AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
WENTWORTH I, INC.
AND
ENECO, INC.
DATED AS OF OCTOBER 28, 2005
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is made and entered into as of October
28, 2005, by and between Eneco, Inc., a Utah corporation ("Eneco"), and
Wentworth I, Inc., a Delaware corporation ("Company"). Each of the stockholders
of the Company shall be referred to herein collectively as the "Stockholders"
and individually as the "Stockholder".
RECITALS
A. Upon the terms and subject to the conditions of this Agreement (as
defined in Section 1.2) and in accordance with the General Corporation Law of
the State of Delaware (the "DGCL") and the Utah Revised Business Corporation Act
(the "UBCA"), Eneco and the Company intend to enter into a business combination
transaction by means of a merger between Eneco and the Company in which Eneco
will merge with the Company and be the surviving entity, through an exchange of
all the issued and outstanding shares of capital stock of the Company for shares
of common stock of Eneco.
B. The Board of Directors of the Company and Eneco have determined that
the Merger (as defined in Section 1.1) is fair to, and in the best interests of,
their respective companies and their respective stockholders.
C. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the DGCL and UBCA, the Company shall be merged with and
into Eneco (the "Merger"), the separate corporate existence of the Company shall
cease and Eneco shall continue as the surviving corporation. Eneco as the
surviving corporation after the Merger is hereinafter sometimes referred to as
the "Surviving Corporation." The Merger is hereinafter sometimes referred to as
the "Transaction."
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1.2 Effective Time; Closing. Subject to the conditions of this Agreement,
the parties hereto shall cause the Merger to be consummated by filing with the
Secretary of State of the State of Delaware and Utah Department of Commerce,
Division of Corporations, in accordance with the relevant provisions of the DGCL
and UBCA a Certificate of Merger and/or Articles of Merger (the "Certificate of
Merger") (the time of such filing with the Secretary of State of the State of
Delaware and Utah Department of Commerce, Division of Corporations, or such
later time as may be agreed in writing by the Company and Eneco and specified in
the Certificate of Merger, being the "Effective Time") as soon as practicable on
or after the Closing Date (as herein defined). The term "Agreement" as used
herein refers to this Agreement and Plan of Merger, as the same may be amended
from time to time, and all schedules hereto (including the Company Schedule and
Eneco Schedule). Unless this Agreement shall have been terminated pursuant to
Section 8.1, the closing of the Merger (the "Closing") shall take place at the
offices of ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLC, ▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇,
▇▇ ▇▇▇▇▇ at a time and date to be specified by the parties, which shall be no
later than the second business day after the satisfaction or waiver of the
conditions set forth in Article VI, or at such other time, date and location as
the parties hereto agree in writing (the "Closing Date").
1.3 Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement and the applicable provisions of the DGCL
and UBCA. Without limiting the generality of the foregoing, and subject thereto,
at the Effective Time all the property, rights, privileges, powers and
franchises of the Company shall vest in Eneco, and all debts, liabilities and
duties of the Company shall become the debts, liabilities and duties of Eneco.
1.4 Certificate of Incorporation; Bylaws.
(a) At the Effective Time, the Articles of Incorporation of Eneco
shall continue to be the Articles of Incorporation of Eneco until thereafter
amended as provided by law and such Articles of Incorporation of Eneco.
(b) The Bylaws of Eneco shall continue to be the Bylaws of Eneco.
1.5 Directors and Officers. The directors of Eneco shall continue to be
the directors of Eneco immediately after the Effective Time. The officers of
Eneco shall continue to be the officers of Eneco immediately after the Effective
Time.
1.6 Effect on Capital Stock. Subject to the terms and conditions of this
Agreement, at the Effective Time, by virtue of the Merger and this Agreement and
without any action on the part of the Company or the Stockholders, the following
shall occur:
(a) Conversion of Company Common Stock. Each share of common stock,
par value $0.01 per share, of the Company (the "Company Common Stock") issued
and outstanding immediately prior to the Effective Time, other than any shares
of Company Common Stock to be canceled pursuant to Section 1.6(b), will be
automatically converted (subject to Sections 1.6(e) and (f)) into the right to
receive on the Closing Date 0.434450 share of common stock, par value $0.001 per
share, of Eneco (the "Eneco Common Stock") (the "Exchange Ratio") upon surrender
of the certificate representing such share of Company Common Stock in the manner
provided in Section 1.7 (or in the case of a lost, stolen or destroyed
certificate, upon delivery of an affidavit (and bond, if required) in the manner
provided in Section 1.9). If any shares of Company Common Stock outstanding
immediately prior to the Effective Time are unvested or are subject to a
repurchase option, risk of forfeiture or other condition under any applicable
restricted stock purchase agreement or other agreement with the Company, then
the shares of Eneco Common Stock issued in exchange for such shares of Company
Common Stock will also be unvested or subject to the same repurchase option,
risk of forfeiture or other condition, and the certificates representing such
shares of Eneco Common Stock may accordingly be marked with appropriate legends.
The Company shall take all action that may be necessary to ensure that, from and
after the Effective Time, Eneco is entitled to exercise any such repurchase
option or other right set forth in any such restricted stock purchase agreement
or other agreement.
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(b) Cancellation of Eneco-Owned Stock. Each share of Company Common
Stock held by the Company or owned by Eneco or any direct or indirect
wholly-owned subsidiary of the Company or of Eneco immediately prior to the
Effective Time shall be canceled and extinguished without any conversion or
payment in respect thereof.
(c) Adjustments to Exchange Ratio. The Exchange Ratio shall be
equitably adjusted to the extent Eneco issues from the date hereof through the
Closing any shares of Eneco Common Stock or Eneco Preferred Stock (other than
Eneco Common Stock issued upon conversion of Eneco Preferred Stock). The
Exchange Ratio shall also be adjusted to reflect appropriately the effect of any
stock split, reverse stock split, stock dividend (including any dividend or
distribution of securities convertible into Eneco Common Stock or Company Common
Stock), extraordinary cash dividends, reorganization, recapitalization,
reclassification, combination, exchange of shares or other like change with
respect to Eneco Common Stock or Company Common Stock occurring on or after the
date hereof and prior to the Effective Time.
(d) Fractional Shares. No fraction of a share of Eneco Common Stock
will be issued by virtue of the Merger, and each holder of shares of Company
Common Stock who would otherwise be entitled to a fraction of a share of Eneco
Common Stock (after aggregating all fractional shares of Eneco Common Stock that
otherwise would be received by such holder) shall, upon surrender of such
holder's Certificates(s) (as defined in Section 1.7(c)) receive from Eneco one
(1) share of Eneco Common Stock.
1.7 Surrender of Certificates.
(a) Exchange Agent. Colonial Stock Transfer, Eneco's transfer agent
and registrar, shall be designated by the parties hereto to act as the exchange
agent (the "Exchange Agent") in the Merger.
(b) Eneco to Provide Common Stock. Promptly after the Effective
Time, and in no event more than three (3) business days thereafter, Eneco shall
make available to the Exchange Agent, for exchange in accordance with this
Article I, the shares of Eneco Common Stock issuable pursuant to Section 1.6 in
exchange for outstanding shares of Company Common Stock and any dividends or
distributions to which holders of shares of Company Common Stock may be entitled
pursuant to Section 1.7(d).
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(c) Exchange Procedures. Promptly after the Effective Time, and in
no event more than three (3) business days thereafter, Eneco shall cause the
Exchange Agent to mail to each holder of record (as of the Effective Time) of a
certificate or certificates (the "Certificates"), which immediately prior to the
Effective Time represented outstanding shares of Company Common Stock whose
shares were converted into the right to receive shares of Eneco Common Stock
pursuant to Section 1.6: (i) a letter of transmittal in customary form (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent and shall contain such other customary provisions as Eneco may reasonably
specify), (ii) instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing shares of Eneco Common
Stock and any dividends or other distributions pursuant to Section 1.7(d), and
(iii) an investment representation letter containing such warranties,
representations and agreements by holder as set forth in Section 1.12. Upon
surrender of Certificates for cancellation to the Exchange Agent or to such
other agent or agents as may be appointed by Eneco, together with such letter of
transmittal and investment representation letter, duly completed and validly
executed in accordance with the instructions thereto, the holders of such
Certificates shall be entitled to receive in exchange therefor certificates
representing the number of shares of Eneco Common Stock into which their shares
of Company Common Stock were converted into the right to receive at the
Effective Time and any dividends or distributions payable pursuant to Section
1.7(d), and the Certificates so surrendered shall forthwith be canceled. Until
so surrendered, outstanding Certificates will be deemed from and after the
Effective Time, to evidence only the right to receive the applicable number of
shares of Eneco Common Stock issuable pursuant to Section 1.6(a).
(d) Distributions With Respect to Unexchanged Shares. No dividends
or other distributions declared or made after the date of this Agreement with
respect to Eneco Common Stock with a record date after the Effective Time will
be paid to the holders of any unsurrendered Certificates with respect to the
shares of Eneco Common Stock to be issued upon surrender thereof until the
holders of record of such Certificates shall surrender such Certificates.
Subject to applicable law, following surrender of any such Certificates with a
properly completed letter of transmittal and investment representation letter,
the Exchange Agent shall promptly deliver to the record holders thereof, without
interest, certificates representing shares of Eneco Common Stock issued in
exchange therefor and the amount of any such dividends or other distributions
with a record date after the Effective Time theretofore paid with respect to
such shares of Eneco Common Stock.
(e) Transfers of Ownership. If certificates representing shares of
Eneco Common Stock are to be issued in a name other than that in which the
Certificates surrendered in exchange therefor are registered, it will be a
condition of the issuance thereof that the Certificates so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the persons
requesting such exchange will have paid to Eneco or any agent designated by it
any transfer or other taxes required by reason of the issuance of certificates
representing shares of Eneco Common Stock in any name other than that of the
registered holder of the Certificates surrendered, or established to the
satisfaction of Eneco or any agent designated by it that such tax has been paid
or is not payable.
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(f) Required Withholding. Each of the Exchange Agent and Eneco shall
be entitled to deduct and withhold from any consideration payable or otherwise
deliverable pursuant to this Agreement to any holder or former holder of Company
Common Stock such amounts as are required to be deducted or withheld therefrom
under the Code or under any provision of state, local or foreign tax law or
under any other applicable legal requirement. To the extent such amounts are so
deducted or withheld, such amounts shall be treated for all purposes under this
Agreement as having been paid to the person to whom such amounts would otherwise
have been paid.
(g) Termination of Exchange Agent Funding. Eneco Common Stock held
by the Exchange Agent which have not been delivered to holders of Certificates
within six months after the Effective Time shall promptly be paid or delivered,
as appropriate, to Eneco, and thereafter holders of Certificates who have not
theretofore complied with the exchange procedures outlined in and contemplated
by this Section 1.7 shall thereafter look only to Eneco (subject to abandoned
property, escheat and similar laws) only as general creditors thereof for their
claim for shares of Eneco Common Stock and any dividends or distributions
pursuant to Section 1.7(d) with respect to Eneco Common Stock to which they are
entitled.
(h) No Liability. Notwithstanding anything to the contrary in this
Section 1.7, neither the Exchange Agent, Eneco nor the Company shall be liable
to a holder of shares of Eneco Common Stock or Company Common Stock for any
amount properly paid to a public official pursuant to any applicable abandoned
property, escheat or similar law.
1.8 No Further Ownership Rights in Company Common Stock. All shares of
Eneco Common Stock issued in accordance with the terms hereof shall be deemed to
have been issued in full satisfaction of all rights pertaining to such shares of
Company Common Stock, and there shall be no further registration of transfers on
the records of Eneco of shares of Company Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to Eneco for any reason, they shall be canceled and
exchanged as provided in this Article I.
1.9 Lost, Stolen or Destroyed Certificates. In the event that any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, certificates
representing the shares of Eneco Common Stock which the shares of Company Common
Stock formerly represented by such Certificates were converted into the right to
receive pursuant to Section 1.6 and any dividends or distributions payable
pursuant to Section 1.7(d); provided, however, that Eneco may, in its discretion
and as a condition precedent to the issuance of such certificates representing
shares of Eneco Common Stock and other distributions, require the owner of such
lost, stolen or destroyed Certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against Eneco
or the Exchange Agent with respect to the Certificates alleged to have been
lost, stolen or destroyed.
1.10 Tax Consequences. It is intended by the parties hereto that the
Merger shall constitute a reorganization within the meaning of Section 368 of
the Code. The parties hereto adopt this Agreement as a "plan of reorganization"
within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States
Income Tax Regulations.
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1.11 Taking of Necessary Action; Further Action. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest Eneco with full right, title and
possession to all assets, property, rights, privileges, powers and franchises of
the Company, the officers and directors of the Company will take all such lawful
and necessary action.
1.12 Investment Representation. All shares of Eneco Common Stock issued in
accordance with the terms hereof shall, when issued, be restricted shares and
may not be sold, transferred or otherwise disposed of by the holders thereof
without registration under the Securities Act of 1933, as amended ("Securities
Act") or an available exemption from registration under the Securities Act. The
certificates representing the shares of Eneco Common Stock issued in accordance
with the terms hereof will contain the appropriate restrictive legends, and
Eneco shall issue appropriate stop-transfer instructions to the Exchange Agent
with respect to such shares of Eneco Common Stock. Each holder of record (as of
the Effective Time) of Certificates, which immediately prior to the Effective
Time represented outstanding shares of Company Common Stock whose shares were
converted into the right to receive shares of Eneco Common Stock pursuant to
Section 1.6, shall provide an investment representation letter containing, among
other things, the following:
(a) Each holder has and shall transfer, good and marketable title to
the shares of Company Common Stock owned by such holder, free and clear of all
liens, claims, charges, encumbrances, pledges, mortgages, security interests,
options, rights to acquire, proxies, voting trusts or similar agreements,
restrictions on transfer or adverse claims of any nature whatsoever ("Liens").
(b) Each holder is acquiring the shares of Eneco Common Stock for
investment for holder's own account and not as a nominee or agent, and not with
a view to the resale or distribution of any part thereof, and such holders have
no present intention of selling, granting any participation in, or otherwise
distributing the same. Each holder further represents that he does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participation to such person or to any third person, with
respect to any of the shares of Eneco Common Stock.
(c) Each holder understands that shares of Eneco Common Stock are
not registered under the Securities Act, that the issuance of shares of Eneco
Common Stock is intended to be exempt from registration under the Securities Act
pursuant to Section 4(2) thereof or such other available exemptions under the
Securities Act, and that Eneco's reliance on such exemption is predicated on the
holder's representations set forth herein. Each holder represents and warrants
that: (i) he can bear the economic risk of his respective investments, and (ii)
he possesses such knowledge and experience in financial and business matters
that he is capable of evaluating the merits and risks of the investment in
shares of Eneco Common Stock.
(d) Holders acknowledge that neither the SEC, nor the securities
regulatory body of any state has received, considered or passed upon the
accuracy or adequacy of the information and representations made in this
Agreement.
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(e) Holders acknowledge that they have carefully reviewed such
information as each of them deemed necessary to evaluate an investment in shares
of Eneco Common Stock. To the full satisfaction of each holder, he has been
furnished all materials that he has requested relating to Eneco and the issuance
of shares of Eneco Common Stock hereunder, and each holder has been afforded the
opportunity to ask questions of Eneco's representatives to obtain any
information necessary to verify the accuracy of any representations or
information made or given to the holders. Notwithstanding the foregoing, nothing
herein shall derogate from or otherwise modify the representations and
warranties of Eneco set forth in this Agreement, on which each of the holders
has relied in making an exchange of his shares of Eneco Common Stock.
(f) Each holder understands that shares of Eneco Common Stock may
not be sold, transferred, or otherwise disposed of without registration under
the Securities Act or an available exemption therefrom, and that in the absence
of an effective registration statement covering shares of Eneco Common Stock or
any available exemption from registration under the Securities Act, the shares
of Eneco Common Stock may have to be held indefinitely.
(g) Each holder agrees to be bound by the terms and conditions
applicable to them under Section 1.13 hereof and, upon execution of the
foregoing investment representation, each such Holder shall be a third-party
beneficiary to the provisions contained in Section 1.13 and may enforce such
provisions as if such Holder was a signatory to this Agreement. In the event,
the holder does not agree to be bound by the terms and conditions under Section
1.13 hereof or otherwise fails to return a duly executed investment
representation letter to the Exchange Agent within thirty (30) days following
the Closing, such holder shall not be afforded the rights to include his shares
of Eneco Common stock in the Registration Statement. Each holder acknowledges
and agrees that there can be no assurance that his shares of Eneco Common Stock
will become registered under the Securities Act.
(h) The representations, warranties and agreements of each holder
contained in the investment representation letter shall survive the Closing of
the Transaction.
1.13 Registration Statement. Whenever Eneco proposes to register any of
its securities under the Securities Act (other than a registration on Form S-4
or S-8 or any successor or similar forms) (the "Registration Statement"), Eneco
shall give prompt written notice (but in no event less than fifteen (15) days
before the anticipated filing date) to all holders of Registrable Securities (as
defined below), and such notice shall describe the proposed registration and
distribution and offer to all holders of Registrable Securities the opportunity
to register for re-offer and re-sale the number of Registrable Securities as
each such holder may request. Eneco shall include in such registration all
Registrable Securities with respect to which Eneco has received written requests
for inclusion therein within ten (10) days after the holders' receipt of Eneco's
notice. For purposes hereof, "Registrable Securities" shall mean the shares of
Eneco Common Stock into which the shares of Company Common Stock were converted
into the right to receive at the Effective Time, upon the holder being entitled
to right to receive certificates representing such Eneco Common Stock after
complying with the provisions of Section 1.7(d) hereof (or subsequent holders,
referred to together as the "Holders").
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(a) Eneco shall use its reasonable commercial efforts to keep the
Registration Statement which registers the Registrable Securities pursuant
hereto effective and the related prospectus current until the earlier of: (i)
the date by which all of the Registrable Securities has been sold, or (ii) the
date on which all Registrable Securities may be sold without restriction under
Rule 144(k) promulgated under the Securities Act.
(b) Eneco shall notify each Holder of such Registrable Securities as
expeditiously as possible following the effectiveness of the Registration
Statement on which the Registrable Securities are registered, and/or of any
request by the SEC for the amending or supplementing of such Registration
Statement or prospectus. If the prospectus is amended to comply with the
requirements of the Securities Act, the Holders, if requested by Eneco, shall
immediately cease making offers of the Registrable Securities and return all
prospectuses to Eneco, and Eneco shall promptly provide the Holders with revised
prospectuses to enable the Holders to resume making offers of the Registrable
Securities. Eneco shall promptly notify the Holders, if after delivery of a
prospectus to the Holders, that, in the judgment of Eneco, it is advisable to
suspend use of the prospectus delivered to the Holders due to pending material
developments or other events that have not yet been publicly disclosed and as to
which Eneco believes public disclosure would be detrimental to Eneco. Upon
receipt of such notice, each such Holder shall immediately discontinue any sales
of Registrable Securities pursuant to such Registration Statement until such
Holder has received copies of a supplemented or amended prospectus or until such
Holder is advised in writing by Eneco that the then current prospectus may be
used and has received copies of any additional or supplemental filings that are
incorporated or deemed incorporated by reference in such prospectus.
Notwithstanding anything to the contrary herein, Eneco shall not exercise its
rights under this subsection to suspend sales of Registrable Securities for a
period in excess of 60 days in any 365-day period.
(c) Eneco shall indemnify the Holders of the Registrable Securities
to be sold pursuant to the Registration Statement hereunder, the officers and
directors of each Holder, each underwriter of such Registrable Securities and
each person, if any, who controls such Holders or underwriters within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Securities
Exchange Act of 1934, as amended ("Exchange Act"), or any state securities law
or regulation, against all loss, claim, damage, expense or liability (including
all reasonable attorneys' fees and other expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever incurred by
the indemnified party in any action or proceeding between (A) the indemnified
party and any third party or otherwise or (B) the indemnitor and the indemnified
party only with respect to an action or proceeding to enforce the
indemnification provisions of this Section 1.13(c) to which any of them may
become subject under the Securities Act, the Exchange Act or any other statute
or at common law or otherwise under the laws of any of the United States or
foreign countries, arising from the Registration Statement or based upon any
untrue statement or alleged untrue statement of a material fact contained in (x)
any preliminary prospectus, the Registration Statement or prospectus (as from
time to time each may be amended and supplemented); (y) any post-effective
amendment or amendments or any new registration statement and prospectus in
which is included the Registrable Securities; or (z) any application or other
document or written communication (collectively called "application") executed
by Eneco or based upon written information furnished by Eneco in any
jurisdiction in order to qualify the Registrable Securities under the securities
laws thereof or filed with the SEC, any state securities commission or agency or
any securities exchange; or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, unless such statement or omission is made in reliance upon, and in
conformity with, written information furnished to Eneco by and with respect to
such Holders ("Holder Information") expressly for use in any preliminary
prospectus, the Registration Statement or prospectus, or any amendment or
supplement thereof, or in any application, as the case may be, or unless the
indemnities failed to deliver a final prospectus in which the material
misstatement or omission was corrected. Subject to the foregoing provisions of
this paragraph, Eneco shall reimburse such Holder, underwriter and each such
controlling person for any legal or any other expenses reasonably incurred by
such Holder, underwriter or controlling person in connection with investigating
or defending any such loss, claim, damage, liability or action. Eneco agrees
promptly to notify such Holders of the commencement of any litigation or
proceedings against Eneco or any of its officers, directors or controlling
persons in connection with the issue and sale or resale of the Registrable
Securities or in connection with the Registration Statement or prospectus.
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(d) The Holders agree to indemnify and hold harmless Eneco, the
officers and directors of Eneco and each person, if any, who controls Eneco
within the meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act against all loss, claim, damage, expense or liability to which
Eneco or such controlling person may become subject, under the Securities Act or
otherwise insofar as such losses, claims, damages, expenses or liabilities (or
actions in respect thereof) arise out of or are based upon Holder Information
that is included or relied upon by Eneco in the Registration Statement or
prospectus or any amendment or supplement thereto or in any application; and
shall reimburse Eneco, officer, director and each such controlling person for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action,
provided that such loss, claim, damage, expense or liability is found ultimately
to arise out of or be based upon such Holder Information.
(e) Any party entitled to indemnification hereunder ("Indemnified
Party") shall permit Eneco to assume the defense of any such claim or any
litigation resulting therefrom; provided, that counsel for Eneco, who will
conduct the defense of such claim or litigation, shall be approved by the
Indemnified Party (whose approval shall not be unreasonably withheld). The
Indemnified Party may participate in such defense at such party's expense;
provided, however, that Eneco shall pay such expense if representation of such
Indemnified Party by the counsel retained by Eneco would be inappropriate due to
actual or potential differing interests between the Indemnified Party and any
other party represented by such counsel in such proceeding; provided further
that in no event shall Eneco be required to pay the expenses of more than one
law firm per jurisdiction as counsel for the Indemnified Party. Eneco is also
responsible for the expenses of such defense if Eneco does not elect to assume
such defense. Eneco, in the defense of any such claim or litigation may not,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect of such claim or litigation, and no
Indemnified Party may consent to entry of any judgment or settle such claim or
litigation without the prior written consent of Eneco, which consent may not be
unreasonably withheld.
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(f) Eneco agrees that during the period commencing on the
effectiveness of any registration statement with respect to Eneco's securities
and continuing until the Holder can sell his Registrable Securities without
restriction under Rule 144(k) promulgated under the Securities Act and all
restrictive legends under the Securities Act are removed from the certificates
representing such securities and any stop transfer order for such certificates
is removed, it shall timely file all reports due pursuant to the Exchange Act
and it shall not terminate its obligation to file periodic reports under the
Exchange Act or Securities Act.
(g) Notwithstanding anything to the contrary contained herein, such
registration is not required to be continued or filed after the date on which
all Registrable Securities may be sold without restriction under Rule 144(k)
promulgated under the Securities Act.
(h) The registration rights granted to the Holders inure to the
benefit of all the Holder's successors, heirs, pledges, assignees, transferees
and purchasers of Eneco Common Stock, subject to the limitations imposed by
interpretations of the Commission regarding selling security holder registration
statements.
(i) Each Holder agrees and covenants that he shall promptly
cooperate with all reasonable requests of Eneco in connection with the filing of
the Registration Statement by Eneco, including but not limited to providing
written information regarding the Holder and the distribution proposed by the
Holder, the execution of documents required in connection with the filing or
requested by the underwriter or placement agent, if any, for such filing,
including but not limited to NASD questionnaires.
(j) Notwithstanding anything contained herein to the contrary, the
provisions of this Section 1.13 shall survive (and not be affected in any
respect by) the Closing.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF ENECO
Eneco hereby represents and warrants to, and covenants with, the Company,
as follows:
2.1 Organization and Qualification.
(a) Eneco is a corporation duly incorporated or organized, validly
existing and in good standing under the laws of the State of Utah and has the
requisite corporate power and authority to own, lease and operate its assets and
properties and to carry on its business as it is now being or currently planned
by Eneco to be conducted. Eneco is in possession of all franchises, grants,
authorizations, licenses, permits, easements, consents, certificates, approvals
and orders ("Approvals") necessary to own, lease and operate the properties it
purports to own, operate or lease and to carry on its business as it is now
being or currently planned by Eneco to be conducted, except where the failure to
have such Approvals could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect (as defined in Section 10.2 (b)) on
Eneco. Complete and correct copies of the articles of incorporation or
organization and by-laws (or other comparable governing instruments with
different names) (collectively referred to herein as "Charter Documents") of
Eneco, as amended and currently in effect, have been heretofore delivered to the
Company. Eneco is not in violation of any of the provisions of Eneco's Charter
Documents.
10
(b) Eneco is duly qualified or licensed to do business as a foreign
corporation and is in good standing in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its activities
makes such qualification or licensing necessary, except for such failures to be
so duly qualified or licensed and in good standing that could not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect on
Eneco.
(c) The minute books of Eneco contain true, complete and accurate
records of all meetings and consents in lieu of meetings of its Board of
Directors (and any committees thereof), similar governing bodies and
stockholders ("Corporate Records"), since the time of Eneco's organization.
Copies of such Corporate Records of Eneco have been heretofore delivered to the
Company.
(d) The stock transfer and ownership records of Eneco contain true,
complete and accurate records of the stock ownership as of the date of such
records and the transfers involving the capital stock of Eneco since the time of
Eneco's organization. Copies of such Stock Records of Eneco have been heretofore
delivered to the Company.
2.2 Subsidiaries. The Eneco has no subsidiaries.
2.3 Capitalization.
(a) The authorized capital stock of Eneco consists of 25,000,000
shares of common stock, par value $0.001 per share ("Eneco Common Stock"), and
7,500,000 shares of preferred stock, par value $0.001 per share ("Eneco
Preferred Stock"). At the close of business on the business day prior to the
date hereof, (i) 12,196,018 shares of Eneco Common Stock were issued and
outstanding, all of which are validly issued, fully paid and nonassessable; (ii)
2,466,373 shares of Eneco Preferred Stock, all of which are validly issued,
fully paid and nonassessable, each of which shall be converted into Eneco Common
Stock prior to and as a condition of the Closing; (iii) 2,193,334 shares of
Common Stock were reserved for issuance upon the exercise of outstanding options
to purchase Eneco Common Stock granted to certain employees of Eneco and other
parties ("Eneco Stock Options"), (iv) 1,618,858 shares of Eneco Common Stock
were reserved for issuance upon the exercise of outstanding warrants to purchase
Eneco Common Stock ("Eneco Warrants"), (v) 2,466,373 shares of Eneco Common
Stock were reserved for issuance upon the conversion of the outstanding shares
of Eneco Preferred Stock; and (vi) as of September 30, 2005, approximately
2,085,546 shares of Eneco Common Stock were reserved for issuance upon the
conversion of outstanding convertible notes ("Eneco Convertible Securities"),
although the convertible notes are also convertible into the same terms and
conditions as any Company debt or equity in which proceeds of $1,000,000 or more
are raised. All shares of Eneco Common Stock subject to issuance as aforesaid,
upon issuance on the terms and conditions specified in the instrument pursuant
to which they are issuable, will be duly authorized, validly issued, fully paid
and nonassessable. Except as described in Schedule 2.3 hereto, there are no
commitments or agreements of any character to which Eneco is bound obligating
Eneco to accelerate the vesting of any Eneco Stock Option as a result of the
Transaction. All outstanding securities of Eneco have been issued and granted in
compliance with (i) all applicable securities laws and (in all material
respects) other applicable laws and regulations, and (ii) all requirements set
forth in any applicable Contracts. Eneco has heretofore delivered to the Company
true, complete an accurate copies of Eneco Stock Options, Eneco Warrants and
Eneco Convertible Securities including any and all documents and agreements
relating thereto.
11
(b) Except as set forth in Schedule 2.3 hereto or in Section 2.3(a),
there are no equity securities, partnership interests or similar ownership
interests of any class of any equity security of Eneco, or any securities
exchangeable or convertible into or exercisable for such equity securities,
partnership interests or similar ownership interests, issued, reserved for
issuance or outstanding. Except as set forth in Schedule 2.3 hereof or as set
forth in Section 2.3(a) hereof there are no subscriptions, options, warrants,
equity securities, partnership interests or similar ownership interests, calls,
rights (including preemptive rights), commitments or agreements of any character
to which Eneco is a party or by which it is bound obligating Eneco to issue,
deliver or sell, or cause to be issued, delivered or sold, or repurchase, redeem
or otherwise acquire, or cause the repurchase, redemption or acquisition of, any
shares of capital stock, partnership interests or similar ownership interests of
Eneco or obligating Eneco to grant, extend, accelerate the vesting of or enter
into any such subscription, option, warrant, equity security, call, right,
commitment or agreement.
(c) Except as contemplated by this Agreement and except as set forth
in Schedule 2.3 hereto, there are no registration rights, and there is no voting
trust, proxy, rights plan, anti-takeover plan or other agreement or
understanding to which Eneco is a party or by which Eneco is bound with respect
to any equity security of any class of Eneco.
2.4 Authority Relative to this Agreement. Eneco has all necessary
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder and, to consummate the transactions
contemplated hereby (including the Transaction). The execution and delivery of
this Agreement and the consummation by Eneco of the transactions contemplated
hereby (including the Transaction) have been duly and validly authorized by all
necessary corporate action on the part of Eneco (including the approval by its
Board of Directors), and no other corporate proceedings on the part of Eneco are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby, other than the approval of this Agreement and the
Transaction by a majority of Eneco's stockholders. This Agreement has been duly
and validly executed and delivered by Eneco and, assuming the due authorization,
execution and delivery thereof by the other parties hereto, constitutes the
legal and binding obligation of Eneco, enforceable against Eneco in accordance
with its terms, except as may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally and by general principles of equity and public policy.
12
2.5 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by Eneco does not,
and the performance of this Agreement by Eneco shall not, (i) conflict with or
violate Eneco's Charter Documents, (ii) subject to obtaining the adoption of
this Agreement and the Transaction by the stockholders of Eneco, conflict with
or violate any Legal Requirements, or (iii) result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or materially impair Eneco's rights or alter the
rights or obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of Eneco
pursuant to, any Contracts, except, with respect to clauses (ii) or (iii), for
any such conflicts, violations, breaches, defaults or other occurrences that
would not, individually and in the aggregate, have a Material Adverse Effect on
Eneco.
(b) The execution and delivery of this Agreement by Eneco does not,
and the performance of its obligations hereunder will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
court, administrative agency, commission, governmental or regulatory authority,
domestic or foreign (a "Governmental Entity"), except (i) for applicable
requirements, if any, of the Securities Act, the Exchange Act, state securities
laws ("Blue Sky Laws"), and the rules and regulations thereunder, and
appropriate documents with the relevant authorities of other jurisdictions in
which Eneco is qualified to do business, and (ii) where the failure to obtain
such consents, approvals, authorizations or permits, or to make such filings or
notifications, would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on Eneco or, after the Closing,
Eneco, or prevent consummation of the Transaction or otherwise prevent the
parties hereto from performing their obligations under this Agreement.
2.6 Compliance. To the knowledge of Eneco, it has complied with and is not
in violation of any Legal Requirements with respect to the conduct of its
business, or the ownership or operation of its business, except for failures to
comply or violations which, individually or in the aggregate, have not had and
are not reasonably likely to have a Material Adverse Effect on Eneco. To Eneco's
knowledge, the businesses and activities of Eneco have not been and are not
being conducted in violation of any Legal Requirements. Eneco is not in default
or violation of any term, condition or provision of any applicable Charter
Documents or Contracts. Except as set forth on Schedule 2.6, to Eneco's
knowledge no written notice of non-compliance with any Legal Requirements has
been received by Eneco (and Eneco has no knowledge of any such notice delivered
to any other Person). Except as set forth on Schedule 2.6, Eneco is not in
violation of any term of any contract or covenant relating to employment,
patents, proprietary information disclosure, non-competition or
non-solicitation.
2.7 Financial Statements.
(a) Eneco has provided to the Company a correct and complete copy of
the audited financial statements (including, in each case, any related notes
thereto) of Eneco for the fiscal years ended December 31, 2003 and 2004,
prepared in accordance with the published rules and regulations of any
applicable Governmental Entity and with generally accepted accounting principles
of the United States ("U.S. GAAP") applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto), were audited
in accordance with the auditing standards of the Public Company Accounting
Oversight Board ("PCAOB") by an independent accountant registered with PCAOB,
and each fairly presents in all material respects the financial position of
Eneco at the respective dates thereof and the results of its operations and cash
flows for the periods indicated, and each does not contain any untrue statement
of a material fact or omit to state a 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.
13
(b) Eneco has provided to the Company a correct and complete copy of
the unaudited financial statements (including, in each case, any related notes
thereto) of Eneco for the three-month and six-month periods ended June 30, 2005
and 2004, complied as to form in all material respects with, and prepared in
accordance with U.S. GAAP applied on a consistent basis throughout the period
involved (except as may be indicated in the notes thereto), were reviewed by an
independent accountant registered with PCAOB, and such statements fairly present
in all material respects the financial position of each at the dates thereof and
the results of its operations and cash flows for the periods indicated, except
that the unaudited interim financial statements were or are subject to normal
adjustments which were not or are not expected to have a Material Adverse Effect
on Eneco.
(c) The books of account and other financial records of Eneco have
been maintained in accordance with good business practice.
2.8 No Undisclosed Liabilities. Except as set forth in Schedule 2.8
hereto, Eneco has no liabilities (absolute, accrued, contingent or otherwise) of
a nature required to be disclosed on a balance sheet or in the related notes to
the financial statements prepared in accordance with U.S. GAAP which are,
individually or in the aggregate, material to the business, results of
operations or financial condition of Eneco, except: (i) liabilities provided for
in or otherwise disclosed in the interim balance sheets of Eneco as of June 30,
2005 prepared in accordance with U.S. GAAP, which have been delivered to the
Company, and (ii) such liabilities arising in the ordinary course of Eneco's
business since June 30, 2005, none of which would have a Material Adverse Effect
on Eneco.
2.9 Absence of Certain Changes or Events. Except as set forth in Schedule
2.9 hereto or in the interim balance sheets of Eneco as of June 30, 2005
(including the notes thereto), since June 30, 2005, there has not been: (i) any
Material Adverse Effect on Eneco, (ii) any declaration, setting aside or payment
of any dividend on, or other distribution (whether in cash, stock or property)
in respect of, any of Eneco's stock, or any purchase, redemption or other
acquisition by Eneco of any of Eneco's capital stock or any other securities of
Eneco or any options, warrants, calls or rights to acquire any such shares or
other securities, (iii) any split, combination or reclassification of any of
Eneco's capital stock, (iv) any granting by Eneco of any increase in
compensation or fringe benefits, except for normal increases of cash
compensation in the ordinary course of business consistent with past practice,
or any payment by Eneco of any bonus, except for bonuses made in the ordinary
course of business consistent with past practice, or any granting by Eneco of
any increase in severance or termination pay or any entry by Eneco into any
currently effective employment, severance, termination or indemnification
agreement or any agreement the benefits of which are contingent or the terms of
which are materially altered upon the occurrence of a transaction involving
Eneco of the nature contemplated hereby, (v) entry by Eneco into any licensing
or other agreement with regard to the acquisition or disposition of any
Intellectual Property (as defined in Section 3.20 hereof) other than licenses in
the ordinary course of business consistent with past practice or any amendment
or consent with respect to any licensing agreement filed or required to be filed
by Eneco with respect to any Governmental Entity, (vi) any material change by
Eneco in its accounting methods, principles or practices, (vii) any change in
the auditors of Eneco, (vii) any issuance of capital stock of Eneco, or (viii)
any revaluation by Eneco of any of their respective assets, including, without
limitation, writing down the value of capitalized inventory or writing off notes
or accounts receivable or any sale of assets of Eneco other than in the ordinary
course of business.
14
2.10 Litigation. Except as disclosed in Schedule 2.10 hereto, there are no
claims, suits, actions or proceedings pending, or to the knowledge of Eneco,
threatened against Eneco, before any court, governmental department, commission,
agency, instrumentality or authority, or any arbitrator that seeks to restrain
or enjoin the consummation of the transactions contemplated by this Agreement or
which could reasonably be expected, either singularly or in the aggregate with
all such claims, actions or proceedings, to have a Material Adverse Effect on
Eneco or have a Material Adverse Effect on the ability of the parties hereto to
consummate the Transaction.
2.11 Employee Benefit Plans.
(a) Except as disclosed on Schedule 2.11, all employee compensation,
incentive, fringe or benefit plans, programs, policies, commitments or other
arrangements (whether or not set forth in a written document) covering any
active or former employee, director or consultant of Eneco, or any trade or
business (whether or not incorporated) which is under common control with Eneco,
with respect to which Eneco has liability (collectively, the "Plans") has been
maintained and administered in all material respects in compliance with its
terms and with the requirements prescribed by any and all statutes, orders,
rules and regulations which are applicable to such Plans, and all liabilities
with respect to the Plans have been properly reflected in the financial
statements of Eneco. No suit, action or other litigation (excluding claims for
benefits incurred in the ordinary course of Plan activities) has been brought,
or to the knowledge of Eneco is threatened, against or with respect to any such
Plan. There are no audits, inquiries or proceedings pending or, to the knowledge
of Eneco, threatened by any governmental agency with respect to any Plans.
Except as disclosed on Schedule 2.11, all contributions, reserves or premium
payments required to be made or accrued as of the date hereof to the Plans have
been timely made or accrued. Except as disclosed on Schedule 2.11, Eneco does
not have any plan or commitment to establish any new Plan, to modify any Plan
(except to the extent required by law or to conform any such Plan to the
requirements of any applicable law, in each case as previously disclosed to
Eneco in writing, or as required by this Agreement), or to enter into any new
Plan. Each Plan can be amended, terminated or otherwise discontinued after the
Closing in accordance with its terms, without liability to Eneco (other than
ordinary administration expenses and expenses for benefits accrued but not yet
paid).
(b) Except as disclosed on Schedule 2.11 hereto or set forth herein
in Section 2.9, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute, bonus
or otherwise) becoming due to any Stockholder, director or employee of Eneco
under any Plan or otherwise, (ii) materially increase any benefits otherwise
payable under any Plan, or (iii) result in the acceleration of the time of
payment or vesting of any such benefits.
15
2.12 Labor Matters. Except as disclosed in Schedule 2.12 hereto, Eneco is
not a party to any collective bargaining agreement or other labor union contract
applicable to persons employed by Eneco nor does Eneco know of any activities or
proceedings of any labor union to organize any such employees.
2.13 Restrictions on Business Activities. Except as disclosed on Schedule
2.13 hereto, to Eneco's knowledge there is no agreement, commitment, judgment,
injunction, order or decree binding upon Eneco or to which Eneco is a party
which has or could reasonably be expected to have the effect of prohibiting or
materially impairing any business practice of Eneco, any acquisition of property
by Eneco or the conduct of business by Eneco as currently conducted other than
such effects, individually or in the aggregate, which have not had and could not
reasonably be expected to have a Material Adverse Effect on Eneco.
2.14 Title to Property.
(a) All real property owned by Eneco (including improvements and
fixtures thereon, easements and rights of way) (the "Real Property") is shown or
reflected on the interim balance sheets of Eneco prepared in accordance with
U.S. GAAP. Eneco has good, valid and marketable fee simple title to the Real
Property, and except as set forth in the financial statements of Eneco prepared
in accordance with U.S. GAAP or on Schedule 2.14 hereto, all of the Real
Property is held free and clear of (i) all leases, licenses and other rights to
occupy or use the Real Property and (ii) all Liens, rights of way, easements,
restrictions, exceptions, variances, reservations, covenants or other title
defects or limitations of any kind, other than liens for taxes not yet due and
payable and such liens or other imperfections of title, if any, as do not
materially detract from the value of or materially interfere with the present
use of the property affected thereby. Schedule 2.14 hereto is a list of all
options or other contracts under which Eneco has a right to acquire any interest
in real property.
(b) All leases of real property held by Eneco and all personal
property and other property and assets of Eneco (other than Real Property)
owned, used or held for use in connection with the business of Eneco (the
"Personal Property") are shown or reflected on the interim balance sheets of
Eneco prepared in accordance with U.S. GAAP. Eneco owns and has good and
marketable title to the Personal Property, and all such assets and properties
are in each case held free and clear of all Liens, except for Liens disclosed in
the financial statements of Eneco prepared in accordance with U.S. GAAP or in
Schedule 2.14 hereto, none of which Liens has or will have, individually or in
the aggregate, a Material Adverse Effect on such property or on the present or
contemplated use of such property in the businesses of Eneco.
(c) All leases pursuant to which Eneco leases from others material
real or personal property are valid and effective in accordance with their
respective terms, and there is not, under any of such leases, any existing
material default or event of default of Eneco or, to Eneco's knowledge, any
other party (or any event which with notice or lapse of time, or both, would
constitute a material default), except where the lack of such validity and
effectiveness or the existence of such default or event of default could not
reasonably be expected to have a Material Adverse Effect on Eneco.
16
2.15 Taxes.
(a) Definition of Taxes. For the purposes of this Agreement, "Tax"
or "Taxes" refers to any and all federal, state, local and foreign taxes,
including, without limitation, gross receipts, income, profits, sales, use,
occupation, value added, ad valorem, transfer, franchise, withholding, payroll,
recapture, employment, excise and property taxes, assessments, governmental
charges and duties together with all interest, penalties and additions imposed
with respect to any such amounts and any obligations under any agreements or
arrangements with any other person with respect to any such amounts and
including any liability of a predecessor entity for any such amounts.
(b) Tax Returns and Audits. (c) Except as set forth in Schedule 2.15
hereto:
(i) Eneco has timely filed all federal, state, local and foreign
returns, estimates, information statements and reports relating to Taxes
("Returns") required to be filed by Eneco with any Tax authority prior to the
date hereof, except such Returns which are not material to Eneco. All such
Returns are true, correct and complete in all material respects. Eneco has paid
all Taxes shown to be due on such Returns.
(ii) All Taxes that Eneco is required by law to withhold or collect
have been duly withheld or collected, and have been timely paid over to the
proper governmental authorities to the extent due and payable.
(iii) Eneco has not been delinquent in the payment of any material
Tax nor is there any material Tax deficiency outstanding, proposed or assessed
against Eneco, nor has Eneco executed any unexpired waiver of any statute of
limitations on or extending the period for the assessment or collection of any
Tax.
(iv) No audit or other examination of any Return of Eneco by any Tax
authority is presently in progress, nor has Eneco been notified of any request
for such an audit or other examination.
(v) No adjustment relating to any Returns filed by Eneco has been
proposed in writing, formally or informally, by any Tax authority to Eneco or
any representative thereof.
(vi) Eneco has no liability for any material unpaid Taxes which have
not been accrued for or reserved on Eneco's balance sheets included in the
audited financial statements for the most recent fiscal year ended, whether
asserted or unasserted, contingent or otherwise, which is material to Eneco,
other than any liability for unpaid Taxes that may have accrued since the end of
the most recent fiscal year in connection with the operation of the business of
Eneco in the ordinary course of business, none of which is material to the
business, results of operations or financial condition of Eneco.
17
(vii) Eneco has not taken any action and does not know of any fact,
agreement, plan or other circumstance that is reasonably likely to prevent the
Transaction from qualifying as a reorganization within the meaning of Section
368(a) of the Code.
2.16 Environmental Matters. (a) Except as disclosed in Schedule 2.16
hereto and except for such matters that, individually or in the aggregate, are
not reasonably likely to have a Material Adverse Effect to Eneco's knowledge:
(i) Eneco has complied with all applicable Environmental Laws; (ii) the
properties currently owned or operated by Eneco (including soils, groundwater,
surface water, buildings or other structures) are not contaminated with any
Hazardous Substances; (iii) the properties formerly owned or operated by Eneco
were not contaminated with Hazardous Substances during the period of ownership
or operation by Eneco; (iv) Eneco is not subject to liability for any Hazardous
Substance disposal or contamination on any third party property; (v) Eneco has
not been associated with any release or threat of release of any Hazardous
Substance; (vi) Eneco has not received any notice, demand, letter, claim or
request for information alleging that Eneco may be in violation of or liable
under any Environmental Law; and (vii) Eneco is not subject to any orders,
decrees, injunctions or other arrangements with any Governmental Entity or
subject to any indemnity or other agreement with any third party relating to
liability under any Environmental Law or relating to Hazardous Substances.
(b) As used in this Agreement, the term "Environmental Law" means
any federal, state, local or foreign law, regulation, order, decree, permit,
authorization, opinion, common law or agency requirement relating to: (A) the
protection, investigation or restoration of the environment, health and safety,
or natural resources; (B) the handling, use, presence, disposal, release or
threatened release of any Hazardous Substance or (C) noise, odor, wetlands,
pollution, contamination or any injury or threat of injury to persons or
property.
(c) As used in this Agreement, the term "Hazardous Substance" means
any substance that is: (i) listed, classified or regulated pursuant to any
Environmental Law; (ii) any petroleum product or by-product, asbestos-containing
material, lead-containing paint or plumbing, polychlorinated biphenyls,
radioactive materials or radon; or (iii) any other substance which is the
subject of regulatory action by any Governmental Entity pursuant to any
Environmental Law.
2.17 Brokers; Third Party Expenses. Eneco has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage, finders' fees,
agent's commissions or any similar charges in connection with this Agreement or
any transactions contemplated hereby. Except as disclosed on Schedule 2.17, no
shares of common stock, options, warrants or other securities of Eneco are
payable to any third party by Eneco as a result of this Transaction.
2.18 Intellectual Property. For the purposes of this Agreement, the
following terms have the following definitions:
18
"Intellectual Property" shall mean any or all of the following and all
worldwide common law and statutory rights in, arising out of, or
associated therewith: (i) patents and applications therefor and all
reissues, divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof ("Patents"); (ii) inventions (whether
patentable or not), invention disclosures, improvements, trade secrets,
proprietary information, know how, technology, technical data and customer
lists, and all documentation relating to any of the foregoing; (iii)
copyrights, copyrights registrations and applications therefor, and all
other rights corresponding thereto throughout the world; (iv) domain
names, uniform resource locators ("URLs") and other names and locators
associated with the Internet ("Domain Names"); (v) industrial designs and
any registrations and applications therefor; (vi) trade names, logos,
common law trademarks and service marks, trademark and service ▇▇▇▇
registrations and applications therefor (collectively, "Trademarks");
(vii) all databases and data collections and all rights therein; (viii)
all moral and economic rights of authors and inventors, however
denominated, and (ix) any similar or equivalent rights to any of the
foregoing (as applicable).
"Eneco Intellectual Property" shall mean any Intellectual Property that is
owned by, or exclusively licensed to, Eneco.
"Registered Intellectual Property" means all Intellectual Property that is
the subject of an application, certificate, filing, registration or other
document issued, filed with, or recorded by any private, state, government
or other legal authority.
"Eneco Registered Intellectual Property" means all of the Registered
Intellectual Property owned by, or filed in the name of, Eneco.
"Eneco Products" means all current versions of products or service
offerings of Eneco.
(a) Except as disclosed on Schedule 2.18, to Eneco's knowledge,
Eneco Intellectual Property and Eneco Products are not subject to any material
proceeding or outstanding decree, order, judgment, contract, license, agreement
or stipulation restricting in any manner the use, transfer or licensing thereof
by Eneco, or which may affect the validity, use or enforceability of such Eneco
Intellectual Property or Eneco Products, which in any such case could reasonably
be expected to have a Material Adverse Effect on Eneco.
(b) Except as disclosed on Schedule 2.18 hereto, Eneco owns and has
good and exclusive title to each material item of Eneco Intellectual Property
owned by it free and clear of any Liens (excluding non-exclusive licenses and
related restrictions granted in the ordinary course); and Eneco is the exclusive
owner of all material registered Trademarks used in connection with the
operation or conduct of the business of Eneco including the sale of any products
or the provision of any services by Eneco.
(c) Except as disclosed on Schedule 2.18, the operation of the
business of Eneco as such business currently is conducted, including (i) the
design, development, manufacture, distribution, reproduction, marketing or sale
of the products or services of Eneco (including Eneco Products) and (ii) Eneco's
use of any product, device or process, to Eneco's knowledge and except as could
not reasonably be expected to have a Material Adverse Effect, has not and does
not and will not infringe or misappropriate the Intellectual Property of any
third party or constitute unfair competition or trade practices under the laws
of any jurisdiction.
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2.19 Agreements, Contracts and Commitments. (a) Schedule 2.19 hereto sets
forth a complete and accurate list of all Material Contracts (as hereinafter
defined), specifying the parties thereto. For purposes of this Agreement, (i)
the term "Contracts" shall mean all contracts, agreements, leases, mortgages,
indentures, note, bond, liens, license, permit, franchise, purchase orders,
sales orders, arbitration awards, judgments, decrees, orders, documents,
instruments, understandings and commitments, or other instrument or obligation
(including without limitation outstanding offers or proposals) of any kind,
whether written or oral, to which Eneco is a party or by or to which any of the
properties or assets of Eneco may be bound, subject or affected (including
without limitation notes or other instruments payable to Eneco) and (ii) the
term "Material Contracts" shall mean (x) each Contract (I) providing for
payments (past, present or future) to Eneco in excess of $50,000 in the
aggregate or (II) under which or in respect of which Eneco presently has any
liability or obligation of any nature whatsoever (absolute, contingent or
otherwise) in excess of $50,000, (y) each Contract which otherwise is or may be
material to the businesses, operations, assets, condition (financial or
otherwise) or prospects of Eneco and (z) without limitation of subclause (x) or
subclause (y), each of the following Contracts:
(i) any mortgage, indenture, note, installment obligation or
other instrument, agreement or arrangement for or relating to any borrowing of
money by or from Eneco, or any officer, director or 5% or more stockholder
("Insider") of Eneco;
(ii) any guaranty, direct or indirect, by Eneco or any Insider
of Eneco of any obligation for borrowings, or otherwise, excluding endorsements
made for collection in the ordinary course of business;
(iii) any Contract made other than in the ordinary course of
business or (x) providing for the grant to any preferential rights to purchase
or lease any asset of Eneco or (y) providing for any right (exclusive or
non-exclusive) to sell or distribute, or otherwise relating to the sale or
distribution of, any product or service of Eneco;
(iv) any obligation to register any shares of the capital
stock or other securities of Eneco with any Governmental Entity;
(v) any obligation to make payments, contingent or otherwise,
arising out of the prior acquisition of the business, assets or stock of other
Persons;
(vi) any collective bargaining agreement with any labor union;
(vii) any lease or similar arrangement for the use by Eneco of
personal property;
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(viii) any Contract granting or purporting to grant, or
otherwise in any way relating to, any mineral rights or any other interest
(including, without limitation, a leasehold interest) in real property; and
(ix) any Contract to which any Insider of Eneco is a party.
(b) Except as set forth on Schedule 2.19, each Contract was entered
into at arms' length and in the ordinary course, is in full force and effect and
is valid and binding upon and enforceable against each of the parties thereto.
True, correct and complete copies of all Material Contracts (or written
summaries in the case of oral Material Contracts) and of all outstanding offers
or proposals of Eneco has have been heretofore delivered to the Company.
(c) Except as set forth in Schedule 2.19, neither Eneco nor to the
best of Eneco's knowledge any other party thereto is in breach of or in default
under, and no event has occurred which with notice or lapse of time or both
would become a breach of or default under, any Contract, and no party to any
Contract has given any written notice of any claim of any such breach, default
or event, which, individually or in the aggregate, are reasonably likely to have
a Material Adverse Effect on Eneco. Each agreement, contract or commitment to
which Eneco are a party or by which they are bound that has not expired by its
terms is in full force and effect, except where such failure to be in full force
and effect is not reasonably likely to have a Material Adverse Effect on Eneco.
2.20 Insurance. Schedule 2.20 sets forth Eneco's insurance policies and
fidelity bonds covering the assets, business, equipment, properties, operations,
employees, officers and directors (collectively, the "Insurance Policies") of
Eneco which Eneco reasonably believes are adequate in amount and scope for the
Business in which they are engaged.
2.21 Governmental Actions/Filings. Eneco has been granted and holds, and
has made, all Governmental Actions/Filings (including, without limitation, the
Governmental Actions/Filings required for (i) emission or discharge of effluents
and pollutants into the air and the water and (ii) the manufacture and sale of
all products manufactured and sold by it) necessary to the conduct by Eneco of
its businesses (as presently conducted and as presently proposed to be
conducted) or used or held for use by Eneco, all of which are listed in Schedule
2.21 hereto, and true, complete and correct copies of which have heretofore been
delivered to the Company. Each such Governmental Action/Filing is in full force
and effect and, expect as disclosed in Schedule 2.21 hereto, will not expire
prior to December 31, 2005, and Eneco is in compliance with all of its
obligations with respect thereto. No event has occurred and is continuing which
requires or permits, or after notice or lapse of time or both would require or
permit, and consummation of the transactions contemplated by this Agreement or
any ancillary documents will not require or permit (with or without notice or
lapse of time, or both), any modification or termination of any such
Governmental Actions/Filings. Except as set forth in Schedule 2.21, to Eneco's
knowledge no Governmental Action/Filing is necessary to be obtained, secured or
made by Eneco to enable it to continue to conduct its businesses and operations
and use its properties after the Closing in a manner which is consistent with
current practice.
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For purposes of this Agreement, the term "Governmental Action/Filing"
shall mean any franchise, license, certificate of compliance, authorization,
consent, order, permit, approval, consent or other action of, or any filing,
registration or qualification with, any federal, state, municipal, foreign or
other governmental, administrative or judicial body, agency or authority.
2.22 Interested Party Transactions. Except as set forth in the Schedule
2.22 hereto, no employee, officer, director or stockholder of Eneco or a member
of his or her immediate family is indebted to Eneco, nor is Eneco indebted (or
committed to make loans or extend or guarantee credit) to any of them, other
than (i) for payment of salary for services rendered, (ii) reimbursement for
reasonable expenses incurred on behalf of Eneco, and (iii) for other employee
benefits made generally available to all employees. Except as set forth in
Schedule 2.22, to Eneco's knowledge, none of such individuals has any direct or
indirect ownership interest in any Person with whom Eneco is affiliated or with
whom Eneco has a contractual relationship, or any Person that competes with
Eneco, except that each employee, stockholder, officer or director of Eneco and
members of their respective immediate families may own less than 5% of the
outstanding stock in publicly traded companies that may compete with Eneco.
Except as set forth in Schedule 2.22, to the knowledge of Eneco, no officer,
director or stockholder or any member of their immediate families is, directly
or indirectly, interested in any material contract with Eneco (other than such
contracts as relate to any such individual ownership of capital stock or other
securities of Eneco).
2.23 Board Approval. The board of directors of Eneco or similar governing
body (including any required committee or subgroup of thereof) has, as of the
date of this Agreement, unanimously approved, subject to the approval of
stockholders, this Agreement and the transactions contemplated hereby, and
resolved to seek the stockholders approval and adoption of this Agreement and
approval of the Transaction.
2.24 Representations and Warranties Complete. The representations and
warranties of Eneco included in this Agreement and any list, statement, document
or information set forth in, or attached to, any Schedule provided pursuant to
this Agreement or delivered hereunder, are true and complete in all material
respects and do not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements contained therein not misleading, under the circumstance under which
they were made.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to, and covenants with, Eneco, as
follows:
3.1 Organization and Qualification.
(a) The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware and has the
requisite corporate power and authority to own, lease and operate its assets and
properties and to carry on its business as it is now being or currently planned
by the Company to be conducted. The Company is in possession of all Approvals
necessary to own, lease and operate the properties it purports to own, operate
or lease and to carry on its business as it is now being or currently planned by
the Company to be conducted, except where the failure to have such Approvals
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on the Company. Complete and correct copies of the
Charter Documents of the Company, as amended and currently in effect, have been
heretofore delivered to Eneco. The Company is not in violation of any of the
provisions of the Company's Charter Documents.
22
(b) The Company is duly qualified or licensed to do business as a
foreign corporation and is in good standing, in each jurisdiction where the
character of the properties owned, leased or operated by it or the nature of its
activities makes such qualification or licensing necessary, except for such
failures to be so duly qualified or licensed and in good standing that could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company.
3.2 Subsidiaries. The Company has no Subsidiaries.
3.3 Capitalization.
(a) The authorized capital stock of the Company consists of
40,000,000 shares of common stock, par value $0.01 per share (the "Company
Common Stock") and 10,000,000 shares of preferred stock, par value $0.01 per
share (the "Company Preferred Stock"). At the close of business on the business
day prior to the date hereof, (i) 3,750,000 shares of the Company Common Stock
were issued and outstanding, all of which are validly issued, fully paid and
nonassessable; (ii) no shares of the Company Preferred Stock were issued and
outstanding; (iii) no shares of the Company Common Stock were reserved for
issuance upon the exercise of outstanding options to purchase Company Common
Stock granted to certain employees of Company or other parties (the "Company
Stock Options"); (iv) no shares of the Company Common Stock were reserved for
issuance upon the exercise of outstanding warrants to purchase the Company
Common Stock (the "Company Warrants"); and (v) no shares of the Company Common
Stock were reserved for issuance upon the conversion of any outstanding
convertible notes, debentures or securities (the "Convertible Securities"). All
shares of the Company Common Stock subject to issuance as aforesaid, upon
issuance on the terms and conditions specified in the instrument pursuant to
which they are issuable, will be duly authorized, validly issued, fully paid and
nonassessable. All outstanding shares of the Company Common Stock have been
issued and granted in compliance with (i) all applicable securities laws and (in
all material respects) other applicable laws and regulations, and (ii) all
requirements set forth in any applicable Contracts.
(b) There are no equity securities, partnership interests or similar
ownership interests of any class of any equity security of the Company, or any
securities exchangeable or convertible into or exercisable for such equity
securities, partnership interests or similar ownership interests, issued,
reserved for issuance or outstanding. There are no subscriptions, options,
warrants, equity securities, partnership interests or similar ownership
interests, calls, rights (including preemptive rights), commitments or
agreements of any character to which the Company is a party or by which it is
bound obligating the Company to issue, deliver or sell, or cause to be issued,
delivered or sold, or repurchase, redeem or otherwise acquire, or cause the
repurchase, redemption or acquisition of, any shares of capital stock,
partnership interests or similar ownership interests of the Company or
obligating the Company to grant, extend, accelerate the vesting of or enter into
any such subscription, option, warrant, equity security, call, right, commitment
or agreement. (c) Except as contemplated by this Agreement and except for the
"piggyback" registration rights granted to holders of all of the Company's
Common Stock issued and outstanding, there are no registration rights, and there
is no voting trust, proxy, rights plan, anti-takeover plan or other agreement or
understanding to which the Company is a party or by which it is bound with
respect to any equity security of any class of the Company.
23
3.4 Authority Relative to this Agreement. T3.5 he Company has full
corporate power and authority to: (i) execute, deliver and perform this
Agreement, and each ancillary document which the Company has executed or
delivered or is to execute or deliver pursuant to this Agreement, and (ii) carry
out the Company's obligations hereunder and thereunder and, to consummate the
transactions contemplated hereby (including the Transaction). The execution and
delivery of this Agreement and the consummation by the Company of the
transactions contemplated hereby (including the Transaction) have been duly and
validly authorized by all necessary corporate action on the part of the Company
(including the approval by its Board of Directors), and no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
or to consummate the transactions contemplated hereby, other than the approval
of this Agreement and the Transaction by a majority of the Company's
stockholders. This Agreement has been duly and validly executed and delivered by
the Company and, assuming the due authorization, execution and delivery thereof
by the other parties hereto, constitutes the legal and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except as
may be limited by bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity and public policy.
3.5 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by the Company does
not, and the performance of this Agreement by the Company shall not: (i)
conflict with or violate the Company's Charter Documents, (ii) conflict with or
violate any Legal Requirements, or (iii) result in any breach of or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, or materially impair the Company's rights or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of the
Company pursuant to, any Contracts, except, with respect to clauses (ii) or
(iii), for any such conflicts, violations, breaches, defaults or other
occurrences that would not, individually and in the aggregate, have a Material
Adverse Effect on Company.
(b) The execution and delivery of this Agreement by the Company does
not, and the performance of its obligations hereunder will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Entity, except (i) for applicable requirements, if any, of
the Securities Act, the Exchange Act, Blue Sky Laws, and the rules and
regulations thereunder, and appropriate documents with the relevant authorities
of other jurisdictions in which Company is qualified to do business, and (ii)
where the failure to obtain such consents, approvals, authorizations or permits,
or to make such filings or notifications, would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Company, or prevent consummation of the Transaction or otherwise prevent the
parties hereto from performing their obligations under this Agreement.
24
3.6 Compliance. To the Company's knowledge, the Company has complied with,
is not in violation of, any Legal Requirements with respect to the conduct of
its business, or the ownership or operation of its business, except for failures
to comply or violations which, individually or in the aggregate, have not had
and are not reasonably likely to have a Material Adverse Effect on the Company.
To the Company's knowledge, the businesses and activities of the Company have
not been and are not being conducted in violation of any Legal Requirements. the
Company is not in default or violation of any term, condition or provision of
its Charter Documents. To the Company's knowledge, no written notice of
non-compliance with any Legal Requirements has been received by the Company.
3.7 SEC Filings; Financial Statements.
(a) The Company has made available to Eneco a correct and complete
copy of each report, registration statement and definitive proxy statement filed
by the Company with the SEC for the 36 months prior to the date of this
Agreement (the "Company SEC Reports"), which, to the Company's knowledge, are
all the forms, reports and documents required to be filed by the Company with
the SEC for the 36 months prior to the date of this Agreement. As of their
respective dates, to the Company's knowledge, the Company SEC Reports: (i) were
prepared in accordance and complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
the rules and regulations of the SEC thereunder applicable to such the Company
SEC Reports, and (ii) did not at the time they were filed (and if amended or
superseded by a filing prior to the date of this Agreement then on the date of
such filing and as so amended or superceded) contain any untrue statement of a
material fact or omit to state a 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. Except to the extent set forth in
the preceding sentence, the Company makes no representation or warranty
whatsoever concerning the Company SEC Reports as of any time other than the time
they were filed.
(b) To the Company's knowledge, each set of financial statements
(including, in each case, any related notes thereto) contained in the Company
SEC Reports complied as to form in all material respects with the published
rules and regulations of the SEC with respect thereto, was prepared in
accordance with U.S. GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited statements, do not contain footnotes as permitted by Form 10-QSB of
the Exchange Act) and each fairly presents in all material respects the
financial position of the Company at the respective dates thereof and the
results of its operations and cash flows for the periods indicated, except that
the unaudited interim financial statements were or are subject to normal
adjustments which were not or are not expected to have a Material Adverse Effect
on the Company taken as a whole.
25
(c) the Company has previously furnished to Eneco a complete and
correct copy of any amendments or modifications, which have not yet been filed
with the SEC but which are required to be filed, to agreements, documents or
other instruments which previously had been filed by the Company with the SEC
pursuant to the Securities Act or the Exchange Act.
3.8 No Undisclosed Liabilities. The Company has no liabilities (absolute,
accrued, contingent or otherwise) of a nature required to be disclosed on a
balance sheet or in the related notes to the financial statements prepared in
accordance with U.S. GAAP which are, individually or in the aggregate, material
to the business, results of operations or financial condition of the Company,
except (i) liabilities provided for in or otherwise disclosed in the Company SEC
Reports filed prior to the date hereof, (ii) liabilities incurred since June 30,
2005 in the ordinary course of business, none of which would have a Material
Adverse Effect on the Company, and (iii) those liabilities and obligations
specifically set forth in Section 5.10.
3.9 Absence of Certain Changes or Events. Except as set forth in the
Company SEC Reports filed prior to the date of this Agreement, and except as
contemplated by this Agreement, since June 30, 2005, there has not been: (i) any
Material Adverse Effect on the Company, (ii) any declaration, setting aside or
payment of any dividend on, or other distribution (whether in cash, stock or
property) in respect of, any of the Company's capital stock, or any purchase,
redemption or other acquisition by the Company of any of the Company's capital
stock or any other securities of the Company or any options, warrants, calls or
rights to acquire any such shares or other securities, (iii) any split,
combination or reclassification of any of the Company's capital stock, (iv) any
granting by the Company of any increase in compensation or fringe benefits,
except for normal increases of cash compensation in the ordinary course of
business consistent with past practice, or any payment by the Company of any
bonus, except for bonuses made in the ordinary course of business consistent
with past practice, or any granting by the Company of any increase in severance
or termination pay or any entry by the Company into any currently effective
employment, severance, termination or indemnification agreement or any agreement
the benefits of which are contingent or the terms of which are materially
altered upon the occurrence of a transaction involving the Company of the nature
contemplated hereby, (v) entry by the Company into any licensing or other
agreement with regard to the acquisition or disposition of any Intellectual
Property other than licenses in the ordinary course of business consistent with
past practice or any amendment or consent with respect to any licensing
agreement filed or required to be filed by the Company with respect to any
Governmental Entity, (vi) any material change by the Company in its accounting
methods, principles or practices, except as required by concurrent changes in
U.S. GAAP, (vii) any change in the auditors of the Company, (vii) any issuance
of capital stock of the Company, or (viii) any revaluation by the Company of any
of their respective assets, including, without limitation, writing down the
value of capitalized inventory or writing off notes or accounts receivable or
any sale of assets of the Company other than in the ordinary course of business.
3.10 Litigation. Except as set forth in the Company SEC Reports, there are
no claims, suits, actions or proceedings pending or, to the Company's knowledge,
threatened against the Company, before any court, governmental department,
commission, agency, instrumentality or authority, or any arbitrator that seeks
to restrain or enjoin the consummation of the transactions contemplated by this
Agreement or which could reasonably be expected, either singularly or in the
aggregate with all such claims, actions or proceedings, to have a Material
Adverse Effect on the Company or have a Material Adverse Effect on the ability
of the parties hereto to consummate the Transaction.
26
3.11 Employee Benefit Plans. The Company does not maintain, and has no
liability under, any Plan, and neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (i)
result in any payment (including severance, unemployment compensation, golden
parachute, bonus or otherwise) becoming due to any stockholder, director or
employee of the Company, or (ii) result in the acceleration of the time of
payment or vesting of any such benefits.
3.12 Labor Matters. T3.13 he Company is not a party to any collective
bargaining agreement or other labor union contract applicable to persons
employed by the Company, nor does the Company know of any activities or
proceedings of any labor union to organize any such employees.
3.13 Restrictions on Business Activities. To the Company's knowledge,
there is no agreement, commitment, judgment, injunction, order or decree binding
upon the Company or to which the Company is a party which has or could
reasonably be expected to have the effect of prohibiting or materially impairing
any business practice of the Company, any acquisition of property by the Company
or the conduct of business by the Company as currently conducted other than such
effects, individually or in the aggregate, which have not had and could not
reasonably be expected to have, a Material Adverse Effect on the Company.
3.14 Title to Property. T3.15 he Company does not own or lease any Real
Property or Personal Property. There are no options or other contracts under
which the Company has a right or obligation to acquire or lease any interest in
Real Property or Personal Property.
3.15 Taxes. To the Company's knowledge:
(a) The Company has timely filed all Returns required to be filed by
the Company with any Tax authority prior to the date hereof, except such Returns
which are not material to the Company. All such Returns are true, correct and
complete in all material respects. The Company has paid all Taxes shown to be
due on such Returns.
(b) All Taxes that the Company is required by law to withhold or
collect have been duly withheld or collected, and have been timely paid over to
the proper governmental authorities to the extent due and payable.
(c) The Company has not been delinquent in the payment of any
material Tax nor is there any material Tax deficiency outstanding, proposed or
assessed against the Company, nor has the Company executed any unexpired waiver
of any statute of limitations on or extending the period for the assessment or
collection of any Tax.
(d) No audit or other examination of any Return of the Company by
any Tax authority is presently in progress, nor has the Company been notified of
any request for such an audit or other examination.
27
(e) No adjustment relating to any Returns filed by the Company has
been proposed in writing, formally or informally, by any Tax authority to the
Company or any representative thereof.
(f) The Company has no liability for any material unpaid Taxes which
have not been accrued for or reserved on the Company's balance sheets included
in the audited financial statements for the most recent fiscal year ended,
whether asserted or unasserted, contingent or otherwise, which is material to
the Company, other than any liability for unpaid Taxes that may have accrued
since the end of the most recent fiscal year in connection with the operation of
the business of the Company in the ordinary course of business, none of which is
material to the business, results of operations or financial condition of the
Company.
(g) The Company has not taken any action and does not know of any
fact, agreement, plan or other circumstance that is reasonably likely to prevent
the Transaction from qualifying as a reorganization within the meaning of
Section 368(a) of the Code.
3.16 Environmental Matters. Except for such matters that, individually or
in the aggregate, are not reasonably likely to have a Material Adverse Effect,
to the Company's knowledge: (i) the Company has complied with all applicable
Environmental Laws; (ii) the properties currently owned or operated by the
Company (including soils, groundwater, surface water, buildings or other
structures) are not contaminated with any Hazardous Substances; (iii) the
properties formerly owned or operated by the Company were not contaminated with
Hazardous Substances during the period of ownership or operation by the Company;
(iv) the Company is not subject to liability for any Hazardous Substance
disposal or contamination on any third party property; (v) the Company has not
been associated with any release or threat of release of any Hazardous
Substance; (vi) the Company has not received any notice, demand, letter, claim
or request for information alleging that the Company may be in violation of or
liable under any Environmental Law; and (vii) the Company is not subject to any
orders, decrees, injunctions or other arrangements with any Governmental Entity
or subject to any indemnity or other agreement with any third party relating to
liability under any Environmental Law or relating to Hazardous Substances.
3.17 Brokers. Except for the Company's obligations under the Financial
Advisory Agreement (as defined in Section 5.10), the Company has not incurred,
nor will it incur, directly or indirectly, any liability for brokerage or
finders' fees or agent's commissions or any similar charges in connection with
this Agreement or any transaction contemplated hereby.
3.18 Intellectual Property. The Company does not own, license or otherwise
have any right, title or interest in any Intellectual Property or Registered
Intellectual Property.
3.19 Agreements, Contracts and Commitments.
(a) Except for the Financial Advisory Agreement, the agreements with
Transfer Agent, and as set forth in the Company SEC Reports, to the Company's
knowledge, there are no contracts, agreements, leases, mortgages, indentures,
note, bond, liens, license, permit, franchise, purchase orders, sales orders,
arbitration awards, judgments, decrees, orders, documents, instruments,
understandings and commitments, or other instrument or obligation (including
without limitation outstanding offers or proposals) of any kind, whether written
or oral, to which the Company is a party or by or to which any of the properties
or assets of the Company may be bound, subject or affected, which either (a)
creates or imposes a liability greater than $5,000, or (b) may not be cancelled
by the Company on less than 30 days' or less prior notice (the "Company
Contracts").
28
(b) Each Company Contract was entered into at arms' length and in
the ordinary course, is in full force and effect and is valid and binding upon
and enforceable against each of the parties thereto. True, correct and complete
copies of all the Company Contracts (or written summaries in the case of oral
the Company Contracts) and of all outstanding offers or proposals of the Company
have been heretofore delivered to Eneco.
(c) Neither the Company nor, to the knowledge of the Company, any
other party thereto is in breach of or in default under, and no event has
occurred which with notice or lapse of time or both would become a breach of or
default under, any Company Contract, and no party to any Company Contract has
given any written notice of any claim of any such breach, default or event,
which, individually or in the aggregate, are reasonably likely to have a
Material Adverse Effect on the Company. Each agreement, contract or commitment
to which the Company is a party or by which it is bound that has not expired by
its terms is in full force and effect, except where such failure to be in full
force and effect is not reasonably likely to have a Material Adverse Effect on
the Company.
3.20 Insurance. The Company does not maintain any Insurance Policies.
3.21 Governmental Actions/Filings. The Company has been granted and holds,
and has made, all Governmental Actions/Filings necessary to the conduct by the
Company of its businesses (as presently conducted) or used or held for use by
the Company, and true, complete and correct copies of which have heretofore been
delivered to Eneco. Each such Governmental Action/Filing is in full force and
effect and will not expire prior to December 31, 2005, and the Company is in
compliance with all of its obligations with respect thereto. No event has
occurred and is continuing which requires or permits, or after notice or lapse
of time or both would require or permit, and consummation of the transactions
contemplated by this Agreement or the ancillary documents will not require or
permit (with or without notice or lapse of time, or both), any modification or
termination of any such Governmental Actions/Filings. To the Company's
knowledge, no Governmental Action/Filing is necessary to be obtained, secured or
made by the Company to enable it to continue to conduct its businesses and
operations and use its properties after the Closing in a manner which is
consistent with current practice.
3.22 Interested Party Transactions. Except as set forth in the Company's
SEC Reports, no employee, officer, director or stockholder of the Company or a
member of his or her immediate family is indebted to the Company, nor is the
Company indebted (or committed to make loans or extend or guarantee credit) to
any of them, other than (i) for payment of salary for services rendered, (ii)
reimbursement for reasonable expenses incurred on behalf of the Company, and
(iii) for other employee benefits made generally available to all employees.
Except as set forth in the Company's SEC Reports, to the Company's knowledge,
none of such individuals has any direct or indirect ownership interest in any
Person with whom the Company is affiliated or with whom the Company has a
material contractual relationship, or any Person that competes with the Company,
except that each employee, stockholder, officer or director of the Company and
members of their respective immediate families may own less than 5% of the
outstanding stock in publicly traded companies that may compete with the
Company. To the Company's knowledge, no officer, director or stockholder or any
member of their immediate families is, directly or indirectly, interested in any
material contract with the Company (other than such contracts as relate to any
such individual ownership of capital stock or other securities of the Company).
29
3.23 Indebtedness; Company Assets. Except as set forth in the Company's
SEC Reports, the Company has no indebtedness for borrowed money. Any
indebtedness for borrowed money shall be paid and satisfied in full prior to or
at Closing. Immediately prior to the Closing, the Company will have no assets,
except for cash reserves earmarked for the payment of certain accounts payable
and accrued expenses of the Company with respect to the period prior to Closing
which remain unpaid, which the Company shall be responsible for payment
following the Closing pursuant to Section 5.10 hereof ("Cash Reserve").
3.24 Exchange Act Reporting. The Company is in compliance with, and
current in, all of the reporting, filing and other requirements under the
Exchange Act, the shares of the Company's common stock have been duly and
properly registered under Section 12(g) of the Exchange Act, and the Company is
in compliance with all of the requirements under, and imposed by, Section 12(g)
of the Exchange Act, except where a failure to so comply is not reasonably
likely to have a Material Adverse Effect on the Company.
3.25 Board Approval. The Board of Directors of the Company (including any
required committee or subgroup of the Board of Directors of the Company) has, as
of the date of this Agreement, unanimously (i) declared the advisability of the
Transaction and approved this Agreement and the transactions contemplated
hereby, and (ii) determined that the Transaction is in the best interests of the
stockholders of the Company.
3.26 Representations and Warranties Complete. The representations and
warranties of the Company included in this Agreement and any list, statement,
document or information set forth in, or attached to, any Schedule provided
pursuant to this Agreement or delivered hereunder, are true and complete in all
material respects and do not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements contained therein not misleading, under the circumstance under
which they were made.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business by Company and Eneco. During the period from the
date of this Agreement and continuing until the earlier of the termination of
this Agreement pursuant to its terms or the Closing, each of the Company and
Eneco shall, except to the extent that the other party shall otherwise consent
in writing, carry on its business in the usual, regular and ordinary course
consistent with past practices, in substantially the same manner as heretofore
conducted and in compliance with all applicable laws and regulations (except
where noncompliance would not have a Material Adverse Effect), pay its debts and
taxes when due subject to good faith disputes over such debts or taxes, pay or
perform other material obligations when due, and use its commercially reasonable
efforts consistent with past practices and policies to (i) preserve
substantially intact its present business organization, (ii) keep available the
services of its present officers and employees and (iii) preserve its
relationships with customers, suppliers, distributors, licensors, licensees, and
others with which it has significant business dealings. In addition, except as
required or permitted by the terms of this Agreement, without the prior written
consent of the other party, during the period from the date of this Agreement
and continuing until the earlier of the termination of this Agreement pursuant
to its terms or the Closing, each of the Company and Eneco shall not do any of
the following:
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(a) Except as disclosed on Schedule 4.1(a), waive any stock
repurchase rights, accelerate, amend or (except as specifically provided for
herein) change the period of exercisability of options or restricted stock, or
reprice options granted under any employee, consultant, director or other stock
plans or authorize cash payments in exchange for any options granted under any
of such plans;
(b) Grant any severance or termination pay to any officer or
employee except pursuant to applicable law, written agreements outstanding, or
policies existing on the date hereof and as previously or concurrently disclosed
in writing or made available to the other party, or adopt any new severance
plan, or amend or modify or alter in any manner any severance plan, agreement or
arrangement existing on the date hereof;
(c) Transfer or license to any person or otherwise extend, amend or
modify any material rights to any Intellectual Property of the Company or Eneco,
as applicable, or enter into grants to transfer or license to any person future
patent rights, other than in the ordinary course of business consistent with
past practices provided that in no event shall the Company or Eneco license on
an exclusive basis or sell any Intellectual Property of the Company, or Eneco as
applicable;
(d) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in respect
of any capital stock or split, combine or reclassify any capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for any capital stock, except for the conversion of the
outstanding Eneco Preferred Stock by Eneco prior to Closing and the issuance of
any convertible notes by Eneco pursuant to the terms and conditions of Eneco's
current note offering;
(e) Except as set forth in Schedule 4.1(e) hereof, purchase, redeem
or otherwise acquire, directly or indirectly, any shares of capital stock of the
Company and Eneco, as applicable, except repurchases of unvested shares at cost
in connection with the termination of the employment relationship with any
employee pursuant to stock option or purchase agreements in effect on the date
hereof;
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(f) Except for the conversion of the outstanding Eneco Preferred
Stock by Eneco prior to Closing and the issuance of any convertible notes by
Eneco pursuant to the terms and conditions of Eneco's current note offering,
issue, deliver, sell, authorize, pledge or otherwise encumber, or agree to any
of the foregoing with respect to, any shares of capital stock or any securities
convertible into or exchangeable for shares of capital stock, or subscriptions,
rights, warrants or options to acquire any shares of capital stock or any
securities convertible into or exchangeable for shares of capital stock, or
enter into other agreements or commitments of any character obligating it to
issue any such shares or convertible or exchangeable securities;
(g) Amend its Charter Documents (except for the amendment to Eneco's
articles of incorporation to increase its authorized shares of common stock from
25,000,000 shares to 75,000,000 shares);
(h) Except as disclosed in Schedule 4.1(h) hereto, acquire or agree
to acquire by merging or consolidating with, or by purchasing any equity
interest in or a portion of the assets of, or by any other manner, any business
or any corporation, partnership, association or other business organization or
division thereof, or otherwise acquire or agree to acquire any assets which are
material, individually or in the aggregate, to the business of Eneco or the
Company as applicable, or enter into any joint ventures, strategic partnerships
or alliances or other arrangements that provide for exclusivity of territory or
otherwise restrict such party's ability to compete or to offer or sell any
products or services;
(i) Sell, lease, license, encumber or otherwise dispose of any
properties or assets, except sales of inventory in the ordinary course of
business consistent with past practice and, except for the sale, lease or
disposition (other than through licensing) of property or assets which are not
material, individually or in the aggregate, to the business of such party;
(j) Except as disclosed in Schedule 4.1(j) hereto and the issuance
of any convertible notes by Eneco pursuant to the terms and conditions of
Eneco's current note offering, incur any indebtedness for borrowed money in
excess of $50,000 in the aggregate or guarantee any such indebtedness of another
person, issue or sell any debt securities or options, warrants, calls or other
rights to acquire any debt securities of Eneco or the Company, as applicable,
enter into any "keep well" or other agreement to maintain any financial
statement condition or enter into any arrangement having the economic effect of
any of the foregoing;
(k) Except as disclosed in Schedule 4.1(k) hereto or as contemplated
by this Agreement, adopt or amend any employee benefit plan, policy or
arrangement, any employee stock purchase or employee stock option plan, or enter
into any employment contract or collective bargaining agreement (other than
offer letters and letter agreements entered into in the ordinary course of
business consistent with past practice with employees who are terminable "at
will"), pay any special bonus or special remuneration to any director or
employee, or increase the salaries or wage rates or fringe benefits (including
rights to severance or indemnification) of its directors, officers, employees or
consultants, except in the ordinary course of business consistent with past
practices;
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(l) Except as disclosed in Schedule 4.1(1) hereto, (i) pay,
discharge, settle or satisfy any claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise), or litigation
(whether or not commenced prior to the date of this Agreement) other than the
payment, discharge, settlement or satisfaction, in the ordinary course of
business consistent with past practices or in accordance with their terms, or
liabilities recognized or disclosed in the most recent financial statements (or
the notes thereto) of the Company or of Eneco included in Eneco SEC Reports, as
applicable, or incurred since the date of such financial statements, or (ii)
waive the benefits of, agree to modify in any manner, terminate, release any
person from or knowingly fail to enforce any confidentiality or similar
agreement to which the Company is a party or of which the Company is a
beneficiary or to which Eneco is a party or of which Eneco is a beneficiary, as
applicable;
(m) Except as disclosed on Schedule 4.2(m) and except in the
ordinary course of business consistent with past practices, modify, amend or
terminate any Contract of the Company, or Eneco, as applicable, or other
material contract or material agreement to which the Company, or Eneco is a
party or waive, delay the exercise of, release or assign any material rights or
claims thereunder;
(n) Except as required by U.S. GAAP, revalue any of its assets or
make any change in accounting methods, principles or practices;
(o) Except as set forth in Schedule 4.1(o) hereto or in the ordinary
course of business consistent with past practices, incur or enter into any
agreement, contract or commitment requiring such party to pay in excess of
$50,000 in any 12 month period;
(p) Engage in any action that could reasonably be expected to cause
the Transaction to fail to qualify as a "reorganization" under Section 368(a) of
the Code;
(q) Except as contemplated by Article V herein or as set forth in
Schedule 4.1(q) hereto, settle any litigation;
(r) Make or rescind any Tax elections that, individually or in the
aggregate, could be reasonably likely to adversely affect in any material
respect the Tax liability or Tax attributes of such party, settle or compromise
any material income tax liability or, except as required by applicable law,
materially change any method of accounting for Tax purposes or prepare or file
any Return in a manner inconsistent with past practice;
(s) Form, establish or acquire any Subsidiary;
(t) Permit any Person to exercise any of its discretionary rights
under any Plan to provide for the automatic acceleration of any outstanding
options, the termination of any outstanding repurchase rights or the termination
of any cancellation rights issued pursuant to such plans; or
(u) Agree in writing or otherwise agree, commit or resolve to take
any of the actions described in Section 4.1 (a) through (t) above.
33
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Board of Directors of Eneco. At Closing, the current board of
directors of Eneco shall deliver duly adopted resolutions ("Resolutions") to:
(a) set the size of Eneco's initial board of directors at five (5) members
effective as of the Closing; and (b) the members of the Eneco board of directors
immediately prior to the Closing shall continue to serve as directors
immediately following the Closing. For a period of two years following the
Closing, Eneco hereby grants ▇▇▇▇▇▇▇ Reverse Merger Fund, LLC ("KRM Fund") the
right to send a representative (who need not be the same individual from meeting
to meeting) to observe each meeting or participate in telephone meetings of
Eneco's board of directors and receive all documents and written materials
provided to directors. Such representative shall be entitled to receive
reimbursement for all reasonable costs incurred in attending such meetings,
including, but not limited to, food, lodging and transportation.
5.2 Undertaking by Eneco Accountant. On or before the Closing, Eneco shall
obtain, and deliver to the Company, an undertaking from De ▇▇▇▇ ▇▇▇▇▇▇▇▇ &
Company, LLC ("Accountant"), in a form and substance satisfactory to the
Company, providing that: (i) the Accountant has agreed to an engagement with
Eneco to serve as its certified public accountants following the Closing for
purposes of auditing and reviewing the financial statements of Eneco to comply
with Eneco's ongoing reporting obligations under the Exchange Act as a successor
to the Company under the Exchange Act including, without limitation, the filing
of Forms 10-QSB, 10-KSB, and 8-K, (ii) the transaction contemplated hereunder
will not disqualify or otherwise prohibit the Accountant from rendering the
foregoing engagement services or from undertaking such services in a timely
manner, (iii) the Accountant is duly registered with the PCAOB, and (iv) the
Accountant shall provide its consent to the use of their audited financial
statements and accompanying reports for Eneco in any regulatory filing by Eneco
prior to or following the Closing ("Accountant Undertaking").
5.3 Other Actions.
(a) As soon as practicable after the date hereof, the Company shall
prepare an information statement pursuant to Rule 14(c) promulgated under
Section 14A of the Exchange Act (together with any amendments or supplements
thereto, the "Information Statement") in connection with the approval and
adoption of this Agreement and the Transaction ("Stockholder Matters"). Eneco
shall reasonably cooperate with the Company and provide such information
available to it as may be necessary or required, in the reasonable determination
of counsel to the Company and Eneco, for the Company to prepare the Information
Statement including, without limitation, the delivery of the U.S. GAAP Financial
Statements (as defined below), except that the interim financial statements
shall be for the three-month and six-month periods ended June 30, 2004 and 2005.
As soon as practicable after the date hereof, the Company shall obtain the
written consent of KRM Fund and such other Stockholder as necessary to approve
the Stockholder Matters, such consent to be effective twenty (20) days following
the filing of the definitive Information Statement with the SEC. Upon receipt of
such written consent, the Company will file the Information Statement with the
SEC and shall cause such Information Statement to become definitive and to be
mailed to the holders of the Company's securities entitled to vote at a meeting
of stockholders. In the event the Information Statement is reviewed by the SEC,
the Company shall respond promptly to any comments of the SEC or its staff with
respect to the Information Statement and use its reasonable best efforts to have
the Information Statement cleared by the SEC as soon as practicable after its
filing.
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(b) At least five (5) days prior to Closing, Eneco shall prepare the
Form 8-K announcing the Closing, which shall include all information required by
such form, including the information required by Form 10-SB with respect to
Eneco, any information required for Eneco to become a successor to the Company's
reporting obligations under the Exchange Act, any other information required in
connection with the Company ceasing to be a shell company as a result of the
Transaction, the U.S. GAAP Financial Statements and the Company Pro Forma
Financial Statements (as defined below) ("Transaction Form 8-K"), which shall be
in a form reasonably acceptable to the Company and in a format acceptable for
▇▇▇▇▇ filing. Prior to Closing, Eneco shall prepare the press release announcing
the consummation of the Transaction hereunder ("Press Release"). At the Closing,
Eneco shall file the Transaction Form 8-K with the SEC and distribute the Press
Release.
(c) As soon as practical following the date hereof, Eneco shall
deliver to the Company: (i) the audited financial statements of Eneco for the
fiscal years ended December 31, 2004 and 2003, which financials statements shall
comply in all material respects with the published rules and regulations of the
SEC, shall be prepared in accordance with U.S. GAAP applied on a consistent
basis throughout the period involved, were audited in accordance with the
auditing standards of the PCAOB by an independent accountant registered with
PCAOB, and such statements fairly present in all material respects the financial
position of Eneco at the dates thereof and the results of its operations and
cash flows for the periods indicated, and (ii) the unaudited financial
statements (including, in each case, any related notes thereto) of Eneco for the
three-month and nine-month periods ended September 30, 2005 and 2004, which
financial statements shall comply in all material respects with the published
rules and regulations of the SEC, shall be prepared in accordance with U.S. GAAP
applied on a consistent basis throughout the period involved (except as may be
indicated in the notes thereto), were reviewed by an independent accountant
registered with PCAOB, and such statements fairly present in all material
respects the financial position of each at the dates thereof and the results of
its operations and cash flows for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal adjustments
which were not or are not expected to have a Material Adverse Effect on Eneco
(collectively, the "U.S. GAAP Financial Statements").
(d) The annual financial statements and the interim financial
statements included in the U.S. GAAP Financial Statements shall have been
audited and reviewed, respectively, by the Accountant.
(e) At least ten (10) days prior to the Closing, Eneco shall deliver
to the Company pro forma consolidated financial statements for Eneco and the
Company giving effect to the Transaction, for such periods as required by the
SEC to be included in a Form 8-K or any other report or form required to be
filed with the SEC at or after Closing with respect to the Transaction, all
prepared in all material respects with the published rules and regulations of
the SEC and in accordance with U.S. GAAP applied on a consistent basis
throughout the periods involved (the "Pro Forma Financial Statements"). The Pro
Forma Financial Statements shall have been reviewed by, the Accountant and shall
be in a format acceptable for inclusion on the Transaction 8-K.
35
The Company and Eneco shall further cooperate with each other and
use their respective reasonable best efforts to take or cause to be taken all
actions, and do or cause to be done all things, necessary, proper or advisable
on its part under this Agreement and applicable laws to consummate the
Transaction and the other transactions contemplated hereby as soon as
practicable, including preparing and filing as soon as practicable all
documentation to effect all necessary notices, reports and other filings and to
obtain as soon as practicable all consents, registrations, approvals, permits
and authorizations necessary or advisable to be obtained from any third party
and/or any Governmental Entity in order to consummate the Transaction or any of
the other transactions contemplated hereby. Subject to applicable laws relating
to the exchange of information and the preservation of any applicable
attorney-client privilege, work-product doctrine, self-audit privilege or other
similar privilege, each of the Company and Eneco shall have the right to review
and comment on in advance, and to the extent practicable each will consult the
other on, all the information relating to such party, that appear in any filing
made with, or written materials submitted to, any third party and/or any
Governmental Entity in connection with the Transaction and the other
transactions contemplated hereby. In exercising the foregoing right, each of the
Company and Eneco shall act reasonably and as promptly as practicable.
5.4 Required Information. In connection with the preparation of the
Transaction Form 8-K, the Information Statement, and Press Release, and for such
other reasonable purposes, the Company and Eneco each shall, upon request by the
other, furnish the other with all information concerning themselves, their
respective directors, officers and stockholders (including the directors of
Eneco to be elected effective as of the Closing pursuant to Section 5.1 hereof)
and such other matters as may be reasonably necessary or advisable in connection
with the Transaction, or any other statement, filing, notice or application made
by or on behalf of the Company and Eneco to any third party and/or any
Governmental Entity in connection with the Transaction and the other
transactions contemplated hereby. Each party warrants and represents to the
other party that all such information shall be true and correct in all material
respects and will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading.
5.5 Confidentiality; Access to Information. (a) Any confidentiality
agreement previously executed by the parties shall be superseded in its entirety
by the provisions of this Agreement. Each party agrees to maintain in confidence
any non-public information received from the other party, and to use such
non-public information only for purposes of consummating the transactions
contemplated by this Agreement. Such confidentiality obligations will not apply
to (i) information which was known to the one party or their respective agents
prior to receipt from the other party; (ii) information which is or becomes
generally known; (iii) information acquired by a party or their respective
agents from a third party who was not bound to an obligation of confidentiality;
and (iv) disclosure required by law. In the event this Agreement is terminated
as provided in Article VIII hereof, each party will return or cause to be
returned to the other all documents and other material obtained from the other
in connection with the Transaction contemplated hereby.
36
(b) Access to Information.
(i) The Company will afford Eneco and its financial advisors,
accountants, counsel and other representatives reasonable access during normal
business hours, upon reasonable notice, to the properties, books, records and
personnel of the Company during the period prior to the Closing to obtain all
information concerning the business, including the status of product development
efforts, properties, results of operations and personnel of the Company, as
Eneco may reasonably request. No information or knowledge obtained by Eneco in
any investigation pursuant to this Section 5.5 will affect or be deemed to
modify any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Transaction.
(ii) Eneco will afford the Company and its financial advisors,
underwriters, accountants, counsel and other representatives reasonable access
during normal business hours, upon reasonable notice, to the properties, books,
records and personnel of Eneco during the period prior to the Closing to obtain
all information concerning the business, including the status of product
development efforts, properties, results of operations and personnel of Eneco,
as the Company may reasonably request. No information or knowledge obtained by
the Company in any investigation pursuant to this Section 5.5 will affect or be
deemed to modify any representation or warranty contained herein or the
conditions to the obligations of the parties to consummate the Transaction.
5.6 No Solicitation. Other than with respect to the Transaction,
each of the Company and Eneco agrees that neither it nor any of its officers and
directors shall, and that it shall direct and use its reasonable best efforts to
cause its agents and other representatives (including any investment banker,
attorney or accountant retained by it) not to, directly or indirectly, initiate,
solicit, encourage or otherwise facilitate any inquiries or the making of any
proposal or offer with respect to (i) a merger, reorganization, share exchange,
consolidation or similar transaction involving it, (ii) any sale, lease,
exchange, mortgage, pledge, transfer or purchase of all or substantially all of
the assets or equity securities of, it and its Subsidiaries, taken as a whole,
in a single transaction or series of related transactions, or (iii) any tender
offer or exchange offer for 20% or more of the outstanding shares of Eneco
Common Stock or the Company Common Stock (any such proposal or offer being
hereinafter referred to as an "Acquisition Proposal"). Each of the Company and
Eneco further agrees that neither such party nor any officers or director of
such party shall, and that each such party shall direct and use its reasonable
best efforts to cause its agents and representatives not to, directly or
indirectly, engage in any negotiations concerning, or provide any confidential
information or data to, or have any discussions with, any person relating to an
Acquisition Proposal, or otherwise facilitate any effort or attempt to make or
implement an Acquisition Proposal. Each of the Company and Eneco agrees that it
will immediately cease and cause to be terminated any existing discussions or
negotiations with any parties conducted heretofore with respect to any
Acquisition Proposal. Each of the Company and Eneco agrees that it will take the
necessary steps to promptly inform the individuals or entities referred to in
the first sentence hereof of the obligations undertaken in this Section 5.6.
37
Notwithstanding anything contained in this Agreement to the contrary,
nothing contained in this Agreement shall prevent the board of directors of the
Company, or its representatives from, prior to the time the Company's
stockholders have approved this Transaction (if required) (A) complying with
Rule 14e-2 promulgated under the Exchange Act with regard to an Acquisition
Proposal, if applicable, or otherwise complying with the Exchange Act; (B)
providing information in response to a request therefor by a person who has made
a bona fide unsolicited Acquisition Proposal; (C) engaging in any negotiations
or discussions with any person who has made a bona fide unsolicited Acquisition
Proposal or otherwise facilitating any effort or attempt to implement an
Acquisition Proposal; or (D) withdrawing or modifying the approval or
recommendation by the Company's board of directors of this Agreement, approving
or recommending any Acquisition Proposal or causing the applicable party to
enter into any letter of intent, agreement in principle, acquisition agreement
or other similar agreement relating to any Acquisition Proposal, if, and only to
the extent that in each such case referred to in clause (B), (C) or (D) above,
the Company's board of directors determines in good faith, after consultation
with outside legal counsel that such action is necessary to act in a manner
consistent with the directors' fiduciary duties under applicable law and
determines in good faith after consultation with its financial advisors that the
person or group making such Acquisition Proposal has adequate sources of
financing to consummate such Acquisition Proposal and that such Acquisition
Proposal, if consummated as proposed, is materially more favorable to the
stockholders of the Company from a financial point of view (any such more
favorable Acquisition Proposal being referred to as a "Superior Proposal") and
determines in good faith that such Superior Proposal is reasonably capable of
being consummated, taking into account legal, financial, regulatory and other
aspects of the proposal and the person making the proposal.
5.7 Public Disclosure. Except to the extent previously disclosed or to the
extent the parties believe that they are required by applicable law or
regulation to make disclosure, prior to Closing, no party shall issue any
statement or communication to the public regarding the Transaction without the
consent of the other party, which consent shall not be unreasonably withheld. To
the extent a party hereto believes it is required by law or regulation to make
disclosure regarding the Transaction, it shall, if possible, immediately notify
the other party prior to such disclosure. Notwithstanding the foregoing, the
parties hereto agree that the Company will prepare and file a Current Report on
Form 8-K pursuant to the Exchange Act to report the execution of this Agreement
and that the Company's stockholders may file any reports as required by the
Exchange Act including, without limitation, any reports on Schedule 13D.
5.8 Reasonable Efforts; Notification.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use its commercially reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, and
to assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most expeditious
manner practicable, the Transaction and the other transactions contemplated by
this Agreement, including using commercially reasonable efforts to accomplish
the following: (i) the taking of all reasonable acts necessary to cause the
conditions precedent set forth in Article VI to be satisfied, (ii) the obtaining
of all necessary actions or nonactions, waivers, consents, approvals, orders and
authorizations from Governmental Entities and the making of all necessary
registrations, declarations and filings (including registrations, declarations
38
and filings with Governmental Entities, if any) and the taking of all reasonable
steps as may be necessary to avoid any suit, claim, action, investigation or
proceeding by any Governmental Entity, (iii) the obtaining of all consents,
approvals or waivers from third parties required as a result of the transactions
contemplated in this Agreement, (iv) the defending of any suits, claims,
actions, investigations or proceedings, whether judicial or administrative,
challenging this Agreement or the consummation of the transactions contemplated
hereby, including seeking to have any stay or temporary restraining order
entered by any court or other Governmental Entity vacated or reversed and (v)
the execution or delivery of any additional instruments reasonably necessary to
consummate the transactions contemplated by, and to fully carry out the purposes
of, this Agreement. In connection with and without limiting the foregoing, Eneco
and its board of directors and the Company and its board of directors shall, if
any state takeover statute or similar statute or regulation is or becomes
applicable to the Transaction, this Agreement or any of the transactions
contemplated by this Agreement, use its commercially reasonable efforts to
enable the Transaction and the other transactions contemplated by this Agreement
to be consummated as promptly as practicable on the terms contemplated by this
Agreement. Notwithstanding anything herein to the contrary, nothing in this
Agreement shall be deemed to require Eneco or the Company to agree to any
divestiture by itself or any of its affiliates of shares of capital stock or of
any business, assets or property, or the imposition of any material limitation
on the ability of any of them to conduct their business or to own or exercise
control of such assets, properties and stock.
(b) The Company shall give prompt notice to Eneco upon becoming
aware that any representation or warranty made by them contained in this
Agreement has become untrue or inaccurate, or of any failure of the Company to
comply with or satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by it under this Agreement, in each
case, such that the conditions set forth in Article VI would not be satisfied;
provided, however, that no such notification shall affect the representations,
warranties, covenants or agreements of the parties or the conditions to the
obligations of the parties under this Agreement.
(c) Eneco shall give prompt notice to the Company upon becoming
aware that any representation or warranty made by it contained in this Agreement
has become untrue or inaccurate, or of any failure of Eneco to comply with or
satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement, in each case, such that
the conditions set forth in Article VI would not be satisfied; provided,
however, that no such notification shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations of
the parties under this Agreement.
5.9 Treatment as a Reorganization. Neither Eneco nor the Company shall
take any action prior to or following the Transaction that could reasonably be
expected to cause the Merger to fail to qualify as a "reorganization" within the
meaning of Section 368(a) of the Code.
39
5.10 Absence of Material Liabilities. Immediately prior to Closing, the
Company shall have no liabilities or obligations requiring the payment of
monies, other than obligations under or with respect to: (i) a certain Financial
Advisory Agreement, in the form attached hereto as Exhibit A ("Financial
Advisory Agreement"), (ii) any agreement with the Transfer Agent, (iii) the
Company Contracts disclosed under Section 3.19 hereto, and (iv) accounts payable
and accrued expenses of the Company with respect to the period prior to Closing.
The Company shall establish the Cash Reserve provided for in Section 3.23 in an
amount equal to the monetary obligations of the Company prior to Closing due to
the Transfer Agent, pursuant to the Company Contracts disclosed under Section
3.19 (other than the Financial Advisory Agreement) and in respect of all unpaid
accounts payable and accrued expenses of the Company as of Closing
(collectively, the "Pre-Closing Cash Obligations"). Upon Closing, to the extent
not satisfied by the Company prior to or at Closing, the Pre-Closing Cash
Obligations will be paid in full from the Cash Reserve. Following the Closing,
Eneco shall pay and satisfy the Company's obligations under the Financial
Advisory Agreement (including the payment of the deferred payment thereunder
when due), the agreement with the Transfer Agent, and the remaining Company
Contracts shall be terminated
5.11 Cash Payments at Closing. At Closing, Eneco shall pay ▇▇▇▇▇▇▇
Securities, LLC ("▇▇▇▇▇▇▇ Securities") the reverse merger fees of $200,000 under
the Financial Advisory Agreement, less the amount of the $25,000 deposit
previously paid by Eneco to the Company ("Deposit") and less the deferred
payment of $125,000 under the Financial Advisory Agreement (such sum being
referred to herein, as the "Eneco Closing Payment"). At Closing, the Deposit
shall be paid to ▇▇▇▇▇▇▇ Securities, LLC ("▇▇▇▇▇▇▇ Securities") by the Company
in partial payment of the reverse merger fees under the Financial Advisory
Agreement ("Company Closing Payment"), except to the extent all or a portion of
Company Closing Payment is waived by ▇▇▇▇▇▇▇ Securities in writing.
5.12 Business Records. At Closing, the Company shall cause to be delivered
to Eneco all records and documents relating to the Company, which the Company
possesses, including, without limitation, books, records, government filings,
Returns, Charter Documents, Stock Records, consent decrees, orders, and
correspondence, director and stockholder minutes and resolutions, stock
ownership records, financial information and records, electronic files
containing any financial information and records, and other documents used in or
associated with the Company ("Business Records").
5.13 Quotation on the Over-the-Counter Bulletin Board. Immediately
following the Closing, Eneco shall use its commercially reasonable efforts to
obtain a quotation of its shares of Eneco Common Stock on the NASD
Over-the-Counter Bulletin Board ("OTC BB"), or to otherwise cooperate with or
assist any NASD member firm in the filing of Form 211 under Rule 15c2-11
promulgated under the Exchange Act and the commencement of quotation of Eneco
Common Stock on the OTC BB.
ARTICLE VI
CONDITIONS TO THE TRANSACTION
6.1 Conditions to Obligations of Each Party to Effect the Transaction. The
respective obligations of each party to this Agreement to effect the Transaction
shall be subject to the satisfaction at or prior to the Closing Date of the
following conditions, unless waived by both the Company and Eneco:
40
(a) No Order. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which has the effect of making the Transaction illegal or
otherwise prohibiting consummation of the Transaction, substantially on the
terms contemplated by this Agreement. All waiting periods, if any, under any
foreign law in any jurisdiction in which the Company or Eneco has material
operations relating to the transactions contemplated hereby will have expired or
terminated early and all material foreign antitrust approvals required to be
obtained prior to the Transaction in connection with the transactions
contemplated hereby shall have been obtained.
(b) Debt Holder Consents. The lenders under Eneco's credit
facilities, secured loans, mortgages and other indebtedness for borrowed money
and any holders of Eneco Preferred Stock or Eneco Convertible Securities shall
have consented in writing to the Transaction (if such consent is required in
connection with this Transaction).
(c) Stockholder Approval. This Agreement and the Merger shall have
been duly approved and adopted, by the requisite vote under the laws of the
State of Delaware and the Company Charter Documents, by the stockholders of the
Company, and by the requisite vote under the laws of the State of Utah and Eneco
Charter Documents, by the stockholders of Eneco.
(d) Information Statements. At least twenty (20) days prior to
Closing, the Company shall have filed the definitive Information Statement with
the SEC, and the Company shall have mailed the definitive Information Statement
to each of the Company's stockholders, and the Company shall have otherwise
complied with all of the provisions under Rule 14c under the Exchange Act.
(e) Eneco Preferred Stock. Each holder of Eneco Preferred Stock
shall have converted his shares of Eneco Preferred Stock into Eneco Common
Stock.
(f) Dissenter's Rights. Holders of no more than 200,000 shares of
the Company Common Stock shall have taken action to exercise their dissent's
rights pursuant to Section 262 of the DGCL.
(g) Successor under Exchange Act. Eneco shall be deemed a "successor
issuer" within the meaning of Rule 12(g)-3 under the Exchange Act as a result of
the Merger, and the shares of common stock of Eneco shall be deemed
automatically registered securities under Section 12(g) of the Exchange Act
without the necessity of filing any additional registration statements covering
those shares of common stock.
(h) Transaction 8-K. Eneco shall have filed the Transaction Form 8-K
with the SEC at Closing, and Eneco shall have distributed the Press Release.
(i) Resolutions. Eneco shall have delivered the Resolutions required
by Section 5.1 hereof.
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(j) Financial Advisory Agreement. The Financial Advisory Agreement
between the Company and ▇▇▇▇▇▇▇ Securities in the form of Exhibit A hereto, has
been duly authorized and approved by the Company's board of directors and duly
executed by the Company and ▇▇▇▇▇▇▇ Securities.
6.2 Additional Conditions to Obligations of Eneco. The obligations of
Eneco to consummate and effect the Transaction shall be subject to the
satisfaction at or prior to the Closing Date of each of the following
conditions, any of which may be waived, in writing, exclusively by Eneco:
(a) Representations and Warranties. Each representation and warranty
of the Company contained in this Agreement (i) shall have been true and correct
as of the date of this Agreement and (ii) shall be true and correct on and as of
the Closing Date with the same force and effect as if made on the Closing Date.
Eneco shall have received a certificate with respect to the foregoing signed on
behalf of the Company by an authorized officer of the Company ("Company Closing
Certificate").
(b) Agreements and Covenants. The Company shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by them on or prior to the
Closing Date, except to the extent that any failure to perform or comply (other
than a willful failure to perform or comply or failure to perform or comply with
an agreement or covenant reasonably within the control of the Company) does not,
or will not, constitute a Material Adverse Effect with respect to the Company,
and Eneco shall have received the Company Closing Certificate to such effect.
(c) Consents. The Company shall have obtained all consents, waivers
and approvals required in connection with the consummation of the transactions
contemplated hereby, other than consents, waivers and approvals the absence of
which, either alone or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect on the Company.
(d) Material Adverse Effect. No Material Adverse Effect with respect
to the Company shall have occurred since the date of this Agreement.
(e) No Financial Obligations. Immediately prior to the Closing, the
Company shall have no material liabilities or obligations, other than as set
forth in Section 5.10 hereof.
(f) SEC Compliance. Immediately prior to Closing, the Company shall
be in compliance with the reporting requirements under the Exchange Act.
(g) Business Records. The Company shall have delivered to Eneco the
Business Records.
(h) Other Deliveries. At or prior to Closing, the Company shall have
delivered to Eneco (i) copies of resolutions and actions taken the Company's
board of directors and stockholders in connection with the approval of this
Agreement and the transactions contemplated hereunder, and (ii) such other
documents or certificates as shall reasonably be required by Eneco and its
counsel in order to consummate the transactions contemplated hereunder.
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6.3 Additional Conditions to the Obligations of the Company. The
obligations of the Company to consummate and effect the Transaction shall be
subject to the satisfaction at or prior to the Closing Date of each of the
following conditions, any of which may be waived, in writing, exclusively by the
Company:
(a) Representations and Warranties. Each representation and warranty
of Eneco contained in this Agreement (i) shall have been true and correct as of
the date of this Agreement and (ii) shall be true and correct on and as of the
Closing Date with the same force and effect as if made on and as of the Closing.
The Company shall have received a certificate with respect to the foregoing
signed on behalf of Eneco by an authorized officer of Eneco ("Eneco Closing
Certificate")
(b) Agreements and Covenants. Eneco shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by them at or prior to the Closing
Date except to the extent that any failure to perform or comply (other than a
willful failure to perform or comply or failure to perform or comply with an
agreement or covenant reasonably within the control of Eneco) does not, or will
not, constitute a Material Adverse Effect on Eneco, and Eneco shall have
received the Eneco Closing Certificate to such effect.
(c) Consents. Eneco shall have obtained all consents, waivers,
permits and approvals required in connection with the consummation of the
transactions contemplated hereby, other than consents, waivers and approvals the
absence of which, either alone or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect on Eneco.
(d) Material Adverse Effect. No Material Adverse Effect with respect
to Eneco shall have occurred since the date of this Agreement.
(e) Eneco Financial Statements. Eneco shall have delivered to the
Company the U.S. GAAP Financial Statements and the Pro Forma Financial
Statements.
(f) Accountant Undertaking. Eneco shall have delivered to the
Company the Accountant Undertaking in a form satisfactory to the Company.
(g) Employment Agreements. Each Management Member shall have
executed and delivered employment agreements with Eneco, which agreements shall
be in full force and effect as of the Closing and shall be acceptable to the
Company.
(h) Repayment of Affiliate Obligations. At the Closing Date, all
amounts owed to Eneco by any Insider of Eneco (regardless of whether such
amounts are due and payable) shall have been paid in full.
43
(i) Closing Payments. The Eneco Closing Payment and Company Closing
Payment shall have been disbursed as provided in Section 5.11.
(j) Other Deliveries. At or prior to Closing, Eneco shall have
delivered to the Company: (i) copies of resolutions and actions taken Eneco's
board of directors and stockholders in connection with the approval of this
Agreement and the transactions contemplated hereunder, and (ii) such other
documents or certificates as shall reasonably be required by the Company and its
counsel in order to consummate the transactions contemplated hereunder.
ARTICLE VII
SURVIVAL
Except as specifically set forth in Sections 1.13, 5.1, 5.10, 5.13, 8.3
and 9.1, or except where the performance by Eneco following the Closing is
herein contemplated (collectively, the "Surviving Provisions"), all
representations, warranties, agreements and covenants contained in or made
pursuant to this Agreement by any party hereto or contained in any Schedule
hereto shall not survive the Closing, and no claims made by virtue of such
representations, warranties, agreements and covenants shall be made or commenced
by any party hereto from and after the Closing. Eneco and the company agree that
KRM Fund shall be a third party beneficiary with respect to the Surviving
Provisions and may enforce the same against Eneco at any time after Closing as
if KRM Fund was a party to this Agreement.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated at any time prior to the
Closing:
(a) by mutual written agreement of Eneco and the Company at any
time;
(b) by either Eneco or the Company if the Transaction shall not have
been consummated by January 1, 2006 for any reason; provided, however, that the
right to terminate this Agreement under this Section 8.1(b) shall not be
available to any party whose action or failure to act has been a principal cause
of or resulted in the failure of the Transaction to occur on or before such date
and such action or failure to act constitutes a breach of this Agreement;
(c) by either Eneco or the Company if a Governmental Entity shall
have issued an order, decree or ruling or taken any other action, in any case
having the effect of permanently restraining, enjoining or otherwise prohibiting
the Transaction, which order, decree, ruling or other action is final and
nonappealable;
44
(d) by the Company, upon a material breach of any representation,
warranty, covenant or agreement on the part of Eneco set forth in this
Agreement, or if any representation or warranty of Eneco shall have become
materially untrue, in either case such that the conditions set forth in Article
VI would not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, provided, that if such
inaccuracy in Eneco's representations and warranties or breach by Eneco is
curable by Eneco prior to the Closing Date, then the Company may not terminate
this Agreement under this Section 8.1(d) for thirty (30) days after delivery of
written notice from the Company to Eneco of such breach, provided Eneco
continues to exercise commercially reasonable efforts to cure such breach (it
being understood that the Company may not terminate this Agreement pursuant to
this Section 8.1(d) if the Company shall have materially breached this Agreement
or if such breach by Eneco is cured during such thirty (30)-day period); and
(e) by Eneco, upon a material breach of any representation,
warranty, covenant or agreement on the part of the Company set forth in this
Agreement, or if any representation or warranty of the Company shall have become
materially untrue, in either case such that the conditions set forth in Article
VI would not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, provided, that if such
inaccuracy in the Company's representations and warranties or breach by the
Company is curable by the Company prior to the Closing Date, then Eneco may not
terminate this Agreement under this Section 8.1(e) for thirty (30) days after
delivery of written notice from Eneco to the Company of such breach, provided
the Company continues to exercise commercially reasonable efforts to cure such
breach (it being understood that Eneco may not terminate this Agreement pursuant
to this Section 8.1(e) if it shall have materially breached this Agreement or if
such breach by the Company is cured during such thirty (30)-day period).
8.2 Notice of Termination; Effect of Termination. Any termination of this
Agreement under Section 8.1 above will be effective immediately upon (or, if the
termination is pursuant to Section 8.1(d) or Section 8.1(e) and the proviso
therein is applicable, thirty (30) days after) the delivery of written notice of
the terminating party to the other parties hereto. In the event of the
termination of this Agreement as provided in Section 8.1, this Agreement shall
be of no further force or effect and the Transaction shall be abandoned, except
for and subject to the following: (i) Section 8.2, Section 8.3 and Article X
(General Provisions) shall survive the termination of this Agreement, and (ii)
nothing herein shall relieve any party from liability for any intentional or
willful breach of this Agreement.
8.3 Fees and Expenses. All fees and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expenses whether or not the Transaction is consummated. The
parties further agree that, whether or not the Transaction is consummated, Eneco
shall be responsible for any and costs and expenses incurred by it in connection
with the preparation of the Transaction Form 8-K (including the U.S. GAAP
Financial Statements and Pro Forma Financial Statements contained therein), and
the Company shall be responsible for any and costs and expenses incurred by it
in connection with the preparation of the Information Statement and the filing
and mailing thereof.
8.4 Amendment. This Agreement may be amended by the parties hereto at any
time by execution of an instrument in writing signed on behalf of each of the
parties hereto.
45
8.5 Extension; Waiver. At any time prior to the Closing, any party hereto
may, to the extent legally allowed, (i) extend the time for the performance of
any of the obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions for the benefit of such party contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. Delay in exercising any right under this Agreement shall
not constitute a waiver of such right.
ARTICLE IX
POST-CLOSING COVENANTS
9.1 Post-Closing Covenants. Eneco acknowledge that the agreements
contained in this Section 9.1 are an integral part of the transactions
contemplated by this Agreement and that, without these agreements, KRM Fund
would not approve this Agreement or the Merger. The parties hereto acknowledge
and agree that the failure by Eneco to satisfy, perform and comply with the
covenants set forth in this Section 9.1 ("Post-Closing Covenants") following the
Closing will have a material adverse effect on the investment of KRM Fund in
Eneco. During the period beginning upon the Closing and ending on the first
anniversary of the Closing, Eneco agrees to satisfy, perform and comply with,
the following agreements and covenants:
(a) Without the consent of KRM Fund, Eneco shall not issue any of
its securities to any officers, directors, 10% or more shareholders,
consultants, service providers or other parties, except for (i) any issuance
pursuant to any of Eneco's options, warrants and convertible securities issued
and outstanding as of Closing, (ii) any grant of options or stock awards to
employees pursuant to a stock plan duly adopted by Eneco's board of directors
and shareholders, (iii) any public offerings or private placements of Eneco's
securities approved by Eneco's board of directors, and (iv) any issuance of
securities for any arm's-length, third party business transactions involving
business combinations, fixed asset purchases, joint ventures or strategic
alliances which have been approved by Eneco's board of directors.
(b) Eneco's certified public accountants shall at all times be
registered with PCAOB. In the event Eneco's certified public accountants resign
or are terminated for any reason, Eneco shall promptly engage a new certified
public accountant registered with PCAOB.
(c) Audit and compensation committee charters are duly adopted by
Eneco's board of directors, regular meetings for the audit and compensation
committee meetings are scheduled, with notice to all directors, and such
committee meetings are properly held as scheduled.
(d) Proper disclosure, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and code of ethics policies
are adopted by Eneco's board and complied with by Eneco and its management.
(e) Eneco files within the statutory time limits any required
filings or notifications with the SEC, NASDAQ and any other federal, state or
regulatory agency including any agency or organization with jurisdiction over
any exchange on which Eneco's securities are listed or traded.
46
(f) The use of proceeds from any financing undertaken simultaneous
with or after the Closing shall be approved by Eneco's board of directors.
(g) Eneco shall file all tax returns of any kind in a timely manner,
and Eneco shall pay, when due, all tax obligations of any kind or nature.
(h) Eneco shall pay, when due, all transfer agent fees, listing fees
and any other fees the non-payment of which may adversely effect compliance with
applicable laws and regulations (including securities laws and regulations) or
the listing or quotation of its common stock.
(i) Within thirty (30) days following the Closing, Eneco shall
engage an investor relations firm and an independent research firm, acceptable
to Eneco's board of directors and KRM Fund.
(j) Respond in a timely manner, and to the satisfaction of the SEC,
to any review or inquiry by the SEC to the Transaction Form 8-K.
9.2 Other Provisions. Notwithstanding anything contained herein to the
contrary, the provisions of this Article IX shall survive (and not be affected
in any respect by) the Closing.
ARTICLE X
GENERAL PROVISIONS
10.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or sent via telecopy (receipt confirmed) to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as shall be specified by like notice):
(a) if to the Company, to:
Wentworth I, Inc.
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ telephone
(▇▇▇) ▇▇▇-▇▇▇▇ telecopy
47
(b) if to the Company, to:
Dr. H. ▇▇▇▇▇ ▇▇▇▇▇, President
Eneco, Inc.
▇▇▇-▇ ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇-▇▇▇-▇▇▇▇ telephone
801-583-6245 telecopy
with a copy to:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, ▇▇
▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇-▇▇▇-▇▇▇▇ telephone
▇▇▇-▇▇▇-▇▇▇▇ telecopy
10.2 Interpretation.
(a) When a reference is made in this Agreement to Exhibits, such
reference shall be to an Exhibit to this Agreement unless otherwise indicated.
When a reference is made in this Agreement to Sections, such reference shall be
to a Section of this Agreement. Unless otherwise indicated the words "include,"
"includes" and "including" when used herein shall be deemed in each case to be
followed by the words "without limitation." The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. When reference is
made herein to "the business of" an entity, such reference shall be deemed to
include the business of all direct and indirect Subsidiaries of such entity.
Reference to the Subsidiaries of an entity shall be deemed to include all direct
and indirect Subsidiaries of such entity.
(b) For purposes of this Agreement, the term "Material Adverse
Effect" when used in connection with an entity means any change, event,
violation, inaccuracy, circumstance or effect, individually or when aggregated
with other changes, events, violations, inaccuracies, circumstances or effects,
that is materially adverse to the business, assets (including intangible
assets), revenues, financial condition or results of operations of such entity
(it being understood that neither of the following alone or in combination shall
be deemed, in and of itself, to constitute a Material Adverse Effect: (a)
changes attributable to the public announcement or pendency of the transactions
contemplated hereby, (b) changes in general national or regional economic
conditions, (c) changes affecting the industry generally in which Company or
Eneco operates), or (d) any SEC rulemaking requiring enhanced disclosure of
reverse merger transactions with a public shell.
(c) For purposes of this Agreement, the term "Legal Requirements"
means any federal, state, local, municipal, foreign or other law, statute,
constitution, principle of common law, resolution, ordinance, code, edict,
decree, rule, regulation, ruling or requirement issued, enacted, adopted,
promulgated, implemented or otherwise put into effect by or under the authority
of any Governmental Entity (as defined in Section 2.5(b)), and all requirements
set forth in applicable Contracts (as defined in Section 2.19).
48
(d) For purposes of this Agreement, the term "Subsidiary" shall mean
any Person in which the Company or Eneco or any subsidiary thereof directly or
indirectly, owns beneficially securities or interests representing 50% or more
of (x) the aggregate equity or profit interests, or (y) the combined voting
power of voting interests ordinarily entitled to vote for management or
otherwise.
(e) For purposes of this Agreement, the term "Person" shall mean any
individual, corporation (including any non-profit corporation), general
partnership, limited partnership, limited liability partnership, joint venture,
estate, trust, company (including any limited liability company or joint stock
company), firm or other enterprise, association, organization, entity or
Governmental Entity.
(f) For purposes of this Agreement, all monetary amounts set forth
herein are referenced in United States dollars, unless otherwise noted.
10.3 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
10.4 Entire Agreement; Third Party Beneficiaries. This Agreement and the
documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including the Schedules hereto (a)
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof,
it being understood that the letter of intent between Eneco and the Company
dated September 2, 2005, including any and all proposals related thereto, are
hereby terminated in their entirety and shall be of no further force and effect;
and (b) are not intended to confer upon any other person any rights or remedies
hereunder (except as specifically provided in this Agreement).
10.5 Severability. In the event that any provision of this Agreement, or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
10.6 Other Remedies; Specific Performance. 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 or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to seek an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
49
10.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, USA, regardless of the laws
that might otherwise govern under applicable principles of conflicts of law
thereof.
10.8 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
10.9 Assignment. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other parties. Subject to the first sentence of this Section 10.9, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
10.10 Arbitration. Any disputes or claims arising under or in connection
with this Agreement or the transactions contemplated hereunder shall be resolved
by binding arbitration. Notice of a demand to arbitrate a dispute by either
party shall be given in writing to the other at their last known address.
Arbitration shall be commenced by the filing by a party of an arbitration demand
with the American Arbitration Association ("AAA") in its office in Denver,
Colorado USA. The arbitration and resolution of the dispute shall be resolved by
a single arbitrator appointed by the AAA pursuant to AAA rules. The arbitration
shall in all respects be governed and conducted by applicable AAA rules, and any
award and/or decision shall be conclusive and binding on the parties. The
arbitration shall be conducted in Denver, Colorado. The arbitrator shall supply
a written opinion supporting any award, and judgment may be entered on the award
in any court of competent jurisdiction. Each party shall pay its own fees and
expenses for the arbitration, except that any costs and charges imposed by the
AAA and any fees of the arbitrator for his services shall be assessed against
the losing party by the arbitrator. In the event that preliminary or permanent
injunctive relief is necessary or desirable in order to prevent a party from
acting contrary to this Agreement or to prevent irreparable harm prior to a
confirmation of an arbitration award, then either party is authorized and
entitled to commence a lawsuit solely to obtain equitable relief against the
other pending the completion of the arbitration in a court having jurisdiction
over the parties. All rights and remedies of the parties shall be cumulative and
in addition to any other rights and remedies obtainable from arbitration.
[The remainder of this page has been intentionally left blank.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above.
WENTWORTH I, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
ENECO, INC.
By: /s/ H. ▇▇▇▇▇ ▇▇▇▇▇
-------------------------------------------
Dr. H. ▇▇▇▇▇ ▇▇▇▇▇, President
51
Index of Exhibits and Schedules
Exhibits
Exhibit A - Financial Advisory Agreement
Schedules
Eneco Disclosure Schedules
52