MEMBERSHIP INTEREST PURCHASE AGREEMENT
This Membership Interest Purchase Agreement (this “Agreement”) dated effective as of September 10, 2024 (the “Effective Date”), by and between Exponential Digital LLC, a Delaware limited liability company (“Seller”) and CleanSpark TN, LLC, a Tennessee limited liability company (“Buyer”). Each of the Seller and the Buyer are referred to individually herein as a “Party” and collectively herein as the “Parties”.
RECITALS
WHEREAS, Seller owns all of the issued and outstanding membership interests (collectively, the “Membership Interests”) of Decatur Technologies LLC, a Tennessee limited liability company (“Decatur”) and Campbell Junction Technologies LLC, a Tennessee limited liability company (“Campbell” and together with Decatur, each a “Company” and collectively the “Companies”);
WHEREAS, Seller wishes to sell the Membership Interests to Buyer, and Buyer wishes to purchase the Membership Interests from Seller, subject to the terms and conditions of this Agreement; and
NOW THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and for 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
The terms defined in this Article I shall, for all purposes of this Agreement, have the following respective meanings (all terms used in this Agreement that are not defined in this Article I shall have the meanings as set forth elsewhere in this Agreement):
“Action” means any claim, action, cause of action, demand, lawsuit, arbitration, inquiry, audit, notice of violation, proceeding, litigation, citation, summons, subpoena or investigation of any nature, civil, criminal, administrative, regulatory or otherwise, whether at law or in equity.
“Affiliate” of a Person means any other Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. The term “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.
“Assignment” has the meaning set forth in Section 3.2(a)(i).
“Business” means the business of each Company of providing mining, hardware and hosting services for the bitcoin network and the owning of assets and taking of activities incidental thereto.
“Business Day” means any day except Saturday, Sunday or any other day on which commercial banks located in Tennessee are authorized or required by Law to be closed for business.
“Code” means the Internal Revenue Code of 1986, as amended.
“Confidential Information” means any and all data and information relating to any of the Companies, including, without limitation, information relating to any Company’s cryptocurrency mining facilities, its activities, business, or customers that (i) was disclosed to Seller or of which Seller became aware as a consequence of its ownership of, management or, or other involvement with any of the Companies; (ii) has value to any Company itself; and (iii) is not generally known outside of Seller. “Confidential Information” also includes, without limitation, the following types of information regarding, related to, or concerning the cryptocurrency mining facility: trade secrets; product lists and specifications; data; know how; formulae; compositions; processes; designs; sketches; graphs; drawings; samples; inventions and ideas; past, current and planned research and development; current and planned sales and marketing methods and processes; loyalty program information; customer lists, current and anticipated customer requirements; price lists and pricing policies; market studies (including analysis of new markets and locations); business plans; improvements; information and competitive strategies; historical financial statements; financial projections and budgets; historical and projected sales; capital spending budgets and plans; the names and backgrounds of key personnel, contractors, agents, suppliers and potential suppliers; personnel training and related techniques and materials; purchasing methods and related techniques; information regarding competitors; and any and all notes, analysis, compilations, studies, summaries and other material prepared by or for Seller containing or based, in whole or in part, upon any information included in the foregoing. “Confidential Information” also includes combinations of information or materials which individually may be generally known outside of the Seller, but for which the nature, method, or procedure for combining such information or materials is not generally known outside of Seller. In addition to data and information relating to the cryptocurrency mining facility, “Confidential Information” also includes any and all data and information relating to or concerning a third party that otherwise meets the definition set forth above, that was provided or made available to Seller by such third party, and that the Seller has a duty or obligation to keep confidential. This definition does not limit any definition of “confidential information” or any equivalent term under state or federal. law. “Confidential Information” does not include information that (i) has become generally known by and available to the public by the act of one who has the right to disclose such information without violating any right or privilege of Buyer, and (ii) that is otherwise in the public domain or generally known in the crypto mining industry other than by violation of any confidentiality agreement or similar obligation.
“Contracts” means all contracts, purchasing orders and agreements, leases, deeds, mortgages, licenses, instruments, notes, commitments, undertakings, indentures, joint ventures and all other agreements, commitments and legally binding arrangements, whether written or oral.
“Disclosure Schedules” means the Disclosure Schedules delivered by Seller concurrently with the execution and delivery of this Agreement.
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“Encumbrance” means any charge, claim, preemptive right, pledge, condition, equitable interest, lien (statutory or other), option, security interest, mortgage, easement, encroachment, right of way, right of first refusal, or restriction of any kind, including any restriction on use, voting, transfer, receipt of income or exercise of any other attribute of ownership.
“Environmental Claim” means any Action, Governmental Order, lien, fine, penalty, or, as to each, any settlement or judgment arising therefrom, by or from any Person alleging Liability of whatever kind or nature (including Liability or responsibility for the costs of enforcement proceedings, investigations, cleanup, governmental response, removal or remediation, natural resources damages, property damages, personal injuries, medical monitoring, penalties, contribution, indemnification and injunctive relief) arising out of, based on or resulting from: (a) the presence, Release of, or exposure to, any Hazardous Materials; or (b) any actual or alleged non-compliance with any Environmental Law or term or condition of any Environmental Permit.
“Environmental Law” means any applicable Law, and any Governmental Order or binding agreement with any Governmental Authority: (a) relating to pollution (or the cleanup thereof) or the protection of natural resources, endangered or threatened species, human health or safety, or the environment (including ambient air, soil, surface water or groundwater, or subsurface strata); or (b) concerning the presence of, exposure to, or the management, manufacture, use, containment, storage, recycling, reclamation, reuse, treatment, generation, discharge, transportation, processing, production, disposal or remediation of any Hazardous Materials.
“Environmental Notice” means any written directive, notice of violation or infraction, or notice respecting any Environmental Claim relating to actual or alleged non-compliance with any Environmental Law or any term or condition of any Environmental Permit.
“Environmental Permit” means any Permit required for the Business under currently applicable Environmental Law.
“Excluded Liability” means any Liability of any Company arising from the Business or any business operation, activity, property or other asset conducted or owned by any Company prior to the Closing.
“First MIPA” means the Membership Interest Purchase Agreement entered into between Buyer and Seller as of the date hereof transferring the membership interests of each of Jellico Technologies LLC, a Tennessee limited liability company, and West Crossville Technologies LLC, a Tennessee limited liability company.
“Governmental Authority” means any federal, state, local or foreign government or political subdivision thereof, or any agency or instrumentality of such government or political subdivision to the extent such organization or authority has jurisdiction over the Company.
“Governmental Order” means any order, court opinion, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority.
“Hazardous Materials” means any material, substance or chemical which are defined or regulated as toxic, dangerous, corrosive, flammable, infectious, radioactive, carcinogenic or otherwise hazardous or as a pollutant or contaminant under Environmental Laws.
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“Holdback Amount” has the meaning set forth in Section 2.3(c).
“Indebtedness” of any Person means, without duplication, (i) the principal and accrued and unpaid interest, prepayment and redemption premiums or penalties (if any), unpaid fees or expenses and other monetary obligations in respect of (A) indebtedness of such Person for money borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable; (ii) all obligations of such Person issued or assumed as the deferred purchase price of property, all conditional sale obligations of such Person and all obligations of such Person under any title retention agreement; (iii) all obligations of such Person under leases required to be capitalized in accordance with historical practices; (iv) all obligations of such Person for the reimbursement of any obligor on any letter of credit, banker’s acceptance or similar credit transaction; (v) all obligations of such Person under interest rate or currency swap transactions (valued at the termination value thereof); (vi) all obligations of the type referred to in clauses (i) through (v) of any Persons for the payment of which such Person is responsible or liable, directly or indirectly, as obligor, guarantor, surety or otherwise, including guarantees of such obligations; (vii) all obligations of the type referred to in clauses (i) through (vi) of other Persons secured by (or for which the holder of such obligations has an existing right, contingent or otherwise, to be secured by) any Encumbrance on any property or asset of such Person (whether or not such obligation is assumed by such Person), and (viii) all obligations of Seller or any of the Companies under the Pipe Agreement.
“Indemnified Taxes” means (a) all Taxes of the Seller; (b) all Taxes of each Company, or relating to the Business of any Company, for all Pre-Closing Tax Periods; (c) all Taxes of any member of an affiliated, consolidated, combined or unitary group of which any Company (or any predecessor of any Company) is or was a member on or prior to the Closing Date by reason of a liability under Treasury Regulation Section 1.1502-6 or any comparable provisions of foreign, state or local Law; (d) any and all Taxes of any Person imposed on the Company arising under the principles of transferee or successor liability or by contract, relating to an event or transaction occurring before the Closing Date; (e) any withholding Taxes imposed in connection with the transactions contemplated by this Agreement; and (f) any Transfer Taxes which are the responsibility of Buyer pursuant to Section 7.4.
“Intellectual Property” means (i) all inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereto, and all patents and patent applications, together with all reissuances, continuations, continuations-in-part, revisions, extensions, and reexaminations thereof, (ii) all trademarks, service marks, trade dress, logos, trade names, domain names, social media handles or accounts, and corporate names, together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith, and all applications, registrations and renewals in connection therewith, (iii) all copyrights, and all applications, registrations, and renewals in connection therewith, (iv) all trade secrets and confidential business information (including ideas, research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, designs, drawings, specifications, technical data, customer and supplier lists, pricing and cost information, and business and marketing plans and proposals), (v) all computer software, (vi) all database rights, (vii) all design rights and registered designs and all documentation and media constituting or describing any of the foregoing and all copies and tangible embodiments thereof (in whatever form or medium and whether or not any of the foregoing is registered), and (viii) all
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other proprietary rights, including all moral rights, pertaining to any product or service designed, manufactured, sold, distributed, marketed, used, performed, employed or exploited, and all rights or forms of protection of a similar nature or having equivalent or similar effect to any of those which may subsist anywhere in the world, owned by or registered in the name of any Person or in which any Person has any rights, licenses or immunities.
“Knowledge of Seller” or “Seller’s Knowledge” means the actual knowledge of any director or officer after reasonable and due inquiry.
“Law” means any statute, law, ordinance, regulation, rule, code, order, constitution, treaty, common law, judgment, decree, other requirement or rule of law of any Governmental Authority.
“Leased Real Property” has the meaning set forth in Section 4.9(b).
“Leases” has the meaning set forth in Section 4.9(b).
“Lease Assignments” has the meaning set forth in Section 3.2(a)(ix).
“Liability” means the amount of any liability or obligation of whatever kind or nature (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due), including any liability for Taxes.
“Losses” means losses, damages, Taxes, Liabilities, deficiencies, judgments, interest, awards, penalties, fines, costs or expenses of whatever kind, including reasonable attorneys’ fees and the cost of enforcing any right to indemnification hereunder or under any other Transaction Document and the cost of pursuing any insurance providers.
“Material Adverse Effect” means any effect, change, event, or circumstance that, individually or together with any other effects, changes events, or circumstances, has or would reasonably be expected to have a material adverse impact on any Company individually, or the Companies in the aggregate, or their assets, operations, or condition of the Business of any Company in any manner, provided, however, that Material Adverse Effect shall not include any event, occurrence, fact or circumstance resulting from (i) the acts or omissions of Buyer, or (ii) changes generally affecting the economy, industry or financial markets generally applicable to the industries or the markets in which the Companies participate, provided, further, however, that any such event shall be taken into account in determining whether a Material Adverse Effect has occurred or would reasonably be expected to occur only to the extent such event has a disproportionate effect on any Company individually, or the Companies in the aggregate, compared to other participants in the virtual currency industry in the United States.
“Membership Interests” has the meaning set forth in the Recitals.
“Ordinary Course of Business” means consistent with the past, lawful practice of the Business by the Companies and, in any event, in a manner no less than as necessary to ensure compliance with Law in all material respects.
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“Organizational Document” means, relative to any Person that is not an individual, its certificate of incorporation, its certificate of formation, its certificate of partnership, its by-laws, its partnership agreement, its limited liability company agreement, its memorandum or articles of association, share designations or similar organization documents and all shareholder agreements, voting trusts and similar arrangements applicable to any of its authorized equity securities, as applicable.
“Permits” means all permits, licenses, franchises, approvals, authorizations, registrations, certificates, variances and similar rights obtained, or required to be obtained, from Governmental Authorities.
“Person” means an individual, corporation, partnership, joint venture, limited liability company, Governmental Authority, unincorporated organization, trust, association or other entity.
“Pipe Agreement” means the Settlement and Release Agreement by and between Pipe Technologies, Inc. and PrimeBlock Mining LLC.
“Power Bills” has the meaning set forth in Section 2.3(b).
“Power Deposits” has the meaning set forth in Section 4.21.
“Power Requirement” has the meaning set forth in Section 4.21.
“Power Usage” has the meaning set forth in Section 2.3(b).
“Pre-Closing Tax Period” means any taxable period ending on or before the Closing Date and, with respect to any taxable period beginning before and ending after the Closing Date, the portion of such taxable period ending on the Closing Date.
“Real Estate Purchase Agreement” means that certain Real Estate Purchase and Sale Agreement dated the date hereof, by and between US Farms & Mining, Inc. and Buyer or its Affiliate pursuant to which Buyer or its Affiliate acquires from US Farms & Mining, Inc. certain real property and related interests.
“Release” means any actual or threatened release, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, abandonment, disposing or allowing to escape or migrate into or through the environment (including, without limitation, ambient air (indoor or outdoor), surface water, groundwater, land surface or subsurface strata or within any building, structure, facility or fixture).
“Representative” means, with respect to any Person, any and all directors, officers, employees, consultants, financial advisors, counsel, accountants and other agents of such Person.
“Tax Return” means any return, declaration, report, claim for refund, information return or statement or other document relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.
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“Taxes” means (a) all U.S. federal, state, local, or foreign. income, franchise, profits or gross receipts, ad valorem, value added, capital gains, sales, goods and services, use, real or personal property, unclaimed or abandoned property liability or obligation (whether delineated as a tax), escheat liability or obligation (whether delineated as a tax), capital stock, capital, alternative minimum, license, registration, branch, payroll, estimated, withholding, employment, excise, severance, privilege, stamp, occupation, premium, windfall profits, environmental, social security (or similar), unemployment compensation, disability, transfer, gains and any other taxes (and any levies, fees, imposts, duties, governmental charges, assessments, obligations or tariffs in the nature of a tax) of any kind whatsoever, together with any interest, fines, assessments, penalties or additions to tax imposed in connection therewith or with respect thereto; and any interest in respect of such additions or penalties and (b) any liability for the payment of any items described in clause (a) above as a result of being (or ceasing to be) a member of an affiliated, consolidated, combined, unitary, or other group for Tax purposes (or being included (or being required to be included) in any Tax Return related to such group), as a transferee or successor, by Contract, pursuant to any Law or otherwise.
“Third MIPA” means the Membership Interest Purchase Agreements entered into between Buyer and Seller as of the date hereof transferring the membership interests of each of Winfield Technologies LLC, a Tennessee limited liability company, Oneida Technologies LLC, a Tennessee limited liability company, and Tazwell Technologies LLC, a Tennessee limited liability company.
“Total Purchase Price” means $25,000,000, which is the cumulative purchase price under this Agreement, the First MIPA and the Third MIPA.
“Transaction Documents” means this Agreement, the Real Estate Purchase Agreement, the First MIPA, the Third MIPA, and the other agreements, instruments, and documents required to be delivered in connection with this Agreement or at the Closing.
“Transaction Fees” means, without duplication, the following unpaid fees, expenses and other similar amounts that have been or are expected to be incurred on or prior to the Closing Date on behalf of the Seller or Buyer: (i) the fees and disbursements of, or other similar amounts charged by, counsel to the Seller or Buyer, as applicable; (ii) the reasonable fees and expenses of, or other similar amounts charged by, any accountants, agents, financial advisors, consultants and experts employed by the Seller or the Buyer, as applicable; and (iii) all other costs or other expenses incurred by the Seller or Buyer, as applicable, in connection with or as a result of the transactions contemplated by this Agreement.
“Treasury Regulations” means the regulations promulgated under the Code, as amended and in effect from time to time.
ARTICLE II
PURCHASE AND SALE
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CLOSING
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REPRESENTATIONS AND WARRANTIES OF SELLER
CONCERNING THE COMPANIES
Except as set forth in the correspondingly numbered Section of the Disclosure Schedules, Seller represents and warrants to Buyer as follows:
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Section 4.26 No Other Representations and Warranties. Except in the case of fraud or as otherwise expressly set forth in this Article IV, Seller expressly disclaims any representations or warranties of any kind or nature, express or implied, including any representations or warranties as to the Seller, its respective businesses and affairs or the transactions contemplated by this Agreement. Except as otherwise expressly set forth in this Article IV, neither Seller nor any of its respective Affiliates, employees, officers, directors or members, has made, and shall not be deemed to have made, any representations or warranties in the materials relating to the business and affairs of the Seller that have been made available to Buyer, including in any presentation of the business and affairs of the Seller by the management of the Seller or others in connection with
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the transactions contemplated hereby, and no statement contained in any of such materials or made in any such presentation shall be deemed a representation or warranty hereunder or otherwise or deemed to be relied upon by Buyer in executing, delivering and performing this Agreement and the transactions contemplated hereby.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
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COVENANTS
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ARTICLE VII
TAX MATTERS
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ARTICLE VIII
CONDITIONS PRECEDENT
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INDEMNIFICATION
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For the sole purpose of determining Losses (and not for determining whether or not any breaches of representations or warranties have occurred), the representation or warranty shall be determined without regard to any materiality, material adverse effect or other similar qualification contained in or otherwise applicable to such representation or warranty.
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TERMINATION
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GENERAL TERMS
If to Buyer:
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CleanSpark, Inc.
10624 S Eastern Ave Ste A-638
Henderson, NV 89052
Attn: Leighton Koehler, General Counsel
Email: lkoehler@cleanspark.com
With a copy to (which shall not constitute notice):
Cozen O’Connor
1650 Market Street, Suite 2800
Philadelphia, Pennsylvania 19103
Attn: Joseph C. Bedwick
Email: jbedwick@cozen.com
If to Seller: | [REDACTED] |
with a copy to: | Croke Fairchild Duarte and Beres
|
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[Signatures contained on following page.]
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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed as of the date first written above.
BUYER:
CLEANSPARK TN, LLC
By: /s/ Zachary Bradford
Name: Zachary Bradford
Title: Manager
SELLER:
EXPONENTIAL DIGITAL LLC
By: /s/ Gavin Qu .
Name: Gavin Qu
Title: Manager
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