EXHIBIT 10.1
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SHARE EXCHANGE AGREEMENT
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THIS SHARE EXCHANGE AGREEMENT (this "Agreement") is made and entered
into as of May 12, 2004, by and among Accessity Corp., a New York corporation
("Accessity"); Pacific Ethanol, Inc., a California corporation ("PEI"); Kinergy
Marketing, LLC, an Oregon limited liability company ("Kinergy"); Reenergy, LLC,
a California limited liability company ("Reenergy," and together with PEI and
Kinergy, the "Acquired Companies"); each of the shareholders of PEI identified
on the signature pages hereof (collectively, the "PEI Shareholders"); each of
the holders of options or warrants to acquire shares of common stock of PEI
identified on the signature pages hereof (collectively, the "PEI
Warrantholders"); each of the limited liability company members of Kinergy
identified on the signature pages hereof (collectively, the "Kinergy Members");
each of the limited liability company members of Reenergy identified on the
signature pages hereof (collectively, the "Reenergy Members").
R E C I T A L S
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A. PEI is in the business of developing a large-scale ethanol plant
(the "PEI Business"). Kinergy is in the business of marketing ethanol throughout
the Western United States (the "Kinergy Business"). Reenergy is in the business
of developing a large-scale ethanol plant (the "Reenergy Business"). The PEI
Business, Kinergy Business and Reenergy Business are sometimes collectively
referred to herein as the "Businesses."
B. The PEI Shareholders are the holders of all of the issued and
outstanding capital stock of PEI (collectively, the "PEI Stock"); the PEI
Warrantholders are the holders of all of the issued and outstanding options and
warrants to acquire shares of PEI Stock (collectively, the "PEI Warrants");
Kinergy Members are the holders of all of the outstanding limited liability
company membership interests of Kinergy (collectively, the "Kinergy Interests");
and the Reenergy Members are the holders of all of the outstanding limited
liability company membership interests of Reenergy (collectively, the "Reenergy
Interests").
C. Accessity desires to acquire the PEI Stock from the PEI
Shareholders, and the PEI Shareholders desire to transfer the PEI Stock to
Accessity, in exchange for shares of Common Stock of Accessity ("Accessity
Exchange Shares"), subject to and in accordance with the terms and conditions
set forth herein; Accessity desires to have the PEI Warrants cancelled in
exchange for the issuance to the PEI Warrantholders of warrants to acquire
shares of common stock of Accessity, subject to and in accordance with the terms
and conditions set forth herein; Accessity desires to acquire the Kinergy
Interests from the Kinergy Members, and the Kinergy Members desire to transfer
the Kinergy Interests to Accessity, in exchange for Accessity Exchange Shares,
subject to and in accordance with the terms and conditions set forth herein; and
Accessity desires to acquire the Reenergy Interests from the Reenergy Members,
and the Reenergy Members desire to transfer the Reenergy Interests to Accessity,
in exchange for Accessity Exchange Shares, subject to and in accordance with the
terms and conditions set forth herein.
D. This Agreement is being entered into by the parties as part of a
unified plan for the exchange of stock that is intended by the parties to
qualify for non-recognition treatment under Section 351 of the Internal Revenue
Code of 1986, as amended (the "Code").
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises and the
respective promises of the parties set forth herein, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement, in addition to the other capitalized
terms defined elsewhere in this Agreement, the following terms shall have the
meanings specified or referred to in this Article 1:
"Action" or "Actions" shall mean any litigation, suits, actions, causes
of actions, and proceedings or investigations, collectively.
"Affiliate" shall mean, with respect to any individual, partnership,
corporation, limited liability company, association, business trust, joint
venture, governmental entity or other entity of any nature ("Person"), any
Person that controls, is controlled by, or is under common control with, such
Person.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Environmental, Health, and Safety Liabilities" shall mean any cost,
damages, expense, liability, obligation, or other responsibility arising from or
under Environmental Law or Occupational Safety and Health Law and consisting of
or relating to:
(a) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational safety and health,
and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial, or inspection costs and expenses arising under
Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or Occupational
Safety and Health Law for cleanup costs or corrective action, including any
investigation, cleanup, removal, containment, or other remediation or response
actions ("Cleanup") required by applicable Environmental Law or Occupational
Safety and Health Law (whether or not such Cleanup has been required or
requested by any Governmental Body or any other Person) and for any natural
resource damages; or
(d) any other compliance, corrective, investigative, or remedial
measures required under Environmental Law or Occupational Safety and Health Law.
The terms "removal," "remedial," and "response action" include but are
not limited to the types of activities covered by the United States
Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C.
Section 9601 et seq., as amended ("CERCLA").
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"Environmental Laws" shall mean any federal, state and local
environmental laws, rules, regulations, standards and requirements, including,
without limitation, those respecting hazardous materials and substances
(including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, 42 U.S.C. sec. 9601, et. seq.; the
Resource Conservation and Recovery Act, as amended, 42 U.S.C. sec. 6901. et.
seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C sec. 1251,
et. seq.; the Toxic Substances Control Act, as amended, 15 U.S.C. sec. 9601, et.
seq.; the Emergency Planning and Community Right to Know Act, 42 U.S.C. sec.
11001, et. seq.; the Safe Drinking Water Act, 42 U.S.C. sec. 300f, et. seq.; the
Solid Waste Disposal Act, as amended; and all comparable state and local laws;
and any common law (including without limitation common law that may impose
strict liability) that may impose liability or obligations for injuries or
damages to, or threatened as a result of, the present of or exposure to any
hazardous materials or substances).
"ERISA" shall mean the Employee Retirement Income Security Act of 1974
or any successor law, and regulations and rules issued pursuant to that Act or
any successor law.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor law, and regulations and rules issued pursuant to that
Act or any successor law
"GAAP" shall mean generally accepted United States accounting
principles, applied on a basis consistent with the basis.
"Governmental Body" shall mean any:
(a) nation, state, county, city, town, village, district, or other
jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity and
any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority or
power of any nature.
"Legal Requirement" shall mean any federal, state, local, municipal,
foreign, international, multinational, or other administrative order,
constitution, law, ordinance, principle of common law, regulation, statute, or
treaty.
"Liability" or "Liabilities" shall mean debts, liabilities, commitments
or obligations of any nature, absolute, accrued, contingent or otherwise.
"Lien" or "Liens" shall mean any mortgage, pledge, security interest,
conditional sale or other title retention agreement, encumbrance, lien,
easement, claim, right, covenant, restriction, right of way, warrant, option or
charge of any kind.
"Occupational Safety and Health Law" shall mean any Legal Requirement
designed to provide safe and healthful working conditions and to reduce
occupational safety and health
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hazards, and any program, whether governmental or private (including those
promulgated or sponsored by industry associations and insurance companies),
designed to provide safe and healthful working conditions.
"Owners" shall mean the PEI Shareholders, the Kinergy Members and the
Reenergy Members, collectively.
"Permit" or "Permits" shall mean any licenses, permits, authorizations,
approvals, consents, franchises and orders required for the conduct and
operation of business as presently conducted.
"Permitted Liens" shall mean any (i) Liens for taxes not yet due and
payable or for taxes that are being contested in good faith through appropriate
proceedings, (ii) Liens for purchase money security interests and Liens securing
rental payments under capital lease arrangements, (iii) other Liens arising in
the ordinary course of business and not incurred in connection with the
borrowing of money, and (iv) Liens described on Schedules 4.13, 6.13 and 8.13.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"Share Exchange" shall mean the PEI Exchange, the Kinergy Exchange and
the Reenergy Exchange, collectively.
ARTICLE II
EXCHANGE OF OWNERSHIP INTERESTS
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2.1 Exchange of PEI Stock. Subject to the terms and conditions of this
Agreement, each PEI Shareholder hereby agrees to assign, transfer and deliver to
Accessity the shares of PEI Stock owned by the PEI Shareholder free and clear of
all liens, claims, encumbrances, pledges, options, security interests and any
other adverse interests of any kind or nature whatsoever, and Accessity hereby
agrees to accept delivery of the PEI Stock from each of the PEI Shareholders. In
consideration for the assignment and transfer of the PEI Stock to Accessity by
the PEI Shareholders, Accessity shall issue to each of the PEI Shareholders one
(1) Accessity Exchange Share for each one (1) share of PEI Stock ("PEI Exchange
Ratio"), as set forth on Exhibit A (the "PEI Exchange"). No fractional shares
shall be issued and in the event that the conversion results in a fraction, the
number of Accessity Exchange Shares to be issued shall be rounded up to the
nearest whole number.
2.2 Cancellation and Replacement of PEI Warrants. Subject to the terms
and conditions of this Agreement, each PEI Warrantholder hereby agrees that the
PEI Warrants which such PEI Warrantholder has to acquire shares of common stock
of PEI shall be cancelled on and as of the Closing Date in consideration for the
issuance by Accessity to such PEI Warrantholder of warrants to acquire the same
number of shares of Accessity Common Stock at the same exercise price and on the
same terms and conditions as provided for in the PEI Warrants of such PEI
Warrantholder (the "Accessity Replacement Warrants").
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2.3 Exchange of Kinergy Interests. Subject to the terms and conditions
of this Agreement, each Kinergy Member hereby agrees to assign, transfer and
deliver to Accessity the Kinergy Interests owned by each of the Kinergy Members
free and clear of all Liens and any other adverse interests of any kind or
nature whatsoever, and Accessity hereby agrees to accept delivery of the Kinergy
Interests from each of the Kinergy Members. In consideration for the assignment
and transfer of the Kinergy Interests to Accessity by the Kinergy Members,
Accessity shall issue 1,875,000 Accessity Exchange Shares to Xxxx Xxxxxxx, the
sole Kinergy Member, for 100% of the Kinergy Interests ("Kinergy Exchange
Ratio"), as set forth on Exhibit A (the "Kinergy Exchange"). No fractional
shares shall be issued and in the event that the conversion results in a
fraction, the number of Accessity Exchange Shares to be issued shall be rounded
up to the nearest whole number.
2.4 Exchange of Reenergy Interests. Subject to the terms and conditions
of this Agreement, each Reenergy Member hereby agrees to assign, transfer and
deliver to Accessity the Reenergy Interests owned by each of the Reenergy
Members free and clear of all liens, claims, encumbrances, pledges, options,
security interests and any other adverse interests of any kind or nature
whatsoever, and Accessity hereby agrees to accept delivery of the Reenergy
Interests from each of the Reenergy Members. In consideration for the assignment
and transfer of the Reenergy Interests to Accessity by the Reenergy Members,
Accessity shall issue to each of the Reenergy Members 21,250 Accessity Exchange
Shares for each one percent (1%) of Reenergy Interests ("Reenergy Exchange
Ratio"), as set forth on Exhibit A (the "Reenergy Exchange"). No fractional
shares shall be issued and in the event that the conversion results in a
fraction, the number of Accessity Exchange Shares to be issued shall be rounded
up to the nearest whole number.
2.5 Share Exchange. The parties intend to adopt this Agreement and
consummate the Share Exchange as part of a unified plan for the exchange of
stock that is qualified for non-recognition treatment under Section 351 of the
Code. The Accessity Exchange Shares issued in the PEI Exchange will be issued
solely in exchange for shares of PEI Stock, the Accessity Exchange Shares issued
in the Kinergy Exchange will be issued solely in exchange for the Kinergy
Interests, and the Accessity Exchange Shares issued in the Reenergy Exchange
will be issued solely in exchange for the Reenergy Interests, and no other
transaction other than the Share Exchange represents, provides for or is
intended to be an adjustment to the consideration given for the PEI Stock, the
Kinergy Interests and the Reenergy Interests. No consideration that could
constitute "other property or money" within the meaning of Section 351(b) of the
Code is being transferred by Accessity for the PEI Stock, the Kinergy Interests
or the Reenergy Interests. The parties shall not take a position on any tax
return inconsistent with this Section 2.5. In addition, the parties represent
that, as of the Closing Date and after giving effect to the transactions
contemplated by this Agreement, PEI, Kinergy and Reenergy shall be "in control"
of Accessity within the meaning of Section 351(a) of the Code.
ARTICLE III
CLOSING
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3.1 Closing. The closing (the "Closing") of the transactions
contemplated by this Agreement will be held at 10:00 a.m. at the offices of
Xxxxx & Xxxxxx, LLP, 000 Xxxxx Xxxxxxxxx, Xxxxx 0000, Xxxxx Xxxx, Xxxxxxxxxx
00000, on such date as the parties hereto shall mutually agree upon, or at such
other time, date or location as the parties hereto may mutually agree upon (the
"Closing Date").
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3.2 Deliveries By Accessity. At the Closing, Accessity shall deliver:
(a) to each PEI Shareholder, a stock certificate evidencing his or her
ownership of the number of Accessity Exchange Shares set forth opposite his or
her name as set forth on Exhibit B; to each PEI Warrantholder, an Accessity
Replacement Warrant evidencing such PEI Warrantholder's right to acquire the
number of shares of Accessity Common Stock set forth opposite his or her name as
set forth on Exhibit B and otherwise providing for the same terms and conditions
as provided for in the PEI Warrants of such PEI Warrantholder; to each Kinergy
Member, a stock certificate evidencing his or her ownership of the number of
Accessity Exchange Shares set forth opposite his or her name as set forth on
Exhibit C; and to each Reenergy Member, a stock certificate evidencing his or
her ownership of the number of Accessity Exchange Shares set forth opposite his
or her name as set forth on Exhibit D;
(b) a copy of the Articles of Incorporation and Bylaws of Accessity,
each as amended to date, and the resolutions adopted by the Board of Directors
of Accessity approving, authorizing and directing the execution of this
Agreement and the transactions contemplated thereby, each certified by the
Secretary of Accessity as being in full force and effect on and as of the
Closing Date;
(c) a certificate of the Secretary of State of Delaware to the effect
that Accessity is a validly existing corporation in good standing under the laws
of the State of Delaware and a certificate from the Secretary of State of each
other state in which the character of its properties owned or leased or the
nature of its activities requires qualification as a foreign corporation doing
business in such state to the effect that Accessity (as a New York corporation)
is a foreign corporation in good standing under the laws of such state;
(d) the written resignations of each of Xxxxx Xxxxxx, Xxxxx X. Xxxxxxx,
Xxxxxxx X. Xxxxxxxx and Xxxxx X. Xxxxx as directors of Accessity dated as of the
Closing Date, in form and substance reasonably acceptable to each of PEI,
Kinergy and Reenergy; provided, that one current director may temporarily remain
for the sole purpose of confirming said resignations and appointing one
individual designated by Accessity as a Class II director (thereby holding such
board seat until the annual meeting of Accessity shareholders to be held in the
fourth calendar quarter of 2005) pursuant to a unanimous written consent of such
remaining sole director, in form and substance reasonably acceptable to PEI,
Kinergy and Reenergy, to be delivered by Accessity at the Closing; and the
written resignation of such remaining sole director dated as of the Closing Date
effective immediately after the effectiveness of such appointment, in form and
substance reasonably acceptable to each of PEI, Kinergy and Reenergy;
(e) a certificate of the president or chief executive officer of
Accessity certifying that the representations and warranties by Accessity set
forth in this Agreement and in any certificate or document delivered pursuant to
the provisions of this Agreement are true and accurate, on and as of the Closing
Date, and that Accessity has performed and complied in all material respects
with all agreements, obligations and conditions required by this Agreement to be
performed or complied with by it on or prior to the Closing Date.
(f) the written resignation of each executive of Accessity who has
entered into an employment agreement with Accessity (including, without
limitation, a confirmation of the voluntary termination by such individual of
his or her existing employment agreement with
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Accessity), including but not limited to Xxxxx Xxxxxx and Xxxxxx Kart, dated as
of the Closing Date, in form and substance reasonably acceptable to each of PEI,
Kinergy and Reenergy.
(g) an opinion of legal counsel to Accessity to the effect that: (i)
Accessity is a corporation duly incorporated, validly existing and in good
standing under the laws of New York and is duly qualified as a foreign
corporation in each state in which the character of its properties owned or
leased or the nature of its activities requires qualification as a foreign
corporation doing business in such state, except where the failure to be so
qualified would not have a material adverse effect on Accessity; (ii) this
Agreement and each related agreement to which Accessity is a party has been duly
authorized, executed and delivered by Accessity and each of this Agreement and
each such related agreement constitutes the valid and binding obligation of
Accessity enforceable against Accessity in accordance with its terms, except (x)
as the same may be limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws now or hereafter in effect relating to creditors' rights
generally and (y) that the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought;
(iii) Accessity, through its Board of Directors and shareholders, has taken all
corporate action necessary for the approval of the execution, delivery and
performance of this Agreement by Accessity; (iv) the Accessity Exchange Shares
when issued to the Owners in exchange for the PEI Stock, Kinergy Interests and
Reenergy Interests, will be duly and validly issued, fully paid and
nonassessable; (v) except as otherwise disclosed in any Accessity SEC Documents
(as defined below), to the knowledge of such legal counsel, there are no pending
or threatened claims or litigation against Accessity; and (vi) neither the
execution of this Agreement, nor the consummation of the Share Exchange and the
other transactions contemplated hereby or any announcement of the execution of
this Agreement or the consummation of the Share Exchange and the other
transactions contemplated hereby constitutes or shall constitute a "Triggering
Event" or a "Business Combination" as such terms are defined and used in that
certain Rights Agreement dated as of December 28, 1998, between Accessity
(formerly First Priority Group, Inc.) and North American Transfer Co., as Rights
Agent.
(h) an original stock certificate evidencing the ownership by GV
Capital Corp. of 150,000 shares of common stock of Accessity, together with a
letter from Xxxxx Xxxxxx confirming that issuance of such shares to GV Capital
Corp. shall constitute full payment of a finder's fee for introducing Accessity
to PEI and the other Acquired Companies;
(i) evidence, in form and substance reasonably acceptable to each of
PEI, Kinergy and Reenergy, that each of the conditions precedent set forth in
Article XIII below have been satisfied; and
(j) any and all consents, approvals, notices, filings or recordations
of third parties required with respect to the execution and delivery of this
Agreement or the transactions contemplated hereby or by any of the agreements,
documents or instruments referred to herein.
3.3 Deliveries by Acquired Companies and Owners.
(a) PEI. At the Closing, PEI and the PEI Shareholders and PEI
Warrantholders shall deliver to Accessity:
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(i) the original PEI Warrants and the original stock
certificates representing the PEI Stock, accompanied by stock powers separate
from such stock certificates duly executed in blank by the PEI Shareholders
evidencing the transfer of PEI Stock to Accessity and, for each married PEI
Shareholder that is a resident of California or a resident of any other
community property state, a Consent of Spouse in the form attached hereto duly
executed by the spouse of such PEI Shareholder;
(ii) any and all consents, approvals, notices, filings or recordations
of third parties required with respect to the execution and delivery of this
Agreement or the transactions contemplated hereby or by any of the agreements,
documents or instruments referred to herein;
(iii) evidence, in form and substance reasonably satisfactory to
Accessity, that any and all shareholder agreements or similar agreements to
which PEI and the PEI Shareholders, or any of them, are a party or to which they
or any of them may be subject have been duly terminated;
(iv) a certificate of the president or chief executive officer of PEI
certifying that the representations and warranties by PEI set forth in this
Agreement and in any certificate or document delivered pursuant to the
provisions of this Agreement are true and accurate, on and as of the Closing
Date, and that PEI has performed and complied in all material respects with all
agreements, obligations and conditions required by this Agreement to be
performed or complied with by it on or prior to the Closing Date;
(v) a copy of the Articles of Incorporation and Bylaws of PEI, each as
amended to date, and the resolutions adopted by the Board of Directors of PEI
approving, authorizing and directing the execution of this Agreement and the
transactions contemplated thereby, each certified by the Secretary of PEI as
being in full force and effect on and as of the Closing Date;
(vi) a certificate of the Secretary of State of California to the
effect that PEI is a validly existing corporation in good standing under the
laws of the State of California and a certificate from the Secretary of State of
each other state in which the character of its properties owned or leased or the
nature of its activities requires qualification as a foreign corporation doing
business in such state to the effect that PEI is a foreign corporation in good
standing under the laws of such state; and
(vii) an opinion of legal counsel to PEI to the effect that: (i) PEI is
a corporation duly incorporated, validly existing and in good standing under the
laws of California and is duly qualified as a foreign corporation in each state
in which the character of its properties owned or leased or the nature of its
activities requires qualification as a foreign corporation doing business in
such state, except where the failure to be so qualified would not have a
material adverse effect on PEI; (ii) this Agreement and each related agreement
to which PEI is a party has been duly authorized, executed and delivered by PEI
and each of this Agreement and each such related agreement constitutes the valid
and binding obligation of PEI enforceable against PEI in accordance with its
terms, except (x) as the same may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect relating
to creditors' rights generally and (y) that the remedy of specific performance
and injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the
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court before which any proceeding therefor may be brought; and (iii) PEI,
through its Board of Directors and shareholders, has taken all corporate action
necessary for the approval of the execution, delivery and performance of this
Agreement by PEI.
(b) Kinergy. At the Closing, Kinergy and the Kinergy Members shall
deliver to Accessity:
(i) original certificates, if any have been issued, representing the
Kinergy Interests, accompanied by assignments of interest duly executed in blank
by the Kinergy Members evidencing the transfer of the Kinergy Interests to
Accessity and, for each married Kinergy Member that is a resident of California
or a resident of any other community property state, a Consent of Spouse in the
form attached hereto as Exhibit E, duly executed by the spouse of such Kinergy
Member;
(ii) any and all consents, approvals, notices, filings or recordations
of third parties required with respect to the execution and delivery of this
Agreement or the transactions contemplated hereby or by any of the agreements,
documents or instruments referred to herein;
(iii) evidence, in form and substance reasonably satisfactory to
Accessity, that any and all member agreements or similar agreements to which
Kinergy and the Kinergy Members, or any of them, are a party or to which they or
any of them may be subject have been duly terminated;
(iv) a certificate of the Managers or Managing Members of Kinergy
certifying that the representations and warranties by Kinergy set forth in this
Agreement and in any certificate or document delivered pursuant to the
provisions of this Agreement are true and accurate, on and as of the Closing
Date, and that Kinergy has performed and complied in all material respects with
all agreements, obligations and conditions required by this Agreement to be
performed or complied with by it on or prior to the Closing Date;
(v) a copy of the Articles of Organization and Operating Agreement of
Kinergy, each as amended to date, and the resolutions adopted by the Managers or
Managing Members of Kinergy and the Kinergy Members approving, authorizing and
directing the execution of this Agreement and the transactions contemplated
thereby, each certified by the Managers or Managing Members of Kinergy as being
in full force and effect on and as of the Closing Date;
(vi) a certificate of the Secretary of State of Oregon to the effect
that Kinergy is a validly existing limited liability company in good standing
under the laws of the State of Oregon and a certificate from the Secretary of
State of each other state in which the character of its properties owned or
leased or the nature of its activities requires qualification as a foreign
limited liability company doing business in such state to the effect that
Kinergy is a foreign limited liability company in good standing under the laws
of such state; and
(vii) an opinion of legal counsel to Kinergy to the effect that: (i)
Kinergy is a limited liability company duly organized, validly existing and in
good standing under the laws of California and is duly qualified as a foreign
limited liability company in each state in which the character of its properties
owned or leased or the nature of its activities
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requires qualification as a foreign limited liability company doing business in
such state, except where the failure to be so qualified would not have a
material adverse effect on Kinergy; (ii) this Agreement and each related
agreement to which Kinergy is a party has been duly authorized, executed and
delivered by Kinergy and each of this Agreement and each such related agreement
constitutes the valid and binding obligation of Kinergy enforceable against
Kinergy in accordance with its terms, except (x) as the same may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to creditors' rights generally and (y) that the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought; and (iii) Kinergy, through
its Managers or Managing Members and the Kinergy Members, has taken all limited
liability company action necessary for the approval of the execution, delivery
and performance of this Agreement by Kinergy.
(c) Reenergy. At the Closing, Reenergy and the Reenergy Members shall
deliver to Accessity:
(i) original certificates, if any have been issued, representing the
Reenergy Interests, accompanied by assignments of interest duly executed in
blank by the Reenergy Members evidencing the transfer of the Reenergy Interests
to Accessity and, for each married Reenergy Member that is a resident of
California or a resident of any other community property state, a Consent of
Spouse in the form attached hereto as Exhibit E duly executed by the spouse of
such Reenergy Member;
(ii) any and all consents, approvals, notices, filings or recordations
of third parties required with respect to the execution and delivery of this
Agreement or the transactions contemplated hereby or by any of the agreements,
documents or instruments referred to herein;
(iii) evidence, in form and substance reasonably satisfactory to
Accessity, that any and all member agreements or similar agreements to which
Reenergy and the Reenergy Members, or any of them, are a party or to which they
or any of them may be subject have been duly terminated;
(iv) a certificate of the Managers or Managing Members of Reenergy
certifying that the representations and warranties by Reenergy set forth in this
Agreement and in any certificate or document delivered pursuant to the
provisions of this Agreement are true and accurate, on and as of the Closing
Date, and that Reenergy has performed and complied in all material respects with
all agreements, obligations and conditions required by this Agreement to be
performed or complied with by it on or prior to the Closing Date;
(v) a copy of the Articles of Organization and Operating Agreement of
Reenergy, each as amended to date, and the resolutions adopted by the Managers
or Managing Members of Reenergy and the Reenergy Members approving, authorizing
and directing the execution of this Agreement and the transactions contemplated
thereby, each certified by the Managers or Managing Members of Reenergy as being
in full force and effect on and as of the Closing Date;
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(vi) a certificate of the Secretary of State of California to the
effect that Reenergy is a validly existing limited liability company in good
standing under the laws of the State of California and a certificate from the
Secretary of State of each other state in which the character of its properties
owned or leased or the nature of its activities requires qualification as a
foreign limited liability company doing business in such state to the effect
that Reenergy is a foreign limited liability company in good standing under the
laws of such state; and
(vii) an opinion of legal counsel to Reenergy to the effect that: (i)
Reenergy is a limited liability company duly organized, validly existing and in
good standing under the laws of Oregon and is duly qualified as a foreign
limited liability company in each state in which the character of its properties
owned or leased or the nature of its activities requires qualification as a
foreign limited liability company doing business in such state, except where the
failure to be so qualified would not have a material adverse effect on Reenergy;
(ii) this Agreement and each related agreement to which Reenergy is a party has
been duly authorized, executed and delivered by Reenergy and each of this
Agreement and each such related agreement constitutes the valid and binding
obligation of Reenergy enforceable against Reenergy in accordance with its
terms, except x) as the same may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect relating
to creditors' rights generally and (y) that the remedy of specific performance
and injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought; and (iii) Reenergy, through its Managers or Managing Members and
the Reenergy Members, has taken all limited liability company action necessary
for the approval of the execution, delivery and performance of this Agreement by
Reenergy.
3.4 Further Assurances. From time to time after the Closing, and
without further consideration, each of the Acquired Companies and Owners shall
execute and deliver such other instruments of conveyance, assignment, transfer
and delivery, and take such other actions as Accessity may reasonably request in
order to more effectively transfer to Accessity, and to place Accessity in
possession or control of, the Acquired Companies and to reasonably assist in the
collection of any and all such rights, properties and assets, and to enable
Accessity to exercise and enjoy all of the rights and benefits with respect
thereto.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PEI
-------------------------------------
PEI hereby represents and warrants to Accessity that the following
representations and warranties are true and correct on and as of the date
hereof:
4.1 Organization and Good Standing. PEI is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California, has the power and authority to own, operate and lease its properties
and to carry on its business as now conducted, and is duly qualified to do
business and is in good standing in each jurisdiction where the character of its
properties owned or leased or the nature of its activities make such
qualification necessary (each such jurisdiction being listed on Schedule 4.1),
except where the failure to be so qualified would not have a material adverse
effect on PEI.
4.2 Capitalization. The authorized capital stock of PEI consists solely
of 20,000,000 shares of common stock, without
11
par value, and 30,000,000 shares of Preferred Stock, without par value. There
are no shares of Preferred Stock issued and outstanding as of the date of this
Agreement. A total of 12,252,200 shares of PEI Stock are issued and outstanding
as of the date of this Agreement, all of which are held of record and owned by
the PEI Shareholders as set forth in Exhibit B. No equity securities of PEI are
issued and outstanding as of the date of this Agreement other than the shares of
PEI Stock set forth on Exhibit B. Exhibit B sets forth the number of shares of
PEI Stock that are held by each PEI Shareholder as of the date of this
Agreement. All issued and outstanding shares of PEI Stock have been duly
authorized and validly issued, are fully paid and nonassessable, are not subject
to any right of rescission and have been offered, issued, sold and delivered by
PEI in compliance with all requirements of applicable laws.
4.3 Power and Authority. PEI has full power and authority to enter into this
Agreement, to perform its obligations hereunder and to carry out the
transactions contemplated hereby. The execution and delivery of this Agreement,
the performance by PEI of its obligations hereunder and the consummation of the
transactions contemplated hereby have been duly authorized by all corporate,
shareholder and other actions on the part of PEI required by applicable law,
PEI's Articles of Incorporation or its Bylaws. This Agreement constitutes the
legal, valid and binding obligation of PEI, enforceable against it in accordance
with its terms.
4.4 Options/Rights. Except as set forth in Exhibit B or in Schedule
4.4, there are no (i) stock appreciation rights, options, warrants, calls,
rights, commitments, conversion privileges or preemptive or other rights or
agreements outstanding to purchase or otherwise acquire any shares of PEI,
specifically including the PEI Stock (collectively, "PEI Capital Stock"), (ii)
securities or debt convertible into or exchangeable for PEI Capital Stock or
obligating PEI to grant, extend or enter into any such option, warrant, call,
commitment, conversion privileges or preemptive or other right or agreement, or
(iii) voting agreements, registration rights, rights of first refusal,
preemptive rights, co-sale rights, or other restrictions applicable to any
outstanding securities of PEI.
4.5 Subsidiaries. Except as set forth in Schedule 4.5, PEI does not
have any subsidiaries or any equity interest, direct or indirect, in, or loans
to, any corporation, partnership, joint venture, limited liability company or
other business entity.
4.6 No Violation. Neither the execution and delivery of this Agreement
nor the performance by PEI of its obligations hereunder nor the consummation of
the transactions contemplated hereby will (a) contravene any provision of the
Articles of Incorporation or Bylaws of PEI; (b) violate, be in conflict with,
constitute a default under, permit the termination of, cause the acceleration of
the maturity of any debt or obligation of PEI under, require (except as
disclosed on Schedule 4.6 hereto) the consent of any other party to, constitute
a breach of, create a loss of a material benefit under, or result in the
creation or imposition of any Lien, upon any property or assets of PEI under,
any mortgage, indenture, lease, contract, agreement, instrument or commitment to
which PEI is a party or by which it or he or any of its or his respective assets
or properties may be bound; (c) to the knowledge of PEI, violate any statute or
law or any judgment, decree, order, regulation or rule of any court or
Governmental Body to which PEI or the PEI Business is subject or by which PEI,
any of its assets or properties are bound; or (d) result in the loss of any
license, privilege or certificate benefiting PEI or the PEI Business.
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4.7 Consents and Approvals. Except as set forth on Schedule 4.7 hereto,
no consent, approval or authorization of, or declaration, filing or registration
with, any governmental or regulatory authority or any other third party is
required to be made or obtained by PEI in connection with the execution,
delivery or performance of this Agreement.
4.8 Litigation. There are no Actions to which PEI is a party,
including, without limitation, Actions for personal injury, products liability,
wrongful death or other tortious conduct, or breach of warranty arising from or
relating to materials, commodities, products or goods used, transferred,
processed, manufactured, sold, distributed or shipped by PEI (a) involving or
relating to PEI or any of its assets, properties or rights, or (b) pending, or,
to PEI's knowledge, threatened, against PEI, or any of their respective assets,
properties or rights, before any court, arbitrator or administrative or
Governmental Body which, if adversely resolved, would have a material adverse
effect on the PEI Business.
4.9 PEI Financial Statements. PEI has previously delivered to Accessity
the unaudited balance sheet of PEI as of December 31, 2003 and the related
statements of income and changes in financial position or cash flows, as
appropriate, for the period then ended (the "Unaudited 2003 PEI Financial
Statements"), together with an unaudited balance sheet of PEI as of March 31,
2004 and the related statements of income and changes in financial position or
cash flows, as appropriate, for the period then ended and, subsequent to the
date hereof, PEI will deliver to Accessity the audited balance sheet of PEI as
of December 31, 2003 and the related statements of income and changes in
financial position or cash flows, as appropriate, for the period then ended (the
"Audited 2003 PEI Financial Statements") (all such financial statements,
excluding, upon delivery to Accessity of the Audited 2003 PEI Financial
Statements, the Unaudited 2003 PEI Financial Statements, are hereinafter
collectively referred to as the "PEI Financial Statements"). The PEI Financial
Statements, together with the notes thereto, (i) were compiled from the books
and records of PEI regularly maintained by management and used to prepare the
financial statements of PEI, (ii) were prepared in accordance with GAAP
consistently applied throughout the period then ended and all periods prior to
that period; and (iii) present fairly and accurately the financial condition of
PEI for the period or as of the dates thereof, subject, where appropriate, to
normal year-end audit adjustments, in each case in accordance with GAAP
consistently applied during the period covered.
4.10 No Undisclosed Liabilities. PEI has, and on the Closing Date will
have, no Liabilities other than those which (a) are fully reflected reserved
against in the PEI Financial Statements, (b) have been incurred since March 31,
2004 in the ordinary course of business in amounts and for terms consistent,
individually and in the aggregate, with the past practice of PEI or (c) have
been specifically disclosed in the Schedules hereto by reference to the specific
section of this Agreement to which such disclosure relates.
4.11 Taxes and Tax Returns. All of the tax returns and reports of PEI
required by applicable law to be filed prior to the date hereof have been duly
filed and all taxes shown as due thereon have been paid. There are in effect no
waivers of the applicable statutes of limitations for any federal, state, local
or foreign taxes for any period. No liability for any federal, state, local or
foreign income, sales, use, withholding, payroll, franchise, real property or
personal property taxes is pending, and there is no proposed liability for any
such taxes to be imposed upon the properties or assets of PEI. PEI does not have
any liability for any federal, state, local or foreign income, sales, use,
withholding, payroll, franchise, real property or personal property taxes,
assessments, amounts, interest or penalties of any nature whatsoever other than
as shown on the Xxxxx 00, 0000 XXX Financial Statements and there is no basis
for any additional claim or assessment other than with respect to liabilities
for taxes which may have accrued since the date
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of the March 31, 2004 PEI Financial Statements in the ordinary course of
business and reserved against on the books and records of PEI compiled in
accordance with generally accepted accounting principles which have been
consistently applied to the Closing Date. The provisions for taxes reflected in
the Xxxxx 00, 0000 XXX Financial Statements are adequate for federal, state,
county and local taxes for the period ended on December 31, 2003 and for all
prior periods, whether disputed or undisputed. There are no present disputes
about taxes of any nature payable by PEI. PEI has never filed, and will not file
on or before the Closing Date, any consent under section 341(f) of the Code.
PEI's tax returns have never been audited by any taxation authority.
4.12 Absence of Certain Changes. Except as set forth on Schedule 4.12,
since December 31, 2003, PEI has conducted the PEI Business only in the ordinary
course and consistent with prior practices and has not:
(a) suffered any material adverse change in its condition (financial or
otherwise), results of operations, assets, liabilities, reserves, the PEI
Business, or operations;
(b) suffered any damage, destruction or loss, whether covered by
insurance or not, materially adversely affecting the PEI Business, operations,
assets, or condition (financial or otherwise);
(c) paid, discharged or satisfied any Liability or other expenses,
other than the payment, discharge or satisfaction of the Liabilities described
in Section 4.10 at the time the same were due and payable and in the ordinary
course of business;
(d) paid or otherwise made any contribution to any profit-sharing or
pension plan or other Employee Benefit Plan (as defined in Section 4.17 below);
(e) mortgaged or pledged, or permitted the imposition of any Lien upon,
any of its properties or assets (real, personal or mixed, tangible or
intangible), other than those incurred in the ordinary course of business or
otherwise listed on Schedule 4.12 hereto;
(f) cancelled or compromised any debts, or waived or permitted to lapse
any material claims or rights, or sold, assigned, transferred or otherwise
disposed of, other than in the ordinary course, any of its properties or assets
(real, personal or mixed, tangible or intangible);
(g) disposed of or permitted to lapse any rights to the use of any
patent, registered trademark, service xxxx, trade name or copyright, or disposed
of or disclosed to any person any trade secret, formula, process or know-how
material to the PEI Business not theretofore a matter of public knowledge;
(h) except as disclosed on Schedule 4.12, granted any increase in the
compensation of any officer, employee or consultant of PEI (including any such
increase pursuant to any bonus, pension, profit-sharing or other plan or
commitment) or any increase in the compensation payable or to become payable to
any officer, employee or consultant;
(i) other than commitments, transactions and expenditures in connection
with engineering work and other preliminary site work at the site of the ethanol
plant currently being developed by PEI, the anticipated expenditures for which
are set forth on Schedule 4.12, and commitments, transactions and expenditures
in connection with the repair of the grain facility of
14
PEI located in Madera, California due to the fire that occurred at such facility
in the first quarter of 2004, the expenditures for which are anticipated to be
reimbursed under applicable insurance coverage, entered into any commitment or
transaction not in the ordinary course of business or made any capital
expenditure or commitment for any additions to property, plant or equipment,
except commitments, transactions or capital expenditures which do not in any
single case exceed $25,000 or in the aggregate exceed $50,000;
(j) made any change in any method of accounting or accounting practice
(including, without limitation, any change in depreciation or amortization
policies or rates);
(k) paid, loaned or advanced any amount to, or sold, transferred or
leased any properties or assets (real, personal or mixed, tangible or
intangible) to, or entered into any agreement or arrangement with, any of its
officers, directors, employees, shareholders, or any family member or Affiliate
of any of its officers, directors, employees or shareholders, or any officer,
director, employee or shareholder of any such Affiliate;
(l) declared, set aside, paid or made any dividend or other
distribution or payment in respect of the capital stock of PEI, or any direct or
indirect redemption, purchase or other acquisition of any of its shares of
capital stock;
(m) knowingly waived or released any right or claim of PEI;
(n) received a commencement notice or, to the knowledge of PEI,
received any threat of commencement, of any civil or criminal litigation,
investigation or proceeding against PEI;
(o) experienced any labor trouble or, to the knowledge of PEI, received
any claim of wrongful discharge or worker's compensation claim;
(p) agreed, whether in writing or otherwise, to take any action
referred to in and prohibited by this Section 4.12; or
(q) become aware of any other event or condition that has had or would
reasonably be expected to have a material adverse effect on the condition
(financial or otherwise), results of operations, assets, liabilities, reserves,
the PEI Business, the PEI Intellectual Property (as defined below) or the
operations of PEI.
4.13 Title to Properties; Encumbrances.
(a) PEI has good and marketable title to all of its properties and
assets (real, personal or mixed, tangible or intangible), including without
limitation the PEI Intellectual Property. None of PEI's properties or assets is
subject to any Lien, except Permitted Liens (including the Liens set forth on
Schedule 4.13), none of which adversely affects the PEI Business or the
continued operations of PEI.
(b) All material property and assets (real, personal or mixed, tangible
or intangible) used or required by PEI in the conduct of the PEI Business are
fully owned by PEI (except to the extent of any Permitted Liens). All such
property and assets, or the leases or
15
licenses thereof, constitute all property, assets and contractual rights
necessary for the conduct of the PEI Business as presently conducted.
4.14 Leases.
(a) Schedule 4.14 contains a true and complete list of:
(i) all leases pursuant to which PEI leases or subleases any real
property interests, whether as lessor, lessee, sublessor or sublessee;
(ii) all leases pursuant to which PEI leases any type of personal
property;
(iii) all leases pursuant to which PEI leases any vehicles or related
equipment; and
(iv) all leases pursuant to which PEI leases to others any type of
property.
(b) Each such lease described on Schedule 4.14 is the legal, valid and
binding obligation of PEI and, to the knowledge of PEI, the other parties
thereto, enforceable in accordance with their respective terms, and is in full
force and effect. PEI is not in default under any such lease, and PEI has not
received any notice from any person or entity asserting that PEI is in default
under any such lease, and no events or circumstances exist which, with notice or
the passage of time or both, would constitute a default under any such lease.
4.15 Intellectual Property. PEI owns all right, title and interest in,
or has the right to use, sell or license all patent applications, patents,
trademark applications, trademarks, service marks, trade names, copyright
applications, copyrights, trade secrets, know-how, technology, customer lists,
proprietary processes and formulae, all source and object code, algorithms,
inventions, development tools and all documentation and media constituting,
describing or relating to the above, including, without limitation, manuals,
memoranda and records and other intellectual property and proprietary rights
used in or reasonably necessary or required for the conduct of its respective
business as presently conducted (collectively, the "PEI Intellectual Property").
4.16 Compliance with Laws. PEI has not been charged with, and, to PEI's
knowledge, PEI is not threatened with or under any investigation with respect
to, any charge concerning any violation of any provision of any federal, state,
local or foreign law, regulation, ordinance, order or administrative ruling
affecting the PEI Business or PEI, and PEI is not in default with respect to any
order, writ, injunction or decree of any court, agency or instrumentality
affecting the PEI Business or PEI. To PEI's knowledge, PEI is not in violation
of any federal, state, local or foreign law, ordinance or regulation or any
other requirement of any Governmental Body or regulatory body, court or
arbitrator applicable to the PEI Business or PEI which would have a material
adverse effect on PEI or the PEI Business. Without limiting the generality of
the foregoing, PEI is in compliance in all material respects with all
Occupational Safety and Health Laws, including those rules and regulations
promulgated by OSHA, except where such non-compliance would not have a material
adverse effect on PEI or the PEI Business.
16
4.17 Employee Benefit
Plans.
(a) Schedule 4.17 contains a true and complete list and description of
each pension, retirement, severance, welfare, profit-sharing, stock purchase,
stock option, vacation, deferred compensation, bonus or other incentive plan, or
other employee benefit program, arrangement, agreement or understanding, or
medical, vision, dental or other health plan, or life insurance or disability
plan, retiree medical or life insurance plan or any other employee benefit
plans, including, without limitation, any "employee benefit plan" (as defined in
Section 3(3) of ERISA), to which PEI contributes or is a party or by which it is
bound or under which it may have liability and under which employees or former
employees of PEI (or their beneficiaries) are eligible to participate or derive
a benefit. Each employee benefit plan which is a "group health plan" (as such
term is defined in Section 5000(b)(i) of the Code) satisfies the applicable
requirements of Section 4980B of the Code. Except as described on Schedule 4.17,
PEI has no formal plan or commitment, whether legally binding or not, to create
any additional plan, practice or agreement or modify or change any existing
plan, practice or agreement that would affect any of its employees or terminated
employees. Benefits under all employee benefit plans are as represented and have
not been and will not be increased subsequent to the date copies of such plans
have been provided.
(b) PEI does not contribute to or have any obligation to contribute to,
has not at any time contributed to or had an obligation to contribute to,
sponsor or maintain, and has not at any time sponsored or maintained, a
"multi-employer plan" (within the meaning of Section 3(37) of ERISA) for the
benefit of employees or former employees of PEI.
(c) PEI has, in all material respects, performed all obligations,
whether arising by operation of law, contract, or past custom, required to be
performed under or in connection with the employee benefit plans disclosed on
Schedule 4.17 (individually, a "PEI Employee Benefit Plan" and, collectively,
the "PEI Employees Benefit Plans"), and PEI has no knowledge of any default or
violation by any other party with respect thereto.
(d) There are no Actions, suits or claims (other than routine claims
for benefits) pending, or, to PEI's knowledge, threatened, against any PEI
Employee Benefit Plan or against the assets funding any PEI Employee Benefit
Plan.
(e) PEI neither maintains nor contributes to any "employee welfare
benefit" (as such term is defined in Section 3(i) of ERISA) plan which provides
any benefits to retirees or former employees of PEI.
4.18 Employment Law Matters.
(a) PEI (i) is in material compliance with all applicable laws
respecting employment, employment practices, terms and conditions of employment
and wages and hours; (ii) is in material compliance with all applicable laws and
regulations relating to the employment of aliens or similar immigration matters;
and (iii) is not engaged in any unfair labor practice, including, but not
limited to, discrimination or wrongful discharge.
(b) PEI has not at anytime had, nor to PEI's knowledge, is there now threatened,
a strike, picket, work stoppage, work slowdown or other labor trouble, against
or directly affecting PEI that had or would reasonably be expected to have a
material adverse effect on the PEI Business or PEI.
17
(c) None of the employees of PEI is represented by a labor union, and
no petition has been filed or proceedings instituted by any employee or group of
employees with any labor relations board seeking recognition of a bargaining
representative. PEI is not a party to any multi-employer collective bargaining
agreement covering any of its employees.
(d) There are no controversies or disputes (including any union
grievances or arbitration proceeding) pending, or, to PEI's knowledge,
threatened, between PEI and any employees of PEI (or any union or other
representative of such employees). No unfair labor practice complaints have been
filed against PEI with the National Labor Relations Board or any other
Governmental Body or administrative body, and PEI has not received any written
notice or communication reflecting an intention or a threat to file any such
complaint.
4.19 Contracts and Commitments.
(a) Together with the leases set forth on Schedule 4.14, the insurance
policies set forth on Schedule 4.23, and the PEI Employee Benefit Plans and
commitments set forth on Schedule 4.17, Schedule 4.19 contains a true and
complete list and description (stated without duplication), of:
(i) all contracts (including, without limitation, letters of credit,
and obligations for borrowed money) and commitments of PEI which are material to
the operations, business, prospects or condition (financial or otherwise) of
PEI;
(ii) all consulting agreements (whether written or oral), regardless of
amounts or duration;
(iii) all material contracts or commitments (whether written or oral)
with distributors, brokers, manufacturer's representatives, sales
representatives, service or warranty representatives, customers and other
persons, firms, corporations or other entities engaged in the sale,
distribution, service or repair of PEI's products;
(iv) all contracts relating to construction-in-progress of capital
assets; and
(v) all joint venture, licensing, profit sharing, royalty or similar
agreements or arrangements to which PEI is a party in any way associated with
the manufacture, marketing, sale or distribution of any products or provision of
any services of PEI.
(b) PEI has delivered to Accessity true and complete copies of all of
the documents identified on Schedule 4.19 (collectively, the "PEI Material
Contracts") and shall deliver true and complete copies of all such other
agreements, instruments and documents as Accessity may reasonably request
relating to the operation, ownership or conduct of the PEI Business.
(c) PEI is not a party to any written agreement that would restrict it
from carrying on the PEI Business anywhere in the world.
18
(d) PEI is not a party to any "take-or-pay" contracts.
(e) Except as identified on Schedule 4.19, PEI is not a party to any
employment agreements, arrangements and commitments, including severance or
termination arrangements and commitments (whether written or oral), between PEI
and any employees of PEI.
(f) PEI is not, and to the knowledge of PEI and the PEI Majority
Shareholders, no other party is, in default under or in breach or violation of,
nor has PEI received notice of any asserted claim of default by PEI or by any
other party under, or a breach or violation of, any of the PEI Material
Contracts.
4.20 No Brokers. Except as disclosed on Schedule 4.20, PEI is not
obligated for the payment of fees or expenses of any investment banker, broker
or finder in connection with the origin, negotiation or execution of this
Agreement in connection with any exchange of stock transaction provided for
herein.
4.21 Environmental Matters. PEI is in compliance in all material
respects with all Environmental Laws. There is no Action pending before any
court, Governmental Body or board or other forum or threatened by any person or
entity (i) for noncompliance by PEI with any Environmental Law (ii) relating to
the release into the environment by PEI of any pollutant, toxic or hazardous
material or waste generated by PEI, whether or not occurring at or on a site
owned, leased or operated by PEI. There has not been by PEI, nor to the
knowledge of PEI has there been at all, any past, storage, disposal, generation,
manufacture, refinement, transportation, production or treatment of any
hazardous materials or substances at, upon or from the facilities occupied or
used by PEI and any other real property presently or formerly owned by, used by
or leased to or by PEI, any predecessor of PEI (collectively, the "PEI
Property"). To the knowledge of PEI, neither PEI nor any properties owned or
operated by PEI has been or is in violation or is otherwise liable under, any
Environmental Law. To the knowledge of PEI, there are no asbestos-containing
materials, underground storage tanks or polychlorinated biphenyls (PCBs) located
on the PEI Property. To the knowledge of PEI, there has been no spill,
discharge, leak, emission, injection, disposal, escape, dumping or release of
any kind on, beneath or above the PEI Property or into the environment
surrounding such PEI Property of any hazardous materials or substances in
violation of any Environmental Law or requiring any remedial action. To the
knowledge of PEI, PEI has all permits, registrations, approvals and licenses
required by any Governmental Body under any Environmental Law to be obtained by
PEI in connection with the conduct of the business of PEI as presently
conducted.
4.22 Bank Accounts. Schedule 4.22 sets forth the names and locations of
all banks, trust companies, savings and loan associations, and other financial
institutions at which PEI maintains accounts of any nature and the names of all
persons authorized to draw thereon or make withdrawals therefrom.
4.23 Insurance. Schedule 4.23 sets forth a true and complete list and
description of (a) all of PEI's self-insurance practices and items covered by
such self-insurance and (b) all policies of fire, liability, worker's
compensation and other forms of insurance owned or held by PEI. No installment
premiums are due under the policies set forth on Schedule 4.23 or, if
installment premiums shall be due and owing under such policies prior to the
Closing Date, such premiums shall have been paid up-to-date prior to the Closing
Date. All such policies are in full
19
force and effect, insure against risks and liabilities to the extent and in the
manner deemed appropriate and sufficient by PEI in its reasonable business
judgment, and, other than the receipt of a notice of nonrenewal of a general
liability insurance policy expiring in June 2004 applicable to the grain
facility of PEI located in Madera, California due to a fire that occurred at
such facility in the first quarter of 2004, PEI has not received any notice of
cancellation with respect thereto. To PEI's knowledge, PEI is not in default
with respect to any provision contained in any such policy and has not failed to
give any notice or present any claim under any such policy in a timely fashion.
4.24 Suppliers and Customers. PEI does not have any knowledge that any
supplier or customer or group of related suppliers or customers of PEI has
canceled or otherwise terminated or threatened to cancel or otherwise terminate,
its relationship with PEI, which termination would have a material adverse
effect on the PEI Business or PEI, or that any such supplier or customer or
group of related suppliers or customers expects to reduce its business with PEI
by reason of the transactions contemplated by this Agreement or for any other
reason whatsoever.
4.25 Licenses, Permits and Authorizations. PEI has all necessary
Permits for the use and ownership or leasing of its properties and assets as
currently operated, used, owned or leased (including, without limitation, the
operation of a plant to produce up to 40 million gallons of ethanol per year),
except for such Permits as to which the lack thereof does not and would not have
a material adverse effect on PEI or the PEI Business and except for certain
non-discretionary grading, foundation and building Permits to be obtained by PEI
in connection with the construction of an ethanol plant, as more particularly
described on Schedule 4.25. All of the Permits are valid, in full force and
effect and in good standing. Schedule 4.25 contains a true and complete list and
description of all the Permits. There is no claim or Action pending, or, to
PEI's knowledge, threatened, which disputes the validity of any such Permit or
threatens to revoke, cancel, suspend or limit any such Permit.
4.26 Accounts Receivable. All accounts receivable of PEI shown on the
PEI Financial Statements and all accounts receivable created after March 31,
2004, subject to reserves created in the ordinary course of business on a basis
consistent with the past practices and policies of PEI and otherwise in
accordance with generally accepted accounting principles, (a) have been
collected or (b) to PEI's knowledge, are valid and enforceable, arose from
bona-fide sales to third parties in the ordinary course of business, and are
collectible at the aggregate recorded amounts thereof on the books of PEI.
4.27 Condition of Tangible Assets. Except as disclosed on Schedule
4.12, PEI's facilities and tangible assets, including, without limitation,
machinery, equipment, vehicles, furniture, plants and buildings, are in good
operating condition and repair (ordinary wear and tear excepted) and are
adequate for the uses to which they have been put by PEI in the ordinary course
of business, except for parts or repairs of an immaterial nature in the
aggregate, and PEI has not received any notice that any of such facilities or
assets is in need of substantial maintenance or repair.
4.28 Disclosure. No representation or warranty of PEI in this Agreement
(including, without limitation, the Schedules of PEI hereto) contains or will
contain any untrue statement of a material fact or omits or will omit to state
any material fact necessary to make the statements herein or therein not
misleading.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PEI SHAREHOLDERS
------------------------------------------------------
Each of the PEI Shareholders, severally and not jointly, hereby
represents and warrants to Accessity that the following representations and
warranties are true and correct on and as of the date hereof:
5.1 Power and Authority. Such PEI Shareholder has full power and
authority to enter into this Agreement, perform its respective obligations
hereunder, and carry out the transactions contemplated hereby. This Agreement
constitutes the legal, valid and binding obligation of such PEI Shareholder,
enforceable against such PEI Shareholder in accordance with its terms.
5.2 No Violation. Neither the execution and delivery of this Agreement
nor the performance by such PEI Shareholder of its respective obligations
hereunder nor the consummation of the transactions contemplated hereby will
violate, or be in conflict with, or constitute a default under, any mortgage,
indenture, lease, or any agreement, instrument or commitment to which such PEI
Shareholder is a party.
5.3 Title; Consents and Approvals; No Claims. Such PEI Shareholder is
the owner, beneficially and of record, of its shares of PEI Stock, free and
clear of all Liens. To such PEI Shareholder's knowledge, no consent, approval or
authorization of, or declaration, filing or registration with, any governmental
or regulatory authority or any other third party is required to be made or
obtained by such PEI Shareholder in connection with the execution, delivery or
performance of this Agreement. To such PEI Shareholder's knowledge, there is no
claim, action, litigation, suit, cause of action or other proceeding pending or
threatened before any federal, state or local court, governmental agency or
regulatory body against such PEI Shareholder which seeks or may seek, directly
or indirectly, (a) to invalidate or set aside, in whole or in part, this
Agreement, (b) to restrain, prohibit, invalidate or set aside, in whole or in
part, the consummation of the transactions contemplated hereby or (c) to obtain
substantial damages in connection therewith.
5.4 Securities Law Compliance.
(a) Such PEI Shareholder has a net worth sufficient to bear the
economic risk (including the entire loss) of its investment made in the
Accessity Exchange Shares;
(b) Such PEI Shareholder is an "accredited investor," as such term is
defined in Rule 501 of Regulation D promulgated under the rules and regulations
of the Securities Act;
(c) Such PEI Shareholder has adequate means of providing for its
current cash needs and personal contingencies and has no need for liquidity in
this investment in the Accessity Exchange Shares and has no reason to anticipate
any change in its personal circumstances, financial or otherwise, which may
cause or require any sale or distribution by such PEI Shareholder or all or any
part of the Accessity Exchange Shares acquired by it herein;
(d) by reason of such PEI Shareholder's business or financial
experience or the business or financial experience of such PEI Shareholder's
professional advisor(s) who are unaffiliated with and who are not compensated by
Accessity or any affiliate or selling agent of
21
Accessity, directly or indirectly, such PEI Shareholder has the capacity to
protect its own interests in connection with an investment in the Accessity
Exchange Shares;
(e) Such PEI Shareholder understands that the he, she or it is
acquiring Accessity Exchange Shares without being furnished any prospectus or
offering circular, other than a copy of this Agreement, a copy of the Proxy
Statement (as defined in Section 11.6 below) and a copy of the Owner Disclosure
Document (as defined in Section 11.7 below);
(f) No representations or warranties have been made to such PEI
Shareholder by Accessity or any employee or agent of Accessity and in entering
into this Agreement, such PEI Shareholder is not relying on any information,
other than as a result of the independent investigation of Accessity by such PEI
Shareholder, and no guarantee of any profit or return on its investment made in
the Accessity Exchange Shares has been made to such PEI Shareholder;
(g) In evaluating the merits and risk of this investment, such PEI
Shareholder has relied on the advice of its personal tax advisor, investment
advisor and/or legal counsel;
(h) Such PEI Shareholder is aware that the Accessity Exchange Shares
have not been registered or qualified, nor is registration or qualification
contemplated (except where such PEI Shareholder is a party to a Registration
Rights Agreement with PEI, to the extent provided for therein), with the SEC
under the Securities Act or any state securities law. Accordingly, the Accessity
Exchange Shares may be sold or otherwise transferred or hypothecated only if
they are subsequently registered or qualified under the Securities Act or
applicable laws or if, in the opinion of counsel, an exemption from registration
or qualification thereunder is available and the transaction will not jeopardize
the availability of the exemptions under applicable federal and state securities
laws relied upon by Accessity in connection with the offering in which such PEI
Shareholder acquired its Accessity Exchange Shares;
(i) Such PEI Shareholder acknowledges that the Accessity Exchange
Shares were not offered by means of any general solicitation or advertising;
(j) Such PEI Shareholder is acquiring its Accessity Exchange Shares
solely for its own account, for investment purposes only, and not with an intent
to sell, or for resale in connection with any distribution of all or any portion
of the Accessity Exchange Shares within the meaning of the Securities Act; and
(k) The address of such PEI Shareholder set forth on the signature
pages hereto is the principal residence of such PEI Shareholder, if such PEI
Shareholder is an individual, or the principal business address of such PEI
Shareholder, if such PEI Shareholder is a business or other entity, and that all
offers to such PEI Shareholder have been made only in the state specified in
such address.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF KINERGY
-----------------------------------------
Kinergy hereby represents and warrants to Accessity that the following
representations and warranties are true and correct on and as of the date
hereof:
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6.1 Organization and Good Standing. Kinergy is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Oregon, has the power and authority to own, operate and lease its
properties and to carry on its business as now conducted, and is duly qualified
to do business and is in good standing in each jurisdiction where the character
of its properties owned or leased or the nature of its activities make such
qualification necessary (each such jurisdiction being listed on Schedule 6.1),
except where the failure to be so qualified would not have a material adverse
effect on Kinergy.
6.2 Capitalization. The limited liability company membership interests
of Kinergy are owned by the Kinergy Members as set forth in Exhibit C. No
limited liability company membership interests of Kinergy are outstanding as of
the date of this Agreement other than the Kinergy Interests set forth on Exhibit
C. The Kinergy Interests have been duly authorized and validly issued, are fully
paid and nonassessable, are not subject to any right of rescission and have been
offered, issued, sold and delivered by Kinergy in compliance with all
requirements of applicable laws.
6.3 Power and Authority. Kinergy has full power and authority to enter
into this Agreement, to perform its obligations hereunder and to carry out the
transactions contemplated hereby. The execution and delivery of this Agreement,
the performance by Kinergy of its obligations hereunder and the consummation of
the transactions contemplated hereby have been duly authorized by the Managers
or the Managing Members and the Kinergy Members as required by applicable law,
Kinergy's Articles of Organization or its Operating Agreement. This Agreement
constitutes the legal, valid and binding obligation of Kinergy, enforceable
against it in accordance with its terms.
6.4 Options/Rights. Except as set forth in Schedule 6.4, there are no
(i) options, warrants, calls, rights, commitments, conversion privileges or
preemptive or other rights or agreements outstanding to purchase or otherwise
acquire any limited liability company membership interests of Kinergy, (ii)
securities or debt convertible into or exchangeable for Kinergy limited
liability company membership interests or obligating Kinergy to grant, extend or
enter into any such option, warrant, call, commitment, conversion privileges or
preemptive or other right or agreement, or (iii) voting agreements, rights of
first refusal, preemptive rights, co-sale rights, or other restrictions
applicable to any outstanding limited liability company membership interests of
Kinergy.
6.5 Subsidiaries. Kinergy does not have any subsidiaries or any equity
interest, direct or indirect, in, or loans to, any corporation, partnership,
joint venture, limited liability company or other business entity.
6.6 No Violation. Neither the execution and delivery of this Agreement
nor the performance by Kinergy of its obligations hereunder nor the consummation
of the transactions contemplated hereby will (a) contravene any provision of the
Articles of Organization or Operating Agreement of Kinergy; (b) violate, be in
conflict with, constitute a default under, permit the termination of, cause the
acceleration of the maturity of any debt or obligation of Kinergy under, require
(except as disclosed on Schedule 6.6 hereto) the consent of any other party to,
constitute a breach of, create a loss of a material benefit under, or result in
the creation or imposition of any Lien, upon any property or assets of Kinergy
under, any mortgage, indenture, lease, contract, agreement, instrument or
commitment to which Kinergy is a party or by which it or any of its assets or
properties may be bound; (c) to the knowledge of Kinergy,
23
violate any statute or law or any judgment, decree, order, regulation or rule of
any court or Governmental Body to which Kinergy or the Kinergy Business is
subject or by which Kinergy, any of its assets or properties are bound; or (d)
result in the loss of any license, privilege or certificate benefiting Kinergy
or the Kinergy Business.
6.7 Consents and Approvals. Except as set forth on Schedule 6.7 hereto,
no consent, approval or authorization of, or declaration, filing or registration
with, any governmental or regulatory authority or any other third party is
required to be made or obtained by Kinergy in connection with the execution,
delivery or performance of this Agreement.
6.8 Litigation. There are Actions to which Kinergy is a party,
including, without limitation, Actions for personal injury, products liability,
wrongful death or other tortious conduct, or breach of warranty arising from or
relating to materials, commodities, products or goods used, transferred,
processed, manufactured, sold, distributed or shipped by Kinergy (a) involving
or relating to Kinergy, or any its assets, properties or rights, or (b) pending,
or, to Kinergy's knowledge, threatened, against Kinergy, or any of its assets,
properties or rights, before any court, arbitrator or administrative or
Governmental Body which, if adversely resolved, would have a material adverse
effect on the Kinergy Business.
6.9 Kinergy Financial Statements. Kinergy has previously delivered to
Accessity the unaudited balance sheet of Kinergy as of December 31, 2003 and the
related statements of income and changes in financial position or cash flows, as
appropriate, for the period then ended (the "Unaudited 0000 Xxxxxxx Financial
Statements"), together with an unaudited balance sheet of Kinergy as of March
31, 2004 and the related statements of income and changes in financial position
or cash flows, as appropriate, for the period then ended and, subsequent to the
date hereof, Kinergy will deliver to Accessity the audited balance sheet of
Kinergy as of December 31, 2003 and the related statements of income and changes
in financial position or cash flows, as appropriate, for the period then ended
(the "Audited 0000 Xxxxxxx Financial Statements") (all such financial
statements, excluding, upon delivery to Accessity of the Audited 0000 Xxxxxxx
Financial Statements, the Unaudited 0000 Xxxxxxx Financial Statements, are
hereinafter collectively referred to as the "Kinergy Financial Statements"). The
Kinergy Financial Statements, together with the notes thereto, (i) were compiled
from the books and records of Kinergy regularly maintained by management and
used to prepare the financial statements of Kinergy, (ii) were prepared in
accordance with GAAP consistently applied throughout the period then ended and
all periods prior to that period; and (iii) present fairly and accurately the
financial condition of Kinergy for the period or as of the dates thereof,
subject, where appropriate, to normal year-end audit adjustments, in each case
in accordance with GAAP consistently applied during the period covered.
6.10 No Undisclosed Liabilities. Kinergy has, and on the Closing Date
will have, no Liabilities other than those which (a) are fully reflected
reserved against in the Kinergy Financial Statements, (b) have been incurred
since March 31, 2004 in the ordinary course of business in amounts and for terms
consistent, individually and in the aggregate, with the past practice of Kinergy
or (c) have been specifically disclosed in the Schedules hereto by reference to
the specific section of this Agreement to which such disclosure relates.
6.11 Taxes and Tax Returns. All of the tax returns and reports of
Kinergy required by applicable law to be filed prior to the date hereof have
been duly filed and all taxes shown as due thereon have been paid. There are in
effect no waivers of the applicable statutes of
24
limitations for any federal, state, local or foreign taxes for any period. No
liability for any federal, state, local or foreign income, sales, use,
withholding, payroll, franchise, real property or personal property taxes is
pending, and there is no proposed liability for any such taxes to be imposed
upon the properties or assets of Kinergy. Kinergy does not have any liability
for any federal, state, local or foreign income, sales, use, withholding,
payroll, franchise, real property or personal property taxes, assessments,
amounts, interest or penalties of any nature whatsoever other than as shown on
the March 31, 2004 Kinergy Financial Statements and there is no basis for any
additional claim or assessment other than with respect to liabilities for taxes
which may have accrued since the date of the March 31, 2004 Kinergy Financial
Statements in the ordinary course of business and reserved against on the books
and records of Kinergy compiled in accordance with generally accepted accounting
principles which have been consistently applied to the Closing Date. The
provisions for taxes reflected in the March 31, 2004 Kinergy Financial
Statements are adequate for federal, state, county and local taxes for the
period ended on December 31, 2003 and for all prior periods, whether disputed or
undisputed. There are no present disputes about taxes of any nature payable by
Kinergy. Kinergy has never filed, and will not file on or before the Closing
Date, any consent under section 341(f) of the Code. Kinergy's tax returns have
never been audited by any taxation authority.
6.12 Absence of Certain Changes. Except as set forth on Schedule 6.12, since
December 31, 2003, Kinergy has conducted the Kinergy Business only in the
ordinary course and consistent with prior practices and has not:
(a) suffered any material adverse change in its condition (financial or
otherwise), results of operations, assets, liabilities, reserves, the Kinergy
Business, or operations;
(b) suffered any damage, destruction or loss, whether covered by
insurance or not, materially adversely affecting the Kinergy Business,
operations, assets, or condition (financial or otherwise);
(c) paid, discharged or satisfied any Liability or other expenses,
other than the payment, discharge or satisfaction of the Liabilities described
in Section 6.10 at the time the same were due and payable and in the ordinary
course of business;
(d) paid or otherwise made any contribution to any profit-sharing or
pension plan or other Employee Benefit Plan (as defined in Section 6.17 below);
(e) mortgaged or pledged, or permitted the imposition of any Lien upon,
any of its properties or assets (real, personal or mixed, tangible or
intangible), other than those incurred in the ordinary course of business or
otherwise listed on Schedule 6.12 hereto;
(f) cancelled or compromised any debts, or waived or permitted to lapse
any material claims or rights, or sold, assigned, transferred or otherwise
disposed of, other than in the ordinary course, any of its properties or assets
(real, personal or mixed, tangible or intangible);
(g) disposed of or permitted to lapse any rights to the use of any
patent, registered trademark, service xxxx, trade name or copyright, or disposed
of or disclosed to any person any trade secret, formula, process or know-how
material to the Kinergy Business not theretofore a matter of public knowledge;
25
(h) except as disclosed on Schedule 6.12, granted any increase in the
compensation of any officer, employee or consultant of Kinergy (including any
such increase pursuant to any bonus, pension, profit-sharing or other plan or
commitment) or any increase in the compensation payable or to become payable to
any officer, employee or consultant;
(i) entered into any commitment or transaction not in the ordinary
course of business or made any capital expenditure or commitment for any
additions to property, plant or equipment, except commitments, transactions or
capital expenditures which do not in any single case exceed $25,000 or in the
aggregate exceed $50,000;
(j) made any change in any method of accounting or accounting practice
(including, without limitation, any change in depreciation or amortization
policies or rates);
(k) paid, loaned or advanced any amount to, or sold, transferred or
leased any properties or assets (real, personal or mixed, tangible or
intangible) to, or entered into any agreement or arrangement with, any of its
officers, employees, members, or any family member or Affiliate of any of its
officers, employees or members, or any officer, employee or member of any such
Affiliate;
(l) declared, set aside, paid or made any distribution or payment in
respect of the limited liability company membership interests of Kinergy, or any
direct or indirect redemption, purchase or other acquisition of any of its
limited liability company membership interests;
(m) knowingly waived or released any right or claim of Kinergy;
(n) received a commencement notice or, to the knowledge of Kinergy,
received any threat of commencement, of any civil or criminal litigation,
investigation or proceeding against Kinergy;
(o) experienced any labor trouble or, to the knowledge of Kinergy,
received any claim of wrongful discharge or worker's compensation claim;
(p) agreed, whether in writing or otherwise, to take any action
referred to in and prohibited by this Section 6.12; or
(q) become aware of any other event or condition that has had or would
reasonably be expected to have a material adverse effect on the condition
(financial or otherwise), results of operations, assets, liabilities, reserves,
the Kinergy Business, the Kinergy Intellectual Property (as defined below) or
the operations of Kinergy.
6.13 Title to Properties; Encumbrances.
(a) Kinergy has good and marketable title to all of its properties and
assets (real, personal or mixed, tangible or intangible), including without
limitation the Kinergy Intellectual Property. None of Kinergy's properties or
assets is subject to any Lien, except for Permitted Liens (including the Liens
set forth on Schedule 6.13), none of which adversely affects the Kinergy
Business or the continued operations of Kinergy.
26
(b) All material property and assets (real, personal or mixed, tangible
or intangible) used or required by Kinergy in the conduct of the Kinergy
Business are fully owned by Kinergy (except to the extent of any Permitted
Liens). All such property and assets, or the leases or licenses thereof,
constitute all property, assets and contractual rights necessary for the conduct
of the Kinergy Business as presently conducted.
6.14 Leases.
(a) Schedule 6.14 contains a true and complete list of:
(i) all leases pursuant to which Kinergy leases or subleases any real
property interests, whether as lessor, lessee, sublessor or sublessee;
(ii) all leases pursuant to which Kinergy leases any type of personal
property;
(iii) all leases pursuant to which Kinergy leases any vehicles or
related equipment; and
(iv) all leases pursuant to which Kinergy leases to others any type of
property.
(b) Each such lease described on Schedule 6.14 is the legal, valid and
binding obligation of Kinergy and, to the knowledge of Kinergy, the other
parties thereto, enforceable in accordance with their respective terms, and is
in full force and effect. Kinergy is not in default under any such lease, and
Kinergy has not received any notice from any person or entity asserting that
Kinergy is in default under any such lease, and no events or circumstances exist
which, with notice or the passage of time or both, would constitute a default
under any such lease.
6.15 Intellectual Property. Kinergy owns all right, title and interest
in, or has the right to use, sell or license all patent applications, patents,
trademark applications, trademarks, service marks, trade names, copyright
applications, copyrights, trade secrets, know-how, technology, customer lists,
proprietary processes and formulae, all source and object code, algorithms,
inventions, development tools and all documentation and media constituting,
describing or relating to the above, including, without limitation, manuals,
memoranda and records and other intellectual property and proprietary rights
used in or reasonably necessary or required for the conduct of its respective
business as presently conducted (collectively, the "Kinergy Intellectual
Property").
6.16 Compliance with Laws. Kinergy has not been charged with, and, to
Kinergy's knowledge, Kinergy is not threatened with or under any investigation
with respect to, any charge concerning any violation of any provision of any
federal, state, local or foreign law, regulation, ordinance, order or
administrative ruling affecting the Kinergy Business or Kinergy, and Kinergy is
not in default with respect to any order, writ, injunction or decree of any
court, agency or instrumentality affecting the Kinergy Business or Kinergy. To
Kinergy's knowledge, Kinergy is not in violation of any federal, state, local or
foreign law, ordinance or regulation or any other requirement of any
Governmental Body or regulatory body, court or arbitrator applicable to the
Kinergy Business or Kinergy which would have a material adverse effect on
Kinergy or the
27
Kinergy Business. Without limiting the generality of the foregoing, Kinergy is
in compliance in all material respects with all Occupational Safety and Health
Laws, including those rules and regulations promulgated by OSHA, except where
such non-compliance would not have a material adverse effect on Kinergy or the
Kinergy Business.
6.17 Employee Benefit Plans.
(a) Schedule 6.17 contains a true and complete list and description of
each pension, retirement, severance, welfare, profit-sharing, stock purchase,
stock option, vacation, deferred compensation, bonus or other incentive plan, or
other employee benefit program, arrangement, agreement or understanding, or
medical, vision, dental or other health plan, or life insurance or disability
plan, retiree medical or life insurance plan or any other employee benefit
plans, including, without limitation, any "employee benefit plan" (as defined in
Section 3(3) of ERISA), to which Kinergy contributes or is a party or by which
it is bound or under which it may have liability and under which employees or
former employees of Kinergy (or their beneficiaries) are eligible to participate
or derive a benefit. Each employee benefit plan which is a "group health plan"
(as such term is defined in Section 5000(b)(i) of the Code) satisfies the
applicable requirements of Section 4980B of the Code. Except as described on
Schedule 6.17, Kinergy has no formal plan or commitment, whether legally binding
or not, to create any additional plan, practice or agreement or modify or change
any existing plan, practice or agreement that would affect any of its employees
or terminated employees. Benefits under all employee benefit plans are as
represented and have not been and will not be increased subsequent to the date
copies of such plans have been provided.
(b) Kinergy does not contribute to or have any obligation to contribute
to, has not at any time contributed to or had an obligation to contribute to,
sponsor or maintain, and has not at any time sponsored or maintained, a
"multi-employer plan" (within the meaning of Section 3(37) of ERISA) for the
benefit of employees or former employees of Kinergy.
(c) Kinergy has, in all material respects, performed all obligations,
whether arising by operation of law, contract, or past custom, required to be
performed under or in connection with the employee benefit plans disclosed on
Schedule 6.17 (individually, a "Kinergy Employee Benefit Plan" and,
collectively, the "Kinergy Employees Benefit Plans"), and Kinergy has no
knowledge of any default or violation by any other party with respect thereto.
(d) There are no Actions, suits or claims (other than routine claims
for benefits) pending, or, to Kinergy's knowledge, threatened, against any
Kinergy Employee Benefit Plan or against the assets funding any Kinergy Employee
Benefit Plan.
(e) Kinergy neither maintains nor contributes to any "employee welfare
benefit" (as such term is defined in Section 3(i) of ERISA) plan which provides
any benefits to retirees or former employees of Kinergy.
6.18 Employment Law Matters.
(a) Kinergy (i) is in material compliance with all applicable laws
respecting employment, employment practices, terms and conditions of employment
and wages and hours; (ii) is in material compliance with all applicable laws and
regulations relating to the employment
28
of aliens or similar immigration matters; and (iii) is not engaged in any unfair
labor practice, including, but not limited to, discrimination or wrongful
discharge.
(b) Kinergy has not at anytime during the last three (3) years had, nor
to Kinergy's knowledge, is there now threatened, a strike, picket, work
stoppage, work slowdown or other labor trouble, against or directly affecting
Kinergy that had or would reasonably be expected to have a material adverse
effect on the Kinergy Business or Kinergy.
(c) None of the employees of Kinergy is represented by a labor union,
and no petition has been filed or proceedings instituted by any employee or
group of employees with any labor relations board seeking recognition of a
bargaining representative. Kinergy is not a party to any multi-employer
collective bargaining agreement covering any of its employees.
(d) There are no controversies or disputes (including any union grie
vances or arbitration proceeding) pending, or, to Kinergy's knowledge,
threatened, between Kinergy and any employees of Kinergy (or any union or other
representative of such employees). No unfair labor practice complaints have been
filed against Kinergy with the National Labor Relations Board or any other
Governmental Body or administrative body, and Kinergy has not received any
written notice or communication reflecting an intention or a threat to file any
such complaint.
6.19 Contracts and Commitments.
(a) Together with the leases set forth on Schedule 6.14, the insurance
policies set forth on Schedule 6.23, and the Kinergy Employee Benefit Plans and
commitments set forth on Schedule 6.17, Schedule 6.19 contains a true and
complete list and description (stated without duplication), of:
(i) all contracts (including, without limitation, letters of credit,
and obligations for borrowed money) and commitments of Kinergy which are
material to the operations, business, prospects or condition (financial or
otherwise) of Kinergy;
(ii) all consulting agreements (whether written or oral), regardless of
amounts or duration;
(iii) all material contracts or commitments (whether written or oral)
with distributors, brokers, manufacturer's representatives, sales
representatives, service or warranty representatives, customers and other
persons, firms, corporations or other entities engaged in the sale,
distribution, service or repair of Kinergy's products;
(iv) all contracts relating to construction-in-progress of capital
assets; and
(v) all joint venture, licensing, profit sharing, royalty or similar
agreements or arrangements to which Kinergy is a party in any way associated
with the manufacture, marketing, sale or distribution of any products or
provision of any services of Kinergy.
29
(b) Kinergy has delivered to Accessity true and complete copies of all
of the documents identified on Schedule 6.19 (collectively, the "Kinergy
Material Contracts") and shall deliver true and complete copies of all such
other agreements, instruments and documents as Accessity may reasonably request
relating to the operation, ownership or conduct of the Kinergy Business.
(c) Kinergy is not a party to any written agreement that would restrict
it from carrying on the Kinergy Business anywhere in the world.
(d) Kinergy is not a party to any "take-or-pay" contracts.
(e) Except as identified on Schedule 6.19, Kinergy is not a party to
any employment agreements, arrangements and commitments, including severance or
termination arrangements and commitments (whether written or oral), between
Kinergy and any employees of Kinergy.
(f) Kinergy is not, and to the knowledge of Kinergy, no other party is,
in default under or in breach or violation of, nor has Kinergy received notice
of any asserted claim of default by Kinergy or by any other party under, or a
breach or violation of, any of the Kinergy Material Contracts.
6.20 No Brokers. Except as disclosed on Schedule 6.20, Kinergy is not
obligated for the payment of fees or expenses of any investment banker, broker
or finder in connection with the origin, negotiation or execution of this
Agreement in connection with any exchange of stock transaction provided for
herein.
6.21 Environmental Matters. Kinergy is in compliance in all material
respects with all Environmental Laws. There is no Action pending before any
court, Governmental Body or board or other forum or threatened by any person or
entity (i) for noncompliance by Kinergy with any Environmental Law (ii) relating
to the release into the environment by Kinergy of any pollutant, toxic or
hazardous material or waste generated by Kinergy, whether or not occurring at or
on a site owned, leased or operated by Kinergy. There has not been by Kinergy,
nor to the knowledge of Kinergy has there been at all, any past, storage,
disposal, generation, manufacture, refinement, transportation, production or
treatment of any hazardous materials or substances at, upon or from the
facilities occupied or used by Kinergy and any other real property presently or
formerly owned by, used by or leased to or by Kinergy, any predecessor of
Kinergy (collectively, the "Kinergy Property"). To the knowledge of Kinergy,
neither Kinergy nor any properties owned or operated by Kinergy has been or is
in violation or is otherwise liable under, any Environmental Law. To the
knowledge of Kinergy, there are no asbestos-containing materials, underground
storage tanks or polychlorinated biphenyls (PCBs) located on the Kinergy
Property. To the knowledge of Kinergy, there has been no spill, discharge, leak,
emission, injection, disposal, escape, dumping or release of any kind on,
beneath or above the Kinergy Property or into the environment surrounding such
Kinergy Property of any hazardous materials or substances in violation of any
Environmental Law or requiring any remedial action. To the knowledge of Kinergy,
Kinergy has all permits, registrations, approvals and licenses required by any
Governmental Body under any Environmental Law to be obtained by Kinergy in
connection with the conduct of the business of Kinergy as presently conducted.
30
6.22 Bank Accounts. Schedule 6.22 sets forth the names and locations of
all banks, trust companies, savings and loan associations, and other financial
institutions at which Kinergy maintains accounts of any nature and the names of
all persons authorized to draw thereon or make withdrawals therefrom.
6.23 Insurance. Schedule 6.23 sets forth a true and complete list and
description of (a) all of Kinergy's self-insurance practices and items covered
by such self-insurance and (b) all policies of fire, liability, worker's
compensation and other forms of insurance owned or held by Kinergy. No
installment premiums are due under the policies set forth on Schedule 6.23 or,
if installment premiums shall be due and owing under such policies prior to the
Closing Date, such premiums shall have been paid up-to-date prior to the Closing
Date. All such policies are in full force and effect, insure against risks and
liabilities to the extent and in the manner deemed appropriate and sufficient by
Kinergy in its reasonable business judgment, and Kinergy has not received any
notice of cancellation with respect thereto. To Kinergy's knowledge, Kinergy is
not in default with respect to any provision contained in any such policy and
has not failed to give any notice or present any claim under any such policy in
a timely fashion.
6.24 Suppliers and Customers. Kinergy does not have any knowledge that
any supplier or customer or group of related suppliers or customers of Kinergy
has canceled or otherwise terminated or threatened to cancel or otherwise
terminate, its relationship with Kinergy, which termination would have a
material adverse effect on the Kinergy Business or Kinergy, or that any such
supplier or customer or group of related suppliers or customers expects to
reduce its business with Kinergy by reason of the transactions contemplated by
this Agreement or for any other reason whatsoever.
6.25 Licenses, Permits and Authorizations. Kinergy has all necessary
Permits for the use and ownership or leasing of its properties and assets as
currently operated, used, owned or leased, except for such Permits as to which
the lack thereof does not and would not have a material adverse effect on
Kinergy or the Kinergy Business. All of the Permits are valid, in full force and
effect and in good standing. Schedule 6.25 contains a true and complete list and
description of all the Permits and Kinergy has previously delivered to Accessity
true and complete copies of all such Permits identified in Schedule 6.25 and in
effect as of the date hereof. There is no claim or Action pending, or, to
Kinergy's knowledge, threatened, which disputes the validity of any such Permit
or threatens to revoke, cancel, suspend or limit any such Permit.
6.26 Accounts Receivable. All accounts receivable of Kinergy shown on
the Kinergy Financial Statements and all accounts receivable created after March
31, 2004, subject to reserves created in the ordinary course of business on a
basis consistent with the past practices and policies of Kinergy and otherwise
in accordance with generally accepted accounting principles, (a) have been
collected or (b) to Kinergy's knowledge, are valid and enforceable, arose from
bona-fide sales to third parties in the ordinary course of business, and are
collectible at the aggregate recorded amounts thereof on the books of Kinergy.
6.27 Condition of Tangible Assets. Kinergy's facilities and tangible
assets, including, without limitation, machinery, equipment, vehicles,
furniture, plants and buildings, are in good operating condition and repair
(ordinary wear and tear excepted) and are adequate for the uses to which they
have been put by Kinergy in the ordinary course of business, except for parts or
31
repairs of an immaterial nature in the aggregate, and Kinergy has not received
any notice that any of such facilities or assets is in need of substantial
maintenance or repair.
6.28 Disclosure. No representation or warranty of Kinergy in this
Agreement (including, without limitation, the Schedules of Kinergy hereto)
contains or will contain any untrue statement of a material fact or omits or
will omit to state any material fact necessary to make the statements herein or
therein not misleading.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF THE KINERGY MEMBERS
-----------------------------------------------------
Each of the Kinergy Members, severally and not jointly, hereby
represents and warrants to Accessity that the following representations and
warranties are true and correct on and as of the date hereof:
7.1 Power and Authority. Such Kinergy Member has full power and
authority to enter into this Agreement, perform its respective obligations
hereunder, and carry out the transactions contemplated hereby. This Agreement
constitutes the legal, valid and binding obligation of such Kinergy Member,
enforceable against such Kinergy Member in accordance with its terms.
7.2 No Violation. Neither the execution and delivery of this Agreement
nor the performance by such Kinergy Member of its respective obligations
hereunder nor the consummation of the transactions contemplated hereby will
violate, or be in conflict with, or constitute a default under, any mortgage,
indenture, lease, or any agreement, instrument or commitment to which such
Kinergy Member is a party.
7.3 Title; Consents and Approvals; No Claims. Such Kinergy Member is
the owner, beneficially and of record, of its Kinergy Interests, free and clear
of all liens, encumbrances, security agreements, options, claims, charges and
restrictions. To such Kinergy Member's knowledge, no consent, approval or
authorization of, or declaration, filing or registration with, any governmental
or regulatory authority or any other third party is required to be made or
obtained by such Kinergy Member in connection with the execution, delivery or
performance of this Agreement. To such Kinergy Member's knowledge, there is no
claim, action, litigation, suit, cause of action or other proceeding pending or
threatened before any federal, state or local court, governmental agency or
regulatory body against such Kinergy Member which seeks or may seek, directly or
indirectly, (a) to invalidate or set aside, in whole or in part, this Agreement,
(b) to restrain, prohibit, invalidate or set aside, in whole or in part, the
consummation of the transactions contemplated hereby or (c) to obtain
substantial damages in connection therewith.
7.4 Securities Law Compliance.
(a) Such Kinergy Member has a net worth sufficient to bear the economic
risk (including the entire loss) of its investment made in the Accessity
Exchange Shares;
(b) Such Kinergy Member is an "accredited investor," as such term is
defined in Rule 501 of Regulation D promulgated under the rules and regulations
of the Securities Act;
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(c) Such Kinergy Member has adequate means of providing for its current
cash needs and personal contingencies and has no need for liquidity in this
investment in the Accessity Exchange Shares and has no reason to anticipate any
change in its personal circumstances, financial or otherwise, which may cause or
require any sale or distribution by such Kinergy Member or all or any part of
the Accessity Exchange Shares acquired by it herein;
(d) by reason of such Kinergy Member's business or financial experience
or the business or financial experience of such Kinergy Member's professional
advisor(s) who are unaffiliated with and who are not compensated by Accessity or
any affiliate or selling agent of Accessity, directly or indirectly, such
Kinergy Member has the capacity to protect its own interests in connection with
an investment in the Accessity Exchange Shares;
(e) Such Kinergy Member understands that he, she or it is acquiring
Accessity Exchange Shares without being furnished any prospectus or offering
circular, other than a copy of this Agreement, a copy of the Proxy Statement (as
defined in Section 11.6 below) and a copy of the Owner Disclosure Document (as
defined in Section 11.7 below);
(f) No representations or warranties have been made to such Kinergy
Member by Accessity or any employee or agent of Accessity and in entering into
this Agreement, such Kinergy Member is not relying on any information, other
than as a result of the independent investigation of Accessity by such Kinergy
Member, and no guarantee of any profit or return on its investment made in the
Accessity Exchange Shares has been made to such Kinergy Member;
(g) In evaluating the merits and risk of this investment, such Kinergy
Member has relied on the advice of its personal tax advisor, investment advisor
and/or legal counsel;
(h) Such Kinergy Member is aware that the Accessity Exchange Shares
have not been registered or qualified, nor is registration or qualification
contemplated, with the SEC under the Securities Act or any state securities law.
Accordingly, the Accessity Exchange Shares may be sold or otherwise transferred
or hypothecated only if they are subsequently registered or qualified under the
Securities Act or applicable laws or if, in the opinion of counsel, an exemption
from registration or qualification thereunder is available and the transaction
will not jeopardize the availability of the exemptions under applicable federal
and state securities laws relied upon by Accessity in connection with the
offering in which such Kinergy Member acquired its Accessity Exchange Shares;
(i) Such Kinergy Member acknowledges that the Accessity Exchange Shares
were not offered by means of any general solicitation or advertising;
(j) Such Kinergy Member is acquiring its Accessity Exchange Shares
solely for its own account, for investment purposes only, and not with an intent
to sell, or for resale in connection with any distribution of all or any portion
of the Accessity Exchange Shares within the meaning of the Securities Act; and
(k) The address of such Kinergy Member furnished by such Kinergy Member
at the end of this Agreement is the principal residence of such Kinergy Member,
if such Kinergy Member is an individual, or the principal business address of
such Kinergy Member, if such Kinergy Member is a business or other entity, and
that all offers to such Kinergy Member have been made only in the state
specified in such address.
33
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES OF REENERGY
------------------------------------------
Reenergy hereby represents and warrants to Accessity that the following
representations and warranties are true and correct on and as of the date
hereof:
8.1 Organization and Good Standing. Reenergy is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of California, has the power and authority to own, operate and lease
its properties and to carry on its business as now conducted, and is duly
qualified to do business and is in good standing in each jurisdiction where the
character of its properties owned or leased or the nature of its activities make
such qualification necessary (each such jurisdiction being listed on Schedule
8.1), except where the failure to be so qualified would not have a material
adverse effect on Reenergy.
8.2 Capitalization. The limited liability company membership interests
of Reenergy are owned by the Reenergy Members as set forth in Exhibit D. No
limited liability company membership interests of Reenergy are outstanding as of
the date of this Agreement other than the Reenergy Interests set forth on
Exhibit D. The Reenergy Interests have been duly authorized and validly issued,
are fully paid and nonassessable, are not subject to any right of rescission and
have been offered, issued, sold and delivered by Reenergy in compliance with all
requirements of applicable laws.
8.3 Power and Authority. Reenergy has full power and authority to enter
into this Agreement, to perform its obligations hereunder and to carry out the
transactions contemplated hereby. The execution and delivery of this Agreement,
the performance by Reenergy of its obligations hereunder and the consummation of
the transactions contemplated hereby have been duly authorized by Reenergy and
the Reenergy Majority Members as required by applicable law, Reenergy's Articles
of Organization or Operating Agreement. This Agreement constitutes the legal,
valid and binding obligation of Reenergy, enforceable against it in accordance
with its terms.
8.4 Options/Rights. Except as set forth in Schedule 8.4, there are no
(i) options, warrants, calls, rights, commitments, conversion privileges or
preemptive or other rights or agreements outstanding to purchase or otherwise
acquire any limited liability company membership interests of Reenergy, (ii)
securities or debt convertible into or exchangeable for Reenergy limited
liability company membership interests or obligating Reenergy to grant, extend
or enter into any such option, warrant, call, commitment, conversion privileges
or preemptive or other right or agreement, or (iii) voting agreements, rights of
first refusal, preemptive rights, co-sale rights, or other restrictions
applicable to any outstanding limited liability company membership interests of
Reenergy.
8.5 Subsidiaries. Reenergy does not have any subsidiaries or any equity
interest, direct or indirect, in, or loans to, any corporation, partnership,
joint venture, limited liability company or other business entity.
8.6 No Violation. Neither the execution and delivery of this Agreement
nor the performance by Reenergy of its obligations hereunder nor the
consummation of the transactions contemplated hereby will (a) contravene any
provision of the Articles of Organization or Operating Agreement of Reenergy;
(b) violate, be in conflict with, constitute a default under,
34
permit the termination of, cause the acceleration of the maturity of any debt or
obligation of Reenergy under, require (except as disclosed on Schedule 8.6
hereto) the consent of any other party to, constitute a breach of, create a loss
of a material benefit under, or result in the creation or imposition of any
Lien, upon any property or assets of Reenergy under, any mortgage, indenture,
lease, contract, agreement, instrument or commitment to which Reenergy is a
party or by which it or he or any of its or his respective assets or properties
may be bound; (c) to the knowledge of Reenergy, violate any statute or law or
any judgment, decree, order, regulation or rule of any court or Governmental
Body to which Reenergy or the Reenergy Business is subject or by which Reenergy,
any of its assets or properties are bound; or (d) result in the loss of any
license, privilege or certificate benefiting Reenergy or the Reenergy Business.
8.7 Consents and Approvals. Except as set forth on Schedule 8.7 hereto,
no consent, approval or authorization of, or declaration, filing or registration
with, any governmental or regulatory authority or any other third party is
required to be made or obtained by Reenergy in connection with the execution,
delivery or performance of this Agreement by Reenergy.
8.8 Litigation. There are Actions to which Reenergy is a party,
including, without limitation, Actions for personal injury, products liability,
wrongful death or other tortious conduct, or breach of warranty arising from or
relating to materials, commodities, products or goods used, transferred,
processed, manufactured, sold, distributed or shipped by Reenergy (a) involving
or relating to Reenergy, or any its assets, properties or rights, or (b)
pending, or, to Reenergy's knowledge, threatened, against Reenergy or any of its
assets, properties or rights, before any court, arbitrator or administrative or
Governmental Body which, if adversely resolved, would have a material adverse
effect on the Reenergy Business.
8.9 Reenergy Financial Statements. Reenergy has previously delivered to
Accessity the unaudited balance sheet of Reenergy as of December 31, 2003 and
the related statements of income and changes in financial position or cash
flows, as appropriate, for the period then ended (the "Unaudited 2003 Reenergy
Financial Statements"), together with an unaudited balance sheet of Reenergy as
of March 31, 2004 and the related statements of income and changes in financial
position or cash flows, as appropriate, for the period then ended and,
subsequent to the date hereof, Reenergy will deliver to Accessity the audited
balance sheet of Reenergy as of December 31, 2003 and the related statements of
income and changes in financial position or cash flows, as appropriate, for the
period then ended (the "Audited 2003 Reenergy Financial Statements") (all such
financial statements, excluding, upon delivery to Accessity of the Audited 2003
Reenergy Financial Statements, the Unaudited 2003 Reenergy Financial Statements,
are hereinafter collectively referred to as the "Reenergy Financial
Statements"). The Reenergy Financial Statements, together with the notes
thereto, (i) were compiled from the books and records of Reenergy regularly
maintained by management and used to prepare the financial statements of
Reenergy, (ii) were prepared in accordance with GAAP consistently applied
throughout the period then ended and all periods prior to that period; and (iii)
present fairly and accurately the financial condition of Reenergy for the period
or as of the dates thereof, subject, where appropriate, to normal year-end audit
adjustments, in each case in accordance with GAAP consistently applied during
the period covered.
8.10 No Undisclosed Liabilities. Reenergy has, and on the Closing Date
will have, no Liabilities other than those which (a) are fully reflected
reserved against in the Reenergy Financial Statements, (b) have been incurred
since March 31, 2004 in the ordinary course of
35
business in amounts and for terms consistent, individually and in the aggregate,
with the past practice of Reenergy or (c) have been specifically disclosed in
the Schedules hereto by reference to the specific section of this Agreement to
which such disclosure relates.
8.11 Taxes and Tax Returns. All of the tax returns and reports of
Reenergy required by applicable law to be filed prior to the date hereof have
been duly filed and all taxes shown as due thereon have been paid. There are in
effect no waivers of the applicable statutes of limitations for any federal,
state, local or foreign taxes for any period. No liability for any federal,
state, local or foreign income, sales, use, withholding, payroll, franchise,
real property or personal property taxes is pending, and there is no proposed
liability for any such taxes to be imposed upon the properties or assets of
Reenergy. Reenergy does not have any liability for any federal, state, local or
foreign income, sales, use, withholding, payroll, franchise, real property or
personal property taxes, assessments, amounts, interest or penalties of any
nature whatsoever other than as shown on the March 31, 2004 Reenergy Financial
Statements and there is no basis for any additional claim or assessment other
than with respect to liabilities for taxes which may have accrued since the date
of the March 31, 2004 Reenergy Financial Statements in the ordinary course of
business and reserved against on the books and records of Reenergy compiled in
accordance with generally accepted accounting principles which have been
consistently applied to the Closing Date. The provisions for taxes reflected in
the March 31, 2004 Reenergy Financial Statements are adequate for federal,
state, county and local taxes for the period ended on December 31, 2003 and for
all prior periods, whether disputed or undisputed. There are no present disputes
about taxes of any nature payable by Reenergy. Reenergy has never filed, and
will not file on or before the Closing Date, any consent under section 341(f) of
the Code. Reenergy's tax returns have never been audited by any taxation
authority.
8.12 Absence of Certain Changes. Except as set forth on Schedule 8.12,
since December 31, 2003, Reenergy has conducted the Reenergy Business only in
the ordinary course and consistent with prior practices and has not:
(a) suffered any material adverse change in its condition (financial or
otherwise), results of operations, assets, liabilities, reserves, the Reenergy
Business, or operations;
(b) suffered any damage, destruction or loss, whether covered by
insurance or not, materially adversely affecting the Reenergy Business,
operations, assets, or condition (financial or otherwise);
(c) paid, discharged or satisfied any Liability or other expenses,
other than the payment, discharge or satisfaction of the Liabilities described
in Section 8.10 at the time the same were due and payable and in the ordinary
course of business;
(d) paid or otherwise made any contribution to any profit-sharing or
pension plan or other Employee Benefit Plan (as defined in Section 8.17 below);
(e) mortgaged or pledged, or permitted the imposition of any Lien upon,
any of its properties or assets (real, personal or mixed, tangible or
intangible), other than those incurred in the ordinary course of business or
otherwise listed on Schedule 8.12 hereto;
36
(f) cancelled or compromised any debts, or waived or permitted to lapse
any material claims or rights, or sold, assigned, transferred or otherwise
disposed of, other than in the ordinary course, any of its properties or assets
(real, personal or mixed, tangible or intangible);
(g) disposed of or permitted to lapse any rights to the use of any
patent, registered trademark, service xxxx, trade name or copyright, or disposed
of or disclosed to any person any trade secret, formula, process or know-how
material to the Reenergy Business not theretofore a matter of public knowledge;
(h) except as disclosed on Schedule 8.12, granted any increase in the
compensation of any officer, employee or consultant of Reenergy (including any
such increase pursuant to any bonus, pension, profit-sharing or other plan or
commitment) or any increase in the compensation payable or to become payable to
any officer, employee or consultant;
(i) entered into any commitment or transaction not in the ordinary
course of business or made any capital expenditure or commitment for any
additions to property, plant or equipment, except commitments, transactions or
capital expenditures which do not in any single case exceed $25,000 or in the
aggregate exceed $50,000;
(j) made any change in any method of accounting or accounting practice
(including, without limitation, any change in depreciation or amortization
policies or rates);
(k) paid, loaned or advanced any amount to,
or sold, transferred or leased any properties or assets (real, personal or
mixed, tangible or intangible) to, or entered into any agreement or arrangement
with, any of its officers, employees, members, or any family member or Affiliate
of any of its officers, employees or members, or any officer, employee or member
of any such Affiliate;
(l) declared, set aside, paid or made any distribution or payment in
respect of the limited liability company membership interests of Reenergy, or
any direct or indirect redemption, purchase or other acquisition of any of its
limited liability company membership interests;
(m) knowingly waived or released any right or claim of Reenergy;
(n) received a commencement notice or, to the knowledge of Reenergy,
received any threat of commencement, of any civil or criminal litigation,
investigation or proceeding against Reenergy;
(o) experienced any labor trouble or, to the knowledge of Reenergy,
received any claim of wrongful discharge or worker's compensation claim;
(p) agreed, whether in writing or otherwise, to take any action
referred to in and prohibited by this Section 8.12; or
(q) become aware of any other event or condition that has had or would
reasonably be expected to have a material adverse effect on the condition
(financial or otherwise), results of operations, assets, liabilities, reserves,
the Reenergy Business, the Reenergy Intellectual Property (as defined below) or
the operations of Reenergy.
37
8.13 Title to Properties; Encumbrances.
(a) Reenergy has good and marketable title to all of its properties and
assets (real, personal or mixed, tangible or intangible), including without
limitation the Reenergy Intellectual Property. None of Reenergy's properties or
assets is subject to any Lien, except Permitted Liens (including the Liens set
forth on Schedule 8.13), none of which adversely affects the Reenergy Business
or the continued operations of Reenergy.
(b) All material property and assets (real, personal or mixed, tangible
or intangible) used or required by Reenergy in the conduct of the Reenergy
Business are fully owned by Reenergy (except to the extent of any Permitted
Liens). All such property and assets, or the leases or licenses thereof,
constitute all property, assets and contractual rights necessary for the conduct
of the Reenergy Business.
8.14 Leases.
(a) Schedule 8.14 contains a true and complete list of:
(i) all leases pursuant to which Reenergy leases or subleases any real
property interests, whether as lessor, lessee, sublessor or sublessee;
(ii) all leases pursuant to which Reenergy leases any type of personal
property;
(iii) all leases pursuant to which Reenergy leases any vehicles or
related equipment; and
(iv) all leases pursuant to which Reenergy leases to others any type of
property.
(b) Each such lease described on Schedule 8.14 is the legal, valid and
binding obligation of Reenergy and, to the knowledge of Reenergy, the other
parties thereto, enforceable in accordance with their respective terms, and is
in full force and effect. Reenergy is not in default under any such lease, and
Reenergy has not received any notice from any person or entity asserting that
Reenergy is in default under any such lease, and no events or circumstances
exist which, with notice or the passage of time or both, would constitute a
default under any such lease.
8.15 Intellectual Property. Reenergy owns all right, title and interest
in, or has the right to use, sell or license all patent applications, patents,
trademark applications, trademarks, service marks, trade names, copyright
applications, copyrights, trade secrets, know-how, technology, customer lists,
proprietary processes and formulae, all source and object code, algorithms,
inventions, development tools and all documentation and media constituting,
describing or relating to the above, including, without limitation, manuals,
memoranda and records and other intellectual property and proprietary rights
used in or reasonably necessary or required for the conduct of its respective
business as presently conducted (collectively, the "Reenergy Intellectual
Property").
38
8.16 Compliance with Laws. Reenergy has not been charged with, and, to
Reenergy's knowledge, Reenergy is not threatened with or under any investigation
with respect to, any charge concerning any violation of any provision of any
federal, state, local or foreign law, regulation, ordinance, order or
administrative ruling affecting the Reenergy Business or Reenergy, and Reenergy
is not in default with respect to any order, writ, injunction or decree of any
court, agency or instrumentality affecting the Reenergy Business or Reenergy. To
Reenergy's knowledge, Reenergy is not in violation of any federal, state, local
or foreign law, ordinance or regulation or any other requirement of any
Governmental Body or regulatory body, court or arbitrator applicable to the
Reenergy Business or Reenergy which would have a material adverse effect on
Reenergy or the Reenergy Business. Without limiting the generality of the
foregoing, Reenergy is in compliance in all material respects with all
Occupational Safety and Health Laws, including those rules and regulations
promulgated by OSHA, except where such non-compliance would not have a material
adverse effect on Reenergy or the Reenergy Business.
8.17 Employee Benefit Plans.
(a) Schedule 8.17 contains a true and complete list and description of
each pension, retirement, severance, welfare, profit-sharing, stock purchase,
stock option, vacation, deferred compensation, bonus or other incentive plan, or
other employee benefit program, arrangement, agreement or understanding, or
medical, vision, dental or other health plan, or life insurance or disability
plan, retiree medical or life insurance plan or any other employee benefit
plans, including, without limitation, any "employee benefit plan" (as defined in
Section 3(3) of ERISA), to which Reenergy contributes or is a party or by which
it is bound or under which it may have liability and under which employees or
former employees of Reenergy (or their beneficiaries) are eligible to
participate or derive a benefit. Each employee benefit plan which is a "group
health plan" (as such term is defined in Section 5000(b)(i) of the Code)
satisfies the applicable requirements of Section 4980B of the Code. Except as
described on Schedule 8.17, Reenergy has no formal plan or commitment, whether
legally binding or not, to create any additional plan, practice or agreement or
modify or change any existing plan, practice or agreement that would affect any
of its employees or terminated employees. Benefits under all employee benefit
plans are as represented and have not been and will not be increased subsequent
to the date copies of such plans have been provided.
(b) Reenergy does not contribute to or have any obligation to
contribute to, has not at any time contributed to or had an obligation to
contribute to, sponsor or maintain, and has not at any time sponsored or
maintained, a "multi-employer plan" (within the meaning of Section 3(37) of
ERISA) for the benefit of employees or former employees of Reenergy.
(c) Reenergy has, in all material respects, performed all obligations,
whether arising by operation of law, contract, or past custom, required to be
performed under or in connection with the employee benefit plans disclosed on
Schedule 8.17 (individually, a "Reenergy Employee Benefit Plan" and,
collectively, the "Reenergy Employees Benefit Plans"), and Reenergy has no
knowledge of any default or violation by any other party with respect thereto.
(d) There are no Actions, suits or claims (other than routine claims
for benefits) pending, or, to Reenergy's knowledge, threatened, against any
Reenergy Employee Benefit Plan or against the assets funding any Reenergy
Employee Benefit Plan.
39
(e) Reenergy neither maintains nor contributes to any "employee
welfare benefit" (as such term is defined in Section 3(i) of ERISA) plan which
provides any benefits to retirees or former employees of Reenergy.
8.18 Employment Law Matters.
(a) Reenergy (i) is in material compliance with all applicable laws
respecting employment, employment practices, terms and conditions of employment
and wages and hours; (ii) is in material compliance with all applicable laws and
regulations relating to the employment of aliens or similar immigration matters;
and (iii) is not engaged in any unfair labor practice, including, but not
limited to, discrimination or wrongful discharge.
(b) Reenergy has not at anytime during the last three (3) years had,
nor to Reenergy's knowledge, is there now threatened, a strike, picket, work
stoppage, work slowdown or other labor trouble, against or directly affecting
Reenergy that had or would reasonably be expected to have a material adverse
effect on the Reenergy Business or Reenergy.
(c) None of the employees of Reenergy is represented by a labor union,
and no petition has been filed or proceedings instituted by any employee or
group of employees with any labor relations board seeking recognition of a
bargaining representative. Reenergy is not a party to any multi-employer
collective bargaining agreement covering any of its employees.
(d) There are no controversies or disputes (including any union
grievances or arbitration proceeding) pending, or, to Reenergy's knowledge,
threatened, between Reenergy and any employees of Reenergy (or any union or
other representative of such employees). No unfair labor practice complaints
have been filed against Reenergy with the National Labor Relations Board or any
other Governmental Body or administrative body, and Reenergy has not received
any written notice or communication reflecting an intention or a threat to file
any such complaint.
8.19 Contracts and Commitments.
(a) Together with the leases set forth on Schedule 8.14, the insurance
policies set forth on Schedule 8.23, and the Reenergy Employee Benefit Plans and
commitments set forth on Schedule 8.17, Schedule 8.19 contains a true and
complete list and description (stated without duplication), of:
(i) all contracts (including, without limitation, letters of credit,
and obligations for borrowed money) and commitments of Reenergy which are
material to the operations, business, prospects or condition (financial or
otherwise) of Reenergy;
(ii) all consulting agreements (whether written or oral), regardless of
amounts or duration;
(iii) all material contracts or commitments (whether written or oral)
with distributors, brokers, manufacturer's representatives, sales
representatives, service or warranty representatives, customers and other
persons, firms, corporations or other entities engaged in the sale,
distribution, service or repair of Reenergy's products;
40
(iv) all contracts relating to construction-in-progress of capital
assets; and
(v) all joint venture, licensing, profit sharing, royalty or similar
agreements or arrangements to which Reenergy is a party in any way associated
with the manufacture, marketing, sale or distribution of any products or
provision of any services of Reenergy.
(b) Reenergy has delivered to Accessity true and complete copies of all
of the documents identified on Schedule 8.19 (collectively, the "Reenergy
Material Contracts") and shall deliver true and complete copies of all such
other agreements, instruments and documents as Accessity may reasonably request
relating to the operation, ownership or conduct of the Reenergy Business.
(c) Reenergy is not a party to any written agreement that would
restrict it from carrying on the Reenergy Business anywhere in the world.
(d) Reenergy is not a party to any "take-or-pay" contracts.
(e) Except as identified on Schedule 8.19, Reenergy is not a party to
any employment agreements, arrangements and commitments, including severance or
termination arrangements and commitments (whether written or oral), between
Reenergy and any employees of Reenergy.
(f) Reenergy is not, and to the knowledge of Reenergy, no other party
is, in default under or in breach or violation of, nor has Reenergy received
notice of any asserted claim of default by Reenergy or by any other party under,
or a breach or violation of, any of the Reenergy Material Contracts.
8.20 No Brokers. Except as disclosed on Schedule 8.20, Reenergy is not
obligated for the payment of fees or expenses of any investment banker, broker
or finder in connection with the origin, negotiation or execution of this
Agreement in connection with any exchange of stock transaction provided for
herein.
8.21 Environmental Matters. Reenergy is in compliance in all material
respects with all Environmental Laws. There is no Action pending before any
court, Governmental Body or board or other forum or threatened by any person or
entity (i) for noncompliance by Reenergy with any Environmental Law (ii)
relating to the release into the environment by Reenergy of any pollutant, toxic
or hazardous material or waste generated by Reenergy, whether or not occurring
at or on a site owned, leased or operated by Reenergy. There has not been by
Reenergy, nor to the knowledge of Reenergy has there been at all, any past,
storage, disposal, generation, manufacture, refinement, transportation,
production or treatment of any hazardous materials or substances at, upon or
from the facilities occupied or used by Reenergy and any other real property
presently or formerly owned by, used by or leased to or by Reenergy, any
predecessor of Reenergy (collectively, the "Reenergy Property"). To the
knowledge of Reenergy, neither Reenergy nor any properties owned or operated by
Reenergy has been or is in violation or is otherwise liable under, any
Environmental Law. To the knowledge of Reenergy, there are no
asbestos-containing materials, underground storage tanks or polychlorinated
biphenyls (PCBs) located on the Reenergy Property. To the knowledge of Reenergy,
there has been no spill,
41
discharge, leak, emission, injection, disposal, escape, dumping or release of
any kind on, beneath or above the Reenergy Property or into the environment
surrounding such Reenergy Property of any hazardous materials or substances in
violation of any Environmental Law or requiring any remedial action. To the
knowledge of Reenergy, Reenergy has all permits, registrations, approvals and
licenses required by any Governmental Body under any Environmental Law to be
obtained by Reenergy in connection with the conduct of the business of Reenergy
as presently conducted. 8.22 Bank Accounts. Schedule
8.22 sets forth the names and locations of all banks, trust companies,
savings and loan associations, and other financial institutions at which
Reenergy maintains accounts of any nature and the names of all persons
authorized to draw thereon or make withdrawals therefrom.
8.23 Insurance. Schedule 8.23 sets forth
a true and complete list and description of (a) all of Reenergy's self-insurance
practices and items covered by such self-insurance and (b) all policies
of fire,
liability, worker's compensation and other forms of insurance owned or held by
Reenergy. No installment premiums are due under the policies set forth on
Schedule 8.23 or, if installment premiums shall be due and owing under such
policies prior to the Closing Date, such premiums shall have been paid
up-to-date prior to the Closing Date. All such policies are in full force and
effect, insure against risks and liabilities to the extent and in the manner
deemed appropriate and sufficient by Reenergy in its reasonable business
judgment, and Reenergy has not received any notice of cancellation with respect
thereto. To Reenergy's knowledge, Reenergy is not in default with respect to any
provision contained in any such policy and has not failed to give any notice or
present any claim under any such policy in a timely fashion.
8.24 Suppliers and Customers. Reenergy does not have any knowledge that
any supplier or customer or group of related suppliers or customers of Reenergy
has canceled or otherwise terminated or threatened to cancel or otherwise
terminate, its relationship with Reenergy, which termination would have a
material adverse effect on the Reenergy Business or Reenergy, or that any such
supplier or customer or group of related suppliers or customers expects to
reduce its business with Reenergy by reason of the transactions contemplated by
this Agreement or for any other reason whatsoever.
8.25 Licenses, Permits and Authorizations. Reenergy has all necessary
Permits for the use and ownership or leasing of its properties and assets as
currently operated, used, owned or leased, except for such Permits as to which
the lack thereof does not and would not have a material adverse effect on
Reenergy or the Reenergy Business. All of the Permits are valid, in full force
and effect and in good standing. Schedule 8.25 contains a true and complete list
and description of all the Permits. There is no claim or Action pending, or, to
Reenergy's knowledge, threatened, which disputes the validity of any such Permit
or threatens to revoke, cancel, suspend or limit any such Permit.
8.26 Accounts Receivable. All accounts receivable of Reenergy shown on
the Reenergy Financial Statements and all accounts receivable created after
March 31, 2004, subject to reserves created in the ordinary course of business
on a basis consistent with the past practices and policies of Reenergy and
otherwise in accordance with generally accepted accounting principles, (a) have
been collected or (b) to Reenergy's knowledge, are valid and enforceable, arose
from bona-fide sales to third parties in the ordinary course of business, and
are collectible at the aggregate recorded amounts thereof on the books of
Reenergy.
42
8.27 Condition of Tangible Assets. Reenergy's facilities and tangible
assets, including, without limitation, machinery, equipment, vehicles,
furniture, plants and buildings, are in good operating condition and repair
(ordinary wear and tear excepted) and are adequate for the uses to which they
have been put by Reenergy in the ordinary course of business, except for parts
or repairs of an immaterial nature in the aggregate, and Reenergy has not
received any notice that any of such facilities or assets is in need of
substantial maintenance or repair.
8.28 Disclosure. No representation or warranty of Reenergy in this
Agreement (including, without limitation, the Schedules of Reenergy hereto)
contains or will contain any untrue statement of a material fact or omits or
will omit to state any material fact necessary to make the statements herein or
therein not misleading.
ARTICLE IX
REPRESENTATIONS AND WARRANTIES OF THE REENERGY MEMBERS
------------------------------------------------------
Each of the Reenergy Members, severally and not jointly, hereby
represents and warrants to Accessity that the following representations and
warranties are true and correct on and as of the date hereof:
9.1 Power and Authority. Such Reenergy Member has full power and
authority to enter into this Agreement, perform its respective obligations
hereunder, and carry out the transactions contemplated hereby. This Agreement
constitutes the legal, valid and binding obligation of such Reenergy Member,
enforceable against such Reenergy Member in accordance with its terms.
9.2 No Violation. Neither the execution and delivery of this Agreement
nor the performance by such Reenergy Member of its respective obligations
hereunder nor the consummation of the transactions contemplated hereby will
violate, or be in conflict with, or constitute a default under, any mortgage,
indenture, lease, or any agreement, instrument or commitment to which such
Reenergy Member is a party.
9.3 Title; Consents and Approvals; No Claims. Such Reenergy Member is
the owner, beneficially and of record, of its Reenergy Interests, free and clear
of all liens, encumbrances, security agreements, options, claims, charges and
restrictions. To such Reenergy Member's knowledge, no consent, approval or
authorization of, or declaration, filing or registration with, any governmental
or regulatory authority or any other third party is required to be made or
obtained by such Reenergy Member in connection with the execution, delivery or
performance of this Agreement. To such Reenergy Member's knowledge, there is no
claim, action, litigation, suit, cause of action or other proceeding pending or
threatened before any federal, state or local court, governmental agency or
regulatory body against such Reenergy Member which seeks or may seek, directly
or indirectly, (a) to invalidate or set aside, in whole or in part, this
Agreement, (b) to restrain, prohibit, invalidate or set aside, in whole or in
part, the consummation of the transactions contemplated hereby or (c) to obtain
substantial damages in connection therewith.
9.4 Securities Law Compliance.
(a) Such Reenergy Member has a net worth sufficient to bear the
economic risk (including the entire loss) of its investment made in the
Accessity Exchange Shares;
(b) Such Reenergy Member is an "accredited investor," as such term is
defined in Rule 501 of Regulation D promulgated under the rules and regulations
of the Securities Act (except in regard to Celilo Group, a member of Kinergy
Resources, LLC, and Xxx Xxxxxxx, a Reenergy Member, each of whom shall be
provided with an Owner Disclosure Document (as defined in Section 11.7 below)
that is in compliance with paragraph (b)(2) of Rule 502 of Regulation D
promulgated under the Securities Act);
(c) Such Reenergy Member has adequate means of providing for its
current cash needs and personal contingencies and has no need for liquidity in
this investment in the Accessity Exchange Shares and has no reason to anticipate
any change in its personal circumstances, financial or otherwise, which may
cause or require any sale or distribution by such Reenergy Member or all or any
part of the Accessity Exchange Shares acquired by it herein;
(d) by reason of such Reenergy Member's business or financial
experience or the business or financial experience of such Reenergy Member's
professional advisor(s) who are unaffiliated with and who are not compensated by
Accessity or any affiliate or selling agent of Accessity, directly or
indirectly, such Reenergy Member has the capacity to protect its own interests
in connection with an investment in the Accessity Exchange Shares;
(e) Such Reenergy Member understands that he, she or it is acquiring
Accessity Exchange Shares without being furnished any prospectus or offering
circular, other than a copy of this Agreement, a copy of the Proxy Statement (as
defined in Section 11.6 below) and a copy of the Owner Disclosure Document (as
defined in Section 11.7 below);
(f) No representations or warranties have been made to such Reenergy
Member by Accessity or any employee or agent of Accessity and in entering into
this Agreement, such Reenergy Member is not relying on any information, other
than as a result of the independent investigation of Accessity by such Reenergy
Member, and no guarantee of any profit or return on its investment made in the
Shares has been made to such Reenergy Member;
(g) In evaluating the merits and risk of this investment, such Reenergy
Member has relied on the advice of its personal tax advisor, investment advisor
and/or legal counsel;
(h) Such Reenergy Member is aware that the Accessity Exchange Shares
have not been registered or qualified, nor is registration or qualification
contemplated, with the SEC under the Securities Act or any state securities law.
Accordingly, the Accessity Exchange Shares may be sold or otherwise transferred
or hypothecated only if they are subsequently registered or qualified under the
Securities Act or applicable laws or if, in the opinion of counsel, an exemption
from registration or qualification thereunder is available and the transaction
will not jeopardize the availability of the exemptions under applicable federal
and state securities laws relied upon by Accessity in connection with the
offering in which such Reenergy Member acquired its Accessity Exchange Shares;
(i) Such Reenergy Member acknowledges that the Accessity Exchange
Shares were not offered by means of any general solicitation or advertising;
44
(j) Such Reenergy Member is acquiring its Accessity Exchange Shares
solely for its own account, for investment purposes only, and not with an intent
to sell, or for resale in connection with any distribution of all or any portion
of the Accessity Exchange Shares within the meaning of the Securities Act; and
(k) The address of such Reenergy Member furnished by such Reenergy
Member at the end of this Agreement is the principal residence of such Reenergy
Member, if such Reenergy Member is an individual, or the principal business
address of such Reenergy Member, if such Reenergy Member is a business or other
entity, and that all offers to such Reenergy Member have been made only in the
state specified in such address.
ARTICLE X
REPRESENTATIONS AND WARRANTIES OF ACCESSITY
-------------------------------------------
Accessity hereby represents and warrants that, except as disclosed
herein or set forth on its Schedules attached hereto:
10.1 Due Organization, Authorization and Validity. Accessity is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation and has all necessary power, legal capacity
and authority to (i) conduct its business in the manner in which its business is
currently being conducted and to own and use its assets in the manner in which
its assets are currently owned and used and (ii) enter into and perform its
obligations under this Agreement and under all contracts, agreements and
instruments to which it is a party or by which it or its assets or properties
are subject or bound. This Agreement and the consummation of the transactions
contemplated hereby has been duly and validly approved by the Board of Directors
of Accessity. This Agreement constitutes the legal, valid and binding obligation
of Accessity, enforceable against it in accordance with its terms.
10.2 Absence of Certain Changes. Since December 31, 2003, there has not
been any change in the financial condition, properties, assets, liabilities,
business or results of operations of Accessity, which change by itself or in
conjunction with all other such changes, whether or not arising in the ordinary
course of business, has had or can reasonably be expected to have a material
adverse effect on Accessity.
10.3 No Brokers. Accessity is not obligated for the payment of fees or
expenses of any investment banker, broker or finder in connection with the
origin, negotiation or execution of this Agreement in connection with the
exchange of stock transaction provided for herein.
10.4 SEC Filings; Financial Statements.
(a) Accessity has delivered to each of the Acquired Companies accurate
and complete copies (excluding copies of exhibits) of each report, registration
statements (on a form other than Form S-8) and definitive proxy statement
required to be filed with the SEC by Accessity with the SEC between January 1,
2002 and the date of this Agreement (collectively, the "Accessity SEC
Documents"). As of the time it was filed with the SEC (or, if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing): (i) each of the Accessity SEC Documents complied in all material
respects with the applicable requirements of the Securities Act or the Exchange
Act (as the case may be); and (ii) none of the Accessity SEC Documents contained
any untrue statement of a material fact or omitted to state a
45
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. All of the Accessity SEC Documents were timely filed,
unless a filing under Rule 12b-25 of the Exchange Act was timely filed, in which
case the applicable filing was made within the time period prescribed in Rule
12b-25.
(b) The consolidated financial statements contained in the Accessity
SEC Documents: (i) complied as to form in all material respect with the then
applicable accounting requirements and with the published rules and regulations
of the SEC applicable thereto; (ii) were prepared in accordance with GAAP
throughout the periods covered, except as may be indicated in the notes to such
financial statements and (in the case of unaudited statements) as permitted by
Form 10-Q or Form 10-QSB, as applicable, and except that unaudited financial
statements may not contain footnotes and are subject to year-end audit
adjustments; and (iii) fairly present the consolidated financial position of
Accessity and its subsidiaries as of the respective dates thereof and the
consolidated results of operations of Accessity and its subsidiaries for the
period covered thereby.
10.5 Valid Issuance. The Accessity Exchange Shares to be issued in the
Share Exchange will, when issued in accordance with the provisions of this
Agreement, be validly issued, fully paid and nonassessable.
10.6 Disclosure. None of the information in the Proxy Statement (as
defined in Section 11.6 below) will contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The Proxy Statement will comply as
to form in all material respects with the provisions of the Exchange Act and the
rules and regulations promulgated by the SEC thereunder, except that no
representation or warranty is made by Accessity with respect to statements made
therein based on information supplied by any of the Acquired Companies for
inclusion in the Proxy Statement.
10.7 Compliance With Applicable Laws. The business of Accessity and the
businesses of the Accessity Subsidiaries (as defined below) are not being
conducted in violation of any law, ordinance, regulation, rule or order of any
Governmental Body where such violation would have a material adverse effect.
Accessity has not been notified by any Governmental Body that any investigation
or review with respect to Accessity or any of the Accessity Subsidiaries is
pending or threatened, nor has any Governmental Body notified Accessity of its
intention to conduct the same. Accessity and the Accessity Subsidiaries Exchange
Shares to be issued in the Share Exchange will, when issued in accordance with
the provisions of this Agreement, be validly issued, fully paid and
nonassessable.
10.8 No Conflict. Neither the execution, delivery and performance of
this Agreement nor the consummation of the transactions contemplated hereby or
thereby nor compliance with the provisions hereof or thereof will: (i) conflict
with, or result in any violations of, or cause a default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
amendment, cancellation or acceleration of any obligation contained in, or the
loss of any material benefit under, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the material properties or
assets of Accessity or any of the Accessity Subsidiaries under, any term,
condition or provision of (x) the articles of incorporation or bylaws of
Accessity or any of the Accessity Subsidiaries or (y) any loan or credit
agreement, note, bond,
46
mortgage, indenture, lease or other material agreement, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Accessity or any of
the Accessity Subsidiaries or their respective properties or assets, other than
any such conflicts, violations, defaults, losses, liens, security interests,
charges, or encumbrances which, individually or in the aggregate, would not have
a material adverse effect on Accessity or the business of Accessity; or (ii)
require the affirmative vote of the holders of greater than a majority of the
issued and outstanding shares of the common stock of Accessity.
10.9 Governmental Consents. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Body, is required to be obtained by Accessity in connection with the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for: (i) the filing with the SEC of (x) the Proxy
Statement relating to the Accessity Shareholders' Meeting (as defined in Section
11.6 below), and (y) such reports and information under the Exchange Act and the
rules and regulations promulgated by the SEC thereunder, as may be required in
connection with this Agreement and the transactions contemplated hereby; (ii)
such filings, authorizations, orders and approvals as may be required under
state "control share acquisition," "anti-takeover" or other similar statutes and
regulations (collectively, "State Takeover Laws"); (iii) such filings,
authorizations, order and approvals as may be required under foreign laws, state
securities laws and the Bylaws of the National Association of Securities
Dealers, Inc. ("NASD"); (iv) such filings and notifications (if any) as may be
necessary under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvement Act of 1976, as
amended ("HSR Act"); and (v) where the failure to obtain such consents,
approvals, etc., would not prevent or delay the consummation of the Share
Exchange or otherwise prevent Accessity from performing its obligations under
this Agreement and would not reasonably be expected to have a material adverse
effect on Accessity or the business of Accessity.
ARTICLE XI
CERTAIN OBLIGATIONS OF THE PARTIES PRIOR TO CLOSING
---------------------------------------------------
Accessity and the Acquired Companies hereby covenant as follows:
11.1 Access to Accessity Prior to Closing. Accessity shall afford the
Acquired Companies and their respective counsel, accountants, investment
bankers, investors and other authorized agents and representatives (their
"Advisors") reasonable access during normal business hours to Accessity's
properties, books, records and personnel in order that the Acquired Companies
and their respective Advisors may have the opportunity to make such reasonable
investigations as they shall desire to make of the affairs of Accessity.
Accessity shall furnish, or shall cause its accountants to furnish, such
additional financial and operating data and other information as any of the
Acquired Companies or any of their Advisors shall from time to time reasonably
request, including, without limitation, all financial and operating data as
shall be necessary for verification of the accuracy of the financial statements
of Accessity. Accessity shall, upon the reasonable request of any of the
Acquired Companies, assist the Acquired Companies and their respective Advisors
in contacting and communicating with suppliers, customers, employees and
Advisors of Accessity.
11.2 Access to Acquired Companies Prior to Closing. Each Acquired
Company shall afford Accessity and the other Acquired Companies and their
respective Advisors reasonable access during normal business hours to such
Acquired Company's properties, books, records and personnel in order that
Accessity and the other Acquired Companies and their
47
respective Advisors may have the opportunity to make such reasonable
investigations as they shall desire to make of the affairs of such Acquired
Company. Each Acquired Company shall furnish, or shall cause its accountants to
furnish, such additional financial and operating data and other information as
Accessity or any of the other Acquired Companies or any of their respective
Advisors shall from time to time reasonably request, including, without
limitation, all financial and operating data as shall be necessary for
verification of the accuracy of the financial statements of such Acquired
Company. Such Acquired Company shall, upon the reasonable request of Accessity
or any of the other Acquired Companies, assist Accessity and the Acquired
Companies and their respective Advisors in contacting and communicating with
suppliers, customers, employees and Advisors of such Acquired Company.
11.3 Confidentiality Prior to Closing. Except as required by law or any
securities exchange, and subject to Section 17.1 below, each party hereto shall,
and shall cause its officers and Advisors to, hold in strict confidence, and not
disclose to others (except its Advisors) for any reason whatsoever, without the
prior written consent of the other party, any nonpublic information received by
it from the other party in connection with the transactions contemplated hereby
and will not use such information for any purpose in the event that no Closing
occurs under this Agreement. No party hereto shall communicate, directly or
indirectly, to any third party other than their respective employees, agents and
Advisors any of the terms, conditions and other aspects of this Agreement and
the negotiation and preparation hereof until the Closing has occurred or the
negotiations between the parties has terminated.
11.4 Conduct Prior to Closing Date. Except as otherwise contemplated by
this Agreement, prior to the Closing Date:
(a) PEI shall:
(i) conduct the PEI Business and operations of PEI only in the ordinary
course, including, without limitation, maintaining inventories at levels not in
excess of those consistent with past practices;
(ii) maintain the properties and assets of PEI in good condition and
repair and not dispose of any of its assets except in the ordinary course of
business consistent with past practices, perform its obligations under all
agreements to which it is a party or by which it or any of its assets or
properties are bound and maintain all of its Permits in good standing;
(iii) continue in effect the policies of insurance (or similar
coverage) referred to in Section 4.23;
(iv) not borrow any money except for amounts that are not in the
aggregate material to the financial condition of PEI;
(v) use its commercially reasonable efforts to keep available the
services of the present employees of PEI;
(vi) not declare, set aside or pay any cash or stock dividend or other
distribution in respect of capital stock, or redeem or otherwise acquire any of
its capital stock;
48
(vii) maintain and preserve the goodwill of the suppliers, customers
and others having business relations with PEI;
(viii) not lend any amount to any person or entity, other than advances
for travel and expenses which are incurred in the ordinary course of business
consistent with past practices, not material in amount and documented by
receipts for the claim amounts;
(ix) not guarantee or act as a surety for any obligation except for
obligations in amounts that are not material; (x) not waive or release any right
or claim except for the waiver or release of non-material claims in the ordinary
course of business consistent with past practices;
(xi) not issue or sell any shares of its capital stock of any class
(except upon the exercise of a bona fide option, warrant or other right to
acquire such capital stock currently outstanding or conversion of any currently
outstanding securities which are by their terms convertible in shares of its
capital stock), or any other of its securities, or issue or create any warrants,
obligations, subscriptions, options, convertible securities or other commitments
to issue shares of capital stock, or accelerate the vesting of any outstanding
option or other security;
(xii) not split or combine the outstanding shares of its capital stock
of any class or enter into any recapitalization or agreement affecting the
number or rights of outstanding shares of its capital stock of any class or
affecting any other of its securities;
(xiii) not form, merge, consolidate or reorganize with, or acquire, any
entity; or
(xiv) not amend its articles of incorporation or bylaws.
(b) Kinergy shall:
(i) conduct the Kinergy Business and operations of Kinergy only in the
ordinary course, including, without limitation, maintaining inventories at
levels not in excess of those consistent with past practices;
(ii) maintain the properties and assets of Kinergy in good condition
and repair and not dispose of any of its assets except in the ordinary course of
business consistent with past practices, perform its obligations under all
agreements to which it is a party or by which it or any of its assets or
properties are bound and maintain all of its Permits in good standing;
(iii) continue in effect the policies of insurance (or similar
coverage) referred to in Section 6.23;
(iv) not borrow any money except for amounts that are not in the
aggregate material to the financial condition of Kinergy;
(v) use its commercially reasonable efforts to keep available the
services of the present employees of Kinergy;
49
(vi) not declare, set aside or pay any cash or dividend or other
distribution in respect of its limited liability company membership interests,
or redeem or otherwise acquire any of its limited liability company membership
interests; provided, however, that effective the close of business on the day
preceding the Closing Date, the Managers or Managing Members of Kinergy shall
distribute to the Members of Kinergy in the form of cash, a promissory note or a
combination of cash and a promissory note, the dollar amount of Kinergy's net
worth as set forth on Kinergy's balance sheet dated as of such date, which
balance sheet shall have been prepared in accordance with GAAP;
(vii) maintain and preserve the goodwill of the suppliers, customers
and others having business relations with Kinergy;
(viii) not lend any amount to any person or entity, other than advances
for travel and expenses which are incurred in the ordinary course of business
consistent with past practices, not material in amount and documented by
receipts for the claim amounts;
(ix) not guarantee or act as a surety for any obligation except for
obligations in amounts that are not material;
(x) not waive or release any right or claim except for the waiver or
release of non-material claims in the ordinary course of business consistent
with past practices;
(xi) not issue or sell any limited liability company membership
interests, or any other of its securities, or issue or create any warrants,
obligations, subscriptions, options, convertible securities or other commitments
to issue limited liability company membership interests, or accelerate the
vesting of any outstanding option or other security;
(xii) not enter into any recapitalization or agreement affecting the
number or rights of outstanding limited liability company membership interests
or affecting any other of its securities;
(xiii) not form, merge, consolidate or reorganize with, or acquire, any
entity; or
(xiv) not amend its articles of organization or operating agreement.
(c) Reenergy shall:
(i) conduct the Reenergy Business and operations of Reenergy only in
the ordinary course, including, without limitation, maintaining inventories at
levels not in excess of those consistent with past practices;
(ii) maintain the properties and assets of Reenergy in good condition
and repair and not dispose of any of its assets except in the ordinary course of
business consistent with past practices, perform its obligations under all
agreements to which it is a party or by which it or any of its assets or
properties are bound and maintain all of its Permits in good standing;
50
(iii) continue in effect the policies of insurance (or similar
coverage) referred to in Section 8.23;
(iv) not borrow any money except for amounts that are not in the
aggregate material to the financial condition of Reenergy;
(v) use its commercially reasonable efforts to keep available the
services of the present employees of Reenergy;
(vi) not declare, set aside or pay any cash or dividend or other
distribution in respect of its limited liability company membership interests,
or redeem or otherwise acquire any of its limited liability company membership
interests; provided, however, that effective the close of business on the day
preceding the Closing Date, the Managers or Managing Members of Reenergy shall
distribute to the Members of Reenergy in the form of cash, a promissory note or
a combination of cash and a promissory note, the dollar amount of Reenergy's net
worth as set forth on Reenergy's balance sheet dated as of such date, which
balance sheet shall have been prepared in accordance with GAAP;
(vii) maintain and preserve the goodwill of the suppliers, customers
and others having business relations with Reenergy;
(viii) not lend any amount to any person or entity, other than advances
for travel and expenses which are incurred in the ordinary course of business
consistent with past practices, not material in amount and documented by
receipts for the claim amounts;
(ix) not guarantee or act as a surety for any obligation except for
obligations in amounts that are not material; (x) not waive or release any right
or claim except for the waiver or release of non-material claims in the ordinary
course of business consistent with past practices;
(xi) not issue or sell any limited liability company membership
interests, or any other of its securities, or issue or create any warrants,
obligations, subscriptions, options, convertible securities or other commitments
to issue limited liability company membership interests, or accelerate the
vesting of any outstanding option or other security; (xii) not enter into any
recapitalization or agreement affecting the number or rights of outstanding
limited liability company membership interests or affecting any other of its
securities;
(xiii) not form, merge, consolidate or reorganize with, or acquire, any
entity; or
(xiv) not amend its articles of organization or operating agreement.
(d) Accessity shall:
(i) conduct the business and operations of Accessity only in the
ordinary course, including, without limitation, maintaining inventories at
levels not in excess of those consistent with past practices;
51
(ii) maintain the properties and assets of Accessity in good condition
and repair and not dispose of any of its assets except in the ordinary course of
business consistent with past practices, perform its obligations under all
agreements to which it is a party or by which it or any of its assets or
properties are bound and maintain all of its Permits in good standing;
(iii) not change any insurance coverage;
(iv) not borrow any money except for amounts that are not in the
aggregate material to the financial condition of Accessity;
(v) use its commercially reasonable efforts to keep available the
services of the present employees of Accessity, except as otherwise provided for
herein;
(vi) not declare, set aside or pay any cash or stock dividend or other
distribution in respect of capital stock, or redeem or otherwise acquire any of
its capital stock;
(vii) maintain and preserve the goodwill of the suppliers, customers
and others having business relations with Accessity;
(viii) not lend any amount to any person or entity, other than advances
for travel and expenses which are incurred in the ordinary course of business
consistent with past practices, not material in amount and documented by
receipts for the claim amounts;
(ix) not guarantee or act as a surety for any obligation except for
obligations in amounts that are not material;
(x) not waive or release any right or claim except for the waiver or
release of non-material claims in the ordinary course of business consistent
with past practices;
(xi) not issue or sell any shares of its capital stock of any class
(except upon the exercise of a bona fide option, warrant or other right to
acquire such capital stock currently outstanding or conversion of any currently
outstanding securities which are by their terms convertible in shares of its
capital stock), or any other of its securities, or issue or create any warrants,
obligations, subscriptions, options, convertible securities or other commitments
to issue shares of capital stock, or accelerate the vesting of any outstanding
option or other security;
(xii) not split or combine the outstanding shares of its capital stock
of any class or enter into any recapitalization or agreement affecting the
number or rights of outstanding shares of its capital stock of any class or
affecting any other of its securities;
(xiii) not form, merge, consolidate or reorganize with, or acquire, any
entity (other than in connection with the reincorporation of Accessity in
Delaware); or
(xiv) not amend its articles of incorporation or bylaws (except as may
be necessary in connection with the reincorporation of Accessity in Delaware).
11.5 Accessity Special Shareholders' Meeting. Accessity shall, in
accordance with its articles of incorporation and bylaws and the applicable
requirements of New York law, call and hold a special meeting of its
shareholders as promptly as practicable for the purpose of
52
permitting them to consider and to vote upon and approve the Share Exchange and
the transactions contemplated by this Agreement, the reincorporation of
Accessity in the State of Delaware referred to in Section 13.6 below, the sale
or other disposition of the Accessity Subsidiaries (as defined below) to Xxxxx
Xxxxxx referred to in Section 13.11 below, the adoption of an Amended and
Restated 1995 Incentive Stock Plan of Accessity, in form and substance
reasonably acceptable to the Acquired Companies, and the adoption of a new stock
option plan referred to in Section 13.16 below, in form and substance reasonably
acceptable to the Acquired Companies) (the "Accessity Special Shareholders'
Meeting"). As soon as permissible under all applicable Legal Requirements,
Accessity shall cause a copy of the Proxy Statement (as defined in Section 11.6
below) to be delivered to each shareholder of Accessity who is entitled to vote
on such matter under its articles of incorporation and bylaws and the applicable
requirements of New York law.
11.6 Proxy Statement. Following delivery to Accessity of the audited
balance sheets as of December 31, 2003 and the related statements of income and
changes in financial position or cash flows, as appropriate, for the period then
ended for each of the Acquired Companies and subject to the reasonable
satisfaction of Accessity with same and with the results of its due diligence
investigation of the Acquired Companies as of such time, promptly thereafter,
Accessity shall prepare and cause to be filed with the SEC a Proxy Statement
with respect to the Accessity Special Shareholders' Meeting (the "Proxy
Statement") and any other documents required by the Securities Act, the Exchange
Act or any other federal, foreign or state Blue Sky or related laws in
connection with the Share Exchange and the transactions contemplated by this
Agreement (collectively, "Other Filings"). Accessity will notify each of the
Acquired Companies of any comments from the SEC or its staff or any other
Governmental Body and of any request by the SEC or its staff or any other
Governmental Body for amendments to the Proxy Statement or any Other Filings or
for additional information and will supply each of the Acquired Companies with
copies of all correspondence between Accessity and any of its Advisors or
representatives, on the one hand, and the SEC or its staff or any other
Governmental Body, on the other hand, with respect to the Proxy Statement, any
Other Filings or the Share Exchange. Accessity shall use all commercially
reasonable efforts to cause the Proxy Statement and any Other Filings to comply
with the rules and regulations promulgated by the SEC and to respond promptly to
any comments of the SEC or its staff or any other Governmental Body. Accessity
will use all reasonable efforts to cause the Proxy Statement to be mailed to
Accessity's shareholders, as promptly as practicable after the Proxy Statement
is permitted to be mailed under the rules and regulations promulgated by the
SEC. Each of the Acquired Companies shall promptly furnish to Accessity all
information concerning such Acquired Company and such Acquired Company's
shareholders that may be required or reasonably requested in connection with any
action contemplated by this Section 11.6.
11.7 Nonpublic Offering; Preparation of Disclosure Document. Prior to
the Closing Date, Accessity shall use all commercially reasonable efforts to
obtain or comply with all regulatory approvals and provisions of any and all
applicable Governmental Bodies to ensure that the Accessity Exchange Shares to
be issued in the Share Exchange will be exempted from registration or
qualification under the securities law of every jurisdiction of the United
States in which any Owner has an address of record as set forth on the signature
pages hereto; provided, that Accessity shall not be required (i) to qualify to
do business as a foreign corporation in any jurisdiction in which it is not now
qualified or (ii) file a general consent to service of process in any
jurisdiction in which it has not already filed a general consent to service of
process. As soon
53
as practicable after the execution of this Agreement, Accessity shall have
prepared a document containing certain disclosures, risk factors and disclaimers
in regard to Accessity, PEI, Kinergy and Reenergy and the Share Exchange for
distribution to the Owners and the PEI Warrantholders prior to the Closing,
subject to the review, comment and approval of each of PEI, Kinergy and Reenergy
prior to such distribution (the "Owner Disclosure Document").
11.8 Cooperation. Each party shall use its best efforts to cause the
transactions contemplated by this Agreement to be consummated, and without
limiting the generality of the foregoing, to obtain all consents and
authorizations of any Governmental Body and third parties listed on Schedules
4.7, 6.7, and 8.7, and to make all filings with and give all notices to
government agencies and third parties which may be necessary or reasonably
required in order to consummate the transactions contemplated by this Agreement.
Each party shall give prompt notice to Accessity and the Acquired Companies,
after receipt thereof by such party, of (i) any notice of, or other
communication relating to, any default or event which, with notice or the lapse
of time or both, would be reasonably likely to become a default under any
indenture, instrument or agreement material to any of the Acquired Companies or
Accessity or the operations, condition (financial or otherwise) of any of the
Acquired Companies or Accessity, or to which any of the Acquired Companies or
Accessity is a party or by which any of the Acquired Companies or Accessity or
their respective assets or properties are bound and (ii) any notice or other
communication from or to any third party alleging or stating that the consent of
such third party is or may be required in connection with the transactions
contemplated by this Agreement.
11.9 No Negotiations, etc. Prior to the Closing Date, neither Accessity
nor any of the Acquired Companies or the Owners shall, directly or indirectly,
in any way contact, initiate, enter into or conduct any discussions or
negotiations, or enter into any agreements, whether written or oral, with any
Person with respect to the sale of all or any part of the assets of any of the
Acquired Companies or Accessity or a merger or consolidation of any of the
Acquired Companies or Accessity with any other person (other than in connection
with the reincorporation of Accessity in Delaware), except, by the Board of
Directors of Accessity or PEI or the managers of any of the Acquired Companies
to the extent otherwise required in the exercise of its fiduciary duties to its
shareholders or members, as the case may be, if it shall have received a
Superior Proposal after the date hereof from a third party or parties. As used
in this Agreement, the defined term "Superior Proposal" shall mean a bona fide
unsolicited written proposal made by a third party which is (a)(i) for a sale,
exchange, transfer or other disposition of more than 50% of the assets of the
company, taken as a whole, in a single transaction or a series of related
transactions, or (ii) for the acquisition, directly or indirectly, by such third
party of beneficial ownership of more than 50% of the stock or limited liability
company membership interests of the company, as the case may be, whether by
merger, reorganization, consolidation, share exchange or purchase, business
combination, recapitalization, liquidation, dissolution or similar transaction,
and which and is (b) otherwise on terms which the Board of Directors or managers
of the company, as the case may be, in good faith has concluded (after
consultation with its financial advisors and legal counsel), taking into
account, among other things, all legal, financial, regulatory and other aspects
of the proposal and the third party making the proposal (x) that the proposal
would, if consummated, result in a transaction that is more favorable to its
shareholders (in their capacity as shareholders) or members (in their capacity
as members), as the case may be, from a financial point of view, than the
transactions contemplated by this Agreement and (y) that the proposal is
reasonably capable of being consummated.
54
11.10 Delivery of Disclosure Schedules. The respective disclosure
schedules relating to the representations and warranties of Accessity and each
of the Acquired Companies in this Agreement shall be delivered as soon as
practicable after such execution and, in any event, a reasonable time prior to
the Closing.
11.11 Distribution to Owners and PEI Warrantholders. As soon as
practicable after delivery of the respective disclosures schedules relating to
the representations and warranties of the Acquired Companies in this Agreement
and completion of the Owner Disclosure Document and the Proxy Statement, each of
the Acquired Companies shall distribute to its respective Owners (and PEI will
also distribute to the PEI Warrantholders) for execution a copy of this
Agreement, together with a copy of such disclosure schedules, a copy of the
Owner Disclosure Document and a copy of the Proxy Statement.
ARTICLE XII
CONDITIONS TO ACCESSITY'S OBLIGATIONS
-------------------------------------
Each and every obligation of Accessity under this Agreement to be
performed on or before the Closing Date shall be subject to the satisfaction, on
or before the Closing Date, of each of the following conditions:
12.1 Representations and Warranties True. The representations and
warranties of each of the Acquired Companies and the Owners contained herein, in
the Schedules and Exhibits hereto and in all certificates and other documents
delivered by each of the Acquired Companies and the Owners to Accessity pursuant
hereto or in connection with the transactions contemplated hereby shall be true
and accurate as of the date of this Agreement and as of the Closing Date with
the same effect as if made on and as of the Closing Date.
12.2 Performance. Each of the Acquired Companies shall have performed
and complied in all material respects with all agreements, obligations and
conditions required by this Agreement to be performed or complied with by it on
or prior to the Closing Date, including, without limitation, those referred to
in Article XI above.
12.3 Permits. The Acquired Companies shall have obtained all such
Permits (other than nondiscretionary Permits issued upon completion of
construction of the proposed ethanol plant) from federal, state and local
Governmental Bodies as are required by applicable law for the Acquired Companies
to conduct each of the PEI Business, the Kinergy Business and the Reenergy
Business (including, without limitation, the commencement of construction of a
plant to produce up to 40 million gallons of ethanol per year), unless the
failure to obtain any such Permit would not have an adverse effect on the
assets, properties, business, condition (financial or otherwise) or prospects of
Accessity or any of the Acquired Companies or the transactions contemplated
hereby.
12.4 Governmental Consents. There shall have been obtained on or before
the Closing such material permits or authorizations, and there shall have been
taken such other action, as may be required to consummate the Share Exchange and
the other transactions contemplated hereby by any Governmental Body having
jurisdiction over the parties and the actions herein proposed to be taken,
including but not limited to requirements under applicable federal and state
securities laws and the compliance with, and expiration of any applicable
waiting period for, the HSR Act.
55
12.5 Documents and Actions. Each of Acquired Companies shall have
executed and delivered to Accessity this Agreement and the other agreements,
documents and instruments and shall have taken the actions contemplated by
Section 3.3 hereof.
12.6 Third Party Approvals and Consents. Each Acquired Company shall
have received any and all consents, approvals, notices, filings or recordations
of third parties required with respect to the execution and delivery of this
Agreement or the transactions contemplated hereby or by any of the agreements,
documents or instruments referred to herein.
12.7 No Legal Action. No temporary restraining order, preliminary
injunction or permanent injunction or other order preventing the consummation of
the Share Exchange or any of the transactions contemplated hereby shall have
been issued by any Federal or state court and remain in effect, nor shall any
proceeding initiated by any Governmental Body seeking any of the foregoing be
pending. 12.8 No Material Adverse Change. There shall have been no material
adverse change in the business, financial condition, operations or financial
performance of any of the Acquired Companies since the date of this Agreement.
12.9 Consulting Agreements. Accessity shall have entered into a
consulting agreement with Xxxxx Xxxxxx for advisory services, in form and
substance mutually acceptable to the Acquired Companies, Accessity and Xxxxx
Xxxxxx and Accessity shall have entered into a consulting agreement with Xxxxxx
Kart for advisory services, in form and substance mutually acceptable to the
Acquired Companies, Accessity and Xxxxxx Kart.
12.10 Proxy Statement. The Proxy Statement shall on the Closing Date
not be subject to any proceedings commenced or threatened by the SEC.
12.11 Audited Financial Statements. Each of the Acquired Companies
shall have delivered to Accessity the audited balance sheet of such Acquired
Company as of December 31, 2003 and the related statements of income and changes
in financial position or cash flows, as appropriate, for the period then ended.
12.12 Execution of Agreement by PEI Shareholders, PEI Warrantholders,
Kinergy Members and Reenergy Members. All or substantially all (representing at
least 95% of the issued and outstanding shares of PEI Stock as of the Closing)
of the PEI Shareholders, all of the PEI Warrantholders, all of Kinergy Members
and all of the Reenergy Members shall have executed and delivered to PEI,
Kinergy or Reenergy, respectively, a copy of this Agreement and, in any event, a
sufficient number of PEI Shareholders shall have executed a copy of this
Agreement such that, after giving effect to the Share Exchange, the PEI
Shareholders, the Kinergy Members and the Reenergy Members shall beneficially
own in the aggregate at least 80% of the issued and outstanding common stock of
Accessity.
12.13 Approval by Accessity Shareholders. The shareholders of Accessity
shall have approved the execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby (including, without
limitation, the reincorporation of Accessity in the State of Delaware referred
to in Section 13.6 below, the sale or other disposition of the Accessity
Subsidiaries (as defined below) to Xxxxx Xxxxxx referred to in Section 13.13
below, the adoption of an Amended and Restated 1995 Incentive Stock Plan of
Accessity, in
56
form and substance reasonably acceptable to the Acquired Companies, and the
adoption of a new stock option plan referred to in Section 13.16 below, in form
and substance reasonably acceptable to the Acquired Companies)).
12.14 Limitation of Outstanding Capital Stock. As of the Closing Date,
giving effect to the transactions contemplated hereby, Accessity shall not be
obligated to issue to the PEI Shareholders, the Kinergy Members and the Reenergy
Members or any other Person(s), more than 18,800,000 Accessity Exchange Shares
in connection with the Share Exchange and the consummation of the transactions
contemplated hereby on a fully-diluted basis (including shares of capital stock
issuable upon exercise of any and all options, calls, warrants, claims,
convertible debt and any other rights to acquire shares of capital stock of any
of the Acquired Companies, whether accrued or contingent (including shares
issuable upon exercise of the Accessity Replacement Warrants).
12.15 Completion of Due Diligence; Disclosure Schedules. Accessity
shall have completed its financial and legal due diligence investigation of each
of the Acquired Companies with results thereof satisfactory to Accessity in its
sole discretion (including, without limitation, satisfaction with matters
related to Security Markets (as defined in Section 14.4 below) and litigation
and any and all disclosures contained in the respective disclosure schedules).
In this regard, each of Accessity and the Acquired Companies acknowledge and
agree that the respective disclosure schedules relating to the representations
and warranties of Accessity and the Acquired Companies in this Agreement are not
required to be delivered as of the time of execution of this Agreement by
Accessity and the Acquired Companies, but are required to be delivered as soon
as practicable after such execution and, in any event, a reasonable time prior
to the Closing, to permit the parties to review, evaluate and approve the
disclosures made therein as a part of their due diligence investigation.
Notwithstanding the absence of such disclosure schedules as of the time of
execution of this Agreement, each of Accessity and the Acquired Companies
acknowledge and agree the representations and warranties made herein by
Accessity and the Acquired Companies shall not be deemed false or misleading or
deemed to contain untrue statements of material fact or to have omitted to state
material facts solely because of the absence of such disclosure schedules as of
the time of execution of this Agreement.
12.16 Fairness Opinion. Accessity shall have received a fairness
opinion regarding the sale or otherwise disposition of its two subsidiaries,
DriverShield CRM Corp., a Delaware corporation, and Sentaur Corp., a Florida
corporation (collectively, the "Accessity Subsidiaries"), in consideration of
the waiver by Xxxxx Xxxxxx of the change in control provisions set forth in the
employment agreement between Accessity and Xxxxx Xxxxxx that expires on December
31, 2004.
ARTICLE XIII
CONDITIONS TO THE ACQUIRED COMPANIES', PEI WARRANTHOLDERS' AND
--------------------------------------------------------------
OWNERS' OBLIGATIONS
-------------------
Each and every obligation of the Acquired Companies, each of the PEI
Warrantholders and each of the Owners under this Agreement to be performed on or
before the Closing Date shall be subject to the satisfaction, on or before the
Closing Date, of each of the following conditions:
57
13.1 Representations and Warranties True. The representations and
warranties of Accessity contained herein and in all certificates and other
documents delivered by Accessity to each of the Acquired Companies or the Owners
pursuant hereto or in connection with the transactions contemplated hereby shall
be true and accurate on and as of the Closing Date with the same effect as if
made on and as of the Closing Date.
13.2 Performance. Accessity shall have performed and complied with all
agreements, obligations and conditions required by this Agreement to be
performed or complied with by it on or prior to the Closing Date, including,
without limitation, those referred to in Article XI above.
13.3 Documents and Actions. Accessity shall have executed and delivered
to the each of the Acquired Companies and each of the Owners the agreements,
documents and instruments and shall have taken the actions contemplated by
Section 3.2.
13.4 Approval by Accessity Shareholders. The shareholders of Accessity
shall have approved the execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby (including, without
limitation, the reincorporation of Accessity in the State of Delaware referred
to in Section 13.6 below, the sale or other disposition of the Accessity
Subsidiaries (as defined below) to Xxxxx Xxxxxx referred to in Section 13.11
below, the adoption of an Amended and Restated 1995 Incentive Stock Plan of
Accessity, in form and substance reasonably acceptable to the Acquired
Companies, and the adoption of a new stock option plan referred to in Section
13.16 below, in form and substance reasonably acceptable to the Acquired
Companies)).
13.5 Resignations of Officers and Directors. At Closing, all of the
directors of Accessity and the officers of Accessity identified in subsection
(f) of Section 3.2 shall have resigned in writing from their positions as
officers and employees of Accessity, effective upon the appointment of the
individuals identified in subsection (d) of Section 3.2 above to the Board of
Directors of Accessity.
13.6 Reincorporation in Delaware; Authorized Capital. Accessity shall
have reincorporated, changed its name to Pacific Ethanol, Inc. and become duly
organized, validly existing and in good standing under the laws of the State of
Delaware in compliance with all applicable federal, state and applicable laws,
rules and regulations and shall have sufficient shares of its capital stock
authorized for issuance in order to complete the Share Exchange and the
transactions contemplated hereby.
13.7 Valid Issuance of Accessity Exchange Shares. The shares of
restricted Accessity common stock to be issued to the PEI Shareholders, the
Kinergy Members and the Reenergy Members at Closing will be validly issued,
fully paid and nonassessable under applicable law and will have been duly issued
in a non-public offering in compliance with all applicable federal and state
securities laws.
13.8 Third Party Approvals and Consents. Each Acquired Company shall
have received any and all consents, approvals, notices, filings or recordations
of third parties required with respect to the execution and delivery of this
Agreement or the transactions contemplated hereby or by any of the agreements,
documents or instruments referred to herein.
58
13.9 Cash Balance. As of the Closing Date, Accessity shall have at
least the same Cash Balance as reported in its Quarterly Report on Form 10-QSB
for the quarter ended March 31, 2004 filed with the SEC (approximately
$4,360,000), subject to adjustment as set forth on Schedule 13.9 hereto, and
Accessity shall have delivered to the Acquired Companies a certificate of the
president or chief executive officer of Accessity certifying to the foregoing.
As used herein, the defined term "Cash Balance" shall mean the sum of (i) the
amount of cash in Accessity's operating and disbursement bank accounts at
JPMorgan-Chase Bank, (ii) the amount of Accessity funds invested in highly
liquid investments in fixed income mutual funds at Solomon Xxxxx Xxxxxx (with
available liquidity on a next-day basis) and (iii) a $300,000 restricted
certificate of deposit with Bank Atlantic in Coral Springs, Florida established
in connection with the lease agreement referred to in Section 13.11 below (which
is to be released in $100,000 increments in the 36th, 48th and 60th months of
such lease agreement), excluding any cash received from the exercise of any
outstanding options or warrants.
13.10 Limitation of Outstanding Capital Stock. As of the Closing Date,
without giving effect to the transactions contemplated hereby, Accessity shall
have no more than 2,638,081 of capital stock issued and outstanding on a
fully-diluted basis (including shares of capital stock issuable upon exercise of
any and all options, calls, warrants, claims and any other rights to acquire
shares of capital stock of Accessity, whether accrued or contingent, other than
an aggregate of 600,000 shares of common stock of Accessity to be issued and
beneficially owned by Xxxxx Xxxxxx and Xxxxxx Kart and up to 100,000 shares of
common stock of Accessity issuable upon conversion of the issued and outstanding
shares of Series A Convertible Preferred Stock of Accessity).
13.11 Disposition of Accessity Subsidiaries and Waiver of Change of
Control Provisions by Xxxxx Xxxxxx. Prior to Closing, Accessity shall have sold
or otherwise disposed of its two subsidiaries, DriverShield CRM Corp., a
Delaware corporation, and Sentaur Corp., a Florida corporation (collectively,
the "Accessity Subsidiaries"), pursuant to a written agreement between Accessity
and Xxxxx Xxxxxx, in form and substance reasonably satisfactory to PEI, Kinergy
and Reenergy, in consideration of the waiver by Xxxxx Xxxxxx of the change in
control provisions set forth in the employment agreement between Accessity and
Xxxxx Xxxxxx that expires on December 31, 2004, as the same would be applicable
to the consummation of the transactions contemplated by this Agreement
(including, but not limited to, the provisions that require Accessity to pay to
Xxxxx Xxxxxx (i) a severance payment of 300% of his average annual salary for
the past five years, less $100; (ii) the cash value of his outstanding but
unexercised stock options; and (iii) for any and all other perquisites in the
event that he is terminated for various reasons specified in such agreement
following a change of control (as defined in such agreement). Without in any way
limiting the foregoing, as part of the disposition of the Accessity Subsidiaries
to Xxxxx Xxxxxx, the facilities of Accessity located in Coral Springs, Florida
shall have been duly subleased to Xxxxx Xxxxxx or an entity owned or controlled
by Xxxxx Xxxxxx (which may be Sentaur Corp.) with the consent of the lessor
under the existing lease agreement for such facilities, on terms and conditions
reasonably satisfactory to the Acquired Companies. The parties acknowledge and
agree that the personal property at the facilities of Accessity located in Coral
Springs, Florida shall also be transferred to Xxxxx Xxxxxx or an entity owned or
controlled by Xxxxx Xxxxxx (which may be Sentaur Corp.).
13.12 Governmental Consents. There shall have been obtained on or
before the Closing such material permits or authorizations, and there shall have
been taken such other action, as may be required to consummate the Share
Exchange and the other transactions
59
contemplated hereby by any Governmental Body having jurisdiction over the
parties and the actions herein proposed to be taken, including but not limited
to requirements under applicable federal and state securities laws.
13.13 No Legal Action. No temporary restraining order, preliminary
injunction or permanent injunction or other order preventing the consummation of
the Share Exchange or any of the transactions contemplated hereby shall have
been issued by any Federal or state court and remain in effect, nor shall any
proceeding initiated by any Governmental Body seeking any of the foregoing be
pending.
13.14 No Material Adverse Change. There shall have been no material
adverse change in the business, financial condition, operations or financial
performance of Accessity since the date of this Agreement.
13.15 Proxy Statement. The Proxy Statement shall on the Closing Date
not be subject to any proceedings commenced or threatened by the SEC.
13.16 Stock Option Plan. Prior to Closing, Accessity shall have adopted
a new stock option plan in the manner requested by PEI.
13.17 Retirement or Conversion of Preferred Stock of Accessity. Prior
to Closing, Accessity shall have retired all of the issued and outstanding
shares of Series A Convertible Preferred Stock of Accessity, on terms and
conditions that are reasonably acceptable to PEI, Kinergy and Reenergy, or all
of the issued and outstanding shares of Series A Convertible Preferred Stock of
Accessity shall have been duly converted into shares of common stock of
Accessity in accordance with the terms and provisions set forth in the
Certificate of Incorporation of Accessity.
13.18 Execution of Agreement by PEI Shareholders, PEI Warrantholders,
Kinergy Members and Reenergy Members. All or substantially all (representing at
least 95% of the issued and outstanding shares of PEI Stock as of the Closing)
of the PEI Shareholders, all of the PEI Warrantholders, all of Kinergy Members
and all of the Reenergy Members shall have executed and delivered to PEI,
Kinergy or Reenergy, respectively, a copy of this Agreement and, in any event, a
sufficient number of PEI Shareholders shall have executed a copy of this
Agreement such that, after giving effect to the Share Exchange, the PEI
Shareholders, the Kinergy Members and the Reenergy Members shall beneficially
own in the aggregate at least 80% of the issued and outstanding common stock of
Accessity.
13.19 Establishment of Escrow Relating to Mercator Action. Prior to
Closing, Accessity shall have established an escrow account with an escrow agent
mutually acceptable to PEI and Accessity into which Accessity will deposit the
net proceeds from a recovery from the current arbitration proceeding with
Presidion Solutions, Inc., which shall thereafter be used solely to fund the
legal fees, expenses and disbursements incurred in connection with the Mercator
Action. After full and final settlement or other final resolution of the
Mercator Action, Accessity shall cause the net proceeds from the Mercator Action
received from the law firms representing Accessity in the Mercator Action (i.e.,
after retention by the law firms representing Accessity in this action, of the
additional fees and expenses pursuant to the engagement agreement between the
law firms and Accessity and an amount equal to twenty-five percent (25%) of the
gross proceeds from the Mercator Action as full payment for these law firms'
60
representation of Accessity in the Mercator Action) to be deposited into such
escrow account and thereafter to be distributed on a pro rata basis, to the
fullest extent permitted under applicable law, to the holders of record of
shares of Accessity common stock as of the date immediately prior to the Closing
Date (for further distribution to the beneficial owners of shares of Accessity
common stock as of such date, as applicable), after payment of any and all other
fees and expenses in connection with the Mercator Action and with respect to
such escrow arrangement, including, without limitation, a fee in an amount equal
to one-third of the net proceeds from the Mercator Action received from the law
firms representing Accessity in the Mercator Action which shall be paid to
Accessity prior to such distribution.
13.20 Completion of Due Diligence; Disclosure Schedules. Each of the
Acquired Companies shall have completed its financial and legal due diligence
investigation of Accessity and each of the other Acquired Companies with results
thereof satisfactory to such Acquired Company in its sole discretion (including,
without limitation, satisfaction with matters related to Security Markets (as
defined in Section 14.4 below), and litigation and any and all disclosures
contained in the respective disclosure schedules). In this regard, each of
Accessity and the Acquired Companies acknowledge and agree that the respective
disclosure schedules relating to the representations and warranties of Accessity
and the Acquired Companies in this Agreement are not required to be delivered as
of the time of execution of this Agreement by Accessity and the Acquired
Companies, but are required to be delivered as soon as practicable after such
execution and, in any event, a reasonable time prior to the Closing, to permit
the parties to review, evaluate and approve the disclosures made therein as a
part of their due diligence investigation. Notwithstanding the absence of such
disclosure schedules as of the time of execution of this Agreement, each of
Accessity and the Acquired Companies acknowledge and agree that the
representations and warranties made herein by Accessity and the Acquired
Companies shall not be deemed false or misleading or deemed to contain untrue
statements of material fact or to have omitted to state material facts solely
because of the absence of such disclosure schedules as of the time of execution
of this Agreement.
ARTICLE XIV
POST-CLOSING COVENANTS
14.1 Certain Reporting Matters. Upon consummation of the Closing,
Accessity shall timely file with the SEC a Current Report on Form 8-K with
respect to the Share Exchange and the consummation of the transactions
contemplated hereby.
14.2 Standard and Poors. Upon consummation of the Closing, to the
extent required or otherwise deemed advisable by the Majority Parties, Accessity
shall apply for listing with Standard and Poors Information Service and Blue Sky
filings.
14.3 Books and Records. Unless otherwise consented to in writing by
Accessity, neither the Acquired Companies nor any of the Owners shall destroy,
alter or otherwise dispose of any original books or records of any of the
Acquired Companies prior to the Closing Date without first offering to surrender
such books and records to Accessity and shall maintain such books and records in
good condition in a reasonably accessible location.
14.4 Listing. If the shares of common stock of Accessity are listed on
the Nasdaq SmallCap Market of the Nasdaq Stock Market, the Nasdaq National
Market of the Nasdaq Stock Market, the American Stock Exchange or the New York
Stock Exchange (these securities
61
markets collectively referred to as the "Security Markets" and, individually as
a Security Market") as of the Closing Date, Accessity shall use its commercially
reasonable efforts to maintain a listing on a Security Market for a period of
one (1) year after the Closing Date.
14.5 Grant of Stock Options and Warrants. Upon consummation of the
Closing and for a period of one (1) year after the Closing Date, Accessity shall
not grant or issue any security, stock option or warrant (other than stock
options contemplated to be issued pursuant to the new stock option plan referred
to in Section 13.16 above, which would not be exercisable until one (1) year
after the Closing Date) that may be sold in the Security Markets after having
been registered under the Securities Act or traded pursuant to an exemption
under the Securities Act, except (i) as otherwise contemplated by this
Agreement; (ii) the sale of securities by Accessity pursuant to equity and/or
debt financings to provide funds for working capital purposes; (iii) the
Accessity Replacement Warrants; and (iv) the Accessity Exchange Shares which are
subject to registration rights of certain PEI Shareholders pursuant to the terms
of the various Registration Rights Agreement between PEI and such PEI
Shareholders.
14.6 Board Seat. As provided in subsection (d) of Section 3.2 above,
immediately prior to the Closing, the Board of Directors of Accessity shall have
designated an individual to serve on the Board of Directors of Accessity as a
Class II director (thereby holding such board seat until the annual meeting of
Accessity shareholders to be held in the fourth calendar quarter of 2005).
14.7 Continuation and Prosecution of Lawsuit.
(a) Upon consummation of the Closing, Accessity shall continue to use
its commercially reasonable efforts to vigorously prosecute the lawsuit
previously filed against Mercator Group, LLC, Mercator Advisory Group, LLC,
Mercator Momentum Fund, LP, Mercator Momentum Fund III, LP and Mercator Focus
Fund, LP, Taurus Global, LLC and the action that was previously filed, dismissed
without prejudice and may be re-filed against Xxxx X. Xxxxxxx, XX, Xxxxx X.
Xxxxxxxxxx, Xxxxx X. Xxxxxx and MediaBus Networks, Inc. n/k/a Presidion Corp.,
in the Circuit Court of the 11th Judicial Circuit in and for Miami-Dade County,
Florida, Case No. 03-30243 CA 15, or as removed or re-filed in such other venue,
as the case may be (the "Mercator Action"). The Mercator Action shall not be
settled, to the fullest extent permitted by applicable law, without the express
written consent (which consent shall not be unreasonably withheld or delayed)
of: (i) the individual sitting on the Board of Directors and designated as the
Accessity Board Member or (ii) should such Accessity Board Member no longer
serve on the Board of Directors, then by the unanimous written consent of all
the independent members of the Board of Directors of Accessity. The proceeds
from any recovery or settlement in the Mercator Action shall be allocated as
provided in Section 13.19 above.
(b) Upon consummation of the Closing, Accessity shall continue to use
its commercially reasonable efforts to vigorously collect an arbitration award
that it may have received from the American Arbitration Association against
Presidion Solutions, Inc. The proceeds of any recovery from Presidion Solutions,
Inc. shall be deposited into the escrow account pursuant to Section 13.19 above.
62
14.8 Reimbursement of Costs Paid by Reenergy Members. As soon as
practicable after the Closing Date, PEI shall pay to the Reenergy Members or
shall otherwise have caused the Reenergy Members to be paid an amount equal to
$150,000, as payment and reimbursement for the services, costs and expenses of
the Reenergy Members in connection with the development of the Visalia project.
ARTICLE XV
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
-----------------------------------------------------------
15.1 Survival of Representations and Warranties. Notwithstanding (a)
the making of this Agreement or any related agreement, (b) any examination made
by or on behalf of the parties hereto and (c) the Closing hereunder, (x) the
representations and warranties of the Acquired Companies, the Owners and
Accessity contained in this Agreement, or in any document delivered pursuant to
the provisions of this Agreement, shall survive the Closing for a period of
twenty-four (24) months, except for the representations and warranties made in
Sections 4.11, 6.11, and 8.11 (Taxes and Tax Returns), Sections 4.13, 6.13, and
8.13 (Title to Properties; Encumbrances), Sections 4.15, 6.15, and 8.15
(Intellectual Property), Sections 4.16, 6.16, and 8.16 (Compliance with Laws),
and Sections 4.21, 6.21 and 8.21 (Environmental Matters), which in each case
shall survive until the expiration of the applicable statute of limitations for
the underlying cause of action plus six (6) months and (y) the covenants and
agreements required to be performed after the Closing or pursuant to Article XI
of this Agreement (unless noncompliance with those covenants contained in
Article XI was waived in writing at the Closing) shall survive until fully
performed or fulfilled. No action may be brought with respect thereto after such
date; provided, however, that if, prior to such date, one party has notified the
other party of a claim for indemnity under this Article XV (whether or not
formal legal action shall have been commenced based upon such claim), such claim
shall continue to be subject to indemnification in accordance with this Article
XV.
15.2 Indemnification. The parties shall indemnify each other as set
forth below:
(a) Subject to Section 15.1 above, from and after the Closing, (x) each
of the Acquired Companies shall, severally and not jointly, indemnify and save
harmless Accessity and its officers, directors, shareholders, successors and
assigns from and against any loss, claim, liability, damage, complaint, action
or causes of action, suits, proceedings, investigations, punitive damages,
remedial costs, civil and criminal penalties or expenses, costs or other damages
of any kind or nature, including reasonable attorneys' fees incurred in
connection with any of the foregoing (collectively, the "Damages"), to the
extent arising from, relating to or otherwise in respect of (i) the inaccuracy
or breach of any representation or warranty of such Acquired Company contained
in this Agreement (as of the date hereof, or as of the Closing Date) or of any
representation, warranty or statement made in any schedule, certificate,
document or instrument delivered by the Acquired Company, and (ii) the failure
of such Acquired Company to perform any agreements or covenants of such Acquired
Company contained in this Agreement; provided, however, that such Acquired
Company shall not be responsible for any Damages with respect to any such
matters until the cumulative aggregate amount of such Damages exceeds $25,000,
in which event such Acquired Company shall then be liable for all such
cumulative aggregate Damages, including the first $25,000; and (y) Accessity
shall indemnify and save harmless each of the Owners, the PEI Warrantholders and
the Acquired Companies and their respective officers, directors, shareholders,
successors and assigns from and against any Damages to the extent arising from,
relating to or otherwise in respect of (i) the inaccuracy or breach of any
representation or warranty of Accessity contained in this Agreement (as of the
date hereof, or as of the Closing Date) or of any representation, warranty or
statement made in any schedule, certificate, document or instrument delivered by
Accessity, and (ii) the
63
failure of Accessity to perform any agreements or covenants of Accessity
contained in this Agreement; provided, however, that Accessity shall not be
responsible for any Damages with respect to any such matters until the
cumulative aggregate amount of such Damages exceeds $25,000, in which event
Accessity shall then be liable for all such cumulative aggregate Damages,
including the first $25,000. As used in this Section 15.2, any Person entitled
to indemnification pursuant to the provisions of this Section 15.2 shall be
referred to herein as an "Indemnified Party" and any Person required to
indemnify any Indemnified Party pursuant to the provisions of this Section 15.2
shall be referred to herein as an "Indemnifying Party."
(b) The Indemnified Parties shall notify each of the Indemnifying
Parties within a reasonable period of time after becoming aware of, and shall
provide to each of the Indemnifying Parties as soon as practicable thereafter
all information and documentation necessary to support and verify, any matter
which the Indemnified Party shall have determined has given rise to a claim for
indemnification hereunder, and the Indemnifying Parties shall be given
reasonable access to all books and records in the possession or under the
control of the Indemnified Party which the Indemnifying Parties reasonably
determine to be related to such claim. The failure by any Indemnified Party to
so notify the Indemnifying Parties or any indemnification claim hereunder shall
not relieve the relevant Indemnifying Party from any liability which such
Indemnifying Party may have to such Indemnified Party under this Agreement,
except to the extent that such claim for indemnification involves the claim of a
third party against the Indemnified Party and the Indemnifying Party shall have
been actually prejudiced by such failure. If any Indemnifying Party does not
notify the Indemnified Parties within 30 calendar days following receipt by it
of such notice that such Indemnifying Parties disputes its liability to the
Indemnified Parties under this Agreement, such claim specified by such
Indemnified Party in such notice shall be conclusively deemed a liability of
such Indemnifying Parties under this Agreement and such Indemnifying Parties
shall pay the amount of such liability to such Indemnified Party on demand or,
in the case of any notice in which the amount of the claim (or any portion
thereof) is estimated, on such later date when the amount of such claim (or
portion thereof) becomes finally determined. If an Indemnifying Party has timely
disputed its liability with respect to such claim, as provided above, such
Indemnifying Party and the Indemnified Party or Parties shall proceed in good
faith to negotiate a resolution of such dispute and, if not resolved through
such negotiations, such dispute shall be resolved by litigation in accordance
with the terms of this Agreement.
(c) All claims for indemnity under this Article XV shall be paid by the
Indemnifying Parties on demand in immediately available funds in U.S. dollars.
(d) With respect to any third party claim or action that could give
rise to indemnity under this Agreement, the Indemnifying Party shall be entitled
to assume the defense thereof with counsel satisfactory to the Indemnified
Party, provided, however, that upon the request of the Indemnified Party, the
Indemnifying Party provide reasonable evidence of its ability to perform its
obligations under this Section 15.2. After notice from the Indemnifying Party to
the Indemnified Party of their election so to assume the defense thereof, the
Indemnifying Party shall not be liable to the Indemnified Party under the
foregoing indemnity agreement for any legal or other expenses subsequently
incurred by the Indemnified Party in connection with the defense thereof other
than (i) those relating to investigation or the furnishing of documents or
witnesses and (ii) all reasonable fees and expenses of separate counsel retained
by such Indemnified Party if (A) the Indemnifying Party and the Indemnified
Party shall have agreed to the retention of such counsel or (B) counsel to the
Indemnified Party shall have
64
concluded reasonably that the representation of the Indemnifying Party and the
Indemnified Party by the same counsel would be inappropriate due to actual or
potential differing interests between them in the conduct of the defense of such
action.
(e) Whenever the Indemnifying Party controls the defense of a third
party claim, the Indemnifying Party may only settle or compromise the matter
subject to indemnification without the consent of the Indemnified Party if such
settlement includes a complete release of all Indemnified Parties as to the
matters in dispute and relates solely to money damages. An Indemnified Party
will not unreasonably withhold consent to any settlement or compromise that
requires its consent.
(f) In the event the Indemnifying Party fails to timely defend, contest
or otherwise protect the Indemnified Party against any such claim or suit, the
Indemnified Party may, but will not be obligated to, depend, contest or
otherwise protect against the same, and make any compromise or settlement
thereof, and in such event, or in the case where the Indemnified Party jointly
controls such claim or suit, the Indemnified Party shall be entitled to recover
its costs thereof from the Indemnifying Party, including without limitation,
attorneys' fees, disbursements and all amounts paid as a result of such claim or
the compromise or settlement thereof.
(g) Each Indemnified Party shall cooperate and provide such assistance
as the Indemnifying Party may reasonably request in connection with the defense
of the matter subject to indemnification and in connection with recovering from
any third parties amounts that the Indemnifying Party may pay or be required to
pay by way of indemnification hereunder.
ARTICLE XVI
TERMINATION
-----------
16.1 Termination. This Agreement may be terminated at any time prior to
the Closing Date (whether before or after approval of this Agreement and the
consummation of the transactions contemplated hereby by the shareholders of
Accessity):
(a) by the mutual consent of Accessity and the Acquired Companies;
(b) by either Accessity or any of the Acquired Companies, upon written
notice, if there has been a material misrepresentation or any breach on the part
of a party hereto in the representations, warranties or covenants contained in
this Agreement which is not cured within ten (10) business days after such
breaching party (and Accessity and the Acquired Companies) has been notified of
the intent to terminate this Agreement pursuant to this subsection (b);
(c) by either Accessity or the Acquired Companies if the Closing has
not occurred on or before July 30, 2004 (the "Final Date");
(d) by Accessity, upon written notice, if the shareholders of Accessity
shall not have approved the Agreement and the consummation of the transactions
contemplated hereby (including, without limitation, with respect to the approval
by the shareholders of Accessity, the appointment of the individuals identified
in subsection (d) of Section 3.2 above to the Board of Directors of Accessity,
the reincorporation of Accessity in the State of Delaware
65
referred to in Section 13.6 above, the sale or other disposition of the
Accessity Subsidiaries (as defined below) to Xxxxx Xxxxxx referred to in Section
13.13 above, the adoption of an Amended and Restated 1995 Incentive Stock Plan
of Accessity, in form and substance reasonably acceptable to the Acquired
Companies, and the adoption of a new stock option plan as referred to in Section
13.16 above, in form and substance reasonably acceptable to the Acquired
Companies) prior to the Closing Date;
(e) by Accessity, if the Board of Directors of Accessity shall have
received a Superior Proposal;
(f) by either Accessity or any of the Acquired Companies, upon written
notice, if Accessity or such Acquired Company, as the case may be, shall have
determined in good faith not to proceed with the Closing on the basis of the
results of its financial and legal due diligence investigation of the other
parties to this Agreement (including, without limitation, satisfaction with
matters related to Security Markets (as defined in Section 14.4 above) and
litigation);
(g) by either Accessity or any of the Acquired Companies, if all the
conditions for Closing shall not have been satisfied or waived on or before the
Final Date other than as a result of a breach of this Agreement by the
terminating party; or
(h) by either Accessity or any of the Acquired Companies, if a
permanent injunction or other order by any federal or state court which would
make illegal or otherwise restrain or prohibit the consummation of the Share
Exchange or the other transactions contemplated hereby shall have been issued
and shall have become final and nonappealable.
16.2 Effect of Termination. If this Agreement is terminated as
expressly permitted under Section 16.1, such termination shall be the sole
remedy and this Agreement shall forthwith become void (except for Section 11.2
and Section 17.3) and there shall be no liability on the part of the Acquired
Companies, the Owners, the PEI Warrantholders, or Accessity or any of their
respective Affiliates; provided, however, that if such termination shall result
from the breach by a party hereto of its obligations under this Agreement, such
party shall be fully liable for any and all damages, costs and expenses
sustained or incurred by the other parties as a result of such breach; and
provided, further, that if such termination shall result from the receipt by
Accessity of a Superior Proposal, such party shall be liable for and shall pay
to the other the termination fee provided for in Section 16.3 below. If this
Agreement is terminated without a Closing, the Acquired Companies shall return
promptly to Accessity all documents, work papers and other materials of
Accessity furnished or made available to the Owners, the PEI Warrantholders, the
Acquired Companies or their respective Advisors, and all copies thereof, and no
such information, documents, work papers or other materials received by the
Owners, the PEI Warrantholders or the Acquired Companies shall be revealed to
any third party or used for the advantage of the Owners, the PEI Warrantholders
or the Acquired Companies or any other party; and Accessity shall return
promptly to each of the Acquired Companies, respectively, all documents, work
papers and other material of the Acquired Companies furnished or made available
to Accessity or its Advisors, and all copies thereof, and no such information,
documents, work papers or other materials received by Accessity shall be
revealed to any third party or used for the advantage of Accessity or any other
party.
66
16.3 Termination Fee. If Accessity, prior to termination of this
Agreement, receives any Superior Proposal, and this Agreement is thereafter
terminated pursuant to Section 16.1(e) above as a result of the receipt of such
Superior Proposal, then Accessity shall promptly pay to each of the Acquired
Companies the reasonable fees and expenses of each such Acquired Company
incurred by it prior to termination, up to a maximum of $150,000 for all of the
Acquired Companies (which, if the combined aggregate amount of such fees and
expenses exceeds $150,000 for all of the Acquired Companies, shall be allocated
to each Acquired Company based on proportion that the aggregate number of
Accessity Exchange Shares that the Owners of such Acquired Company would receive
if the Share Exchange were consummated pursuant to the terms of this Agreement
bears to the aggregate number of Accessity Exchange Shares that all of the
Owners of all of the Acquired Companies would receive if the Share Exchange were
consummated pursuant to the terms of this Agreement, provided, that if such
allocation for any Acquired Company exceeds the amount of actual fees and
expenses of such Acquired Company incurred by it prior to termination, the
excess shall be allocated to the other Acquired Companies and divided based on
the relative number of Accessity Exchange Shares that the Owners of the other
Acquired Companies would receive if the Share Exchange were consummated pursuant
to the terms of this Agreement). Notwithstanding anything to the contrary, the
foregoing termination fee, if paid in the full amount set forth above, shall
constitute liquidated damages and shall constitute the non-terminating party's
sole remedy.
ARTICLE XVII
MISCELLANEOUS PROVISIONS
------------------------
17.1 Public Announcements. Upon the execution of this Agreement by all
parties, Accessity, PEI, Kinergy and Reenergy promptly will issue a joint press
release approved by Accessity and the Acquired Companies announcing the
execution of this Agreement. Thereafter, Accessity may issue such press
releases, and make such other disclosures regarding the proposed Share Exchange,
as it determines (after consultation with legal counsel and after having given
PEI, Kinergy and Reenergy and their respective legal counsel the opportunity to
review and comment on such disclosure) are required under applicable state and
federal securities laws or the rules and regulations of the NASD. Subject to the
foregoing, except as the Acquired Companies and Accessity shall authorize in
writing, the parties hereto shall not, and shall cause their respective
officers, directors, employees, Affiliates and Advisors not to, disclose any
matter or matters relating to this transaction to any person not an officer,
director, employee, Affiliate or Advisor of such party.
17.2 Amendment; Waiver. Neither this Agreement, nor any of the terms or
provisions hereof, may be amended, modified, supplemented or waived, except by a
written instrument signed by the parties hereto (or, in the case of a waiver, by
the party granting such waiver). No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other provision
hereof (whether or not similar), nor shall such waiver constitute a continuing
waiver. No failure of either party hereto to insist upon strict compliance by
the other party with any obligation, covenant, agreement or condition contained
in this Agreement shall operate as a waiver of, or estoppel with respect to, any
subsequent or other failure. Whenever this Agreement requires or permits consent
by or on behalf of any party hereto, such consent shall be given in a manner
consistent with the requirements for a waiver of compliance as set forth in this
Section 17.2. For purposes of this Section 17.2, each of the PEI Shareholders
and each of the PEI Warrantholders hereby appoints Xxxx Xxxxxx as his, her or
its agent and attorney-in-fact to make and execute and any all such amendments,
modifications,
67
supplements and waivers and hereby acknowledge and agree that a decision by Xxxx
Xxxxxx shall be final, binding and conclusive on such PEI Shareholder or PEI
Warrantholder, as the case may be, and that Accessity, Kinergy, Reenergy and the
other Owners may rely upon any act, decision, consent or instruction of Xxxx
Xxxxxx.
17.3 Fees and Expenses. Except as otherwise provided in this Agreement,
each of the parties hereto shall bear and pay its own costs and expenses
incurred in connection with the origin, preparation, negotiation, execution and
delivery of this Agreement and the agreements, instruments, documents and
transactions referred to in or contemplated by this Agreement (whether or not
such transactions are consummated) including, without limitation, any fees,
expenses or commissions of any of its Advisors, attorneys, accountants, agents,
finders or brokers. Accessity shall indemnify the Owners and the PEI
Warrantholders against any claims of third parties for any brokerage, finder's,
agent's or similar fees or commissions in connection with the transactions
contemplated hereby insofar as such claims are alleged to be based on
arrangements or contacts made by, to or with Accessity or its Advisors or
representatives. The Acquired Companies shall indemnify Accessity against all
such claims insofar as they are alleged to be based on arrangements or contacts
made by, to or with any of the Owners, the PEI Warrantholders or the Acquired
Companies or their respective Advisors or representatives.
17.4 Notices.
(a) All notices, requests, demands and other communications required or
permitted under this Agreement shall be in writing (including telefax,
telegraphic, telex or cable communication) and mailed, telefaxed, telegraphed,
telexed, cabled or delivered:
(i) If to the Owners or the PEI Warrantholders, to the respective
address for each such Owner or PEI Warrantholder set forth on the signature
pages hereto.
(ii) If to PEI, to:
Pacific Ethanol, Inc.
0000 X. Xxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxx Xxxxxxxxxx
Facsimile no.: (000) 000-0000
with a copy to:
Xxxxx & Xxxxxx, LLP
000 Xxxxx Xxxx., 00xx Xxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx, Esq.
Facsimile no.: (000) 000-0000
68
(iii) If to Kinergy, to:
Kinergy Marketing, LLC
0000 Xxxx Xxxx., Xxxxx 000
Xxxxx, XX 00000
Attn: Xxxx Xxxxxxx
Facsimile no.: (000) 000-0000
(iv) If to Reenergy, to:
Reenergy, LLC
000 XX 00xx Xxxxxx
Xxxxxxxx, XX 00000
Attn: Xxx Xxxxxxx
Facsimile no.: (000) 000-0000
(v) If to Accessity, to:
Accessity Corp.
00000 Xxxx Xxxxxxxx Xxxx.
Xxxxx Xxxxxxx, XX 00000
Attn: Xxxxx Xxxxxx
Facsimile no.: (000) 000-0000
with a copy to:
Meritz & Xxxxx, LLP
Xxxxx Xxxxxx Xxxxx
Xxx Xxxxx, XX 00000
Attn: Xxxxxxxx X. Xxxxx, Esq.
Facsimile no.: (000) 000-0000
(b) All notices and other communications required or permitted under
this Agreement which are addressed as provided in this Section 17.4 (i) if
delivered personally against proper receipt or by confirmed telefax or telex,
shall be effective upon delivery and (ii) if delivered (A) by certified or
registered mail with postage prepaid, or (B) by Federal Express or similar
courier service with courier fees paid by the sender upon receipt. Either party
may from time to time change its address for the purpose of notices to that
party by a similar notice specifying a new address, but no such change shall be
deemed to have been given until it is actually received by the party sought to
be charged with its contents.
17.5 Assignment. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder may be assigned by any party
hereto without the prior written consent of the other parties; provided,
however, that Accessity may assign its rights and obligations under this
Agreement to any entity who by merger, consolidation, purchase or sale
subsequently becomes an Affiliate without the prior consent of the Owners or any
of the Acquired Companies. Any assignment which contravenes this Section 17.5
shall be void ab initio.
69
17.6 Governing Law. This Agreement and the legal relations between the
parties hereto shall be governed by and construed in accordance with (i) with
respect to matters arising prior to the Closing Date, the internal laws of the
State of New York, without giving effect to the conflicts of laws principles
thereof, and (ii) with respect to matters arising on and after the Closing Date,
the internal laws of the State of Delaware, without giving effect to the
conflicts of laws principles thereof.
17.7 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument. This Agreement will
become binding when one or more counterparts hereof, individually or taken
together, will bear the signatures of all the parties reflected hereon as
signatories.
17.8 Headings. The headings contained in this Agreement are for
convenience of reference only and shall not constitute a part hereof or define,
limit or otherwise affect the meaning of any of the terms or provisions hereof.
17.9 Entire Agreement. This Agreement (which defined term includes the
Schedules and Exhibits to this Agreement) embodies the entire agreement and
understanding among the parties hereto with respect to the subject matter of
this Agreement and supersedes all prior agreements, commitments, arrangements,
negotiations or understandings, whether oral or written, between the parties
with respect thereto. There are no agreements, covenants, undertakings,
representations or warranties with respect to the subject matter of this
Agreement other than those expressly set forth or referred to herein. This is an
integrated agreement.
17.10 Severability. Each term and provision of this Agreement
constitutes a separate and distinct undertaking, covenant, term and/or provision
hereof. In the event that any term or provision of this Agreement shall be
determined to be unenforceable, invalid or illegal in any respect, such
unenforceability, invalidity or illegality shall not affect any other term or
provision of this Agreement, but this Agreement shall be construed as if such
unenforceable, invalid or illegal term or provision had never been contained
herein. Moreover, if any term or provision of this Agreement shall for any
reason be held to be excessively broad as to time, duration, activity or
subject, it shall be construed, by limiting and reducing it, so as to be
enforceable to the extent permitted under applicable law as it shall then exist.
17.11 Other Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby or by law on such party,
and the exercise of any one remedy will not preclude the exercise of any other.
17.12 Absence of Third Party Rights. No provisions of this Agreement
are intended, nor will be interpreted, to provide or create any third party
beneficiary rights or any other rights of any kind in any client, customer,
Affiliate, shareholders, or partner of any party hereto or any other person or
entity unless specifically provided otherwise herein, and, except as so
provided, all provisions hereof will be personal solely between the parties to
this Agreement.
17.13 Construction of Agreement. The Agreement has been negotiated by
the respective parties hereto and their attorneys and the language hereof will
not be construed for or
70
against either party. A reference to a Section or an Exhibit will mean a Section
in, or Exhibit to, this Agreement unless otherwise explicitly set forth herein.
17.14 Attorneys' Fees. In the event that any action or proceeding is
commenced by any party hereto for the purpose of enforcing any provision of this
Agreement, the parties to such action or proceeding may receive as part of any
award, judgment, decision or other resolution of such action or proceeding their
costs and reasonable attorneys' fees as determined by the person or body making
such award, judgment, decision or resolution. Should any claim hereunder be
settled short of the commencement of any such action or proceeding, the parties
in such settlement shall be entitled to include as part of the damages alleged
to have been incurred reasonable costs of attorneys or other professionals in
investigation or counseling on such claim.
17.15 No Joint Venture. Nothing contained in this Agreement will be
deemed or construed as creating a joint venture or partnership between any of
the parties hereto. Except to the extent provided in Article XVI and Section
17.2 above and Section 17.16 below, no party is by virtue of this Agreement
authorized as an agent, employee or legal representative of any other party and
no party will have the power or authority to control the activities and
operations of any other or to bind or commit any other. The status of the
parties hereto is, and at all times will continue to be, that of independent
contractors with respect to each other.
17.16 Further Assurances. On and after the Closing Date, the Owners
shall take such other steps and actions as may be necessary to put Accessity in
actual possession and operating control of PEI, Kinergy and Reenergy as may be
reasonably requested by Accessity. Each party agrees to cooperate fully with the
other parties and to execute such further instruments, documents and agreements
and to give such further written assurances as may be reasonably requested by
any other party to evidence and reflect the transactions described herein and
contemplated hereby and to carry into effect the intents and purposes of this
Agreement.
[SIGNATURES CONTAINED ON THE FOLLOWING PAGES]
71
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
"ACCESSITY": ACCESSITY CORP.
---------
By:
-----------------------------------
Print Name:
--------------------------
Title:
--------------------------------
"ACQUIRED COMPANIES": PACIFIC ETHANOL, INC.
------------------
By:
-----------------------------------
Print Name:
--------------------------
Title:
--------------------------------
KINERGY MARKETING, LLC
By:
-----------------------------------
Print Name:
--------------------------
Title:
--------------------------------
REENERGY, LLC
By:
-----------------------------------
Print Name:
--------------------------
Title:
--------------------------------
72
PEI SHAREHOLDER
SIGNATURE PAGE
TO
SHARE EXCHANGE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
By:____________________________________
Name:__________________________________
Title:_________________________________
Name of PEI Shareholder (if other than individual):
---------------------------------------
73
PEI WARRANTHOLDER
SIGNATURE PAGE
TO
SHARE EXCHANGE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
By:____________________________________
Name:__________________________________
Title:_________________________________
Name of PEI Warrantholder (if other than individual):
---------------------------------------
74
KINERGY MEMBER
SIGNATURE PAGE
TO
SHARE EXCHANGE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
------------------------------------
Xxxx Xxxxxxx
75
REENERGY MEMBER
SIGNATURE PAGE
TO
SHARE EXCHANGE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
By:____________________________________
Name:__________________________________
Title:_________________________________
Name of Reenergy Member (if other than individual):
---------------------------------------
76
EXHIBIT A
Exchange Ratios
PEI Exchange Ratio:
1.0 (1-to-1)
Kinergy Exchange Ratio:
18,750 (18,750 shares per 1% Kinergy Interest)
Reenergy Exchange Ratio:
21,250 (21,250 shares per 1% Reenergy Interest)
A-1
EXHIBIT B
PEI Shareholders and Accessity Exchange Shares to be Received
No. of Shares of No. of Accessity
Name of Shareholder PEI Stock Owned Exchange Shares
Xxxxxxx Xxxxx 4,800,000 4,800,000
SC Fuels, Inc. 1,500,000 1,500,000
Xxxx Xxxxxx 1,243,333 1,243,333
Xxxxxxxx Xxxxxx 6,667 6,667
Xxxx Xxxxxx 100,000 100,000
Xxxxx McAfee Capital Partners, LLC 1,000,000 1,000,000
Xxxxxx Xxxxx 1,350,000 1,350,000
Xxxxxxx Xxxxxx 66,666.67 66,667
Xxxxxx Family Trust 20,000 20,000
Xxxxx and Xxxxx Xxxxxxxx 20,000 20,000
Xxxxxx Xxxxx Xxxxxx, as Trustee for 3,000 3,000
the Xxxxxx Xxxxx Xxxxxx Trust dated
9/10/91
W. Xxxxxx Xxxxxx 126,666 126,666
Luise Xxxxxxx Xxxxxx Xxxxxx 16,667 16,667
Xxxxxx Xxxx Xxxxxx Xxxxxxx 16,667 16,667
Xxxxxxx Xxxx Xxxxxx 16,667 16,667
Xxxx Xxxxxxxxx Xxxxxx 3,333 3,333
Xxxxx Dumper 5,000 5,000
Xxxxxx Dumper 5,000 5,000
B-1
Xxxxxx Childrey 40,000 40,000
Xxxxxxx Xxxxxx Shaugnesy 20,000 20,000
Illiquid Assets Trust, FBO Xxxxx X. 16,666.67 16,667
Xxxxxxx (Xxx X. Xxxxxx, Trustee)
Xxxxx Xxxxxxxxxx 16,666.67 16,667
Xxxxx Xxx 35,000 35,000
Xxxxx and Xxxxxxx Xxxxxxxx 2,000 2,000
Xxxx Xxxxx 5,000 5,000
McDonald Investments, Inc., FBO 10,000 10,000
Xxxxxxx Xxxxxxxxxxxx
Xxxxxx Xxxxxxx 2,000 2,000
Xxxxxx Xxxxxx 8,000 8,000
Xxxxx Xxxxxxxx 4,000 4,000
Xxxxxx Xxxxxx 10,000 10,000
Xxx Xxxxx 8,000 8,000
Xxxxx Xxxxxxx 10,000 10,000
Xxxxxxx XxXxxxx 4,000 4,000
X. X. Xxxxxxx, Xx. 17,000 17,000
Xxxxx Xxxxx 7,000 7,000
Xxxx and Xxxx Xxxxxx 8,000 8,000
Xxxxxxx Xxxxxxxxx (as Custodian for 10,000 10,000
Xxxxx Xxxxxxxxx)
B-2
Xxxxxxx Xxxxxxxxx (as Custodian for 10,000 10,000
Xxxxxx Xxxxxxxxx)
Xxxxxx and Xxxxxxx Xxxxxx Living 10,000 10,000
Trust (Xxxxxx X. Xxxxxx, Trustee)
Xxxxxxx Xxxx 14,000 14,000
Xxxxxx Xxxxx 10,000 10,000
Alex and Xxxx Xxxxxx 10,000 10,000
Xxxxxxx XxXxxxx 3,400 3,400
Xxxxxxxxx Xxxxxx 13,400 13,400
Xxxxxx Xxxxxxxx 7,000 7,000
Alex and Xxxx Xxxxxx 2,000 2,000
Xxxxxxxxx Xxxxx 7,000 7,000
Xxxxx Xxxxxxxxxxx 10,000 10,000
Xxxxx XxXxxxx 35,000 35,000
Xxxxx Xxxxxxx 4,000 4,000
Xxx XxXxxx 3,400 3,400
Xxxxxxxxx Xxxx 17,000 17,000
Xxxxxxx Xxxxxxxxx 10,000 10,000
Xxxxxx Xxxxx 7,000 7,000
Xxxxxxxx Investments, L.P. 34,000 34,000
Xxxxx Xxxxxx 4,000 4,000
Xxxxx Xxxx 8,000 8,000
Xxxxx Diversified, Inc. 1,000,000 1,000,000
B-3
Linden Growth Partners 250,000 250,000
Xxx Xxxxxx 250,000 250,000
TOTAL 12,252,200 12,252,200
========== ==========
------------------------
B-4
PEI Warrantholders and Warrants to Acquire Accessity Common Stock
No. of Shares
Subject to
Accessity Exercise Price
Name of PE Warrantholder Replacement Warrants per Share
Xxxxx-XxXxxx Capital Partners 14,167 $1.50
Prima Capital Group, Inc. 28,320 $1.50
Xxxxx Xxxxxxx 1,000 $1.50
Xxxxx-XxXxxx Capital Partners 50,000 $2.00
Xxxxxxx Xxxxxxxxxx 25,000 $0.01
Liviakis Group 1,150,000 $0.0001
--------- -------
TOTAL 1,268,487 $0.0001-$2.00
========= =============
Convertible Debt
----------------
* Xxxxx Diversified, Inc. 1,000,000* 1,000,000*
* Xxxxx Diversified, Inc. ("LDI") may receive up to 1,000,000 shares of
PEI Stock pursuant to the conversion of a portion of the currently outstanding
debt owed by PEI to LDI, which conversion is at the option of LDI. Accordingly,
the number of Accessity Exchange Shares to be received by LDI shall be equal to
the product of (i) the number of shares of PEI Stock received upon conversion
(at a conversion rate of $1.50 per share) of such portion of such debt,
multiplied by (ii) the PEI Exchange Ratio. The parties acknowledge and agree
that Accessity Exchange Shares will be directly issued to LDI (without any
preceding issuance of shares of PEI Stock) if such conversion occurs after the
Closing Date.
B-5
EXHIBIT C
Kinergy Members and Accessity Exchange Shares to be Received
Kinergy No. of Accessity
Name of Member Percentage Interest Exchange Shares
Xxxx Xxxxxxx 100% 1,875,000
C-1
EXHIBIT D
Reenergy Members and Accessity Exchange Shares to be Received
Reenergy No. of Accessity
Name of Member Percentage Interest Exchange Shares
Kinergy Resources, LLC 23.5% 499,375
Xxxx Xxxxxxxx 23.5% 499,375
Flin-Mac, Inc. 23.5% 499,375
Xxx Xxxxxxx 29.5% 626,875
D-1
EXHIBIT E
Form of Spousal Consent
The undersigned, as the spouse of __________________, hereby signs and
consents to the foregoing "Share Exchange Agreement" for the purpose of binding
and consenting to the commitment of the marital community property of
_____________________ and the undersigned as assets available for the
satisfaction of the undersigned's obligations under the foregoing "Share
Exchange Agreement" and any other documents, agreements or instruments
referenced therein, and for the purpose of acknowledging and agreeing that (i)
no consent of the undersigned shall be required for any future modification of
the foregoing "Share Exchange Agreement" or any other document, agreement or
instrument referenced therein, and (ii) any community property of
____________________ and the undersigned which shall hereafter be transmuted
into separate property of the undersigned shall be available for satisfaction of
obligations under the foregoing "Share Exchange Agreement" and any other
documents, agreements or instruments referenced therein.
By:______________________________________
(Signature)
Name:____________________________________
(Please print)
X-0
XXXXXXXX 00.0 - XXXX XXXXXXX
Reductions and adjustments to Cash Balance: (subject to further review, revision
and finalization by Accessity and the Acquired Companies):
1. For each month running from March 31, 2004, the Cash Balance shall
fall by approximately $135,000 due to current levels of operating
losses.
2. Re-purchase of Series A Convertible Preferred Stock for $350,000.
3. Payment Acceleration-Upon learning of the transaction certain
vendors may insist on being paid more rapidly prior to the closing
because the control of the funds will be in the hands of other
individuals with whom they have no relationship, or because they
may no longer be viewed as continuing vendors.
4. Funding/payment of the arbitration legal costs against Presidion
Solutions, Inc. and Mercator in the months of March and April
2004. Should significant legal demands occur thereafter that are
not currently anticipated, these will also reduce cash.
5. Increase in expenses- This transaction itself results in expenses
that were not contemplated in budgeting process and are not the
normal part of on-going monthly losses. These include, but are not
limited to, legal costs, due diligence trips and searches, proxy
development costs, printing and mailing proxy, ADP solicitation
for a shareholder vote, the formality of a shareholder meeting and
auditor's review of the proxy.
6. Use of estimates/trade debt- The amount of cash used is an
estimate based on expectations of cash inflows and outflows which
cannot be exactly projected under normal conditions and
particularly in light of these circumstances, and accordingly
variations are to be assumed for estimates in losses and demand of
trade debt. Further, some of the invested funds are in fixed
income mutual funds whose values change slightly on a daily basis.
Not withstanding the forgoing, Accessity agrees to use its best efforts to
control its cash use and that expenditures will be in the ordinary course of
business of its on-going operations, or for the purpose of concluding this
transaction.
