EXHIBIT 2.1
AGREEMENT AND PLAN OF
MERGER
This Agreement and Plan of Merger
(“ Agreement ”) is made and entered into as of
September 15, 2008, by and among Balqon Corporation, a California
corporation, with its principal office at 1701 E. Edinger, Unit
E-3, Santa Ana, California, 92705 (“ Balqon ”),
BMR Solutions, Inc., a Nevada corporation, with its principal
office at 1184 Rutland Road, Suite 2, Newport Beach, CA 92660
(“ BMR ”), and Balqon Acquisition Corp., a
newly-formed wholly-owned subsidiary of BMR (“ Acquisition
Sub ”).
RECITALS
A. BMR and Balqon intend to
effect a reverse triangular merger, pursuant to which Balqon will
merge with and into Acquisition Sub and Acquisition Sub will
survive and, in connection therewith, will cause its name to be
changed to “Balqon Corporation.” Immediately
thereafter, Acquisition Sub will merge with and into BMR, and BMR
will survive and, in connection therewith, will cause its name to
be changed to “Balqon Corporation.” The
merger transactions described above are collectively referred to
herein as the “ Mergers .”
B. The parties intend that the
Mergers contemplated by this Agreement will qualify as tax-free
reorganizations within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder (the “ Tax Code
”).
NOW, THEREFORE
, in consideration of the foregoing
and the representations, warranties and mutual covenants herein
made, the parties hereby agree to the foregoing and as
follows:
Section 1.
Definitions.
Capitalized terms not
otherwise defined herein have the meanings set forth in the
attached Schedule 1 .
Section 2.
The Mergers.
(a) Effecting the
Mergers . Upon the terms and subject to the
conditions contained in this Agreement, at the Effective Time,
Balqon shall be merged with and into Acquisition Sub, and the
separate corporate existence of Balqon shall thereupon
cease. In connection therewith, Acquisition Sub’s
name will be changed to “Balqon
Corporation.” Immediately thereafter, BMR will
merge Acquisition Sub into BMR pursuant to a Plan of Merger adopted
by the board of directors of BMR (the “ Board ”)
substantially in the form of Exhibit A attached hereto and
Articles of Merger substantially in the form of Exhibit B
attached hereto, each filed with the Secretary of State of the
State of Nevada in accordance with Section 92A.180 of the Nevada
Revised Statutes (2007). As a result of the Mergers, the
separate corporate existence of Acquisition Sub will cease, BMR
will continue as the surviving corporation (the “
Surviving Corporation ”), and the name of BMR will be
changed to “Balqon Corporation.” At the
Effective Time, all the properties, rights and privileges, and
power of Balqon, shall vest in the Surviving Corporation, and all
debts, liabilities and duties of Balqon shall become the debts,
liabilities and duties of the Surviving Corporation.
(b) Effect on
Capital Stock . Subject to the terms and conditions
of this Agreement, at the Effective Time, by virtue of the Mergers
and without any action on the part of BMR, Balqon and Acquisition
Sub or the holders of any of the following securities, the
following shall occur:
(i) Conversion of
Shares. Each share of common stock of Balqon, no par value per
share (“ Balqon Common Stock ”), that is issued
and outstanding immediately prior to the Effective Time will, by
virtue of the Merger and without any action on the part of any
holder thereof, be converted into and will become one (1) share
(the “ Share Ratio ”) of validly issued, fully
paid and non-assessable common stock of BMR, $0.001 par value per
share (the “ BMR Common Stock ”). All
shares of BMR Common Stock issued upon the surrender for exchange
of shares of Balqon Common Stock in accordance with the terms
hereof shall (i) contain a restricted securities legend in
compliance with the Securities Act and (ii) be deemed to have been
issued in full satisfaction of all rights pertaining to such shares
of Balqon Common Stock. There shall be no further
registration of transfers on the stock transfer books of Balqon of
the shares of Balqon Common Stock that were outstanding immediately
prior to the Effective Time.
(ii) Fractional
Shares. No fractional shares will be issued in connection with
the conversion of Baqon Common Stock into BMR Common Stock, and any
right to receive a fractional share will be rounded-up to the
nearest whole share of BMR Common Stock.
(iii) Cancellation of
Shares of Balqon Common Stock . At the Effective Time, the
shares of Balqon Common Stock will be deemed cancelled and retired
and will cease to exist, and each holder of a certificate for
shares of Balqon Common Stock will cease to have any rights with
respect thereto; provided , however , that, following
the Closing Date, upon surrender of an original stock certificate
representing shares of Balqon Common Stock, BMR shall deliver a
stock certificate for shares of BMR Common Stock to which such
person is entitled pursuant to the Share Ratio, bearing any
necessary or appropriate restricted securities legend. The effect
of the Mergers shall be as provided in the applicable provisions of
Nevada Law.
(c) Dissenting
Shares of Balqon Common Stock . Each outstanding
share of Balqon Common Stock as to which a written demand for
purchase is made in accordance with Section 1301 of the California
Corporations Code, stating that the record holder demand that his
shares be purchased in cash for their fair market value, and which
is not voted in favor of the Mergers, shall not be converted into
shares of BMR Common Stock unless and until the holder shall have
failed to perfect or shall have effectively withdrawn or lost his
right to payment of the fair market value of his shares of Balqon
Common Stock under Sections 1300 to 1309, inclusive, of the
California Corporations Code, at which time such shares of Balqon
Common Stock shall be converted into whole shares of BMR Common
Stock in the same manner as provided for other outstanding shares
of Balqon Common Stock in Section 2(b) and such holder shall
be entitled to receive certificates for whole shares of BMR Common
Stock in accordance with the terms hereof. All such
shares of Balqon Common Stock as to which such a written demand is
made pursuant to Section 1301 of the California Corporations Code
and which are not voted in favor of the Mergers, except any such
shares of Balqon Common Stock the holder of which shall have
effectively withdrawn or lost his right to payment for his shares
under Sections 1300 to 1309 of the California Corporations Code,
are herein called “ Dissenting Balqon Shares
.” Balqon shall give BMR prompt notice of any
Dissenting Balqon Shares (and shall also give BMR prompt notice of
any withdrawals of demands for purchase) and Balqon and BMR shall
mutually direct all negotiations and proceedings with respect to
any such demands. Balqon shall not, except with the
prior written consent of BMR, voluntarily make any payment with
respect to, or settle or offer to settle, any such demand for
purchase.
(d) Lost, Stolen or
Destroyed Certificates . If any certificate
evidencing shares of Balqon Common Stock shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact
by the person claiming the certificate to be lost, stolen or
destroyed and, if required by BMR, the posting of an indemnity
bond, in such reasonable amount as BMR or the transfer agent may
direct, as collateral security against any claim that may be made
with respect to the certificate, BMR
shall issue in exchange for the lost, stolen or destroyed
certificate the applicable number of shares of BMR Common
Stock.
(e) Balqon Warrants
and Options . The warrants (the “
Warrants ”) and options (the “ Options
”) to purchase shares of Balqon Common Stock outstanding at
the Effective Time and listed in Section 5(b) of the Balqon
Schedule (as such Schedule shall be updated, as necessary,
immediately prior to the Effective Time to reflect, among other
things, any issuance of additional Warrants between the date hereof
and immediately prior to the Effective Time), shall, by virtue of
the Mergers and without any further action on the part of any
holder of the Warrants and/or Options, be converted into warrants
and/or options, as the case may be, to purchase the same number of
shares of BMR Common Stock at the same exercise price and upon the
same terms as contained in the Warrants and Options, as the case
may be.
(f) Pre-Merger
Increase in Issued and Outstanding Shares of Balqon Common
Stock . BMR acknowledges and agrees that Balqon has
issued certain convertible promissory notes in the aggregate amount
of $500,000 and may issue up to an additional $1,000,000 in
convertible promissory notes prior to the Effective Time
(collectively, the “ Bridge Notes
”). Immediately preceding the Effective Time, up
to $1,500,000 of convertible promissory notes (including $1,000,000
of Bridge Notes), together with accrued and unpaid interest
thereon, shall automatically convert into shares of Balqon Common
Stock pursuant to the terms and conditions contained in such
convertible promissory notes. Balqon may also issue up
to 3,000,000 shares of Balqon Common Stock at $1.00 per share
pursuant to the terms of a private placement with Accredited
Investors (the “ Private Placement
”). The parties hereto acknowledge and agree that
in connection with the issuance of the Bridge Notes and Balqon
Common Stock pursuant to the Private Placement, Balqon will issue
Warrants to the Bridge Note and Private Placement
investors.
(g) Pre-Merger
Issuance of BMR Warrants . Balqon acknowledges and
agrees that at the Effective Time, BMR shall have issued and
outstanding warrants to purchase an aggregate of 297,738 shares of
BMR Common Stock (the “ BMR Warrants
”). One-third of the BMR Warrants shall have an
exercise price of $1.50 per share and expire one year after the
Closing Date, one-third of the BMR Warrants shall have an exercise
price of $2.00 per share and expire two years after the Closing
Date and one-third of the BMR Warrants shall have an exercise price
of $2.50 per share and expire three years after the Closing
Date.
(h) Cancellation of
BMR Common Stock . In consideration of
Balqon’s willingness to enter into the transactions
contemplated by this Agreement and in order to provide an a
appropriate capital structure after the Closing, immediately prior
to the Effective Time, BMR and certain stockholders of BMR shall
enter into a stock cancellation agreement (the “
Cancellation Agreement ”) pursuant to which BMR shall
cause to be cancelled 6,377,500 shares of BMR Common Stock held by
such BMR stockholders.
(i)
Reorganization . The parties intend to adopt this
Agreement and the Mergers as a plan of reorganization under Section
368(a) of the Tax Code. The BMR Common Stock issued in
the Mergers will be issued solely in exchange for Balqon Common
Stock, and no other transaction other than the Mergers represent,
provides for or is intended to be an adjustment to the
consideration paid for the Balqon Common Stock. No
consideration that could constitute “other property”
within the meaning of Section 356(b) of the Tax Code is being
transferred by BMR for Balqon Common Stock in the
Mergers. The parties shall not take a position on any
tax return inconsistent with this Section 2(g).
(j) Further
Actions . If at any time after the Effective Time,
BMR or Balqon reasonably determines that any deeds, assignments, or
instruments, or conformations of transfer are necessary or
desirable to carry out the purposes of this Agreement and to vest
BMR with full right, title and possession to all assets, property,
rights, privileges, powers and franchises of Balqon, the officers
and directors of BMR and Balqon are fully authorized in the name of
their respective corporations or otherwise to take, and will take,
all such lawful and necessary or desirable actions.
Section 3.
Closing.
(a) Closing
Date . On the terms and subject to the conditions of
this Agreement, the closing of the Mergers (the “
Closing ”) shall take place at the offices of Rutan
& Tucker, LLP, 611 Anton Boulevard, 14 th Floor, Costa Mesa, California, 92626, at 10:00
a.m., local time, on such date as the parties hereto shall mutually
agree upon or such other time, date or place as the parties may
otherwise agree (the “ Closing Date
”).
(b) Documents to be
Delivered by BMR . On or before the Closing, BMR
will deliver or cause to be delivered to Balqon:
(i) the original or
certified copies of the charter documents of BMR, including
amendments thereof, and all corporate records documents and
instruments of BMR, the corporate seal of BMR and all books and
accounts of BMR;
(ii) all consents or
approvals required to be obtained by BMR for the purposes of
completing the Merger;
(iii) a certified copy
of a resolution of the directors of BMR dated as of the Closing
Date appointing the nominee of Balqon to the board of directors of
BMR;
(iv) resignations of
all of the directors of BMR as of the Closing Date;
(v) the Cancellation
Agreement, executed by BMR and certain BMR stockholders;
(vi) the BMR
Registration Rights Agreement, executed by BMR and the stockholders
of BMR as of immediately prior to the Effective Time;
(vii) certified copies
of such resolutions of the directors of BMR as are required to be
passed to authorize the execution, delivery and implementation of
this Agreement; and
(viii) good standing
certificates of BMR from the State of Nevada and the State of
California and tax clearances of BMR from the State of
California.
Section 4.
Directors and Officers of
BMR. The
directors and officers of Balqon immediately prior to the Effective
Time shall be the directors and officers of BMR from and after the
Effective Time, in accordance with BMR’s Articles of
Incorporation and Bylaws. On the Closing Date or as soon
thereafter as practicable, BMR shall file with the Securities and
Exchange Commission (the “SEC” ) and transmit to
the stockholders of record of BMR on such date the information
required by Exchange Act Rule 14f-1 with regard hereto.
Section 5.
Balqon’s Representations
and Warranties. Except as set forth in the
disclosure schedule delivered by Balqon to BMR (the “
Balqon Schedule ”) specifically identifying the
Section of this Agreement requiring delivery of such disclosure,
Balqon represents and warrants to BMR as set forth
below:
(a)
Organization . Balqon is a corporation validly
existing and in good standing under the laws of the State of
California and has all requisite power and authority and possesses
all necessary governmental approvals necessary to own, lease and
operate its properties, to carry on its business as now being
conducted, to execute and deliver this Agreement and the agreements
contemplated herein, and to consummate the transactions
contemplated hereby and thereby. Balqon is duly
qualified to do business and is in good standing in all
jurisdictions in which its ownership of property or the character
of its business requires such qualification, except where the
failure to be so qualified would not reasonably be expected to have
an Adverse Effect. Certified copies of the Articles of
Incorporation of Balqon, as amended to date, have
been made available to BMR, are complete and correct, and no
amendments have been made thereto or have been authorized since the
date thereof. Balqon is not in violation of any of the
provisions of its Articles of Incorporation or Bylaws.
(b)
Capitalization . Balqon’s authorized
capital stock consists solely of 100,000,000 shares of common
stock, no par value per share. As of the date of this
Agreement, 22,000,000 shares of Balqon’s Common Stock are
issued and outstanding. All of the issued and
outstanding shares of Balqon Common Stock are validly issued, fully
paid and non-assessable, not subject to preemptive rights, and were
issued in compliance with all applicable state and federal
securities laws. Except as set forth in
Section 5(b) of the Balqon Schedule, there are no outstanding
(A) options, warrants, or other rights to purchase from Balqon any
capital stock of Balqon; (B) debt securities or instruments
convertible into or exchangeable for shares of capital stock of
Balqon; or (C) commitments of any kind for the issuance of
additional shares of capital stock, options, warrants or other
securities of Balqon.
(c) No
Subsidiaries . Balqon does not own any capital stock
or other equity interest in any corporation, partnership, joint
venture or other entity.
(d)
Authorization . Balqon has all requisite power
and authority to execute and deliver this Agreement, to perform its
obligations hereunder, and to consummate the transactions
contemplated hereby. The execution and delivery of this
Agreement by Balqon and the consummation by Balqon of the
transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action by Balqon and no other
corporate proceedings on the part of Balqon, other than the
approval of the shareholders of Balqon, is necessary to authorize
this Agreement or to consummate the transactions contemplated
hereby. This Agreement has been duly and validly
executed and delivered by Balqon. This Agreement and all
other agreements and obligations entered into and undertaken in
connection with the transactions contemplated hereby to which
Balqon is a party constitute the valid and legally binding
obligations of Balqon, enforceable against Balqon in accordance
with their respective terms, except as may be limited by principles
of equity or applicable bankruptcy, reorganization, insolvency,
moratorium, fraudulent conveyance or other similar laws relating to
or affecting the rights and remedies of creditors
generally. Except as set forth in Section 5(d) of the
Balqon Schedule, the execution, delivery and performance by Balqon
of this Agreement and the agreements provided for herein, and the
consummation by Balqon of the transactions contemplated hereby and
thereby, will not, with or without the giving of notice or the
passage of time or both, violate the provisions of the Articles of
Incorporation or Bylaws of Balqon, or to Balqon’s Knowledge
(i) violate the provisions of any law, rule or regulation
applicable to Balqon, (ii) violate any judgment, decree, order
or award of any court, governmental body or arbitrator; or
(iii) conflict with or result in the breach or termination of
any term or provision of, or constitute a default under, or cause
any acceleration under, or cause the creation of any lien, charge
or encumbrance upon the properties or assets of Balqon pursuant to,
any indenture, mortgage, deed of trust or other instrument or
agreement to which Balqon is a party or by which Balqon or any of
its properties is or may be bound.
(e) No Conflict
. Except as set forth in Section5(e) of the Balqon
Schedule, the execution and delivery of this Agreement by Balqon
does not require any consent or approval under, result in any
breach of, result in any loss of any benefit under, or constitute a
change of control or default (or an event which with notice or
lapse of time or both would become a default) under; give to others
any right of termination, vesting, amendment, acceleration or
cancellation of; or result in the creation of any lien or
encumbrance on any property or asset of Balqon pursuant to any;
material agreement of Balqon or other instrument or obligation of
Balqon.
(f) Litigation
. There is no action, suit, legal or administrative
proceeding or investigation pending or, to Balqon’s
Knowledge, threatened, against or involving Balqon (either as a
plaintiff or defendant) before any court or governmental agency,
authority, body or arbitrator. There is not in existence
on the date hereof any order, judgment or decree of any court,
tribunal or agency to Balqon’s Knowledge enjoining or
requiring Balqon to take any action of any kind with respect to its
business, assets or properties.
(g) Insurance
. Section 5(g) of the Balqon Schedule contains a
listing of all current Balqon insurance policies. To
Balqon’s Knowledge, all current insurance policies are in
full force and effect, are in amounts of a nature that are adequate
and customary for Balqon’s business, and to Balqon’s
Knowledge are sufficient for compliance with all legal requirements
and agreements to which it is a party or by which it is
bound. All premiums due on current policies or renewals
have been paid, and there is no material default under any of the
policies.
(h) Personal
Property . Balqon has good and marketable title to
all of its tangible personal property free and clear of all liens,
leases, encumbrances, claims under bailment and storage agreements,
equities, conditional sales contracts, security interests, charges,
and restrictions, except for liens, if any, for personal property
taxes not due. Such property is used by Balqon in the
ordinary course of its business and is sufficient for continued
conduct of Balqon’s business after the Closing Date in
substantially the same manner as conducted prior to the Closing
Date. Such property is in good operating condition and
repair, normal wear and tear excepted, and normal maintenance has
been performed.
(i) Intangible
Property . Balqon owns, or possesses, adequate
licenses or other valid rights to use all existing United States
and foreign patents, trade names, service marks, copyrights, trade
secrets, and applications therefor listed in Section 5(i) of the
Balqon Schedule, which are material to its business as currently
conducted (the “ Balqon Intellectual Property Rights
”). Balqon has the right and authority to use, and
to continue to use after the Closing Date, such Balqon Intellectual
Property Rights in connection with the conduct of its business in
the manner presently conducted, and to Balqon’s Knowledge
such use or continuing use does not and will not materially
infringe upon or violate any rights of any other person.
(j) Real
Property . Balqon is a party to the lease agreements
listed in Section 5(j) of the Balqon Schedule. Except as
set forth in the preceding sentence, Balqon does not have any
interests in any parcel of real property, improved or
otherwise.
(k) Tax Matters
. Within the times and in the manner prescribed by law,
Balqon has filed all federal, state and local tax returns and all
tax returns for other governing bodies having jurisdiction to levy
taxes upon it that are required to be filed. Balqon has
paid all taxes, interest, penalties, assessments and deficiencies
that have become due, including without limitation income,
franchise, real estate, and sales and withholding
taxes. No examinations of the federal, state or local
tax returns of Balqon are currently in progress or threatened and
no deficiencies have been asserted or, to Balqon’s Knowledge,
assessed against Balqon as a result of any audit by the Internal
Revenue Service or any state or local taxing authority and no such
deficiency has been proposed or threatened.
(l) Books and
Records . The general ledger and books of account of
Balqon, all minute books of Balqon, all federal, state and local
income, franchise, property and other tax returns filed by Balqon,
all of which have been made available to BMR, are in all material
respects complete and correct and have been maintained in
accordance with good business practice and in accordance with all
applicable procedures required by laws and regulations.
(m) Contracts and
Commitments . Section 5(m) of the Balqon
Schedule lists all material contracts and agreements to which
Balqon is a party, whether written or oral, other than those
between Balqon and BMR. Each such contract is a valid
and binding agreement of Balqon, enforceable against Balqon in
accordance with its terms, is in full force and effect and
represents the material terms of the agreement between the
respective parties. Balqon has materially complied with
all obligations required pursuant to such contracts to have been
performed by Balqon on its part and neither Balqon nor, to its
Knowledge, any other party to such contract is in breach of or
default in any material respect under any such contract.
(n) Compliance with
Laws . Balqon has all requisite licenses, permits
and certificates, including environmental, health and safety
permits, from federal, state and local authorities necessary to
conduct its business as currently conducted and own and operate its
assets, except where the failure to have such permits would not
reasonably be expected to have an Adverse Effect. To
Balqon’s Knowledge, Balqon is not in violation of any
federal, state or local law, regulation or ordinance (including,
without limitation, laws, regulations or ordinances relating to
building, zoning, environmental, disposal of hazardous waste, land
use or similar matters) relating to its business or its
properties.
(o) Employee
Benefit Plans . Section 5(o) of the Balqon
Schedule lists all employee benefit plans as defined in ERISA
Section 3(3), and all bonus, stock option, stock purchase,
incentive, deferred compensation, supplemental retirement,
severance and other similar employee benefit plans, and all
material unexpired severance agreements with any current or former
employee of Balqon. With respect to such plans,
individually and in the aggregate, no event has occurred and, to
its Knowledge, there exists no condition or set of circumstances in
connection with which Balqon could be subject to any liability that
is reasonably likely to have an Adverse Effect under ERISA, the Tax
Code or any other applicable law.
(p) Indebtedness to
and from Affiliates . Balqon is not indebted,
directly or to its Knowledge indirectly, to any officer, director
or 10% stockholder of Balqon in any amount other than for salaries
for services rendered or reimbursable business expenses, and no
such person is indebted to Balqon except for advances made to
employees of Balqon in the ordinary course of business to meet
reimbursable business expenses.
(q) Banking
Facilities . Section 5(q) of the Balqon
Schedule sets forth a true, correct, and complete list
of: (i) each bank, savings and loan or similar financial
institution in which Balqon has an account or safety deposit box
and the numbers of the accounts or safety deposit boxes maintained
by Balqon thereat; and (ii) the names of all signatories authorized
to draw on each such account or to have access to any such safety
deposit box facility.
(r) Regulatory
Approvals . All consents, approvals, authorizations
or other requirements prescribed by any law, rule or regulation
that must be obtained or satisfied by Balqon and that are necessary
for the execution and delivery by Balqon of this Agreement or any
documents to be executed and delivered by Balqon in connection
therewith have been, or prior to the Closing Date will be, obtained
and satisfied.
(s) No Brokers
. No broker or finder has acted for Balqon in connection
with this Agreement or the transactions contemplated hereby, and no
broker or finder is entitled to any brokerage or finder’s fee
or other commissions in respect of such transactions based upon
agreements, arrangements or understandings made by or on behalf of
Balqon.
(t) Disclosure
. The information concerning Balqon set forth in this
Agreement, the exhibits and schedules hereto, and any document,
statement or certificate furnished or to be furnished in connection
herewith does not and will not contain any untrue statement of a
material fact or omit to state a material fact required to be
stated herein or therein or necessary to make the statements and
facts contained herein or therein, in light of the circumstances in
which they are made, not false and misleading.
(u) Tax
Treatment . Neither Balqon nor, to the Knowledge of
Balqon, any of its Affiliates has taken or agreed to take action
that would prevent the Merger from constituting a reorganization
qualifying under the provisions of Section 368 of the Tax
Code.
Section 6.
BMR’s Representations and
Warranties. Except
as set forth in the disclosure schedule delivered by BMR to Balqon
(the “ BMR Schedule ”), specifically identifying
the Section of this Agreement requiring delivery of such
disclosure, BMR represents and warrants to Balqon as set forth
below:
(a)
Organization . BMR is a corporation validly
existing and in good standing under the laws of the State of Nevada
and has all requisite power and authority and possesses all
necessary governmental approvals necessary to own, lease and
operate its properties, to carry on its business as now being
conducted, to execute and deliver this Agreement and the agreements
contemplated herein, and to consummate the transactions
contemplated hereby and thereby. BMR is duly qualified
to do business and is in good standing in all jurisdictions in
which its ownership of property or the character of its business
requires such qualification, except where the failure t
