SECURITIES PURCHASE AGREEMENT
EXHIBIT
99.1
THIS SECURITIES
PURCHASE AGREEMENT
(this
“Agreement”),
dated
as of March 30, 2006, by and among BARNABUS
ENERGY, INC.,
a Nevada
corporation (the “Company”),
and
Cornell Capital Partners, LP, a Delaware limited partnership (the “Buyer”).
WITNESSETH
WHEREAS,
the
Company and the Buyer are executing and delivering this Agreement in reliance
upon an exemption from securities registration pursuant to Section 4(2) and/or
Rule 506 of Regulation D (“Regulation
D”)
as
promulgated by the U.S. Securities and Exchange Commission (the “SEC”)
under
the Securities Act of 1933, as amended (the “Securities
Act”);
WHEREAS,
the
parties desire that, upon the terms and subject to the conditions contained
herein, the Company shall issue and sell to the Buyer, as provided herein,
and
the Buyer shall purchase up to Fifteen Million Dollars ($15,000,000) of secured
convertible debentures (the “Convertible
Debentures”),
which
shall be convertible into shares of the Company’s common stock, par value $0.001
(the “Common
Stock”)
(as
converted, the “Conversion
Shares”)
of
which Ten Million Dollars ($10,000,000) shall be funded on the fifth
(5th)
business day following the date hereof (the “First
Closing”)
provided however that Five Million Dollars ($5,000,000) shall be funded to
the
Company on the First Closing and Five Million Dollars shall be deposited in
escrow with Xxxxx Xxxxxxxx, Esq. and released to the Company on the date the
registration statement (the “Registration
Statement”),
pursuant to the Investor Registration Rights Agreement dated March 31, 2006,
is
filed with the United States Securities and Exchange Commission (the
“SEC”)
(the
“Escrowed
First Closing Amount”)
and
Five Million Dollars ($5,000,000) shall be funded on the date the registration
statement (the “Registration
Statement”),
filed
pursuant to the Investor Registration Rights Agreement is declared effective
by
the SEC (the “Second
Closing”)
(each
of the First Closing and the Second Closing are referred to as a “Closing”
and
collectively referred to as the “Closings”),
for a
total purchase price of up to Fifteen Million Dollars ($15,000,000), (the
“Purchase
Price”
and/or
the “Subscription
Amount”);
and
WHEREAS,
contemporaneously with the execution and delivery of this Agreement, the parties
hereto are executing and delivering a Registration Rights Agreement
substantially in the form attached hereto as Exhibit A (the “Investor
Registration Rights Agreement”)
pursuant to which the Company has agreed to provide certain registration rights
under the Securities Act and the rules and regulations promulgated thereunder,
and applicable state securities laws; and
WHEREAS,
contemporaneously with the execution and delivery of this Agreement, the Company
and the Buyer are executing and delivering a Security Agreement; substantially
in the form attached hereto as Exhibit B, and upon consummation of the
transactions contemplated by the CRE Merger Agreement and the Solar Purchase
Agreement, each of 2093603 Ontario, Inc. and Barnabus/CRE Acquisition Corp
and
the Buyer shall execute and deliver Subsidiary Security Agreements substantially
in the form attached hereto as Exhibit C (all such security agreements shall
be
referred to as the “Security
Agreement”)
pursuant to which the Company and its wholly owned subsidiaries shall agree
to
provide the Buyer a security interest in Pledged Collateral (as this term is
defined in the each Security Agreement) to secure the Company’s obligations
under this Agreement, the Transaction Documents, or any other obligations of
the
Company to the Buyer;
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WHEREAS,
contemporaneously with the execution and delivery of this Agreement, the parties
hereto are executing and delivering a Pledge and Escrow Agreement substantially
in the form attached hereto as Exhibit D (the “Pledge
and Escrow Agreement”)
pursuant to which the Company has agreed to provide the Buyer a security
interest in the Pledged Shares (as this term is defined in the Pledge and Escrow
Agreement) to secure the Company’s obligations under this Agreement, the
Transaction Documents, or any other obligations of the Company to the Buyer;
and
WHEREAS,
contemporaneously with the execution and delivery of this Agreement, the parties
hereto are executing and delivering Irrevocable Transfer Agent Instructions
substantially in the form attached hereto as Exhibit E (the “Irrevocable
Transfer Agent Instructions”)
NOW,
THEREFORE,
in
consideration of the mutual covenants and other agreements contained in this
Agreement the Company and the Buyer hereby agree as follows:
1. PURCHASE
AND SALE OF CONVERTIBLE DEBENTURES.
(a) Purchase
of Convertible Debentures.
Subject
to the satisfaction (or waiver) of the terms and conditions of this Agreement,
the Buyer agrees to purchase at each Closing and the Company agrees to sell
and
issue to the Buyer, at each Closing, Convertible Debentures in amounts
corresponding the amounts funded at each Closing. On the First Closing the
Buyer
shall purchase Ten Million Dollars ($10,000,000) of Convertible Debentures
which
shall be funded on the fifth (5th)
business day following the date hereof provided however that Five Million
Dollars ($5,000,000) shall be funded to the Company on the First Closing and
the
Buyer shall be issued a Convertible Debenture in an amount of Five Million
Dollars ($5,000,000) and Five Million Dollars ($5,000,000) shall be deposited
in
escrow with Xxxxx Xxxxxxxx, Esq., along with a Convertible Debenture in the
amount of Five Million Dollars ($5,000,000) (the “Escrowed
First Closing Convertible Debenture”)
of
which Xxxxx Xxxxxxxx agrees to release to the Company the sum of Five Million
Dollars ($5,000,000) and release to the Buyer the Escrowed First Closing
Convertible Debenture, provided that the Company has resolved all comments
from
the SEC pursuant to the SEC’s comment letter dated March 14, 2006 and all
subsequent comment letters thereto and the Company has filed all amended and
restated Exchange Act filings as may be required there under, on the date the
Registration Statement (as defined herein and the Investor Registration Rights
Agreement) which shall include financial statements for the Solar Roofing
Systems, Inc. and Barnabus/CRE Acquisition Corporation in accordance with and
for the time periods prescribed pursuant to Regulation S-X, is initially filed
with the SEC. In the event that the Registration Statement is not initially
filed on or prior to the fifty fifth (55th)
day
following the date hereof in accordance with the Investor’s Registration Rights
Agreement Xxxxx Xxxxxxxx shall, upon the receipt of written instruction from
the
Buyer, deliver the Escrowed First Closing Amount to the Buyer and return the
Escrowed First Closing Convertible Debenture to the Company
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(b) Closing
Date.
The
First Closing of the purchase and sale of the Convertible Debentures shall
take
place at 10:00 a.m. Eastern Standard Time on the fifth (5th)
business day following the date hereof, subject to notification of satisfaction
of the conditions to the First Closing set forth herein and in Sections 6 and
7
below (or such later date as is mutually agreed to by the Company and the Buyer)
(the “First
Closing Date”)
and
the Second Closing of the purchase and sale of the Convertible Debentures shall
take place at 10:00 a.m. Eastern Standard Time on the date the Registration
Statement is declared effective by the SEC, subject to notification of
satisfaction of the conditions to the Second Closing set forth herein and in
Sections 6 and 7 below (or such later date as is mutually agreed to by the
Company and the Buyer) (the “Second
Closing Date”)
(collectively referred to a the “Closing
Dates”).
The
Closing shall occur on the respective Closing Dates at the offices of Yorkville
Advisors, LLC, 0000 Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx Xxxx, Xxx Xxxxxx 00000
(or
such other place as is mutually agreed to by the Company and the Buyer).
(c) Form
of Payment.
Subject
to the satisfaction of the terms and conditions of this Agreement, on the
Closing Dates, (i) the Buyer shall deliver to the Company such aggregate
proceeds for the Convertible Debentures to be issued and sold to such Buyer,
minus the fees to be paid directly from the proceeds the Closings as set forth
herein, and (ii) the Company shall deliver to the Buyer, Convertible
Debentures which such Buyer is purchasing in amounts indicated opposite such
Buyer’s name on Schedule I, duly executed on behalf of the Company.
2. BUYER’S
REPRESENTATIONS AND WARRANTIES.
Each
Buyer represents and warrants, severally and not jointly, that:
(a) Investment
Purpose.
The
Buyer is acquiring the Convertible Debentures and, upon conversion of
Convertible Debentures, the Buyer will acquire the Conversion Shares then
issuable, for its own account for investment only and not with a view towards,
or for resale in connection with, the public sale or distribution thereof,
except pursuant to sales registered or exempted under the Securities Act;
provided, however, that by making the representations herein, such Buyer
reserves the right to dispose of the Conversion Shares at any time in accordance
with or pursuant to an effective registration statement covering such Conversion
Shares (including proper prospectus delivery) or an available exemption under
the Securities Act.
(b) Accredited
Investor Status.
The
Buyer is an “Accredited
Investor”
as
that
term is defined in Rule 501(a)(3) of Regulation D.
(c) Reliance
on Exemptions.
The
Buyer understands that the Convertible Debentures are being offered and sold
to
it in reliance on specific exemptions from the registration requirements of
United States federal and state securities laws and that the Company is relying
in part upon the truth and accuracy of, and such Buyer’s compliance with, the
representations, warranties, agreements, acknowledgments and understandings
of
such Buyer set forth herein in order to determine the availability of such
exemptions and the eligibility of such Buyer to acquire such
securities.
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(d) Information.
The
Buyer and its advisors (and its or, its counsel), if any, have been furnished
with all materials relating to the business, finances and operations of the
Company and information he deemed material to making an informed investment
decision regarding his purchase of the Convertible Debentures and the Conversion
Shares, which have been requested by such Buyer. The Buyer and its advisors,
if
any, have been afforded the opportunity to ask questions of the Company and
its
management. Neither such inquiries nor any other due diligence investigations
conducted by such Buyer or its advisors, if any, or its representatives shall
modify, amend or affect such Buyer’s right to rely on the Company’s
representations and warranties contained in Section 3 below. The Buyer
understands that its investment in the Convertible Debentures and the Conversion
Shares involves a high degree of risk. The Buyer is in a position regarding
the
Company, which, based upon employment, family relationship or economic
bargaining power, enabled and enables such Buyer to obtain information from
the
Company in order to evaluate the merits and risks of this investment. The Buyer
has sought such accounting, legal and tax advice, as it has considered necessary
to make an informed investment decision with respect to its acquisition of
the
Convertible Debentures and the Conversion Shares.
(e) No
Governmental Review.
The
Buyer understands that no United States federal or state agency or any other
government or governmental agency has passed on or made any recommendation
or
endorsement of the Convertible Debentures or the Conversion Shares, or the
fairness or suitability of the investment in the Convertible Debentures or
the
Conversion Shares, nor have such authorities passed upon or endorsed the merits
of the offering of the Convertible Debentures or the Conversion
Shares.
(f) Transfer
or Resale.
The
Buyer understands that except as provided in the Investor Registration Rights
Agreement: (i) the Convertible Debentures have not been and are not being
registered under the Securities Act or any state securities laws, and may not
be
offered for sale, sold, assigned or transferred unless (A) subsequently
registered thereunder, or (B) such Buyer shall have delivered to the Company
an
opinion of counsel, in a generally acceptable form, to the effect that such
securities to be sold, assigned or transferred may be sold, assigned or
transferred pursuant to an exemption from such registration requirements; (ii)
any sale of such securities made in reliance on Rule 144 under the Securities
Act (or a successor rule thereto) (“Rule 144”)
may be
made only in accordance with the terms of Rule 144 and further, if Rule 144
is
not applicable, any resale of such securities under circumstances in which
the
seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the Securities Act) may require
compliance with some other exemption under the Securities Act or the rules
and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register such securities under the Securities
Act or any state securities laws or to comply with the terms and conditions
of
any exemption thereunder. The Company reserves the right to place stop transfer
instructions against the shares and certificates for the Conversion
Shares.
(g) Legends.
The
Buyer understands that the certificates or other instruments representing the
Convertible Debentures and or the Conversion Shares shall bear a restrictive
legend in substantially the following form (and a stop -transfer order may
be
placed against transfer of such stock certificates):
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THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT PURPOSES AND NOT WITH A
VIEW
TOWARD RESALE AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR
AN
OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS.
The
legend set forth above shall be removed and the Company within three (3)
business days shall issue a certificate without such legend to the holder of
the
Conversion Shares upon which it is stamped, if, unless otherwise required by
state securities laws, (i) in connection with a sale transaction, provided
the
Conversion Shares are registered under the Securities Act or (ii) in connection
with a sale transaction, after such holder provides the Company with an opinion
of counsel, which opinion shall be in form, substance and scope customary for
opinions of counsel in comparable transactions, to the effect that a public
sale, assignment or transfer of the Conversion Shares may be made without
registration under the Securities Act.
(h) Authorization,
Enforcement.
This
Agreement has been duly and validly authorized, executed and delivered on behalf
of such Buyer and is a valid and binding agreement of such Buyer enforceable
in
accordance with its terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other similar laws relating to,
or
affecting generally, the enforcement of applicable creditors’ rights and
remedies.
(i) Receipt
of Documents.
The
Buyer and his or its counsel has received and read in their entirety: (i) this
Agreement and each representation, warranty and covenant set forth herein and
the Transaction Documents (as defined herein); (ii) all due diligence and other
information necessary to verify the accuracy and completeness of such
representations, warranties and covenants; (iii) the Company’s Form 10-KSB for
the fiscal year ended May 31, 2005 ; (iv) the Company’s Form 10-QSB for the
fiscal quarter ended November 30, 2005 and (v) answers to all questions the
Buyer submitted to the Company regarding an investment in the Company; and
the
Buyer has relied on the information contained therein and has not been furnished
any other documents, literature, memorandum or prospectus.
(j) Due
Formation of the Buyer.
The
Buyer is a Delaware limited partnership, it has been formed and validly exists
and has not been organized for the specific purpose of purchasing the
Convertible Debentures and is not prohibited from doing so by its organizational
documents, any agreement to which it is a party or is otherwise bound or any
applicable law, rule or regulation.
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(h) No
Legal Advice From the Company.
The
Buyer acknowledges, that it had the opportunity to review this Agreement and
the
transactions contemplated by this Agreement with his or its own legal counsel
and investment and tax advisors. The Buyer is relying solely on such counsel
and
advisors and not on any statements or representations of the Company or any
of
its representatives or agents for legal, tax or investment advice with respect
to this investment, the transactions contemplated by this Agreement or the
securities laws of any jurisdiction.
(i) No
Prior Short Selling.
At no
time during the 30 days prior to the date hereof has Buyer or any affiliate
thereof held an open short position in the Common Stock.
(j) Registration
Statement Questionnaire Completed.
The
Buyer has completed or caused to be completed the Registration Statement
Questionnaire attached here to as part of Appendix I, for use in preparation
of
the Registration Statement, and the answers thereto are true and correct as
of
the date hereof and will be true and correct as of the effective date of the
Registration Statement, or as applicable, any amendment thereto, as will notify
the Company immediately of any material change in any such information provided
in the Registration Statement Questionnaire until such time as Buyer has sold
all of its Conversion Shares and Warrant Shares or until the Company is no
longer required to keep the Registration Statement effective.
3. REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.
The
Company represents and warrants as of the date hereof to the Buyer that, except
as set forth in the SEC Documents (as defined herein) or in the Disclosure
Schedule attached hereto (the “Disclosure
Schedule”):
(a) Organization
and Qualification.
The
Company and its subsidiaries are corporations duly organized and validly
existing in good standing under the laws of the jurisdiction in which they
are
incorporated, and have the requisite corporate power to own their properties
and
to carry on their business as now being conducted. Each of the Company and
its
subsidiaries is duly qualified as a foreign corporation to do business and
is in
good standing in every jurisdiction in which the nature of the business
conducted by it makes such qualification necessary, except to the extent that
the failure to be so qualified or be in good standing would not have a material
adverse effect on the Company and its subsidiaries taken as a
whole.
(b) Authorization,
Enforcement, Compliance with Other Instruments.
(i) The Company has the requisite corporate power and authority to enter
into and perform this Agreement, the Security Agreement, the Investor
Registration Rights Agreement, the Irrevocable Transfer Agent Agreement, the
Pledge and Escrow Agreement, and any related agreements (collectively the
“Transaction
Documents”)
and to
issue the Convertible Debentures and the Conversion Shares in accordance with
the terms hereof and thereof, (ii) the execution and delivery of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated hereby and thereby, including, without limitation, the issuance
of
the Convertible Debentures the Conversion Shares and the reservation for
issuance and the issuance of the Conversion Shares issuable upon conversion
or
exercise thereof, have been duly authorized by the Company’s Board of Directors
and no further consent or authorization is required by the Company, its Board
of
Directors or its stockholders, (iii) the Transaction Documents have been duly
executed and delivered by the Company, (iv) the Transaction Documents constitute
the valid and binding obligations of the Company enforceable against the Company
in accordance with their terms, except as such enforceability may be limited
by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors’ rights and remedies. The
authorized officer of the Company executing the Transaction Documents knows
of
no reason why the Company cannot file the registration statement as required
under the Investor Registration Rights Agreement or perform any of the Company’s
other obligations under such documents.
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(c) Capitalization.
The
authorized capital stock of the Company consists of 1,000,000,000 shares of
Common Stock of which 49,823,549 shares are issued and outstanding. All of
such
outstanding shares have been validly issued and are fully paid and
nonassessable. No shares of Common Stock are subject to preemptive rights or
any
other similar rights or any liens or encumbrances suffered or permitted by
the
Company. Except as disclosed in (or arising under plans disclosed in) the SEC
Documents, as of the date of this Agreement, (i) there are no outstanding
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into,
any
shares of capital stock of the Company or any of its subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of
its
subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its subsidiaries or options, warrants, scrip, rights
to
subscribe to, calls or commitments of any character whatsoever relating to,
or
securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, (ii) there are no outstanding debt
securities issued by the Company and (iii) there are no agreements or
arrangements under which the Company or any of its subsidiaries is obligated
to
register the sale of any of their securities under the Securities Act (except
pursuant to the Registration Rights Agreement) and (iv) the Company has no
outstanding registration statements (other than registration statements on
Form
S-8) and there are no outstanding comment letters from the SEC or any other
regulatory agency. There are no securities or instruments of the Company
containing anti-dilution or similar provisions that will be triggered by the
issuance of the Convertible Debentures as described in this Agreement. The
Company has furnished to the Buyer true and correct copies of the Company’s
Articles of Incorporation, as amended and as in effect on the date hereof (the
“Articles
of Incorporation”),
and
the Company’s By-laws, as in effect on the date hereof (the “By-laws”),
and
the terms of all securities convertible into or exercisable for Common Stock
and
the material rights of the holders thereof in respect thereto other than stock
options issued to employees and consultants.
(d) Issuance
of Securities.
The
Convertible Debentures are duly authorized and, upon issuance in accordance
with
the terms hereof, shall be duly issued, fully paid and nonassessable, are free
from all taxes, liens and charges with respect to the issue thereof. The
Conversion Shares issuable upon conversion of the Convertible Debentures have
been duly authorized and reserved for issuance. Upon conversion or exercise
in
accordance with the Convertible Debentures the Conversion Shares will be duly
issued, fully paid and nonassessable.
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(e) No
Conflicts.
The
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated hereby
will
not (i) result in a violation of the Articles of Incorporation, any certificate
of designations of any outstanding series of preferred stock of the Company
or
the By-laws or (ii) conflict with or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give
to
others any rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or instrument to which the Company or any of its
subsidiaries is a party, or result in a violation of any law, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations and the rules and regulations of The National Association of
Securities Dealers Inc.’s OTC Bulletin Board on which the Common Stock is
quoted) applicable to the Company or any of its subsidiaries or by which any
property or asset of the Company or any of its subsidiaries is bound or
affected. Neither the Company nor its subsidiaries is in violation of any term
of or in default under its Articles of Incorporation or By-laws or their
organizational charter or by-laws, respectively, or any material contract,
agreement, mortgage, indebtedness, indenture, instrument, judgment, decree
or
order or any statute, rule or regulation applicable to the Company or its
subsidiaries. The business of the Company and its subsidiaries is not being
conducted, and shall not be conducted in material violation of any material
law,
ordinance, or regulation of any governmental entity. Except as specifically
contemplated by this Agreement and as required under the Securities Act and
any
applicable state securities laws, the Company is not required to obtain any
consent, authorization or order of, or make any filing or registration with,
any
court or governmental agency in order for it to execute, deliver or perform
any
of its obligations under or contemplated by this Agreement or the Registration
Rights Agreement in accordance with the terms hereof or thereof. All consents,
authorizations, orders, filings and registrations which the Company is required
to obtain pursuant to the preceding sentence have been obtained or effected
on
or prior to the date hereof. The Company and its subsidiaries are unaware of
any
facts or circumstance, which might give rise to any of the
foregoing.
(f) SEC
Documents: Financial Statements.
Since
May 31, 2005, the Company has filed all reports, schedules, forms, statements
and other documents required to be filed by it with the SEC under the Securities
Exchange Act of 1934, as amended (the “Exchange
Act”)
(all
of the foregoing filed prior to the date hereof or amended after the date hereof
and all exhibits included therein and financial statements and schedules thereto
and documents incorporated by reference therein, being hereinafter referred
to
as the “SEC
Documents”).
The
Company has delivered to the Buyer or it’s representatives, or made available
through the SEC’s website at xxxx://xxx.xxx.xxx., true and complete copies of
the SEC Documents. As of their respective dates, the financial statements of
the
Company disclosed in the SEC Documents (the “Financial
Statements”)
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such Financial
Statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and, fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case
of
unaudited statements, to normal year-end audit adjustments). No other
information provided by or on behalf of the Company to the Buyer which is not
included in the SEC Documents, including, without limitation, information
referred to in this Agreement, contains any untrue statement of a material
fact
or omits to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
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(g) Rule
10(b)-5.
The SEC
Documents do not include any untrue statements of material fact, nor do they
omit to state any material fact required to be stated therein necessary to
make
the statements made, in light of the circumstances under which they were made,
not misleading.
(h) Absence
of Litigation.
There
is no action, suit, proceeding, inquiry or investigation before or by any court,
public board, government agency, self-regulatory organization or body pending
against or affecting the Company, the Common Stock or any of the Company’s
subsidiaries, wherein an unfavorable decision, ruling or finding would (i)
have
a material adverse effect on the transactions contemplated hereby (ii) adversely
affect the validity or enforceability of, or the authority or ability of the
Company to perform its obligations under, this Agreement or any of the documents
contemplated herein, or (iii) have a material adverse effect on the business,
operations, properties, financial condition or results of operations of the
Company and its subsidiaries taken as a whole.
(i) Acknowledgment
Regarding Buyer’s Purchase of the Convertible Debentures.
The
Company acknowledges and agrees that the Buyer is acting solely in the capacity
of an arm’s length purchaser with respect to this Agreement and the transactions
contemplated hereby. The Company further acknowledges that the Buyer is not
acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions contemplated
hereby and any advice given by the Buyer or any of their respective
representatives or agents in connection with this Agreement and the transactions
contemplated hereby is merely incidental to such Buyer’s purchase of the
Convertible Debentures or the Conversion Shares. The Company further represents
to the Buyer that the Company’s decision to enter into this Agreement has been
based solely on the independent evaluation by the Company and its
representatives.
(j) No
General Solicitation.
Neither
the Company, nor any of its affiliates, nor any person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D under the Securities Act) in connection
with
the offer or sale of the Convertible Debentures or the Conversion
Shares.
(k) No
Registration Required.
Neither
the Company, nor any of its affiliates, nor any person acting on its or their
behalf has, directly or indirectly, made any offers or sales of any security
or
solicited any offers to buy any security, under circumstances that would require
registration of the Convertible Debentures or the Conversion Shares under the
Securities Act.
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(k) Employee
Relations.
Neither
the Company nor any of its subsidiaries is involved in any labor dispute nor,
to
the knowledge of the Company or any of its subsidiaries, is any such dispute
threatened. None of the Company’s or its subsidiaries’ employees is a member of
a union and the Company and its subsidiaries believe that their relations with
their employees are good.
(l) Intellectual
Property Rights.
The
Company and its subsidiaries own or possess adequate rights or licenses to
use
all trademarks, trade names, service marks, service xxxx registrations, service
names, patents, patent rights, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets and rights necessary to conduct
their
respective businesses as now conducted. The Company and its subsidiaries do
not
have any knowledge of any infringement by the Company or its subsidiaries of
trademark, trade name rights, patents, patent rights, copyrights, inventions,
licenses, service names, service marks, service xxxx registrations, trade secret
or other similar rights of others, and, to the knowledge of the Company there
is
no claim, action or proceeding currently pending, or to the Company’s knowledge,
being threatened against, the Company or its subsidiaries regarding trademark,
trade name, patents, patent rights, invention, copyright, license, service
names, service marks, service xxxx registrations, trade secret or other
infringement; and the Company and its subsidiaries are unaware of any facts
or
circumstances which might give rise to any of the foregoing.
(m) Environmental
Laws.
The
Company and its subsidiaries are (i) in compliance with any and all applicable
foreign, federal, state and local laws and regulations relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants (“Environmental
Laws”),
(ii)
have received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and (iii)
are in compliance with all terms and conditions of any such permit, license
or
approval, except in each case, as would not result in a material adverse effect
on the Company and its subsidiaries, as a whole.
(n) Title.
Any
real property and facilities held under lease by the Company and its
subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use
made
and proposed to be made of such property and buildings by the Company and its
subsidiaries.
(o) Insurance.
The
Company and each of its subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts
as
management of the Company believes to be prudent and customary in the businesses
in which the Company and its subsidiaries are engaged. Neither the Company
nor
any such subsidiary has been refused any insurance coverage sought or applied
for and neither the Company nor any such subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as
may
be necessary to continue its business at a cost that would not materially and
adversely affect the condition, financial or otherwise, or the earnings,
business or operations of the Company and its subsidiaries, taken as a
whole.
-10-
(p) Regulatory
Permits.
The
Company and its subsidiaries possess all material certificates, authorizations
and permits issued by the appropriate federal, state or foreign regulatory
authorities necessary to conduct their respective businesses, and neither the
Company nor any such subsidiary has received any notice of proceedings relating
to the revocation or modification of any such certificate, authorization or
permit.
(q) Internal
Accounting Controls.
The
Company and each of its subsidiaries maintain a system of internal control
over
financial reporting sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, and (iii) the
recorded amounts for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any
differences.
(r) No
Material Adverse Breaches, etc.
Neither
the Company nor any of its subsidiaries is subject to any charter, corporate
or
other legal restriction, or any judgment, decree, order, rule or regulation
which in the judgment of the Company’s officers has or is expected in the future
to have a material adverse effect on the business, properties, operations,
financial condition, results of operations or prospects of the Company or its
subsidiaries. Neither the Company nor any of its subsidiaries is in breach
of
any contract or agreement which breach, in the judgment of the Company’s
officers, has or is expected to have a material adverse effect on the business,
properties, operations, financial condition, results of operations or prospects
of the Company or its subsidiaries.
(s) Tax
Status.
The
Company and each of its subsidiaries has made and filed all federal and state
income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject and (unless and only to the extent that
the
Company and each of its subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) has
paid
all taxes and other governmental assessments and charges that are material
in
amount, shown or determined to be due on such returns, reports and declarations,
except those being contested in good faith and has set aside on its books
provision reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply.
There are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know of no basis
for any such claim.
(t) Certain
Transactions.
Except
for arm’s length transactions pursuant to which the Company makes payments in
the ordinary course of business upon terms no less favorable than the Company
could obtain from third parties and other than as disclosed in the SEC
Documents, none of the officers, directors, or employees of the Company is
presently a party to any transaction with the Company (other than for services
as employees, officers and directors), including any contract, agreement or
other arrangement providing for the furnishing of services to or by, providing
for rental of real or personal property to or from, or otherwise requiring
payments to or from any officer, director or such employee or, to the knowledge
of the Company, any corporation, partnership, trust or other entity in which
any
officer, director, or any such employee has a substantial interest or is an
officer, director, trustee or partner.
-11-
(m) Fees
and Rights of First Refusal.
The
Company is not obligated to offer the securities offered hereunder on a right
of
first refusal basis or otherwise to any third parties including, but not limited
to, current or former shareholders of the Company, underwriters, brokers, agents
or other third parties.
4. COVENANTS.
(a) Best
Efforts.
Each
party shall use its best efforts to timely satisfy each of the conditions to
be
satisfied by it as provided in Sections 6 and 7 of this Agreement.
(b) Form
D.
The
Company agrees to file a Form D with respect to the Convertible Debentures
and
Warrants as required under Regulation D and to provide a copy thereof to the
Buyer promptly after such filing. The Company shall, on or before the Closing
Date, take such action as the Company shall reasonably determine is necessary
to
qualify the Conversion Shares, or obtain an exemption for the Conversion Shares
for sale to the Buyer at the Closing pursuant to this Agreement under applicable
securities or “Blue Sky” laws of the states of the United States, and shall
provide evidence of any such action so taken to the Buyer on or prior to the
Closing Date.
(c) Reporting
Status.
Until
the earlier of (i) the date as of which the Buyer may sell all of the Conversion
Shares without restriction pursuant to Rule 144(k) promulgated under the
Securities Act (or successor thereto), or (ii) the date on which (A) the Buyer
shall have sold all the Conversion Shares and (B) none of the Convertible
Debentures are outstanding (the “Registration
Period”),
the
Company shall use its best efforts to file in a timely manner all reports
required to be filed with the SEC pursuant to the Exchange Act and the
regulations of the SEC thereunder, and the Company shall not voluntarily
terminate its status as an issuer required to file reports under the Exchange
Act even if the Exchange Act or the rules and regulations thereunder would
otherwise permit such termination.
(d) Use
of
Proceeds.
The
Company will use the proceeds from the sale of the Convertible Debentures for
general corporate and working capital purposes and in connection with the Solar
Purchase Agreement, CRE Merger Agreement (as such terms are defined in Section
4(h)(i) below), or any related document or agreement.
(e) Reservation
of Shares.
The
Company shall take all action reasonably necessary to at all times have
authorized, and reserved for the purpose of issuance, such number of shares
of
Common Stock as shall be necessary to effect the issuance of the Conversion
Shares. If at any time the Company does not have available such shares of Common
Stock as shall from time to time be sufficient to effect the conversion of
all
of the Conversion Shares, the Company shall call and hold a special meeting
of
the shareholders within forty five (45) days of such occurrence, for the sole
purpose of increasing the number of shares authorized. The Company’s management
shall recommend to the shareholders to vote in favor of increasing the number
of
shares of Common Stock authorized. Management shall also vote all of its shares
in favor of increasing the number of authorized shares of Common
Stock.
-12-
(f) Listings
or Quotation.
The
Company shall promptly secure the listing or quotation of the Conversion Shares
upon each national securities exchange, automated quotation system or The
National Association of Securities Dealers Inc.’s Over-The-Counter Bulletin
Board (“OTCBB”)
or
other market, if any, upon which shares of Common Stock are then listed or
quoted (subject to official notice of issuance) and shall use its best efforts
to maintain, so long as any other shares of Common Stock shall be so listed,
such listing of all Conversion Shares from time to time issuable under the
terms
of this Agreement. The Company shall use its best efforts to maintain the Common
Stock’s authorization for quotation on the OTCBB or other Principal Market (as
this term is defined in the Convertible Debentures.
(g) Fees
and Expenses.
(i) Each
of
the Company and the Buyer shall pay all costs and expenses incurred by such
party in connection with the negotiation, investigation, preparation, execution
and delivery of the Transaction Documents. The Company shall pay Yorkville
Advisors LLC a fee equal to eight percent (8%) of the Purchase Price of the
Convertible Debentures issued at each Closing.
(ii) The
Company shall pay a structuring fee to Yorkville Advisors LLC of Twelve Thousand
Five Hundred Dollars ($12,500) of which Two Thousand Five Hundred Dollars
($2,500) has already been paid and Ten Thousand Dollars ($10,000) shall be
paid
directly from the proceeds of the First Closing.
(iii) The
Company shall pay Yorkville Advisors, LLC a non-refundable due diligence fee
of
Five Thousand Dollars ($5,000) directly from the proceeds of the First
Closing.
(iv) The
Company shall issue to the Buyer warrants to purchase an aggregate of ten
million (10,000,000) shares of the Company’s Common Stock for a period of
five (5) years at an exercise price of $1.50 per share in substantially the
form
attached hereto as Exhibit F of which a warrant to purchase three million five
hundred thousand (3,500,000) shares of Common Stock shall be issued on the
First
Closing Date, a warrant to purchase three million five hundred thousand
(3,500,000) shares of Common Stock shall be issued on the release to the Company
of the Escrowed First Closing Amount and a warrant to purchase three million
(3,000,000) shares of Common Stock shall be issued on the Second Closing Date
(collectively referred to as the “Warrants”).
The
shares of Common Stock issuable under the Warrants shall collectively be
referred to as the “Warrant
Shares”.
-13-
(h) Corporate
Existence.
Other
than the
transactions pursuant to or contemplated by the Stock Purchase Agreement among
the Company, 2093603 Ontario Inc., and the stockholders of Solar Roofing Systems
Inc. dated as of February 8, 2006 (the "Solar
Purchase Agreement"),
or
the Agreement and Plan of Merger dated as of February 6, 2006 by and among
the
Company, Barnabus/CRE Acquisition Corporation, and the Sellers listed therein
(the "CRE
Merger Agreement")
so
long
as
any of the Convertible Debentures remains outstanding, the Company shall not
directly or indirectly consummate any merger, reorganization, restructuring,
reverse stock split consolidation, sale of all or substantially all of the
Company’s assets or any similar transaction or related transactions unless,
prior to the consummation an Organizational Change, the Company obtains the
written consent of the Buyer. To the extent any of the foregoing would not
constitute a “Change of Control Transaction” pursuant to the Convertible
Debentures (each such transaction, an “Organizational
Change”)
the
Company will make appropriate provision with respect to such holders’ rights and
interests to insure that the provisions of this Section 4(h) will thereafter
be
applicable to the Convertible Debentures.
(i) Transactions
With Affiliates.
So long
as any Convertible Debentures are outstanding, the Company shall not, and shall
cause each of its subsidiaries not to, enter into, amend, modify or supplement,
or permit any subsidiary to enter into, amend, modify or supplement any
agreement, transaction, commitment, or arrangement with any of its or any
subsidiary’s officers, directors, person who were officers or directors at any
time during the previous two (2) years, stockholders who beneficially own five
percent (5%) or more of the Common Stock, or Affiliates (as defined below)
or
with any individual related by blood, marriage, or adoption to any such
individual or with any entity in which any such entity or individual owns a
five
percent (5%) or more beneficial interest (each a “Related
Party”),
except for (a) customary employment arrangements and benefit programs on
reasonable terms, (b) any investment in an Affiliate of the Company, (c) any
agreement, transaction, commitment, or arrangement on an arms-length basis
on
terms no less favorable than terms which would have been obtainable from a
person other than such Related Party, (d) any agreement, transaction,
commitment, or arrangement which is approved by a majority of the disinterested
directors of the Company; for purposes hereof, any director who is also an
officer of the Company or any subsidiary of the Company shall not be a
disinterested director with respect to any such agreement, transaction,
commitment, or arrangement. “Affiliate”
for
purposes hereof means, with respect to any person or entity, another person
or
entity that, directly or indirectly, (i) has a ten percent (10%) or more equity
interest in that person or entity, (ii) has ten percent (10%) or more common
ownership with that person or entity, (iii) controls that person or entity,
or
(iv) shares common control with that person or entity. “Control”
or
“controls”
for
purposes hereof means that a person or entity has the power, direct or indirect,
to conduct or govern the policies of another person or entity.
(j) Transfer
Agent.
The
Company shall not change its transfer agent without the written consent of
the
Buyer(s), which consent shall not be unreasonably withheld or delayed. Iin
the
event that the Company’s agency relationship with the transfer agent should be
terminated for any reason prior to a date which is two (2) years after the
Closing Date, the Company shall immediately appoint a new transfer agent and
shall require that the new transfer agent execute and agree to be bound by
the
terms of the Irrevocable Transfer Agent Instructions (as defined
herein).
-14-
(k) Restriction
on Issuance of the Capital Stock.
Other
than in connection with the
transactions pursuant to or contemplated by the Stock Purchase Agreement among
the Company, 2093603 Ontario Inc., and the stockholders of Solar Roofing Systems
Inc. dated as of February 8, 2006 (the "Solar
Purchase Agreement"),
or
the Agreement and Plan of Merger dated as of February 6, 2006 by and among
the
Company, Barnabus/CRE Acquisition Corporation, and the Sellers listed therein
(the "CRE
Merger Agreement"),
so
long as
any Convertible Debentures are outstanding, the Company shall not, without
the
prior written consent of the Buyer, which consent shall not be unreasonably
withheld, (i) issue or sell shares of Common Stock or Preferred Stock for a
consideration per share less than the Fixed Conversion Price (as this term
is
defined in the Convertible Debentures), (ii) issue any preferred stock, warrant,
option, right, contract, call, or other security or instrument granting the
holder thereof the right to acquire Common Stock for a consideration per share
less than the Fixed Conversion Price (as this term is defined in the Convertible
Debentures), (iii) enter into any security instrument granting the holder a
security interest in any and all assets of the Company (except as permitted
by
the Convertible Debentures, or (iv) file any registration statement on Form
S-8
registering shares of the Company’s Common Stock in excess of fifteen percent
(15%) of the outstanding shares of the Company’s Common Stock on the date
hereof.
Furthermore
so
long as
any Convertible Debentures are outstanding, the Company shall not, without
the
prior written consent of the Buyer issue any shares of the Company’s Common
Stock pursuant to the Form S-8 registration statement currently on file with
the
SEC file No. 333-119222 (the “Existing
Form S-8”),
other
than shares issued upon the exercise of options granted prior to the date hereof
which are disclosed on the Disclosure Schedule attached hereto.
(l) Notwithstanding
the foregoing, the Company shall be entitled to issue, provided that such
issuances do not result in an Organizational Change or a Change of Control
Transaction (as this term is define in the Convertible Debentures), upon ten
(10) calendar days prior written notice to the Buyer (and the Buyer hereby
agrees to retain the confidentiality of such information until such time as
the
Company shall publicly disclose the same) (1)
shares of Common Stock or rights,
warrants, options or other securities or debt that are convertible into or
exchangeable for shares of Common Stock (“Common
Stock Equivalents”)
issued
to financial institutions or lessors in connection with commercial credit
arrangements, equipment financings, commercial property lease transactions
or
similar transactions; (2) Common Stock Equivalents of the Company disclosed
on the Disclosure Schedule attached hereto issued prior to, and outstanding
on,
the Initial Closing Date and Common Stock issuable on exercise or conversion
of
such Common Stock Equivalents, provided such Common Stock Equivalents are not
materially amended after the Initial Closing Date; (3) securities to an
entity which is not an “Affiliate” of the Company (as defined in Rule 144
of the Securities Act) as a component of any business relationship with such
entity for the purpose of (x) joint venture, technology licensing, or
development activities, (y) distribution, supply or manufacture of the
Company’s products or services, or (z) any other arrangement involving corporate
partners that are primarily for purposes other than to raise equity capital;
(4) securities as consideration for a merger or consolidation or the
acquisition of a business, product, license, or other assets of another person
or entity which is not an “Affiliate” of the Company; (5) any issuance as a
result of any stock split or stock dividend applicable to all holders of Common
Stock; (6) Common Stock or Common Stock Equivalents issued for compensatory
purposes pursuant to any of the Company's equity compensation plans, or as
inducement grants to directors and officers in accordance with Section 4(k)
herein; (7) issuances of securities in connection with the transactions pursuant
to or contemplated by the Solar Purchase Agreement or the CRE Merger Agreement;
and (8) shares of Common Stock issued upon conversion of, or as interest or
liquidated damages in respect of, Convertible Debentures, or upon exercise
of
the Warrants.
-15-
(m) Neither
the Buyer nor any of its affiliates have an open short position in the Common
Stock of the Company, and the Buyer agrees that it shall not, and that it will
cause its affiliates not to, engage in any short sales of or hedging
transactions with respect to the Common Stock as long as any Convertible
Debenture or Warrants shall remain outstanding.
(n) Rights
of First Refusal.
So long
as any portion of Convertible Debentures are outstanding, if the Company intends
to raise additional capital by the issuance or sale of capital stock of the
Company, including without limitation shares of any class of Common Stock,
any
class of preferred stock, options, warrants or any other securities convertible
or exercisable into shares of common stock (whether the offering is conducted
by
the Company, underwriter, placement agent or any third party) the Company shall
be obligated to offer to the Buyer such issuance or sale of capital stock,
by
providing in writing the principal amount of capital it intends to raise and
outline of the material terms of such capital raise, prior to the offering
such
issuance or sale of capital stock to any third parties including, but not
limited to, current or former officers or directors, current or former
shareholders and/or investors of the obligor, underwriters, brokers, agents
or
other third parties. The Buyer shall have ten (10) business days from
receipt of such notice of the sale or issuance of capital stock to accept or
reject all or a portion of such capital raising offer. If the Buyer shall reject
or fail to respond to any such capital raising offer, the Company shall be
permitted to issue and sell capital stock to third parties on substantially
the
terms described in the notice of the sale or issuance delivered to the
Buyer.
(o) Delivery
of Subsidiary Security Agreements.
Upon
consummation of the transactions contemplated by the CRE Merger Agrement and
the
Solar Purchase Agreement, the Company shall secure that both 2093603 Ontario,
Inc. and Barnabus/CRE Acquisition Corp execute and deliver Subsidiary Security
Agreements substantially in the form attached hereto as Exhibit C pursuant
to
which the wholly owned subsidiaries provide the Buyer a security interest in
Pledged Collateral (as this term is defined in the each Security Agreement).
Upon delivery of the subsidiary Security Agreements the Company shall have
filed
a form UCC-1 as well as registering in Ontario Personal Property Registry a
financing statement or such other forms as may be required to perfect the
Buyer’s interest in the Pledged Property as detailed in the subsidiary Security
Agreement dated the date hereof and provided proof of such filing to the
Buyer(s).
5. TRANSFER
AGENT INSTRUCTIONS.
-16-
The
Company shall issue the Irrevocable Transfer Agent Instructions to its transfer
agent irrevocably appointing Xxxxx Xxxxxxxx, Esq. as the Company’s agent for
purpose of having certificates issued, registered in the name of the Buyer
or
its respective nominee(s), for the Conversion Shares representing such amounts
of Convertible Debentures as specified from time to time by the Buyer to the
Company upon conversion of the Convertible Debentures, for interest owed
pursuant to the Convertible Debenture, and for any and all Liquidated Damages
(as this term is defined in the Investor Registration Rights Agreement). Xxxxx
Xxxxxxxx, Esq. shall be paid a cash fee of Fifty Dollars ($50) for every
occasion they act pursuant to the Irrevocable Transfer Agent Instructions.
The
Company shall not change its transfer agent without the express written consent
of the Buyer, which may be withheld by the Buyer in its sole discretion. Prior
to registration of the Conversion Shares under the Securities Act, all such
certificates shall bear the restrictive legend specified in Section 2(g) of
this
Agreement. The Company warrants that no instruction other than the Irrevocable
Transfer Agent Instructions referred to in this Section 5, and stop transfer
instructions to give effect to Section 2(g) hereof (in the case of the
Conversion Shares prior to registration of such shares under the Securities
Act)
will be given by the Company to its transfer agent and that the Conversion
Shares shall otherwise be freely transferable on the books and records of the
Company as and to the extent provided in this Agreement and the Investor
Registration Rights Agreement. Nothing in this Section 5 shall affect in any
way
the Buyer’s obligations and agreement to comply with all applicable securities
laws upon resale of Conversion Shares. If the Buyer provides the Company with
an
opinion of counsel, in form, scope and substance customary for opinions of
counsel in comparable transactions to the effect that registration of a resale
by the Buyer of any of the Conversion Shares is not required under the
Securities Act, the Company shall within two (2) business days instruct its
transfer agent to issue one or more certificates in such name and in such
denominations as specified by the Buyer. The Company acknowledges that a breach
by it of its obligations hereunder will cause irreparable harm to the Buyer
by
vitiating the intent and purpose of the transaction contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of
its
obligations under this Section 5 will be inadequate and agrees, in the event
of
a breach or threatened breach by the Company of the provisions of this
Section 5, that the Buyer shall be entitled, in addition to all other
available remedies, to an injunction restraining any breach and requiring
immediate issuance and transfer, without the necessity of showing economic
loss
and without any bond or other security being required.
6. CONDITIONS
TO THE COMPANY’S OBLIGATION TO SELL.
The
obligation of the Company hereunder to issue and sell the Convertible Debentures
to the Buyer at the Closings is subject to the satisfaction, at or before the
Closing Dates, of each of the following conditions, provided that these
conditions are for the Company’s sole benefit and may be waived by the Company
at any time in its sole discretion:
(a) The
Buyer
shall have executed the Transaction Documents and delivered them to the
Company.
(b) The
Buyer
shall have delivered to the Company the Purchase Price for Convertible
Debentures in respective amounts as set forth next to the Buyer as outlined
on
Schedule I attached hereto, minus any fees to be paid directly from the proceeds
the Closings as set forth herein, by wire transfer of immediately available
U.S.
funds pursuant to the wire instructions provided by the Company.
-17-
(c) The
representations and warranties of the Buyer shall be true and correct in all
material respects as of the date when made and as of the Closing Dates as though
made at that time (except for representations and warranties that speak as
of a
specific date), and the Buyer shall have performed, satisfied and complied
in
all material respects with the covenants, agreements and conditions required
by
this Agreement to be performed, satisfied or complied with by the Buyer at
or
prior to the Closing Dates.
7. CONDITIONS
TO THE BUYER’S OBLIGATION TO PURCHASE.
(a) The
obligation of the Buyer hereunder to purchase the Convertible Debentures at
the
First Closing is subject to the satisfaction, at or before the First Closing
Date, of each of the following conditions:
(i) The
Company shall have executed the Transaction Documents and delivered the same
to
the Buyer.
(ii) The
Common Stock shall be authorized for quotation on the OTCBB, trading in the
Common Stock shall not have been suspended for any reason, and all the
Conversion Shares issuable upon the conversion of the Convertible Debentures
shall be approved by the OTCBB.
(iii) The
representations and warranties of the Company shall be true and correct in
all
material respects (except to the extent that any of such representations and
warranties is already qualified as to materiality in Section 3 above, in which
case, such representations and warranties shall be true and correct without
further qualification) as of the date when made and as of the First Closing
Date
as though made at that time (except for representations and warranties that
speak as of a specific date) and the Company shall have performed, satisfied
and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Company at or prior to the First Closing Date. If requested by the Buyer, the
Buyer shall have received a certificate, executed by the President of the
Company, dated as of the First Closing Date, to the foregoing effect and as
to
such other matters as may be reasonably requested by the Buyer including,
without limitation an update as of the First Closing Date regarding the
representation contained in Section 3(c) above.
(iv) The
Company shall have executed and delivered to the Buyer the Convertible
Debentures in the respective amounts set forth opposite the Buyer’s name on
Schedule I attached hereto.
(v) The
Buyer
shall have received an opinion of counsel from counsel to the Company in a
form
satisfactory to the Buyer.
-18-
(vi) The
Company shall have provided to the Buyer a certificate of good standing from
the
secretary of state from the state in which the company is
incorporated.
(vii) The
Company shall have filed a form UCC-1 or such other forms as may be required
to
perfect the Buyer’s interest in the Pledged Property as detailed in the Security
Agreement dated the date hereof and provided proof of such filing to the
Buyer.
(viii) The
Company shall have delivered the Pledged Shares as well as executed and
medallion guaranteed stock powers as required pursuant to the Pledge and Escrow
Agreement.
(ix) The
Company shall have provided to the Buyer an acknowledgement, to the satisfaction
of the Buyer, from the Company’s independent certified public accountants as to
its ability to provide all consents required in order to file a registration
statement in connection with this transaction.
(x) The
Company shall have reserved out of its authorized and unissued Common Stock,
solely for the purpose of effecting the conversion of the Convertible
Debentures, shares of Common Stock to effect the conversion of all of the
Conversion Shares then outstanding.
(xi) The
Irrevocable Transfer Agent Instructions, in form and substance satisfactory
to
the Buyer, shall have been delivered to and acknowledged in writing by the
Company’s transfer agent.
(b) The
obligation of the Buyer hereunder to accept the Convertible Debentures at the
Second Closing is subject to the satisfaction, at or before the Second Closing
Date, of each of the following conditions:
(xii) The
Common Stock shall be authorized for quotation on the OTCBB, trading in the
Common Stock shall not have been suspended for any reason, and all the
Conversion Shares issuable upon the conversion of the Convertible Debentures
shall be approved by the OTCBB.
(xiii) The
representations and warranties of the Company shall be true and correct in
all
material respects (except to the extent that any of such representations and
warranties is already qualified as to materiality in Section 3 above, in which
case, such representations and warranties shall be true and correct without
further qualification) as of the date when made and as of the Second Closing
Date as though made at that time (except for representations and warranties
that
speak as of a specific date) and the Company shall have performed, satisfied
and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Company at or prior to the Second Closing Date. If requested by the Buyer,
the
Buyer shall have received a certificate, executed by two officers of the
Company, dated as of the Second Closing Date, to the foregoing effect and as
to
such other matters as may be reasonably requested by the Buyer including,
without limitation an update as of the Second Closing Date regarding the
representation contained in Section 3(c) above.
-19-
(xiv) The
Company shall have executed and delivered to the Buyer the Convertible
Debentures in the respective amounts set forth opposite the Buyer’s name on
Schedule I attached hereto.
(xv) The
Company shall have delivered subsidiary Security Agreements for 2093603 Ontario,
Inc. and Barnabus/CRE Acquisition Corp.
(xvi) The
Company shall have filed a form UCC-1 as well as registering in Ontario Personal
Property Registry a financing statement or such other forms as may be required
to perfect the Buyer’s interest in the Pledged Property as detailed in the
subsidiary Security Agreement dated the date hereof and provided proof of such
filing to the Buyer(s).
(xvii) The
Company shall have certified that all conditions to the Second Closing have
been
satisfied and that the Registration Statement filed with the SEC has been
declared effective. If requested by the Buyer, the Buyer shall have received
a
certificate, executed by the two officers of the Company, dated as of the Second
Closing Date, to the foregoing effect.
8. INDEMNIFICATION.
(a) In
consideration of the Buyer’s execution and delivery of this Agreement and
acquiring the Convertible Debentures and the Conversion Shares hereunder, and
in
addition to all of the Company’s other obligations under this Agreement, the
Company shall defend, protect, indemnify and hold harmless the Buyer and each
other holder of the Convertible Debentures and the Conversion Shares, and all
of
their officers, directors, employees and agents (including, without
limitation, those retained in connection with the transactions contemplated
by
this Agreement) (collectively, the “Buyer
Indemnitees”)
from
and against any and all actions, causes of action, suits, claims, losses, costs,
penalties, fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Buyer Indemnitee is a party to the action
for
which indemnification hereunder is sought), and including reasonable attorneys’
fees and disbursements (the “Indemnified
Liabilities”),
incurred by the Buyer Indemnitees or any of them as a result of, or arising
out
of, or relating to (a) any misrepresentation or breach of any representation
or
warranty made by the Company in this Agreement, the Convertible Debentures
or
the Investor Registration Rights Agreement or any other certificate, instrument
or document contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in this Agreement, or the
Investor Registration Rights Agreement or any other certificate, instrument
or
document contemplated hereby or thereby, or (c) any cause of action, suit or
claim brought or made against such Indemnitee and arising out of or resulting
from the execution, delivery, performance or enforcement of this Agreement
or
any other instrument, document or agreement executed pursuant hereto by any
of
the parties hereto, any transaction financed or to be financed in whole or
in
part, directly or indirectly, with the proceeds of the issuance of the
Convertible Debentures or the status of the Buyer or holder of the Convertible
Debentures the Conversion Shares, as a Buyer of Convertible Debentures in the
Company. To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution
to
the payment and satisfaction of each of the Indemnified Liabilities, which
is
permissible under applicable law.
-20-
(b) In
consideration of the Company’s execution and delivery of this Agreement, and in
addition to all of the Buyer’s other obligations under this Agreement, the Buyer
shall defend, protect, indemnify and hold harmless the Company and all of its
officers, directors, employees and agents (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the “Company
Indemnitees”)
from
and against any and all Indemnified Liabilities incurred by the Indemnitees
or
any of them as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the Buyer
in this Agreement, instrument or document contemplated hereby or thereby
executed by the Buyer, (b) any breach of any covenant, agreement or obligation
of the Buyer contained in this Agreement, the Investor Registration Rights
Agreement or any other certificate, instrument or document contemplated hereby
or thereby executed by the Buyer, or (c) any cause of action, suit or claim
brought or made against such Company Indemnitee based on material
misrepresentations or due to a material breach and arising out of or resulting
from the execution, delivery, performance or enforcement of this Agreement,
the
Investor Registration Rights Agreement or any other instrument, document or
agreement executed pursuant hereto by any of the parties hereto. To the extent
that the foregoing undertaking by the Buyer may be unenforceable for any reason,
the Buyer shall make the maximum contribution to the payment and satisfaction
of
each of the Indemnified Liabilities, which is permissible under applicable
law.
9. GOVERNING
LAW: MISCELLANEOUS.
(a) Governing
Law.
This
Agreement shall be governed by and interpreted in accordance with the laws
of
the State of New Jersey without regard to the principles of conflict of laws.
The parties further agree that any action between them shall be heard in Xxxxxx
County, New Jersey, and expressly consent to the jurisdiction and venue of
the
Superior Court of New Jersey, sitting in Xxxxxx County and the United States
District Court for the District of New Jersey sitting in Newark, New Jersey
for
the adjudication of any civil action asserted pursuant to this
Paragraph.
(b) Counterparts.
This
Agreement may be executed in two or more identical counterparts, all of which
shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party.
In
the event any signature page is delivered by facsimile transmission, the party
using such means of delivery shall cause four (4) additional original executed
signature pages to be physically delivered to the other party within five (5)
days of the execution and delivery hereof.
(c) Headings.
The
headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement.
-21-
(d) Severability.
If any
provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or
the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
(e) Entire
Agreement, Amendments.
This
Agreement supersedes all other prior oral or written agreements between the
Buyer, the Company, their affiliates and persons acting on their behalf with
respect to the matters discussed herein, and this Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor any Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision
of
this Agreement may be waived or amended other than by an instrument in writing
signed by the party to be charged with enforcement.
(f) Notices.
Any
notices, consents, waivers, or other communications required or permitted to
be
given under the terms of this Agreement must be in writing and will be deemed
to
have been delivered (i) upon receipt, when delivered personally; (ii) upon
confirmation of receipt, when sent by facsimile; (iii) three (3) days after
being sent by U.S. certified mail, return receipt requested, or (iv) one (1)
day
after deposit with a nationally recognized overnight delivery service, in each
case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
|
If
to the Company, to:
|
|
|
000
Xxx xx xx Xxxxx - Xxxxx 000
|
|
|
Xxxxxx
Xxxxx, Xx 00000
|
|
|
Attention:
Xxxxx Xxxxxxx
|
|
|
Telephone: (000)
000-0000
|
|
|
Facsimile: (000)
000-0000
|
|
|
With
a copy to:
|
Sheppard,
Mullin, Xxxxxxx & Xxxxxxx LLP
|
|
00000
Xxxx Xxxxx Xxxxx, Xxxxx 000
|
|
|
Xxx
Xxxxx, XX 00000
|
|
|
Attention:
Xxxx X. Xxxxxxx, Esq.
|
|
|
Telephone:
(000) 000-0000
|
|
|
Facsimile:
(000) 000-0000
|
|
If
to the
Buyer, to its address and facsimile number on Schedule I, with copies to the
Buyer’s counsel as set forth on Schedule I. Each party shall provide five (5)
days’ prior written notice to the other party of any change in address or
facsimile number.
(g) Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and assigns. Neither the Company nor any Buyer
shall
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the other party hereto.
-22-
(h) No
Third Party Beneficiaries.
This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other person.
(i) Survival.
Unless
this Agreement is terminated under Section 9(l), the representations and
warranties of the Company and the Buyer contained in Sections 2 and 3, the
agreements and covenants set forth in Sections 4, 5 and 9, and the
indemnification provisions set forth in Section 8, shall survive the Closing
for
a period of two (2) years following the date on which the Convertible Debentures
are converted in full. The Buyer shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.
(j) Publicity.
The
Company and the Buyer shall have the right to approve, before issuance any
press
release or any other public statement with respect to the transactions
contemplated hereby made by any party; provided, however, that the Company
shall
be entitled, without the prior approval of the Buyer, to issue any press release
or other public disclosure with respect to such transactions required under
applicable securities or stock exchange, automated quotation system, or other
laws, rules, or regulations (the Company shall use its best efforts to consult
the Buyer in connection with any such press release or other public disclosure
prior to its release and Buyer shall be provided with a copy thereof upon
release thereof).
(k) Further
Assurances.
Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.
(l) Termination.
In the
event that the Closing shall not have occurred with respect to the Buyer on
or
before five (5) business days from the date hereof due to the Company’s or the
Buyer’s failure to satisfy the conditions set forth in Sections 6 and 7 above
(and the non-breaching party’s failure to waive such unsatisfied condition(s)),
the non-breaching party shall have the option to terminate this Agreement with
respect to such breaching party at the close of business on such date without
liability of any party to any other party; provided, however, that if this
Agreement is terminated by the Company pursuant to this Section 9(l), the
Company shall remain obligated to reimburse the Buyer for the fees and expenses
of Yorkville Advisors LLC described in Section 4(g) (ii) above.
(m) No
Strict Construction.
The
language used in this Agreement will be deemed to be the language chosen by
the
parties to express their mutual intent, and no rules of strict construction
will
be applied against any party.
[REMAINDER
PAGE INTENTIONALLY LEFT BLANK]
-23-
IN
WITNESS WHEREOF,
the
Buyer, the Company and Xxxxx Xxxxxxxx, Esq. have caused this Securities Purchase
Agreement to be duly executed as of the date first written above.
|
COMPANY:
|
||
| |
|
|
| By: | /s/ Xxxxx Xxxxxxx | |
|
Name:
Xxxxx Xxxxxxx
Title:
Chief
Executive Officer
|
||
| By: | /s/ Xxxxx Xxxxxxxx | |
|
Xxxxx
Xxxxxxxx, Esq. an individual
(solely
with respect to the agreements
set
forth in Section 1 herein)
|
||
-24-
EXHIBIT
A
FORM
OF INVESTOR REGISTRATION RIGHTS AGREEMENT
-1-
EXHIBIT
B
SECURITY
AGREEMENT
-2-
EXHIBIT
C
SUBSIDIARY
SECURITY AGREEMENT
-3-
EXHIBIT
D
PLEDGE
AND ESCROW AGREEMENT
-4-
EXHIBIT
E
IRREVOCABLE
TRANSFER AGENT INSTRUCTIONS
-5-
EXHIBIT
F
WARRANT
-6-
SCHEDULE
I
SCHEDULE
OF BUYERS
|
Name
|
Signature
|
Address/Facsimile
Number
of Buyer
|
Amount
of Subscription
|
|||
|
Cornell
Capital Partners, LP
|
By: Yorkville
Advisors, LLC
|
000
Xxxxxx Xxxxxx - Xxxxx 0000
|
$15,000,000
|
|||
|
Its: General
Partner
|
Xxxxxx
Xxxx, XX 00000
|
|||||
|
Facsimile: (000)
000-0000
|
||||||
|
By: /s/
Xxxx Xxxxxx
|
||||||
|
Name: Xxxx
Xxxxxx
|
||||||
|
Its: Portfolio
Manager
|
||||||
|
With
a copy to:
|
Xxxxx
Xxxxxxxx, Esq.
|
000
Xxxxxx Xxxxxx - Xxxxx 0000
|
||||
|
Xxxxxx
Xxxx, XX 00000
|
||||||
|
Facsimile:
(000) 000-0000
|
||||||
-1-
DISCLOSURE
SCHEDULE
-2-
