LLC MEMBERSHIP INTERESTS SALE AGREEMENT
LLC MEMBERSHIP INTERESTS SALE AGREEMENT (this “ Agreement ”), dated as of March 17, 2011 (the “ Closing Date ”), between Gordon R. Haworth (“ Seller ”), American Energy Fields Inc., a Delaware corporation (“ AEFI ”) and ND Energy Inc., a Delaware corporation (“ Buyer ”) (Buyer, AEFI and Seller each a “ Party ” and collectively the “ Parties ”).
WHEREAS, Seller is the owner of 24.32225% of the membership interests of the Secure Energy LLC, a North Dakota limited liability company (the “ Company ”), as calculated and set forth in Schedule 1; and
WHEREAS, Buyer is a wholly-owned subsidiary of AEFI; and
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase from Seller, such membership interests (the membership interests in the Company to be sold by Seller being referred to hereinafter as the “ Interests ”), upon the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements contained herein, the parties hereto hereby agree as follows:
1. Sale and Purchase of Interests . Seller hereby sells and transfers to Buyer, and Buyer hereby purchases from Seller, all of Seller’s right, title and interests in its membership interests in the Company, being 100% of the Interests, in exchange for aggregate consideration in the form of 975,000 (Nine Hundred Seventy Five Thousand) common stock shares (the “ Shares ”) of AEFI.
2. Stock Certificate . Simultaneously herewith Buyer is delivering to Seller a Stock Certificate representing the Shares duly issued by AEFI as set forth above. The Shares shall be issued in the name of Haworth Family Trust UTD 06/08/1995.
4. Lockup of Shares .
(a) Seller hereby agrees, that without the prior written consent of AEFI during the period beginning on December 3, 2010 (the “ Lockup Date ”) and ending 24 months after such date (the “ Lockup Period ”), Seller will not, directly or indirectly, (i) offer, sell, offer to sell, contract to sell, hedge, pledge, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or sell (or announce any offer, sale, offer of sale, contract of sale, hedge, pledge, sale of any option or contract to purchase, purchase of any option or contract of sale, grant of any option, right or warrant to purchase or other sale or disposition), or otherwise transfer or dispose of (or enter into any transaction or device that is designed to, or could be expected to, result in the disposition by any person at any time in the future), any Shares, beneficially owned, within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), by Seller on the date hereof or (ii) enter into any swap or other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of any Shares, whether any such swap or transaction described in clause (i) or (ii) above is to be settled by delivery of any Shares (each of the foregoing, a “ Prohibited Sale ”).
(b) Notwithstanding the foregoing, Seller (and any transferee of Seller) may transfer any Shares (i) as a bona fide gift or gifts, provided that prior to such transfer the donee or donees thereof agree in writing to be bound by the restrictions set forth herein, (ii) to any trust, partnership, corporation or other entity formed for the direct or indirect benefit of the undersigned or the immediate family of the undersigned, provided that prior to such transfer a duly authorized officer, representative or trustee of such transferee agrees in writing to be bound by the restrictions set forth herein, and provided further that any such transfer shall not involve a disposition for value, (iii) to non-profit organizations qualified as charitable organizations under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, (iv) to its shareholders as a distribution of corporate assets, special dividend or return of capital, or (v) if such transfer occurs by operation of law, such as rules of descent and distribution, statutes governing the effects of a merger or a qualified domestic order, provided that prior to such transfer the transferee executes an agreement stating that the transferee is receiving and holding any Shares subject to the provisions of this Agreement. For purposes hereof, “ immediate family ” shall mean any relationship by blood, marriage or adoption, not more remote than first cousin. In addition, the foregoing shall not prohibit privately negotiated transactions, provided the transferees agree, in writing, to be bound to the terms of these lockup provisions in this Section 4 for the balance of the Lockup Period.
(c) Notwithstanding anything to the contrary contained in this Agreement, (i) the lockup provisions contained in this Section 4 will terminate and shall be null and void after 24 months from the Lockup Date or upon a Change of Control of AEFI and Buyer or either of them; (ii) prior to the termination of these lockup provisions Seller may sell or transfer up to 121,875 Shares per calendar quarter; and (iii) on any day prior to the termination of these lockup provisions, if the trading volume on the principal market on which AEFI’s common stock is then trading is greater than 100,000 shares and AEFI’s common stock is then trading at a price of not less than $1.00 per share, Seller may sell up to an additional 3.29% of the trading volume on the principal market, as reported immediately prior to the sale of the Shares on such day of sale. Upon request, Seller agrees to permit inspection of all account and transfer records by AEFI associated with the foregoing covenant.
5. “ Change of Control ” means the occurrence of any of the following transactions or series of transactions at any time: (a) the acquisition, direct or indirect, by any Person or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act) of the legal, beneficial or equitable ownership of (i) at least fifty percent (50%) of the aggregate voting interests in AEFI and Buyer or either of them, or (ii) equity interests having the right to at least fifty percent (50%) of the profits of AEFI and Buyer or either of them; (b) the sale, lease, conveyance or other disposition to any Person of all or substantially all of the assets of AEFI and Buyer or either of them; (c) the consolidation of AEFI and Buyer or either of them with, or merger into, any Person; (d) the adoption of any plan relating to the liquidation or dissolution of AEFI and Buyer or either of them; (e) the acquisition of the right, whether direct or indirect, by any Person to appoint a majority of the board of directors of AEFI and Buyer or either of them; or (f) the acquisition of the right, whether direct or indirect, by any Person to Control the management of AEFI or Buyer or either of them.
6. Seller’s Representations and Warranties . Seller warrants and represents with respect to its sale of its membership interests in the Company to Buyer as follows:
(a) To the best of Seller’s knowledge, the attached Schedule A is a true, correct and complete listing of the assets and liabilities, contingent or otherwise, of the Company. The Company is a North Dakota Limited Liability Company, ID number 22672400, and is active and in good standing in the state of North Dakota. The Company’s current operating agreement is that Joint Venture Agreement executed by the members of the Company November 16, 2006 and attached hereto as Schedule B (the “ JV Agreement ”). To the best of Seller’s knowledge there are currently no unsettled or ongoing disputes or litigation that are or could be material to the Company’s business prospects, operations or assets.
(b) Seller has good, valid and marketable title to the membership interests, as set forth in Schedule 1, free and clear of any and all liens, equities, claims, charges or other encumbrances or rights of any third parties of any nature (including, but not limited to, options, rights of first refusal or similar rights, contingent or otherwise). Seller is conveying to Buyer good, valid and marketable title thereto, free and clear of any and all liens, equities, claims, charges or other encumbrances or rights of any third parties. The attached Schedule 1 is a true, correct and accurate representation of the Seller’s membership interests.
(c) Seller has all requisite legal power to enter into and to perform his obligations under this Agreement. This Agreement and the membership interests or certificate or powers being delivered concurrently herewith have been duly executed and delivered by Seller. This Agreement constitutes the legal, valid and binding obligation of Seller, enforceable against Seller in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, reorganization, rehabilitation, insolvency, moratorium or other similar laws affecting creditors’ rights generally and by general principles of equity.
(d) Neither the execution and delivery of this Agreement nor the consummation by Seller of the transactions contemplated hereby will conflict with, result in a breach of or constitute a default under or violation of any term of any agreement, contract or instrument to which he is a party or any applicable law, rule, regulation, order or judgment of any court or governmental authority.
(e) No consent, approval, authorization, or order of, registration or filing with, or notice to, any domestic or foreign governmental authority, regulatory body or court is required for the execution or delivery of, or the performance by Seller of his obligations under, or compliance by Seller with, this Agreement or the transactions contemplated hereunder.
(f) Seller has obtained all consents, approvals and waivers of third parties that may be required in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. Notwithstanding anything to the contrary contained herein, Seller has not obtained any consent from other holders of LLC membership interests in the Company as set forth in section 2.05 of the JV Agreement, which provides that members of the Company may not unreasonably withhold consent to a transfer of LLC membership interests in the Company to a third party, to (1) the sale of the Interests pursuant to this Agreement or (2) Haworth’s acquisition of those membership interests in the Company originally owned by Donbara Group LLC, a California limited liability company, the sole member of which was Haworth.
7. Information on AEFI . Seller has been furnished with or has had access to such information and materials concerning AEFI as have been requested by Seller. In addition, Seller may have received in writing from AEFI such other information concerning its operations, financial condition prospects and other matters as Seller has requested in writing (such other information is collectively the “ Other Written Information ”) and considered all factors Seller deems material in deciding on the advisability of acquiring the Shares.
8. Information on Seller . Seller is an “accredited investor”, as such term is defined in Rule 501of Regulation D promulgated by the Securities and Exchange Commission (the “ Commission ”) under the Securities Act of 1933 Act (the “ 1933 Act ”), is experienced in investments and business matters, has made investments of a speculative nature and has purchased securities of United States publicly-owned companies in private placements in the past and, with its representatives, has such knowledge and experience in financial, tax and other business matters as to enable Seller to utilize the information made available by AEFI to evaluate the merits and risks of and to make an informed investment decision with respect to the proposed acquisition of shares of AEFI, which represents a speculative investment. Seller has the authority and is duly and legally qualified to purchase and own its Shares. Seller is able to bear the risk of such investment for an indefinite period and to afford a complete loss thereof.
9. Acquisition of Shares . Seller will acquire its Shares as principal for its own account for investment only and not with a view toward, or for resale in connection with, the public sale or any distribution thereof; provided however , that nothing in this Section 9 negates or impairs Seller’s rights under Section 4 and applicable law.
10. Compliance with Securities Act . Seller understands and agrees that its Shares have not been registered under the 1933 Act or any applicable state securities laws, by reason of their issuance in a transaction that does not require registration under the 1933 Act (based in part on the accuracy of the representations and warranties of Seller contained herein), and that such Shares must be held indefinitely unless a subsequent disposition is registered under the 1933 Act or any applicable state securities laws or is exempt from such registration as contemplated by Section 4.
11. Legend .
(a) The initial certificate evidencing the Shares shall bear the following or similar legend:
“THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY AEFI), IN A G