FEBRUARY 6, 2006
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement") is made as of February __,
2006, by and among Barnabus Energy Inc., a Nevada corporation ("Barnabus"),
Barnabus/CRE Acquisition Corporation, a Nevada corporation ("Buyer"), and
Xxxxxxx X. Xxxx, Xxxxxx X. Xxxxxxx, Xxxx X. Xxxx and Xxxxxxx X. Xxxxxx
(individually referred to herein as "Seller" and collectively as "Sellers"), and
Connect Renewable Energy, Inc., a Nevada corporation (hereinafter referred to as
the "Company" or "CRE").
RECITALS
WHEREAS, Sellers are the beneficial and record owners of all of the issued
and outstanding shares of the capital stock of the Company (the "CRE Shares", as
further set forth and defined in Section 3.3 below); and
WHEREAS, Buyer is a wholly owned subsidiary of Barnabus; and
WHEREAS, the Board of Directors of Buyer and the Board of Directors of the
Company deem it advisable and in the best interests of Buyer and the Company and
their respective shareholders, that the parties engage in an exchange of shares
upon the terms and subject to the conditions of this Agreement; and
WHEREAS, the parties to this Agreement wish to engage in an exchange of
shares upon the terms and conditions set forth herein in order to effect the
Merger, all for the purpose of carrying out a reorganization within the meaning
of Section 368(a)(2)(E) of the Internal Revenue Code of 1986, as amended; and
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"APPLICABLE CONTRACT" shall mean any Contract (a) under which the Company
has or may acquire any rights, (b) under which the Company has or may become
subject to any obligation or liability, or (c) by which the Company or any of
the assets owned or used by it is or may become bound.
"ASSERTED LIABILITY" shall mean any demand, claim or circumstance which,
with the lapse of time, would give rise to a claim or the commencement (or
threatened commencement) of any action, proceeding or investigation relative to
the General Indemnification, or relative to Barnabus' obligation to indemnify
under Section 10 for which notice of indemnity claim has been given under
Section 10.2 or 10.3.
"BALANCE SHEET" shall mean as defined in Section 3.4.
"BARNABUS DISCLOSURE LETTER" shall mean the disclosure letter delivered by
Barnabus to Company concurrently with the execution and delivery of this
Agreement
"BARNABUS FINANCIAL STATEMENTS" shall mean those financial statements
called for by Section 4.6.
"BARNABUS FINANCING" shall mean a private placement of Barnabus securities
which raises at least $10,000,000 in gross proceeds.
"BARNABUS MERGER SHARES" shall mean as defined in Section 2.2.2.1.
"BEST EFFORTS" shall mean the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to ensure that such result
is achieved as expeditiously as possible; provided, however, that an obligation
to use Best Efforts under this Agreement does not require the Person subject to
that obligation to take actions that would result in a materially adverse change
in the benefits to such Person of this Agreement and the Contemplated
Transactions.
"BREACH" shall mean a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be deemed to have occurred if there is or has
been (a) any inaccuracy in or breach of, or any failure to perform or comply
with, such representation, warranty, covenant, obligation, or other provision,
or (b) any claim (by any Person) or other occurrence or circumstance that is or
was inconsistent with such representation, warranty, covenant, obligation, or
other provision, and the term "Breach" means any such inaccuracy, breach,
failure, claim, occurrence, or circumstance.
"CBC CONSULTING AGREEMENT" shall mean as defined in Section 2.5(a)(ii).
"COMPANY" shall mean the Company and each of the subsidiaries and
affiliates referred to in Section 3.1.
"CONFIDENTIALITY AGREEMENT" shall mean the Mutual Confidential Disclosure
Agreement effective as of September 16, 2005 between Barnabus and the Company.
"CONSENT" shall mean any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS" shall mean all of the transactions
contemplated by this Agreement, including, but not limited to:
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(a) the execution, delivery, and performance of a Confidentiality,
Nondisclosure and Assignment of Inventions Agreement by each Seller
and each Option Stockholder;
(b) the execution, delivery, and performance of CBC Consulting Agreement
Noncompetition Agreement;
(c) the execution, delivery, and performance of the Noncompetition
Agreements executed by each Seller;
(d) the performance by Barnabus, Buyer, the Company and Sellers of their
respective covenants and obligations under this Agreement;
(e) the merger of the Buyer with and into the Company and the exchange
of Barnabus Merger Shares for CRE Shares;
(f) the CRE Stockholders' Voting Agreement by and among the Sellers and
Barnabus;
(g) the Option Holder Agreements executed by each Option Stockholder;
and
(h) the making of the Working Capital Loans.
"CONTRACT" shall mean any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"CRE SHARES" shall mean as defined in Section 2.2.2.1.
"CRE STOCKHOLDERS' VOTING AGREEMENT" shall mean as defined in Section
2.3(b).
"DAMAGES" shall mean as defined in Section 10.2.
"DISCLOSURE LETTER" shall mean the disclosure letter delivered by the
Company to Barnabus concurrently with the execution and delivery of this
Agreement.
"EFFECTIVE DATE" shall mean the date this Agreement is executed by all of
the parties hereto.
"EFFECTIVE TIME" shall mean as defined in Section 2.2.1.2.
"ENCUMBRANCE" shall mean any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest, right of
first refusal, or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income, or exercise of any other attribute of
ownership.
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"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES" shall mean any cost,
damages, expense, liability, obligation, or other responsibility arising from or
under environmental law or Occupational Safety and Health Law and consisting of
or relating to:
(a) any environmental, health, or safety matters or conditions;
(b) fines, penalties, judgments, losses, claims or demands arising under
Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under environmental law or Occupational
Safety and Health Law for cleanup costs or corrective action,; or
(d) any other compliance, corrective, investigative, or remedial
measures required under any environmental law or Occupational Safety
and Health Law.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974 or
any successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"EXCHANGE ACT" shall mean shall mean the Securities Exchange Act of 1934,
or any successor law, and regulations or rules issued pursuant to that Act or
any successor law.
"FACILITIES" shall mean any real property, leaseholds, or other interests
currently or formerly owned or operated by the Company and any buildings,
plants, structures, or equipment (including motor vehicles) currently or
formerly owned or operated by the Company.
"FINANCIAL STATEMENTS" shall mean shall mean those financial statements
called for by Section 3.4.
"GAAP" shall mean generally accepted United States accounting principles,
applied on a basis consistent with the basis on which the Balance Sheet and the
other financial statements referred to in Section 3.4(b) were prepared.
"XXXXXXX NON-COMPETITION AGREEMENT" shall mean as defined in Section
2.5(a)(iii).
"GENERAL HOLDBACK STOCK" shall mean ten percent (10%) or 443,478 of the
Barnabus Merger Shares to be issued to Principal Seller under Section 2.2.2, and
to be held in the General Holdback Account.
"GENERAL HOLDBACK ACCOUNT" shall mean the account consisting of the
General Holdback Stock of Sellers, to be established with, and administered by,
Barnabus to secure the General Indemnification by the Principal Seller.
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"GENERAL INDEMNIFICATION" shall mean the obligation of the Principal
Seller under Section 10 to indemnify Barnabus.
"GOVERNMENTAL AUTHORIZATION" shall mean any approval, consent, license,
permit, waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"GOVERNMENTAL BODY" shall mean any federal, state, local, municipal,
foreign, or other government; governmental or quasi-governmental authority of
any nature (including any governmental agency, branch, department, official, or
entity and any court or other tribunal); or body exercising, or entitled to
exercise, any administrative, executive, judicial, legislative, police,
regulatory, or taxing authority or power of any nature.
"INTELLECTUAL PROPERTY ASSETS" shall mean as defined in Section 3.21.
"INTERIM BALANCE SHEET" shall mean as defined in Section 3.4.
"IRC" shall mean the Internal Revenue Code of 1986 or any successor law,
and regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS" shall mean the United States Internal Revenue Service or any
successor agency, and, to the extent relevant, the United States Department of
the Treasury.
"KNOWLEDGE" shall mean an individual will be deemed to have "Knowledge" of
a particular fact or other matter if:
(a) such individual is actually aware of such fact or other matter; or
(b) a prudent individual could be expected to discover or otherwise
become aware of such fact or other matter in the course of
conducting a reasonable investigation concerning the existence of
such fact or other matter.
A Person (other than an individual) will be deemed to have "Knowledge" of a
particular fact or other matter if any individual who is serving, or who has at
any time served, as a director, officer, partner, executor, trustee or
beneficiary of such Person (or in any similar capacity) has, or at any time had,
Knowledge of such fact or other matter.
"LOAN CLOSING DATE" shall mean each of dates on which Barnabus shall make
Working Capital Loans as provided in Section 2.1.
"LEGAL REQUIREMENT" shall mean any law, ordinance, principle of common
law, regulation, statute, or treaty of a Governmental Body.
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"MATERIAL ADVERSE CHANGE" shall mean a change in the assets (including
intangible assets), properties, business, operations or conditions (financial or
otherwise), or results of operations of a Person with a negative impact of
$50,000 or more.
"MERGER CLOSING" shall mean as defined in Section 2.4.
"MERGER CLOSING DATE" shall mean the date and time as of which the Merger
Closing actually takes place.
"OCCUPATIONAL SAFETY AND HEALTH LAW" shall mean any Legal Requirement
designed to provide safe and healthful working conditions and to reduce
occupational safety and health hazards, and any program, whether governmental or
private (including those promulgated or sponsored by industry associations and
insurance companies), designed to provide safe and healthful working conditions.
"OPTION HOLDER AGREEMENT" shall mean as defined in Section 2.1.1(c).
"OPTION HOLDER EXERCISE AND RELEASE AGREEMENT" shall mean as defined in
Section 2.5(a)(v).
"OPTION STOCKHOLDERS" shall mean as defined in Section 3.3.
"ORDER" shall mean any award, decision, injunction, judgment, order,
ruling, subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS" shall mean an action taken by a Person will
be deemed to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such Person and
is taken in the ordinary course of the normal day-to-day operations
of such Person; and
(b) such action is similar in nature and magnitude to actions
customarily taken, in the ordinary course of the normal day-to-day
operations of other Persons that are in the same line of business as
such Person.
"ORGANIZATIONAL DOCUMENTS" shall mean (a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership agreement and
any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) any charter or similar document adopted or filed in connection
with the creation, formation, or organization of a Person; and (e) any amendment
to any of the foregoing.
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"PERSON" shall mean any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"PLAN" shall mean as defined in Section 3.12.
"PRINCIPAL SELLER" shall mean Xxxxxx X. Xxxxxxx, the controlling
stockholder of the Company.
"PROCEEDING" shall mean any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Body or arbitrator.
"RELATED PERSON" shall mean with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by such
individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such individual's
Family hold (individually or in the aggregate) a Material Interest;
and
(d) any Person with respect to which such individual or one or more
members of such individual's Family serves as a director, officer,
partner, executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common
control with such specified Person;
(b) any Person that holds a Material Interest in such specified Person;
(c) each Person that serves as a director, officer, partner, executor,
or trustee of such specified Person (or in a similar capacity);
(d) any Person in which such specified Person holds a Material Interest;
(e) any Person with respect to which such specified Person serves as a
general partner or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in clause (b) or (c).
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For purposes of this definition, (a) the "Family" of an individual includes (i)
the individual, (ii) the individual's spouse and former spouses, (iii) any other
natural person who is related to the individual or the individual's spouse
within the second degree, and (iv) any other natural person who resides with
such individual, and (b) "Material Interest" means direct or indirect beneficial
ownership (as defined in Rule 3d-3 under the Securities Exchange Act of 1934) of
voting securities or other voting interests representing at least 1% of the
outstanding voting power of a Person or equity securities or other equity
interests representing at least 1% of the outstanding equity securities or
equity interests in a Person.
"REPRESENTATIVE" shall mean with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor, or other representative
of such Person, including legal counsel, accountants, and financial advisors.
"SECURITIES ACT" shall mean the Securities Act of 1933 or any successor
law, and regulations and rules issued pursuant to that Act or any successor law.
"SUBSIDIARY" shall mean with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests having the
power to elect a majority of that corporation's or other Person's board of
directors or similar governing body, or otherwise having the power to direct the
business and policies of that corporation or other Person (other than securities
or other interests having such power only upon the happening of a contingency
that has not occurred) are held by the Owner or one or more of its Subsidiaries;
when used without reference to a particular Person, "Subsidiary" means a
Subsidiary of the Company.
"SURVIVING CORPORATION" shall mean the Company as specified in Section
2.2.1.1.
"TAX" OR "TAXES" shall mean taxes of any kind, liens or other like
assessments, customs duties, imposts, charges or fees, including, without
limitation, income, gross receipts, ad valorem, value-added, excise, real or
personal property, asset, sales, use, stamp, stock transfer, license, payroll,
transaction, capital, net worth and franchise taxes, withholding, employment,
social security, workers' compensation, occupation, premium, windfall profits,
surplus lines, transfer and gains taxes or other governmental taxes imposed or
payable to the United States, or any state, county, local or foreign government
or subdivision or agency thereof, and in each instance such term shall include
any interest, penalties or additions to tax attributable to such tax.
"TAX RETURN" shall mean any return (including any information return),
report, statement, schedule, notice, form, or other document or information
filed with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection,
or payment of any Tax or in connection with the administration, implementation,
or enforcement of or compliance with any Legal Requirement relating to any Tax.
"THREATENED" a claim, Proceeding, dispute, action, or other matter will be
deemed to have been "Threatened" if any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in writing), or
if any other event has occurred or any other circumstances exist, that would
lead a prudent Person to conclude that such a claim, Proceeding, dispute,
action, or other matter is likely to be asserted, commenced, taken, or otherwise
pursued in the future.
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"WORKING CAPITAL LOANS" shall mean the loans referenced in Section 2.1
"WORKING CAPITAL NOTE" shall mean as defined in Section 2.1.1.
2. WORKING CAPITAL LOANS; MERGER
2.1 WORKING CAPITAL LOANS TO THE COMPANY. Prior to the Merger Closing
Date, Barnabus will make loans to the Company in accordance with the following
schedule unless otherwise agreed in writing by Barnabus and the Company (the
"Working Capital Loans"), which loans shall be evidenced by the promissory note
of the Company in the form of Exhibit 2.1 (the "Working Capital Note"
(a) First Loan Closing: US $750,000 (less any loans made to the Company
prior to the closing) -February __, 2006;
(b) Second Loan Closing: US $750,000 - February 15, 2006; and
(c) Final Loan Closing: US $1,500,000 - On the Merger Closing Date.
The Company shall use the proceeds of such loans solely for the following
purposes: (i) to acquire photo voltaic cells and other inventory items required
for the production of the Company's products and for other current working
capital obligations; (ii) to complete construction of and to purchase equipment
for the Company's manufacturing facility in Grass Valley, California; and (iii)
to pay a portion of the outstanding indebtedness of the Company specified in
reasonable detail in Part 2.1 of the Disclosure Letter, the total aggregate
principal amount of which payments shall not exceed approximately $1,250,000.
As of the Merger Closing Date, Barnabus shall contribute to the capital of
the Company all of the Working Capital Loans plus such additional funds as may
be necessary so that the total capital contribution by Barnabas as of the Merger
Closing Date is at least $3,000,000.
2.1.1 WORKING CAPITAL LOAN CLOSING OBLIGATIONS.
At each Working Capital Loan Closing:
(a) The Company will deliver to Barnabus a certificate executed by the
Company representing and warranting to Barnabus that each of the
Company's and the Sellers' representations and warranties in this
Agreement is accurate in all respects as of the date of this
Agreement and is accurate in all respects as of the such date as if
made on such date (giving effect to any supplements to the
Disclosure Letter that are delivered by the Company to Barnabus
prior to the such Working Capital Loan in accordance with Section
5.5).
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(b) The Company shall deliver to Barnabus a Stockholder's Voting
Agreement and an Option Holder Agreement in the form of Exhibit
2.1.1(b)(i) and 2.1.1(b)(ii) respectively, attached hereto, duly
executed by the Sellers and the Option Stockholders, as the case may
be, - this requirement applies to first closing only.
(c) Barnabus will deliver to the Company by wire transfer or check or
other mutually acceptable form the amount of such Working Capital
Loan installment.
2.2 MERGER OF BUYER WITH AND INTO COMPANY
2.2.1 MERGER
2.2.1.1 The Merger. Subject to the terms and conditions of
this Agreement, in accordance with the Nevada Revised Statutes, at the Effective
Time, the Buyer shall merge with and into the Company (the "Merger"). The
Company shall be the "Surviving Corporation" in the Merger, and its corporate
existence shall continue under the laws of the State of Nevada. Upon
consummation of the Merger, the separate corporate existence of the Buyer shall
terminate.
2.2.1.2 Effective Time of the Merger. The Merger shall become
effective as of such time as the Certificate of Merger is duly filed with the
Secretary of State of Nevada or at such other time thereafter as is specified in
the Certificate of Merger (the "Effective Time").
2.2.1.3 Effects of Merger. From and after the Effective Time,
the Merger shall have the effects set forth in the Nevada Revised Statutes.
2.2.1.4 Articles of Incorporation. The Articles of
Incorporation of the Buyer, as in effect on the Merger Closing Date, shall be,
until duly amended in accordance with applicable law, the Articles of
Incorporation of the Surviving Corporation, except that the Articles of
Incorporation shall be amended to provide that the name of the Surviving
Corporation shall be Connect Renewable Energy, Inc.
2.2.1.5 Bylaws. The Bylaws of the Buyer, as in effect on the
Merger Closing Date, shall be, until duly amended in accordance with their
terms, the Bylaws of the Surviving Corporation except that the Bylaws shall be
amended to provide that the name of the Surviving Corporation shall be Connect
Renewable Energy, Inc.
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2.2.1.6 Directors. The Board of Directors of the Buyer
immediately prior to the Merger Closing Date shall constitute the Board of
Directors of the Surviving Corporation from and after the Merger Closing Date
until their successors have been duly elected and qualified as provided in the
Bylaws of the Surviving Corporation.
2.2.1.7 Officers. The officers of the Buyer in office on the
Merger Closing Date shall, after the Merger Closing Date, constitute the
officers of the Surviving Corporation until their successors shall have been
duly elected and qualified as provided in the By-laws of the Surviving
Corporation. Barnabus may cause such additional officers to be elected as
Barnabus in its sole discretion shall decide.
2.2.2 CONVERSION OF CRE SHARES. The manner of converting shares
of the Company and Buyer in the Merger shall be as follows:
2.2.2.1 At the Effective Time all of the shares of Common
Stock, $.001 par value, of the Company issued and outstanding on the Merger
Closing Date (the "CRE Shares"), shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into the right to receive
a total of 5,000,000 shares of common stock of Barnabus, par value $.001 per
share (the "Barnabus Merger Shares"). No fraction of a share of Barnabus common
stock shall be issued. Each of Sellers agrees that the CRE Shares held by such
Seller shall be converted into the number of full shares of Barnabus common
stock set forth opposite the name of such Seller on Exhibit 2.2.2.1 of this
Agreement.
2.2.2.2 Each share of Company common stock held in the
treasury of the Company immediately prior to the Effective Time, shall be
cancelled, and no shares of Barnabus common stock shall be issued in respect
thereof.
2.2.2.3 At the Effective Time, all CRE Shares shall be, by
virtue of the Merger and without any action on the part of the holders thereof,
shall no longer be outstanding and shall be cancelled and retired and shall
cease to exist, and each holder of a certificate representing any such shares
shall thereafter cease to have any rights with respect to such CRE Shares,
except the right of the Sellers to receive Barnabus Merger Shares hereunder.
2.2.2.4 No provision is being made with regard to dissenters'
rights since all of the holders of the CRE Shares are parties to this Agreement
and have agreed to vote in favor of the Merger.
2.2.2.5 At the Effective Time, each share of common stock of
Buyer issued and outstanding immediately prior to the Effective Time shall be
converted into an equal number of shares of common stock of the Company.
2.3 Intentionally Omitted.
2.4 MERGER CLOSING. The closing of the Merger (the "Merger Closing")
provided for in this Agreement will take place at the offices of Barnabus, at
10:00 a.m. (local time) on March 31, 2006 or at such other time and place as the
parties may agree (the "Merger Closing Date"). Subject to the provisions of
Section 9, failure to consummate the exchange of shares provided for in this
Agreement on the date and time and at the place determined pursuant to this
Section 2.4 will not result in the termination of this Agreement and will not
relieve any party of any obligation under this Agreement.
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2.5 MERGER CLOSING OBLIGATIONS
At the Merger Closing:
(a) The Company and the Principal Seller will deliver or cause to be
delivered to Barnabus:
(i) certificates representing the CRE Shares, duly
endorsed by Sellers and the Option Stockholders (or
accompanied by duly executed stock powers);
(ii) the CBC Consulting Agreement in the form of Exhibit
2.5(a)(ii), executed by Xxxxxx X. Xxxxxxx;
(iii) Non-competition agreements in the form of Exhibit
2.5(a)(iii), executed by such Seller;
(iv) a General Release Agreement in the form of Exhibit
2.5(a)(iv), executed by each Seller;
(v) an Option Holder Exercise and Release Agreement
executed by each Option Stockholder in the form of Exhibit
2.5(a)(v).
(vi) a Confidentiality Nondisclosure and Assignment of
Inventions Agreement in the form of Exhibit 2.5(a)(vi)
executed by each Seller and Option Stockholder.
(vii) a certificate executed by the Company and the
Principal Seller representing and warranting to Barnabus that
each of the Company's and the Principal Seller's
representations and warranties in this Agreement is accurate
in all respects as of the date of this Agreement and is
accurate in all respects as of the Merger Closing Date as if
made on the Merger Closing Date (giving effect to any
supplements to the Disclosure Letter that are delivered by the
Company to Barnabus prior to the Merger Closing Date in
accordance with Section 5.5).
(b) Buyer will deliver to Sellers and Option Stockholders:
(i) Certificates representing a total of Five Million
(5,000,000) shares of Common Stock of Barnabus $.00l par
value, duly registered in the name of Sellers and Option
Stockholders, and allocated among such Persons as provided in
Exhibit 2.2.2.1;
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(ii) a certificate executed by Barnabus and Buyer to the
effect that each of the representations and warranties of
Barnabus and Buyer in this Agreement was accurate in all
respects as of the date of this Agreement and is accurate in
all respects as of the Merger Closing Date as if made on the
Merger Closing Date; and
(iii) the CBC Consulting Agreement, executed by
Barnabus;
2.6 LEGEND. Each certificate representing Barnabus CRE Shares which is
delivered (and to the extent applicable, any later certificate into which such
certificate may later be exchanged) pursuant to this Agreement will bear a
legend to disclose the limitations upon its transferability by virtue of the
requirements of the Securities Act and/or the Exchange Act and applicable state
securities law(s), and Barnabus's transfer agent will be advised accordingly.
The legend to be placed on such stock certificates shall read as follows:
THESE SECURITIES HAVE BEEN OBTAINED FROM THE ISSUER IN A TRANSACTION
NOT INVOLVING A PUBLIC OFFERING AND HAVE NOT BEEN REGISTERED UNDER
AND ARE SUBJECT TO RESTRICTIONS ON RESALE PURSUANT TO THE SECURITIES
ACT OF 1933 AND STATE SECURITIES LAWS.
The legend shall be removed from any certificate representing either (a) shares
sold under an effective registration statement under the Securities Act, or (b)
shares as to which, in the opinion of counsel reasonably satisfactory to
Barnabus, such registration is not required and that the transfer will not
otherwise violate the Securities Act, the Exchange Act, or applicable state
securities laws; any stop transfer instructions previously given to Barnabus's
transfer agent will be revoked promptly upon the occurrence of (a) or (b) above.
2.7 GENERAL INDEMNIFICATION HOLDBACK
At the Merger Closing, the General Holdback Stock shall be placed in the
General Holdback Account. The General Holdback Stock shall remain in the General
Holdback Account for one (1) year following the Merger Closing Date in order to
secure the performance of the obligations of Principal Seller under the General
Indemnification. During such one (1) year period or until all General Holdback
Stock has been distributed from the General Holdback Account, all dividends paid
and distributions made with respect to the General Holdback Stock shall be the
property of Principal Seller, and Principal Seller shall have the sole power to
exercise all voting rights pertaining to the General Holdback Stock.
On the first anniversary of the Merger Closing Date all of the General
Holdback Stock shall be returned to Principal Seller less the number Barnabus
Merger Shares reasonably necessary to satisfy the amount of all pending
indemnity claims for which notice has been given by Barnabus or Buyer pursuant
to Section 10.5 and 10.6. Any dispute concerning the valuation of the indemnity
claim for purposes of retention of General Holdback Stock or the number of
shares to be retained shall be resolved in accordance with Section 10.7. Any
shares retained beyond the initial one year period not used to satisfy indemnity
claims shall be returned to Principal Seller immediately after the payment or
termination of the last indemnity claim pending at the end of the initial one
year period.
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2.8 VALUE OF BARNABUS COMMON STOCK. For all the purposes of this
Agreement, Barnabus common stock shall be deemed to be valued at $2.00 per share
on and as of the Merger Closing Date.
3. REPRESENTATIONS AND WARRANTIES OF PRINCIPAL SELLER AND THE COMPANY
The Principal Seller and the Company jointly and severally represent and
warrant to Barnabus and Buyer as follows and acknowledge that the Buyer and
Barnabus are relying upon the following representations and warranties in
connection with the acquisition of the CRE Shares pursuant to the Merger which
representations shall be true and correct on the date hereof and on each Loan
Closing Date and on the Merger Closing Date:
3.1 ORGANIZATION AND GOOD STANDING
(a) Part 3.1 of the Disclosure Letter contains a complete and
accurate list for the Company of its name, its
jurisdiction of incorporation, other jurisdictions in
which it is authorized to do business, and its
capitalization (including the identity of each stockholder
and the number of shares held by each). The Company is a
corporation duly organized, validly existing, and in good
standing under the laws of its jurisdiction of
incorporation, with full corporate power and authority to
conduct its business as it is now being conducted, to own
or use the properties and assets that it purports to own
or use, and to perform all its obligations under
Applicable Contracts. The Company is duly qualified to do
business as a foreign corporation and is in good standing
under the laws of each state or other jurisdiction in
which either the ownership or use of the properties owned
or used by it, or the nature of the activities conducted
by it, requires such qualification.
(b) The Company has delivered to Buyer copies of the
Organizational Documents of the Company, as currently in
effect.
3.2 AUTHORITY; NO CONFLICT
(a) This Agreement has been duly executed and delivered by the
Company and each of the Sellers, and constitutes the
legal, valid, and binding obligation of Sellers and the
Company, enforceable against Sellers and the Company in
accordance with its terms. Sellers have the absolute and
unrestricted right, power, authority, and capacity to
execute and deliver this Agreement. Sellers have the
absolute and unrestricted right, power, authority, and
capacity to perform their obligations under this
Agreement, the execution, delivery and performance by the
Company of this Agreement have been duly authorized by all
necessary corporate action, including resolutions duly
adopted by its board of directors and resolutions adopted
by the affirmative vote of the holders of all of the CRE
Shares entitled to vote on the Merger and this Agreement,
copies of which resolutions, certified by the Secretary of
the Company are set forth in Part 3.2(a) of the Disclosure
Letter.
14
(b) To the Knowledge of the Company and the Principal Seller and
except as set forth in Part 3.2 of the Disclosure Letter,
neither the execution and delivery of this Agreement nor the
consummation or performance of any of the Contemplated
Transactions will, directly or indirectly (with or without
notice or lapse of time):
(i) contravene, conflict with, or result in a violation
of (1) any provision of the Organizational Documents of the
Company, or (2) any resolution adopted by the Board of
Directors or the stockholders of the Company;
(ii) contravene, conflict with, or result in a violation
of, or give any Governmental Body or other Person the right to
challenge any of the Contemplated Transactions or to exercise
any remedy or obtain any relief under, any Legal Requirement
or any Order to which the Company or Sellers, or any of the
assets owned or used by the Company, may be subject;
(iii) contravene, conflict with, or result in a
violation of any of the terms or requirements of, or give any
Governmental Body the right to revoke, withdraw, suspend,
cancel, terminate, or modify, any Governmental Authorization
that is held by the Company or that otherwise relates to the
business of, or any of the assets owned or used by, the
Company;
(iv) cause the Company to become subject to, or to
become liable for the payment of, any Tax;
(v) cause any of the assets owned by the Company to be
reassessed or revalued by any taxing authority or other
Governmental Body;
(vi) contravene, conflict with, or result in a violation
or breach of any provision of, or give any Person the right to
declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Applicable Contract; or
15
(vii) result in the imposition or creation of any
Encumbrance upon or with respect to any of the assets owned or
used by the Company.
Except as set forth in Part 3.2 of the Disclosure Letter,
neither Sellers nor the Company are or will be required to give any
notice to, or obtain any Consent from, any Person in connection with
the execution and delivery of this Agreement or the consummation or
performance of any of the Contemplated Transactions.
3.3 CAPITALIZATION
The authorized equity securities of the Company consist of 10,000,000
shares of common stock, $.001 par value, of which 2,205,000 shares are issued
and outstanding. As of the Closing Date, there will be no more than 2,300,000
shares of common stock issued and outstanding. All of such shares of the Company
constitute the CRE Shares. Part 3.3 of the Disclosure Letter contains a true and
complete list of the current holders of CRE Shares (the "Sellers") and the
persons who will exercise stock options and become stockholders of the Company
on or prior to the Merger Closing Date (the "Option Stockholders") and the
number of shares held or to be held by them. They are now, or will be on the
Merger Closing Date the record and beneficial owners and holders of the CRE
Shares, free and clear of all Encumbrances. Except as noted in Part 3.3 of the
Disclosure Letter, no legend or other reference to any purported Encumbrance
appears upon any certificate representing equity securities of the Company. All
of the outstanding equity securities of the Company have been duly authorized
and validly issued and are fully paid and non-assessable. There are no Contracts
relating to the issuance, sale, or transfer of any equity securities or other
securities of the Company. None of the outstanding equity securities or other
securities of the Company was issued in violation of the Securities Act or any
other Legal Requirement. The Company does not own or have any Contract to
acquire, any equity securities or other securities of any Person or any direct
or indirect equity or ownership interest in any other business, except as
disclosed in the Balance Sheets or Interim Balance Sheet.
3.4 FINANCIAL STATEMENTS
3.4.1 Company Financial Statements - the Company has delivered to
Barnabus
(a) an unaudited balance sheet of the Company, as at December 31,
2005 (the "Balance Sheet"); and
(b) an unaudited income statement of the Company, for the period
from the Company's incorporation through December 31, 2005
(the "Interim Income Statement").
To the Knowledge of the Principal Seller and the Company, such
financial statements fairly present the financial condition and the results of
operations of the Company, as at the date of and for the period referred to in
such financial statements; and in the case of the Income Statement, fairly
presents on an accrual basis a compilation of the results of operations and
income of the Company from its inception through December 31, 2005.
16
3.4.2 Checking Account. The Company maintains only the bank accounts
as shown in Part 3.4.2 of the Disclosure Letter and no other bank accounts of
any kind. Except as shown on the Financial Statements or on Part 3.4.2 of the
Disclosure Letter, or as shown on the Company' cash receipts and disbursements
journal, there have been no material receipts or disbursements, whether by cash
or check, by the Company of any kind; since the date of the last of the
Financial Statements, there has been no payment of any kind to or for the
account of Sellers or any Related Person, and no checks which exceed $10,000.00
have been issued for any purpose other than in the ordinary course of business.
3.5 BOOKS AND RECORDS
The books of account, minute books, stock record books, and other records
of the Company, all of which have been made available to Barnabus, are complete
and correct and have been maintained in accordance with sound business
practices, including the maintenance of an adequate system of internal controls.
The minute books of the Company contain accurate and complete records of all
meetings held of, and corporate action taken by, the stockholders, the Board of
Directors, and committees of the Board of Directors of the Company, and no
meeting of any such stockholders, Board of Directors, or committee has been held
for which minutes have not been prepared and are not contained in such minute
books. At the Merger Closing, all of those books and records will be in the
possession of the Company.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES
Part 3.6 of the Disclosure Letter contains a complete and accurate list of
all real property, leaseholds, or other interests therein owned by the Company,
Sellers have delivered or made available to Barnabus copies of the deeds and
other instruments (as recorded) by which the Company acquired such real property
and interests, and copies of all title insurance policies, opinions, abstracts,
and surveys in the possession of Sellers or the Company and relating to such
property or interests. The Company own (with good and marketable title in the
case of real property, subject only to the matters permitted by the following
sentence) all the properties and assets (whether real, personal, or mixed and
whether tangible or intangible) that they purport to own located in the
facilities owned or operated by the Company or reflected as owned in the books
and records of the Company, including all of the properties and assets reflected
in the Balance Sheet (except for assets held under capitalized leases disclosed
or not required to be disclosed in Part 3.6 of the Disclosure Letter and
personal property sold since the date of the Balance Sheet, in the Ordinary
Course of Business), and all of the properties and assets purchased or otherwise
acquired by the Company since the date of the Balance Sheet (except for personal
property acquired and sold since the date of the Balance Sheet in the Ordinary
Course of Business and consistent with past practice), which subsequently
purchased or acquired properties and assets (other than inventory and short-term
investments) are listed in Part 3.6 of the Disclosure Letter. All material
properties and assets reflected in the Balance Sheet is free and clear of all
Encumbrances and are not, in the case of real property, subject to any rights of
way, building use restrictions, exceptions, variances, reservations, or
limitations of any nature except, with respect to all such properties and
assets, (a) mortgages or security interests shown on the Balance Sheet as
securing specified liabilities or obligations, with respect to which no default
(or event that, with notice or lapse of time or both, would constitute a
default) exists, (b) mortgages or security interests incurred in connection with
the purchase of property or assets after the date of the Balance Sheet (such
mortgages and security interests being limited to the property or assets so
acquired), with respect to which no default (or event that, with notice or lapse
of time or both, would constitute a default) exists, (c) liens for current taxes
not yet due, and (d) with respect to real property, (i) minor imperfections of
title, if any, none of which is substantial in amount, materially detracts from
the value or impairs the use of the property subject thereto, or impairs the
operations of the Company, and (ii) zoning laws and other land use restrictions
that do not impair the present or anticipated use of the property subject
thereto. All buildings, plants, and structures owned by the Company, if any, lie
wholly within the boundaries of the real property owned by the Company and do
not encroach upon the property of, or otherwise conflict with the property
rights of, any other Person.
17
3.7 CONDITION AND SUFFICIENCY OF ASSETS
To the Knowledge of the Company and the Principal Seller, the buildings,
plants, structures, and equipment of the Company are structurally sound, are in
good operating condition and repair, and are adequate for the uses to which they
are being put, and none of such buildings, plants, structures, or equipment is
in need of maintenance or repairs except for ordinary, routine maintenance and
repairs that are not material in nature or cost. The building, plants,
structures, and equipment of the Company are sufficient for the continued
conduct of the Company' businesses after the Closing in substantially the same
manner as conducted prior to the Closing.
3.8 ACCOUNTS RECEIVABLE AND INVENTORY
(a) ACCOUNTS RECEIVABLE. All accounts receivable of the Company that are
reflected on the Balance Sheet (the "Accounts Receivable") represent or will
represent valid obligations arising from sales actually made or services
actually performed in the Ordinary Course of Business. Unless paid prior to the
Merger Closing Date, the Accounts Receivable is or will be as of the Merger
Closing Date current and collectable net of the respective reserves shown on the
Balance Sheet (which reserves are adequate and calculated consistent with past
practice). Subject to such reserves, the Accounts Receivable either has been or
will be collected in full. There is no contest, claim, or right of set-off,
other than returns in the Ordinary Course of Business, under any Contract with
any obligor of an Accounts Receivable relating to the amount or validity of such
Accounts Receivable. Part 3.8 of the Disclosure Letter contains a complete and
accurate list of all Accounts Receivable as of the date of the Balance Sheet,
which list sets forth the aging of such Accounts Receivable.
(b) INVENTORY. All inventory set forth on the Financial Statements, and
all additions to inventory of the Company since December 31, 2005, consist of
items of a quantity and quality usable or saleable in the ordinary course of the
business. Since December 31, 2005, no inventory items have been sold or disposed
of except in the ordinary course of business. Part 3.8(b) the Disclosure Letter
sets forth the locations of all items of inventory.
18
3.9 NO UNDISCLOSED LIABILITIES
Except as set forth in Part 3.9 of the Disclosure Letter, the Company has
no liabilities or obligations of any nature except for liabilities or
obligations reflected or reserved against in the Balance Sheet, and current
liabilities incurred in the Ordinary Course of Business since the respective
dates thereof.
3.10 TAXES
(a) The Company filed or caused to be filed all Tax Returns
that are or were required to be filed by or with respect
to any of them, either separately or as a member of a
group of corporations, pursuant to applicable Legal
Requirements. The Company has delivered to Barnabus
copies of, and Part 3.10 of the Disclosure Letter contains
a complete and accurate list of, all such Tax Returns
filed by the Company since its incorporation. The Company
has paid, or made provision for the payment of, all Taxes
that have become due pursuant to those Tax Returns or
otherwise, or pursuant to any assessment received by
Sellers or the Company, except such Taxes, if any, as are
listed in Part 3.10 of the Disclosure Letter and are being
contested in good faith and as to which adequate reserves
(determined in accordance with GAAP) have been provided in
the Balance Sheet.
(b) The Company has had no audits made of any Tax Return.
(c) To the Knowledge of the Company and the Principal Seller,
the charges, accruals, and reserves with respect to Taxes
on the books of the Company are adequate (determined in
accordance with GAAP) and are at least equal to that
Company's liability for Taxes. There exists no proposed
tax assessment against the Company except as disclosed in
the Balance Sheet or in Part 3.10 of the Disclosure
Letter. No consent to the application of Section 341(f)(2)
of the IRC has been filed with respect to any property or
assets held, acquired, or to be acquired by the Company.
All Taxes that the Company is or was required by Legal
Requirements to withhold or collect have been duly
withheld or collected and, to the extent required, have
been paid to the proper Governmental Body or other Person.
3.11 NO MATERIAL ADVERSE CHANGE
Since the date of the Balance Sheet, there has not been any Material
Adverse Change in the business, operations, properties, prospects, assets, or
condition of the Company, and neither the Principal Seller nor the Company has
Knowledge that any event has occurred or circumstance exists that may result in
such a Material Adverse Change.
19
3.12 EMPLOYEE BENEFIT PLANS
(a) Part 3.12 of the Disclosure Letter contains a true and
complete list as of the date of this Agreement of all
employee benefit plans or arrangements applicable to the
employees of Company and all fixed or contingent
liabilities or obligations of Company with respect to any
person now or formerly employed by Company including,
without limitation, pension or thrift plans, individual or
supplemental pension or accrued compensation arrangements,
contributions to hospitalization or other health or life
insurance programs, incentive plans, bonus arrangements
and vacation, sick leave, disability and termination
arrangements or policies, including workers' compensation
policies. Except as listed in Part 3.12 of the Disclosure
Letter, Company maintains no other employee benefit plan
or arrangement applicable to the employees of Company and
possesses no other fixed or contingent liabilities or
obligations with respect to any person now employed by
Company. Part 3.12 of the Disclosure Letter also includes
true and complete copies of all employee handbooks, rules
and regulations.
(b) Company has furnished Purchaser with copies of all applicable
plan documents, trust documents, insurance contract summary
plan descriptions of the written plans and arrangements
listed in Part 3.12 of the Disclosure Letter and with
descriptions, in writing, of the unwritten plans and
arrangements listed in Part 3.12 of the Disclosure Letter.
(c) The employee benefit plans listed and identified as "tax
qualified plans" in Part 3.12 of the Disclosure Letter
constitute plans qualified under Sections 401 et seq. of
the Internal Revenue Code of 1986, as amended (the
"Code"), have been the subject of favorable determination
letters from the Internal Revenue Service (the "Service")
confirming their status as "tax-qualified plans" and are
in compliance in all material respects with any and all
statutes and regulations which are applicable thereto.
(d) All employee benefit and welfare plans or arrangements
listed in Part 3.12 of the Disclosure Letter were
established and have been executed, managed and
administered in all material respects in accordance with
all applicable requirements of the Code, of the Employee
Retirement Income Security Act of 1974, as amended, and of
other applicable laws. Company is not aware of the
existence of any governmental audit or examination of any
of such plans or arrangements or of any facts which would
lead it to believe that any such audit or examination is
pending or threatened. There have been no federal pension
law excise taxes assessed against any of the benefit or
welfare plans, and Company is not aware of any proceedings
or events that could result in the assessment of such
excise taxes.
20
(e) There exists no action, suit or claim (other than routine
claims for benefits) with respect to any of such plans or
arrangements pending or threatened against any of such
plans or arrangements, and Sellers possess no knowledge of
any facts which could give rise to any such action, suit
or claim. Except as set forth in Part 3.12 of the
Disclosure Letter, Company is not a party to any
multi-employer pension benefit or welfare plans.
(f) No "accumulated funding deficiency", as defined in Section
412(a) of the Code, has been incurred with respect to any
"tax qualified plan", whether or not waived. The total
value of assets with respect to each "tax qualified plan"
as of December 31, 1993 and the amount of vested and
unvested benefits under such plans as of such date are set
forth on Part 3.12 of the Disclosure Letter, and there was
no unfunded vested liability as of such date under any
such plan.
3.13 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS
(a) To the Knowledge of the Company and the Principal Seller, and
except as set forth in Part 3.13 of the Disclosure Letter:
(i) the Company is, and has been, in full compliance
with each Legal Requirement that is or was applicable to it or
to the conduct or operation of its business or the ownership
or use of any of its assets, as of the date of Closing;
(ii) no event has occurred or circumstance exists that
(with or without notice or lapse of time) (A) may constitute
or result in a violation by the Company of, or a failure on
the part of the Company to comply with, any Legal Requirement,
or (B) may give rise to any obligation on the part of the
Company to undertake, or to bear all or any portion of the
cost of, any remedial action of any nature; and
(iii) the Company has not received, any actual, specific
notice or other communication (whether oral or written) from
any Governmental Body or any other Person regarding (A) any
actual, alleged, possible, or potential violation of, or
failure to comply with, any Legal Requirement, or (B) any
actual, alleged, possible, or potential obligation on the part
of the Company to undertake, or to bear all or any portion of
the cost of, any remedial action of any nature.
(b) To the Knowledge of the Company and the Principal Seller,
Part 3.13 of the Disclosure Letter contains a complete and
accurate list of each Governmental Authorization that is
held by the Company or that otherwise relates to the
business of, or to any of the assets owned or used by, the
Company. Each Governmental Authorization listed or
required to be listed in Part 3.13 of the Disclosure
Letter is valid and in full force and effect. Except as
set forth in Part 3.13 of the Disclosure Letter:
21
(i) the Company is in full compliance with all of the
terms and requirements of each Governmental Authorization
identified or required to be identified in Part 3.13 of the
Disclosure Letter;
(ii) no event has occurred or circumstance exists that
should (with or without notice or lapse of time) (A)
constitute or result directly or indirectly in a violation of
or a failure to comply with any term or requirement of any
Governmental Authorization listed or required to be listed in
Part 3.13 of the Disclosure Letter, or (B) result directly or
indirectly in the revocation, withdrawal, suspension,
cancellation, or termination of, or any modification to, any
Governmental Authorization listed or required to be listed in
Part 3.13 of the Disclosure Letter;
(iii) the Company has not received, any actual, specific
notice or other communication (whether oral or written) from
any Governmental Body or any other Person regarding (A) any
actual, alleged, possible, or potential violation of or
failure to comply with any term or requirement of any
Governmental Authorization, or (B) any actual, proposed,
possible, or potential revocation, withdrawal, suspension,
cancellation, termination of, or modification to any
Governmental Authorization; and
(iv) all applications required to have been filed for
the renewal of the Governmental Authorizations listed or
required to be listed in Part 3.13 of the Disclosure Letter
have been duly filed on a timely basis with the appropriate
Governmental Bodies, and all other filings required to have
been made with respect to such Governmental Authorizations
have been duly made on a timely basis with the appropriate
Governmental Bodies.
The Governmental Authorizations listed in Part 3.13 of the Disclosure
Letter collectively constitute all of the Governmental Authorizations necessary
to permit the Company to lawfully conduct and operate their businesses in the
manner they currently conduct and operate such businesses and to permit the
Company to own and use their assets in the manner in which they currently own
and use such assets.
3.14 LEGAL PROCEEDINGS; ORDERS
(a) Except as set forth in Part 3.14 of the Disclosure Letter,
there is no pending Proceeding:
22
(i) that has been commenced by or against the Company or
that otherwise relates to or may affect the business of, or
any of the assets owned or used by, the Company; or
(ii) that challenges, or that should have the effect of
preventing, delaying, making illegal, or otherwise interfering
with, any of the Contemplated Transactions.
To the Knowledge of the Company and the Principal Seller, (1) no such
Proceeding has been Threatened, and (2) no event has occurred or circumstance
exists that may give rise to or serve as a basis for the commencement of any
such Proceeding. The Company has delivered to Barnabus copies of all pleadings,
correspondence, and other documents relating to each Proceeding listed in Part
3.14 of the Disclosure Letter.
(b) Except as set forth in Part 3.14 of the Disclosure Letter:
(i) there is no Order to which any of the Company, or
any of the assets owned or used by any of the Company, is
subject;
(ii) none of the Sellers are subject to any Order that
relates to the business of, or any of the assets owned or used
by, any of the Company; and
(iii) to the Knowledge of Sellers and the Company, no
officer, director, agent, or employee of the Company is
subject to any Order that prohibits such officer, director,
agent, or employee from engaging in or continuing any conduct,
activity, or practice relating to the business of any of the
Company.
(c) Except as set forth in Part 3.14 of the Disclosure Letter:
(i) the Company is, and has been, in full compliance
with all of the terms and requirements of each Order to which
it, or any of the assets owned or used by it, is or has been
subject;
(ii) no event has occurred or circumstance exists that
may constitute or result in (with or without notice or lapse
of time) a violation of or failure to comply with any term or
requirement of any Order to which the Company, or any of the
assets owned or used by the Company, is subject; and
(iii) the Company has not received, any actual, specific
notice or other communication (whether oral or written) from
any Governmental Body or any other Person regarding any
actual, alleged, possible, or potential violation of, or
failure to comply with, any term or requirement of any Order
to which the Company, or any of the assets owned or used by
the Company, is or has been subject.
23
3.15 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in Part 3.15 of the Disclosure Letter, since the date
of the Balance Sheet, the Company has conducted its business only in the
Ordinary Course of Business and there has not been any:
(a) change in the Company's authorized or issued capital
stock; grant of any stock option or right to purchase
shares of capital stock of the Company; issuance of any
security convertible into such capital stock; grant of any
registration rights; purchase, redemption, retirement, or
other acquisition by the Company of any shares of any such
capital stock; or declaration or payment of any dividend
or other distribution or payment in respect of shares of
capital stock;
(b) amendment to the Organizational Documents of the Company;
(c) payment or increase by the Company of any bonuses, salaries, or
other compensation to any stockholder, director, officer, or (except
in the Ordinary Course of Business) employee or entry into any
employment, severance, or similar Contract with any director,
officer, or employee;
(d) adoption of, or increase in the payments to or benefits under,
any profit sharing, bonus, deferred compensation, savings,
insurance, pension, retirement, or other employee benefit plan for
or with any employees of the Company;
(e) damage to or destruction or loss of any asset or property of the
Company, whether or not covered by insurance, materially and
adversely affecting the properties, assets, business, financial
condition, or prospects of the Company, taken as a whole;
(f) entry into, termination of, or receipt of actual, specific
notice of termination of (i) any license, broker, agent, sales
representative, joint venture, credit, or similar agreement, or (ii)
any Contract or transaction involving a total remaining commitment
by or to the Company of at least $10,000 or (iii) termination of any
client which represents annual commissions exceeding $10,000;
(g) sale, lease, or other disposition of any asset or property of
the Company or mortgage, pledge, or imposition of any lien or other
encumbrance on any material asset or property of the Company,
including the sale, lease, or other disposition of any of the
Intellectual Property Assets;
24
(h) cancellation or waiver of any claims or rights;
(i) material change in the accounting methods used by the Company;
or
(j) agreement, whether oral or written, by the Company to do any of
the foregoing.
3.16 CONTRACTS; NO DEFAULTS
(a) Part 3.16(a) of the Disclosure Letter contains a complete and
accurate list, and the Company has delivered to Barnabus true
and complete copies, of:
(i) each Applicable Contract (other than insurance
policies procured for clients and customers) that involves
performance of services or delivery of goods or materials by
the Company of an amount or value in excess of $10,000;
(ii) each Applicable Contract that was not entered into
in the Ordinary Course of Business and that involves
expenditures or receipts of the Company in excess of $10,000;
(iii) each lease, rental or occupancy agreement,
license, installment and conditional sale agreement, and other
Applicable Contract affecting the ownership of, leasing of,
title to, use of, or any leasehold or other interest in, any
real or personal property of the Company (except personal
property leases and installment and conditional sales
agreements having a value per item or aggregate payments of
less than $5,000 and with terms of less than one year);
(iv) each licensing agreement or other Applicable
Contract with respect to patents, trademarks, copyrights, or
other intellectual property, including agreements with current
or former employees, consultants, or contractors regarding the
appropriation or the non-disclosure of any of the Intellectual
Property Assets;
(v) each collective bargaining agreement and other
Applicable Contract to or with any labor union or other
employee representative of a group of employees;
(vi) each joint venture, partnership, and other
Applicable Contract (however named) involving a sharing of
profits, losses, costs, or liabilities by the Company with any
other Person;
25
(vii) each Applicable Contract containing covenants that
in any way purport to restrict the business activity of the
Company or any Affiliate of the Company or limit the freedom
of the Company to engage in any line of business or to compete
with any Person;
(viii) each agreement defining the terms and conditions
of employment for any employee of the Company;
(ix) each Applicable Contract providing for payments to
or by any Person based on sales, purchases, or profits, other
than direct payments for goods;
(x) each power of attorney that is currently effective
and outstanding;
(xi) each Applicable Contract entered into other than in
the Ordinary Course of Business that contains or provides for
an express undertaking by the Company to be responsible for
consequential damages;
(xii) each Applicable Contract for capital expenditures
in excess of $5,000;
(xiii) each written warranty, guaranty, and or other
similar undertaking with respect to contractual performance
extended by the Company other than in the Ordinary Course of
Business; and
(xiv) each amendment, supplement, and modification
(whether oral or written) in respect of any of the foregoing.
Part 3.16(a) of the Disclosure Letter sets forth reasonably complete
details concerning such Contracts, including the parties to the Contracts, the
amount of the remaining commitment of the Company under the Contracts, and the
Company's office where details relating to the Contracts are located.
(b) Except as set forth in Part 3.16(b) of the Disclosure Letter:
(i) none of the Sellers (and no Related Person of any
Seller) has or may acquire any rights under, and none of the
Sellers has or may become subject to any obligation or
liability under, any Contract that relates to the business of,
or any of the assets owned or used by, the Company; and
(ii) To the Knowledge of the Company and the Principal
Seller, no officer, director, agent, employee, consultant, or
contractor of the Company is bound by any Contract that
purports to limit the ability of such officer, director,
agent, employee, consultant, or contractor to (A) engage in or
continue any conduct, activity, or practice relating to the
business of the Company, or (B) assign to the Company or to
any other Person any rights to any invention, improvement, or
discovery.
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(c) To the Knowledge of the Company and the Principal Seller and
except as set forth in Part 3.16(c) of the Disclosure Letter,
each Contract identified or required to be identified in Part
3.16(a) of the Disclosure Letter is in full force and effect
and is valid and enforceable in accordance with its terms.
(d) To the Knowledge of the Company and the Principal Seller and
except as set forth in Part 3.16(d) of the Disclosure Letter:
(i) the Company is, and has been, in full compliance
with all applicable terms and requirements of each Contract
under which the Company has or had any obligation or liability
or by which such Company or any of the assets owned or used by
the Company is or was bound;
(ii) each other Person that has or had any obligation or
liability under any Contract under which the Company has or
had any rights is, and has been, in full compliance with all
applicable terms and requirements of such Contract;
(iii) no event has occurred or circumstance exists that
(with or without notice or lapse of time) may contravene,
conflict with, or result in a violation or breach of, or give
the Company or other Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any
Applicable Contract; and
(iv) the Company has not given to or received from any
other Person, any notice or other communication (whether oral
or written) regarding any actual, alleged, possible, or
potential violation or breach of, or default under, any
Contract.
(e) There are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any material amounts paid
or payable to the Company under current or completed
Contracts with any Person and, to the Knowledge of Sellers
and the Company, no such Person has made written demand for
such renegotiation.
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(f) The Contracts relating to the sale, design, or provision of
products or services by the Company have been entered into in
the Ordinary Course of Business and have been entered into
without the commission of any act alone or in concert with
any other Person, or any consideration having been paid or
promised, that is or would be in violation of any Legal
Requirement.
3.17 INSURANCE
The Company maintains in full force and effect such types and amounts of
insurance issued by insurers of recognized responsibility insuring its business
and properties, under such policies, in such amounts and against such losses and
risks as are listed in the Disclosure Schedule. Such policies cover such risks
and are maintained in such amounts as are usually carried by persons engaged in
the same or similar business. The Company has furnished the Purchaser with a
list, as Part 3.17 of the Disclosure Letter, which sets forth a brief
description of all policies of fire, liability and other forms of insurance
currently maintained in force by the Company. The Company has maintained since
its inception product liability insurance in scope and amount adequate to
protect the Company from potential claims and at least consistent with the
industry standards. Since the inception of the Company there has been no
material product liability claims asserted against the Company.
3.18 ENVIRONMENTAL MATTERS
To the Knowledge of the Company and the Principal Seller and except as set
forth in Part 3.18 of the Disclosure Letter:
(a) The Company is, and at all times has been, in full
compliance with, and has not been and is not in violation
of or liable under, any environmental law. Neither
Sellers nor the Company has any basis to expect, nor has
any of them or any other Person for whose conduct they are
or may be held to be responsible received, any actual or
Threatened order, notice, or other communication from (i)
any Governmental Body or private citizen acting in the
public interest, or (ii) the current or prior owner or
operator of any Facilities, of any actual or potential
violation or failure to comply with any environmental law,
or of any actual or Threatened obligation to undertake or
bear the cost of any Environmental, Health, and Safety
Liabilities with respect to any of the Facilities or any
other properties or assets (whether real, personal, or
mixed) in which Sellers or the Company has or had an
interest.
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3.19 EMPLOYEES
(a) Part 3.19 of the Disclosure Letter contains copies of all
employment agreements to which Sellers or any employee of
the Company are a party and a complete and accurate list
of the following information for each employee or director
of the Company, including each employee on leave of
absence or layoff status: employer; name; job title;
current compensation paid or payable and any change in
compensation since January 1, 2004; vacation accrued; and
service credited for purposes of vesting and eligibility
to participate under the Company' pension, retirement,
profit-sharing, thrift-savings, deferred compensation,
stock bonus, stock option, cash bonus, employee stock
ownership (including investment credit or payroll stock
ownership), severance pay, insurance, medical, welfare, or
vacation plan, other Employee Pension Benefit Plan or
Employee Welfare Benefit Plan, or any other employee
benefit plan or any Director Plan.
(b) To the Knowledge of the Principal Seller and the Company,
no employee or director of the Company is a party to, or
is otherwise bound by, any agreement or arrangement,
including any confidentiality, non-competition, or
proprietary rights agreement, between such employee or
director and any other Person ("Proprietary Rights
Agreement") that in any way adversely affects or will
affect (i) the performance of his or her duties as an
employee or director of the Company, or (ii) the ability
of the Company to conduct its business, including any
Proprietary Rights Agreement with Sellers or the Company
by any such employee or director. To the Knowledge of
the Principal Seller and the Company, no director,
officer, or other key employee of the Company intends to
terminate his or her employment with the Company.
3.20 LABOR RELATIONS; COMPLIANCE
The Company has not been a party to any collective bargaining or
other labor Contract. There has not been, there is not presently pending
or existing, and there is not Threatened, (a) any strike, slowdown,
picketing, work stoppage, or employee grievance process, (b) any
Proceeding against or affecting the Company relating to the alleged
violation of any Legal Requirement pertaining to labor relations or
employment matters, including any charge or complaint filed by an employee
or union with the National Labor Relations Board, the Equal Employment
Opportunity Commission, or any comparable Governmental Body,
organizational activity, or other labor or employment dispute against or
affecting the Company or its premises, or (c) any application for
certification of a collective bargaining agent. To the Knowledge of the
Principal Seller and the Company, no event has occurred or circumstance
exists that could provide the basis for any work stoppage or other labor
dispute. To the Knowledge of the Principal Seller and the Company, the
Company has complied in all respects with all Legal Requirements relating
to employment, equal employment opportunity, nondiscrimination,
immigration, wages, hours, benefits, collective bargaining, the payment of
social security and similar taxes, occupational safety and health, and
plant closing. To the Knowledge of the Principal Seller and the Company,
the Company is not liable for the payment of any compensation, damages,
taxes, fines, penalties, or other amounts, however designated, for failure
to comply with any of the foregoing Legal Requirements.
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3.21 INTELLECTUAL PROPERTY
(a) Intellectual Property Assets -- The term "Intellectual
Property Assets" includes:
(i) the name Connect Renewable Energy, Inc. and all
fictional business names, trading names, registered and
unregistered trademarks, service marks, and applications
(collectively, "Marks");
(ii) all patents, patent applications, and inventions
and discoveries that may be patentable (collectively,
"Patents");
(iii) all copyrights in both published works and
unpublished works (collectively, "Copyrights"); and
(iv) all know-how, trade secrets, confidential
information, customer lists, software, technical information,
data, process technology, plans, drawings, and blue prints
(collectively, "Trade Secrets");
owned, used, or licensed by the Company as licensee or licensor.
(b) Agreements--Part 3.21(b) of the Disclosure Letter contains
a complete and accurate list and summary description,
including any royalties paid or received by the Company,
of all Contracts relating to the Intellectual Property
Assets to which the Company is a party or by which the
Company is bound, except for any license implied by the
sale of a product and perpetual, paid-up licenses for
commonly available software programs with a value of less
than $1,000 under which the Company is the licensee.
There are no outstanding and, to the Knowledge of the
Principal Seller and the Company, no Threatened disputes
or disagreements with respect to any such agreement.
(c) Know-How Necessary for the Business
The Intellectual Property Assets are all those necessary for
the operation of the Company' businesses as they are currently
conducted. The Company is the owner of all right, title, and
interest in and to each of the Intellectual Property Assets,
free and clear of all liens, security interests, charges,
encumbrances, equities, and other adverse claims, and has the
right to use without payment to a third party all of the
Intellectual Property Assets.
(d) Trademarks
The Company is not the owner of any registered Marks.
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(e) The Company is not the owner of any registered Copyright.
(f) Trade Secrets
Part 3.21(f) of the Disclosure Letter contains a complete and
accurate summary of all Trade Secrets.
(i) With respect to each Trade Secret, the documentation
relating to such Trade Secret is current, accurate, and
sufficient in detail and content to identify and explain it
and to allow its full and proper use without reliance on the
knowledge or memory of any individual.
(ii) The Principal Seller and the Company have taken all
reasonable precautions to protect the secrecy,
confidentiality, and value of their Trade Secrets.
(iii) The Company has good title and an absolute (but
not necessarily exclusive) right to use the Trade Secrets. The
Trade Secrets are not part of the public knowledge or
literature, and, to the Knowledge of the Principal Seller and
the Company, have not been used, divulged, or appropriated
either for the benefit of any Person (other than the Company)
or to the detriment of the Company. No Trade Secret is subject
to any adverse claim or has been challenged or threatened in
any way.
3.22 CERTAIN PAYMENTS
To the Knowledge of the Company and the Principal Seller, neither the
Company, nor any director, officer, agent, or employee of the Company, or to
Sellers' Knowledge any other Person associated with or acting for or on behalf
of the Company, has directly or indirectly (a) made any contribution, gift,
bribe, rebate, payoff, influence payment, kickback, or other payment to any
Person, private or public, regardless of form, whether in money, property, or
services (i) to obtain favorable treatment in securing business, (ii) to pay for
favorable treatment for business secured, (iii) to obtain special concessions or
for special concessions already obtained, for or in respect of the Company or
any Affiliate of the Company, or (iv) in violation of any Legal Requirement, (b)
established or maintained any fund or asset that has not been recorded in the
books and records of the Company.
3.23 DISCLOSURE
(a) No representation or warranty of any of the Sellers or the
Company in this Agreement and no statement in the Disclosure
Letter omits to state a material fact necessary to make the
statements herein or therein, in light of the circumstances
in which they were made, not misleading.
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(b) No notice given pursuant to Section 5.5 will contain any
untrue statement or omit to state a material fact necessary
to make the statements therein or in this Agreement, in light
of the circumstances in which they were made, not misleading.
(c) There is no fact known to Principal Seller or the Company
that has specific application to either the Principal
Seller or the Company (other than general economic or
industry conditions) and that materially adversely affects
or, as far as any of either the Principal Seller or the
Company can reasonably foresee, materially threatens, the
assets, business, prospects, financial condition, or
results of operations of the Company that has not been set
forth in this Agreement or the Disclosure Letter.
3.24 RELATIONSHIPS WITH RELATED PERSONS
Except as set forth in Part 3.24 of the Disclosure Letter, neither Sellers
nor any Related Person of any Seller or of the Company has, or since January 1,
2004 has had, any interest in any property (whether real, personal, or mixed and
whether tangible or intangible), used in or pertaining to the Company's
businesses. Except as set forth in Part 3.24 of the Disclosure Letter, neither
Sellers nor any Related Person of any Seller or of the Company is, or since
January 1, 2004 has owned (of record or as a beneficial owner) an equity
interest or any other financial or profit interest in, a Person that has (i) had
business dealings or a material financial interest in any transaction with the
Company, or (ii) engaged in competition with the Company with respect to any
line of the products or services of the Company (a "Competing Business") in any
market presently served by the Company except for less than one percent of the
outstanding capital stock of any Competing Business that is publicly traded on
any recognized exchange or in the over-the-counter market. Except as set forth
in Part 3.24 of the Disclosure Letter, neither Sellers nor any Related Person of
any Seller or of the Company is a party to any Contract with, or has any claim
or right against, the Company.
3.25 BROKERS OR FINDERS
Neither Sellers, nor the Company, nor their agents, have incurred any
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement.
4. REPRESENTATIONS AND WARRANTIES OF BARNABUS AND BUYER
Buyer and Barnabus jointly and severally represent and warrant to the
Principal Seller and the Company as follows and acknowledge that the Principal
Seller and the Company are relying upon the following representations and
warranties in connection with the acquisition of the Barnabus Merger Shares
pursuant to the Merger which representations shall be true and correct on the
date hereof and on the Merger Closing Date.
4.1 ORGANIZATION, STANDING AND AUTHORITY
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(a) Barnabus is a corporation duly organized, validly existing and in good
standing under the laws of the State of Nevada. Buyer is a corporation, duly
organized, validly existing and in good standing under the laws of the State of
Nevada. Each of them has all requisite corporate power and authority to conduct
its business as it is now being conducted, to own or use the properties and
assets that it purports to own or use, execute and deliver this Agreement, and
to perform its respective obligations under and consummate the Contemplated
Transactions. Each of them is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each state or other
jurisdiction in which either the ownership or use of the properties owned or
used by it, or the nature of the activities conducted by it, requires such
qualification.
(b) Buyer has delivered to Company copies of the Organizational Documents
of Buyer, as currently in effect and as they will be in effect at the Closing.
(c) Part 4.1 of the Barnabus Disclosure Letter sets forth a list of
officers and directors of Buyer, as they will be in effect at the Merger
Closing, and effective Time of the Merger.
4.2 EXECUTION AND DELIVERY
The execution, delivery and performance of this Agreement by Barnabus and
Buyer and the consummation of the Contemplated Transactions by Barnabus and
Buyer have been duly and validly authorized by all necessary corporate action on
the part of Barnabus and Buyer. This agreement has been duly executed and
delivered by Barnabus and Buyer and constitutes the valid and legally binding
obligation of Barnabus and Buyer, enforceable against them in accordance with
its terms.
4.3 COMPLIANCE WITH LAWS
Neither Barnabus nor Buyer is in material violation of any Federal, state,
local or foreign law, ordinance or regulation or any other requirement of any
governmental or regulatory body, court or arbitrator applicable to its business,
and neither Barnabus nor Buyer has Knowledge of any circumstances or events
which would prevent any of them from consummating the transactions contemplated
hereby in accordance with the terms of this Agreement.
4.4 CONSENTS AND APPROVALS
The execution and delivery by Barnabus and Buyer of this Agreement, the
performance by Barnabus and Buyer of their obligations hereunder, and the
consummation by Barnabus and Buyer of the transactions contemplated hereby do
not require Barnabus and Buyer to obtain any consent, approval or action of, or
make any filing with or give any notice to, any corporation, person or firm or
any public, governmental or judicial authority.
4.5 NO BREACH
33
The execution, delivery and performance of this Agreement and the
consummation of the Contemplated Transactions in accordance with the terms
hereof will not (i) violate any provision of the Articles of Incorporation or
By-Laws of Barnabus or Buyer; (ii) violate, conflict with or result in the
breach of any of the terms of, result in a material modification of or otherwise
give any other contracting party the right to terminate, or constitute (or with
notice or lapse of time or both constitute) a default (by way of substitution,
novation or otherwise) under, any contract or other agreement to which Barnabus
or Buyer is a party or by or to which it or any of its assets or properties may
be bound or subject, the impact of which, individually or in the aggregate would
cause a Material Adverse Change in the assets, properties, business, operations
or conditions (financial or otherwise) of Barnabus and Buyer taken as a whole;
(iii) violate any order, judgment, injunction, award or decree of any court,
arbitrator or governmental or regulatory body against, or binding upon, or any
agreement with, or condition imposed by any governmental or regulatory body
binding upon Barnabus or Buyer or upon the securities, assets or business of
Barnabus and Buyer or (iv) violate any statute, law or regulation of any
jurisdiction or governmental or regulatory body as such statute, law or
regulation relates to Barnabus and Buyer or to the securities, assets or
business of Barnabus or Buyer.
4.6 BARNABUS FINANCIAL STATEMENTS
Barnabus has furnished the Company with true and complete copies of its
audited financial statements as contained in Form 10KSB for the year ending May
31, 2005 (the "Barnabus Financial Statements") and its interim financial
statements as set forth on its Form 10QSB for the six-month period ending
November 30, 2005. The Barnabus Financial Statements have been prepared in
accordance with generally accepted accounting principles consistently applied
and present fairly in all material respects the consolidated financial position
of Barnabus and the results of its consolidated operations as of the dates
indicated and for the periods then ended. Since November 30, 2005 there has been
no Material Adverse Change in the assets, liabilities, properties, business,
operations or conditions (financial or otherwise) of Barnabus and its
subsidiaries and affiliates taken as a whole. Barnabus has disclosed to the
Company the details of the proposed PIPE financing and the investment in and
acquisition of Solar Roofing Systems, and said transactions shall not be deemed
give rise to a Material Adverse Change.
4.7 BARNABUS STOCK.
4.7.1 Dividends. Barnabus has not paid or declared any
dividend on the Barnabus common stock.
4.7.2 Issuance of Barnabus Merger Shares. The issuance of the
Barnabus Merger Shares has been duly approved by the Board of Directors of
Barnabus and no further corporate or other approvals are required as a
precondition to the valid issuance of the Barnabus Merger Shares. Upon the
issuance and delivery to Sellers of the Barnabus Merger Shares after the
effectiveness of the Merger, the Barnabus Merger Shares will be legally and
validly issued, fully paid and non-assessable shares of the capital stock of
Barnabus.
34
4.7.3 Investment Intent. Barnabus is acquiring the CRE Shares
without a view to, or in connection with, any distribution thereof in violation
of the securities registration requirements of the Securities Act or the
requirements of the Exchange Act.
4.8 SEC FILINGS AND PUBLIC DISCLOSURES
(a) Barnabus has timely filed with the United States Securities
and Exchange Commission (the "SEC") all periodic reports
required to be filed pursuant to the requirements of the
Exchange Act, as amended (the "Periodic Reports") and has
complied in all material respects with its obligations
("Disclosures of Material Information"). During the period
covered by the Barnabus Financial Statements, none of the
Periodic Reports (specifically including but not limited to
the Barnabus Financial Statements) or Disclosures of
Material Information contained any untrue statement of a
material fact or omitted to state a material fact necessary
to make the statements contained herein, in light of the
circumstances in which they were made, not misleading.
(b) Barnabus has furnished the Company (and will furnish to the
Company in the case of such filings made after the date
hereof) with true and correct copies of its 2005 10-KSB
statement and all 8-K and 10-QSB statements filed with the
SEC since May 31, 2005, and prior to the Merger Closing
Date Barnabus will furnish Company with true and correct
copies of all its filings with the SEC promptly after
filing.
4.9 CAPITALIZATION
The authorized equity securities of Barnabus consist of 1,125,000,000
shares of common stock, $.001 par value, of which 49,823,540 shares are issued
and outstanding. All of the outstanding equity securities of the Company have
been duly authorized and validly issued and are fully paid and non-assessable.
None of the outstanding equity securities or other securities of Barnabus was
issued in violation of the Securities Act or any other Legal Requirement. Except
as shown on Part 4.9 of the Barnabus Disclosure Letter, (i) there are no
Contracts relating to the issuance, sale or transfer of any equity securities or
other securities of Barnabus; (ii) Barnabus does not own or have any Contract to
acquire, any equity securities or other securities of any Person or any direct
or indirect equity or ownership interest in any other business, except as
disclosed in the Barnabus Financial Statements.
4.10 SOLAR ROOFING SYSTEMS ("SRS") TRANSACTION
Part 4.10 of the Barnabus Disclosure Letter contains a complete and
accurate list of the SRS Transaction Closing Documents and Barnabus has
delivered or will make available to the Company at or prior to the Closing true
and complete copies of those SRS Transaction Documents requested by Company in
writing.
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5. COVENANTS OF THE COMPANY AND THE SELLERS
5.1 ACCESS AND INVESTIGATION
Between the date of this Agreement and the Merger Closing Date, the
Company and its Representatives will (a) afford Barnabus and its Representatives
and prospective lenders and their Representatives (collectively, "Barnabus's
Advisors") full and free access to the Company's personnel with due regard for
the confidentiality of this Agreement, properties, contracts, books and records,
and other documents and data, (b) furnish Barnabus and Barnabus's Advisors with
copies of all such contracts, books and records, and other existing documents
and data as Barnabus may reasonably request, and (c) furnish Barnabus and
Barnabus's Advisors with such additional financial, operating, and other data
and information as Barnabus may reasonably request.
5.2 OPERATION OF THE BUSINESS OF THE COMPANY
Except as set forth in Part 5.2 of the Disclosure Letter between the date
of this Agreement and the Merger Closing Date, the Company will, and the
Principal Seller will cause the Company to:
(a) conduct the business of the Company only in the Ordinary
Course of Business;
(b) use its Best Efforts to preserve intact the current business
organization of the Company, keep available the services of
the current officers, employees, and agents of the Company,
and maintain the relations and good will with suppliers,
customers, landlords, creditors, employees, agents, and
others having business relationships with the Company;
(c) confer with Barnabus concerning operational matters of a
material nature;
(d) not change its accounting procedures and practices;
(e) not license, sell, dispose of or encumber any of its business
or assets;
(f) not create, assume or guarantee any indebtedness;
(g) not declare any cash dividend to its shareholders, or declare
any stock split, stock dividend or engage in any
recapitalization;
(h) otherwise report periodically to Barnabus concerning the
status of the business, operations, and finances of the
Company.
5.3 NEGATIVE COVENANT
36
Except as otherwise expressly permitted by this Agreement, between the
date of this Agreement and the Merger Closing Date, the Company will not and the
Sellers will not, and will cause the Company not to, without the prior consent
of Barnabus, take any affirmative action, or fail to take any reasonable action
within their or its control, as a result of which any of the changes or events
listed in Section 3.15 is likely to occur.
5.4 REQUIRED APPROVALS
As promptly as practicable after the date of this Agreement, Sellers and
the Company will make all filings required by Legal Requirements to be made by
them in order to consummate the Contemplated Transactions. Between the date of
this Agreement and the Merger Closing Date, Sellers and the Company will
cooperate with Barnabus with respect to all filings that Barnabus elects to make
or is required by Legal Requirements to make in connection with the Contemplated
Transactions.
5.5 NOTIFICATION
Between the date of this Agreement and the Merger Closing Date, the
Company will promptly notify Barnabus in writing if Sellers or the Company
become aware of any fact or condition that causes or constitutes a Breach of any
of the Company's or the Sellers' representations and warranties as of the date
of this Agreement, or if Sellers or the Company become aware of the occurrence
after the date of this Agreement of any fact or condition that would (except as
expressly contemplated by this Agreement) cause or constitute a Breach of any
such representation or warranty had such representation or warranty been made as
of the time of occurrence or discovery of such fact or condition. Should any
such fact or condition require any change in the Disclosure Letter if the
Disclosure Letter were dated the date of the occurrence or discovery of any such
fact or condition, the Company will promptly deliver to Barnabus a supplement to
the Disclosure Letter specifying such change. During the same period, the
Company will promptly notify Barnabus of the occurrence of any Breach of any
covenant of the Company or Sellers in this Section 5 or of the occurrence of any
event that may make the satisfaction of the conditions in Section 7 impossible
or unlikely.
5.6 NO NEGOTIATION
Until such time, if any, as this Agreement is terminated pursuant to
Section 9, neither the Company nor the Principal Seller will, or permit their
Representatives to directly or indirectly solicit, initiate, or encourage any
inquiries or proposals from, discuss or negotiate with, provide any non-public
information to, or consider the merits of any unsolicited inquiries or proposals
from, any Person (other than Barnabus) relating to any transaction involving the
sale of the business or assets (other than in the Ordinary Course of Business)
of the Company, or any of the capital stock of the Company, or any merger,
consolidation, business combination, or similar transaction involving the
Company.
5.7 BEST EFFORTS
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Between the date of this Agreement and the Merger Closing Date, Sellers
and the Company will use their Best Efforts to cause the conditions in Section 7
to be satisfied.
5.8 INVESTMENT REPRESENTATIONS
Each Seller represents, warrants and covenants with Barnabus that Sellers
are acquiring the Barnabus Merger Shares for their own account and not with a
view to their distribution within the meaning of Section 2(11) of the Securities
Act. Except as set forth in Part 5.8 of the Disclosure Letter, each of the
Sellers is either (i) an "accredited investor(s)" as such term is defined in
Rule 501(a) under the Securities Act, or (ii) has such knowledge and experience
in financial and business matters that it or he is capable of evaluating the
merits and risks of acquiring Barnabus Merger Shares.
6. COVENANTS OF BUYER AND BARNABUS
6.1 APPROVALS OF GOVERNMENTAL BODIES
As promptly as practicable after the date of this Agreement, Barnabus
will, and will cause each of its Related Persons to, make all filings required
by Legal Requirements to be made by them to consummate the Contemplated
Transactions. Between the date of this Agreement and the Closing Date, Barnabus
will, and will cause each Related Person to, cooperate with the Company and the
Sellers with respect to all filings that the Company or the Sellers are required
by Legal Requirements to make in connection with the Contemplated Transactions,
and (ii) cooperate with the Company in obtaining all consents identified in Part
3.2 of the Disclosure Letter; provided that this Agreement will not require
Barnabus or Buyer to dispose of or make any change in any portion of its
business or to incur any other burden that will cause a Material Adverse Change
to either company to obtain a Governmental Authorization.
6.2 NOTIFICATION
Between the date of this Agreement and the Merger Closing Date, Barnabus
will promptly notify the Company in writing if Barnabus becomes aware of any
fact or condition that causes or constitutes a Breach of any of Barnabus'
representations and warranties as of the date of this Agreement, or if Barnabus
becomes aware of the occurrence after the date of this Agreement of any fact or
condition that would (except as expressly contemplated by this Agreement) cause
or constitute a Breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or discovery
of such fact or condition. Should any such fact or condition require any change
in the Barnabus Disclosure Letter if the Barnabus Disclosure Letter were dated
the date of the occurrence or discovery of any such fact or condition, Barnabus
will promptly deliver to the Company a supplement to the Barnabus Disclosure
Letter specifying such change. During the same period, Barnabus will promptly
notify the Company of the occurrence of any Breach of any covenant of Barnabus
in this Section 6 or of the occurrence of any event that may make the
satisfaction of the conditions in Section 8 impossible or unlikely.
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6.3 BEST EFFORTS
Except as set forth in the proviso to Section 6.1, between the date of
this Agreement and the Merger Closing Date, each of Barnabus and Buyer will use
its Best Efforts to cause the conditions in Section 8 to be satisfied.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Barnabus' and Buyer's obligations to acquire the CRE Shares and to take
the other actions required to be taken by Barnabus and Buyer at the Merger
Closing, and Barnabus' obligations to make the Working Capital Loans, are
subject to the satisfaction, at or prior to the such closings of such
transactions, of each of the following conditions (any of which may be waived by
Barnabus, in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS
All of Sellers' and the Company's representations and warranties in this
Agreement (considered collectively), and each of these representations and
warranties (considered individually), must have been accurate in all material
respects as of the date of this Agreement, and must be accurate in all material
respects as of the Merger Closing Date as if made on the Merger Closing Date and
as of each Loan Closing Date, as if made on such Loan Closing Date, in each case
without giving effect to any supplement to the Disclosure Letter.
7.2 SELLERS' AND THE COMPANY'S PERFORMANCE
(a) All of the covenants and obligations that Sellers and the
Company are required to perform or to comply with pursuant to
this Agreement at or prior to the Merger Closing (considered
collectively), and each of these covenants and obligations
(considered individually), must have been duly performed and
complied with in all material respects.
(b) Each document required to be delivered pursuant to Section
2.5(a) must have been delivered, and each of the other
covenants and obligations in Sections 5.4 and 5.5 must have
been performed and complied with in all respects.
7.3 CONSENTS
Each of the Consents identified in 3.2 of the Disclosure Letter must have
been obtained and must be in full force and effect.
7.4 ADDITIONAL DOCUMENTS
39
Each of the following documents must have been delivered to Barnabus:
(a) such other documents as Barnabus may reasonably request for the
purpose of (i) evidencing the accuracy of any of the Company's and
Sellers' representations and warranties, (ii) evidencing the
performance by either Sellers or the Company of, or the compliance
by either Sellers or the Company with, any covenant or obligation
required to be performed or complied with by such Sellers or the
Company, (iii) evidencing the satisfaction of any condition referred
to in this Section 7, or (iv) otherwise facilitating the
consummation or performance of any of the Contemplated Transactions.
7.5 NO PROCEEDINGS
Since the date of this Agreement, there must not have been commenced or
Threatened against Barnabus or Buyer, or against any Person affiliated with
Barnabus, any Proceeding (a) involving any challenge to, or seeking damages or
other relief in connection with, any of the Contemplated Transactions, or (b)
that may have the effect of preventing, delaying, making illegal, or otherwise
interfering with any of the Contemplated Transactions.
7.6 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS
There must not have been made or Threatened by any Person any claim
asserting that such Person (a) is the holder or the beneficial owner of, or has
the right to acquire or to obtain beneficial ownership of, any stock of, or any
other voting, equity, or ownership interest in, any of the Company, or (b) is
entitled to all or any portion of the Merger consideration payable for the CRE
Shares.
7.7 NO PROHIBITION
Neither the consummation nor the performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time), materially contravene, or conflict with, or result in a material
violation of, or cause Barnabus or any Person affiliated with Barnabus to suffer
any Material Adverse Change under, (a) any applicable Legal Requirement or
Order, or (b) any Legal Requirement or Order that has been published,
introduced, or otherwise proposed by or before any Governmental Body.
8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE
The Sellers' obligations to exchange their CRE Shares for Barnabus Merger
Shares and to take the other actions required to be taken by Sellers at the
Merger Closing are subject to the satisfaction, at or prior to the Merger
Closing, of each of the following conditions (any of which may be waived by the
Principal Seller, in whole or in part):
8.1 ACCURACY OF REPRESENTATIONS
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All of the representations and warranties of Buyer and Barnabus in this
Agreement (considered collectively), and each of these representations and
warranties (considered individually), must have been accurate in all material
respects as of the date of this Agreement and must be accurate in all material
respects as of the Merger Closing Date as if made on the Merger Closing Date.
8.2 PERFORMANCE BY BUYER AND BARNABUS
(a) All of the covenants and obligations that Buyer and Barnabus
are required to perform or to comply with pursuant to this
Agreement at or prior to the Merger Closing (considered
collectively), and each of these covenants and obligations
(considered individually), must have been performed and
complied with in all material respects.
(b) Buyer and Barnabus must have delivered each of the documents
required to be delivered by Buyer and Barnabus pursuant to
Section 2.5(b) and must have delivered the Barnabus Merger
Shares pursuant to Sections 2.5(b)(i) and 2.5(b)(ii).
8.3 CONSENTS
Each of the Consents identified in the Barnabus Disclosure Letter, if any,
must have been obtained and must be in full force and effect.
8.4 ADDITIONAL DOCUMENTS
Barnabus must have caused the following documents to be delivered to the
Company:
(a) such other documents as the Principal Seller or the
Company may reasonably request for the purpose of
(i) evidencing the accuracy of any representation or
warranty of Barnabus or Buyer, (ii) evidencing the
performance by Barnabus or Buyer of, or the compliance by
Barnabus or Buyer with, any covenant or obligation
required to be performed or complied with by Barnabus or
Buyer, (iii) evidencing the satisfaction of any condition
referred to in this Section 8, or (iv) otherwise
facilitating the consummation of any of the Contemplated
Transactions.
8.5 NO INJUNCTION
There must not be in effect any Legal Requirement or any injunction or
other Order that (a) prohibits the sale of the exchange of the CRE Shares by
Sellers for Barnabus Merger Shares pursuant to the Merger and (b) has been
adopted or issued, or has otherwise become effective, since the date of this
Agreement.
8.6 CLOSING OF FINANCING TRANSACTION(S)
41
One or more Financing Transactions netting a minimum of $10,000,000 to
Barnabus and or Buyer shall have closed or will close concurrently with the
Merger Closing.
9. TERMINATION
9.1 TERMINATION EVENTS
This Agreement may, by notice given prior to or at the Merger Closing, be
terminated:
(a) by either Barnabus or by the Company if a material Breach of
any provision of this Agreement has been committed by the
other party and such Breach has not been waived (provided,
however, that any Breach by any of the Sellers shall not
permit the Company to so terminate);
(b) (i) by Barnabus if any of the conditions in Section 7 has not
been satisfied as of the Merger Closing Date or if
satisfaction of such a condition is or becomes impossible
(other than through the failure of Barnabus or Buyer to comply
with its obligations under this Agreement) and Barnabus has
not waived such condition on or before the Merger Closing
Date; or
(ii) by the Company, if any of the conditions in Section
8 have not been satisfied as of the Merger Closing Date or if
satisfaction of such a condition is or becomes impossible
(other than through the failure of the Company or the Sellers
to comply with their obligations under this Agreement) and the
Company has not waived such condition on or before the Merger
Closing Date;
(c) by mutual consent of the Company and Barnabus; or
(d) by either Barnabus or the Company if the Merger Closing
has not occurred (other than through the failure of any
party seeking to terminate this Agreement to comply fully
with its obligations under this Agreement) (provided,
however, that any Breach by the Sellers shall not permit
the Company to so terminate) on or before March 31, 2006,
or such later date as Barnabus and the Company may agree
upon.
9.2 EFFECT OF TERMINATION
Each party's right of termination under Section 9.1 is in addition to any
other rights it may have under this Agreement or otherwise, and the exercise of
a right of termination will not be an election of remedies. If this Agreement is
terminated pursuant to Section 9.1, all further obligations of the parties under
this Agreement will terminate, except that the obligations in Sections 11.1 and
11.3 will survive; provided, however, that if this Agreement is terminated by a
party because of the Breach of the Agreement by the other party or because one
or more of the conditions to the terminating party's obligations under this
Agreement is not satisfied as a result of the other party's failure to comply
with its obligations under this Agreement, the terminating party's right to
pursue all legal remedies will survive such termination unimpaired.
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10. INDEMNIFICATION; REMEDIES
10.1 SURVIVAL
All representations, warranties, covenants, and obligations in this
Agreement, the Disclosure Letter, the supplements to the Disclosure Letter, the
Barnabus Disclosure Letter, the supplements to the Barnabus Disclosure Letter
and any certificate or document delivered pursuant to this Agreement will
survive the Merger Closing for a period of one year.
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY THE PRINCIPAL SELLER
The Principal Seller will indemnify and hold harmless Barnabus, Buyer, the
Company, and their respective Representatives, stockholders, controlling
persons, and affiliates (collectively, the "Indemnified Persons") for, and will
pay to the Indemnified Persons the amount of, any loss, liability, claim, damage
(including incidental and consequential damages), or expense (including costs of
investigation and defense and reasonable attorneys' fees), whether or not
involving a third-party claim (collectively, "Damages"), arising, directly or
indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by the
Company or Principal Seller in this Agreement, the Disclosure
Letter, the supplements to the Disclosure Letter, or any
other certificate or document delivered by the Company or
Principal Seller pursuant to this Agreement;
(b) any Breach of any representation or warranty made by the
Company or Principal Seller in this Agreement as if such
representation or warranty were made on and as of the Merger
Closing Date;
(c) any Breach by the Company or Principal Seller of any of their
covenants or obligations in this Agreement;
(d) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person
with either Sellers or the Company (or any Person acting on
their behalf) in connection with any of the Contemplated
Transactions; and
(e) any liability for Taxes (on an actual, after tax basis)
attributable to the operations or transactions of the
Company resulting from any assessment (an "Asserted Tax
Liability") by any taxing authority with respect to any
taxable year or that portion of any taxable year of the
Company ending on or before the Merger Closing Date, or
ending after the Merger Closing Date if (but only to the
extent that the Asserted Tax Liability arises from or is
directly related to a pre-Merger Closing Date period) it
includes a pre-Merger Closing Date period, including, but
not limited to taxes, interest and penalties and also
including any expenses incurred by Barnabus, Buyer and the
Company as a result of such pre-Merger Closing Date
Asserted Tax Liability.
43
(f) any Environmental, Health, and Safety Liabilities arising out
of or relating to the ownership, operation, or condition at
any time on or prior to the Merger Closing Date of the
Facilities or any other properties and assets (whether real,
personal, or mixed and whether tangible or intangible) in
which the Company has or had an interest.
10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BARNABUS
Barnabus will indemnify and hold harmless Sellers and Option Stockholders,
and their respective heirs and legal representatives (collectively, the
"Indemnified Sellers") for, and will pay to the Indemnified Sellers the amount
of, any loss, liability, claim, damage (including incidental and consequential
damages), or expense (including costs of investigation and defense and
reasonable attorneys' fees), whether or not involving a third-party claim
(collectively, "Damages"), arising, directly or indirectly, from or in
connection with:
(a) any Breach of any representation or warranty made by Barnabus
or Buyer in this Agreement, the Barnabus Disclosure Letter,
the supplements to the Barnabus Disclosure Letter, or any
other certificate or document delivered by Barnabus or Buyer
pursuant to this Agreement;
(b) any Breach of any representation or warranty made by Barnabus
or Buyer in this Agreement as if such representation or
warranty were made on and as of the Merger Closing Date;
(c) any Breach by Barnabus or Buyer of any of their covenants or
obligations in this Agreement;
(d) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person
with either Barnabus or Buyer (or any Person acting on their
behalf) in connection with any of the Contemplated
Transactions; and
(e) only those limitations which were disclosed liability for
taxes, accounts payable, loans or other liabilities (on an
actual, after tax basis) attributable to the operations or
transactions of the Company prior to the Merger Closing
Date and which are specifically listed in the CRE
Disclosure Letter as existing liabilities of the Company
and all liabilities (on an actual, after tax basis)
attributable to the operations or transactions of the
Company after the Merger Closing Date.
44
10.4 INDEMNITY LIMITATIONS
10.4.1 Time of Claim.
If the Closing occurs, the parties responsible for
indemnification under sections 10.2 and 10.3 (individually an
"Indemnifying Party" or collectively, the "Indemnifying Parties")
will have no liability (for indemnification or otherwise) for any
claims, whether or not involving a third-party claim, which, but for
the passage of time could have been processed as an indemnity claim,
unless on or before one (1) year after the Merger Closing Date, the
Indemnified Person or Indemnified Seller (individually an
"Indemnified Party" or collectively, the "Indemnified Parties")
notifies the Indemnifying Party of a claim specifying the factual
basis of that claim in reasonable detail to the extent then known by
the claimant.
10.4.2 Principal Seller Indemnity Amount and Payment.
The liability of the Principal Seller to provide indemnity
under this Agreement is limited to an amount equal to the value of
the General Holdback Stock at the Merger Closing Date. Thirty days
after the final determination of the right to and amount of each
indemnity claim, if the claim has not been paid in full in cash or
other good funds, Barnabus may transfer from the General Holdback
Account the number of shares equal in value to the amount of the
claim. The number of shares to be transferred shall be determined by
dividing the amount of the claim by the higher of the per share
value of the General Holdback Stock on the Merger Closing Date or
the per share closing bid value of Barnabus common stock on the date
of the final determination (or if not a trading day, the next
preceding trading day). If the claim is paid in full within thirty
days after the final determination, the number of shares which would
have been transferable to satisfy the claim shall be released from
the General Holdback Account to the Principal Seller.
10.4.3 Barnabus and Buyer Indemnity Amount and Payment.
The liability of Barnabus and Buyer to provide indemnity under
this Agreement is limited to an amount equal to the value of the
General Holdback Stock at the Merger Closing Date. Within thirty
days after the final determination of the right to and amount of
each indemnity claim, Barnabus shall either pay the claim in full in
cash or other good funds, or transfer to the Indemnified Seller the
number of shares equal in value to the amount of the claim. The
number of shares to be transferred shall be determined by dividing
the amount of the claim by the higher of the per share value of the
General Holdback Stock on the Merger Closing Date or the per share
closing bid value of Barnabus common stock on the date of the final
determination (or if not a trading day, the next preceding trading
day).
45
10.4.4 Deductible
Notwithstanding the foregoing, there shall be a deductible of
$50,000 with respect to the Indemnifying Party's indemnification
obligations. Unless said deductible is exceeded, the Indemnifying
Party shall have no indemnification obligation hereunder and if said
deductible is exceeded, the Indemnifying Party shall only be
responsible for that amount which exceeds the $50,000 deductible.
10.4.5 Exclusive Remedy
The remedies provided in this Section 10 are the exclusive
remedies available to the Indemnified Parties for any claim which,
but for the passage of time could have been processed as an
indemnity claim.
10.5 PROCEDURE FOR INDEMNIFICATION -- THIRD PARTY CLAIMS
10.5.1 Promptly after receipt by an Indemnified Party of notice of
the commencement of any Proceeding against it, such
Indemnified Party will, if a claim is to be made against an
Indemnifying Party under such Section, give notice to the
Indemnifying Party of the commencement of such Proceeding and
the claim for indemnity, but the failure to notify the
Indemnifying Party will not relieve the Indemnifying Party of
any liability that it may have to any Indemnified Party,
except to the extent that the Indemnifying Party demonstrates
that the defense of such action is prejudiced by the
Indemnifying Party's failure to give such notice.
10.5.2 If any Proceeding referred to in Section 10.5.1 is brought
against an Indemnified Party and it gives notice to the
Indemnifying Party of the commencement of such Proceeding,
the Indemnifying Party will, unless the claim involves Taxes,
be entitled to participate in such Proceeding and, to the
extent that it wishes (unless (i) the Indemnifying Party is
also a party to such Proceeding and the Indemnified Party
determines in good faith that joint representation would be
inappropriate, or (ii) the Indemnifying Party fails to
provide reasonable assurance to the Indemnified Party of its
financial capacity to defend such Proceeding and provide
indemnification with respect to such Proceeding), to assume
the defense of such Proceeding with counsel satisfactory to
the Indemnified Party and, after notice from the Indemnifying
Party to the Indemnified Party of its election to assume the
defense of such Proceeding, the Indemnifying Party will not,
as long as it diligently conducts such defense, be liable to
the Indemnified Party under this Section 10 for any fees of
other counsel or any other expenses with respect to the
defense of such Proceeding, in each case subsequently
incurred by the Indemnified Party in connection with the
defense of such Proceeding, other than reasonable costs of
46
investigation. If the Indemnifying Party assumes the defense
of a Proceeding, (i) it will be conclusively established for
purposes of this Agreement that the claims made in that
Proceeding are within the scope of and subject to
indemnification; (ii) no compromise or settlement of such
claims may be effected by the Indemnifying Party without the
Indemnified Party's consent (which consent shall not be
unreasonably withheld) unless (A) there is no finding or
admission of any violation of Legal Requirements or any
violation of the rights of any Person and no effect on any
other claims that may be made against the Indemnified Party,
and (B) the sole relief provided is monetary damages that are
paid in full by the Indemnifying Party; and (iii) the
Indemnified Party will have no liability with respect to any
compromise or settlement of such claims effected without its
consent. If notice is given to an Indemnifying Party of the
commencement of any Proceeding and the Indemnifying Party
does not, within ten days after the Indemnified Party's
notice is given, give notice to the Indemnified Party of its
election to assume the defense of such Proceeding, the
Indemnifying Party will be bound by any determination made in
such Proceeding or any compromise or settlement effected by
the Indemnified Party.
10.5.3 Notwithstanding the foregoing, if an Indemnified Party
determines in good faith that there is a reasonable
probability that a Proceeding may adversely affect it or its
affiliates other than as a result of monetary damages for
which it would be entitled to indemnification under this
Agreement, the Indemnified Party may, by notice to the
Indemnifying Party, assume the exclusive right to defend,
compromise, or settle such Proceeding, but the Indemnifying
Party will not be bound by any determination of a Proceeding
so defended or any compromise or settlement effected without
its consent (which may not be unreasonably withheld).
10.5.4 Indemnified Parties hereby consent to the non-exclusive
jurisdiction of any court in which a Proceeding is brought
against any Indemnified Party for purposes of any claim that
an Indemnified Party may have under this Agreement with
respect to such Proceeding or the matters alleged therein,
and agree that process may be served on Indemnifying Party
with respect to such a claim anywhere in the world.
47
10.5.5 Notwithstanding any other provision of this Section 10.5, the
Indemnified Party must give written notice of its claim for
indemnification for the third party claim to the Indemnifying
Party within one year following the Merger Closing Date. The
notice of indemnity claim shall specify in reasonable detail
each individual item of damage, loss, or expense included in
the aggregate amount stated, the date each item was paid or
properly accrued or the basis for any anticipated liability,
and the nature of the misrepresentation, breach of warranty,
or claim to which each item is related. The Indemnifying
Party shall have 30 days after delivery of the notice of
Indemnity Claim to object in writing to the claim. Notice of
objection shall be given within the thirty-day period. If no
notice of objection is given, the thirty-first day after the
notice of claim shall be deemed to be the date of the final
determination of the right to indemnity.
10.6 PROCEDURE FOR INDEMNIFICATION -- OTHER CLAIMS
10.6.1 A claim for indemnification for any matter not
involving a third-party claim may be asserted within
one year following the Merger Closing Date by written
notice to the Indemnifying Party. The notice of
indemnity claim shall specify in reasonable detail
each individual item of damage, loss, or expense
included in the aggregate amount stated, the date
each item was paid or properly accrued or the basis
for any anticipated liability, and the nature of the
misrepresentation, breach of warranty, or claim to
which each item is related.
10.6.2 The Indemnifying Party shall have 30 days after
delivery of the notice of Indemnity Claim to object
in writing to the claim. Notice of objection shall
be given within the thirty-day period. If no notice
of objection is given, the thirty-first day after the
notice of claim shall be deemed to be the date of the
final determination of the right to and amount of the
indemnity claim and it shall be paid in accordance
with the provisions of Section 10.4.
10.7 DISPUTE RESOLUTION - INDEMNITY CLAIMS
10.7.1 If the Indemnifying Party has objected in
writing to any indemnity claim made pursuant to
Section 10.5, 10.6 or in any other manner, Principal
Seller and Barnabus will attempt in good faith to
agree on the rights of the respective parties
regarding each disputed indemnity claim. If they
agree, a memorandum setting forth the agreement will
be prepared and signed by both parties and payment
will be made in accordance with the memorandum.
48
10.7.2 If no such agreement can be reached after good
faith negotiation, either Buyer or Shareholder Agent
may demand arbitration of the matter; and in such
event the American Arbitration Association will be
asked to appoint one arbitrator to rule on the
matter, such appointment to be in accordance with the
Commercial Arbitration Rules of the American
Arbitration Association then in effect. Any such
arbitration will be held in San Diego County,
California, under the rules of the American
Arbitration Association then in effect. The decision
of the arbitrator about the validity of any indemnity
claim will be binding and conclusive on the
Indemnifying Parties and the Indemnified Parties to
the agreement; and payments, if any due, will be made
in accordance with Section 10.4. Each party to the
arbitration will pay its own expenses, and the fee of
the arbitrator and the administrative fee of the
American Arbitration Association will be paid one
half by Indemnifying Party and one half by
Indemnified Party. Judgment on any award rendered by
the arbitrator may be entered in any court having
jurisdiction over the matter.
11. GENERAL PROVISIONS
11.1 EXPENSES
Except as otherwise expressly provided in this Agreement, each party to
this Agreement will bear its respective expenses incurred in connection with the
preparation, execution, and performance of this Agreement and the Contemplated
Transactions, including all fees and expenses of agents, representatives,
counsel, and accountants; Sellers will pay all amounts payable to finder or
investment banker in connection with this Agreement and the Contemplated
Transactions. Sellers will cause the Company not to incur any out-of-pocket
expenses in connection with this Agreement in excess of $50,000. In the event of
termination of this Agreement, the obligation of each party to pay its own
expenses will be subject to any rights of such party arising from a breach of
this Agreement by another party.
11.2 PUBLIC ANNOUNCEMENTS
No party shall issue any press release or other public announcement or
communication regarding the Contemplated Transactions without the prior approval
of Barnabus or the Company, as the case may be, as to the content thereof, which
approval shall not be unreasonably withheld, provided, however, Barnabus shall
be permitted, subject to prior notice to the Company, to issue a press release
or make a public filing if in the judgment of the Company, such disclosure is a
Legal Requirement.
11.3 CONFIDENTIALITY
The parties acknowledge that the Confidentiality Agreement is binding on
the parties and is in full force and effect. The terms of the Confidentiality
Agreement are incorporated in this Agreement by this reference.
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Pursuant to the Confidentiality Agreement, between the date of this
Agreement and the Effective Time, Buyer, Barnabus, Sellers, and the Company will
maintain in confidence, and will cause the directors, officers, employees,
agents, and advisors of Buyer, Barnabus and the Company to maintain in
confidence, and not use to the detriment of another party or the Company any
written, oral, or other information obtained in confidence from another party or
the Company in connection with this Agreement or the Contemplated Transactions,
unless (a) there is an exception to the Confidentiality Agreement, (b) the use
of such information is necessary or appropriate in making any filing or
obtaining any consent or approval required for the consummation of the
Contemplated Transactions, or (c) the furnishing or use of such information is a
Legal Requirement required by or necessary or appropriate in connection with a
Proceeding.
11.4 NOTICES
All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by telecopier
(with written confirmation of receipt), provided that a copy is mailed by
registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
If to Sellers:
Xxxxxx X. Xxxxxxx
---------------------
---------------------
---------------------
---------------------
---------------------
---------------------
---------------------
---------------------
---------------------
---------------------
---------------------
If to Company:
Connect Renewable Energy, Inc.
0000 Xxxxxxxxxx Xxxxx Xxxx, Xxxxx X
Xxxxx Xxxxxx, XX 00000
Attn: Xxx Xxxxxxx, President and CEO
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Email: Xxx@xxxxxxxxxxxxx.xxx
50
with a copy (which shall not constitute notice) to:
Xxxx Corporate Counsel Services
Attn: Xxxx X. Xxxx
000 X. Xxxxxxx Xxxxxxx, Xxxxx 00-000
Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Email: xxxxxxx@xxx.xxx
If to Buyer:
Barnabus Energy, Inc.
000 Xxx xx xx Xxxxx, Xxxxx 000
Xxxxxx Xxxxx, XX 00000
Attn: Xxxxx Xxxxxxx, President and CEO
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Email: xxxxx_xxxxxxx@xxxxxxx.xxx
with copies (which shall not constitute notice) to:
Xxxxxxx Xxxxxx Xxxxxx & Dodge, LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000 XXX
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: D. Xxxxx Xxxxx, Esq.
Email: xxxxxxx@xxxxxxx.xxx
and
Xxxxxxx Xxxxxx Xxxxxx & Dodge, LLP
0000 Xxxxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000 XXX
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. X. Xxxxx, III, Esq.
Email: xxxxxx@xxxxxxx.xxx
11.5 JURISDICTION; SERVICE OF PROCESS
51
Any action or proceeding seeking to enforce any provision of, or based on
any right arising out of, this Agreement may be brought against any of the
parties in the courts of the State of California, County of San Diego, or, if it
has or can acquire jurisdiction, in the United States District Court for the
Southern District of California, and each of the parties consents to the
jurisdiction of such courts (and of the appropriate appellate courts) in any
such action or proceeding and waives any objection to venue laid therein.
Process in any action or proceeding referred to in the preceding sentence may be
served on any party anywhere in the world.
11.6 FURTHER ASSURANCES
The parties agree (a) to furnish upon request to each other such further
information, (b) to execute and deliver to each other such other documents, and
(c) to do such other acts and things, all as the other party may reasonably
request for the purpose of carrying out the intent of this Agreement and the
documents referred to in this Agreement.
11.7 WAIVER
The rights and remedies of the parties to this Agreement are cumulative
and not alternative. Neither the failure nor any delay by any party in
exercising any right, power, or privilege under this Agreement or the documents
referred to in this Agreement will operate as a waiver of such right, power, or
privilege, and no single or partial exercise of any such right, power, or
privilege will preclude any other or further exercise of such right, power, or
privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
11.8 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements between the parties with
respect to its subject matter and constitutes (along with the documents referred
to in this Agreement) a complete and exclusive statement of the terms of the
agreement between the parties with respect to its subject matter. This Agreement
may not be amended except by a written agreement executed by the party to be
charged with the amendment.
11.9 DISCLOSURE LETTER
(a) The disclosure in the Disclosure Letter, and those in any
Supplement thereto, must relate only to the representations
and warranties in the Section of the Agreement to which they
expressly relate and not to any other representation or
warranty in this Agreement.
52
(b) In the event of any inconsistency between the statements in
the body of this Agreement and those in the Disclosure Letter
(other than an exception expressly set forth as such in the
Disclosure Letter with respect to a specifically identified
representation or warranty), the statements in the body of
this Agreement will control.
11.10 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
Neither Barnabus nor Principal Seller may assign any of their rights under
this Agreement without the prior consent of the other parties, which will not be
unreasonably withheld, except that Barnabus may assign any of its rights under
this Agreement to any Subsidiary of Barnabus. Subject to the preceding sentence,
this Agreement will apply to, be binding in all respects upon, and inure to the
benefit of the successors and permitted assigns of the parties. Nothing
expressed or referred to in this Agreement will be construed to give any Person
other than the parties to this Agreement any legal or equitable right, remedy,
or claim under or with respect to this Agreement or any provision of this
Agreement. This Agreement and all of its provisions and conditions are for the
sole and exclusive benefit of the parties to this Agreement and their successors
and assigns.
11.11 SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable by any
court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
11.12 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Agreement. All words used in this Agreement will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
provided, the word "including" does not limit the preceding words or terms.
11.13 TIME OF ESSENCE
With regard to all dates and time periods set forth or referred to in this
Agreement, time is of the essence.
11.14 GOVERNING LAW
This Agreement will be governed by the laws of the State of Nevada without
regard to conflicts of laws principles.
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11.15 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of which
will be deemed to be an original copy of this Agreement and all of which, when
taken together, will be deemed to constitute one and the same agreement.
{REMAINDER OF PAGE INTENTIONALLY LEFT BLANK}
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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
and Plan of Merger as of the date first written above.
BARNABUS ENERGY, INC. CONNECT RENEWABLE ENERGY, INC.
("BARNABUS) ("COMPANY")
By:________________________________ By:________________________________
Xxxxx Xxxxxxx, President & CEO Xxxxxx X. Xxxxxxx, President &
CEO
BARNABUS/CRE ACQUISITION CORPORATION SELLERS:
("BUYER")
By:_________________________________ _____________________________________
Xxxxx Xxxxxxx, President Xxxxxxx X. Xxxx
_____________________________________
Xxxxxx X. Xxxxxxx
_____________________________________
Xxxx X. Xxxx
_____________________________________
Xxxxxxx X. Xxxxxx
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EXHIBIT 2.2.2.1
--------------------------------------------------------------------------------
SELLER NUMBER OF COMPANY CRE NUMBER OF BARNABUS CRE
SHARES SHARES TO BE RECEIVED IN
MERGER
--------------------------------------------------------------------------------
Xxxxxxx X. Xxxx 25,000 54,348
--------------------------------------------------------------------------------
Xxxxxx X. Xxxxxxx 2,040,000 4,434,782
--------------------------------------------------------------------------------
Xxxx X. Xxxx 115,000 250,000
--------------------------------------------------------------------------------
Xxxxxxx X. Xxxxxx 25,000 54,348
--------------------------------------------------------------------------------
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LIST OF EXHIBITS
EXHIBIT 2.1 WORKING CAPITAL NOTE
EXHIBIT 2.1.1(B)(I) STOCKHOLDERS' VOTING AGREEMENT
EXHIBIT 2.1.1(B)(II)) OPTION HOLDER AGREEMENT
EXHIBIT 2.2.2.1 CONVERSION OF CRE SHARES
EXHIBIT 2.5(A)(II) CBC CONSULTING AGREEMENT
EXHIBIT 2.5(A)(III) FORM OF NON-COMPETITION AGREEMENT
EXHIBIT 2.5(A)(IV) FORM OF GENERAL RELEASE AGREEMENT
EXHIBIT 2.5(A)(V) FORM OF OPTION EXERCISE AND RELEASE AGREEMENT
EXHIBIT 2.5(A)(VI) FORM OF CONFIDENTIALITY NONDISCLOSURE AND ASSIGNMENT
OF INVENTIONS AGREEMENT
57
DISCLOSURE LETTER ITEMS
PART 2.1 USE OF PROCEEDS OF WORKING CAPITAL LOANS
PART 3.1 ORGANIZATION AND GOOD STANDING
PART 3.2 AUTHORITY
PART 3.2(A) NO CONFLICT
PART 3.3 RESTRICTIONS ON COMMON STOCK
PART 3.4.2 CHECKING ACCOUNT
PART 3.6 TITLE TO PROPERTIES; ENCUMBRANCES
PART 3.8 ACCOUNTS RECEIVABLE
PART 3.8(B) INVENTORY
PART 3.9 NO UNDISCLOSED LIABILITIES
PART 3.10 TAXES
PART 3.12 EMPLOYEE BENEFIT PLANS
PART 3.13 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL
AUTHORIZATIONS
PART 3.14 LEGAL PROCEEDINGS; ORDERS
PART 3.15 ABSENCE OF CERTAIN CHANGES AND EVENTS
PART 3.16(A) APPLICABLE CONTRACTS
PART 3.16(B) CONFLICT OF INTEREST
PART 3.16(C) EFFECTIVENESS OF CONTRACTS - NO EXCEPTION
PART 3.16(D) COMPLIANCE WITH CONTRACTS - NO EXCEPTION
PART 3.17 INSURANCE
PART 3.18 ENVIRONMENTAL MATTERS
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PART 3.19 EMPLOYEES
PART 3.21(B) INTELLECTUAL PROPERTY
PART 3.21(F) TRADE SECRETS
PART 3.24 RELATIONSHIPS WITH RELATED PERSONS
PART 5.2 OPERATION OF THE BUSINESS OF THE COMPANY - NO EXCEPTION
PART 5.8 NON-ACCREDITED SELLERS - NO EXCEPTION
59
BARNABUS DISCLOSURE LETTER ITEMS
PART 4.1 LIST OF DIRECTORS AND OFFICERS
PART 4.9 CAPITALIZATION ITEMS
PART 4.10 INDEX OF SRS CLOSING DOCUMENTS
60