder; and

WHEREAS, Indemnitee does not regard the protection available under the Bylaws, the Certificate of Incorporation, and available insurance as adequate in the present circumstances, and may not be willing to serve or continue to serve as a/an [officer/director/employee/agent] without adequate additional protection, and the Company desires Indemnitee to serve or continue to serve in such capacity. Indemnitee is willing to serve, continue to serve and to take on additional service for or on behalf of the Company on the condition that Indemnitee be so indemnified and be advanced expenses.

NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows:

Section 1. Services to the Company. Indemnitee agrees to serve as [a/an] [director/officer/employee/agent] of the Company. Indemnitee may at any time and for any reason resign from such position (subject to any other contractual obligation or any obligation imposed by operation of law). This Agreement does not create any obligation on the Company to continue Indemnitee in such position and is not an employment contract between the Company (or any of its subsidiaries or any Enterprise) and Indemnitee.

Section 2. Definitions. As used in this Agreement:

(a) “Agent” means any person who is authorized by the Company or an Enterprise to act for or represent the interests of the Company or an Enterprise, respectively.

(b) A “Change in Control” occurs upon the earliest to occur after the date of this Agreement of any of the following events:

i. Acquisition of Stock by Third Party. Any Person (as defined below) is or becomes the Beneficial Owner (as defined below), directly or indirectly, of securities of the Company representing fifteen percent (15%) or more of the combined voting power of the Company’s then outstanding securities unless the change in relative beneficial ownership of the Company’s securities by any Person results solely from a reduction in the aggregate number of outstanding shares of securities entitled to vote generally in the election of directors;

ii. Change in Board of Directors. During any period of two (2) consecutive years (not including any period prior to the execution of this Agreement), individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in Sections 2(b)(i), 2(b)(iii) or 2(b)(iv) of this Agreement) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority of the members of the Board;

 

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iii. Corporate Transactions. The effective date of a merger or consolidation of the Company with any other entity, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of the surviving entity outstanding immediately after such merger or consolidation and with the power to elect at least a majority of the board of directors or other governing body of such surviving entity;

iv. Liquidation. The approval by the stockholders of the Company of a complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets; and

v. Other Events. There occurs any other event of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or a response to any similar item on any similar schedule or form) promulgated under the Exchange Act (as defined below), whether or not the Company is then subject to such reporting requirement.]

vi. For purposes of this Section 2(b), the following terms have the following meanings:

 

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“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time.

 

  2

“Person” has the meaning as set forth in Sections 13(d) and 14(d) of the Exchange Act; provided, however, that Person excludes (i) the Company, (ii) any trustee or other fiduciary holding securities under an employee benefit plan of the Company, and (iii) any entity owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company.

 

  3

“Beneficial Owner” has the meaning given to such term in Rule 13d-3 under the Exchange Act; provided, however, that Beneficial Owner excludes any Person otherwise becoming a Beneficial Owner by reason of the stockholders of the Company approving a merger of the Company with another entity.

(c) “Corporate Status” describes the status of a person who is or was acting as a director, officer, employee, or Agent of the Company or an Enterprise.

 

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(d) “Disinterested Director” means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.

(e) “Enterprise” means any other corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other entity for which Indemnitee is or was serving at the request of the Company as a director, officer, employee, or Agent.

(f) “Expenses” includes all reasonable attorneys’ fees, retainers, court costs, transcript costs, fees and other costs of experts and other professionals, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, any federal, state, local or foreign taxes imposed on Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement, ERISA excise taxes and penalties, and all other disbursements, obligations or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, or otherwise participating in, a Proceeding. Expenses also include (i) Expenses incurred in connection with any appeal resulting from any Proceeding, including without limitation the premium, security for, and other costs relating to any cost bond, supersedeas bond, or other appeal bond or its equivalent, and (ii) for purposes of Section 14(d) of this Agreement only, Expenses incurred by Indemnitee in connection with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement, by litigation or otherwise. The parties agree that for the purposes of any advancement of Expenses for which Indemnitee has made written demand to the Company in accordance with this Agreement, all Expenses included in such demand that are certified by affidavit of Indemnitee’s counsel as being reasonable in the good faith judgment of such counsel will be presumed conclusively to be reasonable. Expenses, however, do not include amounts paid in settlement by Indemnitee or the amount of judgments or fines against Indemnitee.

(g) “Independent Counsel” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning the Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” does not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement. The Company agrees to pay the reasonable fees and expenses of such Independent Counsel.

(h) “Potential Change in Control” means the occurrence of any of the following events: (i) the Company enters into any written or oral agreement, undertaking or arrangement, the consummation of which would result in the occurrence of a Change in Control; (ii) any Person or the Company publicly announces an intention to take or consider taking actions which if consummated would constitute a Change in Control; (iii) any Person who becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 5% or more of the combined voting power of the Company’s then outstanding securities entitled to vote generally in the election of directors increases his beneficial ownership of such securities by 5% or more over the percentage so owned by such Person on the date hereof; or (iv) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control has occurred.

 

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(i) “Proceeding” includes any threatened, pending or completed action, suit, claim, counterclaim, cross claim, arbitration, mediation, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought in the right of the Company or otherwise and whether of a civil, criminal, administrative, legislative or investigative (formal or informal) nature, including any appeal therefrom, in which Indemnitee was, is or will be involved as a party, potential party, non-party witness or otherwise by reason of Indemnitee’s Corporate Status or by reason of any action taken by Indemnitee (or a failure to take action by Indemnitee) or of any action (or failure to act) on Indemnitee’s part while acting pursuant to Indemnitee’s Corporate Status, in each case whether or not serving in such capacity at the time any liability or Expense is incurred for which indemnification, reimbursement, or advancement of Expenses can be provided under this Agreement. A Proceeding also includes a situation the Indemnitee believes in good faith may lead to or culminate in the institution of a Proceeding.

Section 3. Indemnity in Third-Party Proceedings. The Company will indemnify Indemnitee in accordance with the provisions of this Section 3 if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding, other than a Proceeding by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 3, the Company will indemnify Indemnitee to the fullest extent permitted by applicable law against all Expenses, judgments, fines and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, judgments, fines and amounts paid in settlement) actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company and, in the case of a criminal Proceeding had no reasonable cause to believe that Indemnitee’s conduct was unlawful.

Section 4. Indemnity in Proceedings by or in the Right of the Company. The Company will indemnify Indemnitee in accordance with the provisions of this Section 4 if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 4, the Company will indemnify Indemnitee to the fullest extent permitted by applicable law against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in, or not opposed to, the best interests of the Company. The Company will not indemnify Indemnitee for Expenses under this Section 4 related to any claim, issue or matter in a Proceeding for which Indemnitee has been finally adjudged by a court to be liable to the Company, unless, and only to the extent that, the Court of Chancery of the state of Delaware (the “Delaware Court”) or any court in which the Proceeding was brought determines upon application by Indemnitee that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnification.

 

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Section 5. Indemnification for Expenses of a Party Who is Wholly or Partly Successful. To the fullest extent permitted by applicable law, the Company will indemnify Indemnitee against all Expenses actually and reasonably incurred by Indemnitee in connection with any Proceeding to the extent that Indemnitee is successful, on the merits or otherwise. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company will indemnify Indemnitee against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with or related to each successfully resolved claim, issue or matter to the fullest extent permitted by law. For purposes of this Section 5 and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, will be deemed to be a successful result as to such claim, issue or matter.

Section 6. Indemnification for Expenses of a Witness. To the fullest extent permitted by applicable law, the Company will indemnify Indemnitee against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with any Proceeding to which Indemnitee is not a party but to which Indemnitee is a witness, deponent, interviewee, or otherwise asked to participate or provide information.

Section 7. Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of Expenses, but not, however, for the total amount thereof, the Company will indemnify Indemnitee for the portion thereof to which Indemnitee is entitled.

Section 8. Additional Indemnification. Notwithstanding any limitation in Sections 3, 4, or 5 of this Agreement, the Company will indemnify Indemnitee to the fullest extent permitted by applicable law (including but not limited to, the DGCL and any amendments to or replacements of the DGCL adopted after the date of this Agreement that expand the Company’s ability to indemnify its officers[, and] directors[/employees/Agents]) if Indemnitee is a party to or threatened to be made a party to any Proceeding (including a Proceeding by or in the right of the Company to procure a judgment in its favor).

Section 9. Exclusions. Notwithstanding any provision in this Agreement, the Company is not obligated under this Agreement to indemnify Indemnitee for:

(a) for any amount actually paid to or on behalf of Indemnitee under any insurance policy or other indemnity provision, except to the extent provided in Section 16(b) of this Agreement and except with respect to any excess beyond the amount paid under any insurance policy or other indemnity provision;

(b) an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company within the meaning of Section 16(b) of the Exchange Act (as defined in Section 2(b) hereof) or similar provisions of state statutory law or common law;

(c) reimbursement of the Company by the Indemnitee of any bonus or other incentive-based or equity-based compensation or of any profits realized by the Indemnitee from the sale of securities of the Company, as required in each case under the Exchange Act (including any such reimbursements that arise from an accounting restatement of the Company pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), or the payment to the Company of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 306 of the Sarbanes-Oxley Act);

 

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(d) reimbursement of the Company by Indemnitee of any compensation pursuant to any compensation recoupment or clawback policy adopted by the Board or the compensation committee of the Board, including but not limited to any such policy adopted to comply with stock exchange listing requirements implementing Section 10D of the Exchange Act; or

(e) and Proceeding initiated by Indemnitee, including any Proceeding (or any part of any Proceeding) initiated by Indemnitee against the Company or its directors, officers, employees or other indemnitees, unless (i) the Proceeding or part of any Proceeding is to enforce Indemnitee’s rights to indemnification or advancement, of Expenses, including a Proceeding (or any part of any Proceeding) initiated pursuant to Section 14 of this Agreement, (ii) the Board authorized the Proceeding (or any part of any Proceeding) prior to its initiation or (iii) the Company provides the indemnification, in its sole discretion, pursuant to the powers vested in the Company under applicable law.

Section 10. Advances of Expenses.

(a) The Company will advance, to the extent not prohibited by law, the Expenses incurred by Indemnitee in connection with:

(i) any Proceeding (or any part of any Proceeding) not initiated by Indemnitee; or

(ii) any Proceeding (or any part of any Proceeding) initiated by Indemnitee if

 

  1.

the Proceeding or part of any Proceeding is to enforce Indemnitee’s rights to obtain indemnification or advancement of Expenses from the Company or Enterprise, including a proceeding initiated pursuant to Section 14 of this Agreement, or

 

  2.

the Board authorized the Proceeding (or any part of any Proceeding) prior to its initiation.

(b) The Company will advance the Expenses within thirty (30) days after the receipt by the Company of a statement or statements requesting such advances from time to time, whether prior to or after final disposition of any Proceeding eligible for advancement of expenses.

(c) Advances will be unsecured and interest free. Indemnitee hereby undertakes to repay any amounts so advanced (without interest) to the extent that it is ultimately determined that Indemnitee is not entitled to be indemnified by the Company, thus Indemnitee qualifies for advances upon the execution of this Agreement and delivery to the Company. No other form of undertaking is required other than the execution of this Agreement. The Company will make advances without regard to Indemnitee’s ability to repay the Expenses and without regard to Indemnitee’s ultimate entitlement to indemnification under the other provisions of this Agreement.

 

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Section 11. Procedure for Notification of Claim for Indemnification or Advancement.

(a) Indemnitee will notify the Company in writing of any Proceeding with respect to which Indemnitee intends to seek indemnification or advancement of Expenses hereunder as soon as reasonably practicable following the receipt by Indemnitee of written notice thereof. Indemnitee will include in the written notification to the Company a description of the nature of the Proceeding and the facts underlying the Proceeding and provide such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification following the final disposition of such Proceeding. Indemnitee’s failure to notify the Company will not relieve the Company from any obligation it may have to Indemnitee under this Agreement, and any delay in so notifying the Company will not constitute a waiver by Indemnitee of any rights under this Agreement. The Secretary of the Company will, promptly upon receipt of such a request for indemnification or advancement, advise the Board in writing that Indemnitee has requested indemnification or advancement.

(b) The Company will be entitled to participate in the Proceeding at its own expense.

Section 12. Procedure Upon Application for Indemnification.

(a) Unless a Change in Control has occurred, the determination of Indemnitee’s entitlement to indemnification will be made:

i. by a majority vote of the Disinterested Directors, even though less than a quorum of the Board;

ii. by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even though less than a quorum of the Board;

iii. if there are no such Disinterested Directors or, if such Disinterested Directors so direct, by written opinion provided by Independent Counsel selected by the Board; or

iv. if so directed by the Board, by the stockholders of the Company.

(b) If a Change in Control has occurred, the determination of Indemnitee’s entitlement to indemnification will be made by written opinion provided by Independent Counsel selected by Indemnitee (unless Indemnitee requests such selection be made by the Board)

(c) The party selecting Independent Counsel pursuant to subsection (a)(iii) or (b) of this Section 12 will provide written notice of the selection to the other party. The notified party may, within ten (10) days after receiving written notice of the selection of Independent Counsel, deliver to the selecting party a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in Section 2 of this

 

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Agreement, and the objection will set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected will act as Independent Counsel. If such written objection is so made and substantiated, the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or the Delaware Court has determined that such objection is without merit. If, within thirty (30) days after the later of submission by Indemnitee of a written request for indemnification pursuant to Section 11(a) of this Agreement and the final disposition of the Proceeding, Independent Counsel has not been selected or, if selected, any objection to has not been resolved, either the Company or Indemnitee may petition the Delaware Court for resolution of any objection to such selection made by the Company or Indemnitee to the other’s selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by such court or by such other person as such court designates. Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 14(a) of this Agreement, Independent Counsel will be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).

(d) Indemnitee will cooperate with the person, persons or entity making the determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. The Company will advance and pay any Expenses incurred by Indemnitee in so cooperating with the person, persons or entity making the indemnification determination irrespective of the determination as to Indemnitee’s entitlement to indemnification and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom. The Company promptly will advise Indemnitee in writing of the determination that Indemnitee is or is not entitled to indemnification, including a description of any reason or basis for which indemnification has been denied and providing a copy of any written opinion provided to the Board by Independent Counsel.

(e) If it is determined that Indemnitee is entitled to indemnification, the Company will make payment to Indemnitee within thirty (30) days after such determination.

Section 13. Presumptions and Effect of Certain Proceedings.

(a) In making a determination with respect to entitlement to indemnification under this Agreement, the person, persons or entity making such determination will, to the fullest extent not prohibited by law, presume Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 11(a) of this Agreement, and the Company will, to the fullest extent not prohibited by law, have the burden of proof to overcome that presumption. Neither the failure of the Company (including by its directors or Independent Counsel) to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper under the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Company (including by its directors or Independent Counsel) that Indemnitee has not met such applicable standard of conduct, will be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.

 

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(b) If the determination of the Indemnitee’s entitlement to indemnification has not been made pursuant to Section 12 of this Agreement within sixty (60) days after the later of (i) receipt by the Company of Indemnitee’s request for indemnification pursuant to Section 11(a) of this Agreement and (ii) the final disposition of the Proceeding for which Indemnitee requested Indemnification (the “Determination Period”), the requisite determination of entitlement to indemnification will, to the fullest extent not prohibited by law, be deemed to have been made and Indemnitee will be entitled to such indemnification, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law. The Determination Period may be extended for a reasonable time, not to exceed an additional thirty (30) days, if the person, persons or entity making the determination with respect to entitlement to indemnification in good faith requires such additional time for the obtaining or evaluating of documentation and/or information relating thereto; and provided, further, the Determination Period will not apply (i) if the determination of entitlement to indemnification is to be made by the stockholders pursuant to Section 12(a)(iv) of this Agreement and if (A) within fifteen (15) days after receipt by the Company of the request for such determination the Board has resolved to submit such determination to the stockholders for their consideration at an annual meeting thereof to be held within seventy-five (75) days after such receipt and such determination is made thereat, or (B) a special meeting of stockholders is called within fifteen (15) days after such receipt for the purpose of making such determination, such meeting is held for such purpose within sixty (60) days after having been so called and such determination is made thereat, or (ii) if the determination of entitlement to indemnification is to be made by Independent Counsel.

(c) The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, will not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that Indemnitee’s conduct was unlawful.

(d) For purposes of any determination of good faith, Indemnitee will be deemed to have acted in good faith if Indemnitee acted based on (i) the records or books of account of the Company, its subsidiaries, or an Enterprise, including financial statements, (ii) information supplied to Indemnitee by the directors or officers of the Company, its subsidiaries, or an Enterprise in the course of their duties, (iii) the advice of legal counsel for the Company, its subsidiaries, or an Enterprise or (iv) information or records given or reports made to the Company or an Enterprise by an independent certified public accountant or by an appraiser, financial advisor or other expert selected with reasonable care by or on behalf of the Company, its subsidiaries, or an Enterprise. Further, Indemnitee will be deemed to have acted in a manner “not opposed to the best interests of the Company,” as referred to in this Agreement if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in the best interests of the participants and beneficiaries of an employee benefit plan. The provisions of this Section 13(d) are not exclusive and do not limit in any way the other circumstances in which the Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Agreement.

 

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(e) The knowledge and/or actions, or failure to act, of any other person affiliated with the Company or an Enterprise (including, but not limited to, a director, officer, trustee, partner, managing member, Agent or employee) may not be imputed to Indemnitee for purposes of determining Indemnitee’s right to indemnification under this Agreement.

Section 14. Remedies of Indemnitee.

(a) Indemnitee may commence litigation against the Company in the Delaware Court to obtain indemnification or advancement of Expenses provided by this Agreement in the event that (i) a determination is made pursuant to Section 12 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) the Company does not advance Expenses pursuant to Section 10 of this Agreement, (iii) the determination of entitlement to indemnification is not made pursuant to Section 12 of this Agreement within the Determination Period, (iv) the Company does not indemnify Indemnitee pursuant to Section 5 or 6 or the second to last sentence of Section 12(d) of this Agreement within thirty (30) days after receipt by the Company of a written request therefor, (v) the Company does not indemnify Indemnitee pursuant to Section 3, 4, 7, or 8 of this Agreement within thirty (30) days after a determination has been made that Indemnitee is entitled to indemnification, or (vi) in the event that the Company or any other person takes or threatens to take any action to declare this Agreement void or unenforceable, or institutes any litigation or other action or Proceeding designed to deny, or to recover from, the Indemnitee the benefits provided or intended to be provided to the Indemnitee hereunder. Alternatively, Indemnitee, at Indemnitee’s option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association. Indemnitee must commence such Proceeding seeking an adjudication or an award in arbitration within one hundred and eighty (180) days following the date on which Indemnitee first has the right to commence such Proceeding pursuant to this Section 14(a); provided, however, that the foregoing clause does not apply in respect of a Proceeding brought by Indemnitee to enforce Indemnitee’s rights under Section 5 of this Agreement. The Company will not oppose Indemnitee’s right to seek any such adjudication or award in arbitration.

(b) If a determination is made pursuant to Section 12 of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 14 will be conducted in all respects as a de novo trial, or arbitration, on the merits and Indemnitee may not be prejudiced by reason of that adverse determination. In any judicial proceeding or arbitration commenced pursuant to this Section 14 the Company will have the burden of proving Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be, and will not introduce evidence of the determination made pursuant to Section 12 of this Agreement.

(c) If a determination is made pursuant to Section 12 of this Agreement that Indemnitee is entitled to indemnification, the Company will be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 14 unless, (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with Indemnitees’ request for indemnification, or (ii) the Company is prohibited from indemnifying Indemnitee under applicable law.

 

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(d) The Company is, to the fullest extent not prohibited by law, precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 14 that the procedures and presumptions of this Agreement are not valid, binding or enforceable and will stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement.

(e) It is the intent of the Company that, to the fullest extent permitted by law, the Indemnitee not be required to incur legal fees or other Expenses associated with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement by litigation or otherwise because the cost and expense thereof would substantially detract from the benefits intended to be extended to the Indemnitee under this Agreement. The Company, to the fullest extent permitted by law, will (within thirty (30) days after receipt by the Company of a written request therefor) advance to Indemnitee such Expenses which are incurred by Indemnitee in connection with a Proceeding concerning this Agreement, Indemnitee’s other rights to indemnification or advancement of Expenses from the Company, or concerning any directors’ and officers’ liability insurance policies maintained by the Company, and will indemnify Indemnitee against any and all such Expenses unless the court determines that Indemnitee’s claims in such action were made in bad faith or frivolous or the Company is prohibited by law from indemnifying Indemnitee for such Expenses.

Section 15. [Reserved].

Section 16. Non-exclusivity; Survival of Rights; Insurance; Subrogation.

(a) The indemnification and advancement of Expenses provided by this Agreement are not exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Certificate of Incorporation, the Bylaws, any agreement, a vote of stockholders, a resolution of the board of directors, or otherwise. The indemnification and advancement of Expenses provided by this Agreement may not be limited or restricted by any amendment, alteration or repeal of this Agreement in any way with respect to any action taken or omitted by Indemnitee in Indemnitee’s Corporate Status occurring prior to any amendment, alteration or repeal of this Agreement. To the extent that a change in Delaware law, whether by statute or judicial decision, permits greater indemnification or advancement of Expenses than would be afforded currently under the Bylaws, the Certificate of Incorporation, or this Agreement, it is the intent of the parties hereto that Indemnitee enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy is cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, will not prevent the concurrent assertion or employment of any other right or remedy.

(b) The Company hereby acknowledges that Indemnitee may have certain rights to indemnification, advancement of Expenses and/or insurance provided by one or more other Persons with whom or which Indemnitee may be associated. The relationship between the Company and such other Persons, other than an Enterprise, with respect to the Indemnitee’s rights to indemnification, advancement of Expenses, and insurance is described by this subsection, subject to the provisions of subsection (d) of this Section 16 with respect to a Proceeding concerning Indemnitee’s Corporate Status with an Enterprise.

 

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i. The Company hereby acknowledges and agrees:

1) the Company’s obligations to Indemnitee are primary and any obligation of any other Persons, other than an Enterprise, are secondary (i.e., the Company is the indemnitor of first resort) with respect to any request for indemnification or advancement of Expenses made pursuant to this Agreement concerning any Proceeding;

2) the Company is primarily liable for all indemnification and advancement of Expenses obligations for any Proceeding, whether created by law, the Bylaws, the Certificate of Incorporation, contract (including this Agreement) or otherwise;

3) any obligation of any other Persons with whom or which Indemnitee may be associated to indemnify Indemnitee and/or advance Expenses to Indemnitee in respect of any proceeding are secondary to the Company’s obligations;

4) the Company will indemnify Indemnitee and advance Expenses to Indemnitee hereunder to the fullest extent provided herein without regard to any rights Indemnitee may have against any other Person with whom or which Indemnitee may be associated or an insurer of any such Person; and

ii. the Company irrevocably waives, relinquishes and releases (A) any other Person with whom or which Indemnitee may be associated from any claim of contribution, subrogation, reimbursement, exoneration or indemnification, or any other recovery of any kind in respect of amounts paid by the Company to Indemnitee pursuant to this Agreement and (B) any right to participate in any claim or remedy of Indemnitee against any Person, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from any Person, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim, remedy or right.

iii. In the event any other Person with whom or which Indemnitee may be associated or their insurers advances or extinguishes any liability or loss for Indemnitee, the payor has a right of subrogation against the Company or its insurers for all amounts so paid which would otherwise be payable by the Company or its insurers under this Agreement. In no event will payment by any other Person with whom or which Indemnitee may be associated or their insurers affect the obligations of the Company hereunder or shift primary liability for the Company’s obligation to indemnify or advance of Expenses to any other Person with whom or which Indemnitee may be associated.

iv. Any indemnification or advancement of Expenses provided by any other Person with whom or which Indemnitee may be associated is specifically in excess over the Company’s obligation to indemnify and advance Expenses or any valid and collectible insurance (including but not limited to any malpractice insurance or professional errors and omissions insurance) provided by the Company.

 

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(c) To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, or Agents of the Company, the Company will obtain a policy or policies covering Indemnitee to the maximum extent of the coverage available for any such director, officer, employee or Agent under such policy or policies, including coverage in the event the Company does not or cannot, for any reason, indemnify or advance Expenses to Indemnitee as required by this Agreement. If, at the time of the receipt of a notice of a claim pursuant to this Agreement, the Company has director and officer liability insurance in effect, the Company will give prompt notice of such claim or of the commencement of a Proceeding, as the case may be, to the insurers in accordance with the procedures set forth in the respective policies. The Company will thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of such policies. Indemnitee agrees to assist the Company’s efforts to cause the insurers to pay such amounts and will comply with the terms of such policies, including selection of approved panel counsel, if required.

(d) The Company’s obligation to indemnify or advance Expenses hereunder to Indemnitee for any Proceeding concerning Indemnitee’s Corporate Status with an Enterprise will be reduced by any amount Indemnitee has actually received as indemnification or advancement of Expenses from such Enterprise. The Company and Indemnitee intend that any such Enterprise (and its insurers) be the indemnitor of first resort with respect to indemnification and advancement of Expenses for any Proceeding related to or arising from Indemnitee’s Corporate Status with such Enterprise. The Company’s obligation to indemnify and advance Expenses to Indemnitee is secondary to the obligations the Enterprise or its insurers owe to Indemnitee. Indemnitee agrees to take all reasonably necessary and desirable action to obtain from an Enterprise indemnification and advancement of Expenses for any Proceeding related to or arising from Indemnitee’s Corporate Status with such Enterprise.

(e) In the event of any payment made by the Company under this Agreement, the Company will be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee from any Enterprise or insurance carrier. Indemnitee will execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

Section 17. Duration of Agreement. This Agreement continues until and terminates upon the later of: (a) ten (10) years after the date that Indemnitee ceases to have a Corporate Status or (b) one (1) year after the final termination of any Proceeding then pending in respect of which Indemnitee is granted rights of indemnification or advancement of Expenses hereunder and of any Proceeding commenced by Indemnitee pursuant to Section 14 of this Agreement relating thereto. The indemnification and advancement of Expenses rights provided by or granted pursuant to this Agreement are (i) binding upon and be enforceable by the parties hereto and their respective successors and assigns (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), (ii) continue as to an Indemnitee who has ceased to be a director, officer, employee or Agent of the Company or of any other Enterprise, and (iii) inure to the benefit of Indemnitee and Indemnitee’s spouse, assigns, heirs, devisees, executors and administrators and other legal representatives.

 

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Section 18. Severability. If any provision or provisions of this Agreement is held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) will not in any way be affected or impaired thereby and will remain enforceable to the fullest extent permitted by law; (b) such provision or provisions will be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) will be construed so as to give effect to the intent manifested thereby.

Section 19. Interpretation. Any ambiguity in the terms of this Agreement will be resolved in favor of Indemnitee and in a manner to provide the maximum indemnification and advancement of Expenses permitted by law. The Company and Indemnitee intend that this Agreement provide to the fullest extent permitted by law for indemnification and advancement of Expenses in excess of that expressly provided, without limitation, by the Certificate of Incorporation, the Bylaws, vote of the Company’s stockholders or disinterested directors, or applicable law.

Section 20. Enforcement.

(a) The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby in order to induce Indemnitee to serve as a director[,] [or] officer [employee or Agent] of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving or continuing to serve as a director[,] [or] officer [employee or Agent] of the Company.

(b) This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof; provided, however, that this Agreement is a supplement to and in furtherance of the Certificate of Incorporation, the Bylaws, any directors’ and officers’ insurance maintained by the Company and applicable law, is not a substitute therefor, and does not diminish or abrogate any rights of Indemnitee thereunder.

Section 21. Modification and Waiver. No supplement, modification or amendment of this Agreement is binding unless executed in writing by the parties hereto. No waiver of any of the provisions of this Agreement will be deemed to constitute a waiver of any other provision of this Agreement nor will any waiver constitute a continuing waiver.

Section 22. Notice by Indemnitee. Indemnitee agrees to promptly notify the Company in writing upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification or advancement of Expenses covered hereunder. The failure of Indemnitee to so notify the Company does not relieve the Company of any obligation which it may have to the Indemnitee under this Agreement or otherwise.

 

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Section 23. Notices. All notices, requests, demands and other communications under this Agreement will be in writing and will be deemed to have been duly given if (a) delivered by hand to the other party, (b) sent by reputable overnight courier to the other party or (c) sent by facsimile transmission or electronic mail, with receipt of oral confirmation that such communication has been received:

(a) If to Indemnitee, at the address indicated on the signature page of this Agreement, or such other address as Indemnitee provides to the Company.

(b) If to the Company to:

 

  Name:

Sable Offshore Corp.

 

  Address:

700 Milam Street, Suite 3300

 

   

Houston, TX 77002

 

  Attention:

General Counsel

Email: aduenner@sableoffshore.com

or to any other address as may have been furnished to Indemnitee by the Company.

Section 24. Contribution. To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, will contribute to the amount incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement and/or for Expenses, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such Proceeding; and/or (ii) the relative fault of the Company (and its directors, officers, employees and Agents) and Indemnitee in connection with such event(s) and/or transaction(s).

Section 25. Applicable Law and Consent to Jurisdiction. This Agreement and the legal relations among the parties are governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. Except with respect to any arbitration commenced by Indemnitee pursuant to Section 14(a) of this Agreement, the Company and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or Proceeding arising out of or in connection with this Agreement may be brought only in the Delaware Court and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or Proceeding arising out of or in connection with this Agreement, (iii) waive any objection to the laying of venue of any such action or Proceeding in the Delaware Court, and (iv) waive, and agree not to plead or to make, any claim that any such action or Proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum.

 

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Section 26. Identical Counterparts. This Agreement may be executed in one or more counterparts, each of which will for all purposes be deemed to be an original but all of which together constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.

Section 27. Headings. The headings of this Agreement are inserted for convenience only and do not constitute part of this Agreement or affect the construction thereof.

IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as of the day and year first above written.

 

COMPANY       INDEMNITEE
By:  

 

      

 

Name:       Name:
Office:       Address:   

 

        

 

        

 

 

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Exhibit 14.1

SABLE OFFSHORE CORP.

CODE OF BUSINESS CONDUCT AND ETHICS

Adopted February 13, 2024

In accordance with the requirements of the Securities and Exchange Commission (“SEC”) and the New York Stock Exchange (“NYSE”), the Board of Directors (the “Board”) of Sable Offshore Corp. (the “Company”) has adopted this Code of Business Conduct and Ethics (the “Code”) to encourage:

 

  •  

Honest and ethical conduct, including fair dealing and the ethical handling of actual or apparent conflicts of interest;

 

  •  

Full, fair, accurate, timely and understandable disclosures;

 

  •  

Compliance with applicable laws and governmental rules and regulations;

 

  •  

Prompt internal reporting of any violations of law or the Code;

 

  •  

Accountability for adherence to the Code, including fair process by which to determine violations;

 

  •  

The protection of the Company’s legitimate business interests, including its assets and corporate opportunities; and

 

  •  

Confidentiality of information entrusted to directors, officers and employees by the Company and its customers.

All directors, officers and employees (each a “Covered Party” and, collectively, the “Covered Parties”) of the Company and all of its subsidiaries and controlled affiliates are expected to be familiar with the Code and to adhere to the principles and procedures set forth below.

 

  I.

Conflicts of Interest

A conflict of interest occurs when the private interests of a Covered Party interfere, or appear to interfere, with the interests of the Company as a whole.

For example, a conflict of interest can arise when a Covered Party takes actions or has personal interests that make it difficult to perform his or her Company duties objectively and effectively. A conflict of interest may also arise when a Covered Party, or a member of his or her immediate family,1 receives improper personal benefits as a result of his or her position at the Company.

Conflicts of interest can also occur indirectly. For example, a conflict of interest may arise when a Covered Party is also an executive officer, a major shareholder or has a material interest in an organization doing business with the Company.

 

1 

Item 404(a) of SEC Regulation S-K defines “immediate family member” as a person’s child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law, or any person (other than a tenant or employee) sharing the person’s household.

Each Covered Party has an obligation to conduct the Company’s business in an honest and ethical manner, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships. Any situation that involves, or may reasonably be expected to involve, a conflict of interest with the Company, should be disclosed promptly to the Company’s Audit Committee of the Board and/or the Company’s General Counsel.

This Code does not attempt to describe all possible conflicts of interest that could develop. Other common conflicts from which Covered Parties must refrain are set out below:

 

  •  

Covered Parties may not engage in any conduct or activities that are inconsistent with the Company’s best interests or that disrupt or impair the Company’s relationship with any person or entity with which the Company has or proposes to enter into a business or contractual relationship.

 

  •  

Covered Parties may not accept compensation, in any form, for services performed for the Company from any source other than the Company.

 

  •  

No Covered Party may take up any management or other employment position with, or have any material interest in, any firm or company that is in direct or indirect competition with the Company.

 

  II.

Disclosures

The information in the Company’s public communications, including all reports and documents filed with or submitted to the SEC, must be full, fair, accurate, timely and understandable.

To ensure the Company meets this standard, all Covered Parties (to the extent they are involved in the Company’s disclosure process) are required to maintain familiarity with the disclosure requirements, processes and procedures applicable to the Company commensurate with their duties. Covered Parties are prohibited from knowingly misrepresenting, omitting or causing others to misrepresent or omit, material facts about the Company to others, including the Company’s independent auditors, governmental regulators and self-regulatory organizations.

 

  III.

Compliance with Laws, Rules and Regulations

The Company is obligated to comply with all applicable laws, rules and regulations. It is the personal responsibility of each Covered Party to adhere to the standards and restrictions imposed by these laws, rules and regulations in the performance of his or her duties for the Company.

Trading on inside information is a violation of federal securities law. Covered Parties in possession of material non-public information about the Company or companies with whom we do business must abstain from trading or advising others to trade in the respective company’s securities from the time that they obtain such inside information until adequate public disclosure of the information. Material information is information of such importance that it can be expected to affect the judgment of investors as to whether or not to buy, sell, or hold the securities in question. To use non-public information for personal financial benefit or to “tip” others, including family members, who might make an investment decision based on this information is not only unethical but also illegal.

The Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer or Controller (or persons performing similar functions) of the Company are also required to promote compliance by all employees with the Code and to abide by Company standards, policies and procedures.

 

  IV.

Reporting, Accountability and Enforcement

The Company promotes ethical behavior at all times and encourages Covered Parties to talk to supervisors, managers and other appropriate personnel, including officers, the General Counsel, outside counsel for the Company and the Board or the relevant committee thereof, when in doubt about the best course of action in a particular situation.

Covered Parties should promptly report suspected violations of laws, rules, regulations or the Code or any other unethical behavior by any director, officer, employee or anyone purporting to be acting on the Company’s behalf to appropriate personnel, including officers, the General Counsel, outside counsel for the Company and the Board or the relevant committee thereof. Reports may be made anonymously. If requested, confidentiality will be maintained, subject to applicable law, regulations and legal proceedings.

The Audit Committee of the Board or other appropriate officer or body shall investigate and determine, or shall designate appropriate persons to investigate and determine, the legitimacy of such reports. The Audit Committee or other appropriate officer or body will then determine the appropriate disciplinary action. Such disciplinary action includes, but is not limited to, reprimand, termination with cause, and possible civil and criminal prosecution.

To encourage employees to report any and all violations, the Company will not tolerate retaliation for reports made in good faith. Retaliation or retribution against any Covered Party for a report made in good faith of any suspected violation of laws, rules, regulations or this Code is cause for appropriate disciplinary action.

 

  V.

Corporate Opportunities

All Covered Parties owe a duty to the Company to advance the legitimate interests of the Company when the opportunity to do so arises. Covered Parties are prohibited from directly or indirectly (a) taking personally for themselves opportunities that are discovered through the use of Company property, information or positions; (b) using Company property, information or positions for personal gain; and (c) competing with the Company.

 

  VI.

Confidentiality

In carrying out the Company’s business, Covered Parties may learn confidential or proprietary information about the Company, its customers, distributors, suppliers, or joint venture partners. Confidential or proprietary information includes all non-public information relating to the Company, or other companies, that would be harmful to the relevant company or useful or helpful to competitors if disclosed. Covered Parties must maintain the confidentiality of all information entrusted to them, except when disclosure is authorized or legally mandated.

  VII.

Fair Dealing

Each Covered Party should endeavor to deal fairly with the Company’s customers, service providers, suppliers, competitors and employees. No Covered Party may take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or any unfair dealing practice.

 

  VIII.

Protection and Proper Use of Company Assets

All Covered Parties should protect the Company’s assets and ensure their efficient use. Theft, carelessness and waste have a direct impact on the Company’s profitability. All Company assets should be used for legitimate business purposes.

 

  IX.

Waivers

Before an employee, or an immediate family member of any such employee, engages in any activity that would be otherwise prohibited by the Code, he or she is strongly encouraged to obtain a written waiver from the Board.

Before a director or executive officer, or an immediate family member of a director or executive officer, engages in any activity that would be otherwise prohibited by the Code, he or she must obtain a written waiver from the disinterested directors of the Board or a committee of the Board. Such waiver must then be disclosed to the Company’s shareholders, along with the reasons for granting the waiver.

 

  X.

No Rights Created

This Code is a statement of certain fundamental principles, policies and procedures that govern the Company’s Covered Parties in the conduct of the Company’s business. It is not intended to and does not create any rights in any employee, customer, client, visitor, supplier, competitor, shareholder or any other person or entity. It is the Company’s belief that the policy is robust and covers most conceivable situations.

Exhibit 16.1

February 14, 2024

Securities and Exchange Commission

100 F Street, N.E.

Washington, DC 20549

Commissioners:

We have read the statements made by Sable Offshore Corp. (formerly known as Flame Acquisition Corp.) under Item 4.01 of its Form 8-K dated February 14, 2024. We agree with the statements concerning our Firm in such Form 8-K; we are not in a position to agree or disagree with other statements of Sable Offshore Corp. (formerly known as Flame Acquisition Corp.) contained therein.

Very truly yours,

/s/ Marcum LLP

Marcum LLP

Exhibit 21.1

Subsidiaries

 

  •  

Pacific Pipeline Company

 

  •  

Pacific Offshore Pipeline Company

Exhibit 99.1

UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Current Report on Form 8-K to which this Unaudited Pro Forma Combined Financial Information is attached (the “Form 8-K”) or, if such terms are not defined in the Form 8-K, then such terms shall have the meanings ascribed to them in the proxy statement filed with the Securities and Exchange Commission (the “SEC”) on January 31, 2024 (the “Proxy Statement”).

Introduction

Flame Acquisition Corp. (“Flame”) is a blank check company formed under the laws of the State of Delaware on October 16, 2020, for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses. Flame effectuated its initial business combination using cash from the proceeds of the Flame IPO and the sale of the private placement warrants, capital stock, debt or a combination of cash, stock and debt.

Beginning in 1968 and over the course of 14 years, Exxon Mobil Corporation (“EM”) consolidated more than a dozen offshore federal oil leases and organized them into a streamlined production unit known as the Santa Ynez Unit (“SYU”). SYU consists of three offshore platforms and a wholly owned onshore processing facility located along the Gaviota Coast at Las Flores Canyon in Santa Barbara County, California (the “Assets”).

The Flame IPO net proceeds of $287,500,000 were placed into the trust account. Flame initially had 24 months from the closing of the IPO (by March 1, 2023) to complete a business combination.

On November 2, 2022, Flame entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Holdco and Legacy Sable, which, among other things, provides for each of Holdco and Legacy Sable to be merged with and into Flame, with Flame being the surviving company in the Merger.

EM has agreed to sell the Assets, including 100% of the equity interests in each of Pacific Offshore Pipeline Company and Pacific Pipeline Company (the “Pipelines”), to Legacy Sable for $625,000,000 payable in cash and seller-financed indebtedness, subject to certain adjustments as further described below.

On February 27, 2023, at a special meeting of stockholders, Flame’s stockholders voted to approve an amendment (the “Extension Amendment Proposal”) to the Flame certificate of incorporation to extend the date by which Flame must complete a business combination (the “Extension”) from March 1, 2023, to September 1, 2023 (the “First Extended Date”). In connection with the Extension, stockholders holding 20,317,255 shares of Flame Class A common stock exercised their right to redeem such shares for a pro rata portion of the funds in the trust account, representing approximately 70.67% of the issued and outstanding Flame Class A common stock. As a result, $206,121,060 (approximately $10.15 per share) was removed from the trust account to pay such redeeming holders on March 2, 2023.

On August 22, 2023, Flame issued an aggregate 7,187,500 shares of Class A common stock upon the conversion of an equal number of shares of Flame Class B common stock (the “Class B Conversion”). The 7,187,500 shares of Flame Class A common stock issued in connection with the Class B Conversion are subject to the same restrictions that applied to the shares of Flame Class B common stock before the Class B Conversion, including, among other things, certain transfer restrictions, waiver of redemption rights and the obligation to vote in favor of an initial business combination.

On August 29, 2023, at a special meeting of stockholders, Flame’s stockholders voted to approve an amendment (the “Second Extension Amendment Proposal”) to the Flame certificate of incorporation to extend the date by which Flame must complete a business combination (the “Second Extension”) from September 1, 2023 to March 1, 2024 (the “Second Extended Date”). In connection with the Second Extension, stockholders holding 2,328,063 public shares exercised their right to redeem such shares for a pro rata portion of the funds in the trust account, representing approximately 27.61% of Flame’s issued and outstanding public shares. As a result, $24,008,096 (approximately $10.31 per share) was removed from the trust account to pay such redeeming stockholders on August 31, 2023. As of September 30, 2023, there was $63,939,672 in the trust account.

On February 12, 2024, Flame held a special meeting of stockholders (the “Special Meeting”), at which the Flame stockholders considered and adopted, among other matters, a proposal to approve the Business Combination, including (a) adopting the Merger Agreement and (b) approving the other transactions contemplated by the Merger Agreement.

 

 

1

Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, following the Special Meeting, on February 14, 2024, the Business Combination was consummated.

In connection with the Business Combination, on February 8, 2024, stockholders holding 150,823 public shares exercised their right to redeem those shares for a pro rata portion of the funds in the trust account, representing approximately 2.47% of Flame’s then issued and outstanding public shares. As a result, approximately $1,573,963 (approximately $10.44 per share) was removed from the trust account to pay such redeeming stockholders on February 14, 2024. As of February 14, the remaining balance of the trust account immediately following that payment was approximately $62.3 million.

The unaudited pro forma condensed combined financial information is prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.”

The unaudited pro forma condensed combined financial information gives effect to the transactions summarized below (for the purposes of this section “Unaudited Pro Forma Condensed Combined Financial Information,” the “Transactions”):

 

  •  

the Merger, together with the other transactions contemplated by the Merger Agreement (including the consummation of the PIPE Investment) and the related agreements, collectively referred to as the “Business Combination”, as further described below;

 

  •  

the conversion of the 7,187,500 shares of Flame Class A common stock held by our Sponsor and other initial stockholders into 7,187,500 shares of Common Stock, which as referenced above occurred on August 22, 2023; and

 

  •  

the illustrative redemption by Flame of shares of Flame Class A common stock held by public stockholders in connection with the Transactions.

The unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2023, and for the year ended December 31, 2022, combines the historical statements of operations of Flame and the historical combined statements of SYU, the predecessor entity, (including the Assets, as defined by the Sable-EM Purchase Agreement, excluding the Pipelines) for such period on a pro forma basis, as if the Transactions had been consummated on January 1, 2022, the beginning of the earliest period presented. The successor entity is Sable and its combined statements of operations and positions will reflect Sable’s purchase of the Assets (as defined in the Sable-EM Purchase Agreement), including the Pipelines.

The unaudited pro forma condensed combined balance sheet as of September 30, 2023 combines the historical balance sheet of Flame and the historical combined balance sheet of SYU on such date on a pro forma basis, as if the Transactions had been consummated on September 30, 2023.

The unaudited pro forma condensed combined financial statements have been developed from and should be read in conjunction with:

 

  •  

the accompanying notes to the unaudited pro forma condensed combined financial statements;

 

  •  

the (i) historical audited financial statements of Flame as of and for the year ended December 31, 2022, and (ii) historical condensed unaudited financial statements of Flame as of and for the nine months ended September 30, 2023, included elsewhere in this proxy statement;

 

  •  

the (i) historical audited combined financial statements of SYU as of and for the year ended December 31, 2022, and (ii) historical unaudited condensed combined financial statements of SYU as of and for the nine months ended September 30, 2023 included elsewhere in this proxy statement; and

 

  •  

other information relating to Flame and SYU contained in this proxy statement, including information in the sections titled “Flame’s Management’s Discussion and Analysis of Financial Conditions and Results of Operations” and “SYU Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

 

2

The Business Combination is accounted for under the scope of Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”). Pursuant to ASC 805, Flame has been determined to be the accounting acquirer based on evaluation of the following facts and circumstances:

 

  •  

Flame is transferring cash via funds from its trust account and proceeds from equity issuances and has incurred liabilities to execute the Business Combination;

 

  •  

Flame obtained direct control and 100% ownership of Holdco;

 

  •  

The Flame certificate of incorporation has been amended to include a name change to Sable Offshore Corp. (“Sable”); and

 

  •  

The members of Flame’s management became Sable’s management and the members of the Flame Board became members of the Sable Board to oversee all operations going forward.

The preponderance of the evidence discussed above supports the conclusion that Flame is the accounting acquirer in the Business Combination. SYU constitutes a business in accordance with ASC 805 and the Business Combination constitutes a change in control. Accordingly, the Business Combination will be accounted for using the acquisition method of accounting. Upon consummation of the Business Combination, SYU will be the predecessor entity and its historical operations will be presented as that of Sable on a going forward basis.

Description of the Business Combination

Pursuant to the Merger Agreement, on the Closing Date and contemporaneously with the completion of the transactions contemplated under the Sable-EM Purchase Agreement (including certain transactions contemplated by the Term Loan Agreement), Holdco merged with and into Flame, with Flame as the surviving company, and immediately thereafter, Legacy Sable merged with and into Flame, with Flame as the surviving company. The aggregate consideration received by holders of Holdco Class A shares immediately prior to the Holdco Merger Effective Time was 3,000,000 shares of Flame Class A common stock. For further details, see “Proposal No. 1—The Business Combination Proposal.”

In accordance with the terms and subject to the conditions of the Merger Agreement, at the Holdco Merger Effective Time:

 

  •  

each Holdco Class A share issued and outstanding immediately prior to the Holdco Merger Effective Time, other than Cancelled Holdco Shares, was converted into the right to receive (a) the Aggregate Merger Consideration divided by (b) the total number of Holdco Class A shares outstanding immediately prior to the Holdco Merger Effective Time (the “Per Share Merger Consideration”). The “Aggregate Merger Consideration” received by holders of Holdco Class A shares immediately prior to the Holdco Merger Effective Time was an aggregate of 3,000,000 shares of Flame Class A common stock; and

 

  •  

each Holdco Class A share issued and outstanding immediately prior to the Holdco Merger Effective Time that was held by Holdco in treasury or owned by Flame was cancelled and no consideration was delivered in exchange therefor.

In accordance with the terms and subject to the conditions of the Merger Agreement, at the Sable Merger Effective Time, each share of Legacy Sable common stock issued and outstanding immediately prior to the Sable Merger Effective Time was cancelled and no consideration was delivered in exchange therefor.

For the avoidance of doubt, at and after each of the Holdco Merger Effective Time and the Sable Merger Effective Time, each share of Flame common stock issued and outstanding immediately prior thereto was not affected by the Merger.

 

3

In addition, immediately prior to the Holdco Merger Effective Time, each founder share issued and outstanding immediately prior to the Holdco Merger Effective Time was automatically converted into shares of Flame Class A common stock on a one-for-one basis. In connection with the closing of the Mergers, Flame Acquisition Corp. was renamed Sable Offshore Corp.

PIPE Subscription Agreement

As previously disclosed on November 2, 2022, July 21, 2023, July 27, 2023, August 3, 2023, December 18, 2023, January 16, 2024, February 12, 2024 and February 13, 2024, in connection with the Business Combination, Holdco and Flame entered into subscription agreements (collectively, the “PIPE Subscription Agreements”) with certain investors (the “PIPE Investors”) and, pursuant thereto, on February 14, 2024, immediately following the Closing, Sable issued 44,024,910 shares of Common Stock, at a price of $10.00 per share for an aggregate purchase price of $440,249,100 in accordance with the terms of the PIPE Subscription Agreements (the “PIPE Investments”).

The following summarizes the shares of Common Stock outstanding following the consummation of the Business Combination:

 

     Shares      %  

Public stockholders*

      5,953,859        10 % 

Initial stockholders**

      7,187,500        12 % 

Merger consideration shares

      3,000,000        5 % 

PIPE Investors

      44,024,910        73 % 
  

 

 

     

 

 

  

Total shares outstanding at close

      60,166,269        100 % 
  

 

 

     

 

 

  

 

Excluded Securities:

 

*    This excludes 14,375,000 public warrants issued in the Flame IPO convertible to Common Stock at a price of $11.50 per share subject to the conditions described herein.

**   This excludes 7,750,000 private placement warrants convertible into Common Stock at a price of $11.50 per share subject to the conditions described herein.

**   This excludes 3,306,370 private placement warrants convertible into Common Stock at a price of $11.50 per share subject to the conditions described herein.

 

4

Assumptions and estimates underlying the unaudited pro forma adjustments set forth in the unaudited pro forma condensed combined financial statements are described in the accompanying notes. The unaudited pro forma condensed combined financial statements have been presented for illustrative purposes only and are not necessarily indicative of the operating results and financial position that would have been achieved had the Transactions and the other related transactions occurred on the dates indicated. Further, the unaudited pro forma condensed combined financial information does not purport to project the future operating results or financial position of Sable following the completion of the Transactions and the other related transactions. The unaudited pro forma adjustments represent our management’s estimates based on information available as of the date of these unaudited pro forma condensed combined financial statements and are subject to change as additional information becomes available and analyses are performed.

 

    Unaudited Pro Forma Condensed Combined Balance
Sheet
As of September 30, 2023
(US Dollars in Thousands, except per share data)		  
    Flame
Acquisition
Corp.
(Historical)		         Santa Ynez
Unit (SYU)
(Historical)		     Transaction
Accounting
and Business
Combination
Adjustments		         Pro Forma
Combined		  

Assets

            

Current assets

            

Cash

   $ 709       $ —      $ 440,249     A   $ 150,805  
          (225,008 )    B  
          (56,382 )    C  
          62,366     D  
          (70,000 )    J  
          (1,129 )    K  

Restricted cash

     —          —        35,000     J     35,000  

Prepaid expenses

     246         —        —          246  

Materials and supplies

     —          17,374       —          17,374  
 

 

 

      

 

 

    

 

 

      

 

 

  

Total current assets

     955         17,374       185,096         203,425  

Investments held in Trust Account

     63,940         —        (1,574 )    I     —   
          (62,366 )    D  

Oil and gas properties - net

     —          689,277       395,964     B     1,085,241  

Other, net

     —          6,689       —          6,689  
 

 

 

      

 

 

    

 

 

      

 

 

  

Total assets

   $ 64,895       $ 713,340     $ 517,120       $ 1,295,355  
 

 

 

      

 

 

    

 

 

      

 

 

  

Liabilities, Redeemable Equity And Stockholders’ Equity (Deficit)

            

Current liabilities

              

Accounts payable and accrued expenses

   $ 6,153       $ 6,195     $ (6,195 )    B   $ 46,021  
          (5,516 )    C  
          10,384     H  
          35,000     J  

Excise tax payable

     2,307         —        —          2,307  

Income taxes payable

     786         —        —          786  

Convertible promissory notes – related parties, at fair value

     2,645         —        (2,645 )    E     —   

Promissory notes to related parties

     1,129         —        (1,129 )    K     —   

Due to related party, net

     —          6,743       (6,743 )    B     —   

Other current liabilities

     —          1,146       —          1,146  
 

 

 

      

 

 

    

 

 

      

 

 

  

Total Current liabilities

     13,020         14,084       23,156         50,260  

Warrant liabilities

     15,154         —        3,306     E     18,460  

Asset retirement obligations

     —          344,197       (231,272 )    B     112,925  

Term loan with 10% per annum pay-in-kind interest

     —          —        763,808     B     763,808  

Other

     —          6,417       —          6,417  
 

 

 

      

 

 

    

 

 

      

 

 

  

Total liabilities

     28,174         364,698       558,998         951,870  
 

 

 

      

 

 

    

 

 

      

 

 

  

 

5

    Unaudited Pro Forma Condensed Combined Balance Sheet
As of September 30, 2023
(US Dollars in Thousands, except per share data)		  
    Flame
Acquisition
Corp.
(Historical)		         Santa Ynez
Unit (SYU)
(Historical)		     Transaction
Accounting
and Business
Combination
Adjustments		         Pro Forma
Combined		  

Commitments

            

Class A common stock subject to possible redemption; 6,104,682 shares at redemption value ($10.34 at September 30, 2023)

     63,124         —        (1,574 )    I     —   
          (61,550 )    I  
 

 

 

      

 

 

    

 

 

      

 

 

  

Total Common Stock Subject to Possible Redemption

     63,124         —        (63,124 )        —   
 

 

 

      

 

 

    

 

 

      

 

 

  

Stockholders’ Equity (Deficit)

            

Net parent investment

     —          348,642       (348,642 )    B     —   

Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding

     —          —        —          —   

Class A common stock, $0.0001 par value; 200,000,000 shares authorized; 7,187,500 shares issued and outstanding, excluding 6,104,682 shares subject to possible redemption at September 30, 2023

     1     F     —        4     A     61,555  
          61,550     I  

Class B common stock, $0.0001 par value; 20,000,000 shares authorized; no shares issued or oustanding at September 30, 2023

     —          —        —      F     —   

Additional paid-in capital

     —          —        440,245     A     448,145  
          (22,100 )    C  
          30,000     G  

Accumulated deficit

     (26,404 )        —        (28,766 )    C     (166,215 ) 
          (661 )    E  
          (30,000 )    G  
          (10,384 )    H  
          (70,000 )    J  
 

 

 

      

 

 

    

 

 

      

 

 

  

Total Stockholders’ Equity (Deficit)

     (26,403 )        348,642       21,246         343,485  
 

 

 

      

 

 

    

 

 

      

 

 

  

Total Liabilities, Common Stock Subject to Possible Redemption and Stockholders’ Equity (Deficit)

   $ 64,895       $ 713,340     $ 517,120       $ 1,295,355  
 

 

 

      

 

 

    

 

 

      

 

 

  

See accompanying notes to unaudited pro forma condensed combined financial information.

 

6

     Unaudited Pro Forma Condensed Combined Statement of Operations
For the nine months ended September 30, 2023
(US Dollars in Thousands, except for share and per share amounts)		  
     Flame
Acquisition
Corp.
(Historical)		     Santa Ynez
Unit (SYU)
(Historical)		            Transaction
Accounting
and Business
Combination
Adjustments		            Pro Forma
Combined		  

Revenue

               

Oil and gas sales

    $ —      $ —         $ —         $ —   

Total revenue

      —        —           —           —   

Operating Expenses

               

Operating and maintenance expenses

      —        43,167          —           43,167  

Depletion, depreciation, amortization and accretion

      —        15,764          (15,764 )      CC        9,624  
            9,624       DD     

General and administrative expenses

      —        9,107          6,788       HH        22,395  
            6,500       JJ     

Operating costs

      3,485       —           —           3,485  
  

 

 

    

 

 

       

 

 

       

 

 

  

Total operating expenses

      3,485       68,038          7,148          78,671  
  

 

 

    

 

 

       

 

 

       

 

 

  

Loss from operations

      (3,485 )      (68,038 )         (7,148 )         (78,671 ) 

Other Income (Expense), net

               

Interest income from Trust Account

      3,841       —           (3,841 )      BB        —   

Change in fair value of convertible promissory notes - related parties

      38       —           (38 )      FF        —   

Change in fair value of warrant liabilities

      (3,005 )      —           —           (3,005 ) 

Other expense

      —        (533 )         —           (533 ) 

Interest expense

      —        —           (63,014 )      AA        (63,014 ) 
  

 

 

    

 

 

       

 

 

       

 

 

  

Total other income (expense), net

      874       (533 )         (66,893 )         (66,552 ) 
  

 

 

    

 

 

       

 

 

       

 

 

  

Loss before provision for income taxes

      (2,611 )      (68,571 )         (74,041 )         (145,223 ) 

Provision for income taxes

      786       —           —           786  
  

 

 

    

 

 

       

 

 

       

 

 

  

Net Loss

    $ (3,397 )    $  (68,571 )       $  (74,041 )       $ (146,009 ) 
  

 

 

    

 

 

       

 

 

       

 

 

  

Basic and diluted net loss per share:

               

Basic and diluted net loss per redeemable Class A common share

    $ (0.17 )      NA             $ (2.43)  

Basic and diluted net loss per non-redeemable Class A and Class B common share

    $ (0.17 )      NA               NA  

Weighted Average Shares for Basic and diluted:

               

Weighted average redeemable Class A common stock outstanding

      12,660,640       NA          (150,823 )      KK        60,166,269  

Weighted average non-redeemable Class A and Class B common stock outstanding

      7,187,500       NA               NA  

See accompanying notes to unaudited pro forma condensed combined financial information.

 

7

    Unaudited Pro Forma Condensed Combined Statement of Operations
For the twelve months ended December 31, 2022
(US Dollars in Thousands, except for share and per share amounts)		  
    Flame
Acquisition
Corp.
(Historical)		     Flame
Acquisition
Corp. 2023
Redemptions		           Subtotal     Santa Ynez
Unit (SYU)
(Historical)		     Transaction
Accounting
and Business
Combination
Adjustments		           Pro Forma
Combined		  

Revenue

                

Oil and gas sales

   $ —      $ —        $ —      $ —      $ —        $ —   
 

 

 

    

 

 

      

 

 

    

 

 

    

 

 

      

 

 

  

Total revenue

     —        —          —        —        —          —   
 

 

 

    

 

 

      

 

 

    

 

 

    

 

 

      

 

 

  

Operating Expenses

                

Operating and maintenance expenses

     —        —          —        62,585       —          62,585  

Depletion, depreciation, amortization and accretion

     —        —          —        20,852       (20,852 )      CC       11,634  
              11,634       DD    

Impairment of oil and gas properties

     —        —          —        1,404,307       —          1,404,307  

General and administrative expenses

     —        —          —        12,807       28,766       EE       169,674  
              30,000       GG    
              9,050       HH    
              10,384       II    
              8,667       JJ    
              70,000       LL    

Operating costs

     6,150       —          6,150       —        —          6,150  
 

 

 

    

 

 

      

 

 

    

 

 

    

 

 

      

 

 

  

Total operating expenses

     6,150       —          6,150       1,500,551       147,649         1,654,350  
 

 

 

    

 

 

      

 

 

    

 

 

    

 

 

      

 

 

  

Loss from operations

     (6,150 )      —          (6,150 )      (1,500,551 )      (147,649 )        (1,654,350 ) 

Other Income (Expense), net

                

Interest income from Trust Account

     3,989       —          3,989       —        (3,989 )      BB       —   

Change in fair value of convertible promissory notes - related parties

     (171 )      —          (171 )      —        171       FF       —   

Change in fair value of warrant liabilities

     498       —          498       —        —          498  

Other income

     —        —          —        1,855       —          1,855  

Interest expense

     —        —          —        —        (76,381 )      AA       (76,381 ) 
 

 

 

    

 

 

      

 

 

    

 

 

    

 

 

      

 

 

  

Total other income (expense), net

     4,316       —          4,316       1,855       (80,199 )        (74,028 ) 
 

 

 

    

 

 

      

 

 

    

 

 

    

 

 

      

 

 

  

Loss before provision for income taxes

     (1,834 )      —          (1,834 )      (1,498,696 )      (227,848 )        (1,728,378 ) 

Provision for income taxes

     757       —          757       —        —          757  
 

 

 

    

 

 

      

 

 

    

 

 

    

 

 

      

 

 

  

Net Loss

   $ (2,591 )    $ —        $ (2,591 )    $ (1,498,696 )    $ (227,848 )      $ (1,729,135 ) 
 

 

 

    

 

 

      

 

 

    

 

 

    

 

 

      

 

 

  

Basic and diluted net loss per share:

                

Class A

   $ (0.07 )          NA       NA         $ (28.74 ) 

Class B

   $ (0.07 )          NA       NA           NA  

Weighted Average Shares for Basic and diluted:

                

Class A

     28,750,000       (20,317,255 )      KK       6,104,682       NA       (150,823 )      KK       60,166,269  
      (2,328,063 )      KK            

Class B (prior to the conversion discussed in F)

     7,187,500       —          7,187,500       NA           NA  

See accompanying notes to unaudited pro forma condensed combined financial information.

 

8

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

Note 1. Basis of Presentation

The unaudited pro forma condensed combined financial information has been prepared using the acquisition method of accounting in accordance with ASC 805, with Flame as the accounting acquirer, using the fair value concepts as defined in the ASC Topic 820, Fair Value Measurement (“ASC 820”), and based on the historical financial statements of Flame and SYU.

The unaudited pro forma combined balance sheet as of September 30, 2023, gives pro forma effect to the Business Combination and related transactions as if they occurred on September 30, 2023. The unaudited pro forma combined statement of operations for the nine months ended September 30, 2023, and the year ended December 31, 2022, gives pro forma effect to the Business Combination and related transactions as if they had been completed on January 1, 2022.

The pro forma adjustments reflecting the consummation of the Business Combination and related transactions are based on information currently available, assumptions, and estimates underlying the unaudited pro forma adjustments and are described herein. Actual results may differ materially from the assumptions used to present the accompanying unaudited pro forma condensed combined financial information. Flame believes that its assumptions and methodologies provide a reasonable basis for presenting all of the significant effects of the Business Combination and related transactions based on information available to management at the time and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma condensed combined financial information.

The unaudited pro forma condensed combined financial information does not give effect to any anticipated synergies, operating efficiencies, tax savings, or cost savings that may be associated with the Business Combination and related transactions. The unaudited pro forma condensed combined financial information is not necessarily indicative of what the actual results of operations and financial position would have been had the Business Combination and related transactions taken place on the dates indicated, nor are they indicative of the future consolidated results of operations or financial position of the post-combination company. They should be read in conjunction with the historical financial statements and notes thereto of Flame and SYU.

Note 2. Accounting Policies

Upon consummation of the Business Combination, management will perform a comprehensive review of the two entities’ accounting policies. As a result of the review, management may identify differences between the accounting policies of the two entities which, when conformed, could have a material impact on the financial statements of the post-combination company. Based on its initial analysis, management did not identify any differences that would have a material impact on the unaudited pro forma condensed combined financial information. As a result, the unaudited pro forma condensed combined financial information does not assume any differences in accounting policies.

Note 3. Adjustments to Unaudited Pro Forma Condensed Combined Financial Information

The unaudited pro forma condensed combined financial information has been prepared to illustrate the effect of the Business Combination and related transactions and has been prepared for informational purposes only.

The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.” Release No. 33-10786 replaced the then existing pro forma adjustment criteria with simplified requirements to depict the accounting for the transaction (“Transaction Accounting Adjustments”). Flame has elected not to present any synergies or other potential transaction effects and will only be presenting Transaction Accounting Adjustments in the accompanying unaudited pro forma condensed combined financial information.

 

9

The pro forma condensed combined provision for income taxes might not necessarily reflect the amounts that would have resulted had the post-combination company filed consolidated income tax returns during the periods presented. There are no income tax effects on the pro forma adjustments because there is no historical revenue or income generated at the predecessor. The SYU assets have been shut in and have remained idle. Accordingly, the combined pro forma entity is producing no taxable income and is in a net operating loss position. Accordingly, there is no income tax effect as any separate return basis deferred tax assets (DTA) for the carve-out financial statements would have a full valuation allowance recorded against the DTA. Therefore, any income tax impact of the pro forma adjustments would result in no financial statement impact.

The pro forma basic and diluted net loss per share amounts presented in the unaudited pro forma condensed combined statements of operations are based upon the number of the post-combination company’s shares outstanding, assuming the Business Combination occurred on January 1, 2022.

Adjustments to the Unaudited Pro Forma Combined Balance Sheet

The following adjustments have been reflected in the unaudited pro forma condensed combined balance sheet:

 

  (A)

Reflects proceeds of $440,249,100 from the issuance and sale of 44,024,910 Holdco Class A shares at $10.00 (par value at $0.0001) per share in the PIPE Investment pursuant to the terms of the PIPE Subscription Agreements, increasing cash and cash equivalents by $440,249,100 with corresponding increases to share capital and additional paid-in capital of $4,402 and $440,244,698, respectively. The adjustment reflects obtained commitments from PIPE Investors for $440,249,100 in PIPE Investment. The PIPE Investors have no affiliation with SYU or EM.

 

  (B)

Reflects the purchase accounting adjustment with the total consideration of $988,816,000, elimination of $6,195,000 of accounts payable and accrued expenses, and elimination of $6,743,000 due to related party, net payable. Per the terms of the Sable-EM Purchase Agreement, these working capital and intercompany balances with EMC are not assumed and therefore eliminated in purchase accounting. Total estimated preliminary purchase consideration of $988,816,000 consists of $225,008,000 purchase price adjustments (which includes the cash deposit on the term loan of $18,750,000) paid in cash and $763,808,000 term loan ($625,000,000 purchase consideration plus $140,184,000 of accrued interest plus $17,374,000 estimated value of material and supplies less $18,750,000 cash deposit) taken over by Flame on behalf of Sable.

 

10

Total purchase consideration is comprised of 1) purchase price, as defined by the Sable-EM Purchase Agreement, 2) accrued interest from the effective date of the Sable-EM Purchase Agreement (January 1, 2022), which Sable has elected to be paid-in-kind, 3) property expenses paid or payable by seller which were incurred on and after the effective date of the Sable-EM Purchase Agreement, 4) estimated value of materials and supply inventory based on balances as of September 30, 2023, 5) reimbursement of cost-sharing and 6) overhead cost and property taxes attributable to purchaser but paid or payable by seller as follows:

 

     Amount  
     (US Dollars
in Thousands)		  

Purchase consideration as per Merger Agreement

    $ 625,000  

Add: Accrued PIK interest on term loan

      140,184  

Add: Property expenses reimbursement

      187,341  

Add: Estimated value of materials and supplies

      17,374  

Add: Reimbursement for cost-sharing

      8,500  

Add: Other adjustments related to overhead cost and property taxes

      10,417  
  

 

 

  

Estimated preliminary adjusted purchase consideration

    $ 988,816  
  

 

 

  

Upon the merger, fair value adjustments related to oil and gas properties and asset retirement obligations were estimated as follows:

 

     Amount  
     (US Dollars
in Thousands)		  

Fair value of oil and gas properties

    $ 1,085,241  

Less: Carrying value of oil and gas properties

      689,277  
  

 

 

  

Fair value adjustment

    $ 395,964  
  

 

 

  

Fair value of asset retirement obligations

    $ 112,925  

Less: Carrying value of asset retirement obligations

      344,197  
  

 

 

  

Fair value adjustment

    $ (231,272 ) 
  

 

 

  

Reconciliation of the preliminary adjusted purchase consideration to net parent investment is as follows:

 

     Amount  
    

(US Dollars

in Thousands)

  

Estimated preliminary adjusted purchase consideration

    $ 988,816  

Less: Fair value adjustment for oil and gas properties

      395,964  

Less: Fair value adjustment for asset retirement obligation

      231,272  

Less: Accounts payable and accrued liabilities

      6,195  

Less: Due to related party, net

      6,743  
  

 

 

  

Net parent investment

    $ 348,642  
  

 

 

  

The following table summarizes the fair value of identified assets acquired and liabilities assumed at the date of acquisition. The preliminary allocation of consideration transferred is based on management’s estimates, judgments and assumptions. These estimates, judgments and assumptions are subject to change upon final valuation and should be treated as preliminary values. Management estimated that consideration paid did not exceed the fair value of the net assets acquired. Therefore, there was no goodwill derived from the transaction.

 

11

The final allocation of purchase consideration could include changes in the estimated fair value of (1) materials and supplies; (2) oil and gas properties; and (3) asset retirement obligations, as well as due to the historical values of certain of the assets and liabilities as of the actual acquisition date versus amounts as of September 30, 2023 utilized herein.

 

     Amount  
     (US Dollars
in Thousands)		  

Total Consideration

    $ 988,816  

Materials and supplies

      17,374  

Oil and gas properties

      1,085,241  

Other—long-term assets

      6,689  
  

 

 

  

Total identifiable assets acquired

      1,109,304  
  

 

 

  

Asset retirement obligations

      112,925  

Other current liability

      1,146  

Other—long term liabilities

      6,417  
  

 

 

  

Net identifiable liabilities assumed

      120,488  
  

 

 

  

Net assets acquired

    $ 988,816  
  

 

 

  

 

  (C)

Reflects payment of preliminary estimated transaction costs of $56,382,000 of which $22,100,000 is related to PIPE Investment offering costs and underwriting fees that are treated as equity issuance costs against additional paid-in capital as a part of the Business Combination. Additional transaction costs of $34,282,000 related to costs of becoming a publicly held operating company such as director and officers’ insurance are included in the total preliminary estimated transaction costs, of which $5,516,000 was accrued as of September 30, 2023. The remaining $28,766,000 of additional transaction costs have been reflected through accumulated deficit and are included in the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2022, as discussed below (please refer to adjustment EE).

 

  (D)

Reflects the reclassification of $62,366,000 of investments held in the trust account to cash.

 

  (E)

Reflects conversion of $2,645,000 related party promissory notes into $3,306,000 of warrants. (comprised of $2,645,000 convertible promissory notes – related parties, at fair value as of September 30, 2023, and the fair value impact of $661,000. The promissory notes to related parties may be convertible into warrants at a price of $1.00 per warrant at the option of the lender. Each warrant is exercisable for one share of Common Stock. The fair value impact of $661,000 related to conversion of promissory notes is recorded in the accumulated deficit. The warrants are expected to remain classified as liabilities.

 

  (F)

On August 22, 2023, we issued an aggregate of 7,187,500 shares of Class A common stock to the Sponsor, FL Co-Investment, Intrepid Financial Partners, our independent directors and certain of our executive officers, upon the conversion of an equal number of shares of Class B common stock.

 

  (G)

Reflects issuance of merger consideration shares of 3,000,000 shares of Common Stock at $10.00 per share (with a nominal value of $0.0001 per share), increasing accumulated deficit by $30,000,000 with corresponding increase to share capital and additional paid-in capital of $300 and $29,999,700, respectively (refer to adjustment GG).

 

  (H)

Reflects accrued liability bonuses of $10,384,000 to Sable executives upon completion of the Business Combination based on executed agreements (refer to adjustment II).

 

  (I)

Reflects transfer of 5,953,859 of Flame Class A common stock subject to possible redemption to Common Stock in Stockholder’s Equity (Deficit). It also reflects the actual redemption of 150,823 Flame’s public shares for approximately $1,574,000 in conjunction with the Business Combination.

 

12

  (J)

Reflects approximately $70,000,000 for litigation defense costs and/or settlement expenses, expected to be paid after the consummation of the Business Combination. Please see the section of the Proxy Statement titled “Information About SYU—Legal Proceedings” beginning on page 272 for more information.

 

  (K)

Reflects $1,129,000 of non-convertible promissory notes to related parties that were repaid in full upon consummation of the Business Combination.

Adjustments to the Unaudited Pro Forma Combined Statements of Operations

The following adjustments have been reflected in the unaudited pro forma combined statements of operations:

 

  (AA)

Reflects recognition of interest expense on the term loan, calculated at the rate 10% per annum amounting to $63,014,000 and $76,381,000 for the nine months ended September 30, 2023 and the year ended December 31, 2022, respectively.

 

  (BB)

Reflects elimination of investment income on the trust account amounting to $3,841,000 and $3,989,000 for the nine months ended September 30, 2023 and for the year ended December 31, 2022, respectively.

 

  (CC)

Reflects the elimination of historical depreciation and accretion expense amounting to $15,764,000 and $20,852,000 for the nine months ended September 30, 2023 and for the year ended December 31, 2022, respectively, as if the Business Combination had been completed on January 1, 2022, considering oil and gas properties not operative during the periods presented. No historical amortization or depletion was recorded.

 

  (DD)

Reflects the accretion expense on the asset retirement obligations amounting to $9,624,000 and $11,634,000 for the nine months ended September 30, 2023 and for the year ended December 31, 2022, respectively, as if the Business Combination had been completed on January 1, 2022.

 

13

  (EE)

Reflects estimated one-time SPAC merger related transactions costs of $28,766,000 in the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2022, as if the Business Combination had occurred on January 1, 2022, to reflect additional expenses to be incurred, including director and officers’ insurance premiums, legal fees, accounting and consulting fees, and additional costs that are not considered to be costs of raising capital under SAB Topic 5.A. Under the provisions of ASC 805, Flame has been determined to be the accounting acquirer and therefore, the pro formas are being presented as a forward acquisition rather than a reverse recapitalization. The estimated forward acquisition costs of $28,766,000 are comprised as follows (amounts below are subject to change upon completion of the Transactions):

 

     Amount  
Merger costs   

(US Dollars

in Thousands)

  

Legal Fees

    $ 6,676  

G&A reimbursement

      5,000  

Contractor reimbursement

      7,600  

Merger and acquisition fees

      4,000  

Accounting fees

      690  

D&O insurance

      3,000  

Insurance premium

      1,500  

Other fees

      300  
  

 

 

  

Total

    $ 28,766  
  

 

 

  

 

  (FF)

Reflects the elimination of the change in fair value of convertible promissory notes of $38,000 and $171,000 for the nine months ended September 30, 2023, and the year ended December 31, 2022, respectively.

 

  (GG)

Reflects the issuance of 3,000,000 merger consideration shares of Common Stock at $10.00 per share for the year ended December 31, 2022, as if the Business Combination had occurred on January 1, 2022.

 

  (HH)

Reflects additional New Sable executive compensation based on executed agreements amounting to $6,788,000 and $9,050,000 for the nine months ended September 30, 2023, and the year ended December 31, 2022, as if the Business Combination had been completed on January 1, 2022.

 

  (II)

Reflects one-time cash bonus expense amounting to $10,384,000 for the year ended December 31, 2022, for Sable executives upon completion of the Business Combination based on executed agreements, as if the Business Combination had occurred on January 1, 2022.

 

  (JJ)

Reflects the share compensation expense under Sable’s Equity Incentive Plan amounting to $6,500,000 and $8,667,000 for the nine months ended September 30, 2023, and the year ended December 31, 2022, respectively, as if the Business Combination had been completed on January 1, 2022 based on executed agreements. In accordance with the executed agreements, 650,000 shares of Common Stock are to be issued to four executive officers. The total aggregate 2,600,000 shares of Common Stock are estimated to have a grant date fair value of $26,000,000. These shares are expected to vest no later than 3 years from the closing of the Business Combination.

 

  (KK)

As previously noted, Flame shareholders redeemed 20,317,255 and 2,328,063 public shares on February 27, 2023 and August 29, 2023, respectively, at approximately $10.15 and $10.31 per share, respectively. Additionally, on February 9, 2024, Flame’s shareholders redeemed 150,823 public shares for approximately $10.44 per share.

 

  (LL)

Reflects approximately $70,000,000 for litigation defense costs and/or settlement expenses, expected to be paid after the consummation of the Business Combination. Please see the section of the Proxy Statement titled “Information About SYU—Legal Proceedings” beginning on page 272 for more information.

 

14

Note 4. Net Loss per Share

The net loss per share was calculated using the historical weighted average shares outstanding, and the issuance of additional shares in connection with the Business Combination, the PIPE Investment and other related events, assuming the shares were outstanding since January 1, 2022. As the actual redemptions, Business Combination, PIPE Investment and related equity transactions are being reflected as if they had occurred at the beginning of the periods presented, the calculation of weighted average shares outstanding for basic and diluted net loss per share assumes that the shares issued relating to the Business Combination have been outstanding for the entire periods presented.

 

    Nine Months Ended
September 30, 2023		     Year Ended
December 31, 2022		  
    (US Dollars in Thousands, except share
and per share amounts)		  

Pro forma net loss

   $ (146,009 )    $ (1,729,135 ) 

Basic and diluted weighted average Common Stock outstanding

     60,166,269       60,166,269  

Basic and diluted net loss per Common Stock

   $ (2.43 )    $ (28.74 ) 

Excluded securities (1):

    

Private placement warrants convertible into Common Stock

     7,750,000       7,750,000  

Warrants issued at IPO convertible to Common Stock

     14,375,000       14,375,000  

Warrants from promissory notes convertible to Common Stock

     3,306,370       3,306,370  

 

(1)

The potentially dilutive outstanding securities were excluded from the computation of pro forma net loss per share, basic and diluted, because their effect would have been anti-dilutive.

 

15

v3.24.0.1
Document and Entity Information
Feb. 14, 2024
Document And Entity Information [Line Items]  
Document Type 8-K
Document Period End Date Feb. 14, 2024
Entity Registrant Name Sable Offshore Corp.
Entity Incorporation State Country Code DE
Entity File Number 001-40111
Entity Tax Identification Number 85-3514078
Entity Address Address Line 1 700 Milam Street
Entity Address Address Line 2 Suite 3300
Entity Address City Or Town Houston
Entity Address State Or Province TX
Entity Address Postal Zip Code 77002
City Area Code 713
Local Phone Number 579-6106
Entity Information Former Legal Or Registered Name Flame Acquisition Corp.
Written Communications false
Soliciting Material false
Pre Commencement Tender Offer false
Pre Commencement Issuer Tender Offer false
Entity Emerging Growth Company true
Entity Ex Transition Period false
Current Fiscal Year End Date --12-31
Amendment Flag false
Entity Central Index Key 0001831481
Common stock, par value $0.0001 per share [Member]  
Document And Entity Information [Line Items]  
Security 12b Title Common stock, par value $0.0001 per share
Trading Symbol SOC
Security Exchange Name NYSE
Warrants, each whole warrant exercisable for one share of Class A common stock at an exercise price of $11.50 per share [Member]  
Document And Entity Information [Line Items]  
Security 12b Title Warrants, each whole warrant exercisable for one share of common stock at an exercise price of $11.50 per share
Trading Symbol SOC.WS
Security Exchange Name NYSE
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