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ACQUISITION AGREEMENT AMONG WENTWORTH ENERGY, INC. ("PURCHASER") AND THE MEMBERS OF KLE MINERAL HOLDINGS, LLC ("SELLERS")

Asset Purchase Agreement

ACQUISITION AGREEMENT AMONG WENTWORTH ENERGY, INC. ( You are currently viewing:
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KLE Mineral Holdings, LLC | Wentworth Energy, Inc

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Title: ACQUISITION AGREEMENT AMONG WENTWORTH ENERGY, INC. ("PURCHASER") AND THE MEMBERS OF KLE MINERAL HOLDINGS, LLC ("SELLERS")
Governing Law: Oklahoma     Date: 3/31/2005
Law Firm: Greenebaum Doll    

ACQUISITION AGREEMENT AMONG WENTWORTH ENERGY, INC. (
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ACQUISITION AGREEMENT

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


 
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