CONFIDENTIAL
EXECUTION COPY
STOCK PURCHASE AGREEMENT
AMONG
BARNABUS ENERGY, INC.,
2093603 ONTARIO INC.,
SOLAR ROOFING SYSTEMS INC.
AND
THE STOCKHOLDERS OF SOLAR ROOFING SYSTEMS INC.
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Dated as of February 8, 2006
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of February 8,
2006, is made among Barnabus Energy, Inc., a Nevada corporation ("Barnabus"),
2093603 Ontario Inc., an Ontario corporation ("Exchangeco"), Solar Roofing
Systems Inc., an Ontario corporation (the "Company"), and the stockholders of
the Company set forth on Schedule I attached hereto (the "Stockholders").
R E C I T A L S
A. The Stockholders own the number of common shares of the Company (the
"Company Common Shares") as set forth on Schedule I (collectively referred to as
the "Purchased Shares").
B. The Purchased Shares, together with the Company Common Shares held by
Barnabus, constitute all of the issued and outstanding Company Common Shares.
C. Barnabus desires to purchase, through its wholly-owned subsidiary,
Exchangeco, and each Stockholder desires to sell, the Shares held by such
Stockholder for the consideration set forth below, subject to the terms and
conditions of this Agreement.
In consideration of the mutual representations, warranties and covenants
contained herein, the parties hereto agree as follows:
SECTION 1 DEFINITIONS
Defined Terms. As used in this Agreement, the following capitalized terms
have the meanings specified below:
"2004 Unaudited Financial Statements" means the unaudited balance sheet
and statement of deficit, operations, shareholders' equity and cash flow of the
Company for the year ended December 31, 2004.
"2006 Financial Statements" means the audited balance sheet and statement
of deficit, operations, shareholders' equity and cash flow of the Company for
the year ended December 31, 2006.
"Actual Gross Sales" shall have the meaning set forth in Section 2.5(a).
"Additional Financing" means the private placement of at least U.S.
$10,000,000 in principal amount of Barnabus subordinated convertible debentures
convertible into Barnabus Common Shares.
"Address Certificate" shall have the meaning set forth in Section 3.9(b).
"Adjusted Additional Barnabus Shares" shall have the meaning set forth in
Section 2.5(a)(i).
"Adjusted Additional Exchangeable Shares" shall have the meaning set forth
in Section 2.5(a)(ii).
"Affiliate" means, with respect to any Person, any other Person that
controls, is controlled by or is under common control with the specified Person.
As used in this definition, the term CONTROL means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through ownership of voting securities, by
contract or otherwise.
"Affiliated Group" means any affiliated group within the meaning of Code
ss. 1504(a) or any similar group defined under a similar provision of Canadian,
provincial, state, local or foreign law.
"Agreement" means this Stock Purchase Agreement, as it may be amended from
time to time.
"Barnabus" means Barnabus Energy, Inc., a Nevada corporation.
"Barnabus Common Shares" shall mean the shares of common stock, par value
U.S. $0.001 per share, of Barnabus.
"Barnabus Disclosure Schedule" means the disclosure schedule delivered by
Barnabus to the Company and to the Stockholders prior to the execution and
delivery of this Agreement.
"Barnabus Financial Statements" means the audited financial statements as
contained in Barnabus' Form 10KSB for the year ending May 31, 2005 and the
interim financial statements as set forth on Barnabus' Form 10QSB for the
six-month period ending November 30, 2005.
"Barnabus Indemnitees" means each of Barnabus, Exchangeco and their
respective directors, officers, employees, agents, Affiliates, Subsidiaries,
successors and permitted assigns, excluding Key Employees.
"Business Plan" means the business plan of the Company dated as of
[___________, 2005].
"Barnabus Proprietary Rights" shall have the meaning set forth in Section
5.7
"Canadian GAAP" means generally accepted accounting principles in Canada,
consistently applied.
"Canadian Securities Laws" shall have the meaning set forth in Section
5.3(b).
"Canadian Share Consideration" shall have the meaning set forth in Section
2.3(a)(ii).
"Canadian Share Reduction" shall have the meaning set forth in Section
2.5(a)(ii).
"Canadian Stockholders" means the Stockholders listed under the heading
"Canadian Stockholders" on Schedule I.
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"Cash Consideration" shall have the meaning set forth in Section 2.3(a).
"Class A Stock" shall mean, if authorized and issued, a special voting
stock of Barnabus with rights, preferences, powers, privileges, restrictions,
qualifications and limitations as set forth in Schedule C to the Support
Agreement.
"Closing" shall have the meaning set forth in Section 2.1.
"Closing Date" shall have the meaning set forth in Section 2.4.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means Solar Roofing Systems Inc., an Ontario corporation.
"Company Common Shares" shall have the meaning set forth in the Recitals
of this Agreement.
"Company Disclosure Schedule" means the disclosure schedule delivered by
the Company to Barnabus and Exchangeco prior to the execution and delivery of
this Agreement.
"Company Financial Statements" means the 2004 Unaudited Financial
Statements and the Interim Financial Statements.
"Company Material Adverse Effect" means a material adverse effect on the
assets, properties, business, results of operations, prospects or financial
condition of the Company.
"Company Proprietary Rights" shall have the meaning set forth in Section
4.12.
"Concurrent Financing" means the private placement of U.S. $5,000,000 in
principal amount of Barnabus subordinated convertible debentures convertible
into Barnabus Common Shares.
"Dispute Resolution Accountants" shall have the meaning set forth in
Section 2.8.
"Employee Transaction Payments" means all payments to be made to any
current or former employee, officer, director, consultant, or independent
contractor of the Company in connection with the transactions contemplated
hereby (other than any payments for a Stock Purchase as described in Section
2.1), including, without limitation, all change in control payments, all
severance benefits, all retention or sale bonuses (including, without
limitation, all amounts paid to executives of the Company in connection with
this transaction), and all settlement payments in respect of existing
non-competition agreements, which payments are identified on Schedule II
attached hereto.
"Environmental Contaminant" means Hazardous Materials, or any other
pollutants, contaminants, toxic or constituent substances or waste radioactive
substances, materials or special wastes, polychlorinated biphenals, or any other
substance or material, in each case regulated by applicable Environmental Laws.
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"Environmental Laws" means any U.S. federal, Canadian, state, provincial,
local or foreign laws (including common law), regulations, codes, rules, orders,
ordinances, permits, requirements and final governmental determinations
pertaining to the environment, pollution or protection of human health, safety
or the environment, as adopted or in effect in the jurisdictions in which the
applicable site or premises are located; and including without limitation any
laws relating to protection of safety, health or the environment that regulate
the use of biological agents or substances including medical or infectious
wastes as any such laws have been amended.
"Estimated Purchase Price" shall have the meaning set forth in Section
2.3(a).
"Exchangeable Shares" means the Class A non-voting exchangeable shares of
Exchangeco.
"Exchange Act" means the Securities and Exchange Act of 1934, as amended,
or any successor law and regulations and rules issued pursuant to that Act or
any successor law.
"Exchangeco" means 2093603 Ontario Inc., an Ontario corporation.
"Exchangeco Disclosure Schedule" means the disclosure schedule delivered
by Exchangeco to the Company and to the Stockholders prior to the execution and
delivery of this Agreement.
"Exchange Right" shall have the meaning set forth in the Exchange Rights
Agreement and in the Support Agreement.
"Exchange Rights Agreement" means an exchange rights agreement in the form
attached hereto as Exhibit K to be entered into at the Closing by Barnabus,
Exchangeco and the holders of Exchangeable Shares, as it may be amended from
time to time.
"Exempt Barnabus Claims" means claims based on any inaccuracy or breach of
the representations made in Sections 5.4 (Capitalization), 5.8 (Environmental
Matters), 5.11 (Tax Matters) and 5.13 (No Finder's Fee) hereof.
"Exempt Principal Stockholders Claims" means claims based on any
inaccuracy or breach of the representations made in Sections 4.3
(Capitalization), 4.17 (Tax Matters), 4.20 (Environmental Matters) and 4.24 (No
Finder's Fee) hereof.
"Expiration Date" shall have the meaning set forth in Section 11.5(c).
"Final Purchase Price" shall have the meaning set forth in Section 2.5(b).
"Governmental Entity" means any U.S. federal, Canadian, state, provincial,
foreign or local court, arbitration tribunal, administrative agency or
commission or other governmental or regulatory body, authority or agency.
"Hazardous Materials" means (a) any chemicals, materials or substances
defined as or included in the definition of "hazardous substances," "hazardous
wastes," "hazardous materials," "extremely hazardous wastes," "restricted
hazardous wastes," "toxic substances," "toxic pollutants," "hazardous air
pollutants," "contaminants," "toxic chemicals," "toxins," "hazardous chemicals,"
"extremely hazardous substances," "pesticides," "oil" or related materials as
defined in any applicable Environmental Law, or (b) any petroleum or petroleum
products, oil, natural or synthetic gas, radioactive materials,
asbestos-containing materials, urea formaldehyde foam insulation, radon, and any
other substance defined or designated as hazardous, toxic or harmful to human
health, safety or the environment under any Environmental Law.
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"Indebtedness" means, without duplication: (a) obligations created, issued
or incurred by the Company for borrowed money (whether by loan, advance, the
issuance and sale of debt securities or the sale of property to another Person
subject to an understanding or agreement, contingent or otherwise, to repurchase
such property from such Person); (b) obligations of the Company to pay the
deferred purchase or acquisition price of property or services, other than trade
accounts payable (other than for borrowed money) arising, and accrued expenses
incurred and paid, in the ordinary course of business consistent with past
practice; (c) capital lease obligations of the Company (determined in accordance
with Canadian GAAP); (d) obligations of the Company in respect of letters of
credit or similar instruments issued or accepted by banks and other financial
institutions for the account of the Company; (e) Indebtedness of others secured
by a Lien on the property of the Company, whether or not the respective
Indebtedness so secured has been assumed by the Company; (f) Indebtedness of
others guaranteed by the Company; and (g) any obligations with respect to fees,
penalties or other obligations payable in connection with any of the foregoing
(and the payoff thereof). The Indebtedness of the Company shall include the
Indebtedness of any other entity (including any partnership in which the Company
is a general partner) to the extent the Company is liable therefor as a result
of the Company's ownership interest in or other relationship with such entity,
except to the extent the terms of such Indebtedness provide that the Company is
not liable therefor. "Independent Auditors" means Xxxxxxxx Co., LLP, or such
other independent certified public accounting firm appointed by Barnabus and
agreed to by the Stockholders' Representative, which consent shall not be
unreasonably denied or delayed.
"Intellectual Property" means:
A. all inventions (whether patentable or unpatentable and whether or
not reduced to practice), all improvements thereto, and all patents
(including utility and design patents, industrial designs and
utility models), patent applications and patent and invention
disclosures, and all other rights of inventorship, together with all
reissuances, continuations, continuations-in-part, divisions,
revisions, supplementary protection certificates, extensions and
re-examinations thereof;
B. all registered and unregistered trademarks, service marks, trade
names, trade dress, logos, business, corporate and product names and
slogans and registrations and applications for registration thereof;
C. all copyrights in copyrightable works, and all other rights of
authorship, worldwide, and all applications, registrations and
renewals in connection therewith;
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D. all trade secrets and confidential business and technical
information (including ideas, research and development, know-how,
formulas, technology, compositions, manufacturing and production
processes and techniques, technical data, engineering, production
and other designs, plans, drawings, engineering notebooks,
industrial models, software, specifications, financial, marketing
and business data, pricing and cost information, business and
marketing plans and customer and supplier lists and information);
E. all computer and electronic data, data processing programs,
documentation and software, both source code and object code
(including flow charts, diagrams, descriptive texts and programs,
computer print-outs, underlying tapes, computer databases and
similar items), computer applications and operating programs, save
and except for third party programs that are: (i) licensed pursuant
to "shrink-wrap", "web-wrap" or similar agreements, (ii) purchased
off-the-shelf by the Company or Barnabus, as the case may be and
(iii) which are not, individually or in the aggregate, material to
the business of the Company or Barnabus, as the case may be;
F. all rights to xxx for and remedies against past, present and
future infringements of any or all of the foregoing and rights of
priority and protection of interests therein under the laws of any
jurisdiction;
G. all copies and tangible embodiments of any or all of the
foregoing (in whatever form or medium, including electronic media);
and
H. all other proprietary, intellectual property and other rights
relating to any or all of the foregoing, including, in each case,
any such rights related to any such items in any and all
jurisdictions, worldwide.
"Interim Financial Statements" means the partial-year unaudited financial
statements of the Company as of and for the six month period ended June 30, 2005
(consisting of an interim balance sheet, interim statement of deficit, interim
statement of operations and interim statement of cash flows), and the partial
year unaudited financial statements of the Company as of and for the period
ending September 30, 2005 (consisting of an interim balance sheet and interim
profit and loss statement), each, certified by the President of the Company.
"Investor Questionnaire" means an investor questionnaire in the form
attached hereto as Exhibit L.
"IRS" means the United States Internal Revenue Service.
"Joint Venture" means any corporation or other entity (including
partnerships, limited liability companies and other business associations) that
is not a Subsidiary in which the Company or one or more Subsidiaries owns an
equity interest.
"Key Employees" means Xxxxxx Xxxx, Xxxxxx Xxxxx, Xxxxx Xxxxxx and Xxxxxx
Xxxxxx.
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"Law" means any U.S. federal, Canadian, state, local or provincial or
foreign law, regulation, rule or ordinance.
"Lien" or "Liens" mean, with respect to any asset: (a) any mortgage, deed
of trust, lien, pledge, hypothecation, encumbrance, charge or security interest
in, on or of such asset; (b) the interest of a vendor or a lessor under any
conditional sale agreement, capital lease or title retention agreement (or any
financing lease having substantially the same economic effect as any of the
foregoing), other than an operating lease, relating to such asset; and (c) in
the case of securities, any purchase option, call or similar right of a third
party with respect to such securities.
"Losses" means any and all losses, liabilities, damages, deficiencies,
costs or expenses, including interest and penalties imposed or assessed by any
judicial or administrative body and reasonable attorneys' fees and costs,
whether or not arising out of Third-Party Claims and including all amounts paid
in investigation, defense or settlement of the foregoing.
"Order" means any agreement or any judgment, order, writ, prohibition,
injunction, decree, award, or other requirement of any Governmental Entity.
"Permits" shall have the meaning set forth in Section 4.8(a).
"Person" means an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture or other entity of whatever nature, whether public or private.
"Plans" means all pension, savings, profit sharing, retirement, deferred
compensation, employment, welfare, fringe benefit, insurance, short and long
term disability, incentive, bonus, stock, vacation pay, severance pay and
similar plans, programs or arrangements, including without limitation all
employee benefit plans.
"Principal Stockholders" means each of Xxxxxx Xxxx, Xxxxxx Xxxxxx, Xxxxxx
Kafato and Xxxxxxx Xxxxx.
"Projected Gross Sales" shall have the meaning set forth in Section
2.5(a).
"Purchased Shares" shall have the meaning set forth in the Recitals of
this Agreement.
"Registration Rights Agreement" means the registration rights agreement in
the form attached hereto as Exhibit I to be entered into at the Closing by
Barnabus and the Stockholders, as it may be amended from time to time.
"Related Agreements" shall have the Support Agreement, the Exchange Rights
Agreement, the Registration Rights Agreement and any other agreement relating to
this Agreement.
"SEC" means the Securities and Exchange Commission or its successor.
"SEC Documents" shall have the meaning set forth in Section 5.5.
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"Securities" shall mean Barnabus Common Shares being issued hereunder,
Exchangeable Shares, Barnabus Common Shares issuable upon exchange of the
Exchangeable Shares, Exchange Right and Class A Stock (if authorized and
issued).
"Securities Act" means the Securities Act of 1933, as amended, or any
successor law and regulations and rules issued pursuant to that Act or any
successor law.
"Share Consideration" shall have the meaning set forth in Section 2.3(a).
"Stock Purchase" shall have the meaning set forth in Section 2.1.
"Stockholders" shall have the meaning set forth in the Recitals of this
Agreement.
"Stockholders' Representative" shall have the meaning set forth in Section
2.7 hereof.
"Subsidiary" means, with respect to the Company or Barnabus, as the case
may be, any corporation, partnership or other organization, whether incorporated
or unincorporated, (i) of which the Company or Barnabus or any of their
respective Subsidiaries is a general partner or (ii) at least 50% of the
securities or other interests having voting power to elect a majority of the
board of directors or others performing similar functions with respect to such
corporation, partnership or other organization are directly or indirectly owned
or controlled by the Company or Barnabus or by any Subsidiary, as the case may
be, or by the Company or Barnabus and one or more of their respective
Subsidiaries, as the case may be.
"Support Agreement" means a support agreement in the form attached hereto
as Exhibit H to be entered into at the Closing by Barnabus, Exchangeco and the
holders of Exchangeable Shares, as it may be amended from time to time.
"Tax" (and, with correlative meaning, "Taxes" and "Taxable") means all
U.S. federal, Canadian, state, provincial and local, and all foreign, income,
profits, franchise, gross receipts, license, payroll, transfer, sales,
employment, severance, occupation, premium, windfall profits, use, real
property, personal property, excise, value added, ad valorem, estimated, stamp,
alternative or add-on minimum, recapture, environmental, withholding, social
security (or similar), unemployment, disability, registration and any other
taxes, charges, duties, impositions or assessments of any kind whatsoever
imposed by any taxing authority, together with all interest, penalties, and
additions imposed on or with respect to such amounts, including any liability
for taxes of a predecessor entity or as a transferee.
"Tax Act" shall have the meaning set forth in Section 2.6.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement, and any schedule, attachment or amendment
thereto, filed or required to be filed with any taxing authority in connection
with the determination, assessment, collection or imposition of any Taxes or the
administration of the laws relating to any Taxes.
"Third-Party Claim" means any claim that is made by, made against or
involves a Person who is not a party to this Agreement and who is not an
assignee, successor, heir or personal representative of a Person who is a party
to this Agreement.
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"U.S. GAAP" means generally accepted accounting principles in the United
States, consistently applied.
"U.S. Person" means: (i) any natural person resident in the United States;
(ii) any partnership or corporation organized or incorporated under the laws of
the United States; (iii) any estate of which any executor or administrator is a
U.S. Person; (iv) any trust of which any trustee is a U.S. Person; (v) any
agency or branch of a foreign entity located in the United States; (vi) any
non-discretionary account or similar account (other than an estate or trust)
held by a dealer or other fiduciary for the benefit or account of a U.S. Person;
(vii) any discretionary account or similar account (other than an estate or
trust) held by a dealer or other fiduciary organized, incorporated, or (if an
individual) resident in the United States; and (viii) any partnership or
corporation if: (A) organized or incorporated under the laws of any foreign
jurisdiction; and (B) formed by a U.S. Person principally for the purpose of
investing in securities not registered under the Securities Act, unless it is
organized or incorporated, and owned, by accredited investors (as defined in
Rule 501(a) under the Securities Act) who are not natural persons, estates or
trusts; provided, however, the following are not "U.S. Persons": (i) any
discretionary account or similar account (other than an estate or trust) held
for the benefit or account of a non-U.S. Person by a dealer or other
professional fiduciary organized, incorporated, or (if an individual) resident
in the United States; (ii) any estate of which any provisional fiduciary acting
as executor or administrator is a U.S. Person if: (A) an executor or
administrator of the estate who is not a U.S. Person has sole or shared
investment discretion with respect to the assets of the estate; and (B) the
estate is governed by foreign law; (iii) any trust of which any professional
fiduciary acting as trustee is a U.S. Person, if a trustee who is not a U.S.
Person has sole and shared investment discretion with respect to the trust
assets, and no beneficiary of the trust (and no settlor if the trust is
revocable) is a U.S. Person; (iv) an employee benefit plan established and
administered in accordance with the laws of a country other than the United
States and in accordance with the customary practices and documentation of such
country; and (v) any agency or branch of a U.S. Person located outside the
United States if: (A) the agency or branch operates for valid business reasons;
and (B) the agency or branch is engaged in the business of insurance or banking
and is subject to substantive insurance or banking regulation, respectively, in
the jurisdiction where located.
"U.S. Share Consideration" shall have the meaning set forth in Section
2.3(a)(i).
"U.S. Share Reduction" shall have the meaning set forth in Section
2.5(a)(i).
"U.S. Stockholders" means the Stockholders listed under the heading "U.S.
Stockholders" on Schedule I.
SECTION 2 PURCHASE AND SALE OF THE SHARES
2.1 Purchase of the Shares from the Stockholders. Subject to and upon
the terms and conditions of this Agreement, at the closing of the transactions
contemplated by this Agreement (the "Closing"), each Stockholder shall sell,
transfer, convey, assign and deliver to Exchangeco, and Exchangeco shall
purchase, acquire and accept from each Stockholder, all the Company Common
Shares owned by such Stockholder (the "Stock Purchase") as set forth opposite
such Stockholder's name in Schedule I, free and clear of all Liens. At the
Closing, each Stockholder shall deliver or cause to be delivered to Exchangeco
certificates evidencing the Company Common Shares owned by such Stockholder,
duly endorsed in blank or with stock powers duly executed by such Stockholder.
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2.2 Further Assurances. At any time and from time to time after the
Closing, at Exchangeco or Barnabus' request and without further consideration,
each Stockholder shall promptly execute and deliver such instruments of sale,
transfer, conveyance, assignment and confirmation, and take all such other
action as Exchangeco or Barnabus may reasonably request, more effectively to (a)
transfer, convey and assign to Exchangeco and to confirm Exchangeco's title to,
all of the Company Common Shares owned by such Stockholder and (b) to carry out
the purpose and intent of this Agreement.
2.3 Estimated Purchase Price for the Purchased Shares.
(a) The aggregate purchase price to be paid by Exchangeco for the
Purchased Shares (the "Estimated Purchase Price") shall equal (without
duplication): CDN $18,545,333, of which (i) an aggregate of CDN $3,709,067 shall
be paid in cash by way of wire transfer to Fasken Xxxxxxxxx XxXxxxxx LLP ( the
"Cash Consideration") and (ii) the remainder shall be paid as follows (the
"Share Consideration"):
(A) To the U.S. Stockholders, 1,472,160 Barnabus Common
Shares, valued at U.S. $2.00 per share (assuming a conversion ratio of U.S.
$2.00 = CDN $2.33117), in the aggregate (the "U.S. Share Consideration"),
subject to the adjustments as set forth in Section 2.5 hereof; and
(B) To the Canadian Stockholders, 4,892,141 Exchangeable
Shares, valued at U.S. $2.00 per share (assuming a conversion ratio of U.S.
$2.00 = CDN $2.33117), in the aggregate (the "Canadian Share Consideration"),
subject to the adjustments as set forth in Section 2.5 hereof.
(b) The Estimated Purchase Price shall be payable as described in
Section 2.3(c) and 2.5 below. The Cash Consideration and the Share Consideration
shall be allocated among the Stockholders as set forth on Schedule I.
(c) At the Closing, subject to Sections 2.6, Exchangeco shall
deliver to Fasken Xxxxxxxxx DuMoulin LLP by wire transfer of immediately
available funds an aggregate amount equal to the Cash Consideration,
certificates registered in each U.S. Stockholder's name evidencing, in the
aggregate, the number of Barnabus Common Shares equal to one-half of the U.S.
Share Consideration and certificates registered in each Canadian Stockholder's
name evidencing, in the aggregate the number Exchangeable Shares equal to
one-half of the Canadian Share Consideration. The other one-half of each of the
U.S. Share Consideration and Canadian Share Consideration shall be authorized
and reserved for issuance by Barnabus and Exchangeco, respectively.
2.4 Closing. The Closing shall take place at the offices of Barnabus, at
9:30 a.m., Pacific time, on a date to be mutually agreed upon by the parties,
after all of the conditions to Closing contained in Sections 8 and 9 have been
satisfied or waived, or at such other place, time and date as may be mutually
agreed upon in writing by the parties (the "Closing Date"), provided that the
Closing Date shall occur no later than March 15, 2006.
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2.5 Post-Closing Earnout.
(a) Within ninety (90) days after the end of the 2006 fiscal year
of the Company, Barnabus and Exchangeco shall have caused the Independent
Auditors to have determined the actual gross sales of the Company for its 2006
fiscal year in accordance with Canadian GAAP (the "Actual Gross Sales"). If the
Actual Gross Sales are less than seventy-five (75%) of the projected gross sales
for the fiscal year 2006 based on the projections provided by the Company to
Barnabus in Exhibit A attached hereto (the "Projected Gross Sales"), the
Estimated Purchase Price shall be adjusted by reducing the number of the
aggregate Share Consideration to which the Stockholders are entitled as follows:
(i) The aggregate reduction (the "U.S. Share Reduction") to
the aggregate U.S. Share Consideration deliverable hereunder shall be equal to
the number of shares calculated by multiplying one-half of the U.S. Share
Consideration by a fraction, the numerator of which is Projected Gross Sales
minus the Actual Gross Sales and the denominator of which is the Projected Gross
Sales, subject to a maximum aggregate U.S. Share Reduction of no greater than
one-fourth of the U.S. Share Consideration. Subject to Sections 2.6, 2.8 and
11.5, within ten (10) days after determining the post-closing earnout pursuant
to this Section 2.5(a), Barnabus shall deliver to Fasken Xxxxxxxxx XxXxxxxx LLP,
certificates representing, in the aggregate, the number of Barnabus Common
Shares equal to one-half of the U.S. Share Consideration minus the U.S. Share
Reduction (the "Adjusted Additional Barnabus Shares"). The Adjusted Additional
Barnabus Shares will be allocated pro rata among the U.S. Stockholders in
accordance with their relative holdings as set forth on Schedule I and the
certificates shall be registered accordingly. If the Actual Gross Sales are at
least seventy-five percent (75%) of the Projected Gross Sales, subject to
Section 11.5 hereof, there will be no adjustment to the Estimated Purchase Price
and Barnabus shall promptly deliver to Fasken Xxxxxxxxx XxXxxxxx, LLP
certificates evidencing, in the aggregate, the remaining one-half of the U.S.
Share Consideration allocated pro rata among the U.S. Stockholders in accordance
with their relative holdings as set forth in Schedule I.
(ii) The aggregate reduction (the "Canadian Share Reduction")
to the aggregate Canadian Share Consideration deliverable hereunder shall be
equal to the number of shares calculated by multiplying one-half of the Canadian
Share Consideration by a fraction, the numerator of which is the Projected Gross
Sales minus the Actual Gross Sales and the denominator of which is the Projected
Gross Sales, subject to a maximum aggregate Canadian Share Reduction of no
greater than one-fourth of the Canadian Share Consideration. Subject to Sections
2.8 and 11.5, within ten (10) days after determining the post-closing earnout
pursuant to this Section 2.5(a), Exchangeco shall deliver to Fasken Xxxxxxxxx
XxXxxxxx LLP certificates representing, in the aggregate, the number of
Exchangeable Shares equal to one-half of the Canadian Share Consideration minus
the Canadian Share Reduction (the "Adjusted Additional Exchangeable Shares").
The Adjusted Additional Exchangeable Shares will be allocated pro rata among the
Canadian Stockholders in accordance with their relative holdings as set forth on
Schedule I and the certificates shall be registered accordingly. If the Actual
Gross Sales are at least seventy-five percent (75%) of the Projected Gross
Sales, subject to Section and 11.5 hereof, there will be no adjustment to the
Estimated Purchase Price and Exchangeco shall promptly deliver to Fasken
Xxxxxxxxx XxXxxxxx LLP, certificates evidencing, in the aggregate, the remaining
one-half of the Canadian Share Consideration allocated pro rata among the
Canadian Stockholders in accordance with their relative holdings as set forth in
Schedule I.
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(iii) Barnabus shall pay the fees and disbursements of the
Independent Auditors.
(b) The Estimated Purchase Price, as reduced by any U.S. Share
Reduction and Canadian Share Reduction, shall be hereinafter referred to as the
"Final Purchase Price."
2.6 Tax Clearance Certificate. On or prior to the date hereof, all of
the Stockholders who are non-residents within the meaning of the Income Tax Act
(Canada) (the "Tax Act" ) shall have applied to the Canada Revenue Agency
("CRA") for a tax clearance certificate to be issued pursuant to section 116 of
the Tax Act in respect of the disposition of their Company Common Shares under
this Agreement. Upon receipt of such certificate, such U.S. Stockholders shall
forthwith provide Exchangeco with a copy thereof. Until receipt of such
certificate, the U.S. Stockholders agree that the entire U.S. Cash Consideration
shall be held in escrow subject to the terms and conditions of the Section 116
Escrow Agreement annexed hereto as Exhibit J (the "Section 116 Escrow
Agreement"). Each U.S. Stockholder agrees to be bound by the conditions
expressed in the Section 116 Escrow Agreement. In the event that such U.S. Cash
Consideration is not sufficient to satisfy Exchangeco's obligations under
section 116 of the Tax Act, Exchangeco shall be permitted to withhold such
number of Barnabus Common Shares equal in value to such deficiency from the
number of Barnabus Common Shares that Exchangeco is otherwise obligated to
deliver under Section 2.5 and such withheld Barnabus Common Shares shall also be
held subject to the Section 116 Escrow Agreement.
2.7 Stockholders' Representative.
(a) The Stockholders hereby designate Xxxxxx Xxxx as their
representative (the "Stockholders' Representative").
(b) The Stockholders hereby authorize the Stockholders'
Representative (i) to make all decisions on behalf of the Stockholders relating
to the determination of the Final Purchase Price and the purchase price
adjustments pursuant to Section 2.5, (ii) to make all decisions relating to the
distribution of any amounts payable or distributable to the Stockholders
hereunder, (iii) to take all action necessary in connection with the waiver of
any condition to the obligations of the Stockholders to consummate the
transactions contemplated hereby, or the defense and/or settlement of any claims
for which the Stockholders may be required to indemnify Barnabus Indemnitees
pursuant to Section 11 hereof, (iv) to give and receive all notices, receipts,
directions and certificates required to be given under the Agreement, (v) to
receive executed copies of Related Agreements at the Closing, (vi) to designate
a director nominee pursuant to Section 7.6, (vii) to take any action necessary
in connection with the registration of Barnabus Common Shares pursuant to the
Registration Rights Agreement and (viii) to take any and all additional action
as is contemplated to be taken by or on behalf of the Stockholders by the terms
of this Agreement.
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(c) In the event that the Stockholders' Representative becomes
unable to perform its responsibilities hereunder or resigns from such position,
the Stockholders who held on the Closing Date a majority of the Company Common
Shares as set forth on Schedule I attached hereto shall select another
representative to fill such vacancy and such substituted representative shall be
deemed to be the Stockholders' Representative for all purposes of this
Agreement.
(d) All decisions and actions by the Stockholders' Representative,
including, without limitation, any agreement between the Stockholders'
Representative and Barnabus, Exchangeco and the Company relating to the
determination of the Final Purchase Price, the purchase price adjustments
pursuant to Section 2.5, or the defense or settlement of any claims for which
the Stockholders may be required to indemnify Barnabus or Exchangeco pursuant to
Section 11 hereof, shall be binding upon and inure to the benefit of all of the
Stockholders, and no Stockholder shall have the right to object, dissent,
protest or otherwise contest the same.
(e) By their execution of this Agreement, the Stockholders agree
that:
(i) Barnabus, Exchangeco and the Company shall be able to
rely conclusively on the instructions and decisions of the Stockholders'
Representative as to the determination of the Final Purchase Price, the purchase
price adjustments pursuant to Section 2.5 or the settlement of any claims for
indemnification by Barnabus or Exchangeco pursuant to Section 11 hereof or any
other actions required to be taken by the Stockholders' Representative
hereunder, and no party hereunder shall have any cause of action against
Barnabus, Exchangeco or the Company for any action taken by Barnabus, Exchangeco
or the Company in reliance upon the instructions or decisions of the
Stockholders' Representative;
(ii) all actions, decisions and instructions of the
Stockholders' Representative shall be conclusive and binding upon and inure to
the benefit of all of the Stockholders and no Stockholder shall have any cause
of action against the Stockholders' Representative for any action taken,
decision made or instruction given by the Stockholders' Representative under
this Agreement, except for fraud or willful breach of this Agreement by the
Stockholders' Representative;
(iii) the provisions of this Section 2.7 are independent and
severable, are irrevocable and coupled with an interest and shall be enforceable
notwithstanding any rights or remedies that any Stockholder may have in
connection with the transactions contemplated by this Agreement;
(iv) the provisions of this Section 2.7 shall be binding upon
the executors, heirs, legal representatives and successors of each Stockholder,
and any references in this Agreement to a Stockholder or the Stockholders shall
mean and include the successors to the Stockholders' rights hereunder, whether
pursuant to testamentary disposition, the laws of descent and distribution or
otherwise; and
(v) each of the Stockholders, other than Xxxxxx Xxxx and the
Xxxx Family Trust, severally agree to indemnify and hold harmless the
Stockholders' Representative for any and all claims to which the Stockholders'
Representative may become subject, insofar as such claims relate to, are caused
by, result from, arise out of, are based upon, directly or indirectly, or as a
consequence of, any decisions made, any action taken, any notices given or
received by the Stockholders' Representative in such capacity and as
contemplated hereunder, provided that the Stockholders' Representative acts
honestly and in good faith.
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(f) All reasonable fees and expenses incurred by the Stockholders'
Representative shall be paid by the Stockholders in proportion to their
ownership of Company Common Shares as set forth on Schedule I attached hereto.
2.8 Dispute Resolution. If there shall arise a dispute relating to the
post-closing adjustments described in Section 2.5, the disputing party shall
notify the other parties in writing of such dispute and the grounds therefor,
and the parties agree to use commercially reasonable efforts to resolve any such
disputes within thirty (30) days after receipt of such notice. If the parties
are unable to obtain a final resolution of the dispute within such thirty (30)
days, then Barnabus and the Stockholders' Representative shall each designate
and appoint an outside independent certified public accountant to represent that
party (collectively, the "Dispute Resolution Accountants"). Barnabus and the
Stockholders' Representative will direct the Dispute Resolution Accountants to
render a determination within thirty (30) days of their retention and the
parties will cooperate with the Dispute Resolution Accountants during their
engagement. The Dispute Resolution Accountants will consider only those items
and amounts that the parties are unable to resolve. The Dispute Resolution
Accountants' determination will be based on such review as the Dispute
Resolution Accountants deem necessary to make their determination, and on the
definitions contained herein. The parties agree to assist the Dispute Resolution
Accountants in providing any information reasonably necessary to the
determination of the disputed matter. If the Dispute Resolution Accountants
resolve the dispute within thirty (30) days of retention, their decision on the
dispute shall be conclusive and binding upon the parties. If the Dispute
Resolution Accountants are unable to resolve the dispute within such thirty-day
period, then the Dispute Resolution Accountants shall select and agree upon a
third outside independent certified accountant who shall act as an arbiter on
the dispute. The third independent accountant shall confer with the Dispute
Resolution Accountants and, within fifteen (15) days of appointment, shall
render a final decision on the dispute that shall be conclusive and binding upon
the parties. The costs, expenses and fees of the independent accountant (a)
appointed by Barnabus shall be borne by Barnabus, (b) appointed by the
Stockholders' Representative shall be borne by the Stockholders, and (c)
selected by the Dispute Resolution Accountants shall be borne by the party that
does not prevail in substantial part as determined by the independent
accountants.
2.9 Joint Tax Election. Each Canadian Stockholder and Exchangeco agree
to file a joint election under subsection 85(1) of the Tax Act in prescribed
form and within the prescribed time period, electing to transfer the Company
Common Shares owned by such Canadian Stockholder at an amount equal to the cost
to the such Canadian Stockholder of such Company Common Shares for the purposes
of the Tax Act immediately before Closing (or at such other amount as the
Canadian Stockholder may determine). The parties agree to file corresponding
joint elections under any applicable provincial taxing statutes. Such tax
elections shall be prepared by accountants chosen by the Stockholders'
Representative based on information provided by the Canadian Stockholders. The
fees and expenses of such accountants shall be paid by the Canadian
Stockholders.
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SECTION 3 REPRESENTATIONS OF THE STOCKHOLDERS
REGARDING THE SHARES
Except as set forth on the disclosure schedule delivered by the
Stockholders' Representative to Barnabus and Exchangeco on the date hereof, as
supplemented or modified prior to the Closing (the "Stockholders Disclosure
Schedule"), the section numbers of which are numbered to correspond to the
section numbers of this Agreement to which they refer, each Stockholder
severally hereby makes the following representations and warranties to Barnabus
and Exchangeco with respect to themselves only and not with respect to any other
Stockholder:
3.1 Title to Shares. Such Stockholder is the sole record and beneficial
owner of all the Company Common Shares that are to be acquired by Exchangeco
from such Stockholder, and upon transfer of such Company Common Shares to
Exchangeco, Exchangeco will acquire all rights of such Stockholder in such
Company Common Shares, free and clear of any and all covenants, conditions,
restrictions, voting trust arrangements, Liens, charges, and adverse claims or
rights whatsoever. Schedule I sets forth a true and correct description of all
Company Common Shares owned by such Stockholder as of the date hereof, which are
to be acquired by Exchangeco.
3.2 Authority to Execute and Perform Agreements. Such Stockholder has
the full right, power, authority and capacity to enter into, execute and deliver
this Agreement and each of the Related Agreements to which such Stockholder is
or is to become a party, and to transfer, convey and sell to Exchangeco at the
Closing the Company Common Shares to be sold by such Stockholder hereunder and
otherwise to perform fully its, his or her obligations hereunder and thereunder.
This Agreement has been duly executed and delivered by such Stockholder and
constitutes, and the Related Agreements will constitute, the valid and binding
obligations of such Stockholder, enforceable against such Stockholder in
accordance with their respective terms. If such Stockholder is not a natural
person, such Stockholder is duly organized, validly existing and in good
standing under the Laws pursuant to which such Stockholder was organized.
3.3 No Conflict. Such Stockholder is not a party to, subject to or bound
by any Order that would prevent the execution or delivery of this Agreement or
any Related Agreements by such Stockholder or the transfer, conveyance and sale
of the Company Common Shares to be sold by such Stockholder to Exchangeco
pursuant to the terms hereof.
3.4 No Breach. The execution, delivery and performance by such
Stockholder of this Agreement and the Related Agreements, and the consummation
by such Stockholder of the transactions contemplated hereby and thereby, will
not, with or without the giving of notice or the passage of time or both (a)
violate the provisions of any Law applicable to such Stockholder; (b) violate
any Order applicable to such Stockholder; (c) require on the part of such
Stockholder any filing with, or any permit, authorization, consent or approval
of, any Governmental Entity; or (d) if such Stockholder is not a natural person,
contravene, conflict with or result in a violation of (A) any provision of any
organizational document of such Stockholder or (B) any resolution adopted by the
board of directors, managers, stockholders, beneficiaries, trustees or partners
of such Stockholder.
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3.5 Purchase Entirely for Own Account. Such Stockholder acknowledges
that this Agreement is entered into by Barnabus and Exchangeco in reliance upon
such Stockholder's representation to Barnabus and Exchangeco that the Securities
will be acquired for investment for such Stockholder's own account, not as a
nominee or agent, and not with a view to the resale or distribution of any part
thereof, and that such Stockholder has no present intention of selling, granting
any participation in, or otherwise distributing the same. By executing this
Agreement, such Stockholder further represents that such Stockholder does not
have any contract, undertaking, agreement or arrangement with any Person to
sell, transfer or grant participations to such Person or to any third Person,
with respect to the Securities.
3.6 Disclosure of Information. Such Stockholder believes that it has
received all the information it considers necessary or appropriate for deciding
whether to acquire the Securities. Such Stockholder further represents that it
has had an opportunity to ask questions and receive answers from Barnabus and
Exchangeco regarding the terms and conditions of the offering of the Securities.
3.7 Investment Experience. Such Stockholder can bear the economic risk
of its investment and has such knowledge and experience in financial or business
matters that it is capable of evaluating the merits and risks of the investment
in the Securities. If other than an individual, such Stockholder also represents
it has not been organized solely for the purpose of acquiring the Securities.
3.8 Risk. Such Stockholder realizes that such Stockholder's acquisition
of the Securities will be a highly speculative investment and that such
Stockholder is able, without impairing such Stockholder's financial condition,
to hold the Securities for an indefinite period of time and to suffer a complete
loss on such Stockholder's investment.
3.9 Accredited Investor.
(a) Except as otherwise set forth on Section 3.9 of the
Shareholder Disclosure Schedule, such Stockholder, if a U.S. Person, is an
"accredited investor" within the definition set forth in Rule 501(a) under the
Securities Act.
(b) If such Stockholder's address given on the Company Secretary's
Certificate, which will be delivered to Barnabus on or prior the Closing (the
"Address Certificate"), is in the United States, such Stockholder represents
that it, he or she is a U.S. Person, that it, he or she resides at that address
and that such Stockholder made its, his or her investment decision at that
address.
(c) Such Stockholder, if a Canadian Stockholder, is not a
non-resident of Canada as defined in the Tax Act.
(d) If such Stockholder's address given on the Address Certificate
is not in the United States, such Stockholder represents that it, he or she is
not a U.S. Person, that it, he or she resides at the address and that such
Stockholder made its, his or her investment decision at that address and
represents that:
16
(i) Such Stockholder is not acquiring the Securities for the
account or benefit of a U.S. Person; and no offer relating to the Securities was
made to such Stockholder in the United States and, at the time of execution by
such Stockholder of this Agreement, such Stockholder will be outside the United
States. For purposes of this Section 3.9, "United States" means the United
States of America, its territories and possessions, any state of the United
States and the District of Columbia.
(ii) Such Stockholder agrees that it, she or he will resell
the Securities in accordance with the Support Agreement or the Exchange Rights
Agreement only in accordance with Regulation S under the Securities Act,
pursuant to an effective registration statement under the Securities Act or
pursuant to an available exemption from the registration requirements of the
Securities Act and as permitted under applicable Canadian Securities Laws; and
further agrees not to engage in hedging transactions with regard to the
Securities unless in compliance with the Securities Act.
(e) Such Stockholder acknowledges that Barnabus and Exchangeco are
relying upon the representations and warranties of such Stockholder.
3.10 Restricted Securities.
(a) Such Stockholder understands that:
(i) The Securities have not been registered under the
Securities Act by reason of their issuance in a transaction either (A) exempt
from the registration requirements of Rule 505 or 506 promulgated under the
Securities Act, or (B) meeting the requirements of Regulation S under the
Securities Act;
(ii) The Securities must be held indefinitely unless a
subsequent disposition thereof (A) is registered or otherwise made in compliance
with the Securities Act and is permitted under applicable Canadian Securities
Laws or (B) is exempt from such registration and permitted under Canadian
Securities Laws, and (except for exchange of Exchangeable Shares) such
Stockholder has notified Barnabus of the proposed disposition and has furnished
Barnabus with a detailed statement of the circumstances surrounding the proposed
disposition and, if reasonably requested by Barnabus, such Stockholder shall
have furnished Barnabus with an opinion of counsel, reasonably satisfactory to
Barnabus, that such disposition will not require registration of such Securities
under the Securities Act or any other applicable securities laws; and (iii)
Barnabus will make a notation on its transfer books to such effect and Barnabus
shall refuse to register any transfer that is not made in accordance with the
terms hereof. Such Stockholder understands that Barnabus Common Shares issued
hereunder and Barnabus Common Shares issuable upon exchange of the Exchangeable
Shares are characterized as "restricted securities" within the meaning of Rule
144 promulgated under the Securities Act and that under such laws and applicable
regulations such securities may be resold without registration under the
Securities Act only in certain limited circumstances. Such Stockholder
understands that the exemption from registration under Rule 144 will not be
available in any event for at least one (1) year from the date of sale of such
Barnabus Common Shares to such Stockholder, and even then will not be available
unless (i) a public trading market then exists for Barnabus Common Shares, (ii)
adequate current public information concerning Barnabus is then available to the
public, (iii) the Stockholder has been the beneficial owner of and has paid the
full purchase price for Barnabus Common Shares at least one (1) year prior to
the sale and (iv) other terms and conditions of Rule 144 are complied with; and
that any sale of Barnabus Common Shares may be made by such Stockholder only in
limited amounts in accordance with such terms and conditions, as amended from
time to time.
(b) Such Stockholder, if a Canadian Stockholder, understands that:
(i) Neither Barnabus nor Exchangeco is a reporting issuer in
any jurisdiction in Canada and that the Securities are being issued in a
transaction exempt from the requirement to file a prospectus under Canadian
Securities Laws; and
(ii) The Securities being issued hereunder must be held
indefinitely unless a subsequent disposition thereof (A) is registered or
otherwise made in compliance with the Securities Act and is permitted under
applicable Canadian Securities Laws or (B) is exempt from such registration
requirement and is permitted under applicable Canadian Securities Laws, and
(except for exchange of Exchangeable Shares) such Stockholder has notified
Exchangeco of the proposed disposition and has furnished Exchangeco with a
detailed statement of the circumstances surrounding the proposed disposition
and, if reasonably requested by Exchangeco, such Stockholder shall have
furnished Exchangeco with an opinion of counsel, reasonably satisfactory to
Exchangeco, that such disposition will not require registration of such shares
under the Securities Act or any other applicable securities laws; and Exchangeco
will make a notation on its transfer books to such effect.
17
3.11 Legends. Such Stockholder understands that, in addition to any
legend setting forth transfer restrictions under Canadian Securities Laws, each
certificate evidencing the Securities issued hereunder shall bear a legend
substantially similar to the following:
(a) If the Stockholder is a U.S. Person:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED, EXCEPT IN COMPLIANCE WITH THE
ACT, IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE
SECURITIES UNDER THE ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT. ANY SUCH TRANSFER MAY ALSO
BE SUBJECT TO APPLICABLE STATE SECURITIES LAWS."
"THE COMPANY IS AUTHORIZED TO ISSUE MORE THAN ONE CLASS OF STOCK.
THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO REQUESTS THE
POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER
SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF AND THE QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS."
18
(b) If the Stockholder is not a U.S. Person:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS.
THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED, EXCEPT IN
COMPLIANCE WITH REGULATION S UNDER THE ACT, IN THE ABSENCE OF A REGISTRATION
STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER THE ACT OR AN OPINION
OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE ACT. ANY SUCH TRANSFER MAY ALSO BE SUBJECT TO APPLICABLE STATE
SECURITIES LAWS. HEDGING TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT BE
CONDUCTED UNLESS IN COMPLIANCE WITH THE ACT."
(c) If the Stockholder holds Exchangeable Shares:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN ISSUED
PURSUANT TO A PROSPECTUS UNDER THE SECURITIES ACT (ONTARIO) (THE "ONTARIO ACT")
OR OTHER PROVINCIAL SECURITIES LAWS.
(d) Whether or not such Stockholder is a U.S. Person, any other
legend required by applicable Law.
3.12 No Finder's Fee. No broker, finder, agent or similar intermediary
has acted on behalf of such Stockholder in connection with this Agreement, any
Related Agreement or the transactions contemplated hereby or thereby, and there
are no brokerage commissions, finders' fees or similar fees or commissions
payable in connection herewith or therewith based on any agreement, arrangement
or understanding with such Stockholder or any action taken by or on behalf of
such Stockholder.
SECTION 4 REPRESENTATIONS AND WARRANTIES OF COMPANY
Except as set forth on the disclosure schedule delivered by the Company to
Barnabus and Exchangeco on the date hereof, as supplemented or modified prior to
the Closing (the "Company Disclosure Schedule"), the section numbers of which
are numbered to correspond to the section numbers of this Agreement to which
they refer (provided that all information disclosed herein as an exception to
any section shall be deemed disclosed under and incorporated into each other
section of this Agreement to the extent that a reasonable person reading the
exception to the first section would be able to reasonably infer from the
information set forth therein that such information reasonably relates to the
disclosures described in the second section), the Company and the Principal
Stockholders hereby, jointly and severally, make the following representations
and warranties to Barnabus and Exchangeco:
4.1 Organization and Qualification; Records.
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the Province of Ontario and has corporate
power and authority to own, lease and operate its assets and to carry on its
business as now being and as heretofore conducted. The Company is qualified to
transact business in the Province of Ontario.
19
(b) The Company has previously provided to Barnabus true and
complete copies of its articles of incorporation and by-laws as presently in
effect, and the Company is not in default in the performance, observation or
fulfillment of any provision of its charter or by-laws. The minute books of the
Company, copies of which have been provided to Barnabus, contain true and
complete records of all meetings and written resolutions in lieu of meetings of
the board of directors (and any committees thereof) and of the stockholders of
the Company since the time of the Company's incorporation and accurately reflect
all transactions referred to in such minutes and written resolutions in lieu of
meetings. The stock record books of the Company, a copy of which the Company
previously has delivered to Barnabus, are true and complete and reflect all
issuances, transfers, repurchases and cancellations of shares of capital stock
of the Company. The books of account, ledgers, order books, records and
documents of the Company accurately reflect all material information relating to
the Company's business, the nature, acquisition, maintenance, location and
collection of its assets and the nature of all transactions giving rise to its
obligations and accounts receivable.
4.2 Authority to Execute and Perform Agreements. The Company has the
corporate power and authority to enter into, execute and deliver this Agreement
and all Related Agreements and to perform fully its obligations hereunder and
thereunder. The execution and delivery of this Agreement and the Related
Agreements and the consummation of the transactions contemplated hereby and
thereby have been duly authorized by the board of directors of the Company. No
other action on the part of the Company is necessary to consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Company and constitutes a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general principles of equity.
4.3 Capitalization.
(a) The Company is authorized to issue an unlimited number of
Company Common Shares of which 11,425,770 Company Common Shares are issued and
outstanding as of the date of this Agreement. All of the issued and outstanding
Company Common Shares are duly authorized, validly issued, fully paid,
non-assessable and free of pre-emptive rights.
(b) Except for the Company Common Shares indicated as issued and
outstanding on the date of this Agreement in Section 4.3(a), there are not as of
the date hereof, and there will not be on the Closing Date, any other common
shares, preferred shares or any other capital shares of the Company issued and
outstanding.
(c) The Company's authorized capital stock consists solely of
Company Common Shares described in Section 4.3(a). Except as disclosed on
Section 4.3 of the Company Disclosure Schedule, there are not as of the date
hereof, and there will not be on the Closing Date, authorized or outstanding any
subscriptions, options, conversion, pre-emptive or exchange rights, warrants,
repurchase or redemption agreements, registration rights agreements or other
agreements, claims or commitments of any nature whatsoever obligating the
Company to issue, transfer, deliver or sell, or cause to be issued, transferred,
delivered, sold, repurchased or redeemed, additional shares of the capital stock
or other securities of the Company or obligating the Company to register any of
the Company's securities under the U.S. securities laws or file a prospectus
under Canadian securities laws or obligating the Company to grant, extend or
enter into any such agreement. Except as disclosed on Section 4.3 of the Company
Disclosure Schedule, there are no stockholder agreements, voting trusts, proxies
or other agreements, instruments or understandings with respect to the voting of
the capital stock of the Company.
20
(d) The Company has no outstanding bonds, debentures, notes or
other Indebtedness that have the right to vote on any matters on which
stockholders may vote.
(e) All of the outstanding securities of the Company were offered,
issued and sold in compliance with all applicable U.S. federal, Canadian, state
and provincial securities laws.
4.4 Company Affiliates, Subsidiaries and Joint Ventures.
(a) The Company has no affiliates.
(b) The Company has no Subsidiaries.
(c) The Company holds no interests in a Joint Venture.
4.5 Financial Statements. The Company has previously delivered to
Barnabus the Company Financial Statements. The Company Financial Statements have
been prepared from, and are in accordance with, the books and records of the
Company and present fairly the financial position and the results of operations
of the Company as of the dates and for the periods indicated, in each case in
accordance with Canadian GAAP (except for the notes), consistently applied
throughout the periods involved except as otherwise stated therein. Section 4.5
of the Company Disclosure Schedule correctly identifies all outstanding
Indebtedness of the Company as of the date hereof and will reflect all
outstanding Indebtedness of the Company as of the Closing Date.
4.6 Absence of Undisclosed Liabilities. Except as disclosed on Section
4.6 of the Company Disclosure Schedule, the Company has no liabilities of any
nature, whether accrued, absolute, contingent or otherwise (including without
limitation, liabilities as guarantor or otherwise with respect to obligations of
others or liabilities for taxes due or then accrued or to become due), required
to be reflected or disclosed in the Company Financial Statements that were not
adequately reflected or reserved against on such Company Financial Statements.
The Company has no liabilities of any nature in an amount greater than CDN
$10,000, whether accrued, absolute, contingent or otherwise, other than
liabilities (i) adequately reflected or reserved against on such Company
Financial Statements, (ii) included in Section 4.6 of the Company Disclosure
Schedule or (iii) incurred since September 30, 2005 in the ordinary course of
business consistent with past practice that would not, individually or in the
aggregate, have a Company Material Adverse Effect.
4.7 Absence of Adverse Changes. Since September 30, 2005, except as
disclosed in Section 4.7 of the Company Disclosure Schedule, there has not been:
(a) any Company Material Adverse Effect;
21
(b) any redemption or other acquisition of any capital stock of
the Company or any declaration, setting aside, or payment of any dividend or
distribution of any kind with respect to any shares of capital stock of the
Company;
(c) any entering into or granting by the Company of any new
employment agreement, any new employee benefit, deferred compensation or other
similar employee benefit arrangement, or any new consulting arrangement and any
grant of any severance or termination rights to any director, officer or
employee of the Company or any increase in benefits payable under existing
severance or termination pay policies or employment agreements;
(d) any making by the Company of any loan or advance to any
Stockholder, officer, director or consultant (other than expense advances made
in the ordinary course of business consistent with past practice), or any other
loan or advance otherwise than in the ordinary course of business consistent
with past practice;
(e) any waiver of any valuable right under contract or Law;
(f) any issuance of any stock, bond or other corporate security;
(g) any incurrence of Indebtedness;
(h) any incurrence of mortgage, pledge, encumbrance or Lien on any
of its assets, tangible or intangible;
(i) any amending of the articles of incorporation or the by-laws
of the Company;
(j) any discharge or satisfaction of any encumbrance or liability
other than those then required to be discharged or satisfied, or any payment of
obligation or liability, absolute, accrued, contingent or otherwise, whether due
or to become due, other than capitalized leases, current liabilities shown on
the Company Financial Statements and current liabilities incurred since the date
thereof in the ordinary course of business consistent with past practice;
(k) any acquisition or disposition of any assets (or any contract
or arrangement therefor) in excess of CDN $10,000 or any other material
transaction by the Company or otherwise than for fair value in the ordinary
course of business consistent with past practice;
(l) any failure to pay accounts payable or other liability
exceeding CDN $10,000 in any single instance, when such account payable or
liability became due and payable; or
(m) any transaction, contract or commitment other than in the
ordinary course of business consistent with past practice.
4.8 Compliance with Laws.
(a) Except as set forth on Section 4.8 of the Company Disclosure
Schedule, on the date hereof, after giving effect to the transactions
contemplated by this Agreement and the Related Agreements, the Company and its
employees have and will have all licenses, permits, franchises, orders or
approvals of any Governmental Entity which are material to the conduct of its
business (collectively, "Permits"); such Permits are and shall be in full force
and effect; and no proceeding is or will be pending or, to the best knowledge of
the Company, threatened to revoke or limit any Permit. Each jurisdiction in
which the Company and/or its employees have obtained such Permits, and the names
of the owners of such Permits, the types of Permits, and dates of expiration of
such Permits are listed in Section 4.8(a) of the Company Disclosure Schedule.
22
(b) The Company is not in violation of and has no liabilities,
whether accrued, absolute, contingent or otherwise, under any Law of any
Governmental Entity, and the operations of the Company have been and are now
conducted in compliance with all applicable Laws of each jurisdiction in which
the Company carries on or has carried on business, including all federal,
provincial, state, municipal or other laws governing the collection, use,
disclosure and storage of information relating to identifiable individuals,
including the Personal Information Protection and Electronic Documents Act
(Canada), except for violations of or liabilities under any of the foregoing
which could not, in the aggregate, reasonably be expected to have a Company
Material Adverse Effect. During the last three years, the Company has not
received notice of, and there has not been any citation, fine, or penalty
imposed against the Company for, any such violation or alleged violation.
(c) Neither the Company nor, to the best knowledge of the Company,
any director, officer, agent, employee or other Person acting on behalf of the
Company, has used any corporate or other funds for unlawful contributions,
payments, gifts, or entertainment, or made any unlawful expenditures relating to
political activity to government officials or others, or established or
maintained any unlawful or unrecorded funds in violation of any domestic or
foreign law. Neither the Company nor, to the best knowledge of the Company, any
director, officer, agent, employee or other Person acting on behalf of the
Company, has accepted or received any unlawful contributions, payments, gifts or
expenditures.
4.9 Actions and Proceedings. Section 4.9 of the Company Disclosure
Schedule sets forth a list and description of all actions, suits, investigations
or claims or legal, administrative or arbitration proceedings to which the
Company has been a party since the date of its incorporation. There are no
outstanding Orders of any Governmental Entity against the Company or any of its
assets or properties, or, to the best of its knowledge, against any of its
directors, officers, employees or securities. There are no actions, suits,
investigations or claims or legal, administrative or arbitration proceedings
pending or, to the best knowledge of the Company, threatened against the Company
or any of its securities, assets or properties. To the best knowledge of the
Company, there is no fact, event or circumstance now in existence that
reasonably could be expected to give rise to any action, suit, claim, proceeding
or investigation that, individually or in the aggregate, could be reasonably
expected to have a Company Material Adverse Effect or interfere with the
Company's ability to consummate the transactions contemplated hereby or to
conduct the business of the Company in substantially the same manner in which
the Company has conducted its business prior to the Closing Date. The foregoing
includes, without limitation, actions pending or, to the best knowledge of the
Company, threatened, involving the prior employment of any of the Company's
employees, their use in connection with the Company's business of any
information, know-how, creations, techniques or intellectual property allegedly
proprietary to any of their former employers or other Persons, or their
obligations under any agreements with prior employers or other Persons. Except
as disclosed on Section 4.9 of the Company Disclosure Schedule, the Company has
not been a party to any individual action, suit, investigation or claim or
legal, administrative or arbitration proceeding in which the Company has
settled, received a judgment or otherwise incurred liability in an individual
amount in excess of CDN $25,000. There is no action, suit or proceeding by the
Company currently pending or which the Company presently intends to initiate.
23
4.10 Contracts and Other Agreements.
(a) Section 4.10 of the Company Disclosure Schedule sets forth a
list of the following contracts and other agreements to which the Company is a
party or by which it or its assets or properties are bound or subject:
(i) any agreement or series or related agreements that
requires aggregate expenditures by the Company in any one year of more than CDN
$10,000;
(ii) any agreement with or for the benefit of any current or
former officer, director, Stockholder, employee or consultant of the Company;
(iii) any agreement with any labor union or association
representing any employee of the Company;
(iv) any indenture, trust agreement, loan agreement or note
that involves or evidences outstanding Indebtedness, obligations or liabilities
for borrowed money;
(v) any agreement of surety, guarantee or indemnification;
(vi) any agreement that limits or restricts the Company or
any of its affiliates or successors in competing or engaging in any line of
business, in any geographic area or with any Person;
(vii) any agreement granting to the Company the right to use,
or restricting the right of the Company to use any Company Proprietary Right;
(viii) an assignment or license of any Company Proprietary
Right;
(ix) any agreement with any customer, supplier or other party
for the sharing of fees, the rebating or discounting of charges, the provision
of free or underpriced services or other similar arrangements;
(x) any interest rate, equity or other swap or derivative
instrument;
(xi) any agreement for the sale of any of the assets or
properties of the Company other than in the ordinary course of business
consistent with past practice or for the grant to any Person of any options,
rights of first refusal, or preferential or similar rights to purchase any of
such assets or properties;
24
(xii) any agreement in which the Company is the purchaser of
goods or services that could result in the Company or an assignee of the Company
incurring a liability, premium or penalty upon cancellation (whether or not such
liability, premium or penalty can be avoided by notice or other action);
(xiii) any agreement requiring the payment to any Person of a
commission or fee other than in the ordinary course of business consistent with
past practice;
(xiv) any agreement with any customer, supplier or other party
that involves, in the aggregate, more than CDN $10,000 in any one year;
(xv) any lease, sublease or other agreement under which the
Company is lessor or lessee of any real property; or
(xvi) any other material agreement, contract or arrangement to
which the Company is a party.
True and complete copies of all the contracts set forth on the Company
Disclosure Schedule have been furnished to Barnabus. All such contracts and
other agreements are valid, subsisting, in full force and effect, binding upon
the Company, and, to the best knowledge of the Company, binding upon the other
parties thereto in accordance with their terms, and, except as disclosed in
Section 4.10(a) of the Company Disclosure Schedule, the Company has paid in full
or accrued all amounts now due from it thereunder, and has satisfied in full all
of its liabilities and obligations thereunder that are presently required to be
satisfied and is not in default under any of them, nor, to the best knowledge of
the Company, is any other party to any such contract or other agreement in
default thereunder, nor does any condition exist that with notice or lapse of
time or both would constitute a default thereunder. Such contracts are not
automatically void or terminable by the other party as a result of the entrance
by the Company into this Agreement or the consummation of the transactions
contemplated hereby or by the Related Agreements.
(b) Except as otherwise disclosed on Section 4.10(b) of the
Company Disclosure Schedule, no stockholder, officer, director or Key Employee
of the Company nor any "affiliate" or "associate" of such Persons (herein, a
"Related Party") is a party to any material agreement with the Company,
including, without limitation, any contract, agreement or other arrangement
providing for the rental of real or personal property from, or otherwise
requiring payments to, any Related Party. Except as disclosed in Section 4.10(b)
of the Company Disclosure Schedule, no employee of the Company or any Related
Party is indebted to the Company and the Company is not indebted to any of its
employees or any Related Party.
4.11 Title to Properties; Absence of Liens and Encumbrances.
(a) The Company does not own, and has never owned, any real
property or any buildings or other structures nor has options or any contractual
obligations to purchase or acquire any interest in real property. Section
4.11(a) of the Company Disclosure Schedule lists all real property leases to
which the Company is a party and each amendment thereto. All such current leases
are in full force and effect, are valid and effective in accordance with their
respective terms, and there is not, under any of such leases, any existing
default or event of default (or event that with notice or lapse of time, or
both, would constitute a default) that could reasonably be expected to have a
Company Material Adverse Effect.
25
(b) The Company is the sole legal and beneficial owner of and has
good and valid title to, or, in the case of leased properties and assets, valid
leasehold interests in, all of its tangible properties and assets, real,
personal and mixed, used or held for use in its business, and such properties
and assets, as well as all other properties and assets of the Company, whether
tangible or intangible, are free and clear of any Liens, except as reflected in
the Company Financial Statements or in Section 4.11(b) of the Company Disclosure
Schedule and except for Liens for taxes not yet due and payable and such
imperfections of title and encumbrances, if any, that are not material in
character, amount or extent, and do not materially detract from the value, or
materially interfere with the present use, of the property subject thereto or
affected thereby, and that have arisen in the ordinary course of business and
shall be removed within a reasonable period. Such properties and assets, and
interests in properties and assets, comprise all properties, assets and
interests necessary or useful to operate the Company's business in the same
manner as it has been operated by the Company in the past. All machinery,
furniture and equipment which is necessary to the business of the Company is in
good condition and repair except for ordinary and reasonable wear and tear, and
all leases of real or personal property to which the Company is a party are
fully effective and, to the best knowledge of the Company, afford the Company
peaceful and undisturbed possession of the subject matter of the lease subject
to the terms of such lease. The Company is not in violation of any zoning,
planning, building or safety ordinance, regulation or requirement or other Law
applicable to the operation of owned or leased properties, except for violations
of or liabilities under any of the foregoing which could not, in the aggregate,
reasonably be expected to have a Company Material Adverse Effect, and the
Company has not received any notice of any such violation.
4.12 Intellectual Property. Section 4.12 of the Company Disclosure
Schedule contains an accurate and complete list of all U.S., Canadian and
foreign:
(a) issued patents, pending patent applications (whether
provisional or regular), approved patents, and invention disclosures awaiting
filing if such filing is reasonably anticipated at the date hereof;
(b) registered trademarks and service marks, pending trademark and
service xxxx applications and unregistered trademarks and service marks;
(c) registered copyrights and pending copyright applications, and
(d) domain names, Universal Resource Locators and sites maintained
on the World Wide Web,
that constitute all of the Company Proprietary Rights (as defined below) owned
or used by or licensed to the Company for which intellectual property protection
has been, or is in the course of being, applied for or registered (other than in
respect of unregistered trademarks), together with the name of the owner of each
thereof, and the country and the serial number, if applicable.
26
Other than as set out in the Section 4.12 of the Company Disclosure Schedule:
(e) The Company owns all right, title and interest in and to the
Company Proprietary Rights listed in the Company Disclosure Schedule and owns or
is licensed to use, or otherwise has the full right to use, all other Company
Proprietary Rights. The Company Proprietary Rights not owned by the Company are
not material to the operation of the business of the Company and/or in the
development of its products, or if material, can be easily replaced on
commercially reasonable terms. The Company has all of the rights required for
the use of the Company Proprietary Rights as such Company Proprietary Rights are
used in the conduct of its business. The conduct of the Company's business, as
presently conducted and as presently proposed to be conducted as set forth in
the Business Plan, does not require the use of the Intellectual Property rights
of any other Person that are not available in the ordinary course of business on
commercially reasonable terms. The Company Proprietary Rights do not contain,
embody or use or require for its full and proper operation, any Intellectual
Property owned by another person. The Company Proprietary Rights are free and
clear of any Liens and free from any legal or contractual obligations to make
any past, present or future payments, charges or fees or conditions, rights or
restrictions.
(f) To the best knowledge of the Company, no Company Proprietary
Right infringes upon any Intellectual Property rights owned or held by any other
Person.
(g) The rights of the Company in and to all Company Proprietary
Rights are valid and enforceable and are not subject to any Taxes, maintenance
fees or actions falling due within ninety (90) days.
(h) No Company Proprietary Right is subject to any outstanding
lien, judgment, ruling, order, writ, decree, stipulation, injunction or
determination by or with any governmental authority, nor is there (or has there
been) pending or, to the best knowledge of the Company, threatened, any action,
suit, proceeding, appeal, claim, arbitration, mediation, alternative dispute
resolution procedure, inquiry or investigation relating to any Company
Proprietary Right (including any interference, reissue, reexamination or
opposition proceeding or proceeding contesting the rights of the Company to any
Company Proprietary Right or the ownership, use, enforceability or validity of
any Company Proprietary Right).
(i) To the best knowledge of the Company, there is no
infringement, misappropriation or unauthorized use of any Company Proprietary
Right by any party or Person.
(j) No rights or licenses (or options to acquire such rights or
licenses) to any Company Proprietary Right have been granted by the Company to
any Person.
(k) The Company has not covenanted or agreed with any Person not
to xxx or otherwise enforce any legal rights with respect to any Company
Proprietary Right.
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(l) All Company Proprietary Rights owned by the Company were
developed entirely by employees of the Company during the time they were
employees of the Company and within the scope of his or her employment such
that, in accordance with applicable Law, all Company Proprietary Rights arising
therefrom became the exclusive property of the Company or by consultants of the
Company pursuant to written agreements assigning all Company Proprietary Rights
arising therefrom to the Company. No Company Proprietary Right was developed by
any employee prior to the commencement of such persons' employment or engagement
with the Company. Each employee of the Company who commenced work prior to
assigning all of his or her right, title and interest in and to the Company
Proprietary Rights has subsequently duly and irrevocably assigned to the Company
all of his or her right, title and interest in and to the Company Proprietary
Rights (the "Prior Work") and has waived all of his or her rights, including any
moral rights where applicable, to such Prior Work. To the knowledge of the
Company after due inquiry, each such employee had no obligations to, or
contractual arrangements with, any Person at the time of the creation of the
Prior Work which might in any manner conflict with, or call into question, the
Company's sole ownership of the Prior Work or the Company Proprietary Rights.
(m) The Company has complied in all material respects with the
intellectual property laws of each jurisdiction in which any of the Company
Proprietary Rights is in use (including payment of filing, examination, and
maintenance fees and proofs of working or use).
(n) The Company has not sold, assigned, exclusively licensed or
otherwise transferred any Company Proprietary Rights developed or acquired by
the Company.
(o) No Company Proprietary Right has been abandoned or has expired
for non-payment of maintenance fees or failure to respond to administrative
deadlines.
(p) The Company has taken commercially reasonable steps (including
measures to protect secrecy and confidentiality) to protect the Company's right,
title and interest in and to all Company Proprietary Rights. All employees,
agents, consultants and other representatives of the Company who have access to
confidential or proprietary information of the Company have a legal obligation
of confidentiality to the Company with respect to such information.
(q) The Company is not aware of any basis for any claim by any
third party that the business of the Company infringes upon the Intellectual
Property of others, nor has the Company received any notice or claim of
infringement from any third party.
(r) The Company has the unencumbered right to sell its products
and services free from any royalty or other obligations to third parties.
28
(s) To the best knowledge of the Company, none of the activities
of the employees of the Company on behalf of the Company violates any agreement
or arrangement that any such employees have with former employers.
(t) To the best knowledge of the Company, none of its officers,
consultants or technical employees knows of any prior art that is material to
any of its Company Proprietary Rights that has not been disclosed in a timely
manner to the United States or Canadian patent office.
(u) To the best knowledge of the Company, there has been no public
disclosure, sale or offer for sale of any invention forming a part of the
Company Proprietary Rights, directly or indirectly derived from the inventor(s)
(such as a non-confidential publication or presentation by an inventor,
employee, officer, director or other representative of the Company) that may
affect the Company's ability to obtain or sustain valid patent rights to such
invention. Without limiting the foregoing, the Company is not aware of any
public disclosure, sale or offer for sale dated prior to a date of filing (past
or future) of a first-ever application for patent for such invention in the case
where the Company Proprietary Rights include a patent application (in
preparation or filed) or patent for such invention in or for a country other
than Canada and the United States. Further without limiting the foregoing, the
Company is not aware of any public disclosure, sale or offer for sale dated more
than one year prior to a date of filing (past or future) of a first application
for patent for any invention in or for Canada and more than one year prior to a
date of filing of a first application for patent for the invention in or for the
United States.
(v) To the best knowledge of the Company, there is no publication,
such as a patent, published or laid-open patent application, journal article,
catalogue, promotion, or specification, of another Person that may prevent the
Company from obtaining or sustaining valid patent rights to any of the Company
Proprietary Rights. (w) The Company has not obtained and is not aware of any
professional opinion, such as the opinion of a patent agent or patent attorney,
whether preliminary in nature or in any other manner qualified, relating to the
ability of the Company to obtain or sustain valid patent rights to any
invention.
(x) The consummation of the transactions contemplated hereby will
not result in the alteration, loss, impairment of or restriction on the
Company's ownership or right to use any of the Intellectual Property which is
necessary for the conduct of the Company's business as currently conducted.
For the purposes of this Section 4.12, the following term shall have the
following meaning:
"Company Proprietary Rights" means all Intellectual Property that is comprised
in the Company's products, and all material Intellectual Property that the
Company requires for the conduct of its business as it is currently conducted
and as it is presently proposed to be conducted as set forth in the Business
Plan.
29
4.13 Insurance. Section 4.13 of the Company Disclosure Schedule sets
forth a true and complete list of all policies or binders of fire, general
liability, product liability, errors and omissions, worker's compensation,
vehicular, directors' and officers', key person life and other insurance held by
or on behalf of the Company. Such policies and binders are in full force and
effect, are reasonably believed to be adequate for the businesses engaged in by
the Company and are in conformity with the requirements of all leases or other
agreements to which the Company is a party and, to the best knowledge of the
Company, are valid and enforceable in accordance with their terms. The Company
is not in default with respect to any provision contained in such policy or
binder nor has the Company failed to give any notice or present any claim under
any such policy or binder in due and timely fashion. There are no outstanding
unpaid claims under any such policy or binder. The Company has not received
notice of cancellation or non-renewal of any such policy or binder.
4.14 Supplier and Other Relationships. The Company's relationships with
its suppliers, distributors, licensors and licensees are generally good
commercial working relationships. No such entity has canceled or otherwise
terminated its relationship with the Company or has, during the last twelve
months, materially altered its relationship with the Company. The Company does
not know of any plan or intention of any such entity, and has not received any
written threat or notice from any such entity, to terminate, cancel or otherwise
materially modify its relationship with the Company.
4.15 Accounts and Notes Receivable. Subject to any reserve set forth on
the Company Financial Statements for doubtful accounts, all accounts and notes
receivable reflected on the Company Financial Statements and all accounts and
notes receivable arising subsequent to September 30 2005, have arisen in the
ordinary course of business of the Company, represent valid and enforceable
obligations due to the Company, have been and are subject to no set-off or
counter-claim that has been asserted or to the best knowledge of the Company,
threatened, and have been collected or, to the best knowledge of the Company,
are fully collectible in the ordinary course of business consistent with past
practice in the aggregate recorded amounts thereof in accordance with their
terms.
4.16 Inventory. All inventory of the Company required by Canadian GAAP to
be reflected or disclosed in the Company Financial Statements is so reflected or
disclosed, and all such inventory is and will be in good and merchantable
condition and will be suitable and saleable or usable in the manufactured
saleable finished goods in ordinary course of business consistent with past
practice.
4.17 Tax Matters.
(a) All Tax Returns required to be filed on or before the date
hereof by or with respect to the Company have been filed within the time and in
the manner prescribed by Law. All such Tax Returns are true, correct and
complete in all material respects, and all Taxes owed by the Company, whether or
not shown on any Tax Return, have been paid when due. The Company files Tax
Returns in all jurisdictions where it is required to so file, and, except as set
forth in Section 4.17 of the Company Disclosure Schedule, no claim has ever been
made by any taxing authority in any other jurisdiction that the Company is or
may be subject to taxation by that jurisdiction. The Company is not currently
the beneficiary of any extension of time within which to file any Tax Return.
30
(b) There are no Liens or other encumbrances with respect to Taxes
upon any of the assets or properties of the Company, other than with respect to
Taxes not yet due and payable.
(c) No director or officer (or employee responsible for Tax
matters) of the Company expects any authority to assess any additional Taxes for
any period for which Tax Returns have been filed. No U.S. federal, Canadian,
state, provincial or local Tax audit or administrative or judicial Tax
proceedings are currently pending or being conducted with respect to the
Company, nor is the Company aware of any information that an audit by any tax
authority may be forthcoming. No deficiency for any Taxes has been proposed in
writing against the Company, which deficiency has not been paid in full. No
issue relating to the Company or involving any Tax for which the Company might
be liable has been resolved in favor of any taxing authority in any audit or
examination which, by application of the same principles, could reasonably be
expected to result in a deficiency for Taxes of the Company for any subsequent
period, and the Company knows of no other basis for the assertion of such a
deficiency.
(d) Section 4.17 of the Company Disclosure Schedule lists all U.S.
federal, Canadian, state, provincial local, and foreign income Tax Returns filed
with respect to the Company for taxable periods commencing on or after the date
of incorporation of the Company, and indicates if any of those Tax Returns (if
any) that have been audited, and indicates those Tax Returns (if any) that
currently are the subject of audit. There are no outstanding agreements, waivers
or arrangements extending the statutory period of limitation applicable to any
claim for, or the period for the collection or assessment of, Taxes due from or
with respect to the Company for any taxable period. No power of attorney granted
by or with respect to the Company relating to Taxes is currently in force, and
no extension of time for filing any Tax Return required to be filed by or on
behalf of the Company is in force. The Company has delivered to Barnabus
complete and correct copies of all income Tax Returns, audit reports and
statements of deficiencies filed by or issued to or with respect to the Company
(or, insofar as such items relate to the Company, by or to any Affiliated Group
of which the Company was then a member).
(e) With respect to any period for which Tax Returns have not yet
been filed, or for which Taxes are not yet due or owing, the Company has, in
accordance with Canadian GAAP, made due and sufficient accruals for such Taxes
in the Company's books and records.
(f) The Company has not been and is not currently in violation
(or, with or without notice or lapse of time or both, would be in violation) of
any applicable Law or regulation relating to the payment or withholding of
Taxes, and all withholding and payroll Tax requirements required to be complied
with by the Company up to and including the date hereof have been satisfied.
(g) The Company is not and has not been a member of an Affiliated
Group filing a consolidated income Tax Return. The Company has no liability for
the Taxes of any other Person, as a transferee or successor, by contract, or
otherwise. The Company is not and has never been a party to or bound by, nor
does it have or has it ever had any obligation under, any Tax sharing agreement
or similar contract or arrangement.
31
(h) The Corporation is registered for purposes of the Excise Tax
Act (Canada). The Corporation has complied on a timely basis with all
registration, reporting, collection, remittance and other requirements in
respect of all applicable sales and value-added Tax Laws, including the Excise
Tax Act (Canada).
(i) The Corporation has been, since its incorporation, a
Canadian-controlled private corporation as defined for purposes of the Tax Act.
4.18 Employee Benefit Plans.
(a) Section 4.18 of the Company Disclosure Schedule sets forth a
summary of each of the Plans.
(b) The Company has delivered or made available to the Buyer
current, accurate and complete copies of each Plan and copies of forms and
notices used for each Plan that is a group health plan.
(c) Each Plan has been administered in all material respects in
accordance with the terms of such Plan and the provisions of any and all
statutes, Orders or governmental rules or regulations, and to the best knowledge
of the Company, nothing has been done or not done with respect to any Plan that
could result in any liability on the part of the Company. All reports, forms and
notices required to be filed with respect to each Plan have been timely filed.
All contributions, premiums and other amounts due to or in connection with each
Plan under the terms of the Plan or applicable Law have been timely made, and
provision has been made on the Company Financial Statements for such
contributions, premiums and other amounts that were not due as of September 30,
2005 but were attributable to service before such date.
(d) Except for continuation of health coverage to the extent
required under any applicable Law or as otherwise set forth in this Agreement,
there are no obligations under any Plan providing benefits after termination of
employment.
(e) Except as set forth on Section 4.18 of the Company Disclosure
Schedule, the Company has not contracted with any "leased employee" or any
"independent contractor".
(f) Except for individual employment agreements, each Plan can be
amended, modified or terminated without advance notice to or consent by any
employee, former employee or beneficiary, except as required by Law.
(g) Schedule II sets forth a true, correct and complete list of
all Persons entitled to Employee Transaction Payments, and an itemized listing
and description of all amounts due to such Persons.
32
4.19 Employee Relations.
(a) Section 4.19 of the Company Disclosure Schedule sets forth a
complete list of employees of the Company, together with each employee's
respective status (whether part or full time), annual salary and bonus for
calendar years 2004 and 2005, and benefits (other than pursuant to one of the
Plans identified in Section 4.18). The Company is not delinquent in payments to
any of its employees or consultants for any wages, salaries, commissions,
bonuses or other direct compensation for any services performed by them or
amounts required to be reimbursed to such employees or consultants. Except as
described in Section 4.19 of the Company Disclosure Schedule, upon termination
of the employment of any employees, neither the Company, Exchangeco nor Barnabus
shall be liable, by reason of the Stock Purchase or anything done prior to the
Closing Date, to any of such employees for severance pay or any other payments
(other than accrued salary, vacation or sick pay in accordance with normal
policies). True and complete information as to all current directors and
executive officers of the Company including name, current job title and
compensation for each of the last three years has been made available previously
to Barnabus.
(b) The Company (i) is in compliance in all material respects with
all applicable Laws respecting employment, employment practices, terms and
conditions of employment and wages and hours, in each case, with respect to
employees, (ii) has withheld all amounts required by Law or by agreement to be
withheld from the wages, salaries and other payments to employees, (iii) is not
liable for any arrears of wages, salaries, commissions, bonuses or other direct
compensation for any services performed or amounts required to be reimbursed to
any employees or consultants or any taxes or any penalty for failure to comply
with any of the foregoing, and (iv) is not liable for any payment to any trust
or other fund or to any Governmental Entity, with respect to unemployment
compensation benefits, social security or other benefits or obligations for
employees (other than routine payments to be made in the ordinary course of
business and consistent with past practice).
(c) No work stoppage or labor strike against the Company is
pending or threatened. The Company is not involved in and, to the best knowledge
of the Company, threatened with, any labor dispute, grievance, or litigation
relating to labor, safety or discrimination matters involving any employee or
any former employee, including without limitation charges of unfair labor
practices or discrimination complaints, that, if adversely determined, could
reasonably be expected to result in material liability to the Company. The
Company has not engaged in any unfair labor practices that, directly or
indirectly, could reasonably be expected to result in material liability to the
Company. The Company is not presently, and has not been in the past, a party to
or bound by any collective bargaining agreement or union contract with respect
to employees and no collective bargaining agreement is being negotiated by the
Company. No union organizing campaign or activity with respect to non-union
employees of the Company is ongoing, pending or, to the best knowledge of the
Company, threatened.
(d) No employee or officer of the Company has given notice to the
Company, nor is the Company otherwise aware, that any employee or officer
intends to terminate his or her employment with the Company.
33
(e) To the best knowledge of the Company: (a) no employee of the
Company is in violation of any term of any employment contract, patent or other
proprietary information disclosure agreement or any other contract or agreement
relating to the right of any such employee to be employed by the Company because
of the nature of the business presently conducted by the Company or presently
proposed to be conducted by the Company as set forth in the Business Plan or any
other reason, and the continued employment by the Company of its respective
present employees will not result in any such violation
(f) Except as described on Section 4.19 of the Company Disclosure
Schedule, the Company is not a party to any agreement with any of its respective
officers or employees with respect to such Person's employment. The Company has
listed on Section 4.19 of the Company Disclosure Schedule all agreements of
which it is aware after reasonable investigation to which any of its employees
are party with respect to non-competition or assignments of proprietary rights
to or non-use of proprietary information of third parties. Except as set forth
in Section 4.19 of the Disclosure Schedule, all current and former employees,
consultants, advisors and directors of the Company have entered into appropriate
non-disclosure, confidentiality and non-competition agreements with the Company
in the forms previously provided to counsel for Barnabus.
4.20 Environmental Matters.
(a) The Company has not violated, and is not in violation of, and
has not been notified that it is in violation of, Environmental Law, and except
in full compliance with Environmental Laws, has not generated, used, handled,
transported or stored any Hazardous Materials or shipped any Hazardous Materials
for treatment, storage or disposal at any other site or facility. There has been
no generation, use, handling, storage or disposal of any Hazardous Materials in
violation of any Environmental Law at any site owned or operated by, or premises
leased by, the Company during the period of the Company's ownership, operation
or lease or, to the best knowledge of the Company, prior thereto, nor has there
been or is there threatened any release of any Environmental Contaminants into,
on, at or from any such site or premises, including without limitation into the
ambient air, groundwater, surface water, soils or subsurface strata, during such
period or, to the best knowledge of the Company, prior thereto in violation of
any Environmental Law or that created or will create an obligation to report or
respond in any way to such release. There is no underground storage tank or
other container at any site owned or operated by, or premises leased by the
Company or, to the best knowledge of the Company, on any site formerly owned or
operated by, or premises formerly leased by, the Company.
(b) The Company has not received notification in any form that, '
and the Company has no knowledge that, any site currently or formerly owned or
operated by, or premises currently or formerly leased by, the Company is the
subject of any U.S., Canadian, provincial or local or foreign civil, criminal or
administrative investigation evaluating whether, or alleging that, any action is
necessary to respond to a release or a threatened release of any Environmental
Contaminant. No such site or premises is listed, or to the best knowledge of the
Company, proposed for listing, on any governmental lists for Environmental
Contamination remediation. The Company has not received written notification of,
and the Company has no knowledge of, any potential responsibility of the Company
pursuant to the provisions of (i) any U.S., Canadian, state, provincial, local,
foreign or other Environmental Law, or (ii) any order issued pursuant to the
provisions of any such Environmental Law with respect to Environmental
Contaminants used, manufactured, generated, stored, or treated at, transported
from, or disposed of on, any site currently or formerly owned or operated by, or
premises currently or formerly leased by, the Company.
34
(c) The Company has obtained all Permits required by Environmental
Law necessary to enable it to conduct its business and is in compliance in all
material respects with the Permits.
(d) There is no environmental or health and safety matter that
reasonably could be expected to have a Company Material Adverse Effect. The
Company does not have any environmental audits or risk assessments, site
assessments, documentation regarding off-site disposal of Hazardous Materials or
release of Environmental Contaminant, spill control plans and all other material
correspondence, documents or communications with any Governmental Entity or
other entity regarding the foregoing.
4.21 No Breach. The execution, delivery and performance of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby will not (i) violate any provision of the articles of
incorporation or the by-laws of the Company, (ii) violate, conflict with or
result in the breach of any of the terms or conditions of, require any party's
approval under, result in modification of, or otherwise give any other
contracting party the right to terminate, accelerate obligations under or
receive payment under or constitute (or with notice or lapse of time or both
constitute) a default under, any instrument, contract or other agreement to
which the Company is a party or to which it or any of its assets or properties
is bound or subject, (iii) violate any Law or Order of any Governmental Entity
applicable to the Company or by which any of its assets or properties is bound,
(iv) violate any Permit, (v) require any filing with, notice to, or permit,
consent or approval of, any Governmental Entity, (vi) result in the creation of
any Lien or other encumbrance on the assets or properties of the Company, or
(vii) cause any of the assets owned by the Company to be reassessed or revalued
by any taxing authority or other Governmental Entity. Except as set forth in
Section 4.21 of the Company Disclosure Schedule, the Company is not and will not
be required to give any notice to or obtain any consent or waiver from any
individual or entity in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby in order
to avoid a modification or termination of, or a payment or default under, a
contract or agreement with a third party.
4.22 Bank Accounts and Powers of Attorney. Section 4.22 of the Company
Disclosure Schedule identifies all bank accounts used in connection with the
operations of the Company whether or not such accounts are held in the name of
the Company, lists the respective signatories therefor and lists the names of
all Persons holding a power of attorney from the Company and a summary statement
of the terms thereof. Except as disclosed in Section 4.22 of the Company
Disclosure Schedule, the Company has not granted powers of attorney to any
Person or entity.
4.23 Full Disclosure. The representations and warranties of the Company
contained in this Agreement and the Related Agreements do not contain any untrue
statement of a material fact, and, when taken together, do not omit to state any
material fact necessary to make such representations, warranties and statements,
in light of the circumstances under which they are made, not misleading. There
is no fact known to the Company that has not been disclosed to Barnabus in this
Agreement, the Related Agreements and the schedules hereto that is reasonably
likely to have a Company Material Adverse Effect.
35
4.24 No Finder's Fee. No broker, finder, agent or similar intermediary
has acted on behalf of the Company in connection with this Agreement or the
transactions contemplated hereby, and there are no brokerage commissions,
finders' fees or similar fees or commissions payable in connection herewith
based on any agreement, arrangement or understanding with the Company, or any
action taken by or on behalf of the Company.
4.25 No Change in Business. On the Closing Date, after giving effect to
the transactions contemplated by this Agreement, Barnabus and the Company shall
have all rights that would permit them to conduct the business of the Company in
substantially the same manner in which the Company has conducted its business
prior to the Closing Date.
4.26 Exempt Take-over Bid. The Company is not a reporting issuer in any
jurisdiction of Canada, there is not a published market in respect of the
Company Common Shares and the number of Stockholders is not more than 50.
SECTION 5 REPRESENTATIONS AND WARRANTIES OF BARNABUS
Except as set forth on the disclosure schedule delivered by Barnabus to
the Company and the Principal Stockholders on the date hereof, as supplemented
or modified prior to the Closing ("Barnabus Disclosure Schedule"), the section
numbers of which are numbered to correspond to the section numbers of this
Agreement to which they refer (provided that all information disclosed herein as
an exception to any section shall be deemed disclosed under and incorporated
into each other section of this Agreement to the extent that a reasonable person
reading the exception to the first section would be able to reasonably infer
from the information set forth therein that such information reasonably relates
to the disclosures described in the second section), Barnabus hereby makes the
following representations and warranties to the Company and the Stockholders:
5.1 Organization and Qualification.
(a) Barnabus is a corporation duly organized validly existing and
in good standing under the laws of the State of Nevada and has the corporate
power and authority to own, lease and operate its assets and to carry on its
business as now being and as heretofore conducted. Barnabus is duly qualified to
do business as a foreign corporation in California.
(b) Barnabus has delivered to the Company copies of the articles
of incorporation and the bylaws of Barnabus, as currently in effect and as they
will be in effect at the Closing.
5.2 Authority to Execute and Perform Agreement. Barnabus has the
corporate power and authority to enter into, execute and deliver this Agreement
and the Related Agreements, to perform fully its obligations hereunder and
thereunder and to issue, sell and deliver Barnabus Common Shares being issued
hereunder and to issue and deliver Barnabus Common Shares issuable upon the
exchange of Exchangeable Shares. The execution and delivery of this Agreement
and the Related Agreements and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action
on the part of Barnabus. This Agreement has been duly executed and delivered by
Barnabus and constitutes a valid and binding obligation of Barnabus, enforceable
against Barnabus in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
principles of equity.
36
5.3 No Breach.
(a) The execution, delivery and performance of this Agreement and
the Related Agreements by Barnabus and consummation by Barnabus of the
transactions contemplated hereby and thereby will not (i) violate any provision
of the articles of incorporation or the by-laws of Barnabus, (ii) violate,
conflict with or result in the breach of any of the terms or conditions of,
result in modification of, or otherwise give any other contracting party the
right to terminate or accelerate obligations under, or constitute (or with
notice or lapse of time or both constitute) a default under, any material
instrument, contract or other agreement to which Barnabus is party or to which
it or any of its assets or properties is bound or subject, (iii) assuming that
all consents, approvals and authorizations contemplated by Section 5.3(b) have
been obtained and all filings described in such section have been made or will
be duly made on a timely basis, violate any Law or Order of any Governmental
Entity applicable to Barnabus or by which any of its assets or properties is
bound or require any other filing with, notice to, or permit, consent or
approval of, any Governmental Entity or (iv) result in the creation of any Lien
or other encumbrance on the assets or properties of Barnabus.
(b) The execution, delivery and performance of this Agreement and
the Related Agreements by Barnabus and the consummation of the transactions
contemplated hereby and thereby by Barnabus do not and will not require any
consent, approval, authorization or permit of, action by, filing with or
notification to, any Governmental Entity, except (i) for applicable
requirements, if any, under the Securities Act, the Exchange Act and the
applicable "blue sky" laws and (ii) for applicable requirements, if any, under
the Securities Act (Ontario) and any other Canadian securities rules,
regulations, laws, national instruments or policies (the "Canadian Securities
Laws") (all of which filings have been made by Barnabus or Exchangeco, other
than those which are required to be made after the Closing and all such
post-Closing filings will be duly made on a timely basis).
5.4 Capitalization.
(a) Barnabus is authorized to issue 1,125,000,000 Barnabus Common
Shares, par value U.S. $0.001 per share, of which 49,823,540 Barnabus Common
Shares were issued and outstanding on February 2, 2006. All of the issued and
outstanding Barnabus Common Shares are duly authorized, validly issued, fully
paid, non-assessable, and upon consummation of the transactions contemplated
herein, the Barnabus Common Shares issued hereunder as the U.S. Share
Consideration and the Barnabus Common Shares issuable upon exchange of the
Exchangeable Shares are duly reserved, allotted, authorized and will be validly
issued, fully paid, non-assessable and free and clear of all Liens. Subject to
the accuracy of the representations and warranties of the Stockholders set forth
in Section 3 hereof and the Company set forth in Section 4.26 hereof, the
Barnabus Common Shares to be issued or issuable hereunder will be issued in a
transaction exempt from registration under the Securities Act, all applicable
"blue sky laws" and Canadian Securities Laws.
37
(b) None of the outstanding equity securities or other securities
of Barnabus was issued in violation of the Securities Act or any other Law.
Except as shown on Section 5.4 of the Barnabus Disclosure Schedule or except as
contemplated herein or in the Related Agreements, (i) there are no
subscriptions, options, conversion, pre-emptive or exchange rights, warrants,
repurchase or redemption agreements, registration rights agreements, or other
agreements, claims or commitments of any nature whatsoever obligating the
Company to issue, transfer, deliver or sell, or cause to be issued, transferred,
delivered or sold, repurchased or redeemed, additional shares of the capital
stock or other securities of Barnabus or obligating Barnabus to register any of
Barnabus' securities under the U.S. securities laws or obligating Barnabus to
grant, extend or enter into any such agreement; (ii) Barnabus does not own or
have any contract or agreement 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.
(c) Barnabus Common Shares issuable upon exchange of the
Exchangeable Shares have been duly reserved for issuance, and upon issuance of
such Barnabus Common Shares, such Barnabus Common Shares will be duly
authorized, validly issued, fully paid and non-assessable shares of Barnabus
Common Shares and will be free and clear of all Liens imposed by or through
Barnabus, other than as set forth in this Agreement, the Related Agreements, the
articles of incorporation of Barnabus, as amended from time to time, or
applicable securities laws.
(d) Barnabus Common Shares issuable under Section 2.5 have been
duly reserved for issuance, and upon issuance, such Barnabus Common Shares will
be duly authorized, validly issued, fully paid and non-assessable shares and
will be free and clear of all Liens imposed by or through Barnabus, other than
as set forth in this Agreement, the Related Agreements, the articles of
incorporation of Barnabus, as amended from time to time, or applicable
securities laws.
5.5 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 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 U.S. GAAP (except for the notes for unaudited financial
statements) 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, other than. 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 Concurrent Financing,
the proposed Additional Financing and the acquisition of Connect Renewable
Energy, Inc., a Nevada corporation, and said transactions shall not be deemed
give rise to a material adverse change in the assets, properties, business,
operations or conditions (financial or otherwise) of Barnabus.
38
5.6 SEC Documents.
(a) All statements, reports, schedules, forms, exhibits and other
documents required to have been filed by Barnabus with the SEC since the date of
incorporation of Barnabus (the "SEC Documents") have been so filed and Barnabus
is not delinquent in respect of any such required filings. Barnabus and its
Subsidiaries are engaged only in the business described in the SEC Documents and
the SEC Documents contain a complete and accurate description in all material
respects of the business of Barnabus and its Subsidiaries, taken as a whole.
(b) At the time of filing thereof, the SEC Documents complied as
to form in all material respects with the requirements of the Exchange Act and
did not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. Barnabus
is not (with or without the lapse of time or the giving of notice, or both) in
breach or default of any material contract and, to the best knowledge of
Barnabus, no other party to any material contract is (with or without the lapse
of time or the giving of notice, or both) in breach or default of any material
contract. Neither Barnabus nor any Subsidiary has received any notice of the
intention of any party to terminate any material contract.
(c) Each registration statement and any amendment thereto filed by
Barnabus since January 1, 2002 pursuant to the Securities Act and the rules and
regulations thereunder, as of the date such statement or amendment became
effective, complied as to form in all material respects with the Securities Act
and did not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading; and each prospectus filed pursuant to Rule 424(b) under
the Securities Act, as of its issue date and as of the closing of any sale of
securities pursuant thereto did not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
5.7 Intellectual Property. All Barnabus Proprietary Rights are currently
in compliance with all legal requirements (including timely filings, proofs and
payments of fees) and is valid and enforceable. Except as listed on Section 5.7
of Barnabus Disclosure Schedule, no Barnabus Proprietary Rights has been or is
now involved in any cancellation, dispute or litigation, and, to the best
knowledge of Barnabus, no such action is threatened. Except as listed on Section
5.7 of Barnabus Disclosure Schedule, no patent of Barnabus or its Subsidiaries
has been or is now involved in any interference, reissue, re-examination or
opposition proceeding.
All of the licenses and sublicenses and consent, royalty or other agreements
concerning Barnabus Proprietary Rights to which Barnabus or any Subsidiary is a
party or by which any of their assets are bound (other than
generally commercially available, non-custom, off-the-shelf software
application programs having a retail acquisition price of less than $10,000 per
license) (collectively, "License Agreements") are valid and binding obligations
of Barnabus or its Subsidiaries that are parties thereto and, to the best
knowledge of Barnabus, the other parties thereto, enforceable in accordance with
their terms, except to the extent that enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws affecting the enforcement of creditors' rights generally, and
there exists no event or condition which will result in a material violation or
breach of or constitute (with or without due notice or lapse of time or both) a
default by Barnabus or any of its Subsidiaries under any such License Agreement.
39
Barnabus and its Subsidiaries own or have the valid right to use all of the
Barnabus Proprietary Rights that is necessary for the conduct of Barnabus' and
each of its Subsidiaries' respective businesses as currently conducted, free and
clear of all liens, encumbrances, adverse claims or obligations to license all
such owned Barnabus Proprietary Rights, other than licenses entered into in the
ordinary course of Barnabus' and its Subsidiaries' businesses. Barnabus and its
Subsidiaries have a valid and enforceable right to use all third party
Intellectual Property used or held for use in the respective businesses of
Barnabus and its Subsidiaries as currently conducted.
To the best knowledge of Barnabus, no Barnabus Proprietary Right infringes upon
any Intellectual Property owned or held by any other Person. To the best
knowledge of Barnabus, Barnabus Proprietary Rights are not being infringed by
any other Person. Except as set forth on Section 5.7 of Barnabus Disclosure
Schedule, there is no litigation or order pending or outstanding or, to the best
knowledge of Barnabus, threatened or imminent, that seeks to limit or challenge
or that concerns the ownership, use, validity or enforceability of any Barnabus
Proprietary Rights owned by any other Person, and, to the best knowledge of
Barnabus, there is no valid basis for the same.
The consummation of the transactions contemplated hereby will not result in the
alteration, loss, impairment of or restriction on Barnabus' or any of its
Subsidiaries' ownership or right to use any of the Intellectual Property which
is necessary for the conduct of Barnabus' and each of its Subsidiaries'
respective businesses as currently conducted.
For the purposes of this Section 5.7, the following term shall have the
following meaning:
"Barnabus Proprietary Rights" means all Intellectual Property that is comprised
in the Barnabus' products (immediately prior to the acquisition of Connect
Renewable Energy, Inc.), and all material Intellectual Property that Barnabus
requires for the conduct of its business as it is currently conducted
(immediately prior to the acquisition of Connect Renewable Energy, Inc.).
5.8 Environmental Matters.
(a) Barnabus has not violated, and is not in violation of, and has
not been notified that it is in violation of, Environmental Law, and except in
full compliance with Environmental Laws, has not generated, used, handled,
transported or stored any Hazardous Materials or shipped any Hazardous Materials
for treatment, storage or disposal at any other site or facility. There has been
no generation, use, handling, storage or disposal of any Hazardous Materials in
violation of any Environmental Law at any site owned or operated by, or premises
leased by, Barnabus during the period of Barnabus' ownership, operation or lease
or, to the best knowledge of Barnabus, prior thereto, nor has there been or is
there threatened any release of any Environmental Contaminants into, on, at or
from any such site or premises, including without limitation into the ambient
air, groundwater, surface water, soils or subsurface strata, during such period
or, to the best knowledge of Barnabus, prior thereto in violation of any
Environmental Law or that created or will create an obligation to report or
respond in any way to such release. There is no underground storage tank or
other container at any site owned or operated by, or premises leased by Barnabus
or, to the best knowledge of Barnabus, on any site formerly owned or operated
by, or premises formerly leased by, Barnabus.
40
(b) Barnabus has not received notification in any form that, and
Barnabus has no knowledge that, any site currently or formerly owned or operated
by, or premises currently or formerly leased by, Barnabus is the subject of any
U.S., Canadian, provincial or local or foreign civil, criminal or administrative
investigation evaluating whether, or alleging that, any action is necessary to
respond to a release or a threatened release of any Environmental Contaminant.
No such site or premises is listed, or to the best knowledge of Barnabus,
proposed for listing, on any governmental lists for Environmental Contamination
remediation. Barnabus has not received written notification of, and Barnabus has
no knowledge of, any potential responsibility of Barnabus pursuant to the
provisions of (i) any U.S., Canadian, state, provincial, local, foreign or other
Environmental Law, or (ii) any order issued pursuant to the provisions of any
such Environmental Law with respect to Environmental Contaminants used,
manufactured, generated, stored, or treated at, transported from, or disposed of
on, any site currently or formerly owned or operated by, or premises currently
or formerly leased by, Barnabus.
5.9 Litigation. Except as disclosed in the SEC Documents or except as
described in Section 5.9 of Barnabus Disclosure Schedule, there are no pending
actions, suits or proceedings against or affecting Barnabus, its Subsidiaries or
any of its or their properties; and to the best knowledge of Barnabus, no such
actions, suits or proceedings are threatened or contemplated.
5.10 Internal Controls. Except as described in Section 5.10 of Barnabus
Disclosure Schedule, Barnabus is in compliance with the provisions of the
Xxxxxxxx-Xxxxx Act of 2002 currently applicable to Barnabus. Barnabus and its
Subsidiaries maintain a system of internal accounting controls 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 US generally accepted accounting principles and to maintain
asset accountability; (iii) access to assets is permitted only in accordance
with management's general or specific authorization; and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
Except as described in Section 5.10 of Barnabus Disclosure Schedule, Barnabus
has established disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for Barnabus and designed such disclosure controls and
procedures to ensure that material information relating to Barnabus, including
its Subsidiaries, is made known to the certifying officers by others within
those entities, particularly during the period in which Barnabus' most recently
filed period report under the Exchange Act, as the case may be, is being
prepared. Except as described in Section 5.10 of Barnabus Disclosure Schedule,
Barnabus' certifying officers have evaluated the effectiveness of Barnabus'
controls and procedures as of the end of the period covered by the most recently
filed periodic report under the Exchange Act (such date, the "Evaluation Date").
Except as described in Section 5.10 of Barnabus Disclosure Schedule, Barnabus
presented in its most recently filed periodic report under the Exchange Act the
conclusions of the certifying officers about the effectiveness of the disclosure
controls and procedures based on their evaluations as of the Evaluation Date.
Except as described in Section 5.10 of Barnabus Disclosure Schedule, since the
Evaluation Date, there have been no significant changes in Barnabus' internal
controls (as such term is defined in Item 307 of Regulation S-B) or, to the best
knowledge of Barnabus, in other factors that could significantly affect
Barnabus' internal controls, or require Barnabus to disclose in its SEC
Documents a "material weakness" or other deficiency in its internal controls as
required by the Exchange Act.
41
5.11 Tax Matters. Each of Barnabus and its Subsidiaries has timely
prepared and filed all tax returns required to have been filed by Barnabus or
such Subsidiary with all appropriate governmental agencies and timely paid all
taxes shown thereon or otherwise owed by it. The charges, accruals and reserves
on the books of Barnabus in respect of taxes for all fiscal periods are adequate
in all material respects, and there are no material unpaid assessments against
Barnabus or any Subsidiary nor, to the best knowledge of Barnabus, any basis for
the assessment of any additional taxes, penalties or interest for any fiscal
period or audits by any federal, state or local taxing authority except for any
assessment which is not material to Barnabus and its Subsidiaries, taken as a
whole. All taxes and other assessments and levies that Barnabus or any
Subsidiary is required to withhold or to collect for payment have been duly
withheld and collected and paid to the proper governmental entity or third party
when due. There are no tax liens or claims pending or, to the best knowledge of
Barnabus, threatened against Barnabus or any Subsidiary or any of their
respective assets or properties. Except as described on Section 5.11 of Barnabus
Disclosure Schedule, there are no outstanding tax sharing agreements or other
such arrangements between Barnabus and any Subsidiary or other corporation or
entity. Neither Barnabus nor any Subsidiary is presently undergoing any audit by
a taxing authority, or has waived or extended any statute of limitations at the
request of any taxing authority.
5.12 Full Disclosure. The representations and warranties of Barnabus
contained in this Agreement and in the Related Agreements do not contain any
untrue statement of a material fact.
5.13 No Finder's Fee. Excluding any brokers, finders, agents or
intermediaries acting on behalf of Barnabus in connection with the Concurrent
Financing or the Additional Financing and any fees payable in connection
therewith, no broker, finder, agent or similar intermediary has acted on behalf
of Barnabus in connection with this Agreement, any Related Agreement or the
transactions contemplated hereby or thereby, and there are no brokerage
commissions, finders' fees or similar fees or commissions payable in connection
herewith or therewith based on any agreement, arrangement or understanding with
Barnabus or any action taken by or on behalf of Barnabus, for which any
Stockholder could become liable or obligated.
SECTION 6 REPRESENTATIONS AND WARRANTIES OF EXCHANGECO
Except as set forth on the disclosure schedule delivered by Exchangeco to
the Company and the Principal Stockholders on the date hereof, as supplemented
or modified prior to the Closing (the "Exchangeco Disclosure Schedule"), the
section numbers of which are numbered to correspond to the section numbers of
this Agreement to which they refer, Exchangeco hereby makes the following
representations and warranties to Barnabus, the Company and the Stockholders:
42
6.1 Organization and Qualification. Exchangeco is a corporation duly
organized validly existing and in good standing under the laws of the Province
of Ontario and has the corporate power and authority to own, lease and operate
its assets and to carry on its business as now being and as heretofore
conducted. Exchangeco is a wholly-owned, direct Subsidiary of Barnabus.
Exchangeco has delivered to the Company and the Stockholders true and correct
copies of the articles of incorporation and the by-laws of Exchangeco.
6.2 Authority to Execute and Perform Agreement. Exchangeco has the
corporate power and authority to enter into, execute and deliver this Agreement
and the Related Agreements, to perform fully its obligations hereunder and
thereunder and to issue, sell and deliver the Canadian Share Consideration. The
execution and delivery of this Agreement and the Related Agreements and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of Exchangeco. This
Agreement has been duly executed and delivered by Exchangeco and constitutes a
valid and binding obligation of Exchangeco, enforceable against Exchangeco in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general principles of equity.
6.3 No Breach.
(a) The execution, delivery and performance of this Agreement and
the Related Agreements by Exchangeco and consummation by Exchangeco of the
transactions contemplated hereby and thereby will not (i) violate any provision
of the articles of incorporation or the by-laws of Exchangeco, (ii) violate,
conflict with or result in the breach of any of the terms or conditions of,
result in modification of, or otherwise give any other contracting party the
right to terminate or accelerate obligations under, or constitute (or with
notice or lapse of time or both constitute) a default under, any material
instrument, contract or other agreement to which Exchangeco is party or to which
it or any of its assets or properties is bound or subject, (iii) assuming that
all consents, approvals and authorizations contemplated by Section 6.3(b) have
been obtained and all filings described in such section have been made or will
be duly made on a timely basis, violate any Law or Order of any Governmental
Entity applicable to Exchangeco or by which any of its assets or properties is
bound or require any other filing with, notice to, or permit, consent or
approval of, any Governmental Entity or (iv) result in the creation of any Lien
or other encumbrance on the assets or properties of Exchangeco.
(b) The execution, delivery and performance of this Agreement and
the Related Agreements by Exchangeco and the consummation of the transactions
contemplated hereby and thereby by Exchangeco do not and will not require any
consent, approval, authorization or permit of, action by, filing with or
notification to, any Governmental Entity, except (i) for applicable
requirements, if any, under the Securities Act, the Exchange Act and the
applicable "blue sky" laws and (ii) for applicable requirements, if any, under
any applicable Canadian Securities Laws (all of which filings have been made by
Barnabus or Exchangeco, other than those which are required to be made after the
Closing and those will be duly made on a timely basis).
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6.4 Capitalization.
(a) Exchangeco is authorized to issue unlimited common shares, of
which 100 shares are issued and outstanding and unlimited Exchangeable Shares,
of which none of the shares are issued and outstanding immediately prior to the
Closing. Immediately prior to the Closing, all of the issued and outstanding
common shares of Exchangeco are owned by Barnabus. All of the issued and
outstanding shares of capital stock of Exchangeco are duly authorized, validly
issued, fully paid, non-assessable, and upon consummation of the transactions
contemplated herein, Exchangeable Shares to be issued pursuant to this Agreement
will be duly authorized and validly issued and fully paid and non-assessable,
free and clear of all Liens imposed by or through the Company or Exchangeco
other than as set forth in this Agreement, Related Agreements, the Articles of
Incorporation of Exchangeco, as amended from time to time, or applicable
securities laws. Subject to the accuracy of the representations and warranties
of the Stockholders set forth in Section 3 hereof and the Company set forth in
Section 4.26 hererof, Exchangeable Shares to be issued pursuant to this
Agreement will be issued in a transaction exempt from registration under the
Securities Act, all applicable "blue sky laws" and exempt from the requirement
to file a prospectus under the Canadian Securities Laws.
(b) Exchangeable Shares issuable under Section 2.5 have been duly
reserved for issuance, and upon issuance, such Exchangeable Shares will be duly
authorized, validly issued, fully paid, non-assessable and will be free and
clear of all Liens imposed by or through Exchangeco, other than as set forth in
this Agreement, the Related Agreements, the articles of incorporation of
Exchangeco, as amended from time to time, or applicable securities laws.
6.5 No Operations. Immediately prior to the Closing, Exchangeco will not
have commenced operations and shall not have any assets or liabilities, except
for such assets that were contributed by Barnabus as consideration for the
Common Shares and except for such assets that were contributed by Barnabus to
consummate the transactions contemplated herein.
6.6 Full Disclosure. The representations and warranties of Exchangeco
contained in this Agreement and in the Related Agreements do not contain any
untrue statement of a material fact.
6.7 No Finder's Fee. No broker, finder, agent or similar intermediary
has acted on behalf of Exchangeco in connection with this Agreement, any Related
Agreement or the transactions contemplated hereby or thereby, and there are no
brokerage commissions, finders' fees or similar fees or commissions payable in
connection herewith or therewith based on any agreement, arrangement or
understanding with Exchangeco or any action taken by or on behalf of Exchangeco,
for which Barnabus or any Stockholder could become liable or obligated.
SECTION 7 COVENANTS AND AGREEMENTS
7.1 Expenses. The Company, each Stockholder, Barnabus and Exchangeco
shall bear their respective expenses incurred in connection with the
preparation, execution and performance of this Agreement and the other Related
Agreements and the transactions contemplated hereby and thereby, including
without limitation, all fees and expenses of agents, representatives, counsel
and accountants; provided that all the fees and expenses of Fasken Xxxxxxxxx
DuMoulin LLP relating to the implementation of the exchangeable share portion of
the transaction contemplated in this Agreement and all of the fees and expenses
of Gowling Xxxxxxx Xxxxxxxxx LLP will be for the account of the Canadian
Stockholders.
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7.2 Authorization from Others. Prior to the Closing Date, the parties
shall obtain all authorizations, consents, waivers and Permits necessary or
desirable to permit the consummation of the Stock Purchase and the other
transactions contemplated hereby on the terms contemplated by this Agreement.
7.3 Further Assurances. Each of the parties shall execute such
documents, further instruments of transfer and assignment and other papers and
take such further actions as may be reasonably required or desirable to carry
out the provisions hereof and the transactions contemplated hereby. Each party
shall use its respective reasonable commercial efforts to take other such
actions to ensure that, to the extent within its control or capable of influence
by it, the transactions contemplated by this Agreement shall be fully carried
out in a timely fashion. Without limiting the generality of the foregoing, the
Company and any Stockholder who is listed as a co-owner of, or who otherwise has
any power of attorney or other rights with respect to, any of the Company
Proprietary Rights listed in Section 4.12 of the Company Disclosure Schedule,
agrees to duly execute and deliver, and to use best efforts to cause any other
individual or entity listed as a co-owner of, or who otherwise has any power of
attorney or other rights with respect to, any of such Company Proprietary
Rights, to duly execute and deliver, such further instruments and do and cause
to be done such further acts and things, including, without limitation, the
execution of such additional assignments, agreements, documents and instruments,
that Barnabus may at any time and from time to time reasonably request to more
effectively transfer ownership, control and/or administration of such Company
Proprietary Rights to the Company.
7.4 Public Announcements. Any press release or other public statement
with respect to the Stock Purchase and the other transactions contemplated
hereby, this Agreement or the Related Agreements shall be jointly approved by
Barnabus and the Stockholders' Representative. No other press release or public
statement shall be made without such approval, except as may be required by
applicable Law.
7.5 Designation of Nominee. Until the second anniversary of the date
hereof, Barnabus shall permit the Stockholders' Representative to designate a
nominee to Barnabus' board of directors and Barnabus agrees to recommend such
nominee to its stockholders and to solicit proxies for such nominee.
7.6 Resignations. Effective as of the Closing, the members of the
Company's Board of Directors and its officers shall have delivered written
resignations to Barnabus.
7.7 Directors & Officers' Insurance. Barnabus shall use its commercially
reasonable efforts to obtain and have in place commercially suitable directors
and officers liability insurance, covering all directors and officers of
Barnabus, including Xxxxxx Xxxx, on or before the Closing.
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7.8 Conduct of Business. Except with the prior written consent of
Barnabus, which consent shall not be unreasonably withheld, and except as
otherwise contemplated herein or referred to in Section 7.9 of the Company
Disclosure Schedule, during the period from the date hereof to the Closing Date,
the Company shall observe the following covenants:
(a) Affirmative Covenants Pending Closing. The Company shall:
(i) Preservation of Personnel. Use reasonable commercial
efforts to preserve intact and keep available the services of present employees
of the Company;
(ii) Insurance. Keep in effect insurance policies in coverage
amounts not less than those in effect at the date of this Agreement;
(iii) Preservation of the Business; Maintenance of Properties,
Contracts, Permits. Use best efforts to preserve the business of the Company,
advertise, promote and market the Company's business activities in accordance
with past practices over the last twelve (12) months, keep the Company's
properties intact, preserve its goodwill and business, maintain all physical
properties in such operating condition as will permit the conduct of the
Company's business on a basis consistent with past practice, perform and comply
in all material respects with the terms of the contracts referred to in Section
4.10, and keep in full force and effect the Permits listed in Section 4.8(a) of
the Company Disclosure Schedule. To the extent any such Permit will terminate,
expire or will otherwise not remain in full force and effect from and after the
Closing, the Company shall promptly notify Barnabus and shall use its best
efforts to keep such Permit in full force and effect, renew or reobtain such
Permit, such that the Company will continue to have all Permits material to the
conduct of its business from and after the Closing and the transactions
contemplated hereby.
(iv) Intellectual Property Rights. Use best efforts to
preserve and protect the Proprietary Rights;
(v) Ordinary Course of Business. Operate the Company's
business solely in the ordinary course consistent with past practices over the
last twelve months; and
(vi) Taxes. File all Tax Returns required to be filed and pay
all Taxes required to be paid on or before the Closing Date, on a basis
consistent with prior Tax practices.
(b) Negative Covenants Pending Closing. The Company shall not:
(i) Disposition of Assets. Sell, license or transfer, or
mortgage, pledge, lease or otherwise encumber any of its assets, including its
Proprietary Rights, other than sales, licenses or transfers in the ordinary
course of business consistent with past practice and in amounts not exceeding,
in the aggregate, CDN $10,000;
(ii) Liabilities. Incur Indebtedness for borrowed money
(including the incurrence of any additional Indebtedness under the Company's
existing credit facilities), obligation or liability or enter into any contracts
or commitments involving potential payments to or by the Company in any single
instance of CDN $10,000 or more or in the aggregate of CDN $25,000 in any
12-month period or more, provided that this clause (ii) shall not prohibit the
Company from entering into contracts or incurring Indebtedness for the purchase
of equipment, vehicles or supplies in the ordinary course of its business
consistent with past practice;
46
(iii) Compensation. Change the compensation payable to any
officer, director, employee, agent or consultant; or enter into any employment,
severance or other agreement with any officer, director, employee, agent or
consultant of the Company, or adopt, or increase the benefits under, any
employee benefit plan, except, in each case, as required by Law, in accordance
with existing agreements or in the ordinary course of business consistent with
past practice;
(iv) Capital Stock. Make any change in the number of shares
of its capital stock authorized, issued or outstanding or grant or accelerate
the exercisability of, any option, warrant or other right to purchase, or
convert any obligation into, shares of its capital stock, or declare or pay any
dividend or other distribution with respect to any shares of its capital stock,
or sell or transfer any shares of its capital stock, or redeem or otherwise
repurchase any shares of its capital stock;
(v) Charter and By-Laws. Cause, permit or propose any
amendments to the articles of incorporation or the by-laws of the Company unless
approved by Barnabus in writing;
(vi) Accounting Policies. Except as may be required as a
result of a change in Law or in GAAP, change any of the accounting practices or
principles used by it or restate, or become obligated to restate, any of the
2004 Unaudited Financial Statements;
(vii) Taxes. Make any Tax election or settle or compromise any
U.S., Canadian, provincial state, local or foreign Tax liability, change the
Company's annual tax accounting period, adopt or change any method of Tax
accounting, file any amended Tax Return, enter into any closing agreement
relating to any Tax, surrender any right to claim a Tax refund, consent to any
extension or waiver of the limitations period applicable to any Tax claim or
assessment or take any other similar action relating to the filing of any Tax
Return or the payment of any Tax, if such election, adoption, change, amendment,
agreement, settlement, surrender, consent or other action would have the effect
of increasing the Tax liability of the Company for any period after the Closing
Date or decreasing any Tax attribute of the Company existing on the Closing
Date;
(viii) Legal. Settle or compromise any pending or threatened
suit, action or claim that is material to the assets, properties, business,
results of operations or financial condition of the Company for an aggregate
amount in excess of CDN $25,000 or that relates to the transactions contemplated
hereby;
(ix) Extraordinary Transactions. Adopt a plan of complete or
partial liquidation, dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization of the Company;
(x) Payment of Indebtedness. Pay, discharge or satisfy any
claims, liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction, in
the ordinary course of business and consistent with past practice, of
liabilities reflected or reserved against in the Company Financial Statements or
incurred in the ordinary course of business consistent with past practice;
47
(xi) New Agreements/Amendments. Enter into or modify any
material supply, license, customer development, research, collaboration,
distribution or other agreement with any other Person or entity other than in
the ordinary course of business consistent with past practice, without the prior
written consent of Barnabus, which consent will not be unreasonably withheld;
(xii) Confidentiality Agreements. Modify, amend or terminate,
or waive, release or assign any material rights or claims with respect to any
confidentiality agreement to which the Company is a party; or
(xiii) Obligations. Obligate itself to do any of the
foregoing.
(c) Control of the Company's Business. Nothing contained in this
Agreement shall give Barnabus, directly or indirectly, the right to control or
direct the Company's operations prior to the Closing Date. Prior to the Closing
Date, the Company shall exercise, consistent with the terms and conditions of
this Agreement, complete control and supervision over its operations.
7.9 Notification. Between the date of this Agreement and the Closing
Date, each party will promptly notify the other party in writing if (a) such
party becomes aware of any fact or condition that causes or constitutes a breach
of any of such party's representations and warranties as of the date of this
Agreement, (b) such party becomes aware of the occurrence after the date of this
Agreement of any fact or condition that would 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, (c)
such party becomes aware of any matter which should have been set forth or
described on such party's Disclosure Schedule as of the date of this Agreement
or (d) such party becomes aware of the occurrence or existence after the date of
this Agreement of any fact or condition that would have been required to have
been set forth or described on such party's Disclosure Schedule had such fact or
condition existed or occurred on or before the date of this Agreement. Any such
notice, amendment or supplement to any party's Disclosure Schedule delivered
pursuant to clause (b) or (d) of this Section 7.9 (each a "Disclosure Update")
shall serve to supplement or modify the representation, and warranties set forth
herein of such party or such party's Disclosure Schedule. Any such notice or
amendment or supplement to the Company Disclosure Schedule or the Stockholders
Disclosure Schedule pursuant clauses (a) or (c) of this Section 7.9 shall be
deemed to cure any breach of any applicable representation or warranty made by
any Stockholder or the Company in this Agreement if Barnabus and Exchangeco
choose to consummate the Stock Purchase. Any such notice or amendment or
supplement to the Barnabus Disclosure Schedule or Exchangeco Disclosure Schedule
pursuant clauses (a) or (c) of this Section 7.9 shall be deemed to cure any
breach of any applicable representation or warranty made by Barnabus or
Exchangeco in this Agreement if Stockholders and the Company choose to
consummate the Stock Purchase. During the same period, each party shall promptly
notify the other party of the occurrence of any event that may make the
satisfaction of the conditions in Section 8 or 9 impossible or unlikely.
48
7.10 Additional Funding. Between the date of this Agreement and February
17, 2006, Barnabus shall, out of the funds raised in the Concurrent Financing,
advance to the Company a minimum of $300,000 for working capital purposes.
SECTION 8 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF
BARNABUS AND EXCHANGECO TO CONSUMMATE THE STOCK PURCHASE
The obligations of Barnabus and Exchangeco to consummate the Stock
Purchase are subject, to the fulfillment of the following conditions, any one or
more of which may be waived by Barnabus in writing:
8.1 Representations, Warranties and Covenants. The representations and
warranties made by the Company and each Stockholder in this Agreement (without
giving effect to any revision, modification or updating pursuant to Section 7.9
hereof) shall have been accurate as of the date of this Agreement and shall be
true and correct in all respects as of the Closing Date as if made on and as of
the Closing Date. The Company and each Stockholder shall have performed and
complied in all material respects with all covenants and agreements required by
this Agreement to be performed or complied with by the Company or such
Stockholders on or prior to the Closing Date. Each of the Company and the
Stockholders' Representative shall have delivered to Barnabus a respective
certificate signed by the Company's president and the Stockholders'
Representative, dated the Closing Date, to the foregoing effect in the form
attached hereto as Exhibit B.
8.2 Company Corporate Certificates. The Company shall have delivered a
certificate of status of the Company, as of the most recent practicable date,
issued by the Ontario Ministry of Government Services.
8.3 Company's Certificate. Stockholders' Representative shall have
delivered a certificate, dated as of the Closing Date, certifying as to (a) the
incumbency of the Company's officers executing documents executed and delivered
in connection herewith, (b) a copy of the Company's articles, as in effect
immediately prior to the Closing Date, (c) a copy of the Company's by-laws, as
in effect on the Closing Date and (d) a copy of the resolutions of the board of
directors authorizing and approving the applicable matters contemplated
hereunder.
8.4 Consents. The Company shall have obtained waivers or consents, which
shall remain in full force and effect, with respect to each agreement required
to be disclosed in Section 4.21 of the Company Disclosure Schedule such that the
terms of each such agreement are unchanged by the Stock Purchase, and the
Company shall have delivered to Barnabus a certificate signed by the Company's
president or such other officer acceptable to Barnabus and dated the Closing
Date, to the foregoing effect in the form of Exhibit B.
8.5 Opinion of Counsel to Company and the Stockholders. Barnabus shall
have received the opinion of Fasken Xxxxxxxxx XxXxxxxx LLP, counsel to the
Company and the Stockholders, dated the Closing Date, addressed to Barnabus and
Exchangeco, and in the form of Exhibit D attached hereto.
8.6 Litigation. No action, suit or proceeding shall have been instituted
before any Governmental Entity or instituted or threatened by any Governmental
Entity, to restrain, modify or prevent the carrying out of the transactions
contemplated hereby, or to seek damages or a discovery order in connection with
such transactions, or that has or may have a Company Material Adverse Effect.
49
8.7 Resignations. Barnabus shall have received written resignations of
all members of the Company's board of directors and the Company's officers.
8.8 Section 116 Compliance. Each U.S. Stockholder shall have executed
and delivered the Section 116 Escrow Agreement annexed hereto as Exhibit J (the
"Section 116 Escrow Agreement").
8.9 Investor Questionnaires. Each of the U.S. Stockholders shall have
delivered to Barnabus a fully completed and executed Investor Questionnaire.
8.10 Concurrent and Additional Financings. Barnabus shall have
consummated the Concurrent Financing and the Additional Financing.
8.11 Concurrent Acquisition. Barnabus shall have consummated the
acquisition of Connect Renewable Energy, Inc.
8.12 Other Agreements. (a) The Support Agreement shall have been executed
and delivered to Barnabus by all other persons designated thereon as parties
thereto, (b) the Exchange Rights Agreement shall have been executed and
delivered to Barnabus by all other persons designated thereon as parties
thereto, (c) the Registration Rights Agreement shall have been executed and
delivered to Barnabus by all other persons designated thereon as parties thereto
and (d) each of the Key Employees shall have entered into an employment
agreement with Barnabus in form acceptable to Barnabus.
8.13 Closing Documents. The Company and the Stockholders shall have
delivered, upon reasonable request by Barnabus, other customary closing
documents reasonably satisfactory to Barnabus and Exchangeco.
SECTION 9 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF
COMPANY AND THE STOCKHOLDERS TO CONSUMMATE THE STOCK PURCHASE
The obligations of the Company and the Stockholders to consummate the
Stock Purchase is subject to the fulfillment of the following conditions, any
one or more of which may be waived in writing by the Company and the Stockholder
Representative:
9.1 Representations, Warranties and Covenants. The representations and
warranties made by Barnabus and Exchangeco in this Agreement (without giving
effect to any revision, modification or updating pursuant to Section 7.9 hereof)
shall have been accurate as of the date of this Agreement and shall be true and
correct in all respects as of the Closing Date as if made on and as of the
Closing Date. Barnabus and Exchangeco have performed and complied in all
material respects with all covenants and agreements required by this Agreement
to be performed or complied with by it on or prior to the Closing Date. Each of
Barnabus and Exchangeco shall have delivered to the Company a certificate from
its respective president, dated the Closing Date, to the foregoing effect in the
form attached hereto as Exhibit C.
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9.2 Corporate Certificates. Barnabus and Exchangeco shall have delivered
a certificate of good standing of Barnabus, as of the most recent practicable
date, issued by the Secretary of State of the State of Nevada and a certificate
of status of Exchangeco, as of the most recent practicable date, issued under
the Business Corporations Act (Ontario), respectively.
9.3 Officer's Certificate. Barnabus shall have delivered a certificate
of its Secretary or such other officer of Barnabus acceptable to the Company,
dated as of the Closing Date, certifying as to (a) the incumbency of its
officers executing documents executed and delivered in connection herewith, (b)
a copy of its articles, as in effect immediately prior to the Closing Date, (c)
a copy of its by-laws as in effect on the Closing Date and (d) a copy of the
resolutions of its board of directors authorizing and approving the applicable
matters contemplated hereunder. Exchangeco shall have delivered a certificate of
its Secretary or such other officer of Exchangeco acceptable to the Company,
dated as of the Closing Date, certifying as to (a) the incumbency of its
officers executing documents executed and delivered in connection herewith, (b)
a copy of its articles, as in effect immediately prior to the Closing Date, (c)
a copy of its by-laws as in effect on the Closing Date and (d) a copy of the
resolutions of its board of directors authorizing and approving the applicable
matters contemplated hereunder
9.4 Delivery of the Estimated Purchase Price. Fasken Xxxxxxxxx DuMoulin
LLP, on behalf of Stockholders, shall have received the payments described in
Section 2.3(b).
9.5 Delivery of Share Consideration. Fasken Xxxxxxxxx XxXxxxxx LLP, on
behalf of the Stockholders, shall have received one-half of the Share
Consideration as described in Section 2.3 (c).
9.6 Opinions of Counsel to Barnabus. The Principal Stockholders shall
have received the opinion of Xxxxxxx Xxxxxx Xxxxxx & Dodge LLP, counsel to
Barnabus, dated the Closing Date, addressed to the Stockholders, and in the form
of Exhibit E attached hereto; the opinion of Xxxxxx Xxxxxxxx Xxxxxx & Xxxxxxx,
Nevada counsel to Barnabus, dated the Closing Date, addressed to the
Stockholders, and in the form of Exhibit F attached hereto; and the opinion of
Gowling Xxxxxxx Xxxxxxxxx LLP, Canadian counsel to Barnabus and Exchangeco,
dated the Closing Date, addressed to the Stockholders, and in the form of
Exhibit G attached hereto.
9.7 Concurrent and Additional Financings. Barnabus shall have
consummated the Concurrent Financing and the Additional Financing.
9.8 Concurrent Acquisition. Barnabus shall have consummated the
acquisition of Connect Renewable Energy, Inc.
9.9 Other Agreements. (a) The Support Agreement shall have been executed
and delivered to the Stockholders' Representative by Barnabus and all other
persons designated thereon as parties thereto, (b) the Exchange Rights Agreement
shall have been executed and delivered to the Stockholders' Representative by
Barnabus and all other persons designated thereon as parties thereto, (c) the
Registration Rights Agreement shall have been executed and delivered to the
Stockholders' Representative by Barnabus and all other persons designated
thereon as parties thereto and (d) each of the Key Employees shall have entered
into an employment agreement with Barnabus in form acceptable to such Key
Employee.
9.10 Closing Documents. Barnabus and Exchangeco shall have delivered,
upon reasonable request by the Company, other customary closing documents
reasonably satisfactory to the Company.
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SECTION 10 AMENDMENT
10.1 Amendment. This Agreement may be amended only by an instrument
signed by Barnabus, Exchangeco, the Company and the Stockholders'
Representative.
SECTION 11 INDEMNIFICATION
11.1 Survival. Notwithstanding any right of any party to fully
investigate the affairs of the other party and notwithstanding any knowledge of
facts determined or determinable by such party pursuant to such investigation or
right of investigation, each party has the right to rely fully upon the
representations, warranties, covenants and agreements of each other party in
this Agreement or in any certificate, financial statement or other document
delivered by any party pursuant hereto. All such representations, warranties,
covenants and agreements shall survive the execution and delivery hereof and the
Closing hereunder, subject to the limitations set forth in Section 11.5.
11.2 Obligation of the Stockholders to Indemnify. Each Stockholder hereby
severally and not jointly agrees to indemnify and hold harmless each of Barnabus
Indemnitees from and against all Losses based upon, arising out of or otherwise
in respect of any inaccuracy in or breach of any representation, warranty or
covenant of such Stockholder contained herein or any certificate delivered by
such Stockholder pursuant hereto.
11.3 Obligation of the Principal Stockholders to Indemnify. Each of the
Principal Stockholders hereby jointly and severally agrees to indemnify and hold
harmless each of Barnabus Indemnitees from and against all Losses based upon,
arising out of or otherwise in respect of any inaccuracy in or breach of any
representation, warranty or covenant of the Company contained herein or any
certificate delivered by it pursuant hereto.
11.4 Obligation of Barnabus to Indemnify. Barnabus and Exchangeco jointly
and severally agree to indemnify and hold harmless the Stockholders (and their
respective directors, officers, employees, agents, affiliates, heirs and
permitted assigns) from and against any Losses based upon, arising out of or
otherwise in respect of any inaccuracy in or breach of any representation,
warranty, or covenant of Barnabus or Exchangeco contained herein or any
certificate delivered pursuant hereto.
11.5 Limitation on Indemnification. Notwithstanding the foregoing:
(a) Threshold on Claims.
(i) Other than with respect to claims based on any
inaccuracy or breach of the representations made in Sections 3.1 (Title to
Shares) and 3.12 (No Finder's Fees), as to which this Section 11.5(a) shall not
apply, a Stockholder shall not have any obligation to make indemnification
payments with respect to Losses under Section 11.2 until the aggregate of all
claims against such Stockholder hereunder exceeds CDN $20,000.
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(ii) Other than with respect to Exempt Principal Stockholder
Claims, as to which this Section 11.5(a) shall not apply, the Principal
Stockholders shall not have any obligation to make indemnification payments with
respect to Losses under Section 11.3 until the aggregate of all claims against
the Principal Stockholders hereunder exceeds CDN $200,000.
(iii) Other than with respect to Exempt Barnabus Claims, as to
which this Section 11.5(a) shall not apply, Barnabus shall not have any
obligation to make indemnification payments with respect to Losses under Section
11.4 until the aggregate of all claims against Barnabus Indemnitees hereunder
exceeds CDN $200,000.
(b) Ceiling on Claims.
(i) No Stockholder shall have any obligation to make
indemnification payments with respect to Losses under Section 11.2, in the
aggregate, for all such claims against such Stockholder under Section 11.2 in
excess of the sum of (1) the Cash Consideration received by such Stockholder
(not taking into account any tax withholdings) plus (2) the aggregate number of
Barnabus Common Shares issued to such Stockholder pursuant to this Agreement
(not taking into account any tax withholdings) or the aggregate number of
Barnabus Common Shares issuable upon exchange of the Exchangeable Shares issued
to such Stockholder pursuant to this Agreement (not taking into account any tax
withholdings), absent fraud or intentional misrepresentation. With respect to
each indemnification claim, in determining how many shares of Barnabus Common
Shares or Exchangeable Shares a Stockholder must deliver in satisfaction of its,
his or her indemnification obligation hereunder, the parties hereto agree that
the market value per share of Barnabus Common Shares or Exchangeable Shares
shall be deemed to be equal to the volume-weighted average of the closing bid
and ask prices of a Barnabus Common Share during a period of 10 consecutive
trading days, commencing immediately after the date on which an announcement of
such claim has been made by Barnabus in compliance with applicable U.S.
securities laws, or to the extent that no such announcement is required, the
date on which notice is given under Section 11.6 hereof. Such Stockholder may,
in its, his or her discretion, satisfy any requirement hereunder to deliver a
Barnabus Common Share or an Exchangeable Share by paying an amount equal to the
market value of such shares in cash. Notwithstanding the foregoing, but subject
to Section 11.5(b)(iii), at any time prior to the delivery of the Adjusted
Additional Exchangeable Shares or the Adjusted Additional Barnabus Shares,
Exchangeco shall be entitled to deduct from the number of Adjusted Additional
Exchangeable Shares and the Adjusted Additional Barnabus Shares that it may
otherwise be obligated to deliver under Section 2.5 to such Stockholder such
number of Barnabus Common Shares or Exchangeable Shares that equals in market
value to such Losses for which any Barnabus Indemnitee is entitled to
indemnification pursuant to Section 11.2.
(ii) No Principal Stockholder shall have any obligation to
make indemnification payments with respect to Losses under Section 11.2 or 11.3,
in the aggregate, for all such claims against such Stockholder under Section
11.2 or 11.3 in excess of the sum of (1) the Cash Consideration received by such
Principal Stockholder (not taking into account any tax withholdings) plus (2)
the aggregate number of Barnabus Common Shares issued to such Principal
Stockholder pursuant to this Agreement (not taking into account any tax
withholdings) or the aggregate number of Barnabus Common Shares issuable upon
exchange of the Exchangeable Shares issued to such Principal Stockholder
pursuant to this Agreement (not taking into account any tax withholdings),
absent fraud or intentional misrepresentation. With respect to each
indemnification claim, in determining how many shares of Barnabus Common Shares
or Exchangeable Shares a Principal Stockholder must deliver in satisfaction of
its, his or her indemnification obligation hereunder, the parties hereto agree
that the market value per share of Barnabus Common Shares or Exchangeable Shares
shall be deemed to be equal to the volume-weighted average of the closing bid
and ask prices of a Barnabus Common Share during a period of 10 consecutive
trading days, commencing immediately after the date on which an announcement of
such claim has been made by Barnabus in compliance with applicable U.S.
securities laws, or to the extent that no such announcement is required, the
date on which notice is given under Section 11.6 hereof. Such Stockholder may,
in its, his or her discretion, satisfy any requirement hereunder to deliver a
Barnabus Common Share or an Exchangeable Share by paying an amount equal to the
market value of such shares in cash. Notwithstanding the foregoing, but subject
to Section 11.5(b)(iii), at any time prior to the delivery of the Adjusted
Additional Exchangeable Shares or the Adjusted Additional Barnabus Shares,
Exchangeco shall be entitled to deduct from the number of Adjusted Additional
Exchangeable Shares and the Adjusted Additional Barnabus Shares such number of
Barnabus Common Shares and Exchangeable Shares that it may otherwise be
obligated to deliver under Section 2.5 to such Principal Stockholders that
equals in market value to such Losses for which any Barnabus Indemnitee is
entitled to indemnification pursuant to Sections 11.2 and 11.3.
53
(iii) The Adjusted Additional Exchangeable Shares and Adjusted
Additional Barnabus Shares shall not be distributed on the date specified in
Section 2.5 if and to the extent that there is pending litigation, pending
arbitration or other similar proceeding or overtly threatened claims, to the
extent that such Adjusted Additional Exchangeable Shares and/or Adjusted
Additional Barnabus Shares are deemed to be necessary in the reasonable judgment
of Barnabus to reserve against such claims and Barnabus so notifies the
Stockholders' Representative in writing.
(iv) In determining how many Barnabus Company Shares or
Exchangeable Shares to withhold hereunder, the value of such shares shall be
calculated based on the volume-weighted average of the closing bid and ask
prices of a Barnabus Common Share during a period of 10 consecutive trading
days, commencing after the date on which an announcement of such claim has been
made by Barnabus in compliance with applicable U.S. securities laws, or to the
extent that no such announcement is required, the date on which notice is given
under Section 11.6 hereof.
(c) Time Limitations on Claims. No indemnification shall be
payable pursuant to Section 11.2, 11.3 or 11.4 on or after the earlier to occur
of (1) the end of the 18th full calendar month after the Closing Date and (2)
the 30th day after the delivery to Barnabus of the Company's 2006 Financial
Statements, unless a claim for such indemnification is made prior to such date
(the "Expiration Date"); except that indemnification for claims based on any
inaccuracy or breach of the representations made in Section 3.1 (Title to
Shares) shall be payable until after the expiration of the applicable statute of
limitations under New York law, unless a claim for such indemnification is made
prior to such date.
54
The limitations of this Section 11 shall not apply in the case of a fraud or
intentional misrepresentation by any party, or a deliberate or willful breach by
any party of its representations or warranties under this Agreement or in any
schedule, document or certificate delivered in connection with this Agreement.
11.6 Notice and Defense of Claims. Promptly after receipt of notice of
any Losses for which a party seeks indemnification hereunder, such party shall
give written notice thereof to the indemnifying party, but such notification
shall not be a condition to indemnification hereunder except to the extent of
actual and material prejudice to the indemnifying party. The notice shall state
the information then available regarding the amount and nature of such Losses
and shall specify the provision or provisions of this Agreement under which the
liability or obligation is asserted. In the case of a non-Third-Party Claim, the
parties hereto agree to comply with the provisions set forth in Section 11.8
hereto, as long as such claim remains a non-Third Party Claim. In the case of a
Third-Party Claim, if within thirty (30) days after receiving such notice the
indemnifying party gives written notice to the indemnified party stating that it
intends to defend against such Losses at its own cost and expense, then defense
of such matter, including selection of counsel (subject to the consent of the
indemnified party, which consent shall not be unreasonably withheld), shall be
by the indemnifying party and the indemnified party shall make no payment on
such Losses as long as the indemnifying party is conducting a good faith and
diligent defense. Notwithstanding the foregoing, the indemnified party shall at
all times have the right to fully participate in such defense of a Third-Party
Claim at its own expense directly or through counsel; provided, however, if the
named parties to the Third-Party Claim or proceeding include both the
indemnifying party and the indemnified party and representation of both parties
by the same counsel would be inappropriate under applicable standards of
professional conduct, the expense of one separate counsel for the indemnified
party shall be paid by the indemnifying party. If no such notice of intent to
dispute and defend is given by the indemnifying party, or if such diligent good
faith defense is not being or ceases to be conducted, the indemnified party
shall, at the expense of the indemnifying party, undertake the defense of such
Losses with counsel selected by the indemnified party, and shall have the right
to compromise or settle the same exercising reasonable business judgment. The
indemnified party shall make available all information and assistance that the
indemnifying party may reasonably request and shall cooperate with the
indemnifying party in such defense.
11.7 Additional Tax Covenants.
(a) (i) Barnabus shall timely prepare (or cause to be prepared)
and file (or cause to be filed) all Tax Returns of the Company for any taxable
year or period ending on or before the Closing Date which are not required to be
filed on or before the Closing Date. Barnabus shall permit the Stockholders'
Representative and his professional advisors to review and comment on each such
Tax Return described in the preceding sentence prior to filing and shall make
such revisions to such Tax Returns as are reasonably requested by the
Stockholders' Representative.
55
(ii) Barnabus shall timely prepare (or cause to be prepared)
and file (or cause to be filed) all Tax Returns of the Company for any taxable
year or period commencing prior to the Closing Date and ending subsequent to the
Closing Date. Barnabus shall permit the Stockholders' Representative and his
professional advisors to review and comment on each such Tax Return described in
the preceding sentence prior to filing and shall make such revisions to such Tax
Returns as are reasonably requested by the Stockholders' Representative.
(iii) The Tax Returns referred to in Sections 11.7(a)(i) and
11.7(a)(ii) shall, to the extent not otherwise required by Law, be prepared in a
manner consistent with the Company's past practice (including any Tax elections
and methods of accounting) as disclosed to Barnabus.
(b) Any Tax refunds that are received by Barnabus, Exchangeco or
the Company, and any amounts credited against Tax to which Barnabus, Exchangeco
or the Company become entitled, that relate to Tax periods or portions thereof
ending on or before the Closing Date shall be for the account of the Company.
(c) (i) Barnabus, Exchangeco and the Company, on one hand, and
Xxxxxx Xxxx and Xxx Xxxxxx, on the other hand, shall cooperate fully, as and to
the extent reasonably requested by the other party, in connection with the
filing of Tax Returns pursuant to this Section 11.7 and any audit, litigation or
other proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon the other party's request) the provision of records and
information which are reasonably relevant to any such audit, litigation or other
proceeding and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder. The Company agrees (x) to retain all books and records with respect
to Tax matters pertinent to the Company relating to any taxable period beginning
before the Closing Date until the expiration of the statute of limitations (and,
to the extent notified by Barnabus, Exchangeco or one of Xxxxxx Xxxx and Xxx
Xxxxxx, any extensions thereof) of the respective taxable periods, and to abide
by all record retention agreements entered into with any taxing authority, and
(y) to give the other party reasonable written notice prior to transferring,
destroying or discarding any such books and records and, if the other party so
requests, the Company shall allow the other party to take possession of such
books and records.
(ii) Barnabus, Xxxxxx Xxxx and Xxx Xxxxxx further agree, upon
request, to use their best efforts to obtain any certificate or other document
from any governmental authority or any other Person as may be necessary to
mitigate, reduce or eliminate any Tax that could be imposed (including, but not
limited to, with respect to the transactions contemplated hereby).
(iii) Barnabus, Xxxxxx Xxxx and Xxx Xxxxxx further agree, upon
request, to provide the other party with all information that either party may
be required to report pursuant to applicable Law.
(d) All transfer, documentary, sales, use, stamp, registration and
other such Taxes, and all conveyance fees, recording charges and other fees and
charges (including any penalties and interest) incurred in connection with the
consummation of the transactions contemplated by this Agreement shall be borne
by the Stockholders.
56
11.8 Arbitration. In the event of any non-Third-Party Claim made by a
party hereto pursuant to this Section 11, such claim shall be settled through
arbitration conducted in accordance with the Commercial Arbitration Rules of the
American Arbitration Association. Such arbitration shall be held in New York,
New York. A single arbitrator selected jointly by the parties shall conduct the
arbitration. If the parties are unable to agree to the appointment of an
arbitrator within thirty (30) days of delivery of the claim notice, the American
Arbitration Association shall appoint the arbitrator. The award through
arbitration shall be final and binding. Either party may enter any such award in
a court having jurisdiction or may make application to such court for judicial
acceptance of the award and an order of enforcement, as the case may be. Each
party shall bear its own costs and expenses related to the arbitration.
SECTION 12 TERMINATION
12.1 Termination. This Agreement may be terminated:
(a) at any time prior to the completion of the Closing by
Barnabus, by written notice to the Company and the Stockholders' Representative
signed by Barnabus, if any of the Key Employees has terminated his employment
with the Company, deceased or become disabled (for purposes of this Section the
term "disabled" shall mean the degree of incapacitation as a result of illness
or accident, whether physical or mental which, in the reasonable opinion of an
independent medical expert agreed to by Barnabus and the Company, makes it
unlikely within a reasonable degree of medical certainty that such Key Employee
will be able to perform his normal duties (with reasonable accommodations as
defined under the Americans with Disabilities Act, as amended) for the Company
for a period of ninety (90) days, whether or not consecutive, during any annual
period);
(b) at any time prior to the completion of the Closing by either
the Company and the Stockholders' Representative, on the one hand, or Barnabus,
on the other, by written notice to the other, if the Closing Date shall not have
occurred prior to March 15, 2006;
(c) at any time prior to the completion of the Closing by Barnabus
(provided that neither Barnabus nor Exchangeco is then in material breach of any
representation, warranty, covenant or other agreement contained herein), by
written notice to the Company and the Stockholders' Representative signed by
Barnabus, if Barnabus determines in good faith that a material adverse change
has occurred with respect to the assets, properties, business, prospects,
results of operations or financial condition of the Company, and such material
adverse change is not cured within fourteen (14) days after receipt of such
notice;
(d) at any time prior to the completion of the Closing by the
Company and the Stockholders' Repesentative (provided that neither the Company
nor any of the Stockholders is then in material breach of any representation,
warranty, covenant or other agreement contained herein), by written notice to
Barnabus signed by the Company and the Stockholders' Representative, if the
Company and the Stockholders' Representative determine in good faith that a
material adverse change has occurred with respect to the assets, properties,
business, prospects, results of operations or financial condition of Barnabus,
and such material adverse change is not cured within fourteen (14) days after
receipt of such notice;
57
(e) at any time prior to the completion of the Closing by either
the Company and the Stockholders' Representative, on the one hand, or Barnabus,
on the other, by written notice to the other, signed by the Company and the
Stockholders' Representative, on the one hand, or Barnabus, on the other, if any
Governmental Entity of competent jurisdiction shall have issued any injunction
or taken any other action permanently restraining, enjoining or otherwise
prohibiting the consummation of the Stock Purchase and such injunction or other
action shall have become final and non-appealable; provided, however, that any
party whose failure to fulfill its obligations under this Agreement shall have
been the cause of, or shall have resulted in, such action shall not be permitted
to terminate this Agreement pursuant to this Section 12.1(d);
(f) at any time prior to the completion of the closing by the
Company and the Stockholders' Representative, by written notice to Barnabus and
Exchangeco signed by the Company and the Stockholders' Representative if
Barnabus has failed to comply with its agreement as set forth in Seciton 7.10
hereof; or
(g) at any time prior to the completion of the Closing by written
consent signed by each of Barnabus and the Company.
12.2 Effect of Termination. If this Agreement is terminated as provided
in Section 12.1, this Agreement shall forthwith become void and have no effect,
without liability on the part of Barnabus, the Company and their respective
directors, officers or stockholders, except that (i) the provisions of Sections
11, 12, 13 and Section 7.4 shall survive and (ii) no such termination shall
relieve any party from liability by reason of any willful breach by such party
of any of its representations, warranties, covenants or other agreements
contained in this Agreement.
SECTION 13 MISCELLANEOUS
13.1 Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be deemed given when so delivered in
person, by overnight courier, by facsimile transmission (with receipt confirmed
by telephone or by automatic transmission report) or three (3) business days
after being sent by registered or certified mail (postage prepaid, return
receipt requested), as follows:
58
(a) if to Barnabus or Exchangeco, to:
Barnabus Energy, Inc.
000 Xxx xx xx Xxxxx
Xxxxxx Xxxxx, XX 00000
Attn: Xxxxx Xxxxxxx
Telephone: 000.000.0000
Facsimile: 858.794.8811
with a copy to:
Xxxxxxx Xxxxxx Xxxxxx & Dodge LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: D. Xxxxx Xxxxx, Esq.
Telephone: 000.000.0000
Facsimile: 212.308.4844
(b) if to the Company, to:
Solar Roofing Systems Inc.
000 Xxxxxxx Xxxxxx, Xxxx 0
Xxxxxx, Xxxxxxx
X0X 0X0
Attn: Xxxxxx Xxxx
Telephone: 000.000.0000
Facsimile: 905.841.9600
with a copy to:
Fasken Xxxxxxxxx XxXxxxxx LLP
Barristers and Solicitors
Patent and Trade-xxxx Agents
00 Xxxxxxxxxx Xxxxxx Xxxx
Xxxxx 0000, Xxxxxxx Dominion Xxxx Xxxxx
Xxx 00, Xxxxxxx-Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
Attn: Xxxxx Xxxxx, Esq.
Telephone: 000.000.0000
Facsimile: 000.000.0000
59
(c) if to the Stockholders' Representative, to:
Xxxxxx Xxxx
c/o Solar Roofing Systems Inc.
000 Xxxxxxx Xxxxxx, Xxxx 0
Xxxxxx, Xxxxxxx
X0X 0X0
Telephone: 000.000.0000
Facsimile: 905.841.9600
(d) if to a Stockholder, to such Stockholder's address specified
on the Address Certificate.
Any party may by notice given in accordance with this Section 12.1 to the other
parties designate another address or Person for receipt of notices hereunder.
13.2 Entire Agreement. This Agreement and the Related Agreements contain
the entire agreement between the parties with respect to the Stock Purchase and
related transactions, and supersede all prior agreements, written or oral,
between the parties with respect thereto.
13.3 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to its conflict
of law provisions.
13.4 Binding Effect; Assignment; No Third-Party Beneficiaries.
(a) This Agreement shall be binding upon and inure to the benefit
of the parties and their respective, executors, heirs, legal representatives,
successors and permitted assigns. This Agreement is not assignable without the
prior written consent of the other parties hereto, except by Barnabus to any of
its affiliates or by Barnabus in connection with the merger, consolidation or
sale of all or substantially all of its business or assets.
(b) Nothing in this Agreement, express or implied, is intended to
or shall confer upon any Person other than Barnabus, Exchangeco, the Company,
the Stockholders, the Key Employees and the Stockholders' Representative and
their respective executors, heirs, legal representatives, successors and
permitted assigns any right, benefit or remedy of any nature whatsoever under or
by reason of this Agreement.
13.5 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.
13.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument. Counterparts may be
exchanged by facsimile and shall be mutually binding on the parties.
60
13.7 Severability. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement shall 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. The
parties further agree to replace such invalid or unenforceable provision of this
Agreement with a valid and enforceable provision that will achieve, to the
extent possible, the economic, business and other purposes of such invalid or
unenforceable provision.
13.8 Submission to Jurisdiction; Waiver. Each of the Stockholders'
Representative, the Principal Stockholders, the Stockholders, Barnabus, the
Company and Exchangeco irrevocably agrees that any legal action or proceeding
with respect to this Agreement or for recognition and enforcement of any
judgment in respect hereof brought by the other party hereto or its, his or her
executors, heirs, legal representatives, successors or permitted assigns may be
brought and determined in any federal or state court located in the Borough of
Manhattan in the City of New York, New York, and each of the Stockholders'
Representative, the Principal Stockholders, the Stockholders, Barnabus, the
Company and Exchangeco hereby irrevocably submits with regard to any action or
proceeding for itself and in respect to its property, generally and
unconditionally, to the nonexclusive jurisdiction of the aforesaid courts. Each
of the Stockholders' Representative, the Principal Stockholders, the
Stockholders, Barnabus, the Company and Exchangeco hereby irrevocably waives,
and agrees not to assert, by way of motion, as a defense, counterclaim or
otherwise, in any action or proceeding with respect to this Agreement (a) any
claim that it is not personally subject to the jurisdiction of the above-named
courts for any reason other than the failure to lawfully serve process, (b) that
it or its property is exempt or immune from jurisdiction of any such court or
from any legal process commenced in such courts (whether through service of
notice, attachment prior to judgment, attachment in aid of execution of
judgment, execution of judgment or otherwise), and (c) to the fullest extent
permitted by applicable law, that (i) the suit, action or proceeding in any such
court is brought in an inconvenient forum, (ii) the venue of such suit, action
or proceeding is improper and (iii) this Agreement, or the subject matter
hereof, may not be enforced in or by such courts.
13.9 Enforcement. The parties recognize and agree that if for any reason
any of the provisions of this Agreement are not performed in accordance with
their specific terms or are otherwise breached, immediate and irreparable harm
or injury would be caused for which money damages would not be an adequate
remedy. Accordingly, each party agrees that in addition to other remedies the
other party shall be entitled to an injunction restraining any violation or
threatened violation of the provisions of this Agreement. In the event that any
action shall be brought in equity to enforce the provisions of the Agreement,
neither party will allege, and each party hereby waives the defense, that there
is an adequate remedy at law.
13.10 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any Law, regulation, holding or ruling
of construction providing that ambiguities in an agreement or other document
will be construed against the party drafting such agreement or document.
61
13.11 Waiver of Jury Trial. EACH OF BARNABUS, EXCHANGECO, THE COMPANY, THE
STOCKHOLDERS' REPRESENTATIVE, THE PRINCIPAL STOCKHOLDERS AND THE STOCKHOLDERS
HEREBY IRREVOCABLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM (WHETHER BASED IN CONTRACT, TORT OR OTHERWISE) ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY RELATED AGREEMENT OR ANY OTHER
RELATED DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENT OR
ACTION RELATED HERETO OR THERETO.
13.12 Currency. Unless otherwise indicated, all references to "dollars" or
"$" in this Agreement are to United States dollars.
13.13 Tax Advisor. ANY STOCKHOLDER WHO HAS QUESTIONS REGARDING THE TAX
CONSEQUENCES OF THE TRANSACTIONS CONTEMPLATED HEREIN SHOULD CONSULT ITS, HIS OR
HER PERSONAL TAX ADVISOR.
62
IN WITNESS WHEREOF, the parties have executed this Stock Purchase
Agreement under seal as of the date first stated above.
BARNABUS ENERGY, INC.
By
---------------------------------------
Name:
Title:
SOLAR ROOFING SYSTEMS INC.
By
---------------------------------------
Name:
Title:
2093603 ONTARIO INC.
By
---------------------------------------
Name:
Title:
(Signatures Continue on Following Page)
[Signature Page to Stock Purchase Agreement]
STOCKHOLDERS' REPRESENTATIVE:
-----------------------------------------
Xxxxxx Xxxx
STOCKHOLDERS:
-----------------------------------------
Name: Xxx Xxxxxx
-----------------------------------------
Name: Xxxxxxx Xxxxxxxx
-----------------------------------------
Name: Xxxx Xxxxxx
-----------------------------------------
Name: Xxxxxx Xxxx
Address:
Xxxx Family Trust
By: _____________________________________
Name:
Name: Xxxxxx Xxxxx
(Signatures Continue on Following Page)
[Signature Page to Stock Purchase Agreement]
-----------------------------------------
Name: Xxxx Xxxxxx
-----------------------------------------
Name: Krino Kafato
-----------------------------------------
Name: Xxxxxx Kafato
-----------------------------------------
Name: Xxxxx Knights
-----------------------------------------
Name: Xxxxxxx Xxxxx
-----------------------------------------
Name: Xxxxxxx Xxxxx
-----------------------------------------
Name: Xxxxxxx Xxxx
-----------------------------------------
Name: Xxxxxx Xxxxxx
1594505 Ontario Inc.
By:______________________________________
Name:
(Signatures Continue on Following Page)
[Signature Page to Stock Purchase Agreement]
-----------------------------------------
Name: Xxxxxxxx Xxxxxxxx
-----------------------------------------
Name: Xxxx Xxxxxxxx
-----------------------------------------
Name: Xxxxxx Xxxxx
-----------------------------------------
Name: Xxxxx Xxxxxx
-----------------------------------------
Name: Xxxx Xxxxxxx
-----------------------------------------
Name: Xxxxx Xxxxx
-----------------------------------------
Name: Xxxxx Xxxxx
Margreg Ltd
By:______________________________________
Name:
[Signature Page to Stock Purchase Agreement]
TABLE OF CONTENTS PAGE
SECTION 1 DEFINITIONS ........................................................................1
DEFINED TERMS 1
SECTION 2 PURCHASE AND SALE OF THE SHARES.....................................................9
2.1 Purchase of the Shares from the Stockholders............................................9
2.2 Further Assurances.....................................................................10
2.3 Estimated Purchase Price for the Purchased Shares......................................10
2.4 Closing................................................................................10
2.5 Post-Closing Earnout...................................................................11
2.6 Tax Clearance Certificate..............................................................12
2.7 Stockholders' Representative...........................................................12
2.8 Dispute Resolution.....................................................................14
2.9 Joint Tax Election.....................................................................14
SECTION 3 REPRESENTATIONS OF THE STOCKHOLDERS REGARDING THE SHARES..........................15
3.1 Title to Shares........................................................................15
3.2 Authority to Execute and Perform Agreements............................................15
3.3 No Conflict............................................................................15
3.4 No Breach..............................................................................15
3.5 Purchase Entirely for Own Account......................................................16
3.6 Disclosure of Information..............................................................16
3.7 Investment Experience..................................................................16
3.8 Risk...................................................................................16
3.9 Accredited Investor....................................................................16
3.10 Restricted Securities..................................................................17
3.11 Legends................................................................................18
3.12 No Finder's Fee........................................................................19
SECTION 4 REPRESENTATIONS AND WARRANTIES OF COMPANY..........................................19
4.1 Organization and Qualification; Records................................................19
4.2 Authority to Execute and Perform Agreements............................................20
4.3 Capitalization.........................................................................20
4.4 Company Affiliates, Subsidiaries and Joint Ventures....................................21
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4.5 Financial Statements...................................................................21
4.6 Absence of Undisclosed Liabilities.....................................................21
4.7 Absence of Adverse Changes.............................................................21
4.8 Compliance with Laws...................................................................22
4.9 Actions and Proceedings................................................................23
4.10 Contracts and Other Agreements.........................................................24
4.11 Title to Properties; Absence of Liens and Encumbrances.................................25
4.12 Intellectual Property..................................................................26
4.13 Insurance..............................................................................30
4.14 Supplier and Other Relationships.......................................................30
4.15 Accounts and Notes Receivable..........................................................30
4.16 Inventory..............................................................................30
4.17 Tax Matters............................................................................30
4.18 Employee Benefit Plans.................................................................32
4.19 Employee Relations.....................................................................33
4.20 Environmental Matters..................................................................34
4.21 No Breach..............................................................................35
4.22 Bank Accounts and Powers of Attorney...................................................35
4.23 Full Disclosure........................................................................35
4.24 No Finder's Fee........................................................................36
4.25 No Change in Business..................................................................36
4.26 Exempt Take-over Bid...................................................................36
SECTION 5 REPRESENTATIONS AND WARRANTIES OF BARNABUS.........................................36
5.1 Organization and Qualification.........................................................36
5.2 Authority to Execute and Perform Agreement.............................................36
5.3 No Breach..............................................................................37
5.4 Capitalization.........................................................................37
5.5 Barnabus Financial Statements..........................................................38
5.6 SEC Documents..........................................................................39
5.7 Intellectual Property..................................................................39
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5.8 Environmental Matters..................................................................40
5.9 Litigation.............................................................................41
5.10 Internal Controls......................................................................41
5.11 Tax Matters............................................................................42
5.12 Full Disclosure........................................................................42
5.13 No Finder's Fee........................................................................42
SECTION 6 REPRESENTATIONS AND WARRANTIES OF EXCHANGECO.......................................42
6.1 Organization and Qualification.........................................................43
6.2 Authority to Execute and Perform Agreement.............................................43
6.3 No Breach..............................................................................43
6.4 Capitalization.........................................................................44
6.5 No Operations..........................................................................44
6.6 Full Disclosure........................................................................44
6.7 No Finder's Fee........................................................................44
SECTION 7 COVENANTS AND AGREEMENTS...........................................................44
7.1 Expenses...............................................................................44
7.2 Authorization from Others..............................................................45
7.3 Further Assurances.....................................................................45
7.4 Public Announcements...................................................................45
7.5 Designation of Nominee.................................................................45
7.6 Resignations...........................................................................45
7.7 Directors & Officers' Insurance........................................................45
7.8 Conduct of Business....................................................................46
7.9 Notification...........................................................................48
7.10 Additional Funding.....................................................................49
SECTION 8 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BARNABUS AND EXCHANGECO TO CONSUMMATE
THE STOCK PURCHASE.................................................................49
8.1 Representations, Warranties and Covenants..............................................49
8.2 Company Corporate Certificates.........................................................49
8.3 Company's Certificate..................................................................49
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8.4 Consents...............................................................................49
8.5 Opinion of Counsel to Company and the Stockholders.....................................49
8.6 Litigation.............................................................................49
8.7 Resignations...........................................................................50
8.8 Section 116 Compliance.................................................................50
8.9 Investor Questionnaires................................................................50
8.10 Concurrent and Additional Financings...................................................50
8.11 Concurrent Acquisition.................................................................50
8.12 Other Agreements.......................................................................50
8.13 Closing Documents......................................................................50
SECTION 9 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF COMPANY AND THE STOCKHOLDERS TO
CONSUMMATE THE STOCK PURCHASE......................................................50
9.1 Representations, Warranties and Covenants..............................................50
9.2 Corporate Certificates.................................................................51
9.3 Officer's Certificate..................................................................51
9.4 Delivery of the Estimated Purchase Price...............................................51
9.5 Delivery of Share Consideration........................................................51
9.6 Opinions of Counsel to Barnabus........................................................51
9.7 Concurrent and Additional Financings...................................................51
9.8 Concurrent Acquisition.................................................................51
9.9 Other Agreements.......................................................................51
9.10 Closing Documents......................................................................52
SECTION 10 AMENDMENT..........................................................................52
10.1 Amendment..............................................................................52
SECTION 11 INDEMNIFICATION....................................................................52
11.1 Survival...............................................................................52
11.2 Obligation of the Stockholders to Indemnify............................................52
11.3 Obligation of the Principal Stockholders to Indemnify..................................52
11.4 Obligation of Barnabus to Indemnify....................................................52
11.5 Limitation on Indemnification..........................................................52
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(CONTINUED)
PAGE
11.6 Notice and Defense of Claims...........................................................55
11.7 Additional Tax Covenants...............................................................55
11.8 Arbitration............................................................................57
SECTION 12 TERMINATION........................................................................57
12.1 Termination............................................................................57
12.2 Effect of Termination..................................................................58
SECTION 13 MISCELLANEOUS......................................................................58
13.1 Notices................................................................................58
13.2 Entire Agreement.......................................................................60
13.3 Governing Law..........................................................................60
13.4 Binding Effect; Assignment; No Third-Party Beneficiaries...............................60
13.5 Section Headings, Construction.........................................................60
13.6 Counterparts...........................................................................60
13.7 Severability...........................................................................61
13.8 Submission to Jurisdiction; Waiver.....................................................61
13.9 Enforcement............................................................................61
13.10 Rules of Construction..................................................................61
13.11 Waiver of Jury Trial...................................................................62
13.12 Currency...............................................................................62
13.13 Tax Advisor............................................................................62
CANADIAN STOCKHOLDERS XXXI
U.S. STOCKHOLDERS XXXII
v
SCHEDULES
Schedule I List of Stockholders and Allocation of Purchase Price
Schedule II Employee Transaction Payments
Stockholders Disclosure Schedule
Company Disclosure Schedule
Barnabus Disclosure Schedule
Exchangeco Disclosure Schedule
EXHIBITS
Exhibit A Projected Gross Sales
Exhibit B Form of Officer's Certificate of the Company
Exhibit C Form of Officer's Certificate of Barnabus and Exchangeco
Exhibit D Form of Opinion of Fasken Xxxxxxxxx XxXxxxxx LLP
Exhibit E Form of Opinion of Xxxxxxx Xxxxxx Xxxxxx & Dodge LLP
Exhibit F Form of Opinion of Barnabus' Nevada counsel
Exhibit G Form of Opinion of Gowling Xxxxxxx Xxxxxxxxx LLP
Exhibit H Form of Support Agreement
Exhibit I Form of Registration Rights
Exhibit J Form of Section 116 Escrow Agreement
Exhibit K Form of Exchange Right Agreement
Exhibit L Form of Investor Questionnaire
vi
Schedule I
List of Stockholders and Allocation of Purchase Price
CANADIAN STOCKHOLDERS
-------------------------------------------------- --------------- ------------------ -----------------------------
Stockholder Name Estimated Number Purchase Price Percentage
---------------- Number of of Exchangeable (calculated based on all the
Company Shares Shares Stockholders)
-------------- ---------------- ----------------------------
-------------------------------------------------- --------------- ------------------ -----------------------------
Xxxxxxx Xxxxxxxx 671,429 405,869 6.3773%
-------------------------------------------------- --------------- ------------------ --------------------------------
Xxxx Xxxxxx 350,000 211,570 3.3243%
-------------------------------------------------- --------------- ------------------ --------------------------------
Xxxxxx Xxxx 2,550,000 1,539,718 24.2201%
-------------------------------------------------- --------------- ------------------ --------------------------------
Xxxx Family Trust 85,714 53,533 .8141%
-------------------------------------------------- --------------- ------------------ --------------------------------
Xxxxxx Xxxxx 268,619 162,376 2.5514%
-------------------------------------------------- --------------- ------------------ --------------------------------
Xxxx Xxxxxx 97,190 58,750 .9231%
-------------------------------------------------- --------------- ------------------ --------------------------------
Krino Kafato 87,667 52,993 .8327%
-------------------------------------------------- --------------- ------------------ --------------------------------
Xxxxxx Kafato 2,635,714 1,593,251 25.0343%
-------------------------------------------------- --------------- ------------------ --------------------------------
Xxxxx Knights 104,016 62,878 .9880%
-------------------------------------------------- --------------- ------------------ --------------------------------
Xxxxx Xxxxx 7,143 4,318 .0678%
-------------------------------------------------- --------------- ------------------ --------------------------------
Xxxxxxx Xxxxx 155,333 93,897 1.4754%
-------------------------------------------------- --------------- ------------------ --------------------------------
-------------------------------------------------- --------------- ------------------ --------------------------------
Xxxxxx Xxxxxx 648,571 392,052 6.1602%
-------------------------------------------------- --------------- ------------------ --------------------------------
1594505 Ontario Inc. 66,667 40,299 .63320%
-------------------------------------------------- --------------- ------------------ --------------------------------
Xxxx Xxxxxxx 142,857 86,355 1.3569%
-------------------------------------------------- --------------- ------------------ --------------------------------
Xxxxx Xxxxx 7,143 4,318 .0678%
-------------------------------------------------- --------------- ------------------ --------------------------------
Margreg Ltd. 215,000 129,964 2.0421%
-------------------------------------------------- --------------- ------------------ --------------------------------
CANADIAN STOCKHOLDER TOTAL 8,093,063 4,892,141 76.8685%
----------------------------------------------------------------------------------------------------------------------
U.S. STOCKHOLDERS
-------------------------------------------------- --------------- ------------------ --------------------------------
Stockholder Name Estimated Number Purchase Price Percentage
---------------- Number of of Barnabus (calculated based on all the
Company Shares Common Shares Stockholders)
-------------- ------------- -------------
-------------------------------------------------- --------------- ------------------ --------------------------------
Xxx Xxxxxx 400,000 241,794 3.7992%
-------------------------------------------------- --------------- ------------------ --------------------------------
Xxxxxxx Xxxx 200,000 120,897 1.8996%
-------------------------------------------------- --------------- ------------------ --------------------------------
Xxxxxxxx Xxxxxxxx 176,014 106,398 1.6718%
-------------------------------------------------- --------------- ------------------ --------------------------------
Xxxx Xxxxxxxx 176,014 106,398 1.6718%
-------------------------------------------------- --------------- ------------------ --------------------------------
Xxxxxx Xxxxx 202,414 122,356 1.9225%
-------------------------------------------------- --------------- ------------------ --------------------------------
Xxxxx Xxxxxx 171,429 103,626 1.6282%
-------------------------------------------------- --------------- ------------------ --------------------------------
Xxxxxxx Xxxxx 1,109,524 670,691 10.5383%
-------------------------------------------------- --------------- ------------------ --------------------------------
US STOCKHOLDER TOTAL 2,435,395 1,472,160 23.1315%
-------------------------------------------------- --------------- ------------------ --------------------------------
-------------------------------------------------- --------------- ------------------ --------------------------------
US AND CANADIAN STOCKHOLDER TOTAL 10,528,458 6,364,301 100%
-------------------------------------------------- --------------- ------------------ --------------------------------
Schedule II
Exhibit A
Projected Gross Sales of Solar Roofing Systems Inc. for Fiscal 2006
CND $12,200,000 as determined in accordance with Canadian GAAP.
