Indicate the number of shares outstanding
of each of the issuer’s classes of common stock, as of the latest practicable date, 52,644,470 shares of common stock
are issued and outstanding as of November 12, 2020.
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 thereunto duly authorized.
Date:
November 12, 2020
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MARATHON
PATENT GROUP, INC.
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By:
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/s/
Merrick Okamoto
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Name:
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Merrick
Okamoto
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Title:
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Chief
Executive Officer and Executive Chairman
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(Principal
Executive Officer)
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By:
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/s/
Simeon Salzman
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Name:
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Simeon
Salzman
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Title:
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Chief
Financial Officer
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(Principal
Financial and Accounting Officer)
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Exhibit 10.1
Execution
Copy
POWER
PURCHASE AGREEMENT
between
BIG COUNTRY DATALEC LLC
(“Seller”)
and
MARATHON
PATENT GROUP, INC.
(“Purchaser”)
Dated: October 3, 2020
TABLE
OF CONTENTS
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Page:
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Article 1
DEFINITIONS, INTERPRETATION
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1
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Section
1.1 Definitions
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1
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Section
1.2 Interpretation.
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8
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Article 2
TERM OF AGREEMENT
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9
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Section
2.1 Term
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9
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Section
2.2 Option to Renew
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9
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Article 3
DESIGN, DEVELOPMENT AND CONSTRUCTION; COVENANTS
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9
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Section
3.1 Purchaser’s Facilities
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9
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Section
3.2 Permits
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9
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Section
3.3 Substation Completion
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9
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Section
3.7 Land Use Arrangement
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10
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Article 4
OPERATION AND MAINTENANCE
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10
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Section
4.1 Responsibility for Operation and Maintenance.
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10
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Section
4.2 Observation Visits
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10
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Article 5
PURCHASE OF ENERGY
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11
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Section
5.1 Contract Energy
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11
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Section
5.2 Title and Risk of Loss
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11
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Section
5.3 Outages
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11
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Article 6
NOMINATION, AVAILABILITY AND DISPATCH
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12
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Section
6.1 Monthly Energy Nomination
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12
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Section
6.2 Daily Availability Notice & Update
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12
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Section
6.3 Daily Energy Nomination
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13
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Section
6.4 Dispatch
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13
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Article 7
PRICE AND ADJUSTMENTS
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13
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Section
7.1 Monthly Energy Payment
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13
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Section
7.2 Adjustment to Contract Price
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13
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Article 8
BILLING AND PAYMENT
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13
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Section
8.1 Monthly Invoices
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13
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Section
8.2 Payment of Monthly Invoice
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13
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Section
8.3 Payment Disputes
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13
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Section
8.4 Late Payments
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14
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Section
8.5 Records
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14
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Section
8.6 Contract Energy Reconciliation
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14
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Article 9
METERING EQUIPMENT
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14
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Section
10.1 Metering Equipment
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14
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Section
10.2 Purchaser Test
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14
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Section
10.3 Billing Adjustments
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15
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Section
10.4 Purchaser Meters
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15
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Article 10
FORCE MAJEURE
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15
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Section
11.1 Force Majeure
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15
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Section
11.2 Notice
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15
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Section
11.3 Scope of Suspension; Duty to Mitigate
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15
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Section
11.4 Termination Due to Force Majeure.
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16
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Article 11
EVENTS OF DEFAULT; REMEDIES; TERMINATION
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16
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Section
12.1 Events of Default
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16
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Section
12.2 Remedies
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16
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Section
12.4 Survival of Obligations
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17
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Article 12
INSURANCE; CASUALTY
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17
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Section
13.1 Purchaser Insurance Coverage
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17
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Section
13.2 Proof of Insurance
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17
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Section
13.3 Casualty Event
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17
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Article 13
CONFIDENTIALITY
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17
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Section
14.1 Confidentiality Obligations
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17
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Section
14.2 Disclosure Compelled by Law
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18
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Section
14.3 Return or Destroy Confidential Information
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18
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Section
14.4 Injunctive Relief
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19
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Section
14.5 Public Announcements
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19
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Article 14
LIABILITY AND INDEMNIFICATION
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19
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Section
15.1 Indemnification
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19
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Section
15.2 Indemnification for Fines and Penalties
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20
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Section
15.3 Indemnification Claim Process
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20
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Section
15.4 Indemnification Procedures for Non-Third Party Claims
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21
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Section
15.5 Limitations on Liability
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22
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Section
15.6 Duty to Mitigate
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22
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Section
15.7 Exclusive Remedy
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22
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Section
15.8 Subrogation
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23
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Article 15
CHANGE IN LAW
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23
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Section
16.1 Change in Law
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23
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Article 16
REPRESENTATIONS AND WARRANTIES
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23
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Section
17.1 Representations and Warranties of Seller
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23
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Section
17.2 Representations and Warranties of Purchaser
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24
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Article 17
NOTICES
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24
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Section
18.1 Notices and Other Communications
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24
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Article 18
MISCELLANEOUS
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26
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Section
19.1 Assignment
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26
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Section
19.2 Forward Contract
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26
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Section
19.3 Entirety
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26
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Section
19.4 Choice of Law and Forum
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26
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Section
19.5 Waiver of Jury Trial
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26
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Section
19.6 Non-Waiver
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27
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Section
19.7 Headings; Attachments
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27
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Section
19.8 Counterparts
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27
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Section
19.9 Partial Invalidity
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27
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Section
19.10 Other
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27
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Section
19.11 No Third Party Beneficiaries
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27
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Section
19.12 Relationship of the Parties
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28
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Exhibits:
Exhibit
A - Power Distribution Equipment
Exhibit
B - [Reserved.]
Exhibit
C - Fuel Quality Parameters
Exhibit
D - Points of Delivery
Exhibit
E - Purchaser Insurance
POWER
PURCHASE AGREEMENT
This Power Purchase Agreement
(this “Agreement”), dated as of October 3, 2020 (the “Effective Date”), is entered into between
Big Country Datalec LLC, a Delaware limited liability company (“Seller”), and Marathon Patent Group, Inc., a
Nevada corporation (“Purchaser”). Each of Seller and Purchaser is hereinafter referred to individually as a
“Party” and, collectively, as the “Parties.”
RECITALS
WHEREAS, Rocky Mountain
Power, LLC, a Delaware limited liability company (“RMP”) owns and operates a coal-fired power station, located
in Big Horn, Montana, known as the Hardin Generating Station, with a net capacity of approximately 105 MW (the “Plant”);
and
WHEREAS, Seller has entered
into, or will enter into, an arrangement with RMP whereby RMP grants Seller the exclusive right to market and sell electrical energy
generated by the Plant; and
WHEREAS, Purchaser intends
to finance, design, construct, own, and operate a 13.8kV distribution system consisting of a 13.8kV isophane bus, a 13.8kV main
breaker, 13.8kV feeder breakers, and 13.8kV to 480 volt transformers (as further described on Exhibit A, the “Power
Distribution Equipment”) to enable Purchaser to receive electrical energy generated by the Plant for use in the Purchaser’s
Facilities (as defined herein); and
WHEREAS, Seller shall procure
a land-use arrangement in the form of a lease agreement between RMP and Purchaser pursuant to which RMP shall grant Purchaser the
right, at no additional cost, to (a) construct, operate, and access the Purchaser’s Interconnection Facilities on certain
real property owned by RMP (the “RMP Premises”); and (b) apply for an electrical interconnection with NorthWestern
Energy in the event this Agreement is terminated in accordance with its terms; and
WHEREAS, the Purchaser
and Seller wish to contract with each other for the purchase and sale of electrical energy to be generated by the Plant consistent
with the terms and conditions set forth herein.
AGREEMENTS
NOW THEREFORE, for and
in consideration of the mutual covenants contained herein, and other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the Parties agree as follows:
Article 1
DEFINITIONS, INTERPRETATION
Section 1.1
Definitions. For purposes of this Agreement, except where the context otherwise requires, the following capitalized terms
have the following meanings:
“Affiliate”
means any Person that directly or indirectly, through one or more intermediaries, controls or is controlled by or is under common
control with the Person specified. For purposes of this definition, control of a Person means the power, direct or indirect, to
direct or cause the direction of the management and policies of such Person whether by contract or otherwise, or ownership of fifty
percent (50%) or more of the voting securities or interests of another Person.
“Agreement”
has the meaning ascribed to such term in the Preamble.
“Anticipated Available
Capacity” has the meaning ascribed to such term in Section 6.2.
“Applicable Permits”
has the meaning ascribed to such term in Section 3.2.
“Availability
Factor” means, with respect to any period of time, a fraction (expressed as a percentage) (a) the numerator of which
is the sum of the Available Output and the Credited Output for such period, and (b) the denominator of which is the Period Output
for such period.
“Availability
Test Period” means, for the first Availability Test Period, the period from the Substation Completion Date to the first
anniversary of the Substation Completion Date, and for each subsequent Availability Test Period, the period from the applicable
anniversary of the Substation Completion Date to the immediately following anniversary of the Substation Completion Date.
“Available Output”
means, with respect to a period of time, the aggregate amount of electrical energy (expressed in MWh) associated with the Contract
Capacity that the Plant is capable of producing and delivering to the Points of Delivery regardless of whether the Plant has been
dispatched by Purchaser.
“Business Day”
means any Day other than Saturdays, Sundays and Days on which banks in Montana are required or permitted to be closed for all or
part of their customary hours of operation.
“Change in Law”
means the occurrence, after the Effective Date, of any enactment, adoption, promulgation, modification or repeal of any applicable
Law, or in the administration, interpretation or application thereof by any Governmental Authority.
“Claims Notice”
has the meaning ascribed to such term in Section 14.3(b).
“Confidential
Information” means all, or any part of, and originals or copies of, any information or data (in any form or media, whether
electronic, paper or oral, irrespective of the form of communication) received from Discloser or its Representatives, including
(a) all such information furnished to Recipient or its Representatives by or on behalf of Discloser (irrespective of the form of
communication and whether such information is so furnished before, on or after the date hereof), and all analyses, compilations,
data, studies, notes, translations, memoranda or other documents prepared by Recipient or its Representatives containing or based
in whole or in part on any such furnished information, and (b) any information in any form which contains, reflects or is based
upon, in whole or in part, the foregoing, but excludes: (i) information that at the time of disclosure was, or thereafter becomes,
part of the public domain (through a source other than Recipient or a Representative of the Recipient) other than as a result of
a breach of Article 13 by Recipient or its Representatives; (ii) information lawfully obtained from a third party source
other than Discloser or its Representatives that, to the knowledge of Recipient, was not under, and did not impose, an obligation
of confidentiality with respect to such information to Discloser; (iii) information that is independently developed by Recipient
without violating any of its obligations under Article 13; and (iv) information that was known by Recipient prior to
disclosure by Discloser (as reasonably evidenced by the Recipient’s records).
“Contract Capacity”
means 40 MW of electrical energy, subject to increase pursuant to Section 5.4.
“Contract Energy”
means the amount of electrical energy associated with the Contract Capacity expressed in MWh, as measured by the Metering Equipment,
that Seller agrees to sell and deliver, or cause to be delivered to Purchaser, and Purchaser agrees to purchase and receive from
Seller, under this Agreement, subject to the nomination and dispatch mechanics in Article 6.
“Contract Price”
has the meaning ascribed to such term in Section 7.1.
“Contract Quarter”
means, for the first Contract Quarter, the period from the Substation Completion Date to the date that is three (3) months after
the Substation Completion Date, and for each subsequent Contract Quarter, each three (3) month period thereafter.
“Credited Output”
means, with respect to a period of time, the aggregate amount of electrical energy (expressed in MWh) associated with the Contract
Capacity that is not available from the Plant for dispatch and receipt by Purchaser due to (a) a Force Majeure event and (b) any
Scheduled Maintenance, as determined by Seller in good faith.
“Day”
means a twenty-four (24) hour period commencing at 0:00:00 hours each day and ending at 23:59:59 hours on the same day, determined
by reference to prevailing Mountain time.
“Discloser”
has the meaning ascribed to such term in Section 13.2.
“Dispute”
has the meaning ascribed to such term in Section 3.3(b).
“Effective Date”
has the meaning ascribed to such term in the Preamble.
“Energy Payment”
has the meaning ascribed to such term in Section 7.1.
“Events of Default”
has the meaning ascribed to such term in Section 11.1.
“Exercise Notice”
has the meaning ascribed to such term in Section 5.4.
“Force Majeure”
means any event or circumstance, or combination of events or circumstances, that is beyond the reasonable control of the Party
claiming the Force Majeure and could not be prevented or overcome by the reasonable efforts and due diligence of the Party claiming
the Force Majeure, including, to the extent the foregoing conditions are met, acts of God, strikes or lockouts, acts of the public
enemy, wars, terrorism, sabotage, riots, blockades, insurrections, epidemics, pandemics (including for the avoidance of doubt impacts
of the novel coronavirus (COVID-19) outbreak, any mutations or strains of this virus, and any related outbreaks), landslides, lightning,
hurricanes, blizzards, volcanic activity, tornadoes, earthquakes, fires, floods, washouts, other severe inclement weather, and
actions or inactions by any Governmental Authority. Notwithstanding anything to the contrary, the term Force Majeure shall not
include: (a) economic hardship, (b) any changes in market conditions, (c) the ability to buy or sell Contract Energy at a higher
or more favorable price, (d) the failure of a Party to timely apply for or obtain any Applicable Permits, or (e) any Change in
Law.
“Forced Outage”
means any condition at the Plant that requires immediate removal of the Plant, or some part thereof, from service, another outage
state, or a reserve shutdown state. This type of outage results from immediate system trips and/or operator-initiated trips in
response to Plant conditions and/or alarms.
“Fuel”
means coal, a fossil fuel composed primarily of carbon along with assorted other elements and taking the form of a readily combustible
black or brownish-black rock extracted from the ground by mining, with the quality parameters substantially as set forth on Exhibit
C hereto.
“Good Industry
Practices” means the practices, methods, acts, techniques and standards as may be followed or employed during the Term,
and that (a) are generally accepted in the United States for use in the industry in connection with facilities of the same or similar
size and type as the Plant and the Purchaser’s Interconnection Facilities, as applicable; and (b) are commonly used in prudent
engineering, construction, project management, maintenance, and operations. The term Good Industry Practices is not intended to
be limited to an optimum practice or method to the exclusion of all others, but rather to be a spectrum of reasonable and prudent
practices and methods given the relevant circumstances and obligations of each of the Parties.
“Governmental
Authority” means any national, state or local government, any political subdivision thereof or any other governmental,
judicial, public or statutory instrumentality, authority, board, commission, department, division, body, agency, bureau or entity,
any of which has the authority to bind a Party at Law.
“Group”
means, with respect to Purchaser, the Purchaser Group, and, with respect to Seller, the Seller Group.
“Increased Capacity
Amount” has the meaning ascribed to such term in Section 5.4.
“Indemnified Party”
has the meaning ascribed to such term in Section 14.3(a).
“Indemnifying
Party” has the meaning ascribed to such term in Section 14.3(b).
“Independent Engineer”
has the meaning ascribed to such term in Section 3.3(b).
“Initial Term”
has the meaning ascribed to such term in Section 2.1.
“Interest Rate”
means the prime interest rate as reflected in The Wall Street Journal under “Money Rates” plus two percent (2%).
“kV”
means kilovolt.
“Law”
means all applicable laws and treaties, judgments, decrees, injunctions, writs and orders of any court or Governmental Authority,
and rules, regulations, orders, ordinances, licenses and permits of any Governmental Authority, including Applicable Permits.
“Lien”
means any mortgage, deed of trust, lien, security interest, retention of title or lease for security purposes, pledge, charge,
encumbrance, equity, attachment, claim, easement, right of way, covenant, condition or restriction, leasehold interest, purchase
right or other right of any kind, including an option, of any other Person in or with respect to any real or personal property.
“Losses”
means any and all claims, liabilities, losses, causes of action, damages, judgments, fines, payments (including amounts paid in
settlement), penalties, administrative proceedings, administrative investigations, costs, expenses, fees (including reasonable
attorneys’ fees), court costs and other costs of suit.
“Maintenance Notice
Date” has the meaning ascribed to such term in Section 5.3(a)(i).
“Major Maintenance”
has the meaning ascribed to such term in Section 5.3(a)(i).
“Metering Equipment”
has the meaning ascribed to such term in Section 9.1.
“Mobilization
Date” means the date on which Purchaser and/or Purchaser’s Contractor mobilize personnel at the RMP Premises in
connection with the design, development, construction, ownership, operation, and maintenance of the Purchaser’s Interconnection
Facilities.
“Month”
means any calendar month during the Term, or, if this Agreement commences or terminates on other than the first or last day of
a Month then all applicable calculations under this Agreement shall be made on a pro rata basis for the number of days in such
Month in which this Agreement was in effect.
“Monthly Energy
Nomination” has the meaning ascribed to such term in Section 6.1.
“Monthly Invoice”
has the meaning ascribed to such term in Section 8.1.
“MW”
means Megawatt.
“MWh”
means Megawatt hours.
“Operations Manual”
means the operational procedures and communication protocols for the Plant with respect to, inter alia, Technical Characteristics,
availability notices, energy nominations and dispatch, Scheduled Maintenance and Forced Outages, which shall be mutually agreed
between the Parties within ninety (90) Days after the Effective Date.
“Option Expiration
Date” has the meaning ascribed to such term in Section 5.4.
“Party”
and “Parties” have the meanings ascribed to such terms in the Preamble.
“Period Output”
means, with respect to a period of time, an amount of electrical energy (expressed in MWh) equal to the product of the Contract
Capacity and the total number of hours in such period.
“Periodic Maintenance”
has the meaning ascribed to such term in Section 5.3(a)(ii).
“Person”
means and includes an individual, a partnership, a corporation, a limited liability company, a joint stock company, an unincorporated
association, a joint venture, a trust or other entity or any Governmental Authority.
“Plant”
has the meaning ascribed to such term in the Recitals.
“Plant Casualty”
has the meaning ascribed to such term in Section 12.3(a).
“Points of Delivery”
means the physical points at which electrical interconnection is made between the Purchaser’s Interconnection Facilities
and the Plant and are the points at which Seller makes available and delivers the Contract Energy to Purchaser. The Points of Delivery
are specified in Exhibit D.
“Power Distribution
Equipment” has the meaning ascribed to such term in the Recitals.
“Purchaser”
has the meaning ascribed to such term in the Preamble.
“Purchaser Business
Claim” means any claim, demand or action arising out of or in connection with the conduct of Purchaser and/or its Affiliates’
respective business.
“Purchaser Group”
has the meaning ascribed to such term in Section 14.1(b).
“Purchaser Hourly
Nomination” has the meaning ascribed to such term in Section 6.3.
“Purchaser Interconnection
Equipment” has the meaning ascribed to such term in Section 3.1.
“Purchaser Maximum
Liability Amount” has the meaning ascribed to such term in Section 14.5(a).
“Purchaser’s
Casualty” has the meaning ascribed to such term in Section 12.3(a).
“Purchaser’s
Contractor” means, individually and collectively, any and all third-party contractors and agents Purchaser shall retain
for purposes of designing, developing, constructing, operating, or maintaining the Purchaser’s Interconnection Facilities.
“Purchaser’s
Facilities” means the data processing facilities to be owned and operated by Purchaser and located adjacent to the Plant
and to which the Purchaser’s Interconnection Facilities will be interconnected.
“Purchaser’s
Interconnection Facilities” means the Power Distribution Equipment and the Purchaser Interconnection Equipment.
“Recipient”
has the meaning ascribed to such term in Section 13.1.
“Renewal Term”
has the meaning ascribed to such term in Section 2.2.
“Representatives”
means, with respect to a Party, such Party’s directors, members, officers, Affiliates, employees, contractors, agents and
advisors (including attorneys, accountants and consultants) who receive Confidential Information.
“Revised Capacity”
has the meaning ascribed to such term in Section 5.4.
“Revised Capacity
Effective Date” has the meaning ascribed to such term in Section 5.4.
“RMP”
has the meaning ascribed to such term in the Recitals.
“RMP Premises”
has the meaning ascribed to such term in the Recitals.
“Scheduled Maintenance”
has the meaning ascribed to such term in Section 5.3(a) and includes both Major Maintenance and Periodic Maintenance.
“Seller”
has the meaning ascribed to such term in the Preamble.
“Seller Group”
has the meaning ascribed to such term in Section 14.1(a).
“Seller Maximum
Liability Amount” has the meaning ascribed to such term in Section 14.5(a).
“Substation Completion”
means the Purchaser’s Interconnection Facilities are capable of safely (a) operating for commercial purposes, and (b) receiving
Contract Energy for commercial use, in each case, in accordance with Good Industry Practices and applicable Law.
“Substation Completion
Date” has the meaning ascribed to such term in Section 3.3.
“Tax”
or “Taxes” means any tax or similar governmental charge, impost or levy (including income taxes, franchise taxes,
transfer taxes or fees, sales taxes, use taxes, gross receipts taxes, value added taxes, employment taxes, excise taxes, ad valorem
taxes, property taxes, withholding taxes, payroll taxes, minimum taxes or windfall profit taxes) together with any related penalties,
fines, additions to tax or interest imposed by the United States or any state, county, local or foreign government or subdivision
or agency thereof.
“Technical Characteristics”
means a set of technical parameters describing the technical capabilities of the Plant, including (a) minimum capacity for stable
operation, (b) ramping speed for increasing and decreasing production capacity, and (c) minimum up-time and minimum down-time.
Technical Characteristics shall be more fully described in the Operations Manual. For the avoidance of doubt, Technical Characteristics
shall not include the Anticipated Available Capacity.
“Term”
has the meaning ascribed to such term in Section 2.2.
“Third Party”
means any Person that is not a member of a Group.
“Third Party Claim”
means (a) any claim or demand for which an Indemnifying Party may be liable to the Indemnified Party hereunder which is asserted
by any Third Party, and (b) in the case of Purchaser as an Indemnifying Party, a Purchaser Business Claim.
“Usage Test Period”
means, for the first Usage Test Period, the period from the Substation Completion Date to the date that is six (6) months after
the Substation Completion Date, and for each subsequent Usage Test Period, each six (6) month period thereafter.
Section 1.2
Interpretation. The following rules of interpretation shall apply unless otherwise stated herein:
(a)
The masculine shall include the feminine and neuter.
(b)
References to “Articles,” “Sections,” or “Exhibits” shall be to articles, sections, or exhibits
of this Agreement.
(c)
The words “herein,” “hereof” and “hereunder” shall refer to this Agreement as a whole and not
to any particular article or section of this Agreement; the word “including” shall mean “including, without limitation;”
and the word “include” shall mean “include, without limitation;” the word “until” shall mean
“until, but not including;” the word “from” shall mean “from and including.”
(d)
The Exhibits attached hereto are incorporated in and are intended to be a part of this Agreement.
(e)
This Agreement was negotiated and prepared by both Parties with the advice and participation of counsel. The Parties have agreed
to the wording of this Agreement and none of the provisions hereof shall be construed against one Party on the ground that such
Party is the author of this Agreement or any part hereof.
(f)
The Parties shall act reasonably and in accordance with the principles of good faith and fair dealing in the performance of this
Agreement. Unless expressly provided otherwise in this Agreement, (i) where this Agreement requires the consent, approval or similar
action by a Party, such consent, approval or similar action shall not be unreasonably withheld, conditioned or delayed, and (ii)
wherever this Agreement gives a Party a right to determine, require, specify or take similar action with respect to a matter, such
determination, requirement, specification or similar action shall be reasonable.
(g)
All references to a particular entity shall include such entity’s successors and permitted assigns.
(h)
All references herein to any contract, agreement, standard, document, policy, instrument, or Law shall be to such contract, agreement,
standard, document, policy, instrument, or Law as amended, supplemented, modified, or replaced to the date of reference.
(i)
The word “or” shall not be exclusive.
(j)
The singular shall include the plural and vice versa.
Article 2
TERM OF AGREEMENT
Section 2.1
Term. This Agreement shall begin on the Effective Date and shall continue in effect for an initial term ending five (5)
years after the Substation Completion Date (the “Initial Term”), unless terminated earlier pursuant to the terms
of this Agreement.
Section 2.2
Option to Renew. The Parties may, by mutual written agreement, elect to extend the term of this Agreement for up to five
(5) additional periods of three (3) years each (each, a “Renewal Term” and, together with the Initial Term,
the “Term”). If the Parties fail to agree to extend the Term prior to the date that is three (3) months before
the expiration of the Initial Term or Renewal Term, as applicable, this Agreement shall terminate at the end of the then-remaining
Initial Term or Renewal Term, as applicable.
Article 3
DESIGN, DEVELOPMENT AND CONSTRUCTION; COVENANTS
Section 3.1
Purchaser’s Interconnection Facilities. Purchaser shall, at Purchaser’s sole cost and expense, design, develop,
construct, own, operate, and maintain the Power Distribution Equipment and any interconnection equipment located on Purchaser’s
side of the Points of Delivery as required for Purchaser to receive the Contract Energy (the “Purchaser Interconnection Equipment”),
each in accordance with applicable Laws and Good Industry Practices. Purchaser shall reasonably cooperate and consult with Seller
regarding the design of the Purchaser’s Interconnection Facilities and shall keep Seller reasonably informed about the construction
progress thereof.
Section 3.2
Permits. Purchaser shall obtain, at Purchaser’s sole cost and expense, all applicable permits, licenses and approvals
from any Governmental Authority required under applicable Law for the construction, ownership, operation, and maintenance of Purchaser’s
Interconnection Facilities and Purchaser’s Facilities (“Applicable Permits”). Purchaser shall file for
all Applicable Permits within thirty (30) Days after the Effective Date. Seller shall have the right to inspect and obtain copies
of all Applicable Permits held by Purchaser.
Section 3.3
Substation Completion.
(a)
Purchaser shall provide Seller notice of when it reasonably anticipates Substation Completion to occur no later than thirty (30)
Days and not earlier than forty-five (45) Days in advance of Purchaser submitting notice to Seller of achieving Substation Completion
and shall provide any completed documentation it has available so that Seller may commence its review. Purchaser shall notify Seller
when it believes that Substation Completion has been achieved, including with such notice the results of any testing performed
and all other information necessary to demonstrate achievement of Substation Completion. Upon receipt thereof, Seller may conduct
such investigations and inspections as Seller deems necessary or appropriate to determine if Substation Completion has been achieved.
Within fifteen (15) days after Seller has received notice of the achievement of Substation Completion and all required documentation,
Seller shall either (a) notify Purchaser that Substation Completion has been achieved, or (b) notify Purchaser that Substation
Completion has not been achieved, stating the reasons therefor as verified by Seller’s licensed engineer. If Seller provides
notice that Substation Completion has not been achieved, Purchaser shall immediately correct and remedy any conditions that prevent
Substation Completion in consultation and reasonable cooperation with Seller. Upon completion of such corrective and remedial actions,
Purchaser shall so notify Seller in writing and the foregoing procedures shall be repeated until the date Substation Completion
has in fact been achieved and Seller has notified Purchaser of the same (the “Substation Completion Date”).
(b)
At any time that Purchaser receives notice by Seller of need for further corrective and remedial actions to achieve Substantial
Completion, Purchaser may consult with its own licensed engineer. If Purchaser’s licensed engineer disagrees with Seller’s
determination that Substation Completion has not been achieved (a “Dispute”), either Party may submit the Dispute
to technical dispute resolution by delivering written notice to the other Party. Within ten (10) days after delivering such notice,
the licensed engineers of Purchaser and Seller shall mutually select an independent third-party engineer (the “Independent
Engineer”) and submit to such Independent Engineer information in support of their respective positions as may be relevant,
which information will simultaneously be sent to the other Party. The Independent Engineer may hold separate meetings with each
Party or call a joint meeting of the Parties, to be held near the vicinity of the Plant (or other mutually agreed location). The
Independent Engineer shall, within thirty (30) days after such request for a determination, issue a non-binding decision. Any Party
that does not wish to comply with such decision shall promptly provide notice of its intention to the other Party within five (5)
days of such decision and shall bring a claim against the other Party in accordance with Section 18.4 and Section 18.5
hereof. The Parties shall share equally the costs of the Independent Engineer.
Section 3.4
Land Use Arrangement. On or prior to the Mobilization Date, Seller shall procure a land-use arrangement between RMP and
Purchaser in the form of a lease agreement pursuant to which RMP shall grant Purchaser the right, at no additional cost, to (a)
construct, operate, and access the Purchaser’s Interconnection Facilities and the Purchaser’s Facilities on the RMP
Premises; and (b) apply for an electrical interconnection with NorthWestern Energy in the event this Agreement is terminated in
accordance with its terms.
Article 4
OPERATION AND MAINTENANCE
Section 4.1
Responsibility for Operation and Maintenance. Purchaser shall, at Purchaser’s sole risk, cost and expense, operate,
maintain, and repair the Purchaser’s Interconnection Facilities, or cause the Purchaser’s Interconnection Facilities
to be operated, maintained and repaired, in accordance with applicable Law and the requirements of this Agreement. Seller shall,
at Seller’s sole risk, cost and expense, cause the Plant to be operated, maintained and repaired, in accordance with applicable
Law, Good Industry Practices, and the requirements of this Agreement.
Section 4.2
Observation Visits. Seller and its Affiliates, and its and their respective Representatives shall have the right, on a recurring
basis at reasonable intervals and upon reasonable prior notice to Purchaser, to observe the progress of the construction of the
Purchaser’s Interconnection Facilities, the testing and commissioning of the Purchaser’s Interconnection Facilities,
and the operation and maintenance of the Purchaser’s Interconnection Facilities. Purchaser shall comply with all reasonable
requests of Seller and its Representatives for, and assist in arranging, any such observation visits. All Persons attending such
observation visits on behalf of Seller shall comply with the instructions and directions of Purchaser, including all of Purchaser’s
reasonable safety and health rules and requirements provided to Seller in writing.
Article 5
PURCHASE OF ENERGY
Section 5.1
Contract Energy. Under the terms and conditions specified in this Agreement, beginning on the Substation Completion Date
and for the remainder of the Term, Seller shall sell and deliver, or cause to be delivered, and Purchaser shall receive and purchase,
the Contract Energy at the Points of Delivery.
Section 5.2
Title and Risk of Loss. Title to the Contract Energy and risk of loss associated with such Contract Energy shall pass to
Purchaser upon delivery of the Contract Energy to Purchaser at the Points of Delivery. Seller and its Affiliates shall be responsible
for the costs, liabilities, Taxes, losses, and charges of any kind associated with the delivery of Contract Energy up to the Points
of Delivery. Purchaser shall be responsible for all costs, liabilities, Taxes, losses, and charges of any kind at and after the
delivery of Contract Energy at the Points of Delivery.
Section 5.3
Outages.
(a)
Scheduled Maintenance. Seller shall submit to Purchaser a copy of RMP’s non-binding schedule of planned interruptions
and/or reductions of the Plant’s generation required for inspection, preventive, corrective and other maintenance activities
at the Plant (“Scheduled Maintenance”) in accordance with the procedures set forth below.
(i)
On or before October 1 and April 1 of each calendar year during the Term (each, a “Maintenance Notice Date”),
Seller shall submit to Purchaser a copy of RMP’s non-binding schedule of any proposed major maintenance at the Plant that
is anticipated to last in excess of twenty (20) Days during the six (6) Month period following such Maintenance Notice Date (“Major
Maintenance”).
(ii)
For curtailments for Scheduled Maintenance that are not Major Maintenance (“Periodic Maintenance”), Seller shall
notify Purchaser at least forty-five (45) Days (or, if it would be impracticable to give such forty-five (45) Days’ notice,
such shorter period as is reasonable under the circumstances) in advance of the proposed commencement of such Periodic Maintenance.
(iii)
Unless otherwise agreed to between the Parties, Seller and its Affiliates shall endeavor to cause any Scheduled Maintenance not
to exceed thirty-five (35) Days; provided, that, commencing on January 1, 2024, Seller and its Affiliates shall be entitled
to arrange one (1) Scheduled Maintenance of up to forty-five (45) Days every seven (7) calendar years during the Term.
(b)
Forced Outages. Seller shall, as promptly as is practicable under the circumstances following the commencement of a Forced
Outage, provide to Purchaser a report by telephone, fax, or electronic mail of such Forced Outage, which report shall include the
amount of capacity in MW affected by such Forced Outage and the expected end date and/or time of the Forced Outage, as advised
by RMP. Seller shall, in consultation with RMP, update such report as necessary to advise Purchaser of any changed circumstances
with respect to such Forced Outage.
Section 5.4
Option to Increase Contract Capacity. At any time, and from time to time, on or prior to March 31, 2022 (the “Option
Expiration Date”), Purchaser shall have the option to increase the Contract Capacity under this Agreement to an amount
not to exceed 100 MW in the aggregate, upon the same terms and conditions as otherwise set forth herein (such increased Contract
Capacity, the “Revised Capacity” and the amount of any such increase (in MW), the “Increased Capacity
Amount”). Purchaser may exercise such option from time to time on or prior to the Option Expiration Date by delivering
written notice (each, an “Exercise Notice”) of such election to Seller which written notice shall include (a)
the proposed Increased Capacity Amount and Revised Capacity and (b) the date on which Purchaser desires to commence receipt of
Contract Energy associated with such Increased Capacity Amount, which date shall be at least 120 Days after the date of such notice
(the “Revised Capacity Effective Date”). Upon Seller’s receipt of a timely delivered Exercise Notice,
(i) the Parties shall amend this Agreement to increase the Contract Capacity to the Revised Capacity effective as of the Revised
Capacity Effective Date and (ii) the Available Output, Credited Output, and Period Output for the applicable Availability Test
Period and Usage Test Period when such Revised Capacity Effective Date occurs shall be calculated on a pro rata basis based on
the portion of such Availability Test Period or Usage Test Period, as applicable, during which the applicable Contract Capacity
immediately prior to such amendment and the applicable Revised Capacity are in effect. Except with respect to any Exercise Notice
delivered on or prior to the Option Expiration Date, such option shall terminate as of the Option Expiration Date and this Section
5.4 shall be of no further force and effect.
Article 6
NOMINATION, AVAILABILITY AND DISPATCH
Section 6.1
Monthly Energy Nomination. At least five (5) Days prior to the Substation Completion Date, and thereafter at least five
(5) Days prior to the first (1st) Day of each Month, Purchaser shall provide Seller a written, non-binding forecast of the amount
of Contract Energy that Purchaser desires to receive and purchase from Seller for each hour in the immediately following Month
(or in the case of the first such forecast, in the Month in which the Substation Completion Date occurs) (the “Monthly
Energy Nomination”). Purchaser shall promptly notify Seller of any changes to the Monthly Energy Nomination.
Section 6.2
Daily Availability Notice & Update. From and after the week immediately prior to the week in which the Substation Completion
Date occurs, Seller shall, no later than two (2) Business Days before each week, notify Purchaser of its reasonable best estimate
of (a) the anticipated available Contract Capacity in MW of the Plant for each hour (the “Anticipated Available Capacity”)
during such week, and (b) the Technical Characteristics of the Plant. From and after the Day immediately prior to the Substation
Completion Date, Seller shall, by 05:00 a.m. Mountain time each Day, provide Purchaser with a daily update of the Anticipated Available
Capacity and the Technical Characteristics for the immediately following Day. In the event that Seller does not provide the daily
update in time, the last provided Anticipated Available Capacity and the Technical Characteristics shall prevail until such update
is provided.
Section 6.3
Daily Energy Nomination. From and after the Day immediately prior to the Substation Completion Date, Purchaser shall, by
6:00 a.m. Mountain time each Day, advise Seller of the amount of Contract Energy that Purchaser desires to receive and purchase
from Seller in each hour of the immediately following Day (the “Purchaser Hourly Nomination”). Purchaser shall
promptly notify Seller of any changes to the Purchaser Hourly Nomination.
Section 6.4
Dispatch. Subject to the terms and conditions of this Agreement, and subject to Plant availability, Fuel availability, ramp
rates, control area requirements, and Good Industry Practice, Contract Energy will be dispatched to Purchaser in substantially
the amounts of the Purchaser Hourly Nomination.
Article 7
PRICE AND ADJUSTMENTS
Section 7.1
Monthly Energy Payment. Subject to Section 7.2, commencing on the Substation Completion Date, Purchaser shall pay
Seller a Monthly payment of Two and Eight Tenths Cents ($0.028) per KWh (as adjusted, the “Contract Price”)
of Contract Energy delivered to Purchaser at the Points of Delivery, which shall be calculated by multiplying the Contract Price
by the amount of Contract Energy delivered to Purchaser at the Points of Delivery in such Month (such payment, the “Energy
Payment”).
Section 7.2
Adjustment to Contract Price. Commencing on the sixth (6th) anniversary of the Substation Completion Date, and each subsequent
anniversary of the Substation Completion Date thereafter during the Term, the Contract Price will automatically increase by two
percent (2%).
Article 8
BILLING AND PAYMENT
Section 8.1
Monthly Invoices. On or about the fifth (5th) Business Day of each Month, Seller shall submit to Purchaser an invoice for
the prior Month (the “Monthly Invoice”) setting forth (a) the Available Output in such Month, if any; (b)
the quantity of Contract Energy delivered to Purchaser in such Month, if any; (c) the Energy Payment for such Month; (d) the amount
of any additional charges assessed pursuant to this Agreement in such Month; and (e) all applicable sales or excise Taxes. The
Monthly Invoice also shall contain detailed calculations indicating the derivation of the amounts specified in (a) through (e)
above. The total amount due from Purchaser in respect of such Month shall equal the sum of the amounts specified in the Monthly
Invoice for items (c) through (e) above.
Section 8.2
Payment of Monthly Invoice. Each Monthly Invoice shall, subject to Section 8.3, be due and payable on or before the
fifteenth (15th) Day after the date such Monthly Invoice was sent to Purchaser. Payment shall be made by wire transfer in immediately
available funds to a bank account specified by Seller in the Monthly Invoice.
Section 8.3
Payment Disputes. If Purchaser, in good faith, disputes any amount due pursuant to a Monthly Invoice, Purchaser shall pay
the undisputed portion of such Monthly Invoice on or before the due date and notify Seller in writing in reasonable detail of the
specific basis for such dispute. Any such notice shall be provided within thirty (30) Days after the date of the statement in which
the disputed amount first appeared. The Parties shall resolve the dispute in accordance with Section 18.4. If any amount
disputed by Purchaser is determined not to have been due to Seller, such amount shall be reimbursed to Purchaser within ten (10)
Business Days after such determination or resolution, along with interest accrued at the Interest Rate from the original date due
until the date reimbursed.
Section 8.4
Late Payments. Undisputed amounts not paid when due shall accrue interest from and including the due date, to and excluding
the date of payment, at the Interest Rate.
Section 8.5
Records. Each Party shall keep and maintain all records as may be necessary or useful in performing or verifying any calculations
made pursuant to this Agreement, or in verifying such Party’s performance hereunder. All such records shall be retained by
each Party for at least three (3) calendar years (or such longer period as may be required by applicable Law) following the calendar
year in which such records were created.
Section 8.6
Contract Energy Reconciliation. Upon request, each Party shall provide to the other Party statements evidencing the quantities
of Contract Energy delivered at the Points of Delivery. If any such statement is found to be inaccurate based on the Metering Equipment
(as defined in Section 9.1 below), a corrected statement shall be issued promptly and any amount due thereunder will be
paid within ten (10) Business Days and shall bear interest calculated at the Interest Rate from the date of the overpayment or
underpayment to the date of receipt of the reconciling payment. Notwithstanding the above, no adjustment shall be made with respect
to any statement or payment hereunder unless a Party asserts its challenge to the accuracy of such payment or statement within
one (1) year after the date of such statement or payment.
Article 9
METERING EQUIPMENT
Section 9.1
Metering Equipment. Seller, at Seller’s cost and expense, shall design, construct, install, operate, calibrate, and
maintain metering devices (the “Metering Equipment”) to measure the Contract Energy delivered to Purchaser from
the Plant. From and after the Substation Completion Date, Seller shall cause the Metering Equipment to be tested and calibrated
once every twelve (12) Months during the Term, at Seller’s sole cost and expense. Seller shall notify Purchaser of the date
and time of such testing and calibration and Purchaser shall be allowed to have one (1) representative present to witness such
tests. Seller shall cause any Metering Equipment that is found upon testing to be inaccurate by more than two percent (2%) to be
repaired, adjusted, or replaced, at Seller’s cost and expense.
Section 9.2
Purchaser Test. Purchaser may request a test of the Metering Equipment at any time during the Term and Purchaser shall be
allowed to have one (1) representative present to witness such test. Such representative of Purchaser shall comply with all instructions
and directions of Seller, Seller’s Affiliates and RMP personnel, including all of RMP’s applicable health and safety
rules. If a Purchaser-requested test reveals that the Metering Equipment registers accurately within two percent (2%), Purchaser
shall bear the cost and expense of such test. If a Purchaser-requested test reveals that the Metering Equipment does not register
accurately within two percent (2%), Seller shall bear the cost and expense of such test, and shall repair, adjust, or replace such
Metering Equipment to be repaired, adjusted, or replaced at Seller’s cost and expense.
Section 9.3
Billing Adjustments. If any test conducted pursuant to this Agreement reveals that the Metering Equipment fails to register
accurately within two percent (2%), the Parties shall correct previous billings under this Agreement according the error percentage
for the actual period determined to be in error. If the actual period cannot be determined, the billing adjustment period shall
be one-half of the period since the most recent test of the Metering Equipment. Any correction in the billing resulting from such
repairs, adjustments, or replacements shall be made in the accounting rendered for the next Month, and such correction, when made,
shall constitute full resolution of any claim between the Parties arising out of such inaccuracy of the Metering Equipment.
Section 9.4
Purchaser Meters. Purchaser may, at Purchaser’s sole cost and expense, install and maintain additional metering equipment
for purposes of monitoring, recording, or transmitting data relating to its purchase of Contract Energy from the Plant. Upon Purchaser’s
reasonable request, Seller shall arrange for an installation location at the Points of Delivery for such additional Purchaser metering
equipment.
Article 10
FORCE MAJEURE
Section 10.1
Force Majeure. No failure or omission to carry out or observe any of the terms, provisions, or conditions of this Agreement
shall give rise to any claim by a Party against the other Party, or be deemed to be a breach or default of this Agreement if such
failure or omission shall be caused by or arise out of an event of Force Majeure. No obligations of either Party that were required
to be performed before the occurrence of an event of Force Majeure causing the suspension of performance shall be excused as a
result of such occurrence. The obligation to pay money in a timely manner shall not be subject to the Force Majeure provisions.
Section 10.2
Notice. If either Party’s ability to perform its obligations under this Agreement is affected by an event of Force
Majeure, such affected Party shall, as promptly as reasonably possible, upon learning of such event and ascertaining that it will
delay its performance hereunder (but in any event within two (2) Business Days after the affected Party becomes aware of such delay),
give notice to the other Party stating the nature of the event, its anticipated duration and effect upon the performance of the
affected Party’s obligations, and any action being taken to avoid or minimize its effect.
Section 10.3
Scope of Suspension; Duty to Mitigate. The suspension of performance due to an event of Force Majeure shall be of no greater
scope and no longer duration than is required by such event and the effects of such event. The affected Party shall use its commercially
reasonable efforts to: (a) mitigate the duration of, and costs arising from, any suspension or delay in the performance; (b) continue
to perform its obligations hereunder to the extent unaffected by the Force Majeure event; and (c) use reasonable efforts to remedy
its inability to perform. The affected Party shall not be obliged to take any steps that would not be in accordance with Good Industry
Practices or applicable Law or that would be beyond its reasonable control. The affected Party shall resume the performance of
its obligations under this Agreement as soon as is reasonably practicable after the events of Force Majeure are remedied or cease
to exist.
Section 10.4
Termination Due to Force Majeure. If a Force Majeure event prohibits a Party from performing under this Agreement for a
consecutive period of time greater than two hundred seventy (270) Days, then the other Party, in its sole discretion, shall have
the right to terminate this Agreement without penalty, subject to Section 11.3 hereof.
Article 11
EVENTS OF DEFAULT; REMEDIES; TERMINATION
Section 11.1
Events of Default. The following events shall be “Events of Default”:
(a)
Failure by a Party to make any undisputed payment hereunder when due, including pursuant to Section 8.2 and Section 8.6,
and such failure continues uncured for five (5) Business Days after receipt by the defaulting Party of written notice of such failure.
(b)
Except to the extent constituting a separate Event of Default, failure of a Party to perform any other material obligation hereunder
and such failure continues uncured for thirty (30) Days after receipt by the defaulting Party of written notice of such failure;
provided, that so long as a defaulting Party has initiated and is diligently attempting to effect a cure, the defaulting
Party’s cure period shall extend for an additional sixty (60) Days.
(c)
Any representation or warranty made by a Party under this Agreement shall have been false in any material respect when made, and
has materially and adversely affected the relying Party and such falsity continues uncured for thirty (30) Days after receipt by
the defaulting Party of written notice of such falsity; provided, that so long as a defaulting Party has initiated and is
diligently attempting to effect a cure, the defaulting Party’s cure period shall extend for an additional sixty (60) Days.
(d)
A Party (A) makes an assignment for the benefit of creditors, (B) files a petition or otherwise commences, authorizes, or acquiesces
in the commencement of a proceeding or cause of action under any bankruptcy or similar law, (C) has a petition filed against it
under any bankruptcy or similar law and such petition is not withdrawn or dismissed for sixty (60) Days after such filing, (D)
becomes insolvent, or (E) is unable to pay its debts when due.
(e)
In the case of Purchaser as the defaulting Party, Purchaser fails to nominate and purchase at least seventy-five percent (75%)
of the Available Output during any Usage Test Period.
(f)
In the case of Seller as the defaulting Party, Seller’s failure to maintain an Availability Factor equal to or greater than
seventy-five percent (75%) during any Availability Test Period.
Section 11.2
Remedies. Upon the occurrence of, and during the continuation of, any of the Events of Default, the non-defaulting Party
may, as its sole and exclusive remedy, elect to terminate this Agreement with immediate effect by notice to the defaulting Party
and this Agreement will be of no further force and effect except (a) as provided in Section 11.3 below and (b) with respect
to the rights and obligations of the Parties arising prior to the applicable termination date.
Section 11.3
Survival of Obligations. The covenants and obligations of the Parties set forth in Section 8.5, Section 8.6,
Article 13, Article 14, Article 17, Section 18.4, and Section 18.5 shall survive
the expiration or earlier termination of this Agreement until such obligations have been satisfied, or as otherwise provided in
such Sections and Articles or pursuant to any applicable statute of limitations.
Article 12
INSURANCE; CASUALTY
Section 12.1
Purchaser Insurance Coverage. During the Term, Purchaser shall secure and maintain, and shall require Purchaser’s
Contractor to secure and maintain, subject to applicable Laws, the minimum insurance or coverages as specified on Exhibit E
of this Agreement, as the same may be amended and restated from time to time by mutual agreement of the Parties.
Section 12.2
Proof of Insurance. Prior to the Mobilization Date, Purchaser shall provide to Seller copies of certificates of insurance
evidencing the coverages Purchaser and Purchaser’s Contractor are required to obtain under this Agreement. Seller shall have
the right to inspect any insurance policies upon five (5) Business Days’ notice, including original copies of such policies.
Section 12.3
Casualty Event.
(a)
If the Purchaser’s Interconnection Facilities, or any portion thereof, shall be damaged or destroyed by fire or other casualty
(a “Purchaser’s Casualty”), Purchaser shall, as soon as reasonably practical, at Purchaser’s sole
cost and expense, repair or reconstruct the Purchaser’s Interconnection Facilities, or such portion thereof, to a condition
that allows the Purchaser’s Interconnection Facilities to be able to safely receive Contract Energy. Purchaser shall apply
any insurance proceeds it receives or to which it is entitled relating to any Purchaser’s Casualty to the repair and, if
necessary, reconstruction of the Purchaser’s Interconnection Facilities, or any portion thereof.
(b)
If (i) the Plant, or any portion thereof, shall be damaged or destroyed by an insurable casualty (a “Plant Casualty”),
and (ii) RMP confirms that the aggregate cost to repair or reconstruct the Plant, or such portion thereof, as a result of such
Plant Casualty is less than One Hundred Million Dollars ($100,000,000), Seller shall cause the Plant, or such portion thereof,
to be repaired or constructed, to a condition that allows the Plant to be able to safely generate and deliver Contract Energy to
Purchaser in accordance with Good Industry Practice. If RMP confirms that the aggregate cost to repair or reconstruct the Plant,
or such portion thereof, as a result of a Plant Casualty is equal to or greater than One Hundred Million Dollars ($100,000,000),
Seller shall be entitled to terminate this Agreement upon notice to Purchaser with immediate effect, subject to Section 11.3
hereof.
Article 13
CONFIDENTIALITY
Section 13.1
Confidentiality Obligations. The Party receiving Confidential Information (“Recipient”) shall (a) use
Confidential Information only for the purpose of carrying out the transactions contemplated by this Agreement, (b) not disclose
Confidential Information to any Person (other than its Representatives, subject to (c) below) or by legal or judicial process (subject
to Section 13.2), and (c) limit dissemination of Confidential Information to its Representatives that have a “need
to know” for purposes of carrying out the transactions contemplated by this Agreement, but only to the extent necessary to
evaluate or carry out the transactions contemplated by this Agreement and only to Representatives who have been specifically instructed
to maintain the confidentiality of the Confidential Information in accordance with the provisions of this Article 13.
The Parties understand and acknowledge that Discloser does not make any representation or warranty, express or implied, as to the
accuracy or completeness of the Confidential Information. The Parties further agree that Discloser shall not have any liability
to the Recipient relating to or resulting from the use of the Confidential Information or any errors therein or omissions therefrom.
Section 13.2
Disclosure Compelled by Law. Except with regard to its Representatives, each Party agrees that, without the prior written
consent of the other Party, neither it nor any of its Representatives will disclose to any other Person (a) the terms of this Agreement,
(b) that it and/or any of its Representatives have received Confidential Information from the disclosing Party (“Discloser”)
or that Confidential Information has been made available by Discloser, or (c) any of the terms, conditions or other facts with
respect to the transactions contemplated by this Agreement, including the status thereof, except that each Party may make such
disclosure if, following consultation with counsel, such Party reasonably believes such disclosure must be made in order to comply
with applicable Law including all disclosures required to be made by Purchaser pursuant to the applicable securities laws and regulations;
provided that, to the extent legally permissible, the Party intending to make such disclosure shall provide the other Party with
notice thereof prior to making such disclosure. If Recipient or any of its Representatives becomes legally compelled (including
by deposition, interrogatory, request for documents, subpoena, civil investigative demand or similar process) to disclose any of
the Confidential Information, Recipient shall use reasonable efforts to provide Discloser with prompt prior written notice to the
extent legally permissible of such requirement so that except with respect to Purchaser’s required disclosures under the
applicable securities laws and regulations, Discloser may seek a protective order or other appropriate remedy (at Discloser’s
sole expense). If such protective order or other remedy is not obtained, Recipient and its Representatives will disclose only that
portion of the Confidential Information which such Party, following consultation with counsel, reasonably believes is legally required
to be disclosed and will take reasonable steps to preserve the confidentiality of the Confidential Information (including reasonably
cooperating with Discloser’s efforts, at Discloser’s sole cost and expense, to obtain an appropriate protective order
or other reliable assurance that confidential treatment will be accorded the Confidential Information so disclosed). Recipient
shall be responsible for any breach of this Article 13 by its Representatives and each Party will (at its own expense)
take all actions necessary to restrain its Representatives from making any unauthorized use or disclosure of any Confidential Information.
Neither Recipient nor its Representatives shall retain or use for its account at any time any trade names, trademark or other proprietary
business designation used or owned in connection with the business of Discloser. Nothing in this Article 13 shall convey
to Recipient or its Representatives any right, title, interest or license in or to any Confidential Information received from Discloser,
or any trade names, trademark or intellectual property rights of Discloser.
Section 13.3
Return or Destroy Confidential Information. At the request of Discloser following the expiration of the Term or earlier
termination of this Agreement, Recipient and its Representatives will promptly: (a) as elected by Recipient, either return to Discloser
or destroy all Confidential Information and all copies thereof furnished to Recipient or its Representatives by or on behalf of
Discloser pursuant hereto, (b) destroy all copies of all other Confidential Information prepared by Recipient or its Representatives,
and (c) expunge, to the extent reasonably practicable, all such Confidential Information from any computer, word processor or other
device containing such information; provided, that Recipient shall not be obligated to return, destroy or expunge (i) Confidential
Information maintained in accordance with its legal and regulatory compliance, security and/or disaster recovery procedures, or
(ii) electronic copies on back-up drives; it being understood that all such retained information will continue to be maintained
in confidence in accordance with the terms of this Article 13.
Section 13.4
Injunctive Relief. The Parties agree that the conditions in this Article 13 and the Confidential Information
disclosed pursuant to this Article 13 are of a special, unique, and extraordinary character, that Discloser may be
irreparably harmed by any disclosure of the Confidential Information in violation of this Article 13, and that the
use of the Confidential Information for the business purposes of (a) any Party other than in connection with the transactions contemplated
by this Agreement, or (b) any third party, would enable such Party or third party to compete unfairly with the Party whose Confidential
Information is disclosed. For these reasons, the Parties acknowledge and agree that money damages would not be a sufficient remedy
for any breach of any provision of this Article 13, and that in addition to any other remedies which Discloser may
have, Discloser shall be entitled to seek specific performance and injunction or other equitable relief as a remedy for any such
breach.
Section 13.5
Public Announcements. The Parties agree to consult with each other before issuing any press release or making any public
statement with respect to this Agreement or the transactions contemplated hereby and, except for any press releases or public announcements
the issuance or making of which is required by applicable Law, not to issue any such press release or make any such public statement
without the prior written consent of the other Party.
Article 14
LIABILITY AND INDEMNIFICATION
Section 14.1
Indemnification.
(a)
Purchaser. Subject to the limitations set forth herein, Purchaser shall indemnify and defend Seller and its Affiliates,
and its and their respective Representatives (collectively, “Seller Group”) against, and hold Seller Group harmless
from, at all times after the date hereof, any and all Losses incurred, suffered, sustained or required to be paid, directly or
indirectly by, or sought to be imposed upon, Seller Group, including as a result of a Third Party Claim, to the extent such Losses
arise out of or result from (i) any Purchaser Business Claim, (ii) any failure of Purchaser or its Affiliates to perform Purchaser’s
obligations under this Agreement, (iii) a breach of any representations or warranties of Purchaser under this Agreement, (iv) any
grossly negligent or willful misconduct or breach of applicable Law on the part of Purchaser or any member of the Purchaser Group
in connection with the performance of this Agreement, or (v) personal injury or death to Persons or damage to property to the extent
caused by the gross negligence or willful misconduct of any member of the Purchaser Group.
(b)
Seller. Seller shall indemnify and defend Purchaser and its Affiliates, and its and their respective Representatives (collectively,
“Purchaser Group”) against, and hold Purchaser Group harmless from, at all times after the Effective Date, any
and all Losses incurred, suffered, sustained or required to be paid, directly or indirectly by, or sought to be imposed upon, Purchaser
Group, including as a result of a Third Party Claim, to the extent such Losses arise out of or result from (i) any failure of Seller
or its Affiliates to perform Seller’s obligations under this Agreement, (ii) a breach of any representations or warranties
of Seller under this Agreement, (iii) any grossly negligent or willful misconduct or breach of applicable Law on the part of Seller
or any member of the Seller Group in connection with the performance of this Agreement, or (iv) personal injury or death to Persons
or damage to property to the extent caused by the gross negligence or willful misconduct of any member of the Seller Group.
Section 14.2
Indemnification for Fines and Penalties. Any fines or other penalties incurred by a Party for non-compliance with applicable
Law shall not be reimbursed by the other Party unless such other Party has breached this Agreement and such fines and penalties
would not have been imposed on the non-breaching Party but for such breach.
Section 14.3
Indemnification Claim Process.
(a)
All claims for indemnification by an indemnified party (the “Indemnified Party”) under this Article 14
shall be asserted and resolved in accordance with Section 14.3 and Section 14.4.
(b)
If an Indemnified Party intends to seek indemnification pursuant to this Article 14 in respect of a Third Party Claim,
the Indemnified Party shall promptly, but in no event more than thirty (30) Business Days following such Indemnified Party’s
knowledge of the basis for making a claim hereunder, notify the indemnifying Party (the “Indemnifying Party”)
in writing of such claim, describing such claim in reasonable detail and the amount or estimated amount of Losses (the “Claims
Notice”); provided that failure to give such notification on a timely basis will not affect the indemnification
provided hereunder except to the extent that such failure to give such notification results in (i) the forfeiture by the Indemnifying
Party of rights and defenses otherwise available to the Indemnifying Party with respect to such claim or (ii) prejudice to the
Indemnifying Party with respect to such claim. For avoidance of doubt, such indemnification obligations shall be reduced only by
the amount of actual prejudice to the Indemnifying Party resulting from such failure to deliver a timely Claims Notice.
(c)
The Indemnifying Party shall have thirty (30) Days from the date on which the Indemnifying Party received the Claims Notice to
notify the Indemnified Party that the Indemnifying Party desires to control the defense or prosecution of the Third Party Claim
and any litigation resulting therefrom with counsel of its choice at the Indemnifying Party’s sole cost and expense; provided,
however, that (i) in no event shall such control of the defense be deemed to be an admission or assumption of liability
on the part of the Indemnifying Party and (ii) the Indemnifying Party will not be entitled to control or continue the defense thereof
if the Third Party Claim (A) principally seeks any injunctive or other equitable relief, (B) relates to or arises in connection
with any criminal conduct or claims by a regulatory agency, or (C) is for a cumulative amount that exceeds the Seller Maximum Liability
Amount or the Purchaser Maximum Liability Amount, as applicable. If the Indemnifying Party is entitled to assume and assumes the
defense of such claim in accordance herewith: (x) the Indemnified Party may retain separate co-counsel at its sole cost and expense
and participate in the defense of such Third Party Claim, but the Indemnifying Party shall control the investigation, defense and
settlement thereof (provided, however, that if (A) there are legal defenses available to an Indemnified Party that
are different from or additional to those available to the Indemnifying Party or (B) there exists a conflict of interest between
the Indemnifying Party and the Indemnified Party, the Indemnifying Party shall be liable for the reasonable fees and expenses of
one (1) separate counsel to all of the applicable Indemnified Parties in addition to one local (1) counsel in each jurisdiction
that may be necessary or appropriate); (y) the Indemnified Party shall not file any papers or consent to the entry of any judgment
or enter into any settlement with respect to such Third Party Claim without the prior written consent of the Indemnifying Party;
and (z) the Indemnifying Party shall not consent to the entry of any judgment or enter into any settlement with respect to such
Third Party Claim without the prior written consent of the Indemnified Party unless the judgment or settlement provides solely
for the payment of money by the Indemnifying Party and the Indemnifying Party makes such payment and the Indemnified Party receives
an unconditional release with respect to such Third Party Claim. The Parties shall act in good faith in responding to, defending
against, settling or otherwise dealing with Third Party Claims, and cooperate in any such defense and give each other reasonable
access to all information relevant thereto. Whether or not the Indemnifying Party has assumed the defense of such Third Party Claim,
the Indemnifying Party will not be obligated to indemnify the Indemnified Party hereunder with respect to any settlement entered
into or any judgment consented to without the Indemnifying Party’s prior written consent.
(d)
If the Indemnifying Party does not or is not entitled to assume the defense of such Third Party Claim within thirty (30) Days of
receipt of the Claims Notice, the Indemnified Party will be entitled to assume such defense, at its sole cost and expense (or,
if the Indemnified Party incurs a Loss with respect to the matter in question for which the Indemnified Party is entitled to indemnification
pursuant to Article 14, at the expense of the Indemnifying Party (which expense shall be paid timely on demand)), upon
delivery of notice to such effect to the Indemnifying Party; provided, however, that the Indemnifying Party (i) shall
have the right to participate in the defense of the Third Party Claim at its sole cost and expense; and (ii) shall not be obligated
to indemnify the Indemnified Party hereunder for any settlement entered into or any judgment consented to without the Indemnifying
Party’s prior written consent.
(e)
From and after the Effective Date, each Party and its respective Affiliates shall provide reasonable cooperation in all aspects
of any investigation, defense, pretrial activities, trial, compromise, settlement or discharge of any claim in respect of which
an Indemnified Party is seeking indemnification pursuant to this Article 14, including by providing the Indemnifying
Party with reasonable access to books, records, employees and officers (including as witnesses) of the Indemnified Party and its
Affiliates.
Section 14.4
Indemnification Procedures for Non-Third Party Claims. The Indemnified Party will deliver a Claims Notice to the Indemnifying
Party promptly upon its discovery of any matter for which the Indemnifying Party may be liable to the Indemnified Party hereunder
that does not involve a Third Party Claim; provided that failure to promptly give such notification will not affect the
indemnification provided hereunder except to the extent that such failure to give such notification results in (a) the forfeiture
by the Indemnifying Party of rights and defenses otherwise available to the Indemnifying Party with respect to such claim or (b)
prejudice to the Indemnifying Party with respect to such claim. For avoidance of doubt, such indemnification obligations shall
be reduced only by the amount of actual prejudice to the Indemnifying Party resulting from such failure to deliver a timely Claims
Notice. The Indemnified Party shall reasonably cooperate and assist the Indemnifying Party in determining the validity of any claim
for indemnity by the Indemnified Party and in otherwise resolving such matters. Such assistance and cooperation shall include providing
reasonable access to and copies of information, records and documents relating to such matters.
Section 14.5
Limitations on Liability.
(a)
NOTWITHSTANDING ANY OTHER PROVISION TO THE CONTRARY, WHETHER AN ACTION OR CLAIM IS BASED ON WARRANTY, CONTRACT (INCLUDING BREACH,
WARRANTY, INDEMNITY), TORT (INCLUDING FAULT, NEGLIGENCE OR STRICT LIABILITY) OR OTHERWISE, UNDER NO CIRCUMSTANCE SHALL (i) SELLER’S
TOTAL AGGREGATE LIABILITY ARISING OUT OF OR RELATED TO THIS AGREEMENT, EXCEED ONE MILLION DOLLARS ($1,000,000) (THE “SELLER
MAXIMUM LIABILITY AMOUNT”) AND (ii) PURCHASER’S TOTAL AGGREGATE LIABILITY ARISING OUT OF OR RELATED TO THIS AGREEMENT,
EXCEED ONE MILLION DOLLARS ($1,000,000) (THE “PURCHASER MAXIMUM LIABILITY AMOUNT”); PROVIDED, HOWEVER,
THAT THE SELLER MAXIMUM LIABILITY AMOUNT, OR THE PURCHASER MAXIMUM LIABILITY AMOUNT, AS APPLICABLE, SHALL NOT APPLY TO, AND NO
CREDIT SHALL BE ISSUSED AGAINST SUCH LIMITATION FOR (A) AN INDEMNIFYING PARTY’S FRAUD OR WILLFUL MISCONDUCT, AND (B) AN INDEMNIFYING
PARTY’S OBLIGATIONS HEREUNDER FOR THIRD PARTY CLAIMS. FOR THE PURPOSE OF DETERMINING WHETHER THE SELLER MAXIMUM LIABILITY
AMOUNT OR THE PURCHASER MAXIMUM LIABILITY AMOUNT, AS APPLICABLE, HAS BEEN MET, INSURANCE PROCEEDS RECEIVED FROM THE INSURANCE POLICIES
REQUIRED TO BE MAINTAINED UNDER THIS AGREEMENT SHALL NOT BE INCLUDED; PROVIDED, HOWEVER, THAT EITHER PARTY WILL NOT
BE SUBJECT TO INDEMNIFICATION TO THE EXTENT AN EVENT IS OTHERWISE COVERED BY INSURANCE AND FOR WHICH THE INDEMNIFIED PARTY ACTUALLY
RECEIVED INSURANCE PROCEEDS.
(b)
NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY SPECIAL, CONSEQUENTIAL, INDIRECT, EXEMPLARY, SPECULATIVE, OR PUNITIVE DAMAGES,
EXCEPT TO THE EXTENT LIABILITY ARISES FROM A PARTY’S INDEMNIFICATION OBLIGATIONS HEREUNDER IN CONNECTION WITH A THIRD PARTY
CLAIM.
Section 14.6
Duty to Mitigate. Each Party agrees that it has a duty to mitigate damages and covenants that it will use commercially reasonable
efforts to minimize any damages that it may incur as a result of the other Party’s default or non-performance of this Agreement.
Section 14.7
Exclusive Remedy. Notwithstanding anything to the contrary herein, except in the case of actual and intentional fraud or
as set forth in Section 11.2, the indemnification provisions of Article 14 shall be the sole and exclusive remedy
of the Parties for any and all breaches or alleged breaches of any representations, warranties, covenants or agreements of the
Parties, or any other provision of this Agreement or the transactions contemplated hereby.
Section 14.8
Subrogation. In the event of payment by or on behalf of any Indemnifying Party to any Indemnified Party (including pursuant
to this Article 14) in connection with any claim or demand by any Person other than the Parties or their respective
Affiliates, such Indemnifying Party shall be subrogated to and shall stand in the place of such Indemnified Party as to any events
or circumstances in respect of which such Indemnified Party may have any right, defense or claim relating to such claim or demand
against any claimant or plaintiff asserting such claim or demand. Such Indemnifying Party shall cooperate with such Indemnifying
Party in a reasonable manner, and at the cost of such Indemnifying Party, in presenting any subrogated right, defense or claim.
Article 15
CHANGE IN LAW
Section 15.1
Change in Law. If there occurs one or more Changes in Law during the Term that requires Seller or RMP to incur any capital,
operating, or other costs relating to the Plant, the Parties shall bear such additional capital, operating, and other costs, as
applicable, equally until the aggregate amount of such costs exceed Two Million Five Hundred Thousand Dollars ($2,500,000). If
the aggregate amount of such costs exceed Two Million Five Hundred Thousand Dollars ($2,500,000), either Party shall be entitled
to terminate this Agreement upon notice to the other Party and this Agreement will be of no further force and effect except (a)
as provided in Section 11.3 hereof and (b) with respect to the rights and obligations of the Parties arising prior to the
applicable termination date.
Article 16
REPRESENTATIONS AND WARRANTIES
Section 16.1
Representations and Warranties of Seller. Seller represents and warrants to Purchaser that:
(a)
Seller is a limited liability company organized, validly existing and in good standing under the Laws of the State of Delaware
and has all requisite legal power and authority to execute this Agreement and carry out the terms, conditions and provisions hereof
and its obligations hereunder.
(b)
This Agreement constitutes the valid, legal and binding obligation of Seller, enforceable in accordance with its terms except as
the enforceability hereof may be limited by applicable bankruptcy, insolvency, moratorium or other similar Laws affecting creditors’
rights generally and except to the extent that the remedies of specific performance, injunctive relief and other forms of equitable
relief are subject to equitable defenses, the discretion of the court before which any proceeding therefor may be brought and the
principles of equity in general.
(c)
There are no actions, suits or proceedings pending or, to Seller’s knowledge, threatened against or affecting Seller before
any court or administrative body or arbitral tribunal that might materially adversely affect the ability of Seller to meet and
carry out its obligations under this Agreement.
(d)
The execution and delivery by Seller of this Agreement has been duly authorized by all requisite limited liability company action,
and will not contravene any provisions of, or constitute a default under, any other agreement or instrument to which it is a party
or by which it or its property may be bound.
(e)
All approvals and consents of any Governmental Authority required for Seller to perform its obligations under this Agreement have
been obtained or will be obtained on or before the Substation Completion Date.
Section 16.2
Representations and Warranties of Purchaser. Purchaser represents and warrants to Seller that:
(a)
Purchaser is a corporation duly organized and validly existing and in good standing under the Laws of the State of Nevada and has
all requisite legal power and authority to execute this Agreement and to carry out the terms, conditions and provisions hereof
and its obligations hereunder and is duly qualified to conduct business in every jurisdiction in which its activities require such
qualification.
(b)
This Agreement constitutes a valid, legal and binding obligation of Purchaser, enforceable in accordance with the terms hereof
except as the enforceability hereof may be limited by applicable bankruptcy, insolvency, moratorium or other similar laws affecting
creditors’ rights generally and except to the extent that the remedies of specific performance, injunctive relief and other
forms of equitable relief are subject to equitable defenses, the discretion of the court before which any proceeding therefor may
be brought, and the principles of equity in general.
(c)
There are no actions, suits or proceedings pending or, to Purchaser’s knowledge, threatened against or affecting Purchaser
before any court or administrative body or arbitral tribunal that might materially adversely affect the ability of Purchaser to
meet and carry out its obligations under this Agreement.
(d)
The execution and delivery by Purchaser of this Agreement has been duly authorized by all requisite board action, and will not
contravene any provisions of, or constitute a default under, any other agreement or instrument to which it is a party or by which
it or its property may be bound.
(e)
All approvals and consents of any Governmental Authority required for Purchaser to perform its obligations under this Agreement
have been obtained or will be obtained on or before the Substation Completion Date.
Article 17
NOTICES
Section 17.1
Notices and Other Communications. Any notice required or authorized to be given hereunder or any other communications between
the Parties provided for under the terms of this Agreement shall be in writing (unless otherwise provided) and shall be served
personally, by “PDF” attached to an email, or by reputable express courier service or certified or registered mail
addressed to the relevant parties at the address stated below or at any other address notified by that Party to the other as its
address for service. Any notice so given personally or by email shall be deemed to have been given, delivered, and received on
delivery or rejection. As proof of such receipt or rejection it shall be sufficient to produce a receipt showing personal service,
the tracking report of a reputable courier company, or the return request provided by the U.S. postal service. All communications,
other than routine correspondence in the ordinary course of business, between Seller and Purchaser pursuant to this Agreement shall
be sent by the same method of communication by the Party sending the communication.
If to Purchaser:
Marathon Patent Group, Inc.
1180 North Town Center Drive, Suite 100
Las Vegas, NV 89144
Attn: Merrick Okamoto, Chief Executive Officer
Telephone: 800-804-1690
Email: merrick@marathonpg.com
With a copy to:
Jolie Kahn, Esq.
12 E. 49th Street, 11th floor
New York, NY 10017
Telephone: 516-217-6379
Email: jolie.kahn@marathonpg.com
If to Seller:
Big Country Datalec LLC
9 Federal Street
Easton, MD 21601
Attn: Nazar M. Khan; Mr. Jordan Love
Telephone: (212) 343-8353
Email: khan@beowulfenergy.com; jordan@beowulfenergy.com
With a copy to:
Big Country Datalec LLC
9 Federal Street
Easton, MD 21601
Attn: General Counsel’s Office
Telephone: (212) 343-8353
Email: legal@beowulfenergy.com
With a copy to:
Holland & Hart LLP
555 17th Street, Suite 3200
Denver, CO 80202
Attn: Stephanie Edinger
Email: SBEdinger@hollandhart.com
Article 18
MISCELLANEOUS
Section 18.1
Assignment. Except as expressly permitted herein, neither Party shall assign this Agreement or any of its rights or obligations
hereunder without the prior written consent of the other Party, such consent not to be unreasonably withheld, conditioned, or delayed.
Notwithstanding the foregoing, Seller may assign this Agreement or any of its rights hereunder without the prior written consent
of Purchaser (a) in favor of any party providing financing or other financial accommodations to or for the benefit of the Plant,
Seller, or Seller’s Affiliates, or (b) to an Affiliate of Seller. Upon Seller’s request from time to time in connection
with any such financing, Purchaser agrees to execute and promptly deliver a consent or other agreements with debt or equity financing
parties reasonably requested by such financing parties, containing customary terms and conditions, and otherwise to cooperate in
a timely manner with the due diligence efforts and other reasonable requests of such financing parties.
Section 18.2
Forward Contract. The Parties acknowledge and agree that this Agreement constitutes a “forward contract” within
the meaning of the United States Bankruptcy Code.
Section 18.3
Entirety. This Agreement and the Exhibits hereto constitute the entire agreement between the Parties and supersede any prior
or contemporaneous agreements, proposal, solicitation, terms and conditions, or representations of the Parties affecting the same
subject matter.
Section 18.4
Choice of Law and Forum. This Agreement shall be governed, construed and interpreted in accordance with the laws of the
State of Montana, without regard to principles of conflicts of law. All disputes arising out of this Agreement will be subject
to the exclusive jurisdiction of the United States District Court in the State of Montana, and each Party hereby expressly consents
to the personal jurisdiction of such court. Each Party hereto further hereby irrevocably and
unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of or relating
to this Agreement in such court, and hereby further irrevocably and unconditionally waives
and agrees not to plead or claim in such court that any such action, suit or proceeding brought in any such court has been
brought in any inconvenient forum.
Section 18.5
Waiver of Jury Trial. EACH PARTY KNOWINGLY, VOLUNTARILY, INTENTIONALLY AND IRREVOCABLY WAIVES THE RIGHT TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED ON THIS AGREEMENT, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT AND ANY AGREEMENT
EXECUTED OR CONTEMPLATED TO BE EXECUTED IN CONJUNCTION WITH THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT TO EACH OF THE PARTIES FOR
ENTERING HEREINTO. EACH PARTY HEREBY WAIVES ANY RIGHT TO CONSOLIDATE ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER AGREEMENT EXECUTED OR CONTEMPLATED TO BE EXECUTED IN CONJUNCTION WITH THIS AGREEMENT,
OR ANY MATTER ARISING HEREUNDER OR THEREUNDER, WITH ANY PROCEEDING IN WHICH A JURY TRIAL HAS NOT OR CANNOT BE WAIVED.
Section 18.6
Non-Waiver. No consent or waiver, either expressed or implied, by any Party to or of any breach or default by any other
Party in the performance by such other Party of the obligations thereof under this Agreement shall be deemed or construed to be
a consent or waiver to or of any other breach or default in the performance by such other Party of the same or any other obligations
of such other Party under this Agreement. The failure of either Party to this Agreement to enforce or insist upon compliance with
or strict performance of any of the terms or conditions hereof, or to take advantage of any of its rights hereunder, shall not
constitute a waiver or relinquishment of any such terms, conditions or rights, but the same shall be and remain at all times in
full force and effect.
Section 18.7
Headings; Attachments. The headings used for the Sections and Articles herein are for convenience and reference purposes
only, and shall in no way affect the meaning or interpretation of the provisions of this Agreement. Any and all Exhibits referred
to in this Agreement are, by such reference, incorporated herein and made a part hereof for all purposes.
Section 18.8
Counterparts. This Agreement may be executed in several counterparts, each of which is an original and all of which constitute
one and the same instrument. A “PDF” or electronic signature to this Agreement shall be deemed an original and binding
upon the Party against whom enforcement is sought.
Section 18.9
Partial Invalidity. If any provision of this Agreement is found illegal or unenforceable, such provision will be deemed
restated in accordance with Law, to reflect as nearly as possible the original intention of the Parties, and the remainder of the
Agreement will continue unaffected in full force and effect.
Section 18.10
Other. This Agreement (a) shall not be altered or amended except by an instrument in writing executed by authorized officers
of the Parties; (b) does not confer any rights upon any Person other than the Parties and their respective successors and permitted
assigns; and (c) may be performed by the Parties through the use of agents and subcontractors (but such use shall not relieve a
Party of any of its obligations hereunder). The Parties shall execute and deliver all documents and perform all further acts that
may be reasonably necessary to effectuate the provisions of this Agreement. This Agreement was prepared jointly by the Parties,
each Party having had access to advice of its own counsel, and not by either Party to the exclusion of the other Party, and shall
not be construed against one Party or the other as a result of the manner in which this Agreement was prepared, negotiated or executed.
Section 18.11
No Third Party Beneficiaries. Nothing in this Agreement, whether expressed or implied, is intended to confer any rights
or remedies under or by reason of this Agreement on any other person other than the Parties and their respective successors and
assigns, nor is anything in this Agreement intended to relieve or discharge the obligation or liability of any third person to
either Party, nor shall any provision give any third party any right of subrogation or actions over or against either Party. This
Agreement is not intended to and does not create any third party rights.
Section 18.12
Relationship of the Parties. This Agreement shall not be interpreted or construed to (a) create an association, joint venture
or partnership between the Parties or impose any partnership obligation or liability on either Party, (b) create any agency relationship
between the Parties or impose any fiduciary duty of any kind on either Party, (c) create a trust or impose any trust obligations
of any kind on either Party, or (d) constitute a lease of property of any kind. Other than as expressly set forth herein, neither
Party shall have any right, power or authority to enter into any agreement or undertaking for, or act on behalf of, or act as or
be an agent or representative of, or otherwise bind, the other Party.
[Signature Pages Follow.]
The Parties have executed
this Agreement as of the Effective Date.
SELLER:
BIG
COUNTRY DATALEC LLC
By:
Name: Kerri Langlais
Title: Chief Financial Officer
PURCHASER:
MARATHON PATENT GROUP,
INC.
By:
Name:
Title:
Signature
Page to Power Purchase Agreement
EXHIBIT A
Power Distribution Equipment
Separately attached.
EXHIBIT B
[Reserved.]
EXHIBIT D
Points of Delivery
Separately attached.
EXHIBIT E
Purchaser Insurance
1.
General Insurance Requirements. Purchaser shall procure on behalf
of itself and shall cause the Purchaser’s Contractor to procure at
its own expense and maintain in
full force and effect at all times on and after
the Mobilization Date (unless otherwise specified below) and
continuing throughout the Term, insurance policies with respect to the Purchaser’s
Facilities and the Purchaser’s Interconnection Facilities (including all other insurance required by
law or regulation) with (i) an A.M. Best
financial strength rating of “A-” or
better and a financial size category
of “X” or higher, or (ii)
a Standard & Poor’s financial
strength rating of “A-” or higher or (iii)
other companies acceptable to Seller and RMP, and, so long as
the Agreement shall not have been terminated
in accordance with its terms, with limits and coverage
provisions sufficient to satisfy the requirements set forth in this Exhibit
E.
(a)
General Liability Insurance. General liability insurance
on an occurrence or claims-made
(or other similar claims-made form) for claims filed in the United
States and occurring anywhere in the world for Purchaser’s
or any Purchaser’s Contractor’s
liability arising out of claims for personal
injury (including bodily injury and death)
and property damage with respect to the
Purchaser’s Facilities and the Purchaser’s Interconnection Facilities. Such insurance
shall provide coverage for products-completed operations, blanket contractual
liability, explosion, collapse and underground coverage, broad form property
damage, personal injury and advertising injury,
with a minimum limit of $1,000,000
per occurrence and $2,000,000 in the annual
aggregate for combined bodily injury and property damage.
The general liability policy shall also include a separation
of insureds clause with no exclusions
or limitations for cross liability. Coverage may
be maintained under combination of project
specific and/or combined policies that insure more than one project or location.
A maximum deductible or self-insured
retention of $50,000 per occurrence shall be allowed.
(b)
Automobile Liability Insurance. Automobile liability insurance
for the liability arising out of claims for bodily injury and property
damage covering all owned (if any), leased, non-owned and hired vehicles of
Purchaser or any Purchaser’s Contractor,
with a minimum combined single limit of $1,000,000 per
accident and containing appropriate no-fault insurance provisions wherever applicable. Coverage
may be maintained under combination
of project specific and/or combined policies that
insure more than one project or insured.
A maximum deductible or self-insured
retention of $50,000 per occurrence shall be allowed.
(c)
Workers’ Compensation and Employer’s Liability. Workers’
compensation insurance in compliance with
statutory requirements and employer’s
liability insurance with a limit of
not less than $1,000,000 per accident, per employee
and per disease including such other forms of insurance that Purchaser or any
Purchaser’s Contractor is required by
law to provide, an all other states endorsement
and USL&H Act and Jones Act coverage
(to the extent such coverages are applicable),
covering loss resulting from bodily injury,
sickness, disability or death of
the employees of Purchaser and Purchaser’s Contractor.
Coverage may be maintained under combination of project
specific and/or combined policies that insure more than one project
or insured. A maximum deductible
or self-insured retention of $50,000 per occurrence
shall be allowed.
(d)
Work Performed on Behalf of
Purchaser. Work performed by others
on behalf of Purchaser or the Purchaser’s Contractor with
respect to the Purchaser’s Facilities or the Purchaser’s Interconnection
Facilities shall not commence until a certificate
of insurance has been delivered to Purchaser
verifying that the contractors or subcontractors
have obtained insurance coverages in compliance with applicable contract, including
but not limited to general liability,
automobile liability and workers compensation and employer’s liability
(including in umbrella or excess liability
insurance that may be required) and evidencing
the applicable contract counterparty as additional
insured (with the exception of workers
compensation) and providing a waiver of subrogation
on all of the aforementioned coverages
in their favor (to the extent such provisions
are required under the applicable contract).
(e)
Excess Liability Insurance. Excess liability insurance
on a claims-made basis (or other similar
claims-made form) covering claims in excess of the underlying
insurance described in the foregoing subsections (a),
(b) and (c) (with respect to employer’s
liability), with minimum per occurrence and annual aggregate
limits of $20,000,000, provided that if the aggregate
limits of liability are reduced below an amount that could create a gap
in coverage between excess layers of insurance
with respect to insured claims, Purchaser shall
take immediate steps to reinstate (or cause to be
reinstated) such aggregate limits to amounts
required herein and/or amend such policies to include
a drop down provision, subject to commercial
availability. The amounts of insurance required in the foregoing
subsections (a), (b), (c) and this subsection
(e) may be satisfied by
Purchaser or the Purchaser’s Contractor purchasing coverage in the amounts specified
or by any combination of primary and
excess insurance, so long as the total
amount of insurance meets the requirements
specified above.
(f)
Environmental Impairment Liability.
Environmental impairment liability coverage
covering Purchaser and the Purchaser’s Contractor for
liability arising out of property damage and bodily injury to third
parties, including the cost of cleanup
in an amount not less than $5,000,000
per occurrence and in the policy aggregate.
Claims-made coverage forms and a deductible
or self-insured retention of not more than $100,000
are acceptable. Coverage may be maintained
under combination of project specific and/or combined policies that insure more than
one project or insured.
(g)
Operational Property Damage Insurance.
Property damage insurance on an “all risk” basis insuring coverage
against damage or loss caused by
earth movement (including, but not limited
to, earthquake, landslide, subsidence
and volcanic eruption), flood, windstorm (named and unnamed), and machinery
and equipment breakdown in an amount
of not less than the amounts listed below. Coverage
may be maintained under combination of project
specific and/or combined policies that insure more than one project.
Losses shall be valued at their repair or
replacement cost, without deduction for
physical depreciation. If loss or damage to insured
property is not repaired or replaced
and the insured amount of the claim reverts
to an actual cash value (ACV) basis, which includes deductions for depreciation and obsolescence,
however Purchaser shall seek at
the first renewal after the Mobilization Date (to
the extent commercially available) to include
terms that limit such deductions for depreciation and obsolescence to an
amount of not greater than 30% of the replacement
cost value of the Purchaser’s Facilities
and the Purchaser’s Interconnection Facilities at the time of loss.
(i) Policy
Limits:
Requirement
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Purchaser’s Equipment
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Policy Limit
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Replacement Cost of Non-Mining Equipment
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Machinery Breakdown
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Included in Policy Limit (no sublimit)
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Earth Movement / Earthquake (aggregate permitted)
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50% of Replacement Cost of Non-Mining Equipment
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Flood (aggregate permitted)
|
50% of Replacement Cost of Non-Mining Equipment
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Named Windstorm (aggregate permitted)
|
50% of Replacement Cost of Non-Mining Equipment
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To
the extent that the policies and/or coverages
noted above are combined to insure
more than one project and/or assets unrelated to Purchaser and this Agreement,
coverage shall be maintained in an amount
that is not less than the greater of:
(i) $25,000,000 per occurrence for Purchaser’s
Facilities and the Purchaser’s Interconnection Facilities;
(ii) such other amount required by Seller
and/or RMP; (iii) 150% of an amount that is supported
by an independent probable maximum
loss (“PML”) analysis for earthquake, flood and windstorm perils
and a maximum foreseeable loss (“MFL”)
analysis for fire, explosion and machinery breakdown risks
and that are in a form and substance
acceptable to Seller and RMP. Any such
PML analysis shall provide property damage
and business interruption loss estimates
on the basis of not less than
a 1 in 500-year return period. The
results of any such MFL or PML analysis
shall not serve to reduce coverage requirements
below the minimum amounts set forth above on an
individual project basis unless otherwise approved by Seller and RMP.
To the extent that aggregate limits applying
to earth movement (or earthquake), flood or named
windstorm (if any) are reduced by more
than 25% of the agreed limit, Purchaser shall
take immediate steps to restore
(or cause to be restored) coverage to the
full amount require but in no event more than
30 days from the date of such reduction
in coverage unless otherwise approved by Seller and RMP.
(ii)
The property damage insurance shall also
provide coverage for (A) the buildings, structures,
machinery, equipment, facilities, supplies, electrical transmission lines within
1,000 feet of the Purchaser’s Facilities
and the Purchaser’s Interconnection Facilities
along with related equipment for which
Purchaser or any Purchaser’s Contractor has
an insurable interest and other properties constituting a part of the Purchaser’s
Facilities or the Purchaser’s Interconnection Facilities, (B) electronic data, equipment and
media, (C) inland transit and off-site storage or repair,
(D) professional fees, (E) expediting expense (F)
increased cost of construction and
loss to undamaged property as the result
of enforcement of building laws
or ordinances and (G) debris removal and such
other usual and customary risks, all of which shall be insured
in amounts are consistent with Good Industry
Practices for similar risks and acceptable to Seller and RMP.
(iii)
The property damage policy shall include
(A) a 72-hour clause for a minimum of flood
and earth movement, (B) an unintentional
errors and omissions clause and (C) a
50/50 clause, the extent marine cargo risks
are insured, if applicable.
(iv)
The property damage policy (or
policies) shall not contain any (A) coinsurance
provision, (B) exclusion for mechanical
or electrical breakdown or limitation
on business interruption coverage arising out of any loss or damage
covered under any guarantee or
warranty arising out of
an insured peril or
(C) exclusion for resultant damage caused
by faulty workmanship, design or
materials more restrictive than LEG-2
clauses.
(v)
The property damage policy shall
have per occurrence deductibles of not greater than $750,000 per
occurrence for all losses, or as otherwise required by Seller and RMP.
(h)
Business Interruption Insurance. When reasonably available and commercially
feasible, business interruption insurance shall be obtained and maintained with a per occurrence limit (and, if applicable, a corresponding
indemnity period) equal to not less than twelve months for 100% of gross revenues minus non-continuing expenses (or gross profit
plus fixed and continuing expenses), arising from loss required to be insured by the Operational
Property Damage Insurance section above.
The maximum deductible waiting period shall not be greater
than 45 days. Extra expense coverage
shall be included in an amount that is consistent
with Good Industry Practices.
(i)
Contingent Business Interruption Insurance. When reasonably available
and commercially feasible, contingent business interruption
insurance shall be obtained and maintained with respect to
loss or damage to a supplier or
customer premises. Contingent business interruption insurance shall be maintained
on terms and conditions that are consistent with Good Industry Practices and acceptable
to Seller and RMP. The maximum deductible
waiting period shall be no greater than
the amounts listed above for Business Interruption Insurance.
(j)
General Policy Endorsements.
All policies of property and liability insurance
required to be maintained herein
by Purchaser or the Purchaser’s Contractor
(unless otherwise specified below) shall
be endorsed as follows:
(i)
each policy shall name (or include
by way of blanket endorsement) RMP and
Seller as additional insured (except workers
compensation);
(ii)
each liability policy (except workers
compensation) shall include a separation of insureds clause,
with no exclusions or limitations for cross liability, and provide that all provisions
thereof, except the limits of liability
(which shall be applicable to all insureds as a group)
shall apply as if a separate policy had
been issued to each insured;
(iii)
each liability policy (except worker’s
compensation) shall provide that the insurance shall be primary
and not excess to or contributing with
any insurance or self-insurance maintained
by Seller or RMP;
(iv)
each policy shall waive subrogation
against the Seller and/or RMP for any
and all loss or damage covered by
any of the insurance policies required
to be maintained herein and Purchaser and all
or any Purchaser’s Contractor hereby waive any
and all rights of subrogation against
Seller and/or RMP;
(v)
each such policy shall provide,
to the extent commercially available, that if any
premium or installment is not paid when due,
or if such insurance is to be cancelled for
any reason whatsoever, the insurers
will promptly notify Purchaser and the Seller, subject to a minimum of 30 days,
except 10 days for non-payment of premium. To
the extent written notice of cancellation from
Purchaser’s (or the Purchaser’s Contractor’)
insurers is not available, Purchaser shall be responsible
for providing the required notice;
(vi)
any time the insurance required to be
obtained and maintained herein by Purchaser
or the Purchaser’s Contractor is materially changed, Purchaser or the Purchaser’s
Contractor shall provide prompt written notice
to Seller and RMP. For purposes of this section
“materially changed” means any change
that would cause Purchaser or any
Purchaser’s Contractor to be in non-compliance
with the insurance requirements of this Exhibit);
and
(vii)
all policies covering real or personal
property or business interruption (including marine cargo insurance)
may be required to include coverage for
terrorism upon request by Seller and RMP.
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2.
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General Insurance Conditions.
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(a)
Notification of Loss.
Purchaser shall promptly notify the Seller of any single
loss or event likely to give
rise to a claim against an insurer for an amount in excess
of $1,000,000 covered by any insurance
maintained pursuant to this Exhibit E.
(b)
Loss Adjustment and Settlement. A loss under
any insurance required to be carried
under the Operational Property Damage
and Business Interruption sections above, shall be adjusted with the insurance
companies, including the filing in a timely manner
of appropriate proceedings, by
Purchaser, subject to the approval
of the Seller if such loss is in excess
of $1,000,000. In addition, Purchaser
may in its reasonable judgment consent
to the settlement of any loss,
provided that in the event that if the
amount of the loss exceeds $1,000,000
the terms of such settlement are concurred with
by Seller and RMP.
(c)
Acceptable Policy Terms and
Conditions. All policies of insurance required
to be maintained pursuant to this Exhibit
E shall be in form and contain terms and conditions reasonably acceptable
to the Seller.
(d)
Claims-Made Coverage. In
the event that any policy is written
on a “claims-made” basis and such
policy is not renewed or the retroactive
date of such policy is changed,
Purchaser or the Purchaser’s Contractor shall
obtain for each such policy or policies
the broadest basic and supplemental extended reporting period or “tail”
coverage available under each such policy (or
policies) and shall provide Seller with
proof that such basic and supplemental extended reporting period or “tail”
coverage has been obtained, subject to a minimum of two (2) years or any
such greater period required by
Seller or RMP.
3.
Evidence of Insurance.
Prior to the Mobilization Date and on an
annual basis or otherwise in accordance with
each insurance policy anniversary, Purchaser and/or
the Purchaser’s Contractor shall furnish to the Seller,
so long as this Agreement shall
not have been terminated or discharged, with
an approved form of certification of all
required insurance held by or for
the benefit of Purchaser and the Purchaser’s
Contractor and required to be in force
by the provisions of this Exhibit E.
Such certification shall be executed
by an authorized representative
of each insurer (or Purchaser’s insurance
broker) and shall identify insurance
carriers, the type of insurance, the insurance
limits, the insurance deductibles and
the policy term and shall specifically list the special
provisions enumerated for such insurance required by this Exhibit
E. Purchaser or the Purchaser’s Contractor upon the request of Seller
will promptly furnish copies of all
insurance policies, binders and cover notes
or other evidence of such
insurance relating to the insurance required to be
maintained by Purchaser.
4.
Reports. Concurrently with
the furnishing of the certification referred to in Section
3 of this Exhibit E, Purchaser or
the Purchaser’s Contractor shall furnish the Seller with a report
of an independent insurance broker, signed by
an officer of the broker, stating that
in the opinion of such broker,
the insurance then carried or to be
renewed is in accordance with
the terms of this Exhibit E and attaching evidence
of insurance in a form
that is acceptable to Seller and RMP as
required in Section 3 of
this Exhibit E. In addition,
Purchaser or the Purchaser’s Contractor will
advise the Seller in writing promptly
of any default in the payment
of any premium and of any other
act or omission on the part of Purchaser or the Purchaser’s Contractor which
may invalidate or render unenforceable, in whole
or in part, any insurance being
maintained by Purchaser or the Purchaser’s
Contractor pursuant to this Exhibit E.
5.
Failure to Maintain
Insurance. In the event
Purchaser or the Purchaser’s Contractor fails to take
out or maintain the full insurance coverage
required by this Exhibit
E, the Seller, upon thirty (30) days’
prior notice (unless the aforementioned insurance
would lapse within such period, in which event notice should be given
as soon as reasonably possible) to Purchaser or
the Purchaser’s Contractor of any such failure,
may (but shall not be obligated to) take
out the required policies of insurance and
pay the premiums on the same. All
amounts so advanced thereof by Seller or
RMP shall become an additional
obligation of Purchaser to the party so advancing the funds,
and Purchaser shall forthwith pay such
amounts to the party that advanced the funds,
together with interest thereon from the date so advanced.
6.
No Duty to
Verify or Review. No provision
of this Exhibit E or any provision
of this Agreement shall impose on Seller
any duty or obligation to verify the existence
or adequacy of the insurance coverage maintained
by Purchaser or the Purchaser’s Contractor,
nor shall Seller be responsible for any
representations or warranties made by
or on behalf of Purchaser or the Purchaser’s
Contractor to any insurance company or underwriter. Any
failure on the part of Seller to pursue
or obtain evidence of insurance
required by this Exhibit E
and/or failure of Seller to point out any non-compliance of such
evidence of insurance to Purchaser or the Purchaser’s Contractor shall
not constitute a waiver of any
of the insurance requirements in this Exhibit
E.
7.
Other Insurance. Seller and/or RMP may
at any time with
reasonable notice amend the requirements
and approved insurance companies of this Exhibit E: (i) due to new information
not known by Seller or RMP on the Mobilization
Date or (ii) due to changed
circumstances after the Mobilization Date which in the reasonable
judgment of Seller, either renders such coverage materially inadequate
or materially reduces the financial ability
of the approved insurance companies to pay claims,
and (iii) to include such other or additional insurance
(as to risks covered, policy amounts, policy provisions or otherwise)
as, under Good Industry Practices, are from time to time insured
against for property and facilities similar in nature,
use and location to the Purchaser’s Facilities
or the Purchaser’s Interconnection Facilities, which Seller and/or RMP may
reasonably require.
Execution
Copy
Mining
Infrastructure & Equipment Sales Agreement
This
Mining Infrastructure & Equipment Sales Agreement (the “Agreement”) dated October 3, 2020 between:
Colorado
Energy Management, LLC of 2575 Park Lane, Lafayette, CO 80026; email: legal@beowulfenergy.com
(the
“Seller”)
and
Marathon
Patent Group, Inc. of 1180 North Town Center Drive, Las Vegas, NV 89144; email: merrick@marathonpg.com
(the
“Buyer”)
In
consideration of the covenants and provisions contained in this Sales Agreement the parties to this Agreement agree as follows:
1.
Sale of Mining Infrastructure & Equipment
The
Seller will sell and deliver to Buyer Mining Infrastructure & Equipment located at 643 Industrial Park Road, Hardin, MT (“Hardin
Location”) as delineated in Schedule I of this Agreement (the “Mining Infrastructure & Equipment”).
2.
Delivery and Purchase Price
The
Buyer will accept delivery of the Mining Infrastructure & Equipment at Hardin Location and pay the sum of seven hundred fifty
thousand dollars ($750,000) (the “Purchase Price”), payable as required in the Section 3 of this Agreement.
The Seller and the Buyer both acknowledge the sufficiency of the Purchase Price as consideration for the Mining Infrastructure
& Equipment.
3.
Payment
The
Buyer will make full payment of the Purchase Price upon execution of this Agreement via wire transfer of immediately available
funds to Seller’s bank account as follows:
4.
Warranties
THE
MINING INFRASTRUCTURE & EQUIPMENT ARE SOLD ‘AS IS’ AND SELLER EXPRESSLY DISCLAIMS ANY REPRESENTATIONS OR WARRANTIES
OF ANY KIND OR NATURE, EXPRESS OR IMPLIED, AS TO THE CONDITION, VALUE OR QUALITY OF THE MINING INFRASTRUCTURE & EQUIPMENT
AND SELLER SPECIFICALLY DISCLAIMS ANY REPRESENTATION OR WARRANTY OF MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS FOR ANY PARTICULAR
PURPOSE WITH RESPECT TO SUCH MINING INFRASTRUCTURE & EQUIPMENT, OR ANY PART THEREOF, OR AS TO THE WORKMANSHIP THEREOF, OR
THE ABSENCE OF ANY DEFECTS THEREIN, WHETHER LATENT OR PATENT, OR ANY MATTER OR CIRCUMSTANCES RELATING TO ENVIRONMENTAL LAWS OR
THE ENVIRONMENTAL CONDITION OF THE MINING INFRASTRUCTURE & EQUIPMENT. EXCEPT AS EXPRESSLY PROVIDED HEREIN, NO SCHEDULE OR
ATTACHMENT TO THIS AGREEMENT, NOR ANY OTHER DOCUMENT OR INFORMATION PROVIDED BY OR COMMUNICATIONS MADE BY SELLER WILL CAUSE OR
CREATE ANY WARRANTY, EXPRESS OR IMPLIED, AS TO THE CONDITION, VALUE OR QUALITY OF SUCH MINING INFRASTRUCTURE & EQUIPMENT.
NOTWITHSTANDING THE FOREGOING, THE SELLER REPRESENTS AND WARRANTS THAT THE MINING INFRASTRUCTURE & EQUIPMENT ARE CONVEYED
FREE AND CLEAR OF ALL LIENS AND ENCUMBRANCES, EXCEPT FOR THE PURCHASE MONEY SECURITY INTEREST DESCRIBED IN PARAGRAPH 6 BELOW.
The Seller does not assume or authorize any other person to assume on behalf of the Seller, any liability in connection with the
sale of the Mining Infrastructure & Equipment.
The
Buyer has been given the opportunity to inspect the Mining Infrastructure & Equipment and the Buyer has accepted the Mining
Infrastructure & Equipment in their existing condition. Further, the Seller disclaims any warranty as to the condition of
the Mining Infrastructure & Equipment.
5.
Title
Title
to and risk of loss for the Mining Infrastructure & Equipment shall pass from Seller to Buyer upon Seller’s receipt
of the Purchase Price in Seller’s bank account.
6.
Security Interest
The
Seller retains a security interest in the Mining Infrastructure & Equipment until paid in full.
7.
Cancellation
The
Seller reserves the right to cancel this Agreement if the Buyer fails to pay for the Mining Infrastructure & Equipment when
due.
8.
Indemnity
Buyer
acknowledges and agrees to be legally bound hereby and to indemnify, save harmless and defend Seller, Seller’s affiliates
and subsidiaries, Seller’s agents, directors, officers, and employees, and representatives from all claims, losses, liabilities,
damages, fines, demands, actions and expenses including, but not limited to, all attorney fees arising out of bodily injury, death,
release of pollutants or contaminants, or damage to Seller’s property or the Hardin Location occurring in connection with
any act or omission (negligent or otherwise) of Buyer or its Representatives based on, or arising from or incurred as a result
of (i) a breach of this Agreement and/or (ii) Buyer’s presence at the Hardin Location, except to the extent Seller is contributorily
negligent.
9.
Limitation of Liability
In
no event, regardless of the form of the claim or cause of action (whether based in contract, infringement, negligence, strict
liability, other tort or otherwise), shall Buyer’s liability to the Seller exceed the Purchase Price giving rise to the
claim or cause of action, except in the case of Buyer’s fraud, willful misconduct or gross negligence. In no event, regardless
of the form of the claim or cause of action (whether based in contract, infringement, negligence, strict liability, other tort
or otherwise), shall Seller’s liability to Buyer exceed the amount of Seller’s applicable insurance coverage. Neither
Buyer nor Seller shall be liable to one another for special or consequential damages including, but not limited to, loss of profit
or revenue, loss of use of the Mining Infrastructure & Equipment or any associated equipment, facilities or services, downtime
cost, costs of environmental restorations, except in the case of Buyer’s or Seller’s fraud or willful misconduct.
10.
Relationship of the Parties
Buyer’s
relationship with Seller will be that of an independent contractor and nothing in this Agreement should be construed to create
a partnership, joint venture, or employer-employee relationship. Buyer is not an agent of Seller and is not authorized to make
any representation, contract, or commitment on behalf of Seller. Buyer will not be entitled to any of the benefits that Seller
may make available to its employees, such as group insurance, profit-sharing or retirement benefits. Buyer will be solely responsible
for all tax returns and payments required to be filed with or made to any federal, state or local tax authority with respect to
Buyer’s performance of the Work and receipt of payments under this Agreement. Because Buyer is an independent contractor,
Seller will not withhold or make payments for social security, make unemployment insurance or disability insurance contributions
or obtain worker’s compensation insurance on Buyer’s behalf. Buyer agrees to accept exclusive liability for complying
with all applicable state and federal laws governing independent contractors, including obligations such as payment of taxes,
social security, disability and other contributions based on fees paid to Buyer or Buyer’s agents or employees under this
Agreement. Buyer hereby agrees to indemnify and defend Seller against any and all such taxes or contributions, including penalties
and interest.
11.
Notices
Any
notice or other communication required or permitted hereunder shall be in writing and shall be delivered personally or by reputable
overnight courier, sent by electronic mail or sent by certified, registered or express mail, postage prepaid and return receipt
requested. Any such notice shall be deemed given (i) when delivered, if delivered personally or by overnight courier, (ii) when
transmitted, if sent by electronic mail (if evidenced by an email delivery receipt) or (iii) if mailed, five (5) days after the
date of deposit in the United States mail.
12.
General Provisions
Headings
are inserted for convenience only and are not to be considered when interpreting this Agreement. Words in the singular mean and
include plural and vice versa. Words in the masculine include the feminine and vice versa.
The
Buyer may not assign its right or delegate its performance under this Agreement without prior written consent of the Seller, which
consent may be withheld by Seller in its sole and absolute discretion. Any assignment or delegation in violation of this clause
shall be null and void.
This
Agreement cannot be modified in any way except in writing signed by all the parties to this Agreement.
The
terms of this Agreement shall be governed by and construed in accordance with the laws of the State of New York, without reference
to the conflict of laws provision thereof which would give rise to the application of the domestic substantive law of any other
jurisdiction. Each of Buyer and Seller hereby irrevocably and unconditionally consents to the exclusive jurisdiction of the federal
and state courts sitting in New York, New York for any action, suit or proceeding arising out of or related hereto. Each of Buyer
and Seller further hereby irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding
arising out of or relating to this Agreement in such courts, and hereby further irrevocably and unconditionally waives and agrees
not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in
any inconvenient forum. Each of Buyer and Seller hereby knowingly, voluntarily and intentionally waives any right (to the fullest
extent permitted by applicable law) to a trial by jury of any dispute arising out of, under or relating to, this Agreement and
agrees that any such dispute shall before a judge sitting without a jury.
This
Agreement will inure to the benefit of and be binding upon the Seller and Buyer and their respective successors and assigns.
This
Agreement constitutes the entire agreement between the parties and there are no further items or provision, either oral or otherwise.
The Buyer acknowledges that it has not relied on any representations of the Seller or any other party as to the condition of the
Mining Infrastructure & Equipment but has relied upon its own inspection and investigation of the subject matter.
This
Agreement may be executed in counterparts, each of which when so executed shall be deemed to be an original all of which taken
together shall constitute one and the same instrument. A signed copy of this Agreement delivered by email, PDF or other means
of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.
[signature
page follows]
The
parties have executed this Agreement as of the day and year first above written as follows:
SELLER:
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Colorado Energy Management, LLC
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By:
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Name:
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Kenneth Deane
|
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Title:
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Chief Financial Officer
|
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BUYER:
|
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Marathon Patent Group, Inc.
|
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By:
|
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Name:
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Kenneth Deane
|
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Title:
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Chief Financial Officer
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Execution
Copy
GROUND
LEASE
This
Ground Lease (this “Lease”), dated as of October 3, 2020 (the “Effective Date”), is entered
into between Rocky Mountain Power, LLC, known in Montana as Rocky Mountain Power – Hardin, LLC, a Delaware limited liability
company (“Landlord”), and Marathon Patent Group, Inc., a Nevada corporation (“Tenant”).
RECITALS
WHEREAS,
Landlord owns and operates a coal-fired power station, located in Big Horn, Montana, known as the Hardin Generating Station, with
a net capacity of approximately 105 MW (the “Plant”); and
WHEREAS,
Big Country Datalec LLC, a Delaware limited liability company (“Seller”), has entered into, or will enter into,
an arrangement with Landlord whereby Landlord grants Seller the exclusive right to market and sell electrical energy generated
by the Plant (the “Exclusive Marketing Arrangement”); and
WHEREAS,
Seller and Tenant entered into a Power Purchase Agreement dated as of the Effective Date (the “PPA”); and
WHEREAS,
Tenant intends to locate, construct, own, and operate the Purchaser’s Facilities and the Purchaser’s Interconnection
Facilities upon that portion of the Plant and in the location and dimensions described and depicted on the attached Exhibit
A (the “Premises”); and
WHEREAS,
Landlord wishes to lease the Premises to Tenant to facilitate the Exclusive Marketing Arrangement and the PPA and to provide to
Tenant a location upon which to locate and operate the Purchaser’s Facilities and the Purchaser’s Interconnection
Facilities (collectively, the “Permitted Use”) on the terms and conditions contained in this Lease; and
WHEREAS,
the Tenant wishes to lease the Premises from the Landlord for the Permitted Use and to enable Tenant to purchase electrical power
under the PPA on the terms and conditions contained in this Lease.
AGREEMENTS
NOW
THEREFORE, for and in consideration of the mutual covenants contained herein, and other good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the Landlord and the Tenant agree as follows:
1.
DEFINED TERMS
Initially
capitalized words or terms used in this Lease, but not defined in this Lease, will have the meanings given them in the PPA.
2.
DEMISE
Landlord
leases the Premises to Tenant and Tenant leases the Premises from Landlord.
3.
TERM
The
term of this Lease shall begin on the Effective Date and end on the date the PPA terminates (the “Term”); provided,
that if the PPA is terminated by Tenant due to the occurrence of the Event of Default in Section 11.1(f) of the PPA, Tenant may,
by written notice to Landlord delivered prior to the date the PPA terminates, elect to extend the Term for a specified period
of time that expires no later than the date that is twenty (20) years after the Effective Date.
4.
RENT; REIMBURSEABLE COSTS AND EXPENSES
In
lieu of payments of cash rent, Tenant has entered into the PPA and will perform its obligations as “Purchaser” under
the PPA in accordance with the terms and conditions of the PPA. Tenant shall reimburse Landlord for any and all costs and expenses
attributable to, or otherwise for the account of, Tenant that are incurred and paid by Landlord. Landlord shall invoice Tenant
for any such costs and expenses and Tenant shall pay Landlord the invoiced amount by wire transfer of immediately available funds
within ten (10) Business Days after receipt of such invoice.
5.
TAXES AND ASSESSMENTS
Tenant
will pay the taxes and assessments measured by, or reasonably attributable to, the cost or value of Tenant’s equipment,
furniture, fixtures, and other personal property located on the Premises, or by the cost or value of any leasehold improvements
made in or to the Premises by or for Tenant assessed, levied, confirmed, or imposed with respect to any period during the Term.
Landlord will pay all taxes and assessments upon, measured by or attributable to the Premises.
6.
UTILITIES / SERVICES
Tenant
will pay directly for all charges for electricity, natural gas, water, and sewer service, telephone or other communication service,
cable television service, ground maintenance service and any other services or utilities used by Tenant on the Premises during
the term of this Lease. Landlord shall not be liable for the failure of any such services, unless caused by the negligence or
willful misconduct of Landlord. Tenant shall pay for all charges associated with the installation and monthly use charges, connection
charges, and monitoring charges for Tenant’s systems and services, if any.
7.
ACCESS
Tenant,
its clients, customers, suppliers, and employees shall have access to all common driveway areas for ingress and egress, and shall
be entitled to the exclusive use of the Premises, subject to rights, reservations, easements, and agreements of record, and Tenant
shall comply with all of Landlord’s site safety and security procedures with respect to the access to and use of the Premises.
8.
CONDITION OF PREMISES
Tenant
accepts the Premises in its present condition. Tenant shall have no right to assert any remedy based on a claim that Landlord
has failed to deliver possession of the Premises in acceptable condition.
9.
REPAIRS AND MAINTENANCE / SURRENDER
9.1
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Tenant’s
Duties. Tenant shall at all times keep the Premises neat, clean, and in a safe and sanitary condition, and
provide trash pickup and snow removal services at its own expense.
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9.2
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Surrender. Tenant
shall quit and surrender the Premises at the expiration of this Lease without notice, and leave the Premises in a neat and
clean condition.
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10.
LIABLITY INSURANCE
10.1
|
Tenant’s
Duties. Tenant shall, at Tenant’s expense, maintain general liability insurance covering the Premises
with an insurance company rated “A+” by Best’s Insurance Guide. The minimum limits of said insurance
shall be One Million Dollars ($1,000,000.00) per accident or occurrence for bodily injury or death, and One Million Dollars
($1,000,000.00) per accident for property damage. In addition, Tenant shall, at Tenant’s expense, maintain
excess liability insurance covering claims in excess of the underlying insurance described in the foregoing sentence, with
minimum per occurrence and annual aggregate limits of Twenty Million Dollars ($20,000,000), provided that if the aggregate
limits of liability are reduced below an amount that could create a gap in coverage between excess layers of insurance with
respect to insured claims, Tenant shall take immediate steps to reinstate (or cause to be reinstated) such aggregate limits
to amounts required herein and/or amend such policies to include a drop down provision, subject to commercial availability. Tenant
will add Landlord as an additional insured under each insurance policy Tenant is required to maintain pursuant to this Section
10.1 (“Required Liability Insurance”).
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10.2
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Documentation. Tenant
shall deliver to Landlord a certificate for all Required Liability Insurance showing it to be in effect and providing that
it will not be canceled without at least thirty days prior written notification to Landlord.
|
11.
PROPERTY AND CASUALTY INSURANCE
Tenant
shall, at Tenant’s expense, maintain on all Tenant’s personal property and Tenant’s leasehold improvements on
the Premises a policy of standard fire insurance, with extended coverage, in the amount of their replacement value. All proceeds
of such insurance shall be applied to the restoration of Tenant’s personal property and leasehold improvements. Any proceeds
of such insurance remaining after such restoration shall belong to Tenant.
12.
WAIVER OF SUBROGATION
12.1
|
Waiver. If
either Landlord or Tenant experience any injury, loss or damage to themselves or their respective real or personal property,
and if that injury, loss or damage is insured against under any or all of their respective insurance policies, including any
extended coverage endorsements thereto, then the appropriate insurance company(ies), and not Landlord or Tenant, shall be
solely liable to compensate the party(ies), who experienced the injury loss or damage, regardless of whether Landlord or Tenant
was responsible for such injury, loss or damage. Landlord and Tenant hereby waive any rights each may have against
the other as a result of any injury, loss or damage that is then insured against by either. This waiver is effective
only to the extent that (i) the insurance company(ies) actually pay(s) for such injury, loss or damage, and (ii) the provisions
of this paragraph do not invalidate any insurance coverage carried by Landlord or Tenant.
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|
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12.2
|
Documentation. Landlord
and Tenant shall either cause their respective insurance companies to waive any right of subrogation against the other party
hereto, and provide proof to the other party within thirty days after the execution of this Lease that such waivers have been
successfully obtained from their respective insurance companies, or shall notify each other that such waivers could not or
cannot be reasonably obtained, because of the failure of their respective insurance companies to provide the same.
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13.
MUTUAL INDEMNITIES
13.1
|
Tenant’s
Indemnities. Neither Landlord, its Affiliates, or any of its or their respective Representatives (collectively,
the “Landlord Group”) shall be liable for any injury to or death of any person, or damage to property,
sustained or alleged to have been sustained by any member of Tenant Group as a result of any condition (including future conditions)
in the Premises, or by any other reason, unless caused by the gross negligence or willful misconduct of Landlord Group. Tenant
agrees to indemnify, defend and hold Landlord Group harmless from any and all damages arising from claims released by Tenant
pursuant to this Section 13.1.
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|
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13.2
|
Landlord’s
Indemnity. Neither Tenant, its Affiliates, or any of its or their respective Representatives (collectively,
the “Tenant Group”) shall be liable for any injury to or death of any person, or damage to property, sustained
or alleged to have been sustained by any member of Landlord Group as a result of any condition (including future conditions)
in the Premises, or by any other reason, unless caused by the gross negligence or willful misconduct of Tenant Group. Landlord
agrees to indemnify, defend, and hold Tenant Group harmless from any and all damages arising from claims released by Landlord
in this Section 13.2.
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14.
TENANT’S USE
The
Tenant shall use the Premises for the Permitted Use and shall not use the Premises for any uses or purposes other than the Permitted
Use unless approved in advance by Landlord in writing. Tenant shall not use Premises for illegal purposes. Tenant shall not cause,
maintain or permit any outside storage, or commit or suffer any waste, or do any act that constitutes a nuisance or disturbs the
quiet enjoyment of others, or commit acts that will increase the rate of insurance on the Premises.
15.
HAZARDOUS SUBSTANCES
15.1
|
Hazardous
Substances. Tenant shall not place, or permit to be placed, any Hazardous Substance upon or under the Premises.
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|
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15.2
|
Landlord
Indemnification. Landlord shall indemnify and hold Tenant harmless from and against all costs of any remedial
action or cleanup, suffered or incurred by Tenant arising out of or related to the presence of any Hazardous Substances on
the Premises that were present prior to the Effective Date.
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|
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15.3
|
Tenant’s
Indemnities. Tenant shall indemnify and hold Landlord harmless from and against all costs of any remedial action
or cleanup, suffered or incurred by Landlord and arising out of Tenant’s breach of Section 15.1 of this Lease.
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|
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15.4
|
Definitions. For
purposes of this Section 15:
|
|
|
15.4.1
|
Environmental
Regulation. “Environmental Regulation” means a Law relating to the environment and/or to
human health or safety.
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|
|
15.4.2
|
Hazardous
Substance. “Hazardous Substance” means any substance or material defined in or governed
or regulated by any Environmental Regulation as a dangerous, toxic or hazardous pollutant, contaminant, chemical, waste, material
or substance, and also expressly includes urea-formaldehyde, polychlorinated biphenyls, dioxin, radon, lead-based paint, asbestos,
asbestos containing materials, nuclear fuel or waste, radioactive materials, explosives, carcinogens and petroleum products,
including but not limited to crude oil or any fraction thereof, natural gas, natural gas liquids, gasoline and synthetic gas,
and any other waste, material, substance, pollutant or contaminant the presence of which on, in, about or under the Premises
would subject the owner or operator thereof to any damages, penalties, fines or liabilities under any applicable Environmental
Regulation.
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16.
LIENS AND INSOLVENCY
Tenant
shall keep the Premises free from any liens arising out of any work performed, materials furnished or obligations incurred by
Tenant. If a petition for relief is filed by or against Tenant under Federal bankruptcy laws, or if a receiver, assignee or other
liquidating officer is appointed for the business of Tenant, then Landlord may terminate this Lease.
17.
ASSIGNMENT AND SUBLEASE
17.1
|
Tenant
Assignment. Tenant shall not directly or indirectly, voluntarily or by operation of law, sell, assign, encumber,
pledge or otherwise transfer or hypothecate all or any portion of its interest in or rights with respect to the Premises or
Tenant’s leasehold estate under this Lease (collectively “Assignment”) or permit all or any of the
Premises to be occupied by anyone other than Tenant or sublet all or any portion of the Premises, or transfer a portion of
its interest in or rights with respect to Tenant’s leasehold estate under this Lease (collectively “Sublease”)
without Landlord’s prior written consent in each instance, which consent may be withheld in Landlord’s sole discretion. In
connection with any Assignment or Sublease to which Landlord has given consent, Tenant agrees to pay Landlord’s reasonable
expenses in reviewing said request, any information accompanying said request, investigating the same and in reviewing and
preparing any documentation regarding the same, which costs and expense shall include, but are not limited to attorney’s
fees, accounting fees, appraiser’s fees, etc.
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|
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17.2
|
Effect
of Landlord Consent. No consent by Landlord to any Assignment or Sublease shall relieve Tenant of any obligation
to be performed by Tenant under this Lease, whether arising before or after the Assignment or Sublease. The consent
by Landlord to any Assignment or Sublease shall not relieve Tenant from the obligation to obtain Landlord’s written
consent to any Assignment or Sublease. Any Assignment or Sublease that is not in compliance with this Section 17
shall be void and, at the option of Landlord, shall constitute a material default by Tenant under this Lease.
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17.3
|
Successor
Liability; Tenant Liability. Each assignee, sublessee, or other transferee, other than Landlord, shall assume
all obligations of Tenant under this Lease, and shall be and remain liable jointly and severely with Tenant for the performance
of all the terms, covenants, conditions, and agreements herein contained on Tenant’s part to be performed for the Term. No
Assignment or Sublease shall be binding on Landlord unless the assignee or subtenant shall deliver to Landlord a counterpart
of the Assignment or Sublease and the instrument in recordable form that contains a covenant or assumption by the assignee
or subtenant satisfactory in substance and form to Landlord, consistent with the requirements set forth in this Lease, but
the failure or refusal of the assignee to execute such instrument of assumption shall not release or discharge the assignee
or subtenant from its liability as set forth in this Lease.
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|
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17.4
|
Landlord
Assignment. Landlord’s interest in this Lease shall be freely assignable without the consent of Tenant.
|
18.
INSPECTION AND ACCESS
Tenant
shall allow the Landlord or Landlord’s agent access to the Premises at all reasonable times for the purpose of inspection
of the Premises. Landlord shall have the right to show the Premises to prospective tenants or purchasers upon reasonable advance
notice to Tenant. Landlord’s exercise of its rights or access herein provided shall not unreasonably interfere with Tenant’s
business upon the Premises.
19.
CONDEMNATION
19.1
|
Total
Condemnation. If all of the Premises is taken by any public or private entity under the power of eminent domain,
or if the Premises are deprived of access as a result of a total or partial taking of the Property, this Lease shall terminate
as of the date possession is taken by the condemner pursuant to condemnation authority.
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|
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19.2
|
Partial
Condemnation. If over twenty-five percent of the Premises is taken by any public or private entity under the
power of eminent domain and Tenant determines in good faith that it is not economically feasible to continue this Lease in
effect, Tenant may terminate this Lease. Termination of this Lease by Tenant shall be made by notice to the Landlord
given no later than ten days after possession is taken by the condemner. Termination of this Lease in accordance
with this Section 19.2 shall be effective as of the date thirty days after notice of termination is delivered. Notwithstanding
the foregoing, Tenant’s duty to pay rent and other charges to Landlord shall terminate on the date the condemner takes
possession of the Premises.
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19.3
|
No
Apportionment of Damages. Damages awarded for the taking or damaging of all or any part of the Premises shall
belong to and be the property of Landlord. Nothing herein contained shall be construed as precluding Tenant from
asserting any claim Tenant may have against the condemner for disruption or relocation of Tenant’s business on the Premises
or the taking of any property belonging to Tenant.
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20.
WAIVER
No
word, act or omission of Landlord shall be deemed to be a waiver of any default or noncompliance by Tenant under the terms of
this Lease or of any right of Landlord under this Lease or of any notice given by Landlord under this Lease unless Landlord so
advises Tenant in writing. No waiver by Landlord of any default or noncompliance under this Lease by Tenant shall be construed
to be or act as a waiver of any subsequent default or noncompliance by Tenant.
21.
NOTICES AND OTHER COMMUNICATIONS
Any
notice required or authorized to be given hereunder or any other communications between the Landlord and the Tenant provided for
under the terms of this Lease shall be in writing and shall be served personally, by “PDF” attached to an email, or
by reputable express courier service or certified or registered mail addressed to the relevant parties at the address stated below
or at any other address notified by that Party to the other as its address for service. Any notice so given personally or by email
shall be deemed to have been given, delivered, and received on delivery or rejection. As proof of such receipt or rejection it
shall be sufficient to produce a receipt showing personal service, the tracking report of a reputable courier company, or the
return request provided by the U.S. postal service. All communications, other than routine correspondence in the ordinary course
of business, between Landlord and Tenant pursuant to this Lease shall be sent by the same method of communication by the party
sending the communication.
Landlord:
|
Rocky
Mountain Power, LLC
|
|
9
Federal Street
|
|
Easton,
MD 21601
|
|
Attn:
Nazar M. Khan; Mr. Jordan Love
|
|
Telephone:
(212) 343-8353
|
|
Email: khan@beowulfenergy.com;
jordan@beowulfenergy.com
|
With
a copy to:
Rocky
Mountain Power, LLC
9
Federal Street
Easton,
MD 21601
Attn:
General Counsel’s Office
Telephone:
(212) 343-8353
Email:
legal@beowulfenergy.com
With
a copy to:
Holland
& Hart LLP
555
17th Street, Suite 3200
Denver,
CO 80202
Attn:
Stephanie Edinger
Email:
SBEdinger@hollandhart.com
Tenant:
|
Marathon
Patent Group, Inc.
|
1180
North Town Center Drive, Suite 100
Las
Vegas, NV 89144
Attn:
Merrick Okamoto, Chief Executive Officer
Telephone:
800-804-1690
Email:
merrick@marathonpg.com
With
a copy to:
Jolie
Kahn, Esq.
12
E. 49th Street, 11th floor
New
York, NY 10017
Telephone:
516-217-6379
Email:
jolie.kahn@marathonpg.com
22.
ALTERNATIONS AND IMPROVEMENTS
22.1
|
Tenant
may undertake the construction and site work described and depicted on Exhibit B to this Lease (the “Construction
and Site Work”) without Landlord’s prior written consent, but subject to the terms and conditions of this
Section 22. Except
for the Construction and Site Work, Tenant shall not undertake any construction, alterations, additions or improvements to
the Premises without the prior written consent of Landlord, which shall not be unreasonably withheld or delayed. All
construction, alterations, additions and improvements shall be made at the sole cost and expense of Tenant. If
Tenant shall perform, or cause to be performed, the Construction and Site Work or any other work with the consent of Landlord,
as foresaid, Tenant shall comply with all applicable laws, ordinances, rules and regulations of any authorized public authority
and the requirements of the development then in existence. Tenant further agrees to save and hold Landlord harmless
from any damage, loss or expense arising out of such work (including, but not limited to, the Construction and Site Work). Tenant
shall give Landlord at least sixty days notice in writing of Tenant’s intent to begin such construction, alteration
or improvement, providing Landlord with a set of construction plans setting forth the nature and extent of the work, including
a listing of all subcontractors and suppliers that Tenant proposes to use for the work.
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22.2
|
The
Purchaser’s Interconnection Facilities shall remain the property of Tenant upon expiration or sooner termination of
this Lease. Subject to the immediately succeeding sentence, Tenant may remove the Purchaser’s Interconnection
Facilities from the Premises. The Purchaser’s Interconnection Facilities shall become the property of Landlord,
without compensation to Tenant, and shall remain on the Premises unless Landlord requires Tenant to remove the same as determined
solely by Landlord, if Tenant fails to remove the Purchaser’s Interconnection Facilities on or before the date that
is twenty (20) days following the expiration or termination of this Lease.
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|
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22.3
|
Any
computer equipment and other data processing equipment and personal property comprising any part of the Purchaser’s
Facilities that may be removed from the Premises or any structure or building placed on the Premises without damaging the
Premises or any structure or building placed on the Premises (collectively, “Movable Equipment”) may be
removed by Tenant upon the expiration or sooner termination of this Lease. Any Movable Equipment that remains on
the Premises on the date that is twenty (20) days following the expiration or sooner termination of this Lease and any of
the other Purchaser’s Facilities (collectively, the “Remaining Facilities”) shall become the property
of Landlord, without compensation to Tenant, and shall remain on the Premises unless Landlord requires Tenant to remove the
same as determined solely by Landlord.
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23.
SIGNAGE
Tenant
may install, at Tenant’s sole expense, a sign with Tenant’s name and/or corporate logo, if desired, on the Premises,
upon receipt of prior approval from Landlord as to size, design and construction. Signage and address signage shall comply with
all state, county, city, and local laws, regulations, ordinances and restrictions.
24.
POSTAL DELIVERY SERVICE
Tenant
shall be responsible for contacting the US Postal Service to make arrangements for mail delivery services, at Tenant’s expense,
if Tenant desires mail delivery service to the Premises.
25.
DEFAULT/LATE CHARGES/REENTRY
25.1
|
Events
of Default. The failure by Tenant to perform or comply with any term, condition or covenant of this Lease within
thirty days (except with respect to any payment default hereunder for which the cure period shall be five days) following
written notice from Landlord to Tenant specifying the nature of Tenant’s failure to perform or comply or any default
of Tenant under the PPA shall be events of default under this Lease; further, Tenant shall be in default if Tenant, or an
agent of Tenant, shall become bankrupt or insolvent, or file any debtor proceeding or take or have taken against Tenant a
petition in bankruptcy or insolvency or for reorganization or for the appointment of a receiver or trustee of all or a portion
of Tenant’s property, or if Tenant makes an assignment for the benefit of creditors, or petitions for or enters into
agreement, or abandons the Premises, or suffers this Lease to be taken under execution; provided further, however, Landlord
agrees that in the event the default is of such nature that it cannot reasonably be corrected in thirty days following written
notice thereof it shall be sufficient if Tenant shall have commenced to cure the default within the stated time limit and
shall continue thereafter with all due diligence to correct the default, provided, however, any such default shall be corrected
within ninety days following written notice thereof and a default for failure to make timely payment hereunder shall not be
considered to be of such a nature.
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25.2
|
Remedies
for Default. In the event of default, Landlord shall have the following remedies, which shall be in addition
to and shall not exclude any other remedy available to Landlord under applicable law:
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|
|
25.2.1
|
Termination. Landlord
may elect to terminate this Lease by notice in writing to Tenant.
|
|
|
25.2.2
|
Re-Entry. If
Landlord elects to terminate this Lease, the rights and obligations of the parties with respect to possession of the Premises
shall be as follows:
|
|
(a)
|
Tenant
shall vacate the Premises immediately, remove any property of Tenant including fixtures which Tenant is required to remove
at the end of the Term and perform cleanup, alterations or other work required to leave the Premises on the condition required
at the end of the Term; and
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|
|
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(b)
|
Landlord
may re-enter, take possession of the Premises and remove any persons or personal property by legal action or by self-help
with the use of reasonable force and without liability for damages. Any such property removed may be stored in a public
warehouse or elsewhere at the cost of and for the account of Tenant.
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26.
COSTS AND ATTORNEY’S FEES
If
by reason of any default by one party to this Lease it becomes necessary for the other party to employ an attorney, the defaulting
party shall pay the other party’s reasonable attorney’s fees and costs, including but not limited to giving notice
of default.
27.
HEIRS, SUCCESSORS, AGENTS, AND EMPLOYEES
Subject
to the provisions of this Lease pertaining to assignment and subletting, the covenants and agreements of this Lease shall be binding
upon the heirs, legal representatives, successors and assigns of the Landlord and Tenant. The terms “Landlord” and
“Tenant” shall include their respective agents and employees.
28.
HOLD-OVER
If
Tenant, with Landlord’s consent, remains in possession of the Premises or any part thereof after the expiration of the Term,
such occupancy shall be a tenancy from month to month upon all the provisions of this Lease except as to the length of the Term,
and either party may terminate such month-to-month tenancy by giving the other party thirty days prior notice.
29.
SUBORDINATION
This
Lease shall be subordinate to future mortgages, deeds of trust and other encumbrances placed on the Premises by Landlord, provided
that the beneficiaries of such encumbrances shall execute a non-disturbance agreement reasonably acceptable to Tenant.
30.
TENANT’S CERTIFICATE
30.1
|
Tenant
shall at any time and from time to time without charge, and within ten days after Tenant’s receipt of written request
therefore by Landlord, complete, execute and deliver to Landlord a written statement concerning the terms of this Lease, whether
it is in full force and effect, and whether there exists any uncured default of either Landlord or Tenant.
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30.2
|
If
Landlord desires to finance, refinance, or sell the Premises or any part of the Premises, Tenant shall deliver to any potential
lender or purchaser designated by Landlord such financial statements of Tenant as may be reasonably required by such lender
or purchaser, including but not limited to Tenant’s financial statements for the past three years. All such
financial statements shall be received by Landlord and such lender or purchaser in confidence and shall be used only for the
purposes herein set forth.
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31.
PARTIAL INVALIDITY
If
any provision of this Lease is found illegal or unenforceable, such provision will be deemed restated in accordance with Law,
to reflect as nearly as possible the original intention of the Landlord and Tenant, and the remainder of this Lease will continue
unaffected in full force and effect.
32.
QUIET POSSESSION
Landlord
represents and warrants that it is the owner of the Premises and has full right to lease the Premises to Tenant in accordance
with the terms of this Lease. So long as Tenant is not in default under this Lease, Tenant shall have quiet possession of the
Premises, subject to the terms and provisions of this Lease.
33.
CONSTRUCTION
This
Lease was prepared jointly by the Landlord and the Tenant, each having had access to advice of its own counsel, and not by either
the Landlord or the Tenant to the exclusion of the other, and shall not be construed against one party or the other as a result
of the manner in which this Lease was prepared, negotiated or executed.
34.
ENTIRETY AND AMENDMENT
This
Lease and the Exhibits to this Lease constitute the entire agreement between the parties and supersede any prior or contemporaneous
agreements, proposal, solicitation, terms and conditions, or representations of the parties affecting the same subject matter.
No modification or amendment of this Lease shall be valid or effective unless evidenced by an agreement in writing signed by party
to be bound.
35.
CHOICE OF LAW AND FORUM
This
Lease shall be governed, construed and interpreted in accordance with the laws of the State of Montana, without regard to principles
of conflicts of law. All disputes arising out of this Lease will be subject to the exclusive jurisdiction of the United States
District Court in the State of Montana, and each party hereby expressly consents to the personal jurisdiction of such court. If
the United States District Court in the State of Montana lacks jurisdiction over any disputes arising out of this Lease, then
such dispute will be subject to the exclusive jurisdiction of the Montana State District Court sitting in Yellowstone County,
Montana, and each party hereby expressly consents to the personal jurisdiction of such court. Each party hereto further hereby
irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of or
relating to this Lease in those courts described in this Section 35, and hereby further irrevocably and unconditionally waives
and agrees not to plead or claim in such court that any such action, suit or proceeding brought in any such court has been brought
in any inconvenient forum.
36.
WAIVER OF JURY TRIAL
EACH
PARTY KNOWINGLY, VOLUNTARILY, INTENTIONALLY AND IRREVOCABLY WAIVES THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
ON THIS LEASE, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS LEASE AND ANY AGREEMENT EXECUTED OR CONTEMPLATED TO BE EXECUTED
IN CONJUNCTION WITH THIS LEASE, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS
OF ANY PARTY HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT TO EACH OF THE PARTIES FOR ENTERING HEREINTO. EACH PARTY HEREBY WAIVES
ANY RIGHT TO CONSOLIDATE ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN CONNECTION WITH THIS LEASE OR ANY OTHER AGREEMENT
EXECUTED OR CONTEMPLATED TO BE EXECUTED IN CONJUNCTION WITH THIS LEASE, OR ANY MATTER ARISING HEREUNDER OR THEREUNDER, WITH ANY
PROCEEDING IN WHICH A JURY TRIAL HAS NOT OR CANNOT BE WAIVED.
37.
SURVIVAL OF INDEMNITIES
All
obligations of Landlord and Tenant to indemnify the other, as set forth in this Lease, shall survive the expiration or sooner
termination of this Lease.
38.
EXHIBITS
The
following exhibits are attached hereto and incorporated herein by reference:
EXHIBIT
A – Premises
EXHIBIT
B – Construction and Site Work
[Signatures
follow on next page.]
The
Landlord and the Tenant have executed this Lease as of the Effective Date.
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LANDLORD:
|
|
|
|
ROCKY
MOUNTAIN POWER, LLC, known in Montana as Rocky Mountain Power – Hardin, LLC
|
|
|
|
|
By:
|
|
|
Name:
|
Kerri
Langlais
|
|
Title:
|
Chief
Financial Officer
|
Signature
Page to Ground Lease
|
TENANT:
|
|
|
|
MARATHON
PATENT GROUP, INC.
|
|
|
|
|
By:
|
|
|
Name:
|
|
|
Title:
|
|
Signature
Page to Ground Lease
EXHIBIT
A
PREMISES
Separately
attached.
EXHIBIT
B
CONSTRUCTION
AND SITE WORK
Separately
attached.
Execution
Copy
DATA
FACILITY SERVICES AGREEMENT
AMONG
LIEFERN
LLC
AND
TWO
POINT ONE, LLC
(“OPERATORS”)
AND
MARATHON
PATENT GROUP, INC.
TABLE
OF CONTENTS
|
Page
|
ARTICLE
1 THE AGREEMENT
|
1
|
|
|
1.1 Purpose
|
1
|
1.2 Contract
Documents
|
1
|
1.3 Timely
Approval
|
1
|
|
|
ARTICLE 2 ENGAGEMENT
OF OPERATOR
|
1
|
|
|
2.1 Engagement
of Operators
|
1
|
2.2 Beowulf
OPCO Agency
|
2
|
2.3 Limitations
on Authority
|
2
|
2.4 Retention
of Control by Marathon
|
3
|
2.5 General
Operational Goals
|
3
|
2.6 Standards
for Performance of Services
|
3
|
2.7 Services
|
3
|
2.8 General
Operation Services
|
4
|
2.9 Asset
Management Services
|
6
|
2.10 Project
Planning, Implementation and Post-Implementation Services.
|
7
|
|
|
ARTICLE 3 MARATHON’S
DUTIES
|
8
|
|
|
3.1 General
Responsibilities
|
8
|
3.2 Marathon
to Provide
|
8
|
3.3 Marathon’s
Insurance
|
9
|
3.4 Permits
|
9
|
3.5 Compliance
with Applicable Laws
|
9
|
|
|
ARTICLE 4 PRICE, PAYMENT
TERMS AND INVOICES
|
9
|
|
|
4.1 Compensation
and Payment Terms
|
9
|
4.2 Billing
|
10
|
|
|
ARTICLE 5 TERM AND
TERMINATION
|
10
|
|
|
5.1 Term
of Agreement
|
10
|
5.2 Automatic
Renew
|
10
|
|
|
ARTICLE 6 REPRESENTATION
AND WARRANTIES OF OPERATORS
|
10
|
|
|
6.1 General
Representation
|
10
|
|
|
ARTICLE 7 REPRESENTATION
AND WARRANTIES OF MARATHON
|
11
|
|
|
7.1 General
Representation
|
11
|
ARTICLE
8 INDEMNIFICATION
|
12
|
|
|
8.1 Covered
Events
|
12
|
8.2 Limitation
on Indemnification
|
12
|
8.3 Procedure
for Indemnification
|
12
|
8.4 No
Consequential or Insured Damages
|
13
|
8.5 [Special
Hazardous Materials Indemnification
|
14
|
|
|
ARTICLE 9 EVENTS OF
DEFAULT; REMEDIES
|
14
|
|
|
9.1 Operator’s
Events of Default
|
14
|
9.2 Marathon’s
Remedies
|
15
|
9.3 Duties
of Operators Upon Termination
|
15
|
9.4 Marathon’s
Event of Default
|
15
|
9.5 Operator’s
Remedies
|
16
|
|
|
ARTICLE 10 LIMITATION
ON LIABILITY
|
17
|
|
|
10.1 Maximum
Liability of Operator
|
17
|
10.2 Maximum
Liability of Marathon
|
18
|
|
|
ARTICLE 11 INSURANCE
|
18
|
|
|
11.1 Operators
Insurance Coverage
|
18
|
11.2 Additional
Insureds
|
18
|
11.3 Subcontractors’
Insurance
|
18
|
11.4 Other
Requirements
|
19
|
11.5 Marathon’s
Insurance Coverage
|
19
|
11.6 Proof
of Insurance
|
20
|
11.7 Form
and Content of Insurance
|
20
|
11.8 Additional
Requirements
|
20
|
|
|
ARTICLE 12 FORCE MAJEURE
|
21
|
|
|
12.1 Events
Constituting Force Majeure
|
21
|
12.2 Notice
|
21
|
12.3 Reasonable
Efforts
|
21
|
|
|
ARTICLE 13 DISPUTES
|
22
|
|
|
13.1 Dispute
Resolution
|
22
|
13.2 Senior
Executives
|
22
|
13.3 Litigation
|
22
|
|
|
ARTICLE 14 ASSIGNMENT
|
23
|
|
|
14.1 Assignment
|
23
|
|
|
ARTICLE 15 MISCELLANEOUS
|
23
|
|
|
15.1 Notices
|
23
|
15.2 Independent
Contractor
|
24
|
15.3 Subcontractors
|
24
|
15.4 Entire
Agreement
|
24
|
15.5 No
Waiver
|
24
|
15.6 Severability
|
24
|
15.7 Governing
Law; Jurisdiction of Courts
|
24
|
15.8 Further
Assurances
|
24
|
15.9 Limitation
|
24
|
15.10 Survival
of Representations and Warranties
|
25
|
15.11 Captions
|
25
|
15.12 Conflicting
Provisions
|
25
|
15.13 Counterparts
|
25
|
15.14 Confidential
and Proprietary Information.
|
25
|
15.15 Effective
Date
|
25
|
DATA FACILITY SERVICES AGREEMENT
This
Data Facility Services Agreement (the “Agreement”) dated as of October 3, 2020 (the “Effective
Date”) is made and entered into by and Marathon Patent Group, Inc., a Nevada corporation (“Marathon”), Liefern
LLC, a Delaware limited liability company (“Beowulf OPCO”) and TWO POINT ONE, LLC, a Delaware limited liability company
(“2P1” and, together with Beowulf OPCO, “Operators” and each, a “Operator”) and Marathon Patent
Group, Inc., a Nevada corporation (“Marathon”). Each of Marathon and each Operator may be hereinafter referred to
individually as a “Party,” and collectively, as the “Parties.”
WITNESSETH:
WHEREAS,
Marathon is having developed for it and will own a data center facility of up to 100-megawatts at the Hardin Generating Station
in Hardin, MT (the “Facility”);
AND
WHEREAS, beginning on the Effective Date Marathon desires Operators to provide
operating and maintenance services for Marathon’s Facility, in accordance with the terms and conditions of this Agreement,
and Operators desire to provide to Marathon such Services.
NOW
THEREFORE, in consideration of the mutual covenants set forth herein, the Parties agree as follows:
ARTICLE
1
THE AGREEMENT
1.1
Purpose. The purpose
of this Agreement is to define the terms under which Operators shall operate and maintain the Facility for Marathon.
1.2
Contract Documents. The following Appendices are either attached to or incorporated into this Agreement by reference:
Appendix
A Definitions
Appendix
B Site
1.3
Timely Approval. If upon due notice from Operators, Marathon shall fail to timely approve or disapprove of matters requiring
Approval, Operators shall continue to operate the Facility in accordance with Section 2.2, resolving such matters requiring
Approval in a manner consistent with Prudent Engineering and Operating Practices until receiving written instructions from Marathon
to the contrary.
ARTICLE
2
ENGAGEMENT OF OPERATOR
2.1
Engagement of Operators. Marathon
hereby engages Operators and Operators accept such engagement to provide or make available operation and maintenance services
and to perform or cause to be performed the Services (as hereinafter defined), all on the terms and conditions and as more fully
described in this Agreement.
2.2
Beowulf OPCO Agency. Under the
terms and subject to the conditions and limitations on authority set forth in this Agreement, Marathon hereby appoints Beowulf
OPCO as agent for Marathon, with effect from and after the Effective Date and continuing until the expiration or termination of
this Agreement, and Beowulf OPCO accepts such appointment. Beowulf OPCO shall have such authority as may be necessary for it to
perform the Services under and pursuant to this Agreement, including without limitation the authority to take actions and execute
documents in the name (and as agent on behalf) of Marathon, subject, in all instances, to the limitations on Marathon’s
authority set forth in this Agreement and the specific written instructions of Marathon from time to time. In the event it is
necessary for Beowulf OPCO to communicate with any counterparty to any of the material agreements between Marathon and certain
counterparties in relation to the Facility in connection with provision of the Services, Marathon will notify such counterparty
that, as of the Effective Date, Beowulf OPCO is, and will be until the expiration or termination of this Agreement, acting as
agent of Marathon under and in connection with such agreements, and not in Beowulf OPCO’s individual capacity. Beowulf OPCO
may, if it reasonably deems it to be necessary to determine whether an action required by Beowulf OPCO falls within its specific
authority, request written instructions from Marathon within a reasonable period, but not less than five (5) business days before
the need to take such action and may defer action pending the receipt of such written instructions. Actions taken by Beowulf OPCO,
its officers, employees and representatives in accordance with any such written instructions of Marathon, or failure to act pending
the receipt of such written instructions, shall be deemed to be conducted within the scope of Beowulf OPCO’s authority under
this Agreement.
2.3
Limitations on Authority. The authority
granted to Beowulf OPCO in Section 2.2 is expressly limited by the provisions of this Section 2.3 and Section 2.4. In furtherance
of the foregoing, each of Beowulf OPCO, as agent for Marathon or otherwise and 2P1 shall not and shall cause their respective
Affiliates, agents, employees, representatives and contractors not to, without the prior written approval of Marathon, take any
of the following actions with respect to the Facility:
(i)
Disposition of Assets. Sell, lease, pledge, mortgage, convey, license, exchange or otherwise transfer or dispose of any property
or assets;
(ii)
Contracts. Make, enter, execute, amend, modify or supplement any Material Project Agreement or any other contract or agreement
on behalf of or in the name of Marathon or any Affiliate thereof;
(iii)
Expenditures. Make, incur or commit to any expenditure greater than $30,000, except as the result of the Parties’ respective
obligations hereunder in the event of Emergency or Force Majeure undertaken in compliance with Section 2.8.2.3 or Article 12,
as applicable;
(iv)
Borrowing. Borrow any money; utilize any property or assets as security for any loans; obligate Marathon or any Affiliate thereof
as guarantor, endorser, surety or accommodation party; or otherwise pledge the credit of Marathon or any Affiliate thereof in
any way;
(v)
Loans. Lend any money, or extend any credit;
(vi)
Exercising Discretionary Rights under Agreements. Take any material discretionary actions under any material agreement to which
Marathon is a party related to the Facility, including (i) exercise or waiver of any remedy or taking of any non-routine action,
(ii) amend, modify, terminate, renew, extend or supersede any such agreement, (iii) assess or settle any claim for liquidated
damages or other damages under any such agreement, or (iv) assert or make any claim for indemnification or insurance coverage
under any such agreement;
(vii)
Change Orders. Execute any change orders (or other similar documents or requests) under any material agreement to which Marathon
is a party related to the Facility;
(viii)
Lawsuits and Settlements. Settle, compromise, assign, pledge, transfer, release or consent to do the same, with respect to any
claim, suit, debt, demand or judgment against, or due from or by, Marathon or any Affiliate thereof, or submit any such claim,
dispute or controversy to arbitration or judicial process, or stipulation thereof to a judgment, or a consent to do the same;
or
(ix)
Violations of Agreements and Laws. Take any action or fail to take any action that would constitute a violation, default or breach
under or in connection with any material agreement to which Marathon is a party related to the Facility or any Applicable Laws.
2.4
Retention of Control by Marathon.
Notwithstanding anything in this Agreement to the contrary, Marathon and each Operator expressly acknowledge and agree that Marathon
retains ultimate decision-making authority relating to the operation of the Facility, which authority may be exercised by Marathon
in its discretion and by specific written direction to Operators or either Operator; provided, however, that the foregoing provisions
of this Section 2.4 shall not, in the absence of any such specific direction, be deemed to affect any actions taken or not taken
by Operators in the performance of the Services otherwise in compliance with the terms hereof and subject to the limitations set
forth herein.
2.5
General Operational Goals. Subject to
Section 2.3, Operators shall perform the Services or cause the Services to be performed in such manner so as to (a) maximize
the Facility’s Income, (b) minimize Facility downtime and disruption, (c) comply with the requirements of Applicable
Laws, and (d) minimize expenses and liabilities. If
from time to time in connection with the provision of Services Operators determines there to be any material conflict in
achieving the goals set forth in this Section 2.5, Operators shall notify Marathon thereof and proceed to perform such Services
or cause such Services to be performed as reasonably directed by Marathon. Except as provided in Section 1.3, absent sufficient
time to notify Marathon in cases of an Emergency, or absent timely directions from Marathon after notification of Marathon, Operators
shall resolve all such conflicts or cause all such conflicts to be resolved in a manner consistent with Prudent Engineering and
Operating Practices and the provisions of this Section 2.5.
2.6
Standards for Performance of Services.
Throughout the Term of this Agreement, Operators shall perform its obligations in accordance with Prudent Engineering and Operating
Practices.
2.7
Services.
Operators shall provide or cause to be provided to Marathon Services during the Term in accordance with the terms of this Agreement.
It is expected that Operators will perform all work or cause all work to be performed, obtain all Permits, licenses and certifications
or cause all Permits, licenses and certifications to be obtained as are necessary for Operators to perform the Services or cause
the Services to be performed and provide or cause to be provided reasonable support and assistance (including the provision of
information) for Marathon to perform its obligations hereunder.
2.8
General Operation Services. Operators
shall perform or cause to be performed the following services during the Term as set forth in this Section 2.8. Operators
shall operate and maintain the Facility or cause the Facility to be operated and maintained in accordance with Prudent Engineering
and Operating Practices, the general operating goals set out in Section 2.5, and the provisions of this Agreement and the
annexes thereto. Operators shall, in fulfilling their operation and maintenance obligations hereunder, perform and supervise or
cause to be performed and supervised any and all operation, maintenance, and repair Services (including, without limitation, the
Services in this Section 2.8) necessary and prudent in order to safely, dependably and efficiently operate, maintain and
repair the Facility consistent with Prudent Engineering and Operating Practices, the provisions
of Article 2 hereof and any other provisions of this Agreement.
2.8.1
Administrative Services. Throughout the Term, Operators shall be responsible for the administration of all activities required
to carry out the Services except for those activities stated in Article 3 as Marathon’s duties. Operators’ responsibilities
include, but are not limited to, the following:
2.8.1.1
Personnel. Operators shall provide and make available all such labor, and professional,
supervisory, and managerial personnel as are required to perform the Services, except for such labor, professional, supervisory
and managerial personnel to be provided by Marathon pursuant to Section 3.2.1 hereof, which personnel Operators shall supervise.
2.8.1.2
Licenses and Permits. Operators shall assist Marathon in securing and maintaining Permits required to be obtained by Marathon
for the ownership or operation of the Facility. Operators shall comply with all Permits required for the operation or maintenance
of the Facility. Copies of all such applicable Permits, licenses and other governmental approvals
shall be retained by Operators at the Facility with the originals being forwarded to Marathon. Operators shall secure and
maintain all Permits necessary for Operators to perform the Services.
2.8.1.3
Reporting. Operators shall submit after
the Effective Date, monthly reports on the status, operation, and maintenance of the Facility (each, a “Monthly Report”).
The format of each report shall be as heretofore agreed upon by and Marathon. The Monthly Report shall be provided to Marathon
ten (10) Business Days after the end of each month covered by the Monthly Report.
2.8.2
Operation. Operators shall operate the Facility or cause the Facility to be operated in accordance with Prudent Engineering
and Operating Practices, and in accordance with the provisions of this Agreement. Operators
acknowledge that certain limitations on operations are imposed by the Permits for the Facility, and Operators shall operate or
cause the operation of the Facility at all times in compliance therewith, and the
other provisions of this Agreement.
2.8.2.1
Training. Operators shall be responsible for training or overseeing the training of
all personnel employed by Operators pursuant to 2.8.1.1. and Marathon pursuant to Section 3.2.1 to operate the Facility in accordance
with Prudent Engineering and Operating Practices and this Agreement. Such training shall be performed in accordance with
Operator’s regular training procedures and shall be sufficient to enable any new personnel to operate the Facility in accordance
with Prudent Engineering and Operating Practices and as required by Permits and Applicable Laws.
2.8.2.2
Safety and Security. Operators shall implement appropriate safety and security procedures
for the Facility and ensure that such procedures are followed at all times consistent
with Prudent Engineering and Operating Practices and shall conduct operations at
the Facility in such a manner as to minimize the risk of bodily harm to persons or damage to property.
Without limiting the generality of the foregoing, Operators shall throughout the Term:
|
a)
|
Meet
all laws, rules, regulations and Permit requirements, including, without limitation,
all Environmental Laws, pertaining to Hazardous Materials,
including, without limitation, posting, manifesting,
labeling, handling, storing, treating, disposal, transportation and notifications
of Hazardous Materials;
|
|
b)
|
Maintain
or supervise the maintenance of a visitors’ log at the Facility; and
|
|
c)
|
Establish
and maintain reasonable security precautions and programs to protect the Facility against
vandalism, theft, arson, or other similar actions; provided that, except in the case
of an Emergency, all such precautions and programs
shall be subject to Marathon’s prior Approval.
|
2.8.2.3
Emergencies. In the event of any Emergency involving the Facility endangering life or property, Operators shall take such
action or cause such action to be taken as may be reasonable and necessary to prevent, avoid,
or mitigate injury, damage, or loss, or to comply with Applicable Laws and shall, as soon as practicable, report any such incident,
including Operators’ response thereto, to Marathon and to the appropriate Government
Authority to the extent required under any Applicable Laws.
2.8.2.4
Access and Inspection. Operators shall
ensure that all areas of the Facility will be open to Marathon and its subsidiaries during normal business hours for inspection
and review of operations and maintenance practices upon reasonable prior notice during normal
business hours. Any such access or inspection shall be carried out in the presence of the Facility Manager or his designee and
shall be conducted so as not to materially interfere with Operators’ activities
at the Facility.
2.8.2.5
Applicable Laws. Operators shall perform
its obligations and duties under this Agreement and shall operate and maintain the Facility or cause the Facility to be operated
and maintained in compliance with all Applicable Laws. Operators must make available and shall post in the Facility any Operator’s
licenses held by Facility personnel and any permit provided to or by Operators or Marathon.
2.8.2.6
Warranties. Operators shall obtain or
cause to be obtained from Subcontractors and vendors all normal and customary warranties given by such Subcontractors and vendors
and shall include in its contractual arrangements with its Subcontractors and vendors provisions that such warranties are for
the benefit of Marathon as well as Operators and are directly enforceable by Marathon and its assignees. Operators shall administer
or cause to be administered any warranties provided by the original equipment manufacturers and Subcontractors, to the extent
still in effect, and shall enforce all such warranties for the benefit of Marathon and as Marathon’s agent for this limited
purpose.
2.8.2.7
Contracts;
Terms and Conditions; Purchase Orders. Notwithstanding
anything to the contrary in this Agreement, Marathon and Operators agree that from time to time Marathon or Marathon’s subsidiaries
may directly enter into contracts, agreements, purchase orders or general terms and conditions with third parties relating to
the Facility. In such cases, Operators will schedule and oversee such activities on behalf of Marathon but will not itself
undertake or be responsible for the maintenance or work performed by the third-party. Operators shall administer and shall
enforce the provisions of all contracts, agreements, purchase orders or general terms and conditions entered into by Marathon,
Marathon’s subsidiaries or Operators with respect to the operation and management of the Facility.
2.8.2.8
Premises, Roads and Easements. Operators shall maintain the Premises or cause the
Premises to be maintained in a clean and presentable manner, including all grounds and landscaping.
2.8.2.9
Books and Records. Books and records (including all data, information and documents) relating to the Facility shall be
maintained or caused to be maintained by Operators and will be available for inspection, copying and audit by Marathon (or its
representatives or designees) during normal business hours. Operators will cause books and records relating to the Facility to
be maintained in accordance with the requirements of all material agreements related to the Facility and, with respect to financial
records, in accordance with United States generally accepted accounting principles. Operators will retain such records in a place
reasonably believed to be safe and secure and in a proper manner in accordance with Marathon’s record retention policy.
All such books and records relating to the Facility shall be the exclusive property of Marathon.
2.9
Asset Management Services. Beowulf OPCO
shall provide or make available, directly or through one or more of its Affiliates, asset management services to Marathon as shall
reasonably be required from time to time, including the following:
(i)
General day-to-day oversight;
(ii)
General accounting services;
(iii)
Financial reporting and external audit facilitation;
(iv)
Assistance with negotiation and procurement of insurance respecting the Facility; and
(v)
Financial budgeting.
2.10
Project Planning, Implementation and Post-Implementation Services.
2.10.1.1
Operators shall perform the following Services during Marathon’s planning for development of the Facility:
(i)
2P1 will provide estimation and forecasting services for miner operations and expert analysis of cooling systems;
and
(ii)
Beowulf OPCO will provide design support for site layout and power delivery; design support for containers, facilities, and storage;
and networking and cable management review.
2.10.1.2
Operators shall perform the following Services during Marathon’s implementation of development the Facility:
(i)
2P1 will provide:
|
a)
|
Support
during prototype container development;
|
|
b)
|
Consulting
during initial miner configurations;
|
|
c)
|
Testing
and evaluation of mining networking;
|
|
d)
|
Pool
setup and worker configuration;
|
|
e)
|
Wallet
setup and testing; and
|
|
f)
|
Design
monitoring dashboards and data collection system.
|
(ii)
Beowulf OPCO will provide:
|
a)
|
On
site project support for deployment events (Phased rollouts, network configurations,
monitoring systems); and
|
|
b)
|
Firmware
/ authentication software support.
|
2.10.1.3
Operators shall perform the following Services after the Facility is operational:
(i)
2P1 will provide:
|
a)
|
Configuration
tuning / remote management;
|
|
b)
|
Miner
alert management (downtime, temperature issues, errors, communication issues)
|
|
c)
|
Pool
tuning, miner reconfigurations, worker management; and
|
|
d)
|
Wallet
rotations and security.
|
(ii)
Beowulf OPCO will provide:
|
a)
|
Network
monitoring support;
|
|
b)
|
Consulting
for support and maintenance of equipment;
|
|
c)
|
Sourcing
and strategic relationships;
|
|
d)
|
Site
reliability support; and
|
ARTICLE
3
MARATHON’S DUTIES
3.1
General Responsibilities. Marathon’s
responsibilities shall be as set forth throughout this Agreement and shall be met in a timely and complete manner.
3.2
Marathon to Provide. Marathon shall furnish
to Operators the information, services, materials, certain Facility personnel and other items described below. All such items
shall be made available at such times and in such manner as may be required for the expeditious
and orderly performance of Services by Operators. Marathon makes no warranty as to the fitness of material prepared by
others or as to its accuracy. Nothing in this Section 3.2 shall be deemed to apply to or dilute in any manner any warranties
provided or to be provided by any vendor or manufacturer of equipment, materials or services relating to the Facility.
3.2.1
Personnel. Marathon shall provide and make available, under the supervision of the Operators, all labor, and professional,
supervisory, and managerial personnel employed by Marathon or its subsidiaries for the Facility.
3.2.2
Facility. The
Facility include all work and materials that are existing at the Effective Date and all applicable manufacturers’ contracts
with such additions and deletions as have been made thereto as of the Effective Date.
3.2.3
Transfer of Custody. During the
Term of this Agreement, Marathon shall provide Operators access to the Facility and any appurtenances thereto, together with the
rights of ingress and egress thereto as necessary for Operators to perform the Services hereunder.
3.2.4
Marathon’s Approval. Marathon shall designate a single individual from whom
Operators will receive directions on behalf of Marathon and to whom requests requiring Marathon Approval will be directed.
Such individual may be replaced temporarily or permanently upon written notice from Marathon.
3.3
Marathon’s Insurance. Marathon
shall, by the Effective Date, obtain and maintain the insurance required to be obtained and maintained by Marathon pursuant to
Article 11.
3.4
Permits. Marathon shall be responsible
for obtaining, maintaining and renewing all Permits necessary for: (i) it to do business in the jurisdictions in which the
Facility and Site are located and (ii) it to own, operate and maintain the Facility and the Premises. Such Permits shall
not be deemed to include those Permits required to be obtained and maintained by Operators in order to perform the Services hereunder.
3.5
Compliance with Applicable Laws. Marathon shall comply with Applicable Laws in fulfilling its obligations under this Agreement.
ARTICLE
4
PRICE, PAYMENT TERMS AND INVOICES
4.1
Compensation and Payment Terms. Compensation to paid by Marathon to the Operators shall be as follows:
|
(a)
|
Simultaneously
with the execution of this Agreement, Marathon will issue 3,000,000 shares of common
stock of Marathon to each of Beowulf OPCO, or its designee, and 2P1, or its designee
(collectively, the “Initial Management Fee”).
|
|
(b)
|
Once
the Facility has utilized 30MW of load, Beowulf OPCO will receive 150,000 shares of common
stock of Marathon; once the Facility has utilized 60MW of load, Beowulf OPCO will receive
150,000 shares of common stock of Marathon; and once the Facility has utilized 100MW
of load, Beowulf OPCO will receive 200,000 shares of common stock of Marathon (each,
an “Incremental Management Fee”, and collectively, the “Incremental
Management Fees”, and together with the Initial Management Fee, the “Management
Fees”).
|
|
(c)
|
Marathon
shall pay Beowulf OPCO a monthly payment of at $0.006 per kwH of Contract Energy (as
defined in the PPA), as adjusted, (the “Services Price”), which shall be
calculated by multiplying the Services Price by the amount of Contract Energy delivered
to Purchaser at the Points of Delivery in such Month under the PPA (such payment, the
“Services Payment”). Commencing on the date which is five (5) years after
the Effective Date, and each subsequent anniversary of the Effective Date thereafter
during the Term, the Services Price will automatically increase by two percent (2%).
|
4.2
Billing .
|
(a)
|
On
or about the fifth (5th) Business Day of each Month, Beowulf OPCO shall submit to Marathon
an invoice for the prior Month (the “Monthly Invoice”) setting forth (a)
the quantity of Contract Energy delivered to Marathon in such Month under the PPA, if
any and (b) the Services Payment for such Month.
|
|
(b)
|
Each
Monthly Invoice shall, subject to Section 4.2(b), be due and payable on or before the
fifteenth (15th) Day after the date such Monthly Invoice was sent to Marathon. Payment
shall be made by wire transfer in immediately available funds to a bank account specified
by Seller in the Monthly Invoice.
|
|
(c)
|
If
Marathon, in good faith, disputes any amount due pursuant to a Monthly Invoice, Marathon
shall pay the undisputed portion of such Monthly Invoice on or before the due date and
notify Beowulf OPCO in writing in reasonable detail of the specific basis for such dispute.
Any such notice shall be provided within thirty (30) Days after the date of the statement
in which the disputed amount first appeared. The Parties shall resolve the dispute in
accordance with Article 13. If any amount disputed by Marathon is determined not to have
been due to Beowulf OPCO, such amount shall be reimbursed to Marathon within ten (10)
Business Days after such determination or resolution, along with interest accrued at
the Interest Rate from the original date due until the date reimbursed.
|
|
(d)
|
Undisputed
amounts not paid when due shall accrue interest from and including the due date, to and
excluding the date of payment, at the Interest Rate.
|
ARTICLE
5
TERM AND TERMINATION
5.1
Term of Agreement Subject
to the provisions of this Article, this Agreement shall begin on the Effective Date and shall continue in effect until the fifth
anniversary of the Effective Date, or September 30, 2025, subject to renewal pursuant to Section 5.3 below (the “Term”).
5.2
Automatic Renewal; Renewal Option. The Term of this Agreement will be automatically extended under the same terms and conditions
set forth in this Agreement for successive additional periods of one (1) year each, unless, at least one
hundred and eighty (180) days prior to the end of the then current Term’s expiration, either Party notifies the other
Party in writing that it elects to terminate this Agreement; provided however that the Term of this Agreement shall not extend
beyond the term of the PPA.
ARTICLE
6
REPRESENTATION AND WARRANTIES OF OPERATORS
6.1
General Representation. Each Operator represents and warrants to Marathon that on the Effective Date:
6.1.1
Existence.
Operator is a limited liability company duly organized, validly existing
and in good standing under the laws of Delaware. Operator has the corporate power to carry
on its business as now conducted, is duly qualified to conduct business in every jurisdiction in which its activities require
such qualification, including Montana, and has the requisite legal power and authority to
execute and deliver this Agreement and to consummate the transactions contemplated hereby.
6.1.2
No Conflict. The execution and
delivery of this Agreement by Operator and the consummation of the transactions contemplated hereby will not conflict with or
result in a breach of or constitute a default under any of the terms, conditions or provisions of the certificate of formation
or operating agreement of Operator, or any statute, judgment, order, injunction, decree, regulation or ruling of any court or
Governmental Authority to which Operator is subject or of any agreement, contract or commitment to which Operator is a party or
requires the consent or approval of any Person.
6.1.3
Violation of Law.
To the knowledge of Operator, Operator is not in violation of any Applicable Law, statute, order, rule or regulation promulgated
or judgment entered by any federal, state, local or Governmental Authority which violations,
individually or in the aggregate, would materially and adversely affect Operator’s performance of its obligations
under this Agreement.
6.1.4
Suits. Operator is not a party
to any legal, administrative, arbitration, or other proceeding, or, to Operator’s knowledge, is such a proceeding threatened,
which, if decided adversely to Operator, would materially and adversely affect Operator’s ability to perform under this
Agreement.
6.1.5
Authorization. The execution, delivery
and performance of this Agreement by Operator has been duly and validly authorized by Operator.
6.1.6
Experience. Operator is experienced
and competent to undertake the responsibilities herein and is in the business of operating and maintaining data center facilities
similar to the Facility.
ARTICLE
7
REPRESENTATION AND WARRANTIES OF MARATHON
7.1
General Representation. Marathon represents and warrants to Operators that on the Effective Date:
7.1.1
Existence. Marathon
is a corporation company duly incorporated and validly existing under the laws of the State of Delaware and has the necessary
power to carry on its business as now conducted and to execute and deliver this Agreement
and to consummate the transactions contemplated hereby.
7.1.2
No Conflict.
The execution and delivery of this Agreement by Marathon and the
consummation of the transactions contemplated hereby will not conflict with or result in a breach of or constitute a default under
any of the terms, conditions or provision of the certificate of formation or limited liability agreement of Marathon, or any statute,
judgment, order, injunction, decree, regulation or ruling of any court or Governmental Authority
to which Marathon is subject or of any agreement, contract or commitment to which Marathon is a party or require the consent
or approval of any Person.
7.1.3
Violation of
Law. To the knowledge of Marathon, Marathon is not in violation of any
Applicable Law, statute, order, rule or regulation promulgated or judgment entered by any federal,
state, local or Governmental Authority which violations, individually or in the aggregate, would materially and adversely
affect Marathon’s performance of its obligations under this Agreement.
7.1.4
Suits. Marathon is not a party
to any legal, administrative, arbitration, or other proceeding, or, to Marathon’s knowledge, is such a proceeding threatened,
which, if decided adversely to Marathon, would materially and adversely affect Marathon’s
ability to perform under this Agreement.
7.1.5
Authorization. The execution, delivery
and performance of this Agreement by Marathon has been duly and validly authorized by Marathon.
ARTICLE
8
INDEMNIFICATION
8.1
Covered Events.
8.1.1
Indemnity by Operators.
Subject to the provisions of this Article 8, each Operators agrees, severally, not jointly, to indemnify, defend, save and hold
harmless Marathon, its Affiliates, and their respective officers and directors from and against all loss, cost or expense, liabilities,
penalties, damages, including reasonable attorney’s fees, arising from (i) any
untruth of any representation or warranty of Operators herein, (ii) with respect to claims by third parties relating
to the Facility, arising from any negligent acts or omissions of Operator, (iii) willful misconduct of Operator, (iv) bad
faith of Operator, (v) any negligent acts or omissions of any Subcontractor or employee of
Operator, or (vi) any breach by Operators of the terms and conditions of this Agreement.
8.1.2
Indemnity by Marathon. Subject to the provisions of this Article 8, Marathon agrees
to indemnify, defend, save and hold harmless each Operator, its Affiliates, and their respective officers and directors
from all loss, cost or expense, liabilities, penalties, damages, including reasonable attorney’s fees, arising from (i) any
untruth of any representation or warranty of Marathon herein, (ii) with respect to claims by third parties relating to the
Facility, arising from negligent acts or omissions of Marathon, (iii) willful misconduct
of Marathon; (iv) bad faith of Marathon; (v) any negligent acts or omissions
of any subcontractor or employee of Marathon, or (vi) or breach by Marathon of the terms and conditions of this Agreement.
8.2
Limitation on Indemnification.
8.2.1
Marathon Concurrence. In no event
shall any Operators be required to indemnify Marathon with respect to acts taken or not taken by Operators at the direction of
Marathon provided that any such action by such Operators be carried out in a manner not involving negligence, willful misconduct,
or bad faith.
8.2.2
No Third Party Beneficiary. The
indemnification provided for in this Article 8 is solely for the benefit of Operators, Marathon and their respective Affiliates
and may be enforced only by Operators, Marathon and such Affiliates or its permitted assignees.
8.2.3
No
Subrogation. Operators and Marathon each agrees to cause its insurance carrier
to waive their rights of subrogation with respect to any indemnity claim otherwise available hereunder except with respect to
workers’ compensation and employer’s liability policies.
8.2.4
Operators Limitation of Indemnification
for Amounts in Excess of Insurance Proceeds. Operators’ indemnification obligations hereunder, to the extent of amounts
exceeding the amount of any applicable insurance proceeds, shall not exceed one hundred thousand
dollars ($100,000).
8.3
Procedure for Indemnification. The obligations of a Party seeking indemnification under this Article 8 shall be subject
to the following conditions:
8.3.1
If any third person
asserts a claim against a Party (the “Indemnified Party”) entitled to indemnification under Section 8.1 of such a
nature for which the Indemnified Party will expect indemnification from the other Party hereunder (the “Indemnifying Party”),
or if a Party desires to assert a claim against another Party for which it will expect indemnification hereunder, the Indemnified
Party shall give prompt written notice thereof to the Indemnifying Party;
8.3.2
Any claim in respect of which indemnification
hereunder is sought must be in writing (i) as to claims made by an Indemnified Party for its own account, within one hundred
twenty (120) days from the date such Indemnified Party has or should have had knowledge that
an indemnifiable event has occurred, and (ii) as to claims made by third persons against
an Indemnified Party for which an Indemnifying Party is asserted to be liable under the provisions hereof, within the lesser
of (i) thirty (30) days from the date such third party claim is first made and (ii) one
half of the applicable time limit for within which a response to such claim must be filed or served;
8.3.3
In the event that the Indemnifying Party
accepts the Indemnified Party’s claim for indemnification, with respect to third parties
the Indemnifying Party shall have control of the defense thereof, the right to select counsel, and the right to settle
the claim; except for situations where there is a conflict of interest between the Indemnifying Party and the Indemnified
Party, in which case the Indemnifying Party shall have the right to participate in the defense
of the claim through independent counsel and the matter shall not be settled in a manner adversely affecting the interest of the
Indemnifying Party without the Indemnifying Party’s prior written consent.
8.3.4
In the event that the Indemnifying Party
disputes the Indemnified Party’s right to indemnity or accepts the Indemnified Party’s right to indemnity only in
part, the Indemnifying Party shall have the right to participate in the defense of the claim and, with respect to that portion
of the claim for which the Indemnifying Party has accepted its indemnification obligations hereunder, the matter shall not be
settled in a manner adversely affecting the interest of the Indemnifying Party without the Indemnifying Party’s prior written
consent.
8.4
No Consequential or Insured Damages. Notwithstanding
any provision contained in this Agreement to the contrary, neither Party nor its shareholders, officers, directors, principals,
agents, contractors, subcontractors, vendors, employees or related or affiliated entities shall be liable to the other
hereunder for any punitive, consequential, special, incidental loss or damage, including cost of capital, loss of goodwill, loss
of revenue, increased operating costs or for damages reimbursed to the Indemnified Party by insurance. The Parties further agree
that the waivers and the disclaimers of liability, indemnities, releases from liability and
limitations on liability expressed in this Agreement shall survive the termination or expiration and shall apply (whether
in contract, equity, tort, statute or otherwise) even in the event of the fault, negligence (including the sole negligence), strict
liability or breach of warranty of the Party indemnified, released or whose liabilities are limited, and shall extend
to the officers, directors, principals, agents, contractors, subcontractors, vendors, employees or related or affiliated
entities of such Party. The Parties hereto have agreed that liability for damages or loss of tangible property of Marathon or
Operators shall be limited to amounts in excess of available insurance proceeds.
8.5
Special Hazardous Materials Indemnification.
8.5.1
Marathon shall indemnify,
defend and hold harmless Operators, its Affiliates, and each of their respective officers, directors, shareholders and employees
for, from and against any and all claims, demands, actions, causes of action, fines, penalties, suits, liability, losses, costs
(including reasonable attorneys’ fees and expenses) and damages arising from or relating to the presence of Hazardous
Material other than Hazardous Materials brought by Operators into the Facility or onto the Premises including Hazardous Materials
furnished, used, applied or stored in a Facility or at the Premises by Operators or any Subcontractor or emanating from a Facility
or the Premises as a result of the performance of the Services.
8.5.2
Operators shall
indemnify, defend and hold harmless, severally, not jointly, Marathon, its Affiliates, and
each of their respective officers, directors, shareholders and employees for, from and against any and all claims, demands, actions,
fines, penalties, suits, liability, losses, costs (including reasonable attorneys’ fees and expenses) and damages arising
from or relating to the presence of any Hazardous Materials in a Facility or on the Premises, to the extent such claims, demands,
actions, causes of action, fines, penalties, suits, liabilities, losses, costs and damages are attributable to Hazardous Materials
brought by such Operator in the Facility or onto the Premises including Hazardous Materials
furnished, used, applied or stored in a Facility or at the Premises by such Operator or any Subcontractors or emanating
from a Facility or the Premises as a result of the performance of the Services.
8.5.3
The foregoing shall not be construed to
limit either Party’s right to bring a cause of action against the other Party for breach of any provision of the Agreement.
ARTICLE
9
EVENTS OF DEFAULT; REMEDIES
9.1
Operator’s Events of Default. An “Operator’s Event of Default” shall mean:
9.1.1
Breach. Failure in the due observance or performance of any of the material
obligations, covenants or agreements of such Operator set forth in this Agreement which failure
is not cured within thirty (30) days after written notice thereof by Marathon to
such Operator or, if the nature of the failure is such that the same cannot be cured within thirty (30) days or such Operator
contests the same in good faith in accordance with Article 13, such Operator has commenced
and is diligently pursuing such cure or contest and, in the case of cure, completes such cure within ninety (90) days after
said written notice; or
9.1.2
Insolvency Event. An Insolvency Event occurs in relation to such Operator. “Insolvency Event” means any of
the following:
(i)
any meeting of creditors of such Person being held or any arrangement or composition with or for the benefit of its
creditors being proposed or entered by or in relation to such Person; or
(ii)
a supervisor, receiver, administrator, administrative receiver or other encumbrance taking possession of or being appointed over
any distress, execution or other process being levied or enforced and not being discharged within thirty days upon the whole or
any substantial part of the assets of such Person; or
(iii)
such Person’s ceasing or threatening to cease to carry on business or being or becoming unable
to pay its debts within as they fall due;
(iv)
or a petition being presented or a meeting being convened by such Person for the purpose of considering
a resolution for the making of an administration order, the winding up, or dissolution of such Person; or
(v)
any event analogous to any of the foregoing occurring in any jurisdiction.
9.2
Marathon’s Remedies. Upon the occurrence of an Operator’s Event of Default, Marathon shall have the right (without
prejudice to any other right Marathon may have) to exercise all or any of the following powers:
9.2.1
Remedies at Law or
Equity. Pursue, concurrently or separately, all remedies available at law, at equity,
in bankruptcy or in other appropriate proceedings, including bringing an action or actions from time to time for recovery
of amounts due and unpaid by the defaulting Party, and/or for damages and expenses resulting from Operator’s Event of Default,
which shall include all costs and expenses reasonably incurred in the exercise of its remedy (including reasonable attorney’s
fees); and
9.2.2
Termination.
Marathon may terminate this Agreement by notice in writing to Operators
on or at any time after the occurrence of an Operator’s Event of Default which has not otherwise been cured as provided
for under this Agreement.
9.3
Duties of Operators Upon Termination. Upon termination of this Agreement by Marathon pursuant to this Article 9:
9.3.1
Continuity of Operation.
Operators shall, if required by Marathon, continue to perform its obligations under this Agreement for a period specified by Marathon
(but not exceeding one-hundred eighty (180) days from the effective date of the termination) while the successor to Operator(s)
is being installed. During any such period, Operators shall continue to act in all respects in accordance with this Agreement
as if the same had not been terminated.
9.3.2
Contract Extension.
In the event this Agreement shall be continued pursuant to subsection 9.3.1, this Agreement shall continue in full force and effect
until the first to occur of (a) the date upon which a new Operator agreeable to Marathon shall have been engaged and
trained, or (b) one hundred eighty (180) days from the effective date of the termination of the Agreement as referenced
in the termination notice in subsection 9.2.2.
9.3.3
Facility
Records and Property to Marathon. Operators
shall transfer, assign or otherwise make available to Marathon all property, drawings, files, warranties, subcontracts, and all
Facility records, including personnel records related to the Facility or related to the Services provided hereunder. All Facility
records and documents related in any way to the operations of the Facility, at all times during the term of the Agreement and
after its termination, shall be the property of Marathon.
9.3.4
Cooperate
with Marathon. Operators will cooperate with Marathon, in the event of Marathon
termination hereunder, to assist Marathon in hiring employees of Operators assigned to work at the Facility on a full-time basis.
9.4
Marathon’s Event of Default. “Marathon’s Event of Default” shall mean:
9.4.1
Failure to Pay.
Failure to pay any sum when due under this Agreement which failure has not been cured within
thirty (30) Days after written notice thereof by Operators to Marathon;
9.4.2
Other Breach. Failure (other than
that described in subsection 9.4.1) in the due observance or performance of any of the material obligations, covenants or agreements
of Marathon set forth in this Agreement which failure is not cured within thirty (30) days
after written notice thereof by Operators to Marathon, or, if the nature of the failure is such that the same cannot
be cured within thirty (30) days, or Marathon contests the same in good faith, Marathon has commenced and is diligently
pursuing such cure or contest and, in the case of cure, completes such cure within six (6) months after said written notice; or
9.4.3
Insolvency Event. An Insolvency Event occurs in relation to Marathon. “Insolvency Event” means any of the following:
(i)
any meeting of creditors of such Person being held or any arrangement or composition with or for the benefit of its
creditors being proposed or entered into by or in relation to such Person; or
(ii)
a supervisor, receiver, administrator, administrative receiver or other encumbrance taking possession of or being appointed over
any distress, execution or other process being levied or enforced and not being discharged within thirty days upon the whole or
any substantial part of the assets of such Person; or
(iii)
such Person’s ceasing or threatening to cease to carry on business or being or becoming unable
to pay its debts within as they fall due; or
(iv)
a petition being presented or a meeting being convened by such Person for the purpose of considering
a resolution for the making of an administration order, the winding up, or dissolution of such Person; or
(v)
any event analogous to any of the foregoing occurring in any jurisdiction.
9.5
Operator’s Remedies. Upon the occurrence of Marathon’s Event of Default, Operators shall have the right (without
prejudice to any other right Operators may have) to exercise all or any of the following powers:
9.5.1
Remedies at Law or Equity. Pursue, concurrently or separately, all remedies available
at law, at equity, in bankruptcy or in other appropriate proceedings, including bringing an action or actions from time
to time for recovery of amounts due and unpaid by the defaulting Party and/or for damages and expenses resulting from Marathon’s
Event of Default which shall include all costs and expenses reasonably incurred in the exercise of its remedy (including reasonable
attorney’s fees); and
9.5.2
Cease Work. Upon written notice
to Marathon of the occurrence of an uncured Marathon Event of Default under Section 9.4.1 for which prior notice has been given,
cease all or a part of the performance of the Services under this Agreement provided that the same is done in a manner as not
to endanger people or property, including the Facility, or the environment.
9.5.3
Termination.
Terminate this Agreement by delivery of a notice to Marathon declaring termination, provided, however, that if Marathon’s
Event of Default is limited to failure to pay money when due, this Agreement shall not terminate
for thirty (30) days after the expiry of such notice and then only if the failure to pay money when due has not been cured.
9.5.4
Transfer of Operator’s Responsibilities.
Immediately before the date on which termination of this Agreement becomes effective, whether pursuant to Section 9.2.2 or Section
9.5.3:
(i)
Operators shall provide its reasonable assistance to Marathon and the successor of Operator to transfer the operation
and maintenance of the Facility to the successor of Operators in order to prevent, limit or mitigate any harm or disruption to
the normal operation and maintenance of the Facility and the business of Marathon;
(ii)
Operators shall further use its reasonable efforts to transfer to the successor of Operator, effective as of the date on which
termination of this Agreement becomes effective pursuant to Section 9.2.2 or Section 9.5.3,
its rights as Operator under all contracts entered into in the performance of its obligations under this Agreement; and
(iii)
Pending such transfer and in relation to all other contracts relating
to the operation and maintenance of the Facility, the Operators shall hold their rights and interest thereunder on trust
for and to the order of the successor of Operator.
ARTICLE
10
LIMITATION ON LIABILITY
10.1
Maximum Liability of Operator. Except as otherwise provided in this Section 10.1, Operator’s total liability
to Marathon during any one year under this Agreement (whether based in indemnity, tort, negligence, strict liability, warranty
or otherwise, unless due to intentional torts, fraud, or bad faith) shall not exceed in the aggregate the amount of one hundred
thousand dollars ($100,000). The following matters shall not be subject to the limit of liability in this Section 10.1: indemnity
obligations of Operators under Section 8.1.1(ii) with respect to claims of third parties only, obligations of Operators under
Section 8.1.1 (iii) and obligations of Operators under Section 8.1.1(iv).
10.2
Maximum Liability of Marathon. Except for amounts payable to Operators
pursuant to Article 4, Marathon’s total liability to Operators for losses incurred by Operators during any one
year under this Agreement, unless due to intentional torts, fraud, or bad faith, shall not exceed one hundred thousand dollars
($100,000).
ARTICLE
11
INSURANCE
11.1
Operators Insurance Coverage. During the Term and any Renewal Term, Operators shall secure and maintain, at
its sole cost, (except to the extent that a waiver is obtained from Marathon), and subject to Applicable Law (including any additional
cover or increased limits required by Applicable Law), the following minimum insurance:
11.1.1
Workers’ Compensation
Insurance. In an amount and upon terms and conditions to comply with the Workers’ Compensation and occupational disease
laws and regulations of the United States. Notwithstanding any provisions provided in this Agreement to the contrary, Operators
shall be liable and shall pay for all costs and expenses, including, without limitation,
the amounts of any premiums or deductibles, relating to Workers’ Compensation insurance.
11.1.2
Employer’s Liability. Insurance
with a limit of liability of not less than US $1,000,000 for each occurrence.
11.1.3
Commercial General Liability Insurance. Liability insurance for Bodily Injury (including mental injury/mental anguish)
and property damage with minimum limits of US $1,000,000 each occurrence and $2,000,000 in the annual aggregate.
11.1.4
Automobile Liability Insurance. Motor
vehicle liability insurance covering all owned, hired, leased, rented or non-owned vehicles for both bodily injury and property
damage, with combined single limit each occurrence: US $1,000,000 or amount required by Applicable Law, whichever is greater.
Policy shall provide for loading and unloading coverage and shall contain appropriate
no fault insurance provisions or other endorsements as are required under Applicable Laws and Permits. For Operator’s
Subcontractors’ motor vehicles, such insurance may be effected by the Subcontractor, however, Operators shall be responsible
for compliance with this Section 11.1.4.
11.1.5
Umbrella/Excess Liability Insurance. Coverage
in excess of the limits of and in accordance with the other terms in Sections 11.1.2, 11.1.3 and 11.1.4 above, with a combined
single limit for bodily injury and property damage of at least US $2,000,000 for each occurrence.
11.2
Additional Insureds. All insurance
required by Section 11.1 (exclusive of Workers’ Compensation) shall name Marathon
and others as required by contract or agreement as additional insureds. All such liability insurance shall be written as
primary policies, not contributing with and not in excess of coverage which Marathon may carry.
11.3
Subcontractors’ Insurance.
Operators shall require all Subcontractors and suppliers to obtain, maintain and keep in force, prior to entry on the Premises
and during the time in which they are engaged in performing work or Services, insurance
coverage complying with United States (including New York) legal requirements and pursuant to Operators’ normal practice
and shall provide Marathon with certificates of insurance evidencing such coverage. Operators shall: (i) obtain a Waiver
of Subrogation which shall be provided to Marathon and all other parties as required by contract or agreement, and (ii) (except
for Workers’ Compensation) name Marathon and all other parties as required by contract or agreement as additional insured
on such polices. Marathon shall have no responsibility for payment of premiums and claims
with respect to such insurance.
11.4
Other Requirements.
All policies of Operators insurance provided for herein shall be issued
by carriers with a Best rating of not less than A+ and a finance rating of not less than Class X or such other carriers as Marathon
shall Approve (such Approval not to be unreasonably withheld), and the terms of coverage shall be as evidenced by certificates
to be furnished to Marathon. Such certificates shall provide that sixty (60) days written
notice shall be given to Marathon prior to cancellation or material alteration of
any policy, and indicate the waiver of subrogation and additional insured requirements as per this Agreement.
11.5
Marathon’s Insurance Coverage. During the Term and Renewal
Term, Marathon shall secure and maintain, at its own expense, and subject to Applicable Laws and with terms, conditions, limits,
self-insured retentions and deductibles, the following insurance:
|
(a)
|
Workers’
Compensation covering all of Marathon’s employees;
|
|
(b)
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Employer’s
Liability, covering all of Marathon’s employees;
|
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(c)
|
Property
All Risk Insurance and Machinery Breakdown coverage (excluding
equipment owned/rented/leased by Operators or Subcontractors);
|
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(d)
|
Commercial
General Liability Insurance. Liability insurance for Bodily Injury (including mental
injury/mental anguish) and property damage with minimum limits of US $1,000,000 each
occurrence and $2,000,000 in the annual aggregate;
|
|
(e)
|
Automobile
Liability Insurance. Motor vehicle liability insurance covering all owned, hired, leased,
rented or non-owned vehicles for both bodily injury and property damage, with combined
single limit each occurrence: US $1,000,000 or amount required by Applicable Law, whichever
is greater. Policy shall provide for loading and unloading coverage and shall contain
appropriate no fault insurance provisions or other endorsements as are required under
Applicable Laws and Permits; and
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|
(f)
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Umbrella/Excess
Liability Insurance. Coverage in excess of the limits of and in accordance with the other
terms in Section 11.5(b), 11.5 (d) and 11.5(e) above, with a combined single limit for
bodily injury and property damage of at least US $2,000,000 for each occurrence.
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In
connection with Services to be performed pursuant to this Agreement only, it is intended
that Marathon will provide, through its insurance under 11.5(c) above, for claims relating to the physical damage of the
Facility (excluding equipment owned/rented/leased by Operators or Subcontractors) and that
Operators shall not be required to carry any such insurance with respect to events covered under Marathon’s insurance.
The
required insurance under Section 11.5(c) shall name Operators and their employees, agents, and contractors. Subcontractors
and directors as “Additional Insureds” as their interests may appear and Marathon as “Named Insureds”
in connection with only claims arising out of or relating to Operators’ presence on the Premises and the Services to be
performed pursuant to this Agreement only.
11.6
Proof of Insurance.
Within thirty (30) days after execution of this Agreement, Marathon and Operators shall each provide the other with evidence (including
certificates of insurance) that their respective coverage required to be carried under this Article 11 is in full force and effect,
together with proof of payment of premiums therefor. As soon as possible, updated certificates shall be provided on an annual
or, if applicable, more frequent basis, showing proof that coverage required under this Agreement is continual.
11.7
Form and Content of Insurance.
All policies with respect to insurance provided pursuant to this Article 11 shall be as follows:
|
(a)
|
Non-Recourse.
All insurance shall provide that there will be no recourse against
the Additional Insureds for the payment of premiums or commissions or (if such policies
provide for the payment thereof) additional premiums or assessments.
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|
(b)
|
Waiver
of Subrogation. All insurance required to be maintained by Operators
and Marathon hereunder shall provide for the waiver of any right of subrogation
by the insurers thereunder against Marathon, Operators (as respects
only claims arising out of or relating to Operator’s presence on the Premises
and Services to be performed pursuant to this Agreement only) and the officers, directors
and employees, agents and representatives of each of them, and any right of the insurers
to any set off or counterclaim or any other deduction, whether by attachment or otherwise,
in respect of any liability of any such person insured under such policy,
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(c)
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Notice
of Cancellation. All insurance shall provide that it may not be canceled or materially
changed without giving Marathon and Operators forty five
(45) days prior written notification thereof, except in cases of nonpayment
of premium for which ten (10) Days prior written notice shall be provided (unless a longer
notice period for non-payment is agreed to by the relevant insurer).
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11.8
Additional Requirements.
|
(a)
|
Compliance
and Notification. Operators shall comply with terms and conditions of the said policies
of insurance and all reasonable requirements of
Marathon or the insurers in connection with the settlement of claims, the recovery
of losses and the prevention of accidents. Operators agree to advise Marathon as soon
as practicable in writing of any notice of claim to which insurance pursuant to this
Article 11 applies. Any payments by the insurers under the policies referred to in Section
11.5 shall, unless directed to the contrary by Marathon, be made in the first instance
to Marathon. Marathon reserves the right (i) to immediately step in and assume full
control at any time of any claim settlements and/or (ii) to directly make claims
for loss or damage to the insurers.
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The
proceeds of claims payments made to Marathon as a result of the application of this sub-section shall be used to repair, reinstate
or replace the subject matter to which the claim payment refers. Marathon shall use best efforts to process any claim expeditiously
and assert to the fullest extent the joint insured rights under the policy in question.
Subject
to Marathon’s step-in rights under this sub-Section 11.8(a) and upon written approval by Marathon, Operators shall be allowed
to communicate and deal directly with the brokers, insurers, claims adjusters or other parties
on behalf of all the named insureds under the policies. Operators shall keep Marathon
informed on a timely basis regarding all reports and claims.
(b)
The provisions of Article 11 do not modify or
change or abrogate any responsibility of Operators or Subcontractor stated elsewhere in this Agreement.
(c)
Failure to Maintain
Insurance. If either Party fails to maintain any insurance that it is
required to maintain hereunder, then the other Party (and without prejudice to any other right or remedy)
may at its sole option obtain such insurance and, in such event, the Party failing to maintain
such insurance shall reimburse the other Party upon demand for the cost thereof.
ARTICLE
12
FORCE MAJEURE
12.1
Events Constituting Force Majeure.
An event of Force Majeure as used herein is any event that (a) restricts or prevents performance under this Agreement (b) is
not reasonably within the control of the Party affected or caused by the default or negligence of the affected Party and (c) cannot
be overcome or avoided by the exercise of due care and shall include: acts of God, acts of the public enemy, terrorism or threat
of terrorism, acts of a court or a Governmental Authority, hurricanes, tornadoes, earthquakes, floods, riots, rebellion, sabotage,
defective design of equipment or the either Facility, latent defects in equipment, lack of
fuel arising from Marathon’s failure to supply same as required herein, vandalism, epidemic, pandemic or spread of contagious
disease including COVID-19 (also known as coronavirus disease), as designated by the World Health Organization; or other similar
events beyond the reasonable control of the Party claiming Force Majeure. Strikes of Operators’ employees or Subcontractors
are specifically excluded from conditions of Force Majeure if those strikes are within the
control of Operators, provided that no strike shall be deemed to be within Operator’s control merely because Operators
could end such strike by agreeing to terms that Operator, in its sole discretion, determines to be unfavorable and Operators shall
not be entitled to claim as Force Majeure hereunder any event or circumstance that is beyond the reasonable control of Marathon.
12.2
Notice. In the event that either
Party is rendered unable, wholly or in part, by an event of Force Majeure, to perform any obligation it has under this Agreement,
the claiming Party shall give notice and state the particulars of the event of Force Majeure
which it claims to the other Party, as soon thereafter as practicable. The obligations
of the Party claiming Force Majeure, so far as they are affected by such event of Force Majeure, shall be suspended during
the continuance of any inability or incapacity so caused, but for no longer. Neither Party shall be relieved from any obligation
to make payment to the other for expenses or liabilities already incurred.
12.3
Reasonable Efforts. The Parties
will use their reasonable efforts to remedy and mitigate the effects of any Force Majeure and diligently pursue such efforts.
The Party claiming a Force Majeure shall have the burden of establishing the existence of such event to a preponderance
of the evidence. The Party claiming Force Majeure shall report in writing weekly to the other Party providing detailed
information of the steps being taken to overcome the Force Majeure and the estimated time such Force Majeure is expected to continue.
An event of Force Majeure which continues for one hundred eighty (180) days shall be deemed to be a permanent closing of the affected
Facility or Facility and shall be treated as provided for under Section 5.2.
ARTICLE
13
DISPUTES
13.1
Dispute Resolution. It is the express intention of the Parties to this Agreement to make a good faith effort
to resolve, without resorting to litigation, any dispute arising under or related to this Agreement according to the procedure
set forth in this Article; provided, however, that nothing in this Article 13 shall limit the rights or remedies of the Parties
set forth in Article 9.
13.2
Senior Executives. In the event
of a dispute relating to any provision of this Agreement which cannot be resolved promptly by negotiations between the representatives
involved directly in the dispute, each Party shall immediately designate a senior executive with authority to resolve the dispute.
The designated senior executives shall promptly begin discussions in an effort to agree upon a resolution.
13.3
Litigation. If said executives
do not agree upon a resolution within thirty (30) days of the referral to them then each Party may resort to litigation in order
to resolve any claim, dispute and other matter in question arising between the Parties hereto
arising out of, or relating to, this Agreement or the interpretation or breach thereof. Each Party hereby irrevocably and
unconditionally consents to the exclusive jurisdiction of the federal and state courts sitting in New York, New York for any action,
suit or proceeding arising out of or related hereto. Each Party hereto further hereby irrevocably and unconditionally waives any
objection to the laying of venue of any action, suit or proceeding arising out of or relating to this Agreement in such courts,
and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action,
suit or proceeding brought in any such court has been brought in any inconvenient forum. Each Party hereby knowingly, voluntarily
and intentionally waives any right (to the fullest extent permitted by applicable law) to a trial by jury of any dispute arising
out of, under or relating to, this Agreement and agrees that any such dispute shall be tried before a judge sitting without a
jury.
ARTICLE
14
ASSIGNMENT
14.1
Assignment. This Agreement
may not be assigned by either Party without the prior written consent of the other, such consent to not be unreasonably withheld,
conditioned or delayed. This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective
successors and assigns to the extent that assignment is permitted hereunder.
ARTICLE
15
MISCELLANEOUS
15.1
Notices. Any notice required or permitted to be delivered hereunder shall be deemed to be delivered when deposited
in the mail, postage prepaid, registered or certified mail, or sent via email, provided, however, that a follow-up hard copy is
either hand delivered or couriered, return receipt requested, or by telecopier or courier, addressed to the Parties at the following
addresses:
If
to Marathon:
|
|
Marathon
Patent Group, Inc.
1180
North Town Center Drive, Suite 100
Las
Vegas, NV 89144
Attn:
Merrick Okamoto, Chief Executive Officer
Telephone:
800-804-1690
Email:
merrick@marathonpg.com
With
a copy to:
Jolie
Kahn, Esq.
12
E. 49th Street, 11th floor
New
York, NY 10017
Telephone:
516-217-6379
Email:
jolie.kahn@marathonpg.com
|
|
If
to Operators:
|
|
Liefern
LLC
9
Federal Street
Easton,
MD 21601
Attn.:
General Counsel
Telephone:
(410) 770-9500
Fax: (410) 770-9949
Email:
legal@beowulfenergy.com
and
TWO
POINT ONE, LLC
300
SE 2nd St, Suite 600
Fort
Lauderdale, FL 33301
Attn.:
Chris Ensey
Telephone:
(410) 274-1257
Email:
chris@2p1.com
|
|
or
in each case to such other address as either Party may from time to time designate in writing. All notices given by personal delivery
or mail shall be effective on the date of actual receipt at the appropriate address. Notice given by telecopier shall be effective
upon actual receipt if received during recipient’s normal business hours or at the beginning of the next regular business
day of the recipient if received after the recipient’s normal business hours.
15.2
Independent Contractor. Each Operator
is an independent contractor and nothing in this Agreement shall be construed as creating a partnership or other relationship
between either Operator and Marathon. Operators will not hold themselves out as an agent or representative of Marathon. Operators,
in their capacity as Operators, have no authority to bind or create any obligation on behalf of Marathon.
15.3
Subcontractors. Operators’
Services may be performed by Operators acting in its own name, or by Operators’ subcontracting portions of such Services
to Subcontractors or other suppliers.
|
(a)
|
For
its Services, Operators shall assume the responsibility for negotiating with, and performance
by, their Subcontractors.
|
|
(b)
|
Operators
shall have authority and control over the Subcontractors’ work, including
overtime and, any special methods required, in the judgment of Operator,
to complete the Subcontractors’ work in a correct and timely manner.
|
|
(c)
|
All
subcontracts shall be consistent with the terms and conditions of this Agreement.
|
|
(d)
|
Subcontractors
are not intended to be, shall not be deemed to be, and are not third-party beneficiaries
of this Agreement.
|
15.4
Entire Agreement. This Agreement is the
entire agreement among the Parties with respect to the subject matter hereof and supersedes all prior agreements with respect
thereto as of the date of the execution of this Agreement, and no amendment, alteration, modification or interpretation of this
Agreement shall be binding unless in writing and signed by all Parties.
15.5
No Waiver. No
failure by any Party to insist upon the strict performance of any term,
covenant or condition of this Agreement, or to exercise any right or remedy upon breach of any provision hereof, and no acceptance
of payment or performance during the continuation of any such breach, shall constitute a waiver of any term, covenant or condition
herein or waiver of any subsequent breach or default in the performance of any terms, covenant,
or condition herein.
15.6
Severability.
If any provision of this Agreement or its application to any Party or circumstances
shall be determined by any court of competent jurisdiction to be invalid and/or unenforceable to any extent, the remainder of
this Agreement or the application of such provision to such Party or circumstances, other
than those determined invalid or unenforceable, shall not be affected thereby, and each provision hereof shall be valid
and shall be enforced to the fullest extent permitted by law. In the event a provision of this Agreement is found to be invalid
or unenforceable, the Parties will negotiate in good faith to agree on a lawful provision having as near the same economic effect
as the unenforceable provision.
15.7
Governing Law; Jurisdiction of Courts.
This Agreement shall be governed by, and construed, interpreted and applied in accordance with, the laws of the State of New York,
without regard to the conflict of laws provisions thereof that would apply the laws of a jurisdiction other than the State of
New York.
15.8
Further Assurances. Marathon and Operators
agrees to execute and deliver such other documents and papers and to do such other acts and things as may be reasonably necessary
more fully to effect the intent and purposes of this Agreement. Each Party agrees to exercise its rights and perform its obligations
hereunder in good faith.
15.9
Limitation. Operators agrees that
it will look only to assets of Marathon for all amounts due to Operators hereunder.
15.10
Survival of Representations and Warranties.
The representations and warranties made pursuant to Articles 6 and 7 shall survive execution of this Agreement for the Term.
15.11
Captions. All headings or captions appearing
herein are for convenience only, shall not be considered a part of this Agreement, for any purpose or as, in any way interpreting,
construing, varying, altering, or modifying this Agreement or any of the provisions hereof.
15.12
Conflicting Provisions. In the event of
any conflict between this document and any Appendix hereto, the terms and provisions of this document, as amended from time to
time, shall control. In the event of any conflict among the Appendices, the Appendix of the latest date shall control.
15.13
Counterparts.
This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together
shall constitute one and the same agreement.
15.14
Confidential and Proprietary Information.
15.14.1
The Parties agree (i) to treat all information furnished or disclosed between
themselves as confidential and proprietary, (ii) to restrict the use of such information to matters relating to the
performance of the Agreement and (iii) to restrict access to such information to such officers, directors and employees of
Marathon and Operators and each of their respective agents whose access is necessary in the implementation of the Agreement. Confidential
information will not be reproduced without the disclosing Party’s prior written consent, and all copies of written information
will be returned to the disclosing Party upon request except to the extent that such information is to be retained pursuant to
the Agreement.
15.14.2
The foregoing restrictions do not apply to information which: (i) is contained in a printed publication which
was released to the public prior to the date of the Agreement; (ii) is, or becomes,
publicly known otherwise than through a wrongful act of a Party hereto or their respective employees, or agents; (iii) is
in possession of a Party hereto or its employees, or agents prior to receipt from the disclosing Party, provided that the person
or persons providing the same have not had access to the information from the disclosing Party; (iv) is furnished to others
by the disclosing Party without restrictions similar to those herein on the right of the
receiving Party to use or disclose; or (v) is required to be disclosed by Applicable Law or order of a Governmental
Authority or (vi) is approved in writing by the disclosing Party for disclosure by
a receiving Party or its agents or employees to a third party.
15.15
Effective Date. This Agreement shall be
effective on the Effective Date.
[Signatures
follow on next page.]
IN
WITNESS WHEREOF, the Parties have executed this Agreement on the dates set forth below, to be effective as of the Effective Date.
MARATHON
PATENT GROUP, INC.
By:
______________________________
Name:
Title:
LIEFERN
LLC
By:
_______________________________
Name: Mila Barrett
Title: Secretary
TWO
POINT ONE, LLC
By:
_______________________________
Name:
Title:
APPENDIX
A
DEFINITIONS
As
used in this Agreement, the terms set forth below shall have the following meanings:
“2P1”
means Two Point One, LLC.
“Affiliate”
means any person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common
control with the Person specified.
“Agreement”
means this Data Facility Services Agreement and the attached Appendices, as amended from time to time.
“Applicable
Laws” means all federal, state or local laws, statutes, treaties, ordinances, judgments, decrees, injunctions, writs and
orders of any court, arbitrator or Governmental Authority or instrumentality and rules, regulations,
orders, interpretations and Permits relating to the operations and maintenance of the Facility, the performance of the
Services or the sale of electric energy from the Facility of any Governmental Authority, court or other body having jurisdiction
over the operation of the Facility, the performance of the Services or the sale of electric energy from the Facility, as
may be in effect from time to time. Applicable Laws include, without limitation, all Environmental Laws.
“Approval”
means that the approving Party has given prior consent in writing before action is taken based on such approval and “Approve”
and “Approved” shall have correlative meanings.
“Beowulf
OPCO” means Liefern LLC.
“Business
Day” means any day on which businesses are normally open for business in New York.
“Contract
Energy” has the meaning ascribed to such term in the PPA.
“Effective
Date” has the meaning set forth in the opening paragraph of this Agreement.
“Emergency”
means an event occurring at a Facility which poses actual or imminent risk of serious personal injury, physical damage, or environmental
contamination requiring immediate preventative or remedial action or notification of a Governmental Authority by Operators under
any Environmental Laws, and for which advance approval by Marathon otherwise required under the Agreement would be impossible
or impractical.
“Environmental
Laws” means all Applicable Laws and Permits relating to (i) the control of any
potential Hazardous Materials, (ii) the protection of human health or the environment, including air, water or land, (iii) the
generation, handling, treatment, storage, disposal, transportation or reporting of Hazardous Materials or other waste materials,
including any discharge or release thereof, (iv) the regulation of or exposure to hazardous, toxic or other substances alleged
to be harmful to human health or the environment, and (v) other environmental and industrial
or occupational health and safety matters. The term “Environmental Laws” includes all judicial and administrative
decisions, orders, notices, directives, and decrees issued by a Governmental Authority pursuant to the foregoing.
“Facility”
has the meaning ascribed to such term in the Recitals.
“Facility
Manager” shall be that Person designated as such by Marathon with respect to the Facility. The initial Facility Manager
for the Facility shall be [Merrick Okamoto].
“Governmental
Authority” means any federal, state, or local governmental body, department, division, office, instrumentality, agency,
board, council, or commission having jurisdiction over a Party or any portion of the Services.
“Hazardous
Materials” means (i) any chemical, material or substance defined as or included in the definition of “hazardous
substances”, “hazardous wastes”, “hazardous materials”, “extremely hazardous waste”,
“extremely hazardous substances”, “restricted hazardous waste”, “hazardous chemicals”, “toxic
wastes”, “pollutant”, “pollution”, “contaminant”,
“toxic substances”, or words of similar import under any applicable Environmental Laws; (ii) any other materials
or pollutants that pose a hazard to the Facility or the Premises or any part thereof or to persons, flora or fauna on or
about the Facility site or the Premises or to any other property that may be affected by the release of such materials or pollutants
from the Facility or the Premises or any part thereof or to persons, flora or fauna on or
about such other property and would cause such property or such other property to be in violation of any Environmental
Law or to become the subject of any site investigation, response, remediation or notification
requirement under any applicable Environmental Law; (iii) petroleum and petroleum by-products and any fraction thereof,
including crude oil, fuel oil, other refined oils, natural gas, natural gas liquids, or liquefied natural gas, and (iv) asbestos,
including asbestos containing material and asbestos contaminated soil urea formaldehyde foam insulation, toluene, polychlorinated
biphenyls and any electrical equipment which contains any oil or dielectric fluid containing levels of polychlorinated biphenyls
in excess of applicable Environmental Laws.
“Incremental
Management Fee” has the meaning ascribed to such term in Section 4.1(b).
“Indemnified
Party” has the meaning ascribed to such term in Section 8.3.1.
“Indemnifying
Party” has the meaning ascribed to such term in Section 8.3.1.
“Insolvency
Event” has the meaning ascribed to such term in Section 9.1.3 or 10.4.3, as applicable.
“Initial
Management Fee” has the meaning ascribed to such term in Section 4.1(a).
“Interest
Rate” means the prime interest rate as reflected in The Wall Street Journal under “Money Rates” plus two percent
(2%).
“Management
Fee(s)” has the meaning ascribed to such term in Section 4.1 (b).
“Marathon”
means Marathon Patent Group, Inc.
“Marathon’s
Event of Default” has the meaning ascribed to such term in Section 9.4.
“Monthly
Invoice” has the meaning ascribed to such term in Section 4.2(a).
“Monthly
Report” has the meaning ascribed to such term in Section 2.8.1.3.
“Operator”
means each of Beowulf OPCO and 2P1.
“Operators’
Event of Default” has the meaning ascribed to such term in Section 9.1.
“Permits”
means all permits, licenses, or other approval of any Governmental Authority required for the operation of the Facility including,
without limitation, those required under or to ensure compliance with any Environmental Laws.
“Person”
means any individual, corporation, partnership, limited liability company, a joint stock company, an unincorporated association,
a joint venture, a trust or other legal entity.
“PPA”
means that certain Power Purchase Agreement dated as of September 30, 2020 between Big Country Datalec LLC and Marathon.
“Premises”
means those lands described on Exhibit A, including,
without limitation, the lands included within the description of the Sites.
“Prudent
Engineering and Operating Practices” means the standards, practices, methods, procedures and acts which (i) conform
with such degree of skill, diligence, prudence and foresight as
would reasonably be expected from a skillful and experienced operator of a data center of similar type to the Facility with a
view to profit-making therefrom and (ii) which would reasonably be expected to be applied by such person exercising reasonable
judgment in light of the facts known known at the time a decision was made to accomplish
the desired result in an efficient and workman-like manner consistent with Applicable Law, reliability, safety,
environmental protection, the Permits and Marathon’s commitments.
“Review”
means that the reviewing Party shall be made aware of and have a right to comment upon the matter involved
but
that such comments may be accepted or rejected by the other Party.
“Services”
means all services of Operators or any Subcontractors to be provided to Marathon pursuant
to this Agreement.
“Services
Payment” has the meaning ascribed to such term in Section 4.1(c).
“Services
Price” has the meaning ascribed to such term in Section 4.1(c).
“Site”
means the real property on which the Facility is located as more fully described in Appendix
B.
“Subcontractors”
means those Persons or entities who have a contractor arrangement with Operator, whether directly or by assignment, or with any
subcontractors or vendors of Operators of any tier, for the performance of any work with respect to the Facility.
“Term”
means the term of this Agreement as determined pursuant to Section 5.1.
“Year”
means a calendar Year commencing on January 1 and ending on December 31 and references to month or months shall be construed
accordingly.
APPENDIX
B
SITE
See
Exhibit A separately attached.
Exhibit
31.1
CERTIFICATION
OF PRINCIPAL EXECUTIVE OFFICER AND
PRINCIPAL
FINANCIAL AND ACCOUNTING OFFICER
PURSUANT
TO SECTION 302 OF THE
SARBANES-OXLEY
ACT OF 2002
I,
Merrick Okamoto, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of Marathon Patent Group, Inc.;
2.
Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this quarterly report;
3.
Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this quarterly report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined
in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
designed
such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly for the period in which this quarterly report is being prepared;
|
|
|
|
|
b)
|
designed
such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
|
|
|
|
|
c)
|
evaluated
the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based
on such evaluation;
|
|
|
|
|
d)
|
disclosed
in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting;
|
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s
auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):
|
a)
|
all
significant deficiencies and material weaknesses in the design or operation of internal controls which are reasonably likely
to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
|
|
|
b)
|
any
fraud, whether material, that involves management or other employees who have a significant role in the registrant’s
internal controls over financial reporting.
|
Dated:
November 12, 2020
|
By:
|
/s/
Merrick Okamoto
|
|
|
Merrick
Okamoto
|
|
|
Chief
Executive Officer and Executive Chairman (Principal Executive Officer)
|
Exhibit
31.2
CERTIFICATION
OF PRINCIPAL EXECUTIVE OFFICER AND
PRINCIPAL
FINANCIAL AND ACCOUNTING OFFICER
PURSUANT
TO SECTION 302 OF THE
SARBANES-OXLEY
ACT OF 2002
I,
Simeon Salzman, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of Marathon Patent Group, Inc.;
2.
Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this quarterly report;
3.
Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this quarterly report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined
in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
designed
such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly for the period in which this quarterly report is being prepared;
|
|
|
|
|
b)
|
designed
such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
|
|
|
|
|
c)
|
evaluated
the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based
on such evaluation;
|
|
|
|
|
d)
|
disclosed
in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting;
|
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s
auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):
|
a)
|
all
significant deficiencies and material weaknesses in the design or operation of internal controls which are reasonably likely
to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
|
|
|
b)
|
any
fraud, whether material, that involves management or other employees who have a significant role in the registrant’s
internal controls over financial reporting.
|
Dated:
November 12, 2020
|
By:
|
/s/
Simeon Salzman
|
|
|
Simeon
Salzman
|
|
|
Chief
Financial Officer (Principal Financial and Accounting Officer)
|
Exhibit
32.1
CERTIFICATION
PURSUANT TO
18
U.S.C. SECTION 1350,
AS
ADOPTED PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
About
the Quarterly Report of Marathon Patent Group, Inc. (the “Company”) on Form 10-Q for the period ended September 30,
2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Merrick Okamoto, Chief
Executive Officer and Chairman (Principal Executive Officer) of the Company, certifies, pursuant to 18 U.S.C. section 1350 of
the Sarbanes-Oxley Act of 2002, that:
|
(1)
|
The
Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
|
|
|
|
(2)
|
The
information contained in the Report fairly presents, in all material respects, the financial condition and results of operations
of the Company.
|
Date:
November 12, 2020
|
By:
|
/s/
Merrick Okamoto
|
|
|
Merrick
Okamoto
|
|
|
Chief
Executive Officer and Executive Chairman (Principal Executive Officer)
|
A
signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise
adopting the signature that appears in typed form within the electronic version of this written statement has been provided to
the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit
32.2
CERTIFICATION
PURSUANT TO
18
U.S.C. SECTION 1350,
AS
ADOPTED PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
In
connection with the Quarterly Report of Marathon Patent Group, Inc. (the “Company”) on Form 10-Q for the period ended
September 30, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Simeon
Salzman, Chief Financial Officer, Secretary and Director (Principal Financial and Accounting Officer) of the Company, certifies,
pursuant to 18 U.S.C. section 1350 of the Sarbanes-Oxley Act of 2002, that:
|
(1)
|
The
Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
|
|
|
|
(2)
|
The
information contained in the Report fairly presents, in all material respects, the financial condition and results of operations
of the Company.
|
Date:
November 12, 2020
|
By:
|
/s/
Simeon Salzman
|
|
|
Simeon
Salzman
|
|
|
Chief
Financial Officer (Principal Financial and Accounting Officer)
|
A
signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise
adopting the signature that appears in typed form within the electronic version of this written statement has been provided to
the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES AND EXCHANGE ACT OF 1934
For
the quarterly period ended June 30, 2020
or
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES AND EXCHANGE ACT OF 1934
For
the transition period from _______to______
MARATHON
PATENT GROUP, INC.
(Exact
Name of Registrant as Specified in Charter)
Nevada
|
|
001-36555
|
|
01-0949984
|
(State or other jurisdiction
of incorporation)
|
|
(Commission
File Number)
|
|
(IRS Employer
Identification No.)
|
1180
North Town Center Drive, Suite 100 Las Vegas, NV
|
|
89144
|
(Address
of principal executive offices)
|
|
(Zip
Code)
|
Registrant’s
telephone number, including area code: 702-945-2773
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit such files). Yes [X] No [ ]
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. [X]
Large
Accelerated Filer
|
[ ]
|
Accelerated
Filer
|
[ ]
|
Non-accelerated
Filer
|
[X]
|
Smaller
Reporting Company
|
[X]
|
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. [ ]
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes [ ] No [X]
Securities
registered pursuant to Section 12(b) of the Act:
Title
of each class
|
|
Trading
Symbol(s)
|
|
Name
of each exchange on which registered
|
Common
Stock
|
|
MARA
|
|
The
Nasdaq Capital Market
|
Indicate
the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date, 32,142,968
shares of common stock are issued and outstanding as of August 14, 2020.
TABLE
OF CONTENTS
OTHER
PERTINENT INFORMATION
Unless
specifically set forth to the contrary, “Marathon Patent Group, Inc.,” “we,” “us,” “our”
and similar terms refer to Marathon Patent Group, Inc., a Nevada corporation, and its subsidiaries. Unless otherwise indicated,
the per share information has been retroactively adjusted to reflect the one for four reverse stock split that went into effect
on April 8, 2019 (the “Reverse Split”).
Item
1. Financial Statements
MARATHON
PATENT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED
CONDENSED BALANCE SHEETS
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
775,119
|
|
|
$
|
692,963
|
|
Digital currencies
|
|
|
108,700
|
|
|
|
1,141
|
|
Deposit
|
|
|
4,195,200
|
|
|
|
-
|
|
Prepaid expenses and other current assets
|
|
|
741,138
|
|
|
|
800,024
|
|
Total current assets
|
|
|
5,820,157
|
|
|
|
1,494,128
|
|
|
|
|
|
|
|
|
|
|
Other assets:
|
|
|
|
|
|
|
|
|
Property and equipment, net of accumulated depreciation and impairment charges of 6,720,281 and 6,157,786 for June 30, 2020 and December 31, 2019, respectively
|
|
|
3,613,529
|
|
|
|
3,754,969
|
|
Right-of-use assets
|
|
|
245,170
|
|
|
|
297,287
|
|
Intangible assets, net of accumulated amortization of 172,010 and 136,422 for June 30, 2020 and December 31, 2019, respectively
|
|
|
1,037,990
|
|
|
|
1,073,578
|
|
Total other assets
|
|
|
4,896,689
|
|
|
|
5,125,834
|
|
TOTAL ASSETS
|
|
$
|
10,716,846
|
|
|
$
|
6,619,962
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
831,784
|
|
|
$
|
1,238,197
|
|
Mining servers payable
|
|
|
-
|
|
|
|
513,700
|
|
Current portion of lease liability
|
|
|
87,447
|
|
|
|
87,959
|
|
Warrant liability
|
|
|
9,625
|
|
|
|
12,849
|
|
Total current liabilities
|
|
|
928,856
|
|
|
|
1,852,705
|
|
Long-term liabilities
|
|
|
|
|
|
|
|
|
Convertible notes payable
|
|
|
-
|
|
|
|
999,106
|
|
Note payable
|
|
|
62,500
|
|
|
|
-
|
|
Lease liability
|
|
|
67,255
|
|
|
|
120,479
|
|
Total long-term liabilities
|
|
|
129,755
|
|
|
|
1,119,585
|
|
Total liabilities
|
|
|
1,058,611
|
|
|
|
2,972,290
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity:
|
|
|
|
|
|
|
|
|
Preferred stock, 0.0001 par value, 50,000,000 shares authorized, no shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively
|
|
|
-
|
|
|
|
-
|
|
Common stock, 0.0001 par value; 200,000,000 shares authorized; 24,526,302 and 8,458,781 issued and outstanding at June 30, 2020 and December 31, 2019, respectively
|
|
|
2,453
|
|
|
|
846
|
|
Additional paid-in capital
|
|
|
118,933,134
|
|
|
|
109,705,051
|
|
Accumulated other comprehensive loss
|
|
|
(450,719
|
)
|
|
|
(450,719
|
)
|
Accumulated deficit
|
|
|
(108,826,633
|
)
|
|
|
(105,607,506
|
)
|
Total stockholders’ equity
|
|
|
9,658,235
|
|
|
|
3,647,672
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$
|
10,716,846
|
|
|
$
|
6,619,962
|
|
The
accompanying notes are an integral part to these unaudited consolidated condensed financial statements.
MARATHON
PATENT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
For the Three Months Ended
|
|
|
For the Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cryptocurrency mining revenue
|
|
$
|
286,161
|
|
|
$
|
355,765
|
|
|
$
|
878,648
|
|
|
$
|
586,459
|
|
Total revenues
|
|
|
286,161
|
|
|
|
355,765
|
|
|
|
878,648
|
|
|
|
586,459
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
|
740,483
|
|
|
|
498,588
|
|
|
|
1,893,724
|
|
|
|
1,007,228
|
|
Compensation and related taxes
|
|
|
1,060,480
|
|
|
|
328,604
|
|
|
|
1,294,137
|
|
|
|
815,291
|
|
Consulting fees
|
|
|
24,313
|
|
|
|
30,000
|
|
|
|
66,125
|
|
|
|
50,000
|
|
Professional fees
|
|
|
162,552
|
|
|
|
110,341
|
|
|
|
309,194
|
|
|
|
195,374
|
|
General and administrative
|
|
|
89,566
|
|
|
|
128,829
|
|
|
|
198,503
|
|
|
|
244,072
|
|
Total operating expenses
|
|
|
2,077,394
|
|
|
|
1,096,362
|
|
|
|
3,761,683
|
|
|
|
2,311,965
|
|
Operating loss
|
|
|
(1,791,233
|
)
|
|
|
(740,597
|
)
|
|
|
(2,883,035
|
)
|
|
|
(1,725,506
|
)
|
Other income (expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
|
|
|
-
|
|
|
|
190,332
|
|
|
|
106,408
|
|
|
|
180,895
|
|
Foreign exchange loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(11,873
|
)
|
Loss on conversion of note
|
|
|
(364,832
|
)
|
|
|
-
|
|
|
|
(364,832
|
)
|
|
|
-
|
|
Realized gain on sale of digital currencies
|
|
|
8,482
|
|
|
|
25,052
|
|
|
|
4,260
|
|
|
|
24,444
|
|
Change in fair value of warrant liability
|
|
|
(6,563
|
)
|
|
|
(38,570
|
)
|
|
|
3,224
|
|
|
|
(76,304
|
)
|
Change in fair value of mining payable
|
|
|
-
|
|
|
|
-
|
|
|
|
(66,547
|
)
|
|
|
-
|
|
Interest income
|
|
|
499
|
|
|
|
10,358
|
|
|
|
2,379
|
|
|
|
22,374
|
|
Interest expense
|
|
|
(7,549
|
)
|
|
|
(12,455
|
)
|
|
|
(20,984
|
)
|
|
|
(24,772
|
)
|
Total other (expenses) income
|
|
|
(369,963
|
)
|
|
|
174,717
|
|
|
|
(336,092
|
)
|
|
|
114,764
|
|
Loss before income taxes
|
|
$
|
(2,161,196
|
)
|
|
$
|
(565,880
|
)
|
|
$
|
(3,219,127
|
)
|
|
$
|
(1,610,742
|
)
|
Income tax expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net loss
|
|
$
|
(2,161,196
|
)
|
|
$
|
(565,880
|
)
|
|
$
|
(3,219,127
|
)
|
|
$
|
(1,610,742
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share, basic and diluted:
|
|
$
|
(0.13
|
)
|
|
$
|
(0.09
|
)
|
|
$
|
(0.26
|
)
|
|
$
|
(0.25
|
)
|
Weighted average shares outstanding, basic and diluted:
|
|
|
16,291,610
|
|
|
|
6,350,080
|
|
|
|
12,473,568
|
|
|
|
6,344,281
|
|
The
accompanying notes are an integral part to these unaudited consolidated condensed financial statements.
MARATHON
PATENT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED
CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
For
the Three Months Ended June 30, 2020
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Additional Paid-in
|
|
|
Accumulated
|
|
|
Accumulated
Other Comprehensive Income
|
|
|
Total Stockholders’
|
|
|
|
Number
|
|
|
Amount
|
|
|
Number
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
(Loss)
|
|
|
Equity
|
|
Balance as of March 31, 2020
|
|
|
-
|
|
|
$
|
-
|
|
|
|
9,212,106
|
|
|
$
|
922
|
|
|
$
|
110,284,952
|
|
|
$
|
(106,665,437
|
)
|
|
$
|
(450,719
|
)
|
|
$
|
3,169,718
|
|
Stock based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
2,745,639
|
|
|
|
275
|
|
|
|
648,475
|
|
|
|
-
|
|
|
|
-
|
|
|
|
648,750
|
|
Issuance of common stock, net of offering costs/At-the-market offering
|
|
|
-
|
|
|
|
-
|
|
|
|
10,544,818
|
|
|
|
1,054
|
|
|
|
6,420,835
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,421,889
|
|
Common stock issued for note conversion
|
|
|
-
|
|
|
|
-
|
|
|
|
2,023,739
|
|
|
|
202
|
|
|
|
1,578,872
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,579,074
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,161,196
|
)
|
|
|
-
|
|
|
|
(2,161,196
|
)
|
Balance as of June 30, 2020
|
|
|
-
|
|
|
$
|
-
|
|
|
|
24,526,302
|
|
|
$
|
2,453
|
|
|
$
|
118,933,134
|
|
|
$
|
(108,826,633
|
)
|
|
$
|
(450,719
|
)
|
|
$
|
9,658,235
|
|
For
the Three Months Ended June 30, 2019
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Additional Paid-in
|
|
|
Accumulated
|
|
|
Accumulated
Other Comprehensive Income
|
|
|
Total Stockholders’
|
|
|
|
Number
|
|
|
Amount
|
|
|
Number
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
(Loss)
|
|
|
Equity
|
|
Balance as of March 31, 2019
|
|
|
-
|
|
|
$
|
-
|
|
|
|
6,385,405
|
|
|
$
|
639
|
|
|
$
|
105,743,575
|
|
|
$
|
(103,135,303
|
)
|
|
$
|
(450,719
|
)
|
|
$
|
2,158,192
|
|
Stock based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
130,295
|
|
|
|
-
|
|
|
|
-
|
|
|
|
130,295
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(565,880
|
)
|
|
|
-
|
|
|
|
(565,880
|
)
|
Balance as of June 30, 2019
|
|
|
-
|
|
|
$
|
-
|
|
|
|
6,385,405
|
|
|
$
|
639
|
|
|
$
|
105,873,870
|
|
|
$
|
(103,701,183
|
)
|
|
$
|
(450,719
|
)
|
|
$
|
1,722,607
|
|
For
the Six Months Ended June 30, 2020
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Additional Paid-in
|
|
|
Accumulated
|
|
|
Accumulated
Other Comprehensive
|
|
|
Total Stockholders’
|
|
|
|
Number
|
|
|
Amount
|
|
|
Number
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Loss
|
|
|
Equity
|
|
Balance as of December 31, 2019
|
|
|
-
|
|
|
$
|
-
|
|
|
|
8,458,781
|
|
|
$
|
846
|
|
|
$
|
109,705,051
|
|
|
$
|
(105,607,506
|
)
|
|
$
|
(450,719
|
)
|
|
$
|
3,647,672
|
|
Stock based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
2,745,639
|
|
|
|
275
|
|
|
|
671,713
|
|
|
|
-
|
|
|
|
-
|
|
|
|
671,988
|
|
Issuance of common stock, net of offering costs/At-the-market offering
|
|
|
-
|
|
|
|
-
|
|
|
|
10,947,893
|
|
|
|
1,095
|
|
|
|
6,805,911
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,807,006
|
|
Common stock issued for purchase of mining servers
|
|
|
-
|
|
|
|
-
|
|
|
|
350,250
|
|
|
|
35
|
|
|
|
171,587
|
|
|
|
-
|
|
|
|
-
|
|
|
|
171,622
|
|
Common stock issued for note conversion
|
|
|
-
|
|
|
|
-
|
|
|
|
2,023,739
|
|
|
|
202
|
|
|
|
1,578,872
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,579,074
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,219,127
|
)
|
|
|
-
|
|
|
|
(3,219,127
|
)
|
Balance as of June 30, 2020
|
|
|
-
|
|
|
$
|
-
|
|
|
|
24,526,302
|
|
|
$
|
2,453
|
|
|
$
|
118,933,134
|
|
|
$
|
(108,826,633
|
)
|
|
$
|
(450,719
|
)
|
|
$
|
9,658,235
|
|
For
the Six Months Ended June 30, 2019
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Additional Paid-in
|
|
|
Accumulated
|
|
|
Accumulated
Other Comprehensive Income
|
|
|
Total Stockholders’
|
|
|
|
Number
|
|
|
Amount
|
|
|
Number
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
(Loss)
|
|
|
Equity
|
|
Balance as of December 31, 2018
|
|
|
-
|
|
|
$
|
-
|
|
|
|
6,379,992
|
|
|
$
|
638
|
|
|
$
|
105,461,396
|
|
|
$
|
(102,090,441
|
)
|
|
$
|
(450,719
|
)
|
|
$
|
2,920,874
|
|
Stock based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
412,475
|
|
|
|
-
|
|
|
|
-
|
|
|
|
412,475
|
|
Par value adjustment and additional shares issued due to reverse split
|
|
|
-
|
|
|
|
-
|
|
|
|
5,413
|
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,610,742
|
)
|
|
|
-
|
|
|
|
(1,610,742
|
)
|
Balance as of June 30, 2019
|
|
|
-
|
|
|
$
|
-
|
|
|
|
6,385,405
|
|
|
$
|
639
|
|
|
$
|
105,873,870
|
|
|
$
|
(103,701,183
|
)
|
|
$
|
(450,719
|
)
|
|
$
|
1,722,607
|
|
The
accompanying notes are an integral part to these unaudited consolidated condensed financial statements.
MARATHON
PATENT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
For the Six Months Ended
|
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(3,219,127
|
)
|
|
$
|
(1,610,742
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
1,010,270
|
|
|
|
274,722
|
|
Amortization of patents and website
|
|
|
35,588
|
|
|
|
35,588
|
|
Realized gain on sale of digital currencies
|
|
|
(4,260
|
)
|
|
|
(24,444
|
)
|
Change in fair value of warrant liability
|
|
|
(3,224
|
)
|
|
|
76,304
|
|
Change in fair value of mining payable
|
|
|
66,547
|
|
|
|
-
|
|
Stock based compensation
|
|
|
671,988
|
|
|
|
412,475
|
|
Amortization of right-of-use assets
|
|
|
52,117
|
|
|
|
44,259
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivables
|
|
|
-
|
|
|
|
-
|
|
Digital currencies
|
|
|
(878,648
|
)
|
|
|
(586,459
|
)
|
Lease liability
|
|
|
(53,736
|
)
|
|
|
(43,672
|
)
|
Prepaid expenses and other assets
|
|
|
58,886
|
|
|
|
122,853
|
|
Accounts payable and accrued expenses
|
|
|
173,555
|
|
|
|
(169,992
|
)
|
Net cash used in operating activities
|
|
|
(2,090,044
|
)
|
|
|
(1,469,108
|
)
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Sale of digital currencies
|
|
|
775,349
|
|
|
|
606,363
|
|
Purchase of property and equipment
|
|
|
(1,277,455
|
)
|
|
|
-
|
|
Deposit for purchase of the miners
|
|
|
(4,195,200
|
)
|
|
|
-
|
|
Net cash provided by investing activities
|
|
|
(4,697,306
|
)
|
|
|
606,363
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Proceeds received on issuance of notes payable
|
|
|
62,500
|
|
|
|
-
|
|
Proceeds from issuance of common stock/At-the-market offering
|
|
|
7,061,603
|
|
|
|
-
|
|
Offering costs for the issuance of common stock/At-the-market offering
|
|
|
(254,597
|
)
|
|
|
-
|
|
Net cash provided by financing activities
|
|
|
6,869,506
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
|
82,156
|
|
|
|
(862,745
|
)
|
Cash and cash equivalents — beginning of period
|
|
|
692,963
|
|
|
|
2,551,171
|
|
Cash and cash equivalents — end of period
|
|
$
|
775,119
|
|
|
$
|
1,688,426
|
|
|
|
|
|
|
|
|
|
|
Supplemental schedule of non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
Par value adjustment due to reverse split
|
|
$
|
-
|
|
|
$
|
1
|
|
Common stock issued for purchase of mining servers
|
|
$
|
171,622
|
|
|
$
|
-
|
|
Reduction of share commitment for purchase of mining servers
|
|
$
|
408,625
|
|
|
|
|
|
Common stock issued for note conversion
|
|
$
|
1,579,074
|
|
|
$
|
-
|
|
The
accompanying notes are an integral part to these unaudited consolidated condensed financial statements.
MARATHON
PATENT GROUP, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE
1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Organization
Marathon
Patent Group, Inc. (the “Company”) was incorporated in the State of Nevada on February 23, 2010 under the name Verve
Ventures, Inc. On December 7, 2011, the Company changed its name to American Strategic Minerals Corporation and was engaged in
the business of exploration and potential development of uranium and vanadium minerals. In June 2012, the Company discontinued
the minerals business and began to invest in real estate properties in Southern California. In October 2012, the Company discontinued
its real estate business when the former CEO joined the firm and the Company commenced IP licensing operations, at which time
the Company’s name was changed to Marathon Patent Group, Inc. The Company purchased cryptocurrency mining machines and established
a data center in Canada to mine digital assets. The Company expanded its activities in the mining of new digital assets, while
at the same time harvesting the value of its remaining IP assets. In order to streamline and create efficiencies, we outsource
most of our operations to service providers, and our Granby facility and its bitcoin mining operations are provided by Block Maintain,
Inc. Additionally, 24-hour security at our facility is provided by Securitas Canada.
On
September 30, 2019, the Company consummated the purchase of 6000 S-9 Bitmain 13.5 TH/s Bitcoin Antminers (“Miners”)
from SelectGreen Blockchain Ltd. (the “Seller”), a British Columbia corporation, for which the purchase price was
$4,086,250 or 2,335,000 shares of its common stock at a price of $1.75 per share. As a result of an exchange cap requirement imposed
in conjunction with the Company’s Listing of Additional Shares application filed with Nasdaq to the transaction, the Company
issued 1,276,442 shares of its common stock which represented $2,233,773 of the $4,086,250 (constituting 19.9% of the issued and
outstanding shares on the date of the Asset Purchase Agreement) and upon the receipt of shareholder approval, at the Annual Shareholders
Meeting to be held on November 15, 2019, the Company was authorized issue the balance of the 1,058,558 unregistered common stock
shares. The Company issued an additional 474,808 at $0.90 per share on December 27, 2019. On March 30, 2020, the Seller agreed
to amend the total of number of shares to be issued was reduced to 2,101,500 shares and the rest of 350,250 shares were issued
at $0.49 per share. There was no mining payable outstanding as of June 30, 2020.
On
May 11, 2020, the Company purchased 700 new generation M305+ASIC Miners from MicroBT for approximately $1.3 million. The 700 miners
produce 80/Th and will generate 56 PH/s (petahash) of hashing power, compared to the Company’s current S-9 production of
46 PH/s. These next generation MicroBT ASIC miners are markedly more energy efficient than our existing Bitmain models. These
miners were delivered to the Company’s Hosting Facility in June and are producing Bitcoins.
The
Company purchased 660 latest generation Bitmain S19 Pro Miners on May 12, 2020, 500 units on May 18, 2020 and an additional 500
units on June 11, 2020. These miners produce 110 TH/s and will generate 73 PH/s (petahash) of hashing power, compared to the Company’s
S-9 production of 46 PH/s. The Company made the payments of approximately $4.2 million in the second quarter of 2020 and expects
660 of the 1,660 units to take delivery at its Hosting Facility in mid-August, and its hosting partner, Compute North, expects
to install them within 48 hours of their arrival. The 1,000 remaining S-19 Pro Miners due to arrive in the 4th quarter
will produce an additional 110 PH/s, which when installed will give the Company an aggregate Hashpower of 294 PH/s.
As
of April 6, 2020, the Company received notice from the Nasdaq Capital Market (the “Capital Market”) that the Company
has failed to maintain a minimum closing bid price of $1.00 per share of its Common Stock over the last consecutive 30 business
days based upon the closing bid price for its common stock as required by Rule 5550(a)(2). However, the Rules also provide the
Company a compliance period of 180 calendar days in which to regain compliance during which time it must maintain a minimum closing
bid price of at least $1.00 per share for a minimum period of 10 consecutive business days, which must be completed by October
5, 2020. On April 20, 2020, the Company received a further notice from the Nasdaq Capital Market that the Company’s time
to maintain a minimum closing bid price of at least $1.00 per share for a minimum period of 10 consecutive business days has been
extended from October 5, 2020 to December 17, 2020. As of August 6, 2020, the Company believes it has regained compliance with
Rule 5550(a)(2) as the closing bid price has been in excess of $1.00 per share for the past ten trading days.
Liquidity
and Financial Condition
The
Company’s consolidated condensed financial statements have been prepared assuming that it will continue as a going concern,
which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.
As
disclosed in Note 4, on July 19, 2019, we entered into an At The Market Offering Agreement (the “Agreement”) with
H.C. Wainwright & Co., LLC (“H.C. Wainwright”) which establishes an at-the-market equity program pursuant to which
we may offer and sell shares of our common stock, par value $0.0001 per share (“Common Stock”), from time to time
as set forth in the Agreement. The Agreement provided for the sale of shares of our Common Stock (“Shares”) having
an aggregate offering price of up to $7.5 million (the Company’s ability to offer shares under the Agreement is limited
to the amount of shares it may sell pursuant to General Instruction I.B.6. of Form S-3). During the six months ended June 30,
2020, 10,947,893 shares of common stock were issued under the Agreement for the total proceeds of approximately $7.1 million,
net of offering cost of $0.3 million, and has sold all shares it is able to sell thereunder.
MARATHON
PATENT GROUP, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
As
reflected in the consolidated condensed financial statements, the Company had an accumulated deficit of approximately $108.8 million
at June 30, 2020, a net loss of approximately $3.2 million and approximately $2.1 million net cash used in operating activities
for the six months ended June 30, 2020. These factors raise substantial doubt about the Company’s ability to continue as
a going concern.
On
July 23, 2020, the Company entered into an underwriting agreement with H.C. Wainwright. The Company agree to sell H.C. Wainwright
(the “Underwriter”) 7,666,666 shares of its common stock, including the exercise in full by the Underwriter of the
option to purchase an additional 999,999 shares of common stock, at a public offering price of $0.90 per share. The gross proceeds
of this offering, which closed on July 28, 2020, were approximately $6.9 million, and proceeds, net of underwriting discount and
expenses of $0.6 million, were $6.3 million. Additionally, representative’s warrant to purchase 536,667 shares of our common
stock with a five year term and an exercise price of $1.125 per share were issued.
Based
on the Company’s current revenue and profit projections, management is uncertain that the Company’s existing cash
will be sufficient to fund its operations through at least the next twelve months from the issuance date of the financial statements,
raising substantial doubt regarding the Company’s ability to continue operating as a going concern. If we do not meet our
revenue and profit projections or the business climate turns negative, then we will need to:
|
●
|
raise
additional funds to support the Company’s operations; provided, however, there is no assurance that the Company will
be able to raise such additional funds on acceptable terms, if at all. If the Company raises additional funds by issuing securities,
existing stockholders may be diluted; and
|
|
|
|
|
●
|
review
strategic alternatives.
|
If
adequate funds are not available, we may be required to curtail our operations or other business activities or obtain funds, if
available, through arrangements with strategic partners or others that may require us to relinquish rights to certain technologies
or potential markets.
The
impact of the worldwide spread of a novel strain of coronavirus (“COVID 19”) has been unprecedented and unpredictable,
but based on the Company’s current assessment, the Company does not expect any material impact on its long-term strategic
plans, operations and its liquidity due to the worldwide spread of COVID-19. However, the Company is continuing to assess the
effect on its operations by monitoring the spread of COVID-19 and the actions implemented to combat the virus throughout the world
and its assessment of the impact of COVID-19 may change.
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation and Principles of Consolidation
The
accompanying consolidated condensed financial statements, including the accounts of the Company’s subsidiaries, Marathon
Crypto Mining, Inc., Crypto Currency Patent Holding Company and Soems Acquisition Corp., have been prepared by the Company, without
audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and disclosures
normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States
of America (U.S. GAAP) have been condensed or omitted pursuant to such rules and regulations. These consolidated condensed financial
statements reflect all adjustments (consisting only of normal recurring adjustments) which, in the opinion of management, are
necessary to present fairly the financial position, the results of operations and cash flows of the Company for the periods presented.
It is suggested that these consolidated condensed financial statements be read in conjunction with the consolidated financial
statements and the notes thereto included in the Company’s most recent Annual Report on Form 10-K. The results of operations
for the interim periods are not necessarily indicative of the results to be expected for the full year ended December 31, 2020.
Use
of Estimates and Assumptions
The
preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those
estimates. Significant estimates made by management include, but are not limited to, estimating the useful lives of patent assets
and fixed assets, the assumptions used to calculate fair value of warrants and options granted, realization of long-lived assets,
deferred income taxes, unrealized tax positions and the realization of digital currencies.
MARATHON
PATENT GROUP, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Significant
Accounting Policies
There
have been no material changes to the Company’s significant accounting policies to those previously disclosed in the Company’s
Annual Report on Form 10-K for the fiscal year ended December 31, 2019.
Digital
Currencies
Digital
currencies are included in current assets in the consolidated balance sheets. Digital currencies are recorded at cost less impairment.
An
intangible asset with an indefinite useful life is not amortized but assessed for impairment annually, or more frequently, when
events or changes in circumstances occur indicating that it is more likely than not that the indefinite-lived asset is impaired.
Impairment exists when the carrying amount exceeds its fair value. In testing for impairment, the Company has the option to first
perform a qualitative assessment to determine whether it is more likely than not that an impairment exists. If it is determined
that it is not more likely than not that an impairment exists, a quantitative impairment test is not necessary. If the Company
concludes otherwise, it is required to perform a quantitative impairment test. To the extent an impairment loss is recognized,
the loss establishes the new cost basis of the asset. Subsequent reversal of impairment losses is not permitted.
Halving
– The bitcoin blockchain and the cryptocurrency reward for solving a block is subject to periodic incremental halving. Halving
is a process designed to control the overall supply and reduce the risk of inflation in cryptocurrencies using a Proof-of-Work
consensus algorithm. At a predetermined block, the mining reward is cut in half, hence the term “Halving”. The next
halving for bitcoin occurred on May 12, 2020. Many factors influence the price of bitcoin and potential increases or decreases
in prices in advance of or following a future halving is unknown.
The
following table presents the activities of the digital currencies for the six months ended June 30, 2020:
Digital currencies at December 31, 2019
|
|
$
|
1,141
|
|
Additions of digital currencies
|
|
|
878,648
|
|
Realized gain on sale of digital currencies
|
|
|
4,260
|
|
Sale of digital currencies
|
|
|
(775,349
|
)
|
Digital currencies at June 30, 2020
|
|
$
|
108,700
|
|
Fair
Value of Financial Instruments
The
Company measures at fair value certain of its financial and non-financial assets and liabilities by using a fair value hierarchy
that prioritizes the inputs to valuation techniques used to measure fair value. Fair value is the price that would be received
to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date,
essentially an exit price, based on the highest and best use of the asset or liability. The levels of the fair value hierarchy
are:
|
Level
1:
|
Observable
inputs such as quoted market prices in active markets for identical assets or liabilities
|
|
|
|
|
Level
2:
|
Observable
market-based inputs or unobservable inputs that are corroborated by market data
|
|
|
|
|
Level
3:
|
Unobservable
inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions.
|
The
carrying amounts reported in the consolidated balance sheet for cash, accounts receivable, accounts payable, and accrued expenses,
approximate their estimated fair market value based on the short-term maturity of these instruments. The carrying value of notes
payable and other long-term liabilities approximate fair value as the related interest rates approximate rates currently available
to the Company.
Financial
assets and liabilities are classified in their entirety within the fair value hierarchy based on the lowest level of input that
is significant to their fair value measurement. The Company measures the fair value of its marketable securities by taking into
consideration valuations obtained from third-party pricing sources. The pricing services utilize industry standard valuation models,
including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly,
to estimate fair value. These inputs included reported trades of and broker-dealer quotes on the same or similar securities, issuer
credit spreads, benchmark securities and other observable inputs.
MARATHON
PATENT GROUP, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
The
following tables present information about the Company’s assets and liabilities measured at fair value on a recurring basis
and the Company’s estimated level within the fair value hierarchy of those assets and liabilities as of June 30, 2020 and
December 31, 2019, respectively:
|
|
Fair value measured at December 31, 2019
|
|
|
|
Total carrying value at December 31,
|
|
|
Quoted prices in active markets
|
|
|
Significant other observable inputs
|
|
|
Significant unobservable inputs
|
|
|
|
2019
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant liability
|
|
$
|
12,849
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
12,849
|
|
|
|
Fair value measured at June 30, 2020
|
|
|
|
Total carrying value at
June 30,
|
|
|
Quoted prices in active markets
|
|
|
Significant other observable inputs
|
|
|
Significant unobservable inputs
|
|
|
|
2020
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant liability
|
|
$
|
9,625
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
9,625
|
|
There
were no transfers between Level 1, 2 or 3 during the six months ended June 30, 2020.
At
June 30, 2020, the Company had an outstanding warrant liability in the amount of $9,625 associated with warrants that were issued
in January 2017 and warrants issued related to the Convertible Notes issued in August and September of 2017. The following table
rolls forward the fair value of the Company’s warrant liability, the fair value of which is determined by Level 3 inputs
for the six months ended June 30, 2020.
Fair
value of warrant liabilities
|
|
Fair value
|
|
Outstanding as of December 31, 2019
|
|
$
|
12,849
|
|
Change in fair value of warrants
|
|
|
(3,224
|
)
|
Outstanding as of June 30, 2020
|
|
$
|
9,625
|
|
Basic
and Diluted Net Loss per Share
Net
loss per common share is calculated in accordance with ASC Topic 260: Earnings Per Share (“ASC 260”). Basic loss per
share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period.
The computation of diluted net loss per share does not include dilutive common stock equivalents in the weighted average shares
outstanding, as they would be anti-dilutive.
Securities
that could potentially dilute loss per share in the future that were not included in the computation of diluted loss per share
at June 30, 2020 and 2019 are as follows:
|
|
As of June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Warrants to purchase common stock
|
|
|
164,222
|
|
|
|
182,191
|
|
Options to purchase common stock
|
|
|
140,182
|
|
|
|
1,466,520
|
|
Convertible notes to exchange common stock
|
|
|
-
|
|
|
|
312,221
|
|
Total
|
|
|
304,404
|
|
|
|
1,960,932
|
|
The
following table sets forth the computation of basic and diluted loss per share:
|
|
For the Three Months Ended
June 30,
|
|
|
For the Six Months Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Net loss attributable to common shareholders
|
|
$
|
(2,161,196
|
)
|
|
$
|
(565,880
|
)
|
|
$
|
(3,219,127
|
)
|
|
$
|
(1,610,742
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares - basic and diluted
|
|
|
16,291,610
|
|
|
|
6,350,080
|
|
|
|
12,473,568
|
|
|
|
6,344,281
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per common share - basic and diluted
|
|
$
|
(0.13
|
)
|
|
$
|
(0.09
|
)
|
|
$
|
(0.26
|
)
|
|
$
|
(0.25
|
)
|
MARATHON
PATENT GROUP, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Sequencing
In
connection with August 14, 2017 Convertible Note financing, the Company adopted a sequencing policy whereby all future instruments
may be classified as a derivative liability with the exception of instruments related to share-based compensation issued to employees
or directors. This convertible note was satisfied in full during the second quarter of 2020, therefore as of June 30, 2020, no
future instruments are subject to the company sequencing policy.
Recent
Accounting Pronouncements
In
December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”)”,
which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to
the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance
is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption
permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related
disclosures.
Any
new accounting standards, not disclosed above, that have been issued or proposed by FASB that do not require adoption until a
future date are not expected to have a material impact on the financial statements upon adoption.
NOTE
3 – DEPOSIT, PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS
On
May 11, 2020, the Company signed a Contract Addendum with Compute North, to pause and suspend services under its Colocation Agreement.
This will suspend all production of Bitcoin using our S-9 miners.
Halving
– The bitcoin blockchain and the cryptocurrency reward for solving a block is subject to periodic incremental halving. Halving
is a process designed to control the overall supply and reduce the risk of inflation in cryptocurrencies using a Proof-of-Work
consensus algorithm. At a predetermined block, the mining reward is cut in half, hence the term “Halving”. The next
halving for bitcoin occurred on May 12, 2020. Many factors influence the price of bitcoin and potential increases or decreases
in prices in advance of or following a future halving is unknown.
On
May 11, 2020, the Company purchased 700 new generation M305+ASIC Miners from MicroBT for approximately $1.3 million. The 700 miners
produce 80/Th and will generate 56 PH/s (petahash) of hashing power, compared to the Company’s current S-9 production of
46 PH/s. These next generation MicroBT ASIC miners are markedly more energy efficient than our existing Bitmain models. These
miners have been delivered to the Company’s Hosting Facility in June and are producing Bitcoins.
The
Company purchased 660 latest generation Bitmain S19 Pro Miners on May 12, 2020, 500 units on May 18, 2020 and an additional 500
units on June 11, 2020. These miners produce 110 TH/s and will generate 73 PH/s (petahash) of hashing power, compared to the Company’s
S-9 production of 46 PH/s. The Company made the payments of approximately $4.2 million in the second quarter of 2020 and expects
660 of the 1,660 units to take delivery at its Hosting Facility in mid-August, and its hosting partner, Compute North, expects
to install them within 48 hours of their arrival. The 1,000 remaining S-19 Pro Miners due to arrive in the 4th quarter
will produce an additional 110 PH/s, which when installed will give the Company an aggregate Hashpower of 294 PH/s.
As
of June 30, 2020, approximately $4.2 million cash paid for Miners was recorded as deposit on the balance sheet.
The
components of property, equipment and intangible assets as of June 30, 2020 and December 31, 2019 are:
|
|
Useful life (Years)
|
|
June 30, 2020
|
|
|
December 31, 2019
|
|
Website
|
|
7
|
|
$
|
121,787
|
|
|
$
|
121,787
|
|
Mining equipment
|
|
2
|
|
|
7,989,335
|
|
|
|
7,120,505
|
|
Mining patent
|
|
17
|
|
|
1,210,000
|
|
|
|
1,210,000
|
|
Gross property, equipment and intangible assets
|
|
|
|
|
9,321,122
|
|
|
|
8,452,292
|
|
Less: Accumulated depreciation and amortization
|
|
|
|
|
(4,669,603
|
)
|
|
|
(3,623,745
|
)
|
Property, equipment and intangible assets, net
|
|
|
|
$
|
4,651,519
|
|
|
$
|
4,828,547
|
|
The
Company’s depreciation expense for the three months ended June 30, 2020 and 2019 were $499,489 and $137,361, and amortization
expense were $17,794 and $17,794 for the three months ended June 30, 2020 and 2019, respectively. The Company’s depreciation
expense for the six months ended June 30, 2020 and 2019 were $1.0 million and $274,722, and amortization expense were $35,588
and $35,588 for the six months ended June 30, 2020 and 2019, respectively.
MARATHON
PATENT GROUP, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE
4 - STOCKHOLDERS’ EQUITY
Common
Stock
At
The Market Offering Agreement
On
July 19, 2019, we entered into an At The Market Offering Agreement (the “Agreement”) with H.C. Wainwright & Co.,
LLC (“H.C. Wainwright”) which establishes an at-the-market equity program pursuant to which we may offer and sell
shares of our common stock, par value $0.0001 per share (“Common Stock”), from time to time as set forth in the Agreement.
The Agreement provided for the sale of shares of our Common Stock (“Shares”) having an aggregate offering price of
up to $7.5 million (the Company’s ability to offer shares under the Agreement is limited to the amount of shares it may
sell pursuant to General Instruction I.B.6. of Form S-3).
During
the six months ended June 30, 2020, 10,947,893 shares of common stock were issued under the Agreement for the total proceeds of
approximately $7.1 million, net of offering cost of $0.3 million, and the Company has sold all shares possible under the Agreement.
Series
B Convertible Preferred Stock
As
of June 30, 2020, there was no share of Series B Convertible Preferred Stock outstanding.
Series
E Preferred Stock
There
was no Series E Convertible Preferred Stock outstanding as of June 30, 2020.
Common
Stock Warrants
A
summary of the status of the Company’s outstanding stock warrants and changes during the six months ended June 30, 2020
is as follows:
|
|
Number of Warrants
|
|
|
Weighted Average
Exercise Price
|
|
|
Weighted Average
Remaining
Contractual Life
(in years)
|
|
Outstanding as of December 31, 2019
|
|
|
182,191
|
|
|
$
|
25.04
|
|
|
|
2.8
|
|
Expired
|
|
|
(17,969
|
)
|
|
|
59.14
|
|
|
|
-
|
|
Outstanding as of June 30, 2020
|
|
|
164,222
|
|
|
$
|
21.30
|
|
|
|
1.8
|
|
Warrants exercisable as of June 30, 2020
|
|
|
164,222
|
|
|
$
|
21.30
|
|
|
|
1.8
|
|
Common
Stock Options
On
May 5, 2020, the Compensation Committee of the Board of Directors held a meeting and approved bonuses and stock option grants
for Directors and Officers for their contributions to the growth of Marathon Patent Group, Inc., for the year ended December 31,
2019. Total awards to be granted amounted to 1,158,138 restricted stock units at a price of $0.43 per unit with a term of one
year, vesting quarterly in equal amounts, and (ii) cash award of $105,000 to Merrick Okamoto and $54,000 to David Lieberman. In
addition, the Compensation Committee agreed to cancel 1,587,500 existing stock options for Directors, Officers and outside legal
counsel, and replace them with 1,587,500 restricted stock units at a price of $0.43 per unit with a term of one year, vesting
quarterly in equal amounts.
MARATHON
PATENT GROUP, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
A
summary of the stock options as of June 30, 2020 and changes during the period are presented below:
|
|
Number of Shares
|
|
|
Weighted Average
Exercise Price
|
|
|
Weighted Average
Remaining
Contractual Life
(in years)
|
|
Outstanding as of December 31, 2019
|
|
|
1,731,745
|
|
|
$
|
5.50
|
|
|
|
7.92
|
|
Cancelled
|
|
|
(1,587,500
|
)
|
|
|
2.28
|
|
|
|
-
|
|
Expired
|
|
|
(4,063
|
)
|
|
|
110.67
|
|
|
|
-
|
|
Outstanding as of June 30, 2020
|
|
|
140,182
|
|
|
$
|
38.92
|
|
|
|
4.63
|
|
Options vested and expected to vest as of June 30, 2020
|
|
|
140,182
|
|
|
$
|
38.92
|
|
|
|
4.63
|
|
Options vested and exercisable as of June 30, 2020
|
|
|
127,682
|
|
|
$
|
42.53
|
|
|
|
4.69
|
|
Restricted
Stock
A
summary of the restricted stock award activity for the six months ended June 30, 2020 as follows:
|
|
Number of Units
|
|
|
Weighted Average
Grant Date Fair
Value
|
|
Nonvested at December 31, 2019
|
|
|
18,750
|
|
|
$
|
6.88
|
|
Granted
|
|
|
2,745,639
|
|
|
$
|
0.43
|
|
Vested
|
|
|
(698,910
|
)
|
|
$
|
0.55
|
|
Nonvested at June 30, 2020
|
|
|
2,065,479
|
|
|
$
|
0.45
|
|
NOTE
5 - DEBT, COMMITMENTS AND CONTINGENCIES
Debt
consists of the following:
|
|
Maturity
|
|
|
Interest
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
Date
|
|
|
Rate
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible Note
|
|
|
9/1/2021
|
|
|
|
5
|
%
|
|
|
-
|
|
|
|
999,106
|
|
Less: debt discount
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
Total convertible notes, net of discount
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
999,106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
999,106
|
|
Less: current portion
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
Long term portion
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
999,106
|
|
On August 14, 2017, the Company entered into
a unit purchase agreement (the “Unit Purchase Agreement”) with certain accredited investors providing for the sale
of up to $5,500,000 of 5% secured convertible promissory notes (the “Convertible Notes”), which are convertible into
shares of the Corporation’s common stock, and the issuance of warrants to purchase 1,718,750 shares of the Company’s
Common Stock (the “Warrants”). The Convertible Notes are convertible into shares of the Company’s Common Stock
at the lesser of (i) $0.80 per share or (ii) the closing bid price of the Company’s common stock on the day prior to conversion
of the Convertible Note; provided that such conversion price may not be less than $0.40 per share. The Warrants have an exercise
price of $4.80 per share. In two closings of the Unit Purchase Agreement, the Company issued $5,500,000 in Convertible Notes to
the investors. The remaining balance of the Convertible Notes were due to mature on May 31, 2018. On February 10, 2020, in consideration
of the payment of $65,000, the investor agreed to extend the maturity date to September 1, 2021, and the conversion price changed
to the lower of, the closing price on the previous days close prior to the conversion request or a maximum conversion price of
$1.00 and a floor of $0.80. The Company made such payment on February 11, 2020. On May 19, 2020, the Company amended the note with
the investor to reduce the conversion price to $0.6 per share. During the six months ended June 30, 2020, $999,106 remaining balance
of the Convertible Notes and $215,136 of accrued and unpaid interest were converted into 2,023,739 shares of the Company’s
Common Stock, and the Company recorded $364,832 expenses pursuant to the inducement of the conversion terms.
During the six months ended June 30, 2020 and
2019, there was no amortization of debt discount. Interest expenses were $8,414 and $12,454 for the three months ended June 30,
2020 and 2019, respectively. Interest expenses were $20,869 and $24,772 for the six months ended June 30, 2020 and 2019, respectively.
MARATHON
PATENT GROUP, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note
Payable
On
May 6, 2020, the Company entered into a Paycheck Protection Program Promissory Note agreement with a bank which is providing $62,500
to the Company. The note accrues interest at a rate of 1% per annum and matures on May 6, 2022.
Leases
Effective
June 1, 2018, the Company rented its corporate office at 1180 North Town Center Drive, Suite 100, Las Vegas, Nevada 89144, on
a month to month basis. The monthly rent is $1,997. A security deposit of $3,815 has been paid.
The
Company also assumed a lease in connection with the mining operations in Quebec, Canada. Operating leases are included in operating
lease right-of-use assets, operating lease liabilities, and noncurrent operating lease liabilities on the balance sheets.
Operation
lease costs are recorded on a straight-line basis within operating expenses. The Company’s total lease expense is comprised
of the following:
|
|
For the Three Months Ended
|
|
|
|
June 30, 2020
|
|
|
June 30, 2019
|
|
Operating leases
|
|
|
|
|
|
|
|
|
Operating lease cost
|
|
$
|
26,333
|
|
|
$
|
27,065
|
|
Operating lease expense
|
|
|
26,333
|
|
|
|
27,065
|
|
Short-term lease rent expense
|
|
|
6,072
|
|
|
|
5,841
|
|
Total rent expense
|
|
$
|
32,405
|
|
|
$
|
32,906
|
|
|
|
For the Six Months Ended
|
|
|
|
June 30, 2020
|
|
|
June 30, 2019
|
|
Operating leases
|
|
|
|
|
|
|
|
|
Operating lease cost
|
|
$
|
53,122
|
|
|
$
|
53,311
|
|
Operating lease expense
|
|
|
53,122
|
|
|
|
53,311
|
|
Short-term lease rent expense
|
|
|
12,064
|
|
|
|
9,948
|
|
Total rent expense
|
|
$
|
65,186
|
|
|
$
|
63,259
|
|
Additional
information regarding the Company’s leasing activities as a lessee is as follow:
|
|
For the Six Months Ended
|
|
|
|
June 30, 2020
|
|
|
June 30, 2019
|
|
Operating cash flows from operating leases
|
|
$
|
52,246
|
|
|
$
|
52,314
|
|
Weighted-average remaining lease term – operating leases
|
|
|
1.4
|
|
|
|
1.8
|
|
Weighted-average discount rate – operating leases
|
|
|
6.5
|
%
|
|
|
6.5
|
%
|
As
of June 30, 2020, contractual minimal lease payments are as follows:
2020
|
|
$
|
43,181
|
|
2021
|
|
|
94,997
|
|
2022
|
|
|
25,908
|
|
Total
|
|
|
164,086
|
|
Less present value discount
|
|
|
(9,384
|
)
|
Less current portion of operating lease liabilities
|
|
|
(87,447
|
)
|
Non-current operating lease liabilities
|
|
$
|
67,255
|
|
MARATHON
PATENT GROUP, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Legal
Proceedings
Feinberg
Litigation
On
March 27, 2018, Jeffrey Feinberg, purportedly joined by the Jeffrey L. Feinberg Personal Trust and the Jeffrey L. Feinberg Family
Trust, filed a complaint against the Company and certain of its former officers and directors. The complaint was filed in the
Supreme Court of the State of New York, County of New York. The plaintiffs purported to state claims under Sections 11, 12(a)(2)
and 15 of the federal Securities Act of 1933 and common law claims for “actual fraud and fraudulent concealment,”
constructive fraud, and negligent misrepresentation, seeking unspecified money damages (including punitive damages), as well as
costs and attorneys’ fees, and equitable or injunctive relief. On June 15, 2018, the defendants filed a motion to dismiss
all claims asserted in the complaint and, on July 27, 2018, the plaintiffs filed an opposition to that motion. The court heard
argument on the motion and, on January 15, 2019, the court granted the motion to dismiss, allowing 30 days for the filing of an
amended complaint. On February 15, 2019, Jeffrey Feinberg, individually and as trustee of the Jeffrey L. Feinberg Personal Trust,
and Terrence K. Ankner, as trustee of the Jeffrey L. Feinberg Family Trust, filed an amended complaint that purports to state
the same claims and seeks the same relief sought in the original complaint. On March 7 and 22, 2019, defendants filed motions
to dismiss the amended complaint and on April 5, 2019, plaintiffs filed an opposition to those motions. The court heard oral argument
on the motions to dismiss on July 9, 2019, and at the conclusion of the argument the court took the motions under submission.
The parties are waiting for the court’s rulings on the motions to dismiss and, while the motions have been under submission,
no discovery has been taken and there have been no other significant developments in the case.
NOTE
6 – Subsequent Events
The
Company has evaluated subsequent events through the date of the consolidated financial statements were available to be issued
and has concluded that no such events or transactions took place that would require disclosure herein except as stated directly
above.
On
July 23, 2020, the Company entered into an underwriting agreement with H.C. Wainwright. The Company agree to sell H.C. Wainwright
(the “Underwriter”) 7,666,666 shares of its common stock, including the exercise in full by the Underwriter of the
option to purchase an additional 999,999 shares of common stock, at a public offering price of $0.90 per share. The gross proceeds
of this offering, which closed on July 28, 2020, were approximately $6.9 million, and proceeds, net of underwriting discount and
expenses of $0.6 million, were $6.3 million. Additionally, representative’s warrant to purchase 536,667 shares of our common
stock with a five year term and an exercise price of $1.125 per share were issued.
On
July 29, 2020, the Company announced the purchase of 700 next generation M31S+ASIC Miners from MicroBT. The miners are expected
to arrive mid-August. Additionally, Bitmain has notified the Company that 660 of the 1,660 Bitmain S-19 Pro Miners previously
purchase will be delivered in mid-August. The 1,000 remaining S-19 Pro Miners due to arrive in the 4th quarter will
produce an additional 110 PH/s, which when installed will give the Company an aggregate Hashpower of 294 PH/s.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This
report on Form 10-Q (“Report”) and other written and oral statements made from time to time by us may contain so-called
“forward-looking statements,” all of which are subject to risks and uncertainties. Forward-looking statements can
be identified by the use of words such as “expects,” “plans,” “will,” “forecasts,”
“projects,” “intends,” “estimates,” and other words of similar meaning. One can identify them
by the fact that they do not relate strictly to historical or current facts. These statements are likely to address our growth
strategy, financial results and product and development programs. One must carefully consider any such statement and should understand
that many factors could cause actual results to differ from our forward-looking statements. These factors may include inaccurate
assumptions and a broad variety of other risks and uncertainties, including some that are known and some that are not. No forward-looking
statement can be guaranteed and actual future results may vary materially.
Information
regarding market and industry statistics contained in this Report is included based on information available to us that we believe
is accurate. It is generally based on industry and other publications that are not produced for purposes of securities offerings
or economic analysis. We have not reviewed or included data from all sources, and cannot assure investors of the accuracy or completeness
of the data included in this Report. Forecasts and other forward-looking information obtained from these sources are subject to
the same qualifications and the additional uncertainties accompanying any estimates of future market size, revenue and market
acceptance of products and services. We do not assume any obligation to update any forward-looking statement. As a result, investors
should not place undue reliance on these forward-looking statements.
Overview
We
were incorporated in the State of Nevada on February 23, 2010 under the name Verve Ventures, Inc. On December 7, 2011, we changed
our name to American Strategic Minerals Corporation and were engaged in exploration and potential development of uranium and vanadium
minerals business. In June 2012, we discontinued our minerals business and began to invest in real estate properties in Southern
California. In October 2012, we discontinued our real estate business when our former CEO joined the firm and we commenced our
IP licensing operations, at which time the Company’s name was changed to Marathon Patent Group, Inc. We purchased our cryptocurrency
mining machines and established a data center in Canada to mine digital assets.
We
entered into an At The Market Offering Agreement (the “Agreement”) with H.C. Wainwright & Co., LLC (“H.C.
Wainwright”) which establishes an at-the-market equity program pursuant to which we may offer and sell shares of our common
stock, par value $0.0001 per share (“Common Stock”), from time to time as set forth in the Agreement. The Agreement
provides for the sale of shares of our Common Stock (“Shares”) having an aggregate offering price of up to $7.5 million
(the Company’s ability to offer shares under the Agreement is limited to the amount of shares it may sell pursuant to General
Instruction I.B.6. of Form S-3). During the six months ended June 30, 2020, 10,947,893 shares of common stock were issued under
the Agreement Offering for the total proceeds of approximately $7.1 million, net of offering cost of $0.3 million.
On
September 30, 2019, we consummated the purchase of 6000 S-9 Bitmain 13.5 TH/s Bitcoin Antminers (“Miners”) from SelectGreen
Blockchain Ltd. (the “Seller”), a British Columbia corporation, for which the purchase price was $4,086,250 or 2,335,000
shares of its common stock at a price of $1.75 per share. As a result of an exchange cap requirement imposed in conjunction with
our Listing of Additional Shares application filed with Nasdaq to the transaction, we issued 1,276,442 shares of its common stock
which represented $2,233,773 of the $4,086,250 (constituting 19.9% of the issued and outstanding shares on the date of the Asset
Purchase Agreement) and upon the receipt of shareholder approval, at the Annual Shareholders Meeting to be held on November 15,
2019, we received approval to issue the balance of the 1,058,558 unregistered common stock shares. We have issued an additional
474,808 at $0.90 per share on December 27, 2019. On March 30, 2020, the Seller has agreed to amend the total of number of shares
to be issued was reduced to 2,101,500 shares and the rest of 350,250 shares were issued at $0.49 per share.
In
March 2020, the World Health Organization categorized the novel coronavirus (COVID-19) as a pandemic, and it continues to spread
throughout the United States and the rest of the world with different geographical locations impacted more than others. The outbreak
of COVID-19 and public and private sector measures to reduce its transmission, such as the imposition of social distancing and
orders to work-from-home, stay-at-home and shelter-in-place, have had a minimal impact on our day to day operations. However,
this could impact our efforts to work with other businesses as they have had to adjust, reduce or suspend their operating activities.
The extent of the impact will vary depending on the duration and severity of the economic and operational impacts of COVID-19.
The Company is unable to predict the ultimate impact at this time. With the current worldwide situation caused by COVID-19 and
related circumstances, there can be no assurances as to when we may see any recovery in the bitcoin market, and if so, whether
any recovery might be significant.
Critical
Accounting Policies and Estimates
Our
critical accounting policies and significant estimates are detailed in our 2019 Annual Report. Our critical accounting policies
and significant estimates have not changed from those previously disclosed in our 2019 Annual Report, except for those accounting
subjects mentioned in the section of the notes to the condensed consolidated financial statements titled Adoption of Recent Accounting
Pronouncements.
Results
of Operations
For
the Three and Six Months Ended June 30, 2020 and 2019
We
generated revenues of $286,161 and $878,648 during the three and six months ended June 30, 2020 as compared to $355,765 and $586,459
during the three and six months ended June 30, 2019. For the three and six months ended June 30, 2020, this represented a decrease
of $69,604 or 20% and an increase of $292,189 or 50% over the same period in 2019. Revenue for the three months ended June 30,
2020 and 2019 were derived primarily from cryptocurrency mining.
Direct
cost of revenues during the three and six months ended June 30, 2020 amounted to $740,483 and $1,893,724 and for the three and
six months ended June 30, 2019, the direct cost of revenues amounted to $498,588 and $1,007,228. For the three and six months
ended June 30, 2020, this represented an increase of $241,895 or 49% and $886,496 or 88% over the same period in 2019. Direct
costs of revenue include depreciation and amortization expenses of the cryptocurrency mining machines and patents, contingent
payments to patent enforcement legal costs, patent enforcement advisors and inventors as well as various non-contingent costs
associated with enforcing the Company’s patent rights and otherwise in developing and entering into settlement and licensing
agreements that generate the Company’s revenue.
We
incurred other operating expenses of $1,336,911 and $1,867,959 for the three and six months June 30, 2020 and $597,774 and $1.3
million for the three and six months ended June 30, 2019. For the three and six months ended June 30, 2020, this represented an
increase of $739,137 or 124% and $563,222 or 43% over 2019. These expenses primarily consisted of stock-based compensation, compensation
to our officers, directors and employees, professional fees and consulting incurred in connection with the day-to-day operation
of our business.
The
operating expenses consisted of the following:
|
|
Total Other Operating Expenses
|
|
|
Total Other Operating Expenses
|
|
|
|
For the Three Months Ended
|
|
|
For the Six Months Ended
|
|
|
|
June 30, 2020
|
|
|
June 30, 2019
|
|
|
June 30, 2020
|
|
|
June 30, 2019
|
|
Compensation and related taxes (1)
|
|
$
|
1,060,480
|
|
|
$
|
328,604
|
|
|
$
|
1,294,137
|
|
|
$
|
815,291
|
|
Consulting fees (2)
|
|
|
24,313
|
|
|
|
30,000
|
|
|
|
66,125
|
|
|
|
50,000
|
|
Professional fees (3)
|
|
|
162,552
|
|
|
|
110,341
|
|
|
|
309,194
|
|
|
|
195,374
|
|
Other general and administrative (4)
|
|
|
89,566
|
|
|
|
128,829
|
|
|
|
198,503
|
|
|
|
244,072
|
|
Total
|
|
$
|
1,336,911
|
|
|
$
|
597,774
|
|
|
$
|
1,867,959
|
|
|
$
|
1,304,737
|
|
Non-cash
other operating expenses for the three and six months ended June 30, 2020, include non-cash other operating expenses totaling
$23,238 and $671,987, and $130,295 and $434,566 for the three and six months ended June 30, 2019 respectively. Non-cash operating
expenses consisted of the following:
|
|
Non-Cash Other Operating Expenses
|
|
|
Non-Cash Other Operating Expenses
|
|
|
|
For the Three Months Ended
|
|
|
For the Six Months Ended
|
|
|
|
June 30, 2020
|
|
|
June 30, 2019
|
|
|
June 30, 2020
|
|
|
June 30, 2019
|
|
Compensation and related taxes (1)
|
|
$
|
23,238
|
|
|
$
|
130,295
|
|
|
$
|
671,987
|
|
|
$
|
434,566
|
|
Total
|
|
$
|
23,238
|
|
|
$
|
130,295
|
|
|
$
|
671,987
|
|
|
$
|
434,566
|
|
|
(1)
|
Compensation
expense and related taxes: Compensation expense includes cash compensation and related payroll taxes and benefits, and non-cash
equity compensation expenses. For the three and six months ended June 30, 2020, compensation expense and related payroll taxes
were $1,060,480 and $1,294,137, an increase of $731,876 or 223% and $478,846 or 59% over the comparable periods in 2019. During
the three and six months ended June 30, 2020, we recognized non-cash employee and board equity-based compensation of $23,238
and $671,987, respectively, and $130,295 and $434,566 for the three and six months ended June 30, 2019, respectively.
|
|
|
|
|
(2)
|
Consulting
fees: For the three and six months ended June 30, 2020, we incurred consulting fees of $24,313 and $66,125, a decrease of
$5,687 or 19% and an increase of $16,125 or 32% over the comparable periods in 2019. Consulting fees include both cash and
non-cash related consulting fees primarily for investor relations and public relations services as well as other consulting
services.
|
|
|
|
|
(3)
|
Professional
fees: For the three and six months ended June 30, 2020 professional fees were $162,552 and $309,194, an increase of $52,211
or 47% and $113,820 or 58% over the comparable periods in 2019. Professional fees primarily reflect the costs of professional
outside accounting fees, legal fees and audit fees.
|
|
|
|
|
(4)
|
Other
general and administrative expenses: For the three and six months ended June 30, 2020, other general and administrative expenses
were $89,566 and $198,503, a decrease of $39,263 or 30% and $45,569 or 19% over the comparable periods in 2019. General and
administrative expenses reflect the other non-categorized operating costs of the Company and include expenses related to being
a public company, rent, insurance, technology and other expenses incurred to support the operations of the Company.
|
Operating
Loss
We
reported operating loss from continuing operations of $1.8 million and $2.9 million for the three and six months ended June 30,
2020 and operating loss of $0.7 million and $1.7 million for the three and six months ended June 30, 2019.
Other
(Expenses) Income
Total
other expenses was $369,963 and $336,092 for the three and six months ended June 30, 2020 and other income of $174,717 and $114,764
for the three and six months ended June 30, 2019, respectively.
Net
Loss Available to Common Shareholders
We
reported net loss of $2.2 million and $3.2 million for the three and six months ended June 30, 2020 and net loss of $0.6 million
and $1.6 million for the three and six months ended June 30, 2019.
Liquidity
and Capital Resources
The
Company’s condensed consolidated financial statements have been prepared assuming that it will continue as a going concern,
which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.
On
July 19, 2019, we entered into an At The Market Offering Agreement (the “Agreement”) with H.C. Wainwright & Co.,
LLC (“H.C. Wainwright”) which establishes an at-the-market equity program pursuant to which we may offer and sell
shares of our common stock, par value $0.0001 per share (“Common Stock”), from time to time as set forth in the Agreement.
The Agreement provides for the sale of shares of our Common Stock (“Shares”) having an aggregate offering price of
up to $7.5 million (the Company’s ability to offer shares under the Agreement is limited to the amount of shares it may
sell pursuant to General Instruction I.B.6. of Form S-3). During the six months ended June 30, 2020, 10,947,893 shares of common
stock were issued under the Agreement Offering for the total proceeds of approximately $7.1 million, net of offering cost of $0.3
million.
As
reflected in the condensed consolidated financial statements, the Company had an accumulated deficit of approximately $108.8 million
at June 30, 2020, a net loss of approximately $3.2 million and $2.1 million net cash used in operating activities for the six
months ended June 30, 2020. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
Liquidity
is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise
operate on an ongoing basis. At June 30, 2020, the Company’s cash and cash equivalents balances totaled $775,119 compared
to $692,963 at December 31, 2019.
Net
working capital increased by $5.2 million, to working capital of $4.9 million at June 30, 2020 from working capital deficit of
$358,577 at December 31, 2019.
Cash
used in operating activities was $2.1 million during the six months ended June 30, 2020 compared to cash used in operating activities
of $1.5 million during the six months ended June 30, 2019.
Cash
used in investing activities was $4.7 during the six months ended June 30, 2020 compared to cash provided by investing activities
of $606,363 for the six months ended June 30, 2019.
Cash
provided by financing activities was $6.9 million during the six months ended June 30, 2020.
On
July 23, 2020, the Company entered into an underwriting agreement with H.C. Wainwright. The Company agree to sell H.C. Wainwright
(the “Underwriter”) 7,666,666 shares of its common stock, including the exercise in full by the Underwriter of the
option to purchase an additional 999,999 shares of common stock, at a public offering price of $0.90 per share. The gross proceeds
of this offering, which closed on July 28, 2020, were approximately $6.9 million, and proceeds, net of underwriting discount and
expenses of $0.6 million, were $6.3 million. Additionally, representative’s warrant to purchase 536,667 shares of our common
stock with a five year term and an exercise price of $1.125 per share were issued.
Based
on our current revenue and profit projections, we are uncertain that our existing cash will be sufficient to fund its operations
through at least the next twelve months, raising substantial doubt regarding our ability to continue operating as a going concern.
If we do not meet our revenue and profit projections or the business climate turns negative, then we will need to:
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●
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raise
additional funds to support our operations, through, among other potential sources, our newly effected Agreement Facility
with H.C. Wainwright; provided, however, there is no assurance that we will be able to raise such additional funds on acceptable
terms, if at all. If we raise additional funds by issuing securities, existing stockholders may be diluted; and
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|
|
|
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●
|
review
strategic alternatives.
|
If
adequate funds are not available, we may be required to curtail our operations or other business activities or obtain funds through
arrangements with strategic partners or others that may require us to relinquish rights to certain technologies or potential markets.
Off-balance
Sheet Arrangements
We
have not entered into any other financial guarantees or other commitments to guarantee the payment obligations of any third parties.
We have not entered into any derivative contracts that are indexed to our shares and classified as stockholder’s equity
or that are not reflected in our consolidated condensed financial statements. Furthermore, we do not have any retained or contingent
interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity.
Item
3. Quantitative and Qualitative Disclosures About Market Risk.
Not
required for smaller reporting companies.
Item
4. Controls and Procedures.
Disclosure
Controls and Procedures.
Our
management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules
13a-15(f) and 15d-15(f) under the Exchange Act. Our management is also required to assess and report on the effectiveness of our
internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”).
Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes of accounting principles generally accepted
in the United States. Management assessed the effectiveness of our internal control over financial reporting as of June 30, 2020.
In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO) in Internal Control - Integrated Framework in the 2013 COSO framework. Based on this assessment, management concluded that
our disclosure controls and procedures were not effective.
Due
to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible.
However, to the extent possible, we will implement procedures to assure that the initiation of transactions, the custody of assets
and the recording of transactions will be performed by separate individuals.
We
believe that the foregoing steps if implemented, will help remediate the material weakness identified above, and we will continue
to monitor the effectiveness of these steps and make any changes that our management deems appropriate. Due to the nature of this
material weakness in our internal control over financial reporting, there is more than a remote likelihood that misstatements
which could be material to our annual or interim financial statements could occur that would not be prevented or detected.
A
material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there
is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or
detected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over
financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible
for oversight of the company’s financial reporting.
Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes
in conditions, or that the degree of compliance with the policies and procedures may deteriorate.
As
part of our ongoing program to implement changes and further improve our internal controls and in conjunction with our Code of
Ethics, our independent directors have been working with management to include protocols and measures aimed at ensuring quality
of our internal controls. Among those measures is the implementation of a whistleblower hotline, which allows third parties to
anonymously report noncompliant activity. The hotline may be accessed as follows:
To
file a report, use the Client Code “MarathonPG” and pick one of the following options:
|
●
|
Call:
1-877-647-3335
|
|
●
|
Click:
http://www.RedFlagReporting.com
|
Changes
in Internal Controls.
There
have been no changes in our internal control over financial reporting during the quarter ended June 30, 2020 that have materially
affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
PART
II - OTHER INFORMATION
Item
1. Legal Proceedings.
Feinberg
Litigation
On
March 27, 2018, Jeffrey Feinberg, purportedly joined by the Jeffrey L. Feinberg Personal Trust and the Jeffrey L. Feinberg Family
Trust, filed a complaint against the Company and certain of its former officers and directors. The complaint was filed in the
Supreme Court of the State of New York, County of New York. The plaintiffs purported to state claims under Sections 11, 12(a)(2)
and 15 of the federal Securities Act of 1933 and common law claims for “actual fraud and fraudulent concealment,”
constructive fraud, and negligent misrepresentation, seeking unspecified money damages (including punitive damages), as well as
costs and attorneys’ fees, and equitable or injunctive relief. On June 15, 2018, the defendants filed a motion to dismiss
all claims asserted in the complaint and, on July 27, 2018, the plaintiffs filed an opposition to that motion. The court heard
argument on the motion and, on January 15, 2019, the court granted the motion to dismiss, allowing 30 days for the filing of an
amended complaint. On February 15, 2019, Jeffrey Feinberg, individually and as trustee of the Jeffrey L. Feinberg Personal Trust,
and Terrence K. Ankner, as trustee of the Jeffrey L. Feinberg Family Trust, filed an amended complaint that purports to state
the same claims and seeks the same relief sought in the original complaint. On March 7 and 22, 2019, defendants filed motions
to dismiss the amended complaint and on April 5, 2019, plaintiffs filed an opposition to those motions. The court heard oral argument
on the motions to dismiss on July 9, 2019, and at the conclusion of the argument the court took the motions under submission.
The parties are waiting for the court’s rulings on the motions to dismiss and, while the motions have been under submission,
no discovery has been taken and there have been no other significant developments in the case.
Other
than as disclosed herein, we know of no other material, active or pending legal proceedings against us, nor are we involved as
a plaintiff in any material proceedings or pending litigation other than in the normal course of business.