Contract
THIS SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) AND APPLICABLE STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF CORPORATE COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
Original Issue Date: June 13, 2024
THIS PROMISSORY NOTE is a duly authorized and validly issued Promissory Notes of 2020 Resources LLC, a Delaware limited liability company (the “Company”), having its principal place of business at 000 Xxxx 000 Xxxxx, Xxxxx 000, Xxxxx Xxxxx, XX 00000 (this “Note”).
FOR VALUE RECEIVED, the Company promises to pay to [Dual Dreams] or its registered assigns (the “Holder”), with an address of [Los Angeles, CA], or shall have paid pursuant to the terms hereunder, the principal sum of $122,500 (“Principal Amount”) together with interest thereon on the earlier of (a) sixty days from the date hereof, (b) the date on which Sky Quarry Inc., the Company’s parent company (“Sky”), receives a minimum of $1,000,000 in funding after the date hereof from either one or more of the following sources: (i) Sky’s sale of convertible notes, (ii) Sky’s sale of equipment, or (iii) the exercise of Sky warrants that are currently outstanding, and (c) any date that this Note is required to be repaid as provided hereunder (the “Maturity Date”). This Note shall bear interest in accordance with Section 2.
This Note carries an original issue discount of $22,500 (the “OID”). The Purchase Price of this Note shall be
$100,000 computed by deducting the OID from the initial principal balance. The net amount to be received by the Company shall be $100,000.
This Note is subject to the following additional provisions:
Section 1. Definitions. For the purposes hereof, in addition to the terms defined elsewhere in this Note, the following terms shall have the following meanings:
“Bankruptcy Event” means any of the following events: (a) the Company commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company, (b) there is commenced against the Company any such case or proceeding that is not dismissed within 60 days after commencement, (c) the Company is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered, (d) the Company suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 60 calendar days after such appointment, (e) the Company makes a general assignment for the benefit of creditors, (f) the Company calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts or (g) the Company, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any limited liability company or other action for the purpose of effecting any of the foregoing.
“Business Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of Utah are authorized or required by law or other governmental action to close.
“Event of Default” shall have the meaning set forth in Section 6(a).
“Utah Courts” shall have the meaning set forth in Section 8(d).
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“Note Register” shall have the meaning set forth in Section 2.
“Original Issue Date” means the date of the first issuance of the Notes, regardless of any transfers of any
Note and regardless of the number of instruments which may be issued to evidence such Notes.
“Securities Act” shall have the meaning set forth in the preamble legend to this Note.
Section 2. Interest; Prepayment; Payments. The Company acknowledges and agrees that this Note is an original issue discount note with no monthly interest due other than the original issue discount amount, except upon an Event of Default, to be paid on the Maturity Date. All payments hereunder will be paid to the Person in whose name this Note is registered on the records of the Company regarding registration and transfers of this Note (the “Note Register”). At the discretion of the Company, the Principal Amount of this Note may be prepaid at any time. If prepaid prior to the Maturity Date, the total amount due to the Holder shall be $120,000, less any payments of principal or interest made prior thereto. Commencing twenty-one days after the date of this Note, the Company shall make weekly payments to the Holder in the amount of $5,000, which shall reduce the amount due to Holder on the Maturity Date, or upon a prepayment.
Section 3. Registration of Transfers and Exchanges.
a)Different Denominations. This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the Holder surrendering the same; provided, that the minimum principal amount of any replacement Note shall be $25,000.00. No service charge will be payable for such registration of transfer or exchange.
b)Transfers. This Note may be transferred or exchanged only in compliance with applicable federal and state securities laws and regulations to successor Holders who provide the same investment representations to the Company.
c)Reliance on Note Register. Prior to due presentment for transfer to the Company of this Note, the Company and any agent of the Company may treat the Person in whose name this Note is duly registered on the Note Register as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Note is overdue, and neither the Company nor any such agent shall be affected by notice to the contrary.
Section 4. Negative Covenants.
As long as at this Note remains outstanding, the Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly:
a)amend its charter documents, including, without limitation, its certificate of incorporation and bylaws, in any manner that materially and adversely affects any rights of the Holder;
b)pay cash dividends or distributions on any equity securities of the Company;
c)enter into any transaction with any Affiliate of the Company which would be required to be disclosed in any public filing with the Commission, unless such transaction is made on an arm’s-length basis and expressly approved by a majority of the disinterested directors of the Company (even if less than a quorum otherwise required for board approval); or
a)enter into any agreement with respect to any of the foregoing.
Section 5. Events of Default.
a)“Event of Default” means, wherever used herein, any of the following events (whatever the reason for such event and whether such event shall be voluntary or involuntary or effected by operation of law or
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pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):
i.any default in the payment of (A) the principal amount of any Note or (B) interest, liquidated damages and other amounts owing to a Holder on any Note, as and when the same shall become due and payable (whether on the Maturity Date or by acceleration or otherwise) which default, solely in the case of an interest payment or other default under clause (B) above, is not cured within fifteen (15) Business Days;
ii.the Company shall fail to observe or perform any other material covenant or agreement contained in the Notes which failure is not cured, if possible to cure, within the earlier to occur of (A) fifteen (15) Business Days after notice of such failure sent by the Holder or by any other Holder to the Company and thirty (30) Business Days after receipt of written notice thereof;
iii.any material representation or warranty made in this Note or any other Transaction Documents shall be untrue or incorrect in any material respect as of the date when made that would cause a Material Adverse Effect; or
iv.the Company shall be subject to a Bankruptcy Event.
b)Remedies Upon Event of Default. If any Event of Default occurs and is continuing before the Maturity Date, the outstanding principal amount of this Note, plus liquidated damages, interest and other amounts owing in respect thereof through the date of acceleration, shall become, at the Holder’s election, immediately due and payable in cash. Commencing fifteen (15) Business Days after the occurrence of any Event of Default that results in the eventual acceleration of this Note, the Principal Amount on this Note shall increase twenty percent (20%). Upon the payment in full, the Holder shall promptly surrender this Note to or as directed by the Company. In connection with such acceleration described herein, the Holder need not provide, and the Company hereby waives, any presentment, demand, protest or other notice of any kind, and the Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such acceleration may be rescinded and annulled by Xxxxxx at any time prior to payment hereunder and the Holder shall have all rights as a holder of the Note until such time, if any, as the Holder receives full payment pursuant to this Section 5(b). No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon. If this Note is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding or the Holder otherwise takes action to collect amounts due under this Note or to enforce the provisions of this Note the Company shall be obligated and pay reasonable attorneys’ fees in connection with such collection, enforcement or action.
Section 0.Xxxxxxxx. This Note shall be secured by the Solor Turbine – T2 – SN GC1-CH-ID HG 85083 (“Turbine”), which is unencumbered and owned by the Company. The Company shall not sell, assign, transfer, or otherwise encumber the Turbine at any time while this Note remains outstanding.
Section 7.Warrant Issuance. As additional consideration for Holder advancing funds to the Company pursuant to the terms of this Note, Sky has agreed to issue an aggregate of 50,000 warrants to purchase shares of common stock of Sky to Holder at an exercise price of $4.50 per share for a period of five years from the date of issuance (“Warrants”). A separate warrant agreement shall be issued to the Holder by Sky in connection with the issuance of this Note, which shall set forth the terms and conditions of the Warrant.
Section 8. Miscellaneous.
a)Notices. Any and all notices or other communications or deliveries to be provided by the Holder hereunder, including, without limitation, shall be in writing and delivered personally, by e-mail, or sent by a nationally recognized overnight courier service, addressed to the Company, at the address set forth above, or such other e-mail address, or address as the Company may specify for such purposes by notice to the Holder delivered in accordance with this Section 8(a). Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by e-mail, or sent by a nationally recognized overnight courier service addressed to each Holder at the e-mail address, or address of the Holder appearing on the signature pages attached to t. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the
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earliest of (i) the date of transmission, if such notice or communication is delivered via e-mail at the email address set forth on the signature pages attached to this Promissory Note prior to 5:30 p.m. (Mountain Standard Time) on any date, (ii) the next Business Day after the date of transmission, if such notice or communication is delivered via e-mail at the e-mail address set forth on the signature pages attached to this Promissory Note on a day that is not a Business Day or later than 5:30 p.m. (Mountain Standard Time) on any Business Day, (iii) the second Business Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (iv) upon actual receipt by the party to whom such notice is required to be given.
b)Absolute Obligation. Except as expressly provided herein, no provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, liquidated damages and accrued interest, as applicable, on this Note at the time, place, and rate, and in the coin or currency, herein prescribed. This Note is a direct debt obligation of the Company.
c)Lost or Mutilated Note. If this Note shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen or destroyed Note, a new Note for the principal amount of this Note so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such Note, and of the ownership hereof, reasonably satisfactory to the Company.
d)Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Note shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware, without regard to the principles of conflict of laws thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in Salt Lake City, Utah (the “Utah Courts”). Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the Utah Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such Utah Courts, or such Utah Courts are improper or inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Note or the transactions contemplated hereby. If any party shall commence an action or proceeding to enforce any provisions of this Note, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorney’s fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.
e)Waiver. Any waiver by the Company or the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Note. The failure of the Company or the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note on any other occasion. Any waiver by the Company or the Holder must be in writing.
f)Severability. If any provision of this Note is invalid, illegal or unenforceable, the balance of this Note shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances. It is expressly understood and agreed by the parties that neither the interest, amounts payable pursuant to Section 4, any remedy upon an Event of Default, nor any original issue discount shall be construed as interest. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or
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take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of or interest on this Note as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Note, and the Company (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such as though no such law has been enacted.
g)Next Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.
h)Headings. The headings contained herein are for convenience only, do not constitute a part of this Note and shall not be deemed to limit or affect any of the provisions hereof.
i)Amendment. This Note may be modified or amended or the provisions hereof waived only in writing signed by both the Company and the Holder.
j)Disclosure. The Company agrees not to publicly disclose Xxxxxx’s name, except as
otherwise required by law, securities regulations or Nasdaq requirements.
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by a duly authorized officer as of the date first above indicated.
2020 RESOURCES LLC
By: Name: Xxxxx Xxxxxxx
Title: CEO
By: Name: Dual Dreams
Title:
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