EXHIBIT 2.2
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (this "AGREEMENT") is made and entered
into as of May 14, 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").
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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
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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.
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"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 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 Neil Koehler, 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, the Owners of the Acquired Companies 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
Rutan & Tucker, LLP, 611 Anton Boulevard, Suite 1400, Costa Mesa, California
92626, 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 Barry Siegel, Barry J.
Spiegel, Kenneth J. Friedman and Bruce S. Udell 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 Accessity), including but not
limited to Barry Siegel and Philip Kart, dated as of the Closing Date, in form
and substance reasonably acceptable to each of PEI, Kinergy and Reenergy.
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(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 Larry Kaplan 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
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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) 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 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
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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 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
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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
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as shown on the March 31, 2004 PEI 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 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 March 31, 2004 PEI 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 mark, 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 PEI located
in Madera, California due to the fire that occurred at such facility in the
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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.
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(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 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.
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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.
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(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.
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(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 force and effect, insure against risks and
liabilities to the extent and in the manner deemed appropriate and sufficient by
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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 product 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 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;
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(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
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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, 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 2003 KINERGY 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 2003 KINERGY FINANCIAL STATEMENTS") (all such financial
statements, excluding, upon delivery to Accessity of the Audited 2003 Kinergy
Financial Statements, the Unaudited 2003 Kinergy 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 limitations for any federal,
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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 mark, 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;
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(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.
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(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
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Kinergy or the 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 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.
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(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 grievances 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.
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(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.
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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
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.
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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;
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(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;
(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.
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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, permit the
termination of, cause the acceleration of the maturity of any debt or obligation
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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 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.
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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;
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(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 mark, 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.
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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").
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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.
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(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;
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(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
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biphenyls (PCBs) located on the Reenergy Property. To the knowledge of Reenergy,
there has been no spill, 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.
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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;
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(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 Tom Koehler, 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;
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(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
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any untrue statement of a material fact or omitted to state a 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
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agreement, note, bond, 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 Hart-Scott-Rodino 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 respective Advisors may
have the opportunity to make such reasonable investigations as they shall desire
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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;
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(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;
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(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;
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(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;
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(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 permitting them to
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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 Barry Siegel 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
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process. As soon 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.
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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.
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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 Barry Siegel for advisory services, in form and
substance mutually acceptable to the Acquired Companies, Accessity and Barry
Siegel (the "Siegel Consulting Agreement"). The Siegel Consulting Agreement
shall include payment to Barry Siegel on the Closing Date of compensation (a) in
the form of the number of shares of Common Stock of Accessity equal to the
excess, if any, of 400,000 shares of the Common Stock of Accessity over the
number of shares of Siegel Common Stock determined in accordance with Section
13.11 of this Agreement and (b) allocated between compensation for consulting
services and a covenant not to compete, each in such amounts as shall be
mutually acceptable to the Acquired Companies, Accessity and Barry Siegel.
Accessity shall also have entered into a consulting agreement with Philip Kart
for advisory services, in form and substance mutually acceptable to the Acquired
Companies, Accessity and Philip Kart (the "Kart Consulting Agreement"). The Kart
Consulting Agreement shall include payment to Philip Kart on the Closing Date of
compensation (a) in the amount of 200,000 shares of the Common Stock of
Accessity and (b) allocated between compensation for consulting services and a
covenant not to compete, in such amounts as shall be mutually acceptable to the
Acquired Companies, Accessity and Philip 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
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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 Barry Siegel referred to in SECTION 13.13
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)).
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 Barry Siegel of the change in control provisions set forth in the
employment agreement between Accessity and Barry Siegel that expires on December
31, 2004.
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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:
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 Barry Siegel 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.
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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.
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 Smith Barney (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 Barry Siegel and Philip 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 BARRY SIEGEL AND PHILIP KART. Prior to Closing, Accessity
shall have (a) 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 Barry Siegel, in form and substance reasonably
satisfactory to PEI, Kinergy and Reenergy, and (b) issued a certain number of
shares of Common Stock of Accessity (the "Siegel Common Stock"), not to exceed
400,000 shares, in consideration of the waiver by Barry Siegel of the change in
control provisions set forth in the employment agreement between Accessity and
Barry Siegel 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
Barry Siegel (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)). The number of
shares of Siegel Common Stock to be issued shall be such number, which shall not
exceed 400,000 shares of Common Stock of Accessity, as shall be equal to a
fraction, the numerator of which is the excess of the value of the waived
severance payment over the combined fair market value of the Accessity
Subsidiaries, both determined as of the Closing Date, and the denominator of
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which is the closing price per share of the Common Stock of Accessity on the
business day before the Closing Date. Without in any way limiting the foregoing,
as part of the disposition of the Accessity Subsidiaries to Barry Siegel, the
facilities of Accessity located in Coral Springs, Florida shall have been duly
subleased to Barry Siegel or an entity owned or controlled by Barry Siegel
(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 Barry Siegel or an entity owned or
controlled by Barry Siegel (which may be Sentaur Corp.). Prior to Closing,
Accessity shall also have obtained from Philip Kart, in consideration for the
execution and delivery by Accessity of the Kart Consulting Agreement described
in Section 12.9 of this Agreement. the waiver by Philip Kart of the change in
control provisions set forth in the employment agreement between Accessity and
Philip Kart 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
Philip Kart (i) a severance payment of 100% of his annual salary on a date
specified in such agreement; (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)).
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 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.
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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'
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
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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 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).
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14.7 CONTINUATION AND PROSECUTION OF LAWSUIT. 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 John
W. Burcham, II, Craig A. Vanderburg, James E. Baiers 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.
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.
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.
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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 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
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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 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.
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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 referred to in SECTION 13.6 above, the sale or other disposition of the
Accessity Subsidiaries (as defined below) to Barry Siegel 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.
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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.
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
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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 Ryan Turner as his, her or
its agent and attorney-in-fact to make and execute and any all such amendments,
modifications, supplements and waivers and hereby acknowledge and agree that a
decision by Ryan Turner 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 Ryan Turner.
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.
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(ii) If to PEI, to:
Pacific Ethanol, Inc.
5711 N. West Avenue
Fresno, CA 93711
Attn: Jeff Manternach
Facsimile no.: (559) 435-1478
with a copy to:
Rutan & Tucker, LLP
611 Anton Blvd., 14th Floor
Costa Mesa, California 92626
Attn: Larry A. Cerutti, Esq.
Facsimile no.: (714) 546-9035
(iii) If to Kinergy, to:
Kinergy Marketing, LLC
1260 Lake Blvd., Suite 225
Davis, CA 95616
Attn: Neil Koehler
Facsimile no.: (530) 750-3019
(iv) If to Reenergy, to:
Reenergy, LLC
225 SE 59th Avenue
Portland, OR 97215
Attn: Tom Koehler
Facsimile no.: (530) 226-7917
(v) If to Accessity, to:
Accessity Corp.
12514 West Atlantic Blvd.
Coral Springs, FL 33071
Attn: Barry Siegel
Facsimile no.: (954) 752-6544
with a copy to:
Meritz & Muenz, LLP
Three Hughes Place
Dix Hills, NY 11746
Attn: Lawrence A. Muenz, Esq.
Facsimile no.: (631) 242-6715
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(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.
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.
-70-
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 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: /s/ Barry Siegel
--------------------------------------
Print Name: Barry Siegel
Title: Chairman and CEO
"ACQUIRED COMPANIES": PACIFIC ETHANOL, INC.
- -------------------
By: /s/ Neil M. Koehler
--------------------------------------
Print Name: Neil M. Koehler
Title: President
KINERGY MARKETING, LLC
By: /s/ Neil M. Koehler
--------------------------------------
Print Name: Neil M. Koehler
Title: Manager and Sole Member
REENERGY, LLC
By: /s/ Neil M. Koehler
--------------------------------------
Print Name: Neil M. Koehler
Title: Manager
-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.
/s/ Neil Koehler
---------------------------------
Neil Koehler
-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: /s/ Thomas Koehler
-----------------------------------
Name: Thomas Koehler
Title: --
Name of Reenergy Member (if other
than individual):
_______________________________________
-76-
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: /s/ Frank R. Lindbloom
-----------------------------------
Name: Frank R. Lindbloom
Title: President
Name of Reenergy Member (if other
than individual):
Flin-Mac, Inc.
---------------------------------------
-76-
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: /s/ Neil M. Koehler
-----------------------------------
Name: Neil M. Koehler
Title: Managing Member
Name of Reenergy Member (if other
than individual):
Kinergy Resources, LLC
---------------------------------------
-76-
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: /s/ Kent Kaulfull
-----------------------------------
Name: Kent Kaulfuss
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
------------------- --------------- ---------------
William Jones 4,800,000 4,800,000
SC Fuels, Inc. 1,500,000 1,500,000
Ryan Turner 1,243,333 1,243,333
Jeannine Campos 6,667 6,667
Tony Campos 100,000 100,000
Cagan McAfee Capital Partners, LLC 1,000,000 1,000,000
Andrea Jones 1,350,000 1,350,000
Bradley Rotter 66,666.67 66,667
Turner Family Trust 20,000 20,000
Clark and Patti Abramson 20,000 20,000
Rogene Scott Turner, as Trustee for
the Rogene Scott Turner Trust dated
9/10/91 3,000 3,000
W. Denman Zirkle 126,666 126,666
Luise Bettina Zirkle Garcia 16,667 16,667
Sigrid Anne Zirkle Carroll 16,667 16,667
William Wade Zirkle 16,667 16,667
Anne Pendleton Zirkle 3,333 3,333
Janet Dumper 5,000 5,000
Robert Dumper 5,000 5,000
B-1
No. of Shares of No. of Accessity
Name of Shareholder Pei Stock Owned Exchange Shares
------------------- --------------- ---------------
Joseph Childrey 40,000 40,000
Micaela Zirkle Shaugnesy 20,000 20,000
Illiquid Assets Trust, FBO Peter H.
Koehler (Jon W. Nickel, Trustee) 16,666.67 16,667
Roger Manternach 16,666.67 16,667
Barry Fay 35,000 35,000
James and Bernice Campbell 2,000 2,000
John Burke 5,000 5,000
McDonald Investments, Inc., FBO
Michael Frangopoulos 10,000 10,000
Samuel Kozasky 2,000 2,000
Dermot Fallon 8,000 8,000
James Burkdoll 4,000 4,000
Howard Kaplan 10,000 10,000
Jay Scott 8,000 8,000
Gregg Mullery 10,000 10,000
Richard DeSousa 4,000 4,000
R. V. Edwards, Jr. 17,000 17,000
Louis Lyras 7,000 7,000
John and Anne Fallon 8,000 8,000
Venkata Kollipara (as Custodian for
Priya Kollipara) 10,000 10,000
B-2
No. of Shares of No. of Accessity
Name of Shareholder Pei Stock Owned Exchange Shares
------------------- --------------- ---------------
Venkata Kollipara (as Custodian for
Puneet Kollipara) 10,000 10,000
Robert and Rosalie Dettle Living
Trust (Robert E. Dettle, Trustee) 10,000 10,000
Michael Kemp 14,000 14,000
Daniel Yates 10,000 10,000
Alex and Lisa Jachno 10,000 10,000
Barbara LaCosse 3,400 3,400
Lakshmana Madala 13,400 13,400
Edward Muransky 7,000 7,000
Alex and Luba Jachno 2,000 2,000
Katharine Moore 7,000 7,000
Armen Arzoomanian 10,000 10,000
David DeSilva 35,000 35,000
Steve Elefter 4,000 4,000
Tom McFaul 3,400 3,400
Elizabeth Reed 17,000 17,000
Venkata Kollipara 10,000 10,000
Kennon White 7,000 7,000
Teixeira Investments, L.P. 34,000 34,000
David Jessen 4,000 4,000
Henry Mauz 8,000 8,000
Lyles Diversified, Inc. 1,000,000 1,000,000
B-3
No. of Shares of No. of Accessity
Name of Shareholder Pei Stock Owned Exchange Shares
------------------- --------------- ---------------
Linden Growth Partners 250,000 250,000
Dan Hollis 250,000 250,000
Lyles Diversified, Inc.* 1,000,000* 1,000,000*
---------- ----------
TOTAL 12,252,200 12,252,200
========== ==========
____________________
* Lyles 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-4
PEI WARRANTHOLDERS AND WARRANTS TO ACQUIRE ACCESSITY COMMON STOCK
-----------------------------------------------------------------
No. of Shares Subject to
Name of Pe Warrantholder Accessity Replacement Warrants Exercise Price Per Share
------------------------ ------------------------------ ------------------------
Cagan-McAfee Capital Partners 14,167 $1.50
Prima Capital Group, Inc. 28,320 $1.50
Frank Siefert 1,000 $1.50
Cagan-McAfee Capital Partners 50,000 $2.00
Jeffrey Manternach 25,000 $0.01
Liviakis Group 1,150,000 $0.0001
--------- -------
TOTAL 1,268,487 $ .0001 - $2.00
========= ================
CONVERTIBLE DEBT
----------------
Lyles Diversified, Inc.* 1,000,000* 1,000,000*
---------- ----------
* Lyles 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
-------------- ------------------- ---------------
Neil Koehler 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
Kent Kaulfuss 23.5% 499,375
Flin-Mac, Inc. 23.5% 499,375
Tom Koehler 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)
E-1