Item 1.01 Entry into a Material Definitive Agreement
Merger Agreement
On June 28, 2022, American Acquisition Opportunity Inc., a Delaware corporation (“AMAO”), entered into an agreement and plan of merger (the “Merger Agreement”) by and among AMAO, Royalty Management Corporation, an Indiana corporation (“RMC”) and Royalty Merger Sub Inc., an Indiana corporation and a wholly owned subsidiary of AMAO (“Merger Sub”). AMAO and Merger Sub are sometimes referred to collectively as the “AMAO Parties.” Pursuant to the Merger Agreement, a business combination between AMAO and RMC will be effected through the merger of Merger Sub with and into RMC, with RMC surviving the merger as a wholly owned subsidiary of AMAO (the “Merger”). Upon the closing of the Merger (the “Closing”), it is anticipated that AMAO will change its name to “Royalty Management Corporation”. The board of directors of AMAO has (i) approved and declared advisable the Merger Agreement, the Ancillary Agreements (as defined in the Merger Agreement) and the transactions contemplated thereby and (ii) resolved to recommend approval of the Merger Agreement and related transactions by the stockholders of AMAO.
RMC is owned and controlled by certain member officers and directors of AMAO and its sponsor. The Merger is expected to be consummated in the fourth quarter of 2022, following the receipt of the required approval by the stockholders of AMAO and the shareholders of RMC and the satisfaction of certain other customary closing conditions.
Merger Consideration
The total consideration to be paid at Closing (the “Merger Consideration”) by AMAO to the RMC shareholders will be $111,000,000, and will be payable in shares of Class A common stock, par value $0.01 per share, of AMAO (“AMAO Common Stock”). The number of shares of AMAO Common Stock to be paid to the shareholders of RMC as Merger Consideration will be 11,100,000, with each share being valued at $10.00. All cash proceeds remaining in the trust will be used to pay transaction costs and as growth capital for RMC.
At the signing of the Merger Agreement, RMC has only one class of stock, common stock, par value $0.0001 per share (the “RMC Common Stock”). Each share of RMC Common Stock issued and outstanding immediately prior to the consummation of the Merger (other than any dissenting shares) shall be exchanged for and otherwise converted into the right to receive the applicable Merger Consideration per share pursuant to the Merger Agreement. The effective date and time of the Merger is referred to in the Merger Agreement as the effective time (the “Effective Time”). Prior to the Effective Time, all RMC warrants and convertible debt shall be converted into shares of RMC Common Stock, so that no warrants or convertible debt will be outstanding as of the Effective Time.
Representations and Warranties
The Merger Agreement contains customary representations and warranties of RMC with respect to, among other things: (i) corporate existence and power; (ii) organizational documents; (iii) capitalization; (iv) authorization to enter into the Merger Agreement and related transactions; (v) no conflicts and non-contravention; (vi) permits and compliance; (vii) financial statements; (viii) no undisclosed liabilities; (ix) absence of certain changes; (x) absence of litigation; (xi) employee benefit plans; (xii) labor matters; (xiii) real property and title to assets; (xiv) intellectual property; (xv) taxes; (xvi) environmental matters; (xvii) material contracts; (xviii) customers and suppliers; (xix) insurance; (xx) internal controls; (xxi) accuracy of statements; (xxii) COVID-19 matters; (xxiii) delivery of support agreement; (xxiv) board approval; (xv) brokers and finders’ fees; (xvi) takeover laws; (xxvii) international trade matters and anti-bribery compliance; (xxix) related party transactions; (xxx) that RMC is not an investment company; (xxxi) withholding; (xxxii) exclusivity of representations and warranties; and (xxxiii) full disclosure.
The Merger Agreement contains customary representations and warranties of the AMAO Parties with respect to, among other things: (i) corporate existence and power; (ii) organizational documents; (iii) capitalization; (iv) authorization to enter into the Merger Agreement and related transactions; (v) no conflicts and non-contravention; (vi) compliance; (viii) AMAO publicly filed documents and financial statements; (viii) absence of certain changes; (ix) absence of litigation; (x) board approval; (xi) no prior operations of Merger Sub; (xii) amount in the trust account; (xii) employees; (xiv) taxes; (xv) listing of AMAO securities; (xvi) that AMAO is not an investment company; (xvii) statements in public filings; (xviii) contracts; (xix) brokers and finders’ fees; (xx) delivery of support agreement; and (xxi) investigation and reliance.
All representations and warranties by all parties shall terminate upon the Effective Time, and no representations, warranties, covenants, obligations or other agreements contained in the Merger Agreement shall survive the Effective Time.
Covenants
The Merger Agreement includes customary covenants of the parties with respect to operation of their respective businesses prior to consummation of the Merger and efforts to satisfy conditions to consummation of the Merger. The Merger Agreement also contains additional covenants of the parties, including, among others, access to information, cooperation in the preparation of the Registration Statement on Form S-4 (the “Registration Statement”) and Proxy Statement (as each such term is defined in the Merger Agreement) required to be filed in connection with the Merger and to obtain all requisite approvals of AMAO’s stockholders. AMAO has also agreed to include in the Proxy Statement the recommendation of its board that its stockholders approve all of the proposals to be presented at the special meeting of AMAO’s stockholders that will be called in order to approve the Merger and related transactions (the “AMAO Special Meeting”).
Conduct between Signing and Closing
Each of AMAO, Merger Sub and RMC has agreed that from the date of the Merger Agreement until the Closing Date or, if earlier, the valid termination of the Merger Agreement in accordance with its terms, it will not initiate, encourage or engage in any negotiations with any party relating to an Alternative Transaction (as defined in the Merger Agreement), take any action intended to facilitate an Alternative Transaction or approve, recommend or enter into any agreement relating to an Alternative Transaction. AMAO and RMC also have agreed to operate their respective companies in the ordinary course through the Closing Date.
Conditions to Closing
The consummation of the Merger is conditioned upon, among other things, (i) the absence of any applicable law or order that makes the transactions contemplated by the Merger Agreement illegal or otherwise prohibits consummation of such transactions; (ii) the Registration Statement shall have become effective under the Securities Act of 1933, as amended (the “Securities Act”); (iii) approval by AMAO’s stockholders of the Merger and related transactions; (iv) approval by RMC’s shareholders of the Merger and related transactions; (v) the aggregate cash available to AMAO at the Closing (after giving effect to any redemptions by AMAO’s stockholders and the payment of all authorized transaction expenses) being at least $2,000,000; (vi) if AMAO elects to pursue an extension proposal with its stockholders to extend the date by which AAO has to consummate a business combination from September 22, 2022 to December 22, 2022, or such other date reasonably determined by AAO (an “Extension Proposal”) such Extension Proposal shall have been approved by AMAO’s stockholders; (vii) all Ancillary Agreements shall have been executed by all parties thereto; (viii) AAO shall have obtained the fairness opinion required by the terms of the AMAO Prospectus dated March 17, 2021, for its initial public offering (the “Prospectus”), such fairness opinion shall have been fully and properly disclosed in the Registration Statement, and shall be in full force and effect as of immediately prior to the Effective Time; and (ix) all required filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and with any other governmental authority shall have been completed and cleared. AMAO is not required to pursue an Extension Proposal.
Solely with respect to the AMAO Parties, the consummation of the Merger is conditioned upon, among other things: (i) RMC having duly performed or complied with all of its obligations under the Merger Agreement in all material respects; (ii) the representations and warranties of RMC being true and correct in all material respects; (iii) no event having occurred that would result in a Company Material Adverse Effect (as defined in the Merger Agreement); (iv) RMC providing AMAO a certificate from an authorized officer of RMC as to the accuracy of the foregoing conditions; (v) AMAO having received evidence that all RMC warrants and convertible debt shall have been converted into RMC Common Stock prior to the Closing; (vi) after giving effect to the Merger, AMAO shall have at least $5,000,001 in net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act); and (vii) AMAO shall have received executed employment agreements from certain RMC executives, in a form reasonably acceptable to AMAO.
Solely with respect to RMC, the consummation of the Merger is conditioned upon, among other things: (i) the AMAO Parties having duly performed or complied with all of their obligations under the Merger Agreement in all material respects; (ii) the representations and warranties of the AMAO Parties being true and correct in all material respects; (iii) no event having occurred that would result in an AAO Material Adverse Effect (as defined in the Merger Agreement; and (iv) each of the AMAO Parties providing RMC a certificate from an authorized officer as to the accuracy of the foregoing conditions.
Termination
The Merger Agreement may be terminated as follows:
| (i) | By the mutual consent of AMAO and RMC; |
| (ii) | by AMAO, if any of the representations or warranties of RMC set forth in the Merger Agreement shall not be true and correct, or if RMC has failed to perform any covenant or agreement set forth in the Merger Agreement (including an obligation to consummate the Merger), in each case such that the conditions to closing would not be satisfied and the breach or breaches causing such representations or warranties not to be true and correct, or the failure to perform any covenant or agreement, as applicable, are not cured (or waived by AMAO) by the earlier of (i) the Outside Date (as defined below) or (ii) 10 days after written notice thereof is delivered to RMC; provided, however that AMAO is not then in material breach of any representation, warranty, covenant, or obligation in the Merger Agreement, which breach has not been cured; |
| (iii) | by RMC, if any of the representations or warranties of AMAO or Merger Sub set forth in the Merger Agreement shall not be true and correct, or if AMAO or Merger Sub has failed to perform any covenant or agreement set forth in the Merger Agreement (including an obligation to consummate the Merger), in each case such that the conditions to closing would not be satisfied and the breach or breaches causing such representations or warranties not to be true and correct, or the failure to perform any covenant or agreement, as applicable, are not cured (or waived by RMC) by the earlier of (i) the Outside Date or (ii) 10 days after written notice thereof is delivered to AMAO; provided, however that RMC is not then in material breach of any representation, warranty, covenant, or obligation in the Merger Agreement, which breach has not been cured; |
| (iv) | by either AMAO or RMC: |
| | (A) on or after November 30, 2022 (the “Outside Date”), if the Merger shall not have been consummated prior to the Outside Date; provided, however, that this right to terminate the Merger Agreement shall not be available to a party if the failure of the Merger to have been consummated before the Outside Date (or such later date as provided in an Extension Proposal approved by AMAO’s stockholders, if applicable) was due to such party’s breach of or failure to perform any of its covenants or agreements set forth in the Merger Agreement; or; |
| | (B) if any applicable law or order that makes the transactions contemplated by the Merger Agreement illegal or otherwise prohibits consummation of such transactions shall have become final and non-appealable; |
| (v) | by AMAO on September 21, 2022, if the Merger Agreement has not been approved by AMAO’s stockholders as of such date and AMAO elects not to pursue an Extension Proposal prior to such date; |
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| (vi) | by RMC if AMAO has not received approval from its stockholders of the Merger and related transactions at the AMAO Special Meeting, unless such meeting has been adjourned or postponed, in which case at the final adjournment or postponement thereof; |
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| (vii) | by AMAO if the RMC shareholders written consent approving the Merger and related transactions shall not have been obtained within three business days following the Registration Statement being declared effective by the Securities and Exchange Commission (the “SEC”); |
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| (viii) | by AMAO within five business days after receiving notice that the fairness opinion described in the Prospectus and delivered to AMAO does not meet the terms of the Prospectus; |
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| (ix) | by AMAO, in the event that RMC’s audited financial statements for 2020 and 2021 have not been delivered to the Parent Parties on or before July 15, 2022 and remain undelivered prior to the termination of the Merger Agreement. |
Certain Related Agreements
Sponsor Support Agreement
Concurrently with the execution of the Merger Agreement, AMAO, RMC and certain stockholders of AMAO entered into a certain Sponsor Support Agreement dated June 28, 2022 (the “Sponsor Support Agreement”) pursuant to which those certain AMAO stockholders who are parties thereto agreed to vote all shares of AMAO Common Stock beneficially owned by them, including any additional shares of AMAO they acquire ownership of or the power to vote, in favor of the Merger and related transactions.
The foregoing description of the Sponsor Support Agreement is qualified in its entirety by reference to the full text of the Sponsor Support Agreement, a copy of which is filed as Exhibit 10.1 to this Current Report on Form 8-K, and the terms of which are incorporated herein by reference.
Shareholder Support Agreement
Concurrently with the execution of the Merger Agreement, AMAO, RMC, and certain shareholders of RMC entered into a certain Shareholder Support Agreement dated June 28, 2022 (the “Shareholder Support Agreement”), pursuant to which those certain RMC shareholders who are parties thereto agreed to vote all RMC Common Stock beneficially owned by them, including any additional shares of RMC they acquires ownership of or the power to vote, in favor of the Merger and related transactions.
The foregoing description of the Shareholder Support Agreement is qualified in its entirety by reference to the full text of the Shareholder Support Agreement, a copy of which is filed as Exhibit 10.2 to this Current Report on Form 8-K, and the terms of which are incorporated herein by reference.
Agreement to be Executed at Closing
Amended and Restated Registration Rights Agreement
The Merger Agreement contemplates that, at or prior to the Closing, AMAO, certain legacy stockholders of AMAO and certain shareholders of RMC will enter into an Amended and Restated Registration Rights Agreement (the “Registration Rights Agreement”), whereby (i) the Registration Rights Agreement will govern the registration of certain shares of AMAO and (ii) each shareholders of RMC will agree, subject to certain customary exceptions, among other things, not to transfer any shares of AMAO Common Stock or any security convertible into or exercisable or exchanged for AMAO Common Stock beneficially owned or owned of record by such holder until the date that is the earlier of (i) ninety (90) days from the date of the Registration Rights Agreement or (ii) the date on which AMAO completes a liquidation, merger, stock exchange, reorganization or other similar transaction that results in all of AMAO’s stockholders having the right to exchange their shares of AMAO Common Stock for cash, securities or other property.
The foregoing description of the Registration Rights Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the form of Registration Rights Agreement, a copy of which is filed as Exhibit 10.3 to this Current Report on Form 8-K, and the terms of which are incorporated herein by reference.