ACQUISITION AGREEMENT
AMONG
WENTWORTH ENERGY, INC.
("PURCHASER")
AND THE MEMBERS OF KLE MINERAL
HOLDINGS, LLC ("SELLERS")
THIS ACQUISITON AGREEMENT, is made and
entered into effective as of March 28, 2005 (the " Agreement
"), among Wentworth Energy, Inc., a Oklahoma corporation
("Wentworth" or " Purchaser "), and the limited liability
members and interest holders of KLE Mineral Holdings, LLC, a
Kentucky Limited Liability Company ("KLE"), Sam P. Burchett, with
an address of 200 W. Vine Street, Suite 400, Lexington, Kentucky
40507 and Stephen G. Lunn, with an address of 427/428 Old Brompton
Road, South Kensington, London SW7 3SS, United Kingdom (British
duel citizenship UK/NZ (respectively the " Sellers
").
WHEREAS, the Sellers and the
Board of Directors of Purchaser have approved the terms of this
Agreement and of the transactions contemplated
hereby;
WHEREAS, the Sellers and
Purchaser have previously entered into an option agreement dated
March 28, 2005, providing for the payment of an initial option
amount of $50,000 and $10,000 per month till Final Closing and upon
such payments that Sellers are irrevocably required to sell to
Purchaser their Limited Liability Interest, at Final Closing to
occur after June 1, 2005 and before August 31, 2005, in exchange
for the Purchase Price and, upon completion of Purchasers due
diligence and other matters;
WHEREAS, this Agreement provides
for the terms of the acquisition from Sellers and transfer of all
of Sellers' Limited Liability Interests (4 Units) in KLE to
Purchaser in exchange for the Purchase Price as set forth herein;
and
WHEREAS, the Sellers and
Purchaser desire to set forth the terms of the agreement in
connection with the transactions provided for.
NOW, THEREFORE, in consideration of
the promises and representations, warranties and agreements herein
contained, the parties hereto agree as follows:
ARTICLE 1 - DEFINITIONS
Definitions . As used herein, the following terms shall have the
following meanings:
" Acquired and Assumed Assets
and Liabilities " is defined as all the disclosed assets and
liabilities of KLE as of the date of Closing and set forth on
exhibits and schedules to this Agreement.
" Agreement " has the
meaning specified in the introductory paragraph above but shall
include all exhibits, schedules and Ancillary Documents as if fully
set forth and incorporated herein.
" Ancillary Documents "
as to any Person means all agreements, releases, certificates and
other documents contemplated by this Agreement and where required
to be entered into or executed by such Person; and where a
reference to a Person is made in conjunction with a reference to "
Ancillary Documents ," the term shall refer only to such
documents which such Person has entered into or
executed.
" Closing" is defined as the
initial execution and delivery of this Agreement and all
transactions contemplated herein to be completed prior to the Final
Closing and as further specified in Section 3.01
hereof.
" Closing Date " is
defined as the date agreed to by the parties, not sooner than June
1, 2005 and before August 31, 2005 whereby the Final Closing shall
take place and as further specified in Section 3.01
hereof.
" Code " means the
Internal Revenue Code of 1986, as amended.
" Common Stock " means
the common stock of Wentworth Energy, Inc.
"Effective Date" The
effective date of this agreement is March 28, 2005.
"Final Closing"
is defined as when the Option is
exercised by Purchaser, the Sellers' transfer the Limited Liability
Interest to Purchaser in exchange for the Purchase Price on the
Closing Date.
" Governmental Entity "
has the meaning specified in Section 4.02 hereof.
" Knowledge " means, with
respect to any Person, (I) actual knowledge of such Person
(including the actual knowledge of the officers, directors and key
employees of such Person).
" Laws " means all applicable
common law and any statute, law, code, ordinance, regulation, rule,
resolution, order, determination, writ, injunction, award
(including, without limitation, any award of any arbitrator),
judgments and decrees applicable to the specified persons or
entities and to the businesses and assets thereof. The laws of the
Commonwealth of Kentucky will have overriding preference if not
otherwise noted.
" Limited Liability
Interest(s) " means the entire interest of the members in KLE
Mineral Holdings, LLC, a Kentucky limited liability company, in the
form of 4 Units, held by the individual Sellers (1 unit held by Sam
P. Burchett and 3 units held by Stephen G. Lunn).
" Option " means the Option
Agreement entered into on March 28, 2005 whereby Purchaser, upon
full payment of the Option Amount shall have the right to close on
the transactions contemplated by this Agreement. The option becomes
irrevocable to Sellers upon full payment of the Option Amount and
may be exercised by Purchaser anytime after June 1, 2005 and before
August 31, 2005.
"Option Amount" shall mean the initial
payment of $50,000 paid upon execution of the Option and any
further monthly instalments of $10,000 commencing on April 1, 2005
and continuing on each successive first day of the month through
August 1, 2005 and not exceeding a total amount of
$100,000.
" Person " means a natural
person, corporation, partnership or other business entity, or any
Governmental Entity.
" Properties " means the KLE's
interest in 119 patents and other assets associated with those
patents as more fully described in Exhibit E, also identified as
Acquired Assets.
" Purchase Price " has the
meaning specified in Section 3.02 hereof.
Purchaser " has the meaning specified in the introductory
paragraph above.
" SEC " means the Securities
and Exchange Commission.
" Securities Act " means the
Securities Act of 1933, as amended.
" Sellers " as previously
defined and specified in the introductory paragraph above are Sam
P. Burchett and Stephen G. Lunn. This shall mean the individual
limited liability interest holders of KLE for purposes of the sale
of the entity known as KLE.
ARTICLE 1 – EXERCISE OF OPTION
TO PURCHASE INTERESTS
1.01 Option
Rights . Previously, Purchaser entered into an Option Agreement
for the amount of $50,000.00 plus $10,000 per month until Closing,
(as defined hereinabove the "Option Amount") executed by the
parties on March 28, 2005 (a copy of which is attached hereto and
incorporated herein as Exhibit F). Upon full payment of the Option
Amount in the instalments provided for in the Option Agreement,
Purchaser will have the right to exercise the option to acquire the
Limited Liability Interests of Sellers for a period extending from
June 1, 2005, through August 31, 2005. The total amount paid under
the option agreement shall be deducted from the cash portion of the
Purchase Price at the Final Closing. As provided in the Option
Agreement, the failure by Purchaser to make any instalment, when
due, renders the Option null and void with no obligation by Sellers
to return any Option instalments previously paid all such payments
to be deemed liquidated damages to Sellers.
1.02
Exercise of Option . Upon payment of the entire Option
Amount the option shall be deemed irrevocable by the parties
and the Closing of the acquisition of the Limited Liability
Interests pursuant to this Agreement shall take place at a date
after June 1, 2005, but before August 31, 2005, at Purchaser's
election and determination.
1.03
Failure to Exercise. Should Purchaser fail to exercise the
Option and close on this Agreement by August 31, 2005, the Sellers
shall retain the Option Amount as liquidated damages and shall have
no further obligation to sell the Limited Liability Interest to
Purchaser.
ARTICLE 2 – PURCHASED INTERESTS
AND ASSUMED LIABILITIES
2.01 Purchase and Sale of
Shares . Subject to the terms and conditions of this Agreement,
Purchaser will offer to acquire the Sellers' Limited Liability
Interest as set forth on Schedule 2.01 from Sellers in exchange of
the Purchase Price as set forth and defined in Section
3.01
2.02 Transfer of ownership .
Ownership rights in the Properties will remain with KLE and Sellers
will be transferring their respective ownership rights in KLE. KLE
will have the assets and liabilities as set forth on Exhibit B (as
defined the Assumed Assets and Liabilities), with net changes in
the worth of these assets and liabilities only to occur in the
normal course of business during the period of operation prior to
acquisition of the Limited Liability Interests by
Purchaser.
2.03 Transfer free from charge
. Interests tendered will be acquired on the terms of the offer,
free from charges and encumbrances not specifically set forth in
this Agreement, together with all rights attaching
thereto.
2.04 Assumption of liabilities
. Purchaser will take KLE subject to those Assumed Liabilities
which are associated with KLE, including mining or clean up costs
and facilities closing costs as set out in Schedule
2.04.
2.05 Recommendation/Consent .
KLE is a member managed limited liability company and therefore
does not require the consent of any managing member. The sale of
any member's limited liability interest requires the consent of a
majority of the non-selling members. As there are only two members,
the execution of this Agreement by both members shall constitute
the requisite consent as required under applicable Kentucky law and
the KLE operating agreement as well as any recommendation of sale
by KLE's interest holders.
ARTICLE 3 – THE CLOSING;
PURCHASE PRICE
3.01 Closing and Final
Closing . The Closing shall occur upon execution of this
Agreement which may be held in escrow pending final due diligence
and arrangements for funding the Purchase Price. The Final
Closing of the transaction contemplated by this Agreement shall
occur after June 1, 2005 and before August 31, 2005 at Purchaser's
election. At the Final Closing, on the Closing Date, all rights to
the Interests of Sellers in KLE shall be assigned, transferred and
conveyed to Purchaser in exchange for the Purchase Price as set
forth in Section 3.02, including the delivery of the agreed shares
in Purchaser and cash in accordance with the Closing Procedure set
out in Exhibit A.
3.02 Purchase Price . The
Purchase Price is Twelve Million Two Hundred and Fifty Thousand
Dollars and no cents ($12,250,000) in a tax-free exchange (if
applicable) of the Limited Liability Interest of Sellers for Seven
Million Five Hundred Thousand (7,500,000) common shares (at an
agreed upon value of $1.50 per share) in Wentworth stock and the
payment of $1,000,000 (less the aggregate amount already paid to
Buyer pursuant to the option agreement) in cash payable as follows:
one-third (1/3) of the balance due at Closing payable on or before
June 1, 2005, one-third (1/3) of the balance due at Closing payable
on or before July 1, 2005 and the remaining one-third of the
balance due at Closing on or before August 1, 2005 all of which
shall be paid into an escrow account to be set up specifically for
this purpose at Central Bank and Trust Company, a financial
institution, located in Lexington, Kentucky. Therefore, on the
Closing Date at the Final Closing, Purchaser shall purchase all of
the Limited Liability Interests and associated rights for a price
of Twelve Million, Two Hundred and Fifty Thousand Dollars and no
cents ($12,250,000). Sellers, at their sole option, may elect to
receive, in lieu of cash at Final Closing, an additional Six
Hundred and Sixty Six Thousand Six Hundred and Sixty Seven
(666,667) common shares of Wentworth stock (valued for purposes of
this Agreement at $1.50 per share), minus an amount of common
shares equal to the amount of payments previously paid pursuant to
the Option Agreement, divided by $1.50, with such election to be
exercised in writing within one business day of the Closing Date.
3.02(a)
At the Final Closing, Wentworth will also issue Seven Million Five
Hundred Thousand (7,500,000) shares of Wentworth common stock
(valued at $1.50 per share only for purpose of the exchange) to
Sellers in the proportions of their ownership of the Limited
Liability Interest in further exchange for the acquisition of the
Limited Liability Interest and in satisfaction of Eleven Million
Two Hundred and Fifty Thousand Dollars and no cents ($11,250,000)
of the Purchase Price which exchange shall be deemed a tax-free
exchange.
3.02(b)
At the Final Closing, if Wentworth is unable to make the payment of
the cash portion of the Purchase Price as provided in section 3.02
($1,000,000 less the amount of payments already made pursuant to
the Option Agreement) it shall be at Sellers' sole option, whether
to elect to take the entire Purchase Price in shares of Wentworth
(valued for purposes of this Agreement at $1.50 per share) or
declare the Agreement null and void. In electing to declare the
Agreement null and void, Sellers shall retain the Option Amount as
its sole liquidated damages.
3.03 Post Acquisition
Cooperation. The Purchaser and Sellers, post acquisition, shall
exert all efforts to increase the probability of prevailing in any
existing and future litigation and in exploring, developing and
leasing the Properties with the intent to bring them into
production.
3.04 Representation to the Board of
Directors. Sellers and Purchaser agree that, post Closing, it
will be in the parties' interest to have at least two former
members of KLE on the Board of Directors of Purchaser. It is
therefore the expressed intention of the parties to make the
necessary arrangements to propose to the annual general meeting of
Purchaser to elect two new members to the Board of Directors of
Purchaser reflecting the shareholders situation post-acquisition.
To the extent possible, by a written consent of a majority of the
Wentworth shareholders, the two (2) newly-appointed board members
will be Sam Burchett and Stephen Lunn, and their appointment will
be ratified, if necessary, at the next Annual General Meeting of
the shareholders.
3.05
Total Number of Wentworth Shares Outstanding. Wentworth
warrants that it shall have no more than twenty-five (25) million
shares of common stock outstanding after the completion of the
transactions contemplated by the Agreement and the subsequent
financing for the exploration and development of the Properties.
Any subsequent issuance of additional Wentworth common stock shall
be accomplished such that there shall be equal dilution of the
ownership immediately after the final closing and issuance of the
seven million five hundred thousand (7,500,000) shares to
Sellers.
ARTICLE 4 - REPRESENTATIONS AND
WARRANTIES
OF SELLER
Seller hereby represents and
warrants to Purchaser as follows:
4.01 Organization, Good Standing
and Foreign Qualification . Sellers represent that KLE is a
Limited Liability Company duly organized, validly existing and in
active standing under the laws of the Commonwealth of Kentucky.
4.02 Authority Relative to
Agreements . Sellers have the requisite individual power and
authority to enter into this Agreement and all Ancillary Documents,
and to carry out their obligations hereunder and thereunder. The
execution and delivery of this Agreement and each ancillary
document, and the consummation of the transactions provided for
herein and therein, have been duly authorized by the unanimous
consent of the Members of KLE and do not violate any provision of
the respective Articles of Organization or Operating Agreement of
KLE. The execution by Sellers of this Agreement and each ancillary
document, and the consummation of the transactions provided for
hereby and thereby, will not conflict with or effect a
breach
