AGREEMENT AND PLAN OF EXCHANGE EMVELCO CORP. and DAVY CROCKETT GAS COMPANY, LLC May 1, 2008
______________________
AGREEMENT
AND PLAN OF EXCHANGE
and
▇▇▇▇
▇▇▇▇▇▇▇▇ GAS COMPANY, LLC
_______________________
May
1,
2008
AGREEMENT
AND PLAN OF EXCHANGE
THIS
EXCHANGE AGREEMENT (the "Agreement") is made and entered into on May 1, 2008
by
and among EMVELCO Corp., a Delaware corporation (hereinafter referred to as
“EMVELCO”) and ▇▇▇▇ ▇▇▇▇▇▇▇▇ GAS COMPANY, LLC, a Nevada limited liability
company (hereinafter referred to as “DC Gas") and the members of DC Gas (the
“Members”). The individuals and entities above are referred to in this Agreement
individually as a “Party” and collectively as the “Parties.”
RECITALS
A. EMVELCO
is a corporation that files reports with the Securities and Exchange Commission
("SEC") pursuant to the Securities Exchange Act of 1934 (the "1934 Act"), as
amended.
B. EMVELCO
is willing to acquire all of the issued and outstanding membership interests
of
DC Gas, owned by the Members in exchange for convertible notes issued by EMVELCO
making DC Gas, inclusive of all of its assets, rights and interests, a
wholly-owned subsidiary of EMVELCO, and the Members are willing to exchange
all
of the issued and outstanding membership interests in DC Gas in exchange for
the
convertible notes issued by EMVELCO.
C. It
is the
intention of the Parties hereto that: (i) EMVELCO shall acquire all of the
issued and outstanding membership interests of DC Gas in exchange for
convertible notes (the "Exchange"); (ii) the Exchange shall qualify as a
tax-free reorganization under Section 368(a)(1)(B) of the Internal Revenue
Code
of 1986, as amended (the "Code"), and related sections thereunder; and (iii)
the
Exchange shall qualify as a transaction in securities exempt from registration
or qualification under the Securities Act of 1933, as amended (the "1933 Act")
and under the applicable securities laws of each state or jurisdiction where
the
Shareholders of EMVELCO and the Members of DC Gas reside.
D. For
federal income tax purposes, it is intended that the reorganization contemplated
hereby shall qualify as a reorganization with the meaning of Section 368(a)
of
the Code.
NOW,
therefore, in consideration of the mutual covenants, agreements, representations
and warranties contained in this Agreement, and for other good and valuable
consideration, the receipt and adequacy of which are acknowledged, the Parties
hereto agree as follows:
SECTION
1. OWNERSHIP OF EMVELCO AND DC GAS
The
Parties acknowledge that the ownership of the Companies, as of the date all
Parties hereto have executed this Agreement, immediately prior to giving effect
to the transactions hereunder, is as follows:
1.1. The
authorized capital stock of EMVELCO currently consists of Thirty-Five Million
(35,000,000) shares
of
common stock
and Five
Million (5,000,000) shares of preferred stock. At Closing, EMVELCO shall cause
to be issued convertible notes (“Convertible Notes”), substantially in the form
attached hereto as Exhibit A, that are convertible into Fifty Million
(50,000,000) shares of EMVELCO common stock (the “EMVELCO
Shares”)
upon
the shareholders holding a majority of the outstanding shares of common stock
of
EMVELCO approving the issuance of the EMVELCO Shares upon conversion of the
Convertible Notes (the “Shareholder Approval”). Further, in accordance with
Section 2 of this Agreement below, EMVELCO may issue additional Convertible
Notes that are convertible into up to Two Hundred and Fifty Million
(250,000,000) shares for consideration in this transaction if certain conditions
are satisfied; provided, however, in the event that Shareholder Approval has
been provided, then EMVELCO will issue shares of EMVELCO as opposed to
Convertible Notes. EMVELCO will take the necessary steps to increase its
authorized capital stock up to Four Hundred Million (400,000,000) shares of
common stock in order to have available the necessary EMVELCO Shares for such
issuance and distribution.
1.2. The
membership interests of DC Gas, currently consists of Ten Thousand units of
membership interests and is owned of record and held beneficially by the
Members. The Members currently own collectively 10,000 units of DC Gas which
represents 100% of the outstanding units of DC Gas (the “DC Gas Units”) and the
Members are the sole members of DC Gas. The Members will transfer their DC
Gas
Units to EMVELCO at the Closing and such DC Gas Units shall be free and clear
of
all liens.
SECTION
2. EXCHANGE
OF CONVERTIBLE NOTES AND DC GAS UNITS
The
Parties hereby acknowledge and agree to perform the following acts at the
closing of the transactions contemplated herein (the “Closing”):
2.1 Convertible
Notes and Additional Convertible Notes.
EMVELCO
hereby agrees that it shall issue the Convertible Notes to the Members in
exchange for their outstanding DC Gas Units in proportion to their membership
interest. EMVELCO will issue Convertible Notes in the amount of $25,000,000
concurrently with execution of this Agreement and the remaining Convertible
Notes in the amount of $25,000,000 shall be released and distributed in
accordance with the following phases:
| · |
Convertible
Notes in the amount of $5,000,000 shall be issued upon the first
well
going into production.
|
| · |
Convertible
Notes in the amount of $5,000,000 shall be issued upon the second
well
going into production,
|
| · |
Convertible
Notes in the amount of $5,000,000 shall be issued upon the third
well
going into production,
|
| · |
Convertible
Notes in the amount of $5,000,000 shall be issued upon the fourth
well
going into production and
|
| · |
Convertible
Notes in the amount of $5,000,000 shall be issued upon the fifth
well
going into production.
|
2
The
Convertible Notes shall be issued to the Members in the amounts set forth next
to their respective names on Schedule
2.1
to this
Agreement. The Members may be entitled to receive Convertible Notes up to an
additional amount of $200,000,000 (the “Additional Convertible Notes”) in
accordance with the formula set forth on Schedule 2.1 depending upon the gross
revenue of DC Gas. The gross revenue shall be the revenue generated from that
certain land rights held by DC Gas located in ▇▇▇▇▇▇▇▇ County, Texas less
concession fees and taxes.
2.2 DC
Gas
Units.
The
Members hereby agree and shall transfer to EMVELCO, on the Closing Date, all
of
the Membership Units of DC Gas representing 100% interest in DC
Gas.
2.3 Delivery
of Share and Membership Certificates.
On the
Closing Date, EMEVELCO will deliver to the Members the Convertible Notes.
Simultaneously, the Members will deliver the certificates representing the
DC
Gas Units to EMVELCO with executed stock powers.
2.4 Other
Transfer Documents.
At the
Closing, the Parties each shall execute and deliver such sale and transfer
documents and agreements reasonably requested by the other Party, including
customary representations and warranties that the Convertible Notes and the
DC
Gas Units, respectively, are free and clear of any security interest, liens,
charges, claims and that, upon such transfer and sale by the Parties, each
Party
shall hold good and marketable title to the Convertible Notes or DC Gas Units
(as the case may be).
2.5
Ownership
After Transfer.
The
Parties acknowledge that after consummation of the transfers described above,
EMVELCO shall own 100% of DC Gas.
2.6 Advisor’s
Fee.
C.
Properties Ltd., a Barbados company (the “Advisor”) shall be paid a fee for
rendering consulting services in connection with this transaction (the
“Advisor’s Fee”). The Advisor’s Fee shall be the greater of (i) five percent
(5%) of the dollar value of the Convertible Notes and the Additional Convertible
Notes issued to the Members not to exceed $12,500,000 or (ii) $10,000,000;
which
is to be paid by EMVELCO. The Advisor has agreed that in lieu of cash payment
it
will receive shares of stock of the Atia Group Ltd. (the “Atia Shares”). The
Advisor has agreed that, in lieu of cash payment, it will receive an aggregate
of up to 734,060,505 shares of stock of the Atia Group Ltd. of which 200,000,000
shares shall be transferred by EMVELCO to the Advisor at Closing effective
as of January 1, 2008,
200,000,000 shares shall be transferred by EMVELCO to the Advisor upon the
first
DC Gas well going into production, 200,000,000 shall be transferred by EMVELCO
to the Advisor upon the second DC Gas well going into production and 134,060,505
shares shall be transferred by EMVELCO to the Advisor upon the third DC Gas
well
going into production. In addition, upon a fourth DC Gas well going into
production, EMVELCO shall transfer an additional 50,366,671 shares of Atia
Group
Ltd. The Advisor’s Fee shall be deposited in an Escrow Account in accordance
with Section 8.4 herein.
SECTION
3. REPRESENTATIONS AND WARRANTIES OF EMVELCO
EMVELCO,
to the best of its knowledge and belief, hereby represents and warrants as
follows:
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3.1 Organization
and Good Standing.
EMVELCO
is duly organized, validly existing and in good standing under the laws of
the
State of Delaware, and is entitled to own or lease its properties and to carry
on its business as and in the places where such properties are now owned, leased
or operated and such business is now conducted. Other than as previously
disclosed and an option to purchase 100,000 shares of common stock held by
▇▇▇▇▇
▇▇▇▇▇, EMVELCO’s CEO, there are no outstanding subscriptions, rights, options,
warrants or other agreements obligating EMVELCO to issue, sell or transfer
any
stock or other securities of EMVELCO, except simultaneously
herewith.
3.2 Intentionally
left blank.
3.3 Financial
Statements, Books and Records.
There
has been previously delivered to DC Gas and the Members financial statements
dated December 31, 2007 that fairly represent the financial position of
EMVELCO.
3.4 No
Material Adverse Changes.
Since
the date of the Balance Sheet there has not been and there will not be before
the Closing Date:
(i) any
material adverse change in the assets, operations, condition (financial or
otherwise) or prospective business of EMVELCO;
(ii) any
damage, destruction or loss materially affecting the assets, prospective
business, operations or condition (financial or otherwise) of EMVELCO, whether
or not covered by insurance;
(iii) any
declaration, setting aside or payment of any dividend or distribution with
respect to any redemption or repurchase of EMVELCO’s capital stock or the
EMVELCO Shares;
(iv) any
sale
of an asset (other than in the ordinary course of business) or any mortgage
or
pledge by EMVELCO of any properties or assets; or
(v) adoption
of any pension, profit sharing, retirement, stock bonus, stock option or similar
plan or arrangement.
3.5 Taxes.
EMVELCO
has prepared and filed all appropriate federal, state and local tax returns
for
all periods prior to and through the date hereof for which any such returns
have
been required to be filed by it and has paid all taxes shown to be due by said
returns or on any assessments received by it or has made adequate provision
for
the payment thereof.
3.6 Compliance
with Laws.
EMVELCO
has complied with all federal, state, county and local laws, ordinances,
regulations, inspections, orders, judgments, injunctions, awards or decrees
applicable to it or its business which, if not complied with, would materially
and adversely affect the business of EMVELCO.
4
3.7 No
Breach.
The
execution, delivery and performance of this Agreement and the consummation
of
the transactions contemplated hereby will not:
(i) violate
any provision of the Articles of Incorporation or By-Laws of EMVELCO;
(ii) violate,
conflict with or result in the breach of any of the terms of, result in a
material modification of, otherwise give any other contracting party the right
to terminate, or constitute (or with notice or lapse of time or both constitute)
a default under, any contract or other agreement to which EMVELCO is a party
or
by or to which it or any of its assets or properties may be bound or
subject;
(iii) violate
any order, judgment, injunction, award or decree of any court, arbitrator or
governmental or regulatory body against, or binding upon, EMVELCO, or upon
the
properties or business of EMVELCO; or
(iv) violate
any statute, law or regulation of any jurisdiction applicable to the
transactions contemplated herein which could have a material, adverse effect
on
the business or operations of EMVELCO.
3.8 Actions
and Proceedings.
There
is no outstanding order, judgment, injunction, award or decree of any court,
governmental or regulatory body or arbitration tribunal against or involving
EMVELCO. There is no action, suit or claim or legal, administrative or arbitral
proceeding or (whether or not the defense thereof or liabilities in respect
thereof are covered by insurance) pending or threatened against or involving
EMVELCO or any of its properties or assets. There is no fact, event or
circumstances that may give rise to any suit, action, claim, investigation
or
proceeding.
3.9 Brokers
or Finders.
Any
broker's or finder's fees will be paid by EMVELCO in connection with the
transactions contemplated by this Agreement.
3.10 Real
Estate.
EMVELCO
has previously disclosed to DC Gas the properties it owns and its interests
in
real estate.
3.11 Tangible
and Intangible Assets.
EMVELCO
has full title and interest in all machinery, equipment, furniture, leasehold
improvements, fixtures, vehicles, structures, patents, licenses owned or leased
or licensed by EMVELCO, any related capitalized items or other tangible or
intangible property material to the business of EMVELCO (the "Tangible and
Intangible Assets"). EMVELCO holds all rights, title and interest in all the
Tangible and Intangible Assets owned by it on the Balance Sheet or acquired
by
it after the date of the Balance Sheet, free and clear of all liens, pledges,
mortgages, security interests, conditional sales contracts or any other
encumbrances except as set forth on Schedule 3.11. All of the Tangible and
Intangible Assets are in good operating condition and repair and are usable
in
the ordinary course of business of EMVELCO and conform to all applicable laws,
ordinances and governmental orders, rules and regulations relating to their
construction and operation.
5
3.12 Liabilities.
EMVELCO
does not have any direct or indirect indebtedness, liability, claim, loss,
damage, deficiency, obligation or responsibility, known or unknown, fixed or
unfixed, liquidated or unliquidated, secured or unsecured, accrued or absolute,
contingent or otherwise, including, without limitation, any liability on account
of taxes, any other governmental charge or lawsuit (all of the foregoing
collectively defined to as "Liabilities"), which were not fully, fairly and
adequately reflected on the Balance Sheet. As of the Closing Date, EMVELCO
will
not have any Liabilities, other than Liabilities fully and adequately reflected
on the Balance Sheet, except for Liabilities incurred in the ordinary course
of
business.
3.13 Operations
of EMVELCO.
From
the date of the Balance Sheet and through the Closing Date hereof EMVELCO has
not and will not have:
(i) incurred
any indebtedness for borrowed money, other than as disclosed previously in
connection with EMVELCO’s real estate properties;
(ii) declared
or paid any dividend or declared or made any distribution of any kind to any
member, or made any direct or indirect redemption, retirement, purchase or
other
acquisition of any shares of its capital stock;
(iii) made
any
loan or advance to any shareholder, officer, director, employee, consultant,
agent or other representative or made any other loan or advance otherwise than
in the ordinary course of business;
(iv) except
in
the ordinary course of business, incurred or assumed any indebtedness or
liability (whether or not currently due and payable);
(v) disposed
of any assets of EMVELCO except in the ordinary course of business;
(vi) materially
increased the annual legal or compensation of any executive employee of ERC;
(vii) increased,
terminated, amended or otherwise modified any plan for the benefit of employees
of EMVELCO;
(viii) issued
any equity securities or rights to acquire such equity securities;
or
(ix) except
in
the ordinary course of business, entered into or modified any contract,
agreement or transaction.
3.14 Capitalization.
EMVELCO
has not granted, issued or agreed to grant, issue or make available any
warrants, options, subscription rights or any other commitments of any character
relating to the issued or unissued shares of common stock of EMVELCO, other
than
in this Agreement and the option to purchase 100,000 shares of common stock
issued to ▇▇▇▇▇ ▇▇▇▇▇, EMVELCO’s CEO.
6
3.15 Full
Disclosure.
No
representation or warranty by EMVELCO in this Agreement or in any document
or
schedule to be delivered by them pursuant hereto, and no written statement,
certificate or instrument furnished or to be furnished to DC Gas and its Members
hereto or in connection with the negotiation, execution or performance of this
Agreement, contains or will contain any untrue statement of a material fact
or
omits or will omit to state any fact necessary to make any statement herein
or
therein not materially misleading or necessary to a complete and correct
presentation of all material aspects of the businesses of EMVELCO. The foregoing
notwithstanding, all of the aforementioned representations and warranties are
qualified to extent that any of the companies or businesses acquired or to
be
acquired pursuant to EMVELCO acquisition program may include events, conditions
or circumstances involving matters contemplated by such representations and
warranties, the disclosure of which will not be made pursuant to this Agreement.
SECTION
4. REPRESENTATIONS AND WARRANTIES OF DC GAS AND ITS
MEMBERS
DC
Gas
and its Members hereby represent and warrant to EMVELCO as follows:
4.1 Organization
and Good Standing.
DC Gas
is a limited liability company duly organized, validly existing and in good
standing under the laws of the State of Nevada and is entitled to own or lease
its properties and to carry on its business as and in the places where such
properties are now owned, leased, or operated and such business is now
conducted. The authorized equity of DC Gas consists of 10,000 units of
Membership Interests, all of which are issued and outstanding to the Members.
DC
Gas is duly licensed or qualified and in good standing as a foreign corporation
where the character of the properties owned by DC Gas or the nature of the
business transacted by it make such license or qualification necessary. DC
Gas
does not have any subsidiaries.
4.2 The
DC
Gas Units.
The DC
Gas Units to be transferred to EMVELCO have been or will have been duly
authorized by all necessary company and Member actions and, when so issued
in
accordance with the terms of this Agreement, will be validly issued, fully
paid
and non-assessable.
4.3 Financial
Statements; Books and Records.
There
has been previously delivered to EMVELCO, financial statements dated March
31,
2008 that fairly represent the financial position of DC Gas.
4.4 No
Material Adverse Changes.
Since
the date of formation of DC Gas, there has not been and there will not be before
the date of Closing:
(i) any
material adverse change in the assets, operations, condition (financial or
otherwise) or prospective business of DC Gas;
(ii) any
damage, destruction or loss materially affecting the assets, prospective
business, operations or condition (financial or otherwise) of DC Gas, whether
or
not covered by insurance;
7
(iii) any
declaration, setting aside or payment of any dividend or distribution with
respect to any redemption or repurchase of DC Gas' capital;
(iv) any
sale
of an asset (other than in the ordinary course of business) or any mortgage
or
pledge by DC Gas of any properties or assets; or
(v) adoption
of any pension, profit sharing, retirement, stock bonus, stock option or similar
plan or arrangement.
4.5 Compliance
with Laws.
DC Gas
has complied with all federal, state, county and local laws, ordinances,
regulations, inspections, orders, judgments, injunctions, awards or decrees
applicable to their businesses which, if not complied with, would materially
and
adversely affect the business of DC Gas.
4.6 No
Breach.
The
execution, delivery and performance of this Agreement and the consummation
of
the transactions contemplated hereby will not:
(i) violate
any provision of the Articles of Organization or Operating Agreement of DC
Gas;
(ii) violate,
conflict with or result in the breach of any of the terms of, result in a
material modification of, otherwise give any other contracting party the right
to terminate, or constitute (or with notice or lapse of time or both constitute)
a default under, any contract or other agreement to which DC Gas is a party
or
by or to which it or any of its assets or properties may be bound or subject,
other than as previously disclosed in connection with the real estate or other
holdings of DC Gas;
(iii) violate
any order, judgment, injunction, award or decree of any court, arbitrator or
governmental or regulatory body against, or binding upon, DC Gas or upon the
securities, properties or business of DC Gas; or
(iv) violate
any statute, law or regulation of any jurisdiction applicable to the
transactions contemplated herein.
4.7 Actions
and Proceedings.
There
is no outstanding order, judgment, injunction, award or decree of any court,
governmental or regulatory body or arbitration tribunal against or involving
DC
Gas. There is no action, suit or claim or legal, administrative or arbitral
proceeding or (whether or not the defense thereof or liabilities in respect
thereof are covered by insurance) pending or threatened against or involving
DC
Gas or any of its properties or assets.
4.8 Brokers
or Finders.
There
are no broker’s or finder’s fee due or payable by DC Gas in connection with the
transactions contemplated by this Agreement.
4.9 Liabilities.
DC Gas
does not have any direct or indirect indebtedness, liability, claim, loss,
damage, deficiency, obligation or responsibility, known or unknown, fixed or
unfixed, liquidated or unliquidated, secured or unsecured, accrued or absolute,
contingent or otherwise, including, without limitation, any liability on account
of taxes, mining claims, environmental claims any other governmental charge
or
lawsuit (all of the foregoing collectively defined to as "Liabilities"), which
were not fully, fairly and adequately reflected on the financial statements.
As
of the Closing Date, DC Gas will not have any Liabilities, other than as
previously disclosed, and except for Liabilities incurred in the ordinary course
of business.
8
4.10 Operations
of DC Gas .
From
the date of the organization of DC Gas and through the Closing Date DC Gas
has
not and will not have:
(i) incurred
any indebtedness for borrowed money;
(ii) declared
or paid any dividend or declared or made any distribution of any kind to any
shareholder, or made any direct or indirect redemption, retirement, purchase
or
other acquisition of any shares of its capital stock;
(iii) made
any
loan or advance to any member, officer, director, employee, consultant, agent
or
other representative or made any other loan or advance otherwise than in the
ordinary course of business;
(iv) except
in
the ordinary course of business, incurred or assumed any indebtedness or
liability (whether or not currently due and payable);
(v) disposed
of any assets of DC Gas except in the ordinary course of business;
(vi) incurred
any compensation for any executive employee of DC Gas;
(vii) adopted,
increased, terminated amended or otherwise modified any plan for the benefit
of
employees of DC Gas;
(viii) issued
any equity securities or rights to acquire such equity securities except as
described herein; or
(xiv)
except in the ordinary course of business, entered into or modified any
contract, agreement or transaction.
4.11 Authority
to Execute and Perform Agreements.
DC Gas
has the full legal right and power and all authority and approval required
to
enter into, execute and deliver this Agreement and to perform fully its
obligations hereunder. This Agreement has been duly executed and delivered
and
is the valid and binding obligation of DC Gas enforceable in accordance with
its
terms, except as may be limited by bankruptcy, moratorium, insolvency or other
similar laws generally affecting the enforcement of creditors' rights. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby and the performance by DC Gas of this
Agreement, in accordance with its respective terms and conditions will not:
9
(i) require
the approval or consent of any governmental or regulatory body, or the approval
or consent of any other person;
(ii) conflict
with or result in any breach or violation of any of the terms and conditions
of,
or constitute (or with any notice or lapse of time or both would constitute)
a
default under, any order, judgment or decree applicable to DC Gas or any
instrument, contract or other agreement to which DC Gas is a party or by or
to
which DC Gas is bound or subject; or
(iii) result
in
the creation of any lien or other encumbrance on the assets or properties of
DC
Gas.
4.12 Full
Disclosure.
No
representation or warranty by DC Gas or the Members in this Agreement or in
any
document or schedule to be delivered by it pursuant hereto, and no written
statement, certificate or instrument furnished or to be furnished to EMVELCO
pursuant hereto or in connection with the execution or performance of this
Agreement, contains or will contain any untrue statement of a material fact
or
omits or will omit to state any fact necessary to make any statement herein
or
therein not materially misleading or necessary to a complete and correct
presentation of all material aspects of the business of DC Gas. The foregoing
notwithstanding, all of the aforementioned representations and warranties are
qualified to extent that any of the companies or businesses acquired or to
be
acquired pursuant to DC Gas’ acquisition program may include events, conditions
or circumstances involving matters contemplated by such representations and
warranties, the disclosure of which will not be made pursuant to this Agreement.
4.13 Real
Estate and Assets.
DC Gas
does not own or have any interests in real estate, only interests in drilling
rights.
4.14 Several
Representations by the Members.
Each
Member, for himself or itself:
(i) Is
the
sole record and beneficial owner of the DC Gas Units subject to no
Claim.
(ii) Has
full
power and authority to carry out the transactions provided for in this
Agreement, and this Agreement constitutes the legal, valid and binding
obligations of such Member, enforceable in accordance with its terms, except
as
enforceability may be limited by bankruptcy, insolvency and other laws of
general application affecting the enforcement of creditor’s rights and that any
remedies in the nature of equitable relief are in the discretion of the court.
All necessary action required to be taken by Members for the consummation of
the
transactions contemplated by this Agreement has been taken.
(iii) Is
an
accredited investor within the meaning of Rule 501 of the Commission pursuant
to
the Securities Act;
(iv) Is
acquiring the Convertible
Notes and the Additional Convertible Notes pursuant to this Agreement for
investment and not with a view to the sale or distribution thereof;
10
(v) Understands
that shares of common stock issuable upon conversion of the Convertible Notes
and the Additional Convertible Notes, which will only occur if EMVELCO obtains
Shareholder Approval, constitute restricted securities within the meaning of
Rule 144 of the Securities Exchange Commission (the “Commission”) pursuant to
the Securities Act and may not be sold or otherwise transferred except pursuant
to an effective registration statement or an exemption from the registration
requirements of the Securities Act;
(vi) Has
been
advised by counsel as to the meaning and implication of the acquisition of
restricted securities and the illiquid nature of the shares issued upon
conversion of the Convertible Notes and the Additional Convertible Notes, if
any;
(vii) Acknowledges
that the certificate or certificates for the shares issuable upon conversion
of
the Convertible Notes and the Additional Convertible Notes, if any, will bear
EMVELCO’s customary Securities Act restrictive legend;
(viii) Represents
that he or she understands that an investment in the Convertible Notes and
the
Additional Convertible Notes involves a high degree of risk; and
(ix) Represents
that the execution and performance of this Agreement will not constitute a
breach of any contract to which such Member is a party or by which he or she
is
bound, and will not violate any judgment, decree, order, writ, rule, statute,
or
regulation applicable to such Members or his or her properties.
SECTION
5. COVENANTS
5.1 Corporate
Examinations and Investigations.
Prior
to the Closing Date, the Parties acknowledge that they have been entitled,
through their employees and representatives, to make such investigation of
the
assets, properties, business and operations, books, records and financial
condition of the other as they each may reasonably require. No investigation
by
a Party hereto shall, however, diminish or waive in any way any of the
representations, warranties, covenants or agreements of the other party under
this Agreement.
5.2 Expenses.
Each
party hereto agrees to pay its own costs and expenses incurred in negotiating
this Agreement and consummating the transactions described herein.
5.3 Further
Assurances.
The
Parties shall execute such documents and other papers and take such further
actions as may be reasonably required or desirable to carry out the provisions
hereof and the transactions contemplated hereby. Each such Party shall use
its
best efforts to fulfill or obtain the fulfillment of the conditions to the
Closing, including, without limitation, the execution and delivery of any
documents or other papers, the execution and delivery of which are necessary
or
appropriate to the Closing.
5.4 Confidentiality.
In the
event the transactions contemplated by this Agreement are not consummated,
each
of the Parties hereto agree to keep confidential any information disclosed
to
each other in connection therewith for a period of two (2) years from the date
hereof; provided, however, such obligation shall not apply to information which:
11
(i) at
the
time of disclosure was public knowledge;
(ii) after
the
time of disclosure becomes public knowledge (except due to the action of the
receiving Party); or
(iii) the
receiving Party had within its possession at the time of
disclosure.
5.5 Membership
Certificates.
At the
Closing, the Members shall have delivered the certificates representing the
DC
Gas Units duly endorsed so as to make EMVELCO the sole owner thereof. At such
Closing, ENVELCO shall issue to the Members the Convertible Notes as
applicable.
5.6 Investment
Intent.
The
Members understand that the Convertible Notes being issued have not been
registered or approved for sale by the SEC or any state securities authority.
5.7.Board
of Directors of EMVELCO.
At and
as of the Closing, a new Board of Directors and new Officers shall be elected
for EMVELCO.
5.8 Managers
of DC Gas.
At and
as of the Closing, the Managers and Officers of DC Gas shall remain the same.
5.9 Reporting
Requirements.
The
Parties hereto, and specifically DC Gas the Members, acknowledge that due to
EMVELCO being subject to the 1934 Act that there are definite reporting
requirements and that the Parties agree that they shall continue to comply
with
all financial reporting requirements, including but not limited to monthly
and
quarterly reports and any acceptance of an auditor appointment selected by
EMVELCO in the event that there is a consolidation reporting on an equity
level.
5.10 Consummation
of Transactions.
As of
and through the Closing, the Parties shall not have caused or permitted to
occur
or be made any event or condition of any character which would prevent
consummation of the transactions contemplated by this Agreement or cause any
of
the transactions contemplated by this Agreement to be rescinded following
consummation.
SECTION
6. SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF EMVELCO, DC GAS AND THE MEMBERS
Notwithstanding
any right of a Party fully to investigate the affairs of another Party , the
former shall have the right to rely fully upon the representations, warranties,
covenants and agreements of a Party contained in this Agreement or in any
document delivered by such Party or any of its representatives, in connection
with the transactions contemplated by this Agreement. All such representations,
warranties, covenants and agreements shall survive the execution and delivery
hereof and the Closing Date hereunder for twelve (12) months following the
Closing.
12
SECTION
7. INDEMNIFICATION
7.1 Obligation
of EMVELCO to Indemnify.
Subject
to the limitations on the survival of representations and warranties contained
in Section 6, EMVELCO hereby agrees to indemnify, defend and hold harmless
DC
Gas and the Members from and against any losses, liabilities, damages,
deficiencies, costs or expenses (including interest, penalties and reasonable
attorneys' fees and disbursements) (a "Loss") based upon, arising out of or
otherwise due to any inaccuracy in or any breach of any representation,
warranty, covenant or agreement of EMVELCO contained in this Agreement or in
any
document or other writing delivered pursuant to this Agreement.
7.2 Obligation
of DC Gas and the Members to Indemnify.
Subject
to the limitations on the survival of representations and warranties contained
in Section 6, DC Gas and the Members agree to indemnify, defend and hold
harmless EMVELCO from and against any Loss, based upon, arising out of or
otherwise due to any inaccuracy in or any breach of any representation,
warranty, covenant or agreement made by any of them and contained in this
Agreement or in any document or other writing delivered pursuant to this
Agreement.
SECTION
8. CLOSING
8.1 Closing.
The
Closing shall take place at 1061 ½ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ or
at such other later time or place as may be agreed upon by the Parties hereto
on
the date of the execution of this Agreement. At the Closing, the Parties shall
provide each other with such documents as may be necessary or appropriate in
order to consummate the transactions contemplated hereby including evidence
of
due authorization of the Agreement and the transactions contemplated
hereby.
8.2 Ancillary
Documents.
At the
Closing, or as soon thereafter as practicable, the Parties shall deliver fully
executed documents as follows:
8.2.1 Any
amendments to the Articles of Incorporation or Bylaws increasing the number
of
directors on the Articles of Organization or Operating Agreement of DC
Gas.
8.2.2 Any
other
document, notice, filing or agreement as reasonably requested by a Party or
necessary to effect the intent of this Agreement.
8.2.3
The
Parties agree that the operating and drilling of the Wolfcamp Canyon Sandstone
Program shall be operated and/or drilled exclusively by Ozona Natural Gas
Company, LLC (unaffiliated third party) at the relevant market rates.
8.3 Tax
Matters.
Each
Party acknowledges and agrees that it has relied solely on counsel and
accountants of its own selection for advice concerning the tax implications,
if
any, of stock being transferred, debts being assumed, satisfied or contributed,
and other transfers hereunder. The Parties agree that it is expressly understood
and agreed that as between the Parties, any and all obligations for reporting
and paying any tax assessments, penalties or interest shall be the sole and
exclusive responsibility of the Party receiving the benefit and each Party
shall
indemnify the other Party for any liability of the first Party incurred or
as a
result of failure to pay such tax assessments, penalties or interest; provided,
however, each Party shall file its tax return and report the transactions
contemplated herein in a manner consistent with the terms of this
Agreement.
13
8.4 Escrow.
The
Advisor’s Fee which shall be paid in shares of stock from the Atia Group shall
be deposited into an Escrow Account and held by the Escrow Agent in accordance
with the Escrow Instructions to be delivered to the Escrow Agent.
8.5 Employment
Agreement.
EMVELCO
shall enter into Executive Services Agreement with ▇▇▇▇ ▇. Mustafoglu as
Chairman.
8.6 Board
of Directors.
EMVELCO
shall have six (6) members on the Board of Directors. Following
the Closing, EMVELCO shall cause the resignations of certain representatives
on
the Board of Directors and Members shall be entitled to select and fill three
(3) seats on the Board.
SECTION
9. GENERAL TERMS
9.1 Waiver.
The
waiver of a breach of this Agreement or the failure of any party hereto to
exercise any right under this Agreement shall in no event constitute waiver
as
to any future breach whether similar or dissimilar in nature or as to the
exercise of any further right under this Agreement.
9.2 Amendment.
This
Agreement may be amended or modified only by an instrument of equal formality
signed by the parties or the duly authorized representatives of the respective
parties.
9.3 Assignment.
This
Agreement is not assignable except by operation of law.
9.4 Notices.
The
mailing addresses of both parties of this Agreement shall be as from time to
time designated in writing.
9.5 Publicity.
No
publicity release or announcement concerning this Agreement or the transactions
contemplated hereby shall be issued by either party hereto at any time from
the
signing hereof without advance approval in writing of the form and substance
thereof by the other party.
9.6 Entire
Agreement.
This
Agreement (including the Exhibits and Schedules hereto) and the collateral
agreements executed in connection with the consummation of the transactions
contemplated herein contain the entire agreement among the parties and supersede
all prior agreements, written or oral, with respect thereto. No amendment of
this Agreement shall be enforceable unless signed by the party to be charged
with performance thereto.
9.7 Headings.
the
headings in this Agreement are for reference purposes only and shall not in
any
way affect the meaning or interpretation of this Agreement.
14
9.8 Severability
of Provisions.
The
invalidity or unenforceability of any term, phrase, clause, paragraph,
restriction, covenant, agreement or other provision of this Agreement shall
in
no way affect the validity or enforcement of any other provision or any part
thereof.
9.9 Counterparts.
This
Agreement may be executed in any number of counterparts, each of which when
so
executed, shall constitute an original copy hereof, but all of which together
shall consider but one and the same document.
9.10 Professional
Advice. Each
Party hereto has been provided with adequate opportunity to consult with legal,
tax and accounting professionals of their own independent selection regarding
the legal, tax and accounting implications of entering into this Agreement
and
hereby warrants, covenants and agrees that he/she/it has not relied on any
oral
or written communication or advice by another party or any agent, accountant
or
attorney of another party except as otherwise specifically set forth herein
with
respect to the accuracy of financial statements.
9.11 Expenses.
Each of
the parties hereto shall pay its own expenses in connection with this Agreement
and the transactions contemplated hereby, including without limitation the
fees
and expenses of legal counsel and certified public accountants.
9.12 Brokers.
The
Parties hereto warrant, covenant and agree that there has been no act or
omission by any party hereto that would give rise to any valid claim against
any
of the parties hereto for a brokerage commission, finder's fee, or other like
payment in connection with the transactions contemplated hereby.
9.13 Successors
and Assigns.
All
rights and obligations created by this Agreement shall be binding upon and
inure
to the benefit of the parties hereto, their successors and assigns. Whenever
used, the singular number shall include the plural, the plural the singular,
and
the use of any gender shall include all genders.
9.14 Choice
of Law, Binding Arbitration and Attorney’s Fees.
Any
controversy or claim arising out of or relating to this Agreement, or the breach
thereof, including any purchase or exchange of capital stock, shall be resolved
under California law without regard to conflicts of laws except insofar as
securities issues are concerned which shall be resolved by reference to the
federal securities laws through binding arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association and
judgment upon the award rendered by the arbitrator(s) may be entered in any
court having jurisdiction thereof. Should any arbitration or lawsuit be filed
pursuant to or as a consequence of this Agreement, including an action for
declaratory relief, the prevailing party shall be entitled to the recovery
of
reasonable attorney's fees in addition to costs. Venue for any controversy
or
claim, regardless of whether filed in arbitration or court, shall be in the
City
of Los Angeles, California. the parties hereto may wish to seek the advice
of
legal counsel of their own choosing regarding the importance of this paragraph.
Execution of this document will result in a waiver of the right to a jury trial
and other procedures inherent in civil litigation in the event of a dispute
concerning this Agreement.
15
9.15 Exclusive
Remedy.
By
executing this Agreement, the Parties hereby agree that the rights and remedies
provided in this Agreement shall be the sole and exclusive rights and remedies
surviving as between and among the Parties hereto relating to the facts and
circumstances encompassed by this Agreement.
9.16 Construction
of Agreement.
Each
Party hereto has cooperated in the drafting and preparation of this Agreement,
and, therefore, any construction of the intent of the Parties hereto or language
hereof to be made shall not be construed against any of the Parties
hereto.
9.17 Authority;
Valid and Binding Agreement of Parties.
Each
Party executing this Agreement hereby represents and warrants that it has full
power and authority to enter into this Agreement, is free to enter into this
Agreement and is not subject to any obligations or disabilities which will
or
might prevent or interfere with keeping and performing all of the agreements,
covenants and conditions to be kept or performed hereunder. This Agreement
is a
legal, valid and binding obligation of each Party. No third party consents
or
approvals are required, other than those stated herein.
9.18 Binding
Effect of Agreement.
The
Parties hereby agree that the terms contained in this Agreement shall be binding
upon and inure to the benefit of each of the Parties hereto, including any
and
all of their past or present agents, associates, partners, officers, directors,
shareholders, trustees, beneficiaries and employees, including attorneys and
experts, and actual, implied or ostensible agents, and any and all of their
heirs, executors, successors and assignees. The obligations and duties of each
Party hereunder are personal and not assignable and any attempt of assignment
or
transfer of a Party’s duties or obligation, unless otherwise anticipated and
provided for in this Agreement.
9.19 Governing
Law; Enforceability.
This
Agreement has been executed and delivered within the State of California, and
the rights and obligations of the Parties hereunder shall be governed by,
construed and enforced in accordance with the laws of the State of California
without regard to the conflicts of law doctrine. Each
Party irrevocably consents to the exclusive jurisdiction and venue of any
federal or state court within Los Angeles County, California, in connection
with
any matter based upon or arising out of this Agreement or the matters
contemplated in this Agreement, agrees that process may be served upon them
in
any manner authorized by the laws of the State of California for such persons,
and waives and covenants not to assert or plead any objection that they might
otherwise have to such jurisdiction, venue and such process.
9.20 Attorneys’
Fees.
In the
event any action or suit is brought by a Party hereto against another Party
hereunder by reason of any breach of any of the covenants, conditions,
agreements or provisions on the part of another Party arising out of this
Agreement, the prevailing Party shall be entitled to recover from the other
Party all costs and expenses of the action or suit, including reasonable
attorneys’ fees.
16
IN
WITNESS WHEREOF,
the
Parties have executed this Agreement on the date first above
written.
a
Delaware Corporation
By:
/s/
▇▇▇▇▇ ▇▇▇▇▇ __
Name:
▇▇▇▇▇ ▇▇▇▇▇
Its:
Chief Executive Officer
▇▇▇▇
▇▇▇▇▇▇▇▇ GAS COMPANY, LLC,
a
Nevada Limited Liability Company
By: TransGlobal Financial Services LLC,
Its:
Manager
By:
/s/
▇▇▇▇ ▇. Mustafoglu
▇▇▇▇ ▇. Mustafoglu, President
By:
▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Its:
Manager
/s/
▇▇▇▇▇ ▇▇▇ Gorelick_____
▇▇▇▇▇
▇▇▇
▇▇▇▇▇▇▇▇ Esq.
▇▇▇▇
▇▇▇▇▇▇▇▇ GAS COMPANY, LLC MEMBERS:
PMFT
HOLDINGS, LTD.
By: /s/
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, Officer
CORPORATE
GROUP SERVICES LIMITED
By: /s/
Hulya Oransel
Hulya
Oransel, President
17
SULLY,
LLC
By:
/s/
▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇, Manager
BEACON
FINANCIAL CORP.
By:
/s/
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, President
ADVISOR
(with respect to Section 2.6 ONLY):
C.
PROPERTIES LTD.
By:___/s/
Younes Berrada_______________________
Name:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title:
President
18
SCHEDULE
2.1
|
Name
|
DC
Gas Units
|
%
of Convertible Notes
|
|
PMFT
Holdings, Ltd.
|
3,000
|
30%
|
|
CORPORATE
GROUP SERVICES LIMITED
|
3,000
|
30%
|
|
Sully,
LLC
|
2,000
|
20%
|
|
Beacon
Financial Corp.
|
2,000
|
20%
|
Schedule
2.1
FORMULA
FOR ISSUANCE OF ADDITIONAL CONVERTIBLE NOTES
The
Additional Convertible Notes shall not exceed $200,000,000 in principal value.
The number of Additional Convertible Notes shall be issued within 30 days of
the
first, second, third, fourth and fifth anniversary of the Closing. The
Additional Convertible Notes shall be issued to the Members in accordance with
their ownership interest in the DC Gas Units.
The
principal amount of Additional Convertible Notes to be issued shall be
determined by subtracting $50,000,000 from the product of DC Gas’s gross revenue
by .50. The conversion price for the Additional Convertible Notes will be
EMVELCO’s market price, which is the 90 day average closing price prior to the
anniversary.
For
example, if the gross revenue of DC Gas for the first anniversary of the Closing
is $110,000,000 and the 90 day average closing price is $1.15, then the formula
would be as follows:
(($110,000,000
x .50) - 50,000,000) = $5,000,000
The
principal amount of the Additional Convertible Debenture shall be $5,000,000
and
the conversion price shall be $1.15. In the event that EMVELCO has received
Shareholder Approval, then the shares of common stock of EMVELCO will be issued
as if the Additional Convertible Notes had been fully converted.
2