Exhibit 2.3.0
DISTRIBUTION AGREEMENT BETWEEN
META MATERIALS, INC. AND
NEXT BRIDGE HYDROCARBONS, INC.
Dated September 2, 2022
DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT, made and entered into effective as of September 2, 2022 (this “Agreement”), is by and between META MATERIALS, INC., a Nevada corporation (formerly known as Torchlight Energy Resources, Inc., “Parent”), and NEXT BRIDGE HYDROCARBONS, INC., a Nevada corporation, and, as of the date hereof, a wholly-owned subsidiary of Parent (“NBH”). Parent and NBH are each a “Party” and are sometimes referred to herein as the “Parties”. Certain capitalized terms used in this Agreement are defined in Section 1.1.
WITNESSETH:
WHEREAS, Parent and NBH previously entered into an Assignment of Company Interests and Stock Power dated as of June 28, 2022 (the “Assignment Agreement”), pursuant to which Parent contributed to NBH the equity interests of certain entities that were previously wholly-owned subsidiaries of Parent;
WHEREAS, Parent intends to divest all of its ownership interest in NBH through a distribution of outstanding shares of NBH Common Stock to the persons holding shares of Parent Series A Preferred Stock (each, a “Parent Shareholder” and one or more, “Parent Shareholders”) on the Record Date, without any consideration being paid by such Parent’s stockholders, pursuant to the terms and subject to the conditions of this Agreement (the “Distribution”); and
WHEREAS, it is appropriate and desirable to set forth the principal corporate transactions required to effect the Distribution, as well as certain other agreements all on the terms and conditions set forth below.
NOW, THEREFORE, for and in consideration of the premises and the covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereby agree as follows:
ARTICLE I DEFINITIONS
For purposes of this Agreement, the following terms shall have the meanings specified in this Section 1.1:
“AAA Commercial Arbitration Rules” shall have the meaning set forth in Section 5.2(a).
“Action” means any demand, action, claim, dispute, suit, countersuit, arbitration, inquiry, proceeding or investigation by or before any federal, state, local, foreign or international Governmental Entity or any arbitration or mediation tribunal.
“Affiliate” means, when used with respect to a specified Person, a Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with such specified Person. For the purpose of this definition, “control” (including with correlative meanings, “controlled by” and “under common control with”), when used with respect to any specified Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting securities or other interests, by contract, agreement, obligation, indenture, instrument, lease, promise, arrangement, release, warranty, commitment, undertaking or otherwise. It is expressly agreed that, from and after the Effective Time and for purposes of this Agreement and the Ancillary Agreements, NBH shall not be deemed to be an Affiliate of Parent, and Parent shall not be deemed to be an Affiliate of NBH.
“Ancillary Agreements” means the (i) Tax Matters Agreement, (ii) Assignment Agreement, (iii) 8% Secured Promissory Note, dated October 1, 2021, issued by Oilco Holdings, Inc., a Nevada corporation (now known as Next Bridge Hydrocarbons, Inc.), in an original principal amount of up to $15 million in favor of Parent and (iv) unsecured Loan Agreement, dated September 2, 2022 by and among NBH, Torchlight Energy, Inc., a Nevada corporation, Torchlight Hazel, LLC, a Texas limited liability company, Hudspeth Oil Corporation, a Texas corporation, Hudspeth Operating, LLC, a Texas limited liability company and Parent.
“Assignment Agreement” has the meaning set forth in the Recitals. “Code” means the Internal Revenue Code of 1986, as amended.
“Consent” means any consent, waiver or approval from, or notification requirement to, any third
parties.
“Dispute” means any controversy or dispute with respect to the interpretation or enforcement of this Agreement.
“Distribution” has the meaning set forth in the Recitals.
“Distribution Agent” means the distribution agent to be appointed by Parent to distribute to the Parent Shareholders all of the outstanding shares of NBH pursuant to the Distribution.
“Distribution Date” means the date on which Parent, through the Distribution Agent, distributes all of the issued and outstanding shares of NBH to Parent Shareholders in the Distribution.
“Effective Time” means 5:00 p.m. Central Time, or such other time as Parent may determine, on the Distribution Date.
“Force Majeure” means, with respect to a Party, an event beyond the control of such Party (or any Person acting on its behalf), which by its nature could not have been reasonably foreseen by such Party (or such Person) or, if it could have been reasonably foreseen, was unavoidable, and includes acts of God, storms, floods, riots, labor unrest, pandemics, nuclear incidents, fires, sabotage, civil commotion or civil unrest, interference by civil or military authorities, acts of war (declared or undeclared) or armed hostilities, or other national or international calamity or one or more acts of terrorism or failure of energy sources or distribution or transportation facilities.
“Governmental Approvals” means any notice, report or other filing to be made with, or any consent, registration, approval, permit or authorization to be obtained from, any Governmental Entity; provided, however, that no consent required from any counterparty to any contract shall constitute a Governmental Approval for purposes of this Agreement.
“Governmental Entity” means any domestic or foreign (whether national, federal, state, provincial, local or otherwise) government or any court, administrative agency or commission or other governmental or regulatory authority or agency, domestic or foreign.
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“Group” means either the NBH Group or the Parent Group, as the context requires. “Indemnifying Party” shall have the meaning set forth in Section 6.3(a).
“Indemnitee” shall have the meaning set forth in Section 6.3(a).
“Indemnity Payment” shall have the meaning set forth in Section 6.3(a).
“Information” means documents and information, whether or not patentable or copyrightable, in written, oral, electronic or other tangible or intangible form, stored in any medium, including studies, reports, records, books, contracts, instruments, surveys, discoveries, ideas, concepts, know-how, techniques, designs, specifications, drawings, blueprints, diagrams, models, prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes, computer programs or other software, marketing plans, customer names, communications by or to attorneys (including attorney-client privileged communications), memoranda and other materials prepared by attorneys or under their direction (including attorney work product), and other technical, financial, employee or business information or data.
“Insurance Proceeds” means those monies:
in either such case net of any applicable premium adjustments (including reserves and retrospectively rated premium adjustments) and net of any costs or expenses incurred in the collection thereof; provided, however, that with respect to a captive insurance arrangement, Insurance Proceeds shall only include net amounts received by the captive insurer from a Third Party in respect of any captive reinsurance arrangement.
“Law” means any national, supranational, federal, state, provincial, local or similar law (including common law), statute, code, order, ordinance, rule, regulation, treaty (including any income tax treaty), license, permit, authorization, approval, consent, decree, injunction, binding judicial or administrative interpretation or other requirement, in each case, enacted, promulgated, issued or entered by a Governmental Entity.
“Lien” means any pledges, claims, liens, charges, options, rights of first refusal, encumbrances and security interests of any kind or nature whatsoever (including any limitation on voting, sale, transfer or other disposition or exercise of any other attribute of ownership).
“Losses” means actual losses (including any diminution in value), costs, damages, fines, penalties and expenses (including legal and accounting fees and expenses and costs of investigation and litigation), whether or not involving a Third-Party Claim.
“NBH Common Stock” means the common stock, $0.0001 par value, of NBH.
“NBH Group” means NBH, each Subsidiary of NBH immediately after the Effective Time and each Affiliate of NBH immediately after the Effective Time.
“NBH Indemnities” has the meaning set forth in Section 6.2.
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“NBH Liabilities” means any and all liabilities associated with or relating to the oil and gas operations of Parent whether before or after the Distribution, including, without limitation, any environmental liabilities, any obligation or liability resulting from the extinguishment of debt on or about March 9, 2020 relating to Parent’s Series C Unsecured Convertible Promissory Notes, and any liabilities that are expressly provided by this Agreement or any Ancillary Agreement as liabilities to be assumed by NBH.
“Parent Group” means Parent, each Subsidiary of Parent immediately after the Effective Time and each Affiliate of Parent immediately after the Effective Time (in each case other than any member of the NBH Group).
“Parent Indemnitees” has the meaning set forth in Section 6.2.
“Parent Preferred Stock” means the Series A Preferred Stock, $0.0001 par value, of Parent. “Parent Shareholder” and “Parent Shareholders” have the meaning set forth in the Recitals.
“Person” means any individual, general or limited partnership, corporation, business trust, joint venture, association, company, limited liability company, unincorporated organization, a limited liability entity, any other entity and any Governmental Entity.
“Privilege” has the meaning set forth in Section 4.4.
“Prospectus” means the Prospectus attached to the S-1, including any amendment or supplement
thereto.
“Record Date” means 5:00 p.m. Central Time on the date to be determined by the Board of Directors of Parent as the Record Date for determining Parent Shareholders entitled to receive shares of NBH Common Stock in the Distribution.
“Record Holders” means the holders of record of Parent Preferred Stock as of the Record Date. “Representatives” means, with respect to any Person, any of such Person’s directors, officers,
employees, agents, consultants, advisors, accountants, attorneys or other representatives.
“S-1” means the registration statement on Form S-1 filed by NBH with the SEC in connection with the Distribution, including any amendments or supplements thereto.
“SEC” means the U.S. Securities and Exchange Commission. “Securities Act” means the Securities Act of 1933, as amended.
“Subsidiary” or “subsidiary” means, with respect to any Person, any corporation, limited liability company, joint venture or partnership of which such Person (a) beneficially owns, either directly or indirectly, more than fifty percent (50%) of (i) the total combined voting power of all classes of voting securities of such Person, (ii) the total combined equity interests or (iii) the capital or profit interests, in the case of a partnership, or (b) otherwise has the power to vote, either directly or indirectly, sufficient securities to elect a majority of the board of directors or similar governing body.
“Taxing Authority” means a Governmental Entity having jurisdiction over the assessment, determination, collection, or other imposition of any Tax.
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“Tax Matters Agreement” means the Tax Matters Agreement, dated as of the date hereof, between Parent and NBH, in substantially the form attached as Exhibit A hereto, as such agreement may be modified or amended from time to time in accordance with its terms.
“Tax Return” means any return, declaration, report, claim for refund, property rendition or information return or statement relating to Taxes, including any schedule or attachment thereto and including any amendment thereof.
“Taxes” means (a) all federal, state, local or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Section 59A of the Code), customs, duties, capital stock, franchise, margins, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, escheat, registration, value added, wealth, net wealth, net worth, alternative or add-on minimum, estimated or any other taxes, unclaimed property liabilities, any payments in lieu of taxes or other similar payments, charges, fees, fines, levies, imposts, customs or duties of any kind, whatsoever, including any interest, penalty, fines, or addition thereto, whether disputed or not and including any obligations to indemnify or otherwise assume or succeed to the Tax liability of any other Person or
(b) any liability for the payment of any taxes, interest, penalty, addition to tax or like additional amount resulting from the application of Treasury Regulation Section 1.1502-6 or comparable federal, state or local Law.
“Third Party” shall have the meaning set forth in Section 6.4(a).
“Third-Party Claim” shall have the meaning set forth in Section 6.4(a).
ARTICLE II
CERTAIN ACTIONS AT OR PRIOR TO THE DISTRIBUTION
Subject to the terms and conditions of this Agreement, the Distribution shall be consummated on the Distribution Date.
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ARTICLE III THE DISTRIBUTION
The following are conditions to the consummation of any part of the Distribution. The conditions are for the sole benefit of Parent and shall not give rise to or create any duty on the part of Parent or Parent’s board of directors to waive or not waive any such condition.
Securities Act.
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Subsidiaries:
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respects, and (2) paid all Taxes due or claimed due by a Taxing Authority (whether or not shown as due on a filed Tax Return) from or with respect to it; and
ARTICLE IV COVENANTS
Except as otherwise provided in any Ancillary Agreement, each of Parent and NBH, on behalf of itself and the members of its respective Group, shall use commercially reasonable efforts to provide or make available, or cause to be provided or made available, to the other Party, at any time before or after the Effective Time, as soon as reasonably practicable after written request therefor, any Information (or a copy thereof) in the possession or under the control of either Party or any of its Subsidiaries to the extent that: (i) such Information relates to NBH if NBH is the requesting Party, or to Parent if Parent is the requesting Party; (ii) such Information is required by the requesting Party to comply with its obligations under this Agreement or any Ancillary Agreement; (iii) such Information is required by the requesting Party in connection with any litigation, legal proceeding or dispute involving the requesting Party; or (iv) such Information is required by the requesting Party to comply with any obligation imposed by any Governmental Entity; provided, however, that, in the event that the Party to whom the request has been made determines that any such provision of Information could be commercially detrimental, violate any Law or agreement or waive any attorney-client privilege, then the Parties shall use commercially reasonable efforts to permit compliance with such obligations to the extent and in a manner that avoids any such harm or consequence. The Party providing Information pursuant to this Section 4.1 shall only be obligated to provide such Information in the form, condition and format in which it then exists and in no event shall such Party be required to perform any improvement, modification, conversion, updating or reformatting of any such Information.
In addition, each of Parent and NBH, on behalf of itself and the members of its respective Group, shall use commercially reasonable efforts to provide or make available, or cause to be provided or made available, to the other Party, at any time before or after the Effective Time, as soon as reasonably
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practicable after written request therefor, such Party’s employees to support and in connection with any litigation, legal proceeding or dispute involving the requesting Party.
ARTICLE V
DISPUTE RESOLUTION
JURY.
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by either Party, the sole independent arbitrator shall be appointed pursuant to AAA Commercial Arbitration Rules.
U.S.C. §§ 1 et seq., shall govern any arbitration between the Parties pursuant to this Section 5.2.
5.3. Allocation of Undetermined Liabilities and Third-Party Claims.
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the dispute shall be attempted to be resolved between the Parties pursuant to good faith negotiations, and if unable, then pursuant to binding arbitration in accordance with Section 5.2 hereof.
ARTICLE VI
MUTUAL RELEASES; INDEMNIFICATION; COOPERATION
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whether or not such directors or officers would otherwise fall within the definition of “NBH Group” or “NBH Indemnitees”) save and except for any employees or contractors of subsidiaries of Parent that are becoming directors and officers of Parent as of the Distribution Date for any liability to Parent or the Parent Group in respect of pre-Distribution Date misconduct or breaches of fiduciary duty, including but not limited to the claims asserted in the consolidated securities class action pending in the United States District Court for the Eastern District of New York captioned In re Meta Materials Inc. Securities Litigation, No. 1:21-cv-07203 or the shareholder derivative action pending in the United States District Court for the Eastern District of New York captioned Hines v. Palikaras, et al., No. 1:22-cv-00248.
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(c) subject to Section 6.2(b), any liability of the Parent or its Subsidiaries in connection with litigation, whether or not outstanding on the Distribution Date, arising in respect of pre-Distribution Date acts or omissions of the Parent or its Subsidiaries or arising in respect of Parent’s consummation of the transactions contemplated herein (including the legal proceedings set forth in Part II, Item 1 of the Parent’s Form 10-Q for the quarterly period ended March 31, 2022).
For the avoidance of doubt, nothing in this Section 6.3, specifically, or this Agreement, generally, shall create, extend, modify, limit, change, supplant, replace or amend in any way any obligation of the Parent or the Parent Group to indemnify current or former directors or officers of Parent (notwithstanding whether or not such directors or officers would otherwise fall within the definition of “NBH Group” or “NBH Indemnitees”) with respect to pre-Distribution Date misconduct or breaches of fiduciary duty, including but not limited to any misconduct or breaches of fiduciary duty prior to consummation of the Arrangement Agreement between Parent and Metamaterial Inc. on June 28, 2021, including but not limited to any indemnification rights related to the claims asserted in the consolidated securities class action pending in the United States District Court for the Eastern District of New York captioned In re Meta Materials Inc. Securities Litigation, No. 1:21-cv-07203 or the shareholder derivative action pending in the United States District Court for the Eastern District of New York captioned Hines v. Palikaras, et al., No. 1:22-cv-00248. The current and former directors and officers of Parent and/or Torchlight Energy Resources, Inc. shall retain whatever rights they have to indemnification by Parent or the Parent Group, including but not limited to by contract, Parent’s Articles of Incorporation and Bylaws, and/or Nevada law, as of the Distribution Date.
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any claim or of the commencement by any such Person of any action (collectively, a “Third-Party Claim”) with respect to which an Indemnifying Party may be obligated to provide indemnification to such Indemnitee pursuant to Section 6.2 or 6.3, or any other Section of this Agreement or, subject to Section 6.9, any Ancillary Agreement, such Indemnitee shall give such Indemnifying Party written notice thereof within fourteen (14) days of receipt of such written notice. Any such notice shall describe the Third-Party Claim in reasonable detail and include copies of all notices and documents (including court papers) received by the Indemnitee relating to the Third-Party Claim. Notwithstanding the foregoing, the failure of an Indemnitee to provide notice in accordance with this Section 6.5(a) shall not relieve an Indemnifying Party of its indemnification obligations under this Agreement, except to the extent to which the Indemnifying Party shall demonstrate that it was materially prejudiced by the Indemnitee’s failure to provide notice in accordance with this Section 6.5(a).
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such counsel shall be at the expense of such Indemnitee or Indemnifying Party, as the case may be, and the provisions of Section 6.5(c) shall not apply to such fees and expenses. Notwithstanding the foregoing, such Party shall cooperate with the Party entitled to conduct and control the defense of such Third-Party Claim in such defense and make available to the controlling Party, at the non-controlling Party’s expense, all witnesses, information and materials in such Party’s possession or under such Party’s control relating thereto as are reasonably required by the controlling Party. In addition to the foregoing, if any Indemnitee shall in good faith determine that such Indemnitee and the Indemnifying Party have actual or potential differing defenses or conflicts of interest between them that make joint representation inappropriate, then the Indemnitee shall have the right to employ separate counsel (including local counsel as necessary) and to participate in (but not control) the defense, compromise or settlement thereof, and the Indemnifying Party shall bear the reasonable fees and expenses of such counsel for all Indemnitees.
(II) THE KNOWLEDGE BY THE INDEMNITEE OF LIABILITIES FOR WHICH IT MIGHT BE ENTITLED TO INDEMNIFICATION HEREUNDER AND (III) ANY TERMINATION OF THIS AGREEMENT.
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ARTICLE VII OTHER AGREEMENTS
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(ii) that, as between the two parties, was originally collected by the other Party or the other Party’s Subsidiaries and that may be subject to and protected by privacy, data protection or other applicable Laws. As may be provided in more detail in an applicable Ancillary Agreement, each Party agrees that it shall hold, protect and use, and shall cause its Subsidiaries and its and their respective Representatives to hold, protect and use, in strict confidence the confidential and proprietary Information of, or personal Information relating to, Third Parties in accordance with privacy, data protection or other applicable Laws
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and the terms of any agreements that were either entered into before the Effective Time or affirmative commitments or representations that were made before the Effective Time by, between or among the other Party or the other Party’s Subsidiaries, on the one hand, and such Third Parties, on the other hand.
ARTICLE VIII MISCELLANEOUS
This Agreement and, unless expressly provided therein, each other Ancillary Agreement, shall be governed by, and construed and interpreted in accordance with, the laws of the State of Nevada, without giving effect to any conflicts of law rule or principle that might require the application of the laws of another jurisdiction.
All notices, requests, claims, demands and other communications under this Agreement and, to the extent applicable and unless otherwise provided therein, under each of the Transaction Documents shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by overnight courier service, by facsimile with receipt confirmed (followed by delivery of an original via overnight courier service) or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 8.2):
If to Parent, to:
Meta Materials Inc. Attention: CEO
1 Research Drive
Dartmouth, Nova Scotia B2Y 4M9
Email: george.palikaras@metamaterial.com
With a copy to:
Wilson Sonsini Goodrich & Rosati Attention: Tom Hornish
12235 El Camino Real
San Diego, California 92130 Email: thornish@wsgr.com
If to NBH, to:
Next Bridge Hydrocarbons, Inc. 6300 Ridglea Place, Suite 950
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Fort Worth, Texas 76116
Email: cdubose@nextbridgehydrocarbons.com
With a copy to:
O’Melveny & Myers LLP Attention: Jason A. Schumacher 2501 N. Harwood Street, Floor 17
Dallas, Texas 75201
Email: jschumacher@omm.com
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[Signature Page Follows]
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DocuSign Envelope ID: DC743403-C932-4988-BA01-5D5DE31FB2B2
IN WITNESS WHEREOF, the parties have caused this Distribution Agreement to be executed to be effective on the date first written above by their respective duly authorized officers.
PARENT
META MATERIALS, INC.,
A Nevada corporation
By: Name: Kenneth Rice
Title: Chief Financial Officer and Chief Operating Officer
NBH
NEXT BRIDGE HYDROCARBONS, INC.,
A Nevada corporation
By: Name: George Palikaras
Title: President
[Signature Page to Distribution Agreement]