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STOCK PURCHASE AGREEMENT
among:
ISONICS CORPORATION,
a California corporation
METALLURGY INTERNATIONAL, INC.,
a Nevada corporation
and
INTERNATIONAL PROCESS RESEARCH CORPORATION,
a Colorado corporation
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Dated as of April 30, 1998
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TABLE OF CONTENTS
PAGE
SECTION 1. DESCRIPTION OF TRANSACTION.....................................1
1.1 Sale and Transfer of the Shares................................1
1.2 Purchase Price.................................................1
1.3 Delivery of the Shares and Purchase Price......................1
1.4 Accounting Treatment...........................................2
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLER.......................2
2.1 Due Organization; No Subsidiaries; Etc.........................2
2.2 Articles of Incorporation and Bylaws; Records..................3
2.3 Capitalization, Etc............................................3
2.4 Financial Statements...........................................4
2.5 Absence of Changes.............................................4
2.6 Title to Assets................................................6
2.7 Bank Accounts; Receivables.....................................6
2.8 Equipment; Leasehold...........................................7
2.9 Proprietary Assets.............................................7
2.10 Contracts......................................................8
2.11 Liabilities...................................................10
2.12 Compliance with Legal Requirements............................10
2.13 Governmental Authorizations...................................11
2.14 Tax Matters...................................................11
2.15 Employee and Labor Matters; Benefit Plans.....................12
2.16 Environmental Matters.........................................14
2.17 Insurance.....................................................15
2.18 Related Party Transactions....................................15
2.19 Legal Proceedings; Orders.....................................16
2.20 Authority; Binding Nature of Agreement........................16
2.21 Non-Contravention; Consents...................................17
2.22 No Brokers or Finders Fees....................................18
2.23 Investment....................................................18
2.24 Full Disclosure...............................................18
i.
TABLE OF CONTENTS
(CONTINUED)
PAGE
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PURCHASER...................18
3.1 SEC Filings; Financial Statements.............................19
3.2 Authority; Binding Nature of Agreement........................19
3.3 Valid Issuance................................................19
3.4 No Brokers or Finders Fees....................................19
3.5 Organization and Qualification................................20
3.6 Absence of Breach; No Consents................................20
SECTION 4. PRE-CLOSING COVENANTS OF SELLER AND THE COMPANY...............20
4.1 Access and Investigation......................................20
4.2 Operation of Business.........................................20
4.3 Filings and Consents..........................................21
4.4 Notification; Updates to Disclosure Schedule..................21
4.5 No Negotiation................................................22
4.6 Best Efforts..................................................22
SECTION 5. PRE-CLOSING COVENANTS OF PURCHASER............................23
5.1 Notification..................................................23
5.2 Filings.......................................................23
5.3 Best Efforts..................................................23
SECTION 6. CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATION TO CLOSE.......23
6.1 Accuracy of Representations and Warranties....................23
6.2 Delivery of Closing Documents.................................24
6.3 Performance of Obligations....................................24
6.4 No Adverse Change.............................................24
6.5 Compliance Certificate........................................25
6.6 No Legal Proceedings..........................................25
6.7 No Claim Regarding Stock Ownership or Sale Proceeds...........25
6.8 No Prohibition................................................25
SECTION 7. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE..........25
7.1 Accuracy of Representations and Warranties....................25
7.2 Delivery of Closing Documents.................................25
ii.
TABLE OF CONTENTS
(CONTINUED)
PAGE
7.3 Performance of Obligations....................................26
7.4 Release of Guarantee of Bank Line of Credit...................26
7.5 Release of Encumbrances on the Shares.........................26
7.6 No Injunction.................................................26
SECTION 8. TERMINATION...................................................26
8.2 Termination Procedures........................................27
8.3 Effect of Termination.........................................27
8.4 Nonexclusivity of Termination Rights..........................27
SECTION 9. INDEMNIFICATION, ETC..........................................28
9.1 Survival of Representations, Etc..............................28
9.2 Indemnification by Seller.....................................28
9.3 Indemnification by Purchaser..................................29
9.4 Satisfaction of Indemnification Claim; No Contribution........30
9.5 Payment.......................................................30
9.6 Notice of Claims..............................................30
9.7 Disputed Claims...............................................30
9.8 Defense of Third Party Claims.................................31
9.9 Interest......................................................32
SECTION 10. MISCELLANEOUS PROVISIONS......................................32
10.1 Seller's Agent................................................32
10.2 Further Assurances............................................32
10.3 Fees and Expenses.............................................32
10.4 Attorneys' Fees...............................................33
10.5 Notices.......................................................33
10.6 Confidentiality...............................................34
10.7 Headings......................................................34
10.8 Counterparts; Facsimile Signatures............................34
10.9 Governing Law; Arbitration....................................34
10.10 Successors and Assigns........................................34
10.11 Remedies Cumulative; Specific Performance.....................35
iii.
TABLE OF CONTENTS
(CONTINUED)
PAGE
10.12 Waiver........................................................35
10.13 Amendments....................................................35
10.14 Severability..................................................35
10.15 Parties in Interest...........................................35
10.16 Entire Agreement..............................................35
10.17 Construction..................................................36
iv.
EXHIBITS
Exhibit A Definitions
Exhibit B Form of Escrow Agreement
Exhibit C Form of Seller's General Release
Exhibit D Form of Employment Agreement
Exhibit E Form of Noncompetition Agreement
Exhibit F Form of Opinion of Xxxxxxx & Xxxxx, P.C.
Exhibit G Form of Opinion of Xxxxxx Godward LLP
Exhibit H Form of Purchaser's General Release
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT ("Agreement") is made and entered into as
of April 30, 1998, by and among: ISONICS CORPORATION, a California corporation
("Purchaser"); METALLURGY INTERNATIONAL, INC. a Nevada corporation ("Seller");
and INTERNATIONAL PROCESS RESEARCH CORPORATION, a Colorado corporation (the
"Company"). Certain other capitalized terms used in this Agreement are defined
in Exhibit A.
RECITALS
A. Seller owns 4,590,909 shares of capital stock of the Company (the
"Shares"), which constitute all of the issued and outstanding shares of capital
stock of the Company.
B. Seller desires to sell, and Purchaser desires to purchase, all of
the Shares for the consideration and on the terms set forth in this Agreement.
C. The Company desires to induce Purchaser to enter into this
Agreement.
AGREEMENT
The parties to this Agreement, intending to be legally bound hereby,
agree as follows:
SECTION 1. DESCRIPTION OF TRANSACTION
1.1 Sale and Transfer of the Shares. Upon the terms and subject to the
conditions set forth in this Agreement, at the Closing (as defined in Section
1.3(a)) Seller shall sell, assign and transfer to Purchaser, and Purchaser shall
purchase from Seller, the Shares.
1.2 Purchase Price. The purchase price for the Shares shall be 353,982
shares of the Common Stock of Purchaser ("Purchaser Common Stock").
1.3 Delivery of the Shares and Purchase Price
(a) The consummation of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Xxxxxxx & Xxxxx,
P.C., 0000 Xxxxxxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxx 00000 at 10:00 a.m. on May 15,
1998, or at such other time and date as Purchaser may designate upon not less
than five days' prior notice to Seller (the "Scheduled Closing Time," and the
actual date on which the Closing takes place, the "Closing Date").
(b) At the Closing, the parties hereto shall deliver to each other
the following documents to effect the assignment, transfer and delivery to
Purchaser of the Shares and the payment by Purchaser to Seller of the
consideration therefor:
(i) Seller shall deliver to Purchaser a stock certificate or
stock certificates representing the Shares, duly endorsed (or accompanied by
duly executed stock powers) for transfer to Purchaser; and
(ii) Purchaser shall (A) deliver to Seller a stock certificate
registered in the name of Seller representing 176,991 shares of Purchaser Common
Stock, and (B) shall deliver to the Escrow Agent an additional stock certificate
registered in the name of Seller representing 176,991 shares of Purchaser Common
Stock to be held in escrow pursuant to the provisions of the Escrow Agreement
and Section 9 hereof.
1.4 Accounting Treatment. For accounting purposes, the stock purchase
is intended to be treated as a "purchase."
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants, to and for the benefit of
Purchaser, as follows (except with respect to Section 2.3(a) and (b),
representations and warranties made with respect to facts prior to October 1,
1993, as they relate to the Company, are made only as to the best of the
Knowledge of Seller):
2.1 Due Organization; No Subsidiaries; Etc.
(a) Seller is a corporation duly organized, validly existing and in
good standing under the laws of the State of Nevada, the Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Colorado, and each of Seller and the Company has all necessary
power and authority: (i) to conduct its business in the manner in which its
business is currently being conducted; (ii) to own and use its assets in the
manner in which its assets are currently owned and used; and (iii) in the case
of the Company, to perform its obligations under all Company Contracts.
(b) Except as set forth in Part 2.1(b) of the Disclosure Schedule,
the Company has not conducted any business under or otherwise used, for any
purpose or in any jurisdiction, any fictitious name, assumed name, trade name or
other name, other than the name "International Process Research Corporation" and
"Colorado Minerals Research Institute."
(c) The Company is not and has not been required to be qualified,
authorized, registered or licensed to do business as a foreign corporation in
any jurisdiction other than the jurisdictions identified in Part 2.1(c) of the
Disclosure Schedule, except where the failure to be so qualified, authorized,
registered or licensed has not had and will not have a Material Adverse Effect
on the Company. The Company is in good standing as a foreign corporation in each
of the jurisdictions identified in Part 2.1(c) of the Disclosure Schedule.
(d) Part 2.1(d) of the Disclosure Schedule accurately sets forth
(i) the names of the members of the Company's board of directors, (ii) the names
of the members of each
2.
committee of the Company's board of directors, and (iii) the names and titles of
the Company's officers.
(e) The Company does not own any controlling interest in any Entity
and, except for the equity interests identified in Part 2.1(e) of the Disclosure
Schedule, the Company has never owned, beneficially or otherwise, any shares or
other securities of, or any direct or indirect equity interest in, any Entity.
The Company has not agreed and is not obligated to make any future investment in
or capital contribution to any Entity. Except as set forth in Part 2.1(e) of the
Disclosure Schedule, the Company has not guaranteed and is not responsible or
liable for any obligation of any of the Entities in which it owns or has owned
any equity interest.
2.2 Articles of Incorporation and Bylaws; Records. Seller has delivered
to Purchaser accurate and complete copies of: (1) the Company's articles of
incorporation and bylaws, including all amendments thereto; (2) the stock
records of the Company; and (3) except as set forth in Part 2.2 of the
Disclosure Schedule, the minutes and other records of the meetings and other
proceedings (including any actions taken by written consent or otherwise without
a meeting) of the shareholders of the Company, the board of directors of the
Company and all committees of the board of directors of the Company. There have
been no formal meetings or other proceedings of the shareholders of the Company,
the board of directors of the Company or any committee of the board of directors
of the Company that are not fully reflected in such minutes or other records.
There has not been any violation of any of the provisions of the Company's
articles of incorporation or bylaws, and the Company has not taken any action
that is inconsistent in any material respect with any resolution adopted by the
Company's shareholders, the Company's board of directors or any committee of the
Company's board of directors. The books of account, stock records, minute books
and other records of the Company are accurate, up-to-date and complete in all
material respects, and have been maintained in accordance with prudent business
practices.
2.3 Capitalization, Etc.
(a) The authorized capital stock of the Company consists solely of
5,000,000 shares of Common Stock (with no par value) ("Company Common Stock"),
of which 4,590,909 shares have been issued and are outstanding as of the date of
this Agreement. All of the outstanding shares of the Company Common Stock have
been duly authorized and validly issued, and are fully paid and non-assessable,
and are held beneficially and of record by Seller free and clear of all
Encumbrances. At the Closing Purchaser will acquire the Shares free and clear of
all Encumbrances.
(b) There is no: (i) outstanding subscription, option, call,
warrant or right (whether or not currently exercisable) to acquire any shares of
the capital stock or other securities of the Company; (ii) outstanding security,
instrument or obligation that is or may become convertible into or exchangeable
for any shares of the capital stock or other securities of the Company; (iii)
Contract under which the Company is or may become obligated to sell or otherwise
issue any shares of its capital stock or any other securities, or under which
Seller may become obligated to sell or otherwise transfer the Shares; or (iv) to
the best of the Knowledge of Seller, condition or circumstance that may give
rise to or provide a basis for the assertion of a
3.
claim by any Person to the effect that such Person is entitled to acquire or
receive any shares of capital stock or other securities of the Company.
(c) All outstanding shares of Company Common Stock have been issued
and granted in compliance with (i) all applicable securities laws and other
applicable Legal Requirements, and (ii) all requirements set forth in applicable
Contracts.
(d) Except as set forth in Part 2.3 of the Disclosure Schedule, the
Company has never repurchased, redeemed or otherwise reacquired any shares of
its capital stock or its other securities. All securities so reacquired by the
Company were reacquired in compliance with (i) the applicable provisions of
Legal Requirements, and (ii) all requirements set forth in applicable Contracts.
2.4 Financial Statements.
(a) Seller has delivered to Purchaser the following financial
statements (collectively, the "Company Financial Statements"): the unaudited
balance sheet of the Company as of February 28, 1998 (the "Balance Sheet"); and
the related unaudited income statement and statement of shareholders' equity of
the Company for the two months then ended.
(b) The Company Financial Statements are accurate and complete in
all material respects and present fairly the financial position of the Company
as of the date thereof and the results of operations of the Company for the
periods covered thereby. The Company Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods covered (except that the financial statements
referred to in Section 2.4(a) do not contain footnotes and are subject to normal
and recurring year-end audit adjustments, which will not, individually or in the
aggregate, be material in magnitude).
2.5 Absence of Changes. Except as set forth in Part 2.5 of the
Disclosure Schedule, since February 28, 1998:
(a) there has not been any material adverse change in the Company's
business, condition, assets, liabilities, operations, financial performance or
prospects, and, to the best of the Knowledge of Seller, no event has occurred
that will, or could reasonably be expected to, have a Material Adverse Effect on
the Company;
(b) to the best of the Knowledge of Seller, there has not been any
material loss, damage or destruction to, or any material interruption in the use
of, any of the Company's assets (whether or not covered by insurance);
(c) the Company has not declared, accrued, set aside or paid any
dividend or made any other distribution in respect of any shares of its capital
stock, and has not repurchased, redeemed or otherwise reacquired any shares of
its capital stock or other securities;
(d) except as provided for by this Agreement, the Company has not
sold, issued or authorized the issuance of (i) any capital stock or other
security, (ii) any option or right
4.
to acquire any capital stock or any other security, or (iii) any instrument
convertible into or exchangeable for any capital stock or other security;
(e) there has been no amendment to the Company's articles of
incorporation or bylaws, and the Company has not effected or been a party to any
Acquisition Transaction, recapitalization, reclassification of shares, stock
split, reverse stock split or similar transaction except as contemplated by this
Agreement;
(f) the Company has not formed any subsidiary or acquired any
equity interest or other interest in any other Entity;
(g) the Company has not made any capital expenditure which, when
added to all other capital expenditures made on behalf of the Company since
February 28, 1998, exceeds $25,000;
(h) the Company has not (i) entered into or permitted any of the
assets owned or used by it to become bound by any Contract that is or would
constitute a Material Contract (as defined in Section 2.10(a)), or (ii) amended
or prematurely terminated, or expressly waived any material right or remedy
under, any such Contract;
(i) the Company has not (i) acquired, leased or licensed any right
or other asset from any other Person, (ii) sold or otherwise disposed of, or
leased or licensed, any right or other asset to any other Person, or (iii)
waived or relinquished any right, except for immaterial rights or other
immaterial assets acquired, leased, licensed or disposed of in the ordinary
course of business and consistent with the Company's past practices;
(j) the Company has not written off as uncollectible, or
established any extraordinary reserve with respect to, any account receivable or
other indebtedness;
(k) the Company has not made any pledge of any of its assets or
otherwise permitted any of its assets to become subject to any Encumbrance,
except for pledges of immaterial assets made in the ordinary course of business
and consistent with the Company's past practices;
(l) the Company has not (i) lent money to any Person (other than
pursuant to routine travel advances made to employees in the ordinary course of
business), or (ii) incurred or guaranteed any indebtedness for borrowed money
except as expressly set forth in the Company Financial Statements;
(m) the Company has not (i) established or adopted any Employee
Benefit Plan, (ii) paid any bonus or made any profit-sharing or similar payment
to, or increased the amount of the wages, salary, commissions, fringe benefits
or other compensation or remuneration payable to, any of its directors, officers
or employees, or (iii) hired any new employee;
(n) the Company has not changed any of its methods of accounting or
accounting practices in any respect;
5.
(o) the Company has not made any Tax election;
(p) the Company has not commenced or settled any Legal Proceeding;
(q) the Company has not entered into any material transaction or
taken any other material action outside the ordinary course of business or
inconsistent with its past practices; and
(r) the Company has not agreed or committed to take any of the
actions referred to in clauses "(c)" through "(q)" above.
2.6 Title to Assets.
(a) The Company owns, and has good, valid and marketable title to,
all assets purported to be owned by it, including: (i) all assets reflected on
the Balance Sheet; (ii) all assets referred to in Parts 2.1, 2.7(b) and 2.9 of
the Disclosure Schedule and all of the Company's rights under the Contracts
identified in Part 2.10 of the Disclosure Schedule; and (iii) all other assets
reflected in the Company's books and records as being owned by the Company.
Except as set forth in Part 2.6(a) of the Disclosure Schedule, all of said
assets are owned by the Company free and clear of any Encumbrances, except (x)
for any lien for current taxes not yet due and payable, and (y) for minor liens
that have arisen in the ordinary course of business and that do not (in any case
or in the aggregate) materially detract from the value of the assets subject
thereto or materially impair the operations of the Company, and (z) as are
expressly set forth in the Company Financial Statements.
(b) Part 2.6(b) of the Disclosure Schedule identifies all assets
that are material to the business of the Company and that are being leased or
licensed to the Company.
2.7 Bank Accounts; Receivables.
(a) Part 2.7(a) of the Disclosure Schedule provides the bank or
financial institution account number and account balance with respect to each
account currently maintained by or for the benefit of the Company at any bank or
other financial institution.
(b) Part 2.7(b) of the Disclosure Schedule provides an accurate and
complete breakdown and aging of all accounts receivable, notes receivable and
other receivables of the Company as of February 28, 1998. Except as set forth in
Part 2.7(b) of the Disclosure Schedule, all existing accounts receivable of the
Company (including those accounts receivable reflected on the Balance Sheet that
have not yet been collected and those accounts receivable that have arisen since
February 28, 1998 and have not yet been collected) (i) to the best of the
Knowledge of Seller, represent valid obligations of customers of the Company
arising from bona fide transactions entered into in the ordinary course of
business, (ii) are current and, to the best of the Knowledge of Seller, can be
collected in full when due, without any counterclaim or set off (net of an
allowance for doubtful accounts not to exceed $40,000 in the aggregate).
6.
2.8 Equipment; Leasehold.
(a) All material items of equipment and other material tangible
assets owned by or leased to the Company and which are currently used by the
Company in its ordinary course of business are adequate for the uses to which
they are being put, are in good condition and repair (ordinary wear and tear
excepted) and are adequate for the conduct of the Company's business in the
manner in which such business is currently being conducted.
(b) The Company does not own any real property or any interest in
real property, except for the leasehold created under the real property lease
identified in Part 2.10 of the Disclosure Schedule.
2.9 Proprietary Assets.
(a) Part 2.9(a)(i) of the Disclosure Schedule sets forth, with
respect to each Company Proprietary Asset registered with any Governmental Body
or for which an application has been filed with any Governmental Body, (i) a
brief description of such Proprietary Asset, and (ii) the names of the
jurisdictions covered by the applicable registration or application. Part
2.9(a)(ii) of the Disclosure Schedule identifies and provides a brief
description of all other Company Proprietary Assets owned by the Company. Part
2.9(a)(iii) of the Disclosure Schedule identifies and provides a brief
description of each Proprietary Asset licensed to the Company by any Person
(except for any Proprietary Asset that is licensed to the Company under any
third party software license generally available to the public at a cost of less
than $10,000), and identifies the license agreement under which such Proprietary
Asset is being licensed to the Company. Except as set forth in Part 2.9(a)(iv)
of the Disclosure Schedule, the Company has good, valid and marketable title to
all of the Company Proprietary Assets identified in Parts 2.9(a)(i) and
2.9(a)(ii) of the Disclosure Schedule, free and clear, to the best of the
Knowledge of Seller, of all liens and other Encumbrances, and, to the best of
the Knowledge of Seller, has a valid right to use all Proprietary Assets
identified in Part 2.9(a)(iii) of the Disclosure Schedule. Except as set forth
in Part 2.9(a)(v) of the Disclosure Schedule, the Company is not obligated to
make any payment to any Person for the use of any Company Proprietary Asset.
Except as set forth in Part 2.9(a)(vi) of the Disclosure Schedule, the Company
has not developed jointly with any other Person any Company Proprietary Asset
with respect to which such other Person has any rights.
(b) The Company has taken all measures and precautions necessary to
protect and maintain the confidentiality and secrecy of all Company Proprietary
Assets (except Company Proprietary Assets whose value would be unimpaired by
public disclosure) and otherwise to maintain and protect the value of all
Company Proprietary Assets. Except as set forth in Part 2.9(b) of the Disclosure
Schedule, the Company has not (other than pursuant to license agreements
identified in Part 2.10 of the Disclosure Schedule) disclosed or delivered to
any Person, or permitted the disclosure or delivery to any Person of, (i) the
source code, or any portion or aspect of the source code, of any Company
Proprietary Asset, or (ii) the object code, or any portion or aspect of the
object code, of any Company Proprietary Asset.
7.
(c) To the best of the Knowledge of Seller, none of the Company
Proprietary Assets infringes or conflicts with any Proprietary Asset owned or
used by any other Person. To the best of the Knowledge of Seller, the Company is
not infringing, misappropriating or making any unlawful use of, and the Company
has not at any time infringed, misappropriated or made any unlawful use of, or
received any notice or other communication (in writing or otherwise) of any
actual, alleged, possible or potential infringement, misappropriation or
unlawful use of, any Proprietary Asset owned or used by any other Person. To the
best of the Knowledge of Seller, no other Person is infringing, misappropriating
or making any unlawful use of, and no Proprietary Asset owned or used by any
other Person infringes or conflicts with, any Company Proprietary Asset.
(d) Except as set forth in Part 2.9(d) of the Disclosure Schedule,
there has not been any claim by any customer or other Person alleging that any
Company Proprietary Asset (including each version thereof that has ever been
licensed or otherwise made available by the Company to any Person) does not
conform in all material respects with any specification, documentation,
performance standard, representation or statement made or provided by or on
behalf of the Company, and, to the best of the Knowledge of Seller, there is no
basis for any such claim.
(e) The Company Proprietary Assets constitute all the Proprietary
Assets necessary to enable the Company to conduct its business in the manner in
which such business has been and is being conducted. Except as set forth in Part
2.9(e) of the Disclosure Schedule, (i) the Company has not licensed any of the
Company Proprietary Assets to any Person on an exclusive basis, and (ii) the
Company has not entered into any covenant not to compete or Contract limiting
its ability to exploit fully any of its Proprietary Assets or to transact
business in any market or geographical area or with any Person.
2.10 Contracts.
(a) Part 2.10 of the Disclosure Schedule identifies:
(i) each written Contract relating to the employment of, or
the performance of services by, any employee, consultant or independent
contractor (and Seller represents and warrants that, to the best of the
Knowledge of Seller, there are no oral Contracts of such nature);
(ii) each Company Contract relating to the acquisition,
transfer, use, development, sharing or license of any technology or any
Proprietary Asset;
(iii) each Company Contract imposing any restriction on the
Company's right or ability (A) to compete with any other Person, (B) to acquire
any product or other asset or any services from any other Person, to sell any
product or other asset to or perform any services for any other Person or to
transact business or deal in any other manner with any other Person, or (C)
develop or distribute any technology;
(iv) each Company Contract creating or involving any agency
relationship, distribution arrangement or franchise relationship;
8.
(v) each Company Contract relating to the acquisition,
issuance or transfer of any securities, except as contemplated hereunder;
(vi) each Company Contract relating to the creation of any
Encumbrance with respect to any asset of the Company;
(vii) each Company Contract involving or incorporating any
guaranty, any pledge, any performance or completion bond, any indemnity or any
surety arrangement;
(viii) each Company Contract creating or relating to any
partnership or joint venture or any sharing of revenues, profits, losses, costs
or liabilities;
(ix) each Company Contract relating to the purchase or sale of
any product or other asset by or to, or the performance of any services by or
for, any Related Party (as defined in Section 2.18);
(x) each Company Contract constituting or relating to a
Government Contract or Government Bid;
(xi) any other Company Contract that was entered into outside
the ordinary course of business or was inconsistent with the Company's past
practices; and
(xii) any other Company Contract that has a term of more than
120 days and that may not be terminated by the Company (without penalty) within
120 days after the delivery of a termination notice by the Company.
(The term "Material Contracts" as used in this Agreement refers to the Contracts
in the respective categories described in clauses "(i)" through "(xii)" above.)
(b) Seller has delivered to Purchaser accurate and complete copies
of all written Material Contracts identified in Part 2.10 of the Disclosure
Schedule, including all amendments thereto. Part 2.10 of the Disclosure Schedule
provides an accurate description of the terms of each Material Contract that is
not in written form. Each Material Contract identified in Part 2.10 of the
Disclosure Schedule, to the best of the Knowledge of Seller, is valid and in
full force and effect, and, to the best of the Knowledge of Seller, is
enforceable by the Company in accordance with its terms, subject to (i) laws of
general application relating to bankruptcy, insolvency and the relief of
debtors, and (ii) rules of law governing specific performance, injunctive relief
and other equitable remedies.
(c) Except as set forth in Part 2.10(c) of the Disclosure Schedule:
(i) to the best of the Knowledge of Seller, the Company has
not violated or breached, or committed any default under, any Material Contract,
and, to the best of the Knowledge of Seller, no other Person has violated or
breached, or committed any default under, any Material Contract;
9.
(ii) to the best of the Knowledge of Seller, no event has
occurred, and no circumstance or condition exists, that (with or without notice
or lapse of time) will, or could reasonably be expected to, (A) result in a
violation or breach of any of the provisions of any Material Contract, (B) give
any Person the right to declare a default or exercise any remedy under any
Material Contract, (C) give any Person the right to accelerate the maturity or
performance of any Material Contract, or (D) give any Person the right to
cancel, terminate or modify any Material Contract;
(iii) since December 31, 1995, the Company has not received
any notice or other communication regarding any actual or possible violation or
breach of, or default under, any Material Contract; and
(iv) the Company has not expressly waived any of its material
rights under any Material Contract.
(d) No Person is renegotiating, or has a right pursuant to the
terms of any Company Contract to renegotiate, any amount paid or payable to the
Company under any Material Contract or any other material term or provision of
any Material Contract.
(e) The Material Contracts collectively constitute all of the
Contracts necessary to enable the Company to conduct its business in the manner
in which its business is currently being conducted.
(f) Except as set forth in Part 2.10(f) of the Disclosure Schedule,
to the best of the Knowledge of Seller, the Company has not entered into any
Government Contract in which payments to be made under any such Government
Contract is in excess of $50,000, and with respect to all such Government
Contracts set forth in Part 2.10(f) of the Disclosure Schedule, to the best of
the Knowledge of Seller the Company is in compliance with all Legal Requirements
relating to such Government Contracts.
2.11 Liabilities. The Company has no accrued, contingent or other
liabilities of any nature except for: (a) liabilities identified as such in the
"liabilities" column of the Balance Sheet; (b) accounts payable or accrued
salaries that have been incurred by the Company since February 28, 1998 in the
ordinary course of business and consistent with the Company's past practices;
(c) liabilities under the Company Contracts identified in Part 2.10 of the
Disclosure Schedule, to the extent the nature and magnitude of such liabilities
can be specifically ascertained by reference to the text of such Company
Contracts; and (d) the liabilities identified in Part 2.11 of the Disclosure
Schedule.
2.12 Compliance with Legal Requirements. To the best of the Knowledge
of Seller, the Company is, and has at all times since December 31, 1994 been, in
compliance with all applicable Legal Requirements, except where the failure to
comply with such Legal Requirements has not had and will not have a Material
Adverse Effect on the Company. Except as set forth in Part 2.12 of the
Disclosure Schedule, since December 31, 1994, the Company has not received any
notice or other communication from any Governmental Body regarding any actual or
possible violation of, or failure to comply with, any Legal Requirement.
10.
2.13 Governmental Authorizations. Part 2.13 of the Disclosure Schedule
identifies each material Governmental Authorization currently held by the
Company (except for any Governmental Authorizations currently held by the
Company pursuant to Environmental Laws), and Seller has delivered to Purchaser
accurate and complete copies of all Governmental Authorizations identified in
Part 2.13 of the Disclosure Schedule. The Governmental Authorizations identified
in Part 2.13 of the Disclosure Schedule are valid and in full force and effect,
and collectively constitute all Governmental Authorizations necessary to enable
the Company to conduct its business in the manner in which its business is
currently being conducted. To the best of the Knowledge of Seller, the Company
is, and at all times since December 31, 1994 has been, in substantial compliance
with the terms and requirements of the respective Governmental Authorizations
identified in Part 2.13 of the Disclosure Schedule. Since December 31, 1994, the
Company has not received any notice or other communication from any Governmental
Body regarding (a) any actual or possible violation of or failure to comply with
any term or requirement of any Governmental Authorization, or (b) any actual or
possible revocation, withdrawal, suspension, cancellation, termination or
modification of any Governmental Authorization.
2.14 Tax Matters.
(a) All Tax Returns required to be filed by or on behalf of the
Company with any Governmental Body with respect to any taxable period ending on
or before the date of this Agreement (the "Company Returns") (i) have been or
will be filed on or before the applicable due date (including any extensions of
such due date if properly obtained), and (ii) have been, or will be when filed,
accurately and completely prepared in all material respects in compliance with
all applicable Legal Requirements. All amounts shown on the Company Returns to
be due on or before the date of this Agreement have been or will be paid on or
before the date of this Agreement. Seller has delivered to Purchaser accurate
and complete copies of all Company Returns filed since December 31, 1993 which
have been requested by Purchaser.
(b) The Company Financial Statements fully accrue all actual and
contingent liabilities for Taxes with respect to all periods through December
31, 1997 in accordance with generally accepted accounting principles.
(c) No Company Return relating to income Taxes has ever been
examined or audited by any Governmental Body. Except as set forth in Part 2.14
of the Disclosure Schedule, there have been no examinations or audits of any
Company Return. Seller has delivered to Purchaser accurate and complete copies
of all audit reports and similar documents (to which the Company has access)
relating to the Company Returns. Except as set forth in Part 2.14 of the
Disclosure Schedule, no extension or waiver of the limitation period applicable
to any of the Company Returns has been granted (by the Company or any other
Person), and no such extension or waiver has been requested from the Company.
(d) Except as set forth in Part 2.14 of the Disclosure Schedule, no
claim or Proceeding is pending or has been threatened against or with respect to
the Company in respect of any Tax. There are no unsatisfied liabilities for
Taxes (including liabilities for interest, additions to tax and penalties
thereon and related expenses) with respect to any notice of
11.
deficiency or similar document received by the Company with respect to any Tax
(other than liabilities for Taxes asserted under any such notice of deficiency
or similar document which are being contested in good faith by the Company and
with respect to which adequate reserves for payment have been established).
There are no liens for Taxes upon any of the assets of the Company except liens
for current Taxes not yet due and payable. The Company has not entered into or
become bound by any agreement or consent pursuant to Section 341(f) of the Code.
The Company has not been, and the Company will not be, required to include any
adjustment in taxable income for any tax period (or portion thereof) pursuant to
Section 481 or 263A of the Code or any comparable provision under state or
foreign Tax laws as a result of transactions or events occurring, or accounting
methods employed, prior to the Closing.
(e) There is no agreement, plan, arrangement or other Contract
covering any employee or independent contractor or former employee or
independent contractor of the Company that, to the best of the Knowledge of
Seller, considered individually or considered collectively with any other such
Contracts, will, or could reasonably be expected to, give rise directly or
indirectly to the payment of any amount that would not be deductible pursuant to
Section 280G or Section 162 of the Code. The Company is not, and has never been,
a party to or bound by any tax indemnity agreement, tax sharing agreement, tax
allocation agreement or similar Contract. Except as set forth in Part 2.14 of
the Disclosure Schedule, the Company has never been a member of a consolidated
group of corporations or analogous group under any Legal Requirement for which
it could be liabile for Taxes of any Person (other than the Company) following
the date of this Agreement.
2.15 Employee and Labor Matters; Benefit Plans.
(a) Part 2.15(a) of the Disclosure Schedule contains a complete
list of each salary, bonus, deferred compensation, incentive compensation, stock
purchase, stock option, severance pay, termination pay, hospitalization,
medical, life or other insurance, supplemental unemployment benefits,
profit-sharing, pension or retirement plan, program or agreement (collectively,
the "Plans") sponsored, maintained, contributed to or required to be contributed
to by the Company for the benefit of any employee of the Company ("Employee").
(b) No Plan is subject to Title IV of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), Part 3 of Title I of ERISA or
Section 412 of the Code, and no Plan constitutes a "multiemployer plan" (as
defined in Section 3(37) of ERISA), except as set forth in Part 2.15(b) of the
Disclosure Schedule.
(c) With respect to the 401(k) plan of the Company identified in
Part 2.15(a) of the Disclosure Schedule (the "401(k) Plan"), Seller has
delivered to Purchaser:
(i) an accurate and complete copy of such 401(k) Plan
(including all amendments thereto);
(ii) an accurate and complete copy of the annual report, if
required under ERISA, with respect to such 401(k) Plan for the last two years;
12.
(iii) an accurate and complete copy of the most recent summary
plan description, together with each Summary of Material Modifications, if
required under ERISA, with respect to such 401(k) Plan, and all material
employee communications relating to such 401(k) Plan;
(iv) if such 401(k) Plan is funded through a trust or any
third party funding vehicle, an accurate and complete copy of the trust or other
funding agreement (including all amendments thereto) and accurate and complete
copies the most recent financial statements thereof;
(v) accurate and complete copies of all Contracts relating to
such 401(k) Plan, including service provider agreements, insurance contracts,
minimum premium contracts, stop-loss agreements, investment management
agreements, subscription and participation agreements and recordkeeping
agreements; and
(vi) an accurate and complete copy of the most recent
determination letter received from the Internal Revenue Service with respect to
such 401(k) Plan (if such 401(k) Plan is intended to be qualified under Section
401(a) of the Code).
(d) The Company is not required to be, and, to the best of the
Knowledge of Seller, has never been required to be, treated as a single employer
with any other Person under Section 4001(b)(1) of ERISA or Section 414(b), (c),
(m) or (o) of the Code. The Company has never been a member of an "affiliated
service group" within the meaning of Section 414(m) of the Code. To the best of
the Knowledge of Seller, the Company has never made a complete or partial
withdrawal from a multiemployer plan, as such term is defined in Section 3(37)
of ERISA, resulting in "withdrawal liability," as such term is defined in
Section 4201 of ERISA (without regard to subsequent reduction or waiver of such
liability under either Section 4207 or 4208 of ERISA).
(e) The Company does not have any plan or commitment to create any
additional Plan, or to modify or change any existing Plan (other than to comply
with applicable law) in a manner that would affect any Employee.
(f) Except as set forth in Part 2.15(f) of the Disclosure Schedule
and except as required by law, no Plan provides or ever has provided death,
medical or health benefits (whether or not insured) with respect to any current
or former Employee after any such Employee's retirement or other termination of
service (other than (i) benefit coverage mandated by applicable law, including
coverage provided pursuant to Section 4980B of the Code, (ii) deferred
compensation benefits accrued as liabilities on the Interim Balance Sheet, (iii)
benefits the full cost of which are borne by current or former Employees (or the
Employees' beneficiaries), (if) death or retirement benefits under any Plan that
is intended to be qualified under Section 401(2) of the Code, (v) disability
benefits under any Plan that is an employee welfare benefit plan (as defined in
Section 3(1) of ERISA), and (vi) life insurance benefits for employees who died
while in service).
13.
(g) With respect to each of the Plans constituting a group health
plan within the meaning of Section 4980B(g)(2) of the Code, to the best of the
Knowledge of Seller the provisions of Section 4980B of the Code ("COBRA") have
been complied with in all material respects.
(h) to the best of the Knowledge of Seller, each of the Plans has
been operated and administered in all material respects in accordance with its
terms and applicable Legal Requirements, including but not limited to ERISA and
the Code.
(i) Each of the Plans intended to be qualified under Section 401(a)
of the Code has received a favorable determination from the Internal Revenue
Service, if required, and neither the Company nor Seller is aware of any reason
why any such determination letter should be revoked.
(j) Except as set forth in Part 2.15(j) of the Disclosure Schedule,
neither the execution, delivery or performance of this Agreement, nor the
consummation of the transactions contemplated by this Agreement, will result in
any payment (including any bonus, golden parachute or severance payment) to any
current or former Employee or director of the Company (whether or not under any
Plan), or materially increase the benefits payable under any Plan, or result in
any acceleration of the time of payment or vesting of any such benefits.
(k) Part 2.15(k) of the Disclosure Schedule contains a list of all
salaried employees of the Company as of the date of this Agreement, and
correctly reflects, in all material respects, their salaries, any other
compensation payable to them (including compensation payable pursuant to bonus,
deferred compensation or commission arrangements), their dates of employment and
their positions. The Company is not a party to any collective bargaining
contract or other Contract with a labor union involving any of its Employees. To
the best of the Knowledge of Seller, all of the Company's employees are "at
will" employees.
(l) Part 2.15(l) of the Disclosure Schedule identifies each
Employee who is not fully available to perform work because of disability or
other leave and sets forth the basis of such leave and the anticipated date of
return to full service.
(m) The Company is in compliance in all material respects with all
applicable Legal Requirements and Contracts relating to employment, employment
practices, wages, bonuses and terms and conditions of employment, including
employee compensation matters.
(n) Except as set forth in Part 2.15(n) of the Disclosure Schedule,
the Company has good labor relations, and none of the Company nor Seller has any
reason to believe that (i) the consummation of the transactions contemplated by
this Agreement will have a material adverse effect on the Company's labor
relations, or (ii) any of the Company's employees intends to terminate his or
her employment with the Company.
2.16 Environmental Matters. Except as set forth in Part 2.16 of the
Disclosure Schedule, to the best of the Knowledge of Seller the Company is in
compliance in all material respects with all applicable Environmental Laws,
which compliance includes the possession by the Company of all permits and other
Governmental Authorizations required under applicable
14.
Environmental Laws, and compliance with the terms and conditions thereof. Except
as set forth in Part 2.16 of the Disclosure Schedule, to the best of the
Knowledge of Seller none of the properties currently or formerly owned, leased
or operated by the Company has a release of Materials of Environmental Concern
which requires or will require any investigation or remediation under applicable
Environmental Laws. Except as set forth in Part 2.16 of the Disclosure Schedule,
the Company has not received any notice or other communication (in writing or
otherwise), whether from a Governmental Body, citizens group, employee or
otherwise, that alleges that the Company is not in compliance with any
Environmental Law, and, to the best of the Knowledge of Seller, there are no
circumstances that have resulted in any liability of the Company under any
Environmental Law or that may prevent or interfere with the Company's compliance
with any Environmental Law in the future. To the best of the Knowledge of
Seller, no current or prior owner of any property leased or controlled by the
Company has received any notice or other communication (in writing or
otherwise), whether from a Government Body, citizens group, employee or
otherwise, that alleges that such current or prior owner or the Company is not
in compliance with any Environmental Law. All Governmental Authorizations
currently held by the Company pursuant to Environmental Laws are identified in
Part 2.16 of the Disclosure Schedule. Seller has delivered to Purchaser all
environmental inspections, investigations, studies, audits, tests, reviews or
other written analyses in the Company's possession and conducted in relation to
any property or business now or previously owned or operated by the Company.
(For purposes of this Section 2.16: (i) "Environmental Law" means any federal,
state, local or foreign Legal Requirement relating to pollution or protection of
human health or the environment (including ambient air, surface water, ground
water, land surface or subsurface strata), including any law or regulation
relating to emissions, discharges, releases or threatened releases of Materials
of Environmental Concern, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern; and (ii) "Materials of Environmental
Concern" include chemicals, pollutants, contaminants, wastes, toxic substances,
petroleum and petroleum products and any other substance that is now or
hereafter regulated by any Environmental Law.)
2.17 Insurance. Part 2.17 of the Disclosure Schedule identifies all
insurance policies maintained by, at the expense of or for the benefit of the
Company and identifies any material claims made thereunder, and Seller has
delivered to Purchaser accurate and complete copies of the insurance policies
identified on Part 2.17 of the Disclosure Schedule. Each of the insurance
policies identified in Part 2.17 of the Disclosure Schedule is in full force and
effect. Since December 31, 1994, the Company has not received any notice or
other communication regarding any actual or possible (a) cancellation or
invalidation of any insurance policy, (b) refusal of any coverage or rejection
of any claim under any insurance policy, or (c) material adjustment in the
amount of the premiums payable with respect to any insurance policy.
2.18 Related Party Transactions. To the best of the Knowledge of
Seller, except as set forth in Part 2.18 of the Disclosure Schedule: (a) no
Related Party has, and no Related Party has at any time since December 31, 1994
had, any direct or indirect interest in any material asset used in or otherwise
relating to the business of the Company; (b) no Related Party is, or has at any
time since December 31, 1994 been, indebted to the Company; (c) since December
31, 1994, no Related Party has entered into, or has had any direct or indirect
financial interest in, any
15.
material Contract, transaction or business dealing involving the Company; (d) no
Related Party is competing, or has at any time since December 31, 1994 competed,
directly or indirectly, with the Company; and (e) no Related Party has any claim
or right against the Company (other than rights under company Options and rights
to receive compensation for services performed as an employee of the Company).
(For purposes of this Section 2.18 each of the following shall be deemed to be a
"Related Party": (i) each of Seller, Xx. Xxxxxxxx, Xxxxxxxx X. Xxxxxxxx,
Metallurgy PTY, an Australian corporation, and Xxxxx X. Xxxxxx; (ii) each
individual who is, or who has at any time since December 31, 1994 been, an
officer of the Company; (iii) each member of the immediate family of each of the
individuals referred to in clauses "(i)" and "(ii)" above; (iv) any trust or
other Entity (other than the Company) in which any one of the individuals
referred to in clauses "(i)", "(ii)" and "(iii)" above holds (or in which more
than one of such individuals collectively hold), beneficially or otherwise, a
material voting, proprietary or equity interest.)
2.19 Legal Proceedings; Orders.
(a) To the best of the Knowledge of Seller, except as set forth in
Part 2.19 of the Disclosure Schedule there is no pending Legal Proceeding, and
no Person has threatened to commence any Legal Proceeding: (i) that involves the
Company or any of the assets owned or used by the Company or any Person whose
liability the Company has or may have retained or assumed, either contractually
or by operation of law; or (ii) that challenges, or that may have the effect of
preventing, delaying, making illegal or otherwise interfering with, the
transactions contemplated by this Agreement. To the best of the Knowledge of
Seller, except as set forth in Part 2.19 of the Disclosure Schedule, no event
has occurred, and no claim, dispute or other condition or circumstance exists,
that will, or that could reasonably be expected to, give rise to or serve as a
basis for the commencement of any such Legal Proceeding.
(b) Except as set forth in Part 2.19 of the Disclosure Schedule, no
Legal Proceeding has ever been commenced by or has ever been pending against the
Company.
(c) There is no order, writ, injunction, judgment or decree to
which the Company, or any of the assets owned or used by the Company, is
subject. None of the Company nor Seller is subject to any order, writ,
injunction, judgment or decree that relates to the Company's business or to any
of the assets owned or used by the Company. To the best of the Knowledge of
Seller, no officer or other employee of the Company is subject to any order,
writ, injunction, judgment or decree that prohibits such officer or other
employee from engaging in or continuing any conduct, activity or practice
relating to the Company's business.
2.20 Authority; Binding Nature of Agreement.
(a) Each of Seller and the Company has the absolute and
unrestricted right, power and authority, corporate or otherwise, to enter into
and to perform its obligations under this Agreement. The execution, delivery and
performance of this Agreement by each of Seller and the Company has been duly
authorized by all necessary action on the part of Seller and the Company, and
their respective boards of directors and stockholders. This Agreement
constitutes the legal, valid and binding obligation of Seller and the Company,
enforceable against Seller and the Company in accordance with its terms, subject
to (i) laws of general application relating to
16.
bankruptcy, insolvency and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief and other equitable remedies.
(b) Xx. Xxxxxxxx has the absolute and unrestricted right, power and
authority to enter into and to perform its obligations under the Noncompetition
Agreement referred to in Section 6.2(a)(v). The Noncompetition Agreement
constitutes the legal, valid and binding obligation of Xx. Xxxxxxxx, enforceable
against Xx. Xxxxxxxx in accordance with its terms, subject to (i) laws of
general application relating to bankruptcy, insolvency and the relief of
debtors, and (ii) rules of law governing specific performance, injunctive relief
and other equitable remedies.
2.21 Non-Contravention; Consents. Except as set forth in Part 2.21 of
the Disclosure Schedule, neither (1) the execution, delivery or performance of
this Agreement or any of the other agreements referred to in this Agreement, nor
(2) the consummation of the transactions contemplated by this Agreement, will
directly or indirectly (with or without notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i) any
of the provisions of Seller's or the Company's articles of incorporation or
bylaws, or (ii) any resolution adopted by the shareholders of Seller or the
Company, the board of directors of Seller or the Company or any committee of the
board of directors of Seller or the Company;
(b) to the best of the Knowledge of Seller, contravene, conflict
with or result in a violation of, or give any Governmental Body or other Person
the right to challenge any of the transactions contemplated by this Agreement or
to exercise any remedy or obtain any relief under, any Legal Requirement or any
order, writ, injunction, judgment or decree to which the Company, or any of the
assets owned or used by the Company, is subject;
(c) to the best of the Knowledge of Seller, contravene, conflict
with or result in a violation of any of the terms or requirements of, or give
any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate
or modify, any Governmental Authorization that is held by the Company or that
otherwise relates to the Company's business or to any of the assets owned or
used by the Company;
(d) to the best of the Knowledge of Seller, contravene, conflict
with or result in a violation or breach of, or result in a default under, any
provision of any Company Contract that is or would constitute a Material
Contract, or give any Person the right to (i) declare a default or exercise any
remedy under any such Company Contract, (ii) accelerate the maturity or
performance of any such Company Contract, or (iii) cancel, terminate or modify
any such Company Contract; or
(e) contravene, conflict with or result in a violation or breach
of, or result in a default under, any provision of any Contract to which Seller
is a party; or
(f) result in the imposition or creation of any lien or other
Encumbrance upon or with respect to (i) any asset owned or used by the Company
(except for minor liens that will not, in any case or in the aggregate,
materially detract from the value of the assets subject thereto or materially
impair the operations of the Company) or (ii) the Shares.
17.
Except as set forth in Part 2.21 of the Disclosure Schedule, neither Seller nor
the Company is not and will not be required to make any filing with (other than
filings required to be made in connection with Purchaser's filing obligations
with the SEC) or give any notice to, or to obtain any Consent from, any Person
in connection with (x) the execution, delivery or performance of this Agreement
or any of the other agreements referred to in this Agreement, or (y) the
consummation of the transactions contemplated by this Agreement.
2.22 No Brokers or Finders Fees. No broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with the sale of the Shares or any of the other transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Seller, the
Company or any of their respective affiliates.
2.23 Investment.
(a) Seller, taking into account the personnel and resources it can
practically bring to bear on the acquisition of the shares of Purchaser Common
Stock contemplated hereby, either alone or together with the advice of its
purchaser representative, is knowledgeable, sophisticated and experienced in
making, and is qualified to make, decisions with respect to investments in
shares presenting an investment decision like that involved in the acquisition
of the shares of Purchaser Common Stock, and has requested, received, reviewed
and considered, either alone or with his purchaser representative, all
information Seller deems relevant in making an informed decision to acquire the
shares of Purchaser Common Stock.
(b) Seller is acquiring the shares of Purchaser Common Stock set
forth in Section 1.2 for its own account for investment only and with no present
intention of distributing any of such shares of Purchaser Common Stock or any
arrangement or understanding with any other Persons regarding the distribution
of such shares of Purchaser Common Stock except in compliance with Section
2.23(c).
(c) Seller will not, directly or indirectly, offer, sell, pledge,
transfer or otherwise dispose of (or solicit any offers to buy, purchase or
otherwise acquire or take a pledge of) any of the shares of Purchaser Common
Stock purchased hereunder except in compliance with the Securities Act,
applicable blue sky laws, and the rules and regulations promulgated thereunder.
(d) Seller acknowledges that Purchaser may place on the stock
certificates representing the Purchaser Common Stock to be issued to Seller
legends as may be required or advisable relating to the restrictions imposed on
transfer by the Securities Act.
2.24 Full Disclosure. This Agreement (including the Disclosure
Schedule) does not (i) contain any representation, warranty or information that
is false or misleading with respect to any material fact, or (ii) omit to state
any material fact or necessary in order to make the representations, warranties
and information contained and to be contained herein and therein (in the light
of the circumstances under which such representations, warranties and
information were or will be made or provided) not false or misleading.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PURCHASER
18.
Purchaser represents and warrants to Seller as follows:
3.1 SEC Filings; Financial Statements.
(a) Purchaser has delivered to Seller accurate and complete copies
(excluding copies of exhibits) of each report, registration statement (on a form
other than Form S-8) and definitive proxy statement filed by Purchaser with the
SEC between September 22, 1997 and the date of this Agreement (the "Purchaser
SEC Documents"). As of the time it was filed with the SEC (or, if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing): (i) each of the Purchaser SEC Documents complied in all material
respects with the applicable requirements of the Securities Act or the Exchange
Act (as the case may be); and (ii) none of the Purchaser SEC Documents contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(b) The financial statements contained in the Purchaser SEC
Documents: (i) complied as to form in all material respects with the published
rules and regulations of the SEC applicable thereto; (ii) were prepared from the
books and records of Purchaser in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods covered, except
as may be indicated in the notes to such financial statements and, in the case
of unaudited statements, as permitted by Form 10-QSB of the SEC, and except that
unaudited financial statements may not contain footnotes and are subject to
normal year-end audit adjustments, none of which Purchaser believes will be
material; and (iii) fairly present the financial position of Purchaser as of the
respective dates thereof and the results of operations of Purchaser for the
periods covered thereby.
3.2 Authority; Binding Nature of Agreement. Purchaser has the absolute
and unrestricted right, power and authority to enter into and perform its
obligations under this Agreement; and the execution, delivery and performance by
Purchaser of this Agreement (including the contemplated issuance of Purchaser
Common Stock in accordance with this Agreement) have been duly authorized by all
necessary action on the part of Purchaser and its board of directors. No vote of
Purchaser's shareholders is needed to approve the transactions contemplated by
this Agreement. This Agreement has been duly and validly executed and delivered
by Purchaser and constitutes the legal, valid and binding obligation of
Purchaser, enforceable against it in accordance with its terms, subject to (i)
laws of general application relating to bankruptcy, insolvency and the relief of
debtors, and (ii) rules of law governing specific performance, injunctive relief
and other equitable remedies.
3.3 Valid Issuance. The Purchaser Common Stock to be issued in
connection with this Agreement will, when issued in accordance with the
provisions of this Agreement, be duly and validly authorized and issued, and be
fully paid and nonassessable.
3.4 No Brokers or Finders Fees. No broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with any of the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Purchaser.
19.
3.5 Organization and Qualification. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has the requisite corporate power and
authority to carry on its business as it is now being conducted. Purchaser is or
will prior to the Closing be, duly qualified as a foreign corporation to do
business, and in good standing, in each jurisdiction where the character of the
properties owned or leased by it, or the nature of its activities, is such that
qualification as a foreign corporation in that jurisdiction is required by law.
3.6 Absence of Breach; No Consents. The execution, delivery, and
performance of this Agreement, and the performance by Purchaser of its
obligations hereunder (except for compliance with any regulatory or licensing
laws applicable to the business of the Purchaser, all of which, to the extent
applicable to Purchaser (and to the extent within its control), will be
satisfied in all material respects prior to the Closing) do not, (i) conflict
with, and will not result in a breach of, any of the provisions of the Articles
of Incorporation or By-Laws of Purchaser; (ii) to the knowledge of Purchaser
contravene any Legal Requirement, or any order, writ, judgement, injunction,
decree, determination, or award affecting or binding upon the Purchaser or any
of its material properties, or cause the suspension or revocation of any
Governmental Authorization presently in effect, which affects or bind Purchaser
or any of its material properties, except in any such case where such
contravention will not have a material adverse effect on the business, condition
(financial or otherwise), operations, or prospects of Purchaser; (iii) conflict
with or result in a material breach of or default under any material indenture
or loan or credit agreement or any other material agreement or instrument to
which Purchaser is a party or by which it or any of its material properties may
be affected or bound; (iv) require the authorization, consent, approval or
license of any third party of such a nature that the failure to obtain the same
would have a material adverse effect on the business, condition (financial or
otherwise), operations or prospects of Purchaser, and (v) constitute grounds for
the loss or suspension of any permits, licenses or other authorizations material
to the business, condition (financial or otherwise), operations or prospects of
Purchaser.
SECTION 4. PRE-CLOSING COVENANTS OF SELLER AND THE COMPANY.
4.1 Access and Investigation. Seller and the Company shall ensure that,
at all times during the period from the date of this Agreement until the Closing
(the "Pre-Closing Period"), the Company and its Representatives provide
Purchaser and its Representatives with free and complete access to the Company's
Representatives, personnel and assets and to all existing books, records, Tax
Returns, work papers and other documents and information relating to the
Company.
4.2 Operation of Business. Seller and the Company shall ensure that,
during the Pre-Closing Period:
(a) Seller does not directly or indirectly sell or otherwise
transfer, or offer, agree or commit (in writing or otherwise) to sell or
otherwise transfer, any of the Shares or any interest in or right relating to
any of the Shares;
20.
(b) Seller does not permit, and Seller does not offer, agree or
commit (in writing or otherwise) to permit, any of the Shares to become subject,
directly or indirectly, to any Encumbrance (except in furtherance of the
transactions contemplated herein);
(c) the Company conducts its operations exclusively in the ordinary
course of business and in the same manner as such operations have been conducted
prior to the date of this Agreement;
(d) the Company immediately notifies Purchaser of any inquiry,
proposal or offer from any Person relating to any Acquisition Transaction;
(e) the Company does not declare, accrue, set aside or pay any
dividend or make any other distribution in respect of any shares of capital
stock, and does not repurchase, redeem or otherwise reacquire any shares of
capital stock or other securities;
(f) the Company does not sell or otherwise issue any shares of
capital stock or any other securities; and
(g) the Company does not amend its articles of incorporation or
bylaws (except in furtherance of the transactions contemplated herein), and does
not effect or become a party to any Acquisition Transaction, recapitalization,
reclassification of shares, stock split, reverse stock split or similar
transaction.
4.3 Filings and Consents. Seller and Company shall ensure that:
(a) each Consent, filing or notice required to be obtained, made or
given (pursuant to any applicable Legal Requirement, legal order or Contract, or
otherwise) by Seller or the Company in connection with the execution and
delivery of any of this Agreement or in connection with the consummation or
performance of any of the transactions contemplated in this Agreement (including
each of the Consents identified in Part 2.21 of the Disclosure Schedule) is
obtained, made or given as soon as possible after the date of this Agreement and
remains in full force and effect through the Closing Date;
(b) Seller promptly delivers to Purchaser a copy of each filing
made, each notice given and each Consent obtained by Seller or the Company
during the Pre-Closing Period; and (c) during the Pre-Closing Period, the
Company and its Representatives cooperate with Purchaser and with Purchaser's
Representatives, and prepare and make available such documents and take such
other actions as Purchaser may request in good faith, in connection with any
filing, notice or Consent that Purchaser is required or elects to make, give or
obtain hereunder.
4.4 Notification; Updates to Disclosure Schedule.
(a) During the Pre-Closing Period, Seller and the Company shall
promptly notify Purchaser in writing of the discovery by Seller or the Company
of:
21.
(i) any event, condition, fact or circumstance that occurred
or existed on or prior to the date of this Agreement and that caused or
constitutes a breach of any representation or warranty made by Seller in this
Agreement;
(ii) any event, condition, fact or circumstance that occurs,
arises or exists after the date of this Agreement and that would cause or
constitute a material breach of any representation or warranty made by Seller in
this Agreement if (A) such representation or warranty had been made as of the
time of the occurrence, existence or discovery of such event, condition, fact or
circumstance, or (B) such event, condition, fact or circumstance had occurred,
arisen or existed on or prior to the date of this Agreement;
(iii) any material breach of any covenant or obligation of
Seller or the Company; and
(iv) any event, condition, fact or circumstance that may make
the timely satisfaction of any of the conditions set forth in Section 6 or
Section 7 impossible or unlikely.
(b) If any event, condition, fact or circumstance that is required
to be disclosed pursuant to Section 4.4(a) requires any change in the Disclosure
Schedule, or if any such event, condition, fact or circumstance would require
such a change assuming the Disclosure Schedule were dated as of the date of the
occurrence, existence or discovery of such event, condition, fact or
circumstance, then Seller shall promptly deliver to Purchaser an update to the
Disclosure Schedule specifying such change. Such update shall be deemed to
supplement or amend the Disclosure Schedule for the purpose of determining the
accuracy of any of the representations and warranties made by Seller in this
Agreement, but not for determining whether any of the conditions set forth in
Section 6 has been satisfied.
4.5 No Negotiation. Seller and the Company shall ensure that, during
the Pre-Closing Period, neither the Company nor any of the Company's
Representatives directly or indirectly:
(a) solicits or encourages the initiation of any inquiry, proposal
or offer from any Person (other than Purchaser) relating to any Acquisition
Transaction;.
(b) participates in any discussions or negotiations with, or
provides any non-public information to, any Person (other than Purchaser)
relating to any Acquisition Proposal; or
(c) considers the merits of any unsolicited inquiry, proposal or
offer from any Person (other than Purchaser) relating to any Acquisition
Transaction.
4.6 Best Efforts. During the Pre-Closing Period, Seller and the Company
shall use their best efforts to cause the conditions set forth in Sections 6 and
7.5 to be satisfied on a timely basis.
22.
SECTION 5. PRE-CLOSING COVENANTS OF PURCHASER.
5.1 Notification. During the Pre-Closing Period, Purchaser shall
promptly notify Seller in writing of the discovery by Purchaser of:
(a) any event, condition, fact or circumstance that occurred or
existed on or prior to the date of this Agreement and that caused or constitutes
a breach of any representation or warranty made by Purchaser in this Agreement;
(b) any event, condition, fact or circumstance that occurs, arises
or exists after the date of this Agreement and that would cause or constitute a
breach of any representation or warranty made by Purchaser in this Agreement if
(A) such representation or warranty had been made as of the time of the
occurrence, existence or discovery of such event, condition, fact or
circumstance, or (B) such event, condition, fact or circumstance had occurred,
arisen or existed on or prior to the date of this Agreement;
(c) any breach of any covenant or obligation of Purchaser; and
(d) any event, condition, fact or circumstance that may make the
timely satisfaction of any of the conditions set forth in Section 6 or Section 7
impossible or unlikely.
5.2 Filings. Purchaser shall ensure that:
(a) Purchaser promptly delivers to Seller a copy of each filing
made by Purchaser during the Pre-Closing Period; and
(b) during the Pre-Closing Period, Purchaser and its
Representatives cooperate with Seller and Seller's Representatives, and prepare
and make available such documents and take such other actions as Seller may
request in good faith, in connection with any filing that Purchaser is required
or elects to make.
5.3 Best Efforts. During the Pre-Closing Period, Purchaser shall use
its best efforts to cause the condition set forth in Section 7 to be satisfied.
SECTION 6. CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATION TO CLOSE.
Purchaser's obligation to purchase the Shares and to take the other
actions required to be taken by Purchaser at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by Purchaser, in whole or in part, in accordance
with Section 10.12(b)):
6.1 Accuracy of Representations and Warranties. Each of the
representations and warranties of Seller set forth Section 2 shall have been
accurate in all respects as of the date of this Agreement, and shall be accurate
in all material respects as of the Closing Date, without giving any update to
the Disclosure Schedule.
23.
6.2 Delivery of Closing Documents.
(a) Seller shall have delivered to Purchaser:
(i) each of the stock certificates, duly endorsed, as required
by Section 1.3(b)(i);
(ii) the Escrow Agreement, in the form attached hereto as
Exhibit B, duly executed by Seller, Seller's Agent and the Escrow Agent;
(iii) a Seller's General Release, in the form attached hereto
as Exhibit C, duly executed by each of the direct and designated indirect
stockholders of the Company;
(iv) an Employment Agreement, in the form attached hereto as
Exhibit D, duly executed by Xx. Xxxxxxxx;
(v) a Noncompetition Agreement, duly executed by Xx. Xxxxxxxx,
in the form attached hereto as Exhibit E, relating to the obligation of Xx.
Xxxxxxxx not to engage in competition with Purchaser and/or the Company;
(vi) an Estoppel Certificate, dated as of a date not more than
5 days prior to the Closing Date, duly executed by the Colorado School of Mines
Research Institute, a Colorado not-for-profit corporation, relating to the
Company's facility located at 0000 XxXxxxxx Xxxxxx, Xxxxxx, Xxxxxxxx 00000, in
form and substance satisfactory to Purchaser;
(vii) a legal opinion of Xxxxxxx & Xxxxx, P.C., legal counsel
to the Company, to the effect of Exhibit F hereto, in the form satisfactory to
Purchaser; and
(viii) Such other documents reasonably requested by Purchaser
to confirm Seller's authority to sell and transfer the Shares to Purchaser.
(b) Seller shall have delivered to the Escrow Agent the Escrow
Agreement duly executed by Seller, and the executed stock assignments referred
to in the Escrow Agreement.
(c) The Escrow Agent shall have delivered to Purchaser the Escrow
Agreement duly executed by the Escrow Agent.
6.3 Performance of Obligations. Each of the covenants and obligations
that Seller and/or the Company are required to comply with or perform at or
prior to the Closing shall have been duly complied with and performed in all
material respects.
6.4 No Adverse Change. There shall have been no material adverse change
in the Company's business, condition, assets, liabilities, operations, financial
performance, net income or prospects since the date of this Agreement.
24.
6.5 Compliance Certificate. Seller shall have delivered to Purchaser an
officer's certificate, duly executed by the President of Seller, certifying that
the conditions set forth in Sections 6.1, 6.3 and 6.4 have been fulfilled.
6.6 No Legal Proceedings. Since the date of this Agreement, there shall
not have been commenced or threatened against Purchaser, or against any Person
affiliated with Purchaser, any Legal Proceeding (a) involving any challenge to,
or seeking damages or other relief in connection with, any of the transactions
contemplated by this Agreement, or (b) that may have the effect of preventing,
delaying, making illegal or otherwise interfering with any of the transactions
contemplated by this Agreement.
6.7 No Claim Regarding Stock Ownership or Sale Proceeds. No Person
shall have made or threatened any claim asserting that such Person (a) may be
the holder or the beneficial owner of, or may have the right to acquire or to
obtain beneficial ownership of, any capital stock or other securities of the
Company, or (b) may be entitled to all or any portion of the purchase price for
the Shares.
6.8 No Prohibition. Neither the consummation nor the performance of any
the transactions contemplated by this Agreement will, directly or indirectly
(with or without notice or lapse of time), contravene or conflict with or result
in a violation of, or cause Purchaser or any Person affiliated with Purchaser to
suffer any adverse consequence under, (a) any applicable Legal Requirement or
legal order, or (b) any Legal Requirement or legal order that has been proposed
by or before any Governmental Body.
SECTION 7. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE.
Seller's obligation to sell the Shares and to take the other
actions required to be taken by Seller at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by the Seller's Agent, in whole or in part, in
accordance with Section 10.12(b)):
7.1 Accuracy of Representations and Warranties. Each of the
representations and warranties of Purchaser set forth Section 3 shall have been
accurate in all respects as of the date of this Agreement, and shall be accurate
in all respects as of the Closing Date
7.2 Delivery of Closing Documents.
(a) Purchaser shall have delivered to Seller and the Escrow Agent:
(i) the stock certificates referred to and as required by
Section 1.3(b)(ii); and
(ii) the Escrow Agreement in the form attached hereto as
Exhibit B, duly executed by Purchaser.
25.
(b) Purchaser shall have delivered to Seller:
(i) a legal opinion of Xxxxxx Godward LLP, legal counsel to
Purchaser, to the effect of Exhibit G hereto, in the form satisfactory to
Seller; and
(ii) a Purchaser's General Release in the form attached hereto
as Exhibit H, duly executed by Purchaser.
(c) Purchaser shall have delivered to Xx. Xxxxxxxx the Employment
Agreement in the form attached hereto as Exhibit D, duly executed by Purchaser.
7.3 Performance of Obligations. Each of the covenants and obligations
that Purchaser is required to comply with or perform at or prior to the Closing
shall have been duly complied with and performed.
7.4 Release of Guarantee of Bank Line of Credit. Purchaser shall have
assumed the guarantee by Xx. Xxxxxxxx and Xxxxxxxx Xxxxxxxx of the Company's
line of credit with Norwest Bank Colorado N.A., and Norwest Bank Colorado shall
have released Xx. Xxxxxxxx and Xxxxxxxx Xxxxxxxx from such guarantee.
7.5 Release of Encumbrances on the Shares. All Encumbrances on the
Shares shall have been fully and completely released, and there shall be no
Encumbrances of any kind on the Shares.
7.6 No Injunction. There shall not be in effect any injunction that
shall have been entered by a court of competent jurisdiction since the date of
this Agreement and that prohibits the sale of the Shares by Seller to Purchaser.
SECTION 8. TERMINATION.
8.1 Termination Events. This Agreement may be terminated prior to the
Closing:
(a) by Purchaser if (i) there is a material breach of any covenant
or obligation of Seller or the Company, or (ii) Purchaser reasonably determines
that the timely satisfaction of any condition set forth in Section 6 has become
impossible or impractical (other than as a result of any failure on the part of
Purchaser to comply with or perform its covenants and obligations set forth in
this Agreement);
(b) by the Seller's Agent if (i) there is a material breach of any
covenant or obligation of Purchaser, or (ii) the Seller's Agent reasonably
determines that the timely satisfaction of any condition set forth in Section 7
has become impossible or impractical (other than as a result of any failure on
the part of Seller or the Company to comply with or perform any of their
covenants or obligations set forth in this Agreement);
26.
(c) by Purchaser at or after the Scheduled Closing Time if any
condition set forth in Section 6 has not been satisfied by the Scheduled Closing
Time;
(d) by the Seller's Agent at or after the Scheduled Closing Time if
any condition set forth in Section 7 has not been satisfied by the Scheduled
Closing Time;
(e) by Purchaser if the Closing has not taken place on or before
May 29, 1998 (other than as a result of any failure on the part of Purchaser to
comply with or perform its covenants and obligations under this Agreement);
(f) by the Seller's Agent if the Closing has not taken place on or
before May 29, 1998 (other than as a result of the failure on the part of Seller
or the Company to comply with or perform any covenant or obligation set forth in
this Agreement); or
(g) by the mutual consent of Purchaser and the Seller's Agent.
8.2 Termination Procedures. If Purchaser wishes to terminate this
Agreement pursuant to Section 8.1(a), Section 8.1(c) or Section 8.1(e),
Purchaser shall deliver to the Seller's Agent a written notice stating that
Purchaser is terminating this Agreement and setting forth a reasonably detailed
description of the basis on which Purchaser is terminating this Agreement. If
the Seller's Agent wishes to terminate this Agreement pursuant to Section
8.1(b), Section 8.1(d) or Section 8.1(f), the Seller's Agent shall deliver to
Purchaser a written notice stating that the Seller's Agent is terminating this
Agreement and setting forth a reasonably detailed description of the basis on
which the Seller's Agent is terminating this Agreement.
8.3 Effect of Termination. If this Agreement is terminated pursuant to
Section 8.1, all further obligations of the parties under this Agreement shall
terminate; provided, however, that:
(a) no party shall be relieved of any obligation or other liability
arising from any breach by such party of any provision of this Agreement; and
(b) the parties shall, in all events, remain bound by and continue
to be subject to the provisions set forth in Section 10.
8.4 Nonexclusivity of Termination Rights. The termination rights
provided in Section 8.1 shall not be deemed to be exclusive. Accordingly, the
exercise by any party of its right to terminate this Agreement pursuant to
Section 8.1 shall not be deemed to be an election of remedies and shall not be
deemed to prejudice, or to constitute or operate as a waiver of, any other right
or remedy that such party may be entitled to exercise (whether under this
Agreement, under any other Contract, under any statute, rule or other Legal
Requirement, at common law, in equity or otherwise).
27.
SECTION 9. INDEMNIFICATION, ETC.
9.1 Survival of Representations, Etc.
(a) The representations and warranties made by Seller (including
the representations and warranties set forth in Section 2) shall survive the
Closing and shall expire on the first anniversary of the date of this Agreement;
provided, however, that if, at any time prior to the first anniversary of the
date of this Agreement, Purchaser (acting in good faith) delivers to Seller a
written notice alleging the existence of an inaccuracy in or a breach of any of
the representations and warranties made by Seller (and setting forth in
reasonable detail the basis for Purchaser's belief that such an inaccuracy or
breach may exist) and asserting a claim for recovery under Section 9.2 based on
such alleged inaccuracy or breach, then the claim asserted in such notice shall
survive the first anniversary of the Closing until such time as such claim is
fully and finally resolved.
(b) All representations and warranties made by Purchaser shall
terminate and expire one year from the date hereof, and any liability of
Purchaser with respect to such representations and warranties shall thereupon
cease; provided, however, that if, at any time prior to the first anniversary of
the date of this Agreement, Seller (acting in good faith) delivers to Purchaser
a written notice alleging the existence of an inaccuracy in or a breach of any
of the representations and warranties made by Purchaser (and setting forth in
reasonable detail the basis for Seller's belief that such an inaccuracy or
breach may exist) and asserting a claim for recovery under Section 9.3 based on
such alleged inaccuracy or breach, then the claim asserted in such notice shall
survive the first anniversary of the Closing until such time as such claim is
fully and finally resolved.
(c) The representations, warranties, covenants and obligations of
Seller, and the rights and remedies that may be exercised by Purchaser, shall
not be limited or otherwise affected by or as a result of any information
furnished to, or any investigation made by or knowledge of, Purchaser or any of
its Representatives. The representations, warranties, covenants and obligations
of Purchaser, and the rights and remedies that may be exercised by Seller, shall
not be limited or otherwise affected by or as a result of any information
furnished to, or any investigation made by or knowledge of, Seller or any of its
Representatives.
9.2 Indemnification by Seller.
(a) Subject to Section 9.1(a), Seller shall hold harmless and
indemnify Purchaser from and against, and shall compensate and reimburse
Purchaser for, any Damages which are directly or indirectly suffered or incurred
by Purchaser or to which Purchaser may otherwise become subject (regardless of
whether or not such Damages relate to any third-party claim) and which arise
from or as a result of, or are directly or indirectly connected with:
(i) any inaccuracy in or breach of any representation or
warranty set forth in Section 2;
(ii) any breach of any covenant or obligation of Seller or the
Company set forth in this Agreement;
28.
(iii) any Legal Proceeding relating to any inaccuracy, breach
or liability of the type referred to in clause "(i)" or "(ii)" above (including
any Legal Proceeding commenced by Purchaser for the purpose of enforcing any of
its rights under this Section 9).
(b) Seller acknowledges and agrees that, if the Company suffers,
incurs or otherwise becomes subject to any Damages as a result of or in
connection with any inaccuracy in or breach of any representation, warranty,
covenant or obligation of Seller or the Company, then Purchaser shall also be
deemed, by virtue of its ownership of the stock of the Company, to have incurred
Damages as a result of and in connection with such inaccuracy or breach.
(c) Seller shall not be required to make any indemnification
payment pursuant to Section 9.2(a) for any inaccuracy in or breach of any of its
representations and warranties set forth in Section 2 until such time as the
total amount of all Damages (including the Damages arising from such inaccuracy
or breach and all other Damages arising from any other inaccuracies in or
breaches of any representations or warranties) that have been directly or
indirectly suffered or incurred by Purchaser, or to which Purchaser has
otherwise become subject, exceeds $40,000 in the aggregate. If the total amount
of such Damages exceeds $40,000, then Purchaser shall be entitled to be
indemnified against and compensated and reimbursed all Damages incurred,
including such $40,000.
9.3 Indemnification by Purchaser.
(a) Subject to Section 9.3(b), Purchaser shall hold harmless and
indemnify Seller from and against, and shall compensate and reimburse Seller
for, any Damages which are directly or indirectly suffered or incurred by Seller
or to which Seller may otherwise become subject (regardless of whether or not
such Damages relate to any third-party claim) and which arise from or as a
result of, or are directly or indirectly connected with:
(i) any inaccuracy in or breach of any representation or
warranty set forth in Section 3;
(ii) any breach of any covenant or obligation of Purchaser; or
(iii) any Legal Proceeding relating to any inaccuracy or
breach of the type referred to in clause "(i)" or "(ii)" above (including any
Legal Proceeding commenced by Seller for the purpose of enforcing any of its
rights under this Section 9).
(b) Purchaser shall not be required to make any indemnification
payment pursuant to Section 9.3(a) for any inaccuracy in or breach of any of its
representations and warranties set forth in Section 3 until such time as the
total amount of all Damages (including the Damages arising from such inaccuracy
or breach and all other Damages arising from any other inaccuracies in or
breaches of any representations or warranties) that have been directly or
indirectly suffered or incurred by Seller, or to which Seller has otherwise
become subject, exceeds $40,000 in the aggregate. If the total amount of such
Damages exceeds $40,000, then Seller shall be entitled to be indemnified against
and compensated and reimbursed all Damages incurred, including such $40,000. The
maximum liability for any Damages incurred by Seller for which indemnification
may be sought under this Section 9 shall be $400,000.
29.
9.4 Satisfaction of Indemnification Claim; No Contribution.
(a) From and after the Closing, the escrow under the Escrow
Agreement shall serve as security for the obligations owed Purchaser under this
Section 9. Any liability (for indemnification or otherwise) to Purchaser
following the Closing under this Section 9 may be satisfied by the delivery to
Purchaser, from the shares escrowed pursuant to the Escrow Agreement, of the
number of shares of Purchaser Common Stock determined by dividing (a) the
aggregate dollar amount of such liability by (b) $2.26 (as adjusted as
appropriate to reflect any stock split, reverse stock split, stock dividend,
recapitalization or other similar transaction effected by Purchaser between the
date hereof and the date such liability is satisfied).
(b) Except with respect to claims based on knowing and intentional
misrepresentations of representations and warranties, Purchaser agrees that the
sole recourse of Purchaser from and after the Closing with respect to a breach
by Seller of its representations or warranties made in this Agreement or in the
Disclosure Schedule or the other indemnification rights set forth in this
Section 9 shall be against the shares held in escrow under the Escrow Agreement.
(c) Except with respect to claims based on knowing and intentional
misrepresentations or representations and warranties, Seller agrees that the
sole recourse of Seller with respect to a breach by Purchaser of its
representations or warranties made in this Agreement or the other
indemnification rights set forth in this Section 9 shall be pursuant to this
Section 9.
(d) Seller waives, and acknowledges and agrees that it shall not
have and shall not exercise or assert (or attempt to exercise or assert), any
right of contribution, right of indemnity or other right or remedy against the
Company in connection with any indemnification obligation or any other liability
to which it may become subject under or in connection with this Agreement.
9.5 Payment. At such time as the reimbursable amount of a Claim (as
defined below) or a Third Party Claim (as defined below) has been determined in
accordance with this Section 9 (a "Liquidated Claim"), the indemnifying party
shall immediately pay the Person to be indemnified hereunder (an "Indemnitee")
the amount of the Liquidated Claim. No forbearance of an Indemnitee in demanding
payment from the indemnifying party shall act as a waiver of any right of an
Indemnitee to receive payment from the indemnifying party, nor shall it relieve
the indemnifying party of any obligation to an Indemnitee under this Agreement.
9.6 Notice of Claims. In the event an Indemnitee has any claim for
indemnification under Section 9.2 or Section 9.3 (a "Claim"), it shall give
prompt written notice thereof to the indemnifying party (Seller's Agent in the
case of Seller), including in such notice a reasonably detailed description of
the facts upon which such claim is based and the amount thereof.
9.7 Disputed Claims. If the Indemnifying Party objects to any Claim or
Third Party Claim, it shall give written notice of such objection and reasonably
detailed statement of the grounds of such objection to Indemnitee within 30
business days after notice is received. If no
30.
such objection is given, such Claim or Third Party Claim, as the case may be,
shall be a Liquidated Claim. If such objection is made, Indemnitee and the
Indemnifying Party shall meet and use their best efforts to settle the dispute
in writing that when resolved shall be a Liquidated Claim.
9.8 Defense of Third Party Claims.
(a) If any third party shall notify an Indemnitee with respect to
any matter (a "Third Party Claim") that may give rise to a claim for
indemnification against a party hereto (the "Indemnifying Party") under this
Section 9, then the Indemnitee shall promptly notify the Indemnifying Party
thereof in writing; provided, however, that no delay on the part of the
Indemnitee in notifying the Indemnifying Party shall relieve the Indemnifying
Party from any obligation hereunder, unless (and then solely to the extent that)
the Indemnifying Party is prejudiced.
(b) The Indemnifying Party shall have the right to defend the
Indemnitee against the Third Party Claim with counsel of the Indemnifying
Party's choice reasonably satisfactory to the Indemnitee so long as (A) the
Indemnifying Party notifies the Indemnitee within 15 days after the Indemnitee
has given notice of the Third Party Claim that the Indemnifying Party will
indemnify the Indemnitee as required by (and subject to the limitations of) this
Section 9 for Losses arising out of, relating to, in the nature of, or caused by
the Third Party Claim; (B) the Indemnifying Party provides the Indemnitee with
evidence reasonably acceptable to the Indemnitee that the Indemnifying Party
will have the financial resources to defend against the Third Party Claim and
fulfill its indemnification obligations hereunder; (C) the Third Party Claim
involves only money damages and does not seek an injunction or other equitable
relief; (D) settlement of, or an adverse judgment with respect to, the Third
Party Claim is not, in the good faith judgment of the Indemnitee, likely to
establish a precedential custom or practice materially adverse to the continuing
business interest of the Indemnitee; and (E) the Indemnifying Party conducts the
defense of the Third Party Claim actively and diligently.
(c) So long as the Indemnifying Party is conducting the defense of
the Third Party Claim in accordance with Section 9.8(b) above, (A) the
Indemnitee may retain separate co-counsel at its sole cost and expense and
participate in the defense of the Third Party Claim; (B) the Indemnitee shall
not consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written consent of the
Indemnifying Party (not to be withheld unreasonably); and (C) the Indemnifying
Party shall not consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim without the prior written
consent of the Indemnitee (not to be withheld unreasonably).
(d) In the event any of the conditions in Section 9.8(b) above is
or becomes unsatisfied, (A) the Indemnitee may defend against, and consent to
the entry of any judgment or enter into any settlement with respect to, the
Third Party Claim in any manner it reasonably may deem appropriate (and the
Indemnitee need not consult with or obtain any consent from, any Indemnifying
Party in connection therewith); (B) the Indemnifying Party shall reimburse the
Indemnitee promptly and periodically for the reasonable costs of defending
against the Third Party Claim (including attorneys' fees and expenses), and (C)
the Indemnifying Party shall
31.
remain responsible for any Losses the Indemnitee may suffer resulting from,
arising out of, relating to, in the nature of, or caused by the Third Party
Claim to the fullest extent provided in this Section 9.
9.9 Interest. An indemnifying party, if required to hold harmless,
indemnify, compensate or reimburse any Indemnitee pursuant to this Section 9
with respect to any Damages, shall also be liable to such Indemnitee for
interest on the amount of such Damages (for the period commencing as of the date
on which the indemnifying party first received notice of a claim for recovery by
such Indemnitee and ending on the date on which the liability of the
indemnifying party to such Indemnitee is fully satisfied by the indemnifying
party) at a floating rate equal to the rate of interest publicly announced by
Bank of America, N.T. & S.A. from time to time as its prime, base or reference
rate.
SECTION 10. MISCELLANEOUS PROVISIONS
10.1 Seller's Agent. Seller hereby irrevocably appoint Xx. Xxxxxxxx as
its agent for purposes of Section 9 (the "Seller's Agent"), and Xx. Xxxxxxxx
hereby accepts his appointment as the Seller's Agent. Purchaser shall be
entitled to deal exclusively with the Seller's Agent, with notices given to
Seller's counsel as set forth in Section 10.5, on all matters relating to
Section 9, and shall be entitled to rely conclusively (without further evidence
of any kind whatsoever) on any document executed or purported to be executed on
behalf of Seller by the Seller's Agent, and on any other action taken or
purported to be taken on behalf of Seller by the Seller's Agent, as fully
binding upon Seller. If the Seller's Agent shall die, become disabled or
otherwise be unable to fulfill his responsibilities as agent of Seller, then
Seller shall, within ten days after such death or disability, appoint a
successor agent and, promptly thereafter, shall notify Purchaser of the identity
of such successor. Any such successor shall become the "Seller's Agent" for
purposes of Section 9 and this Section 10.1. If for any reason there is no
Seller's Agent at any time, all references herein to the Seller's Agent shall be
deemed to refer to Seller.
10.2 Further Assurances. Each party hereto shall execute and cause to
be delivered to each other party hereto such instruments and other documents,
and shall take such other actions, as such other party may reasonably request
(at or after the Closing) for the purpose of carrying out or evidencing any of
the transactions contemplated by this Agreement.
10.3 Fees and Expenses. Each party to this Agreement shall bear and pay
all fees, costs and expenses (including legal fees and accounting fees) that
have been incurred or that are incurred by such party in connection with the
transactions contemplated by this Agreement, including all fees, costs and
expenses incurred by such party in connection with or by virtue of (a) the
investigation and review conducted by Purchaser and its Representatives with
respect to the Company's business (and the furnishing of information to
Purchaser and its Representatives in connection with such investigation and
review), (b) the negotiation, preparation and review of this Agreement
(including the Disclosure Schedule) and all agreements, certificates, opinions
and other instruments and documents delivered or to be delivered in connection
with the transactions contemplated by this Agreement, (c) the preparation and
submission of any filing or
32.
notice required to be made or given in connection with any of the transactions
contemplated by this Agreement, and the obtaining of any Consent required to be
obtained in connection with any of such transactions, and (d) the consummation
of the transactions contemplated by this Agreement.
10.4 Attorneys' Fees. If any action or proceeding relating to this
Agreement or the enforcement of any provision of this Agreement is brought
against any party hereto, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
10.5 Notices. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed effective: (a) upon personal
delivery; (b) two (2) business days after it is deposited in a regularly
maintained depository of the United States Postal Service, registered or
certified mail, postage prepaid, return receipt requested and properly
addressed; (c) on the next business day after having been sent either by
overnight delivery courier service (including, but not limited to Federal
Express), or (d) upon receipt if by facsimile transmission on machine capable of
verifying receipt, and addressed or sent, to the parties at the addresses and/or
facsimile numbers set forth below:
if to Purchaser:
Isonics Corporation
0000 Xxxxxxxx Xxxxxx
Xxxxx 000
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
Attention: President
With a copy to:
Xxxxxx Godward LLP
0000 Xxxx Xxxx Xxxx
Xxxxxxxx 0, Xxxxx 000
Xxxxx Xxxx, XX 00000-0000
Fax: (000) 000-0000
Attention: Xxxx X. Xxxxxxx, Esq.
if to Seller, Seller's Agent or the Company:
Xxxxxx X. Xxxxxxxx
0000 XxXxxxxx Xxxxxx
Xxxxxx, XX 00000
Fax: (000) 000-0000
With a copy to:
33.
Xxxxxxx & Xxxxx, P.C.
0000 Xxxxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxx X. Xxxxx III, Esq.
10.6 Confidentiality. On and at all times after the date of this
Agreement, Seller shall, and shall use its best efforts to cause each of its
Affiliates to, keep confidential, and shall not use or disclose to any other
Person, any non-public document or other non-public information in Seller's
possession that relates to the business of the Company or Purchaser.
10.7 Headings. The underlined headings contained in this Agreement are
for convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
10.8 Counterparts; Facsimile Signatures. This Agreement may be executed
in several counterparts, each of which shall constitute an original and all of
which, when taken together, shall constitute one agreement. A facsimile copy,
including a facsimile copy of a signature, shall have the same force and effect
as an original.
10.9 Governing Law; Arbitration.
(a) This Agreement shall be construed in accordance with, and
governed in all respects by, the internal laws of the State of California
(without giving effect to principles of conflicts of laws).
(b) Any dispute, claim or controversy of any nature arising out of
or relating to this Agreement, including without limitation any action or claim
based on tort, contract, statute, or for any other cause of action, and which
relates in any way to the interpretation, effect, termination, validity,
enforcement, performance and/or breach of this Agreement, shall be resolved by
final binding arbitration administered by the American Arbitration Association
("AAA"). The arbitration shall be conducted before a panel of three arbitrators
under the commercial arbitration rules of the AAA and shall be held at an AAA
facility in Santa Xxxxx County, California. The parties hereto agree that all
arbitrators serving on such panel must be available to serve on the panel in
accordance with the timetable of the arbitration.
(c) Not for the adjudication of any matters (other than judicial
review for fraud or undisclosed bias), but for the enforcement of an arbitration
award or the granting of injunctive relief, the parties hereto irrevocably elect
as the sole judicial forum for the adjudication of any matters arising under or
in connection with this Agreement, and consent to the jurisdiction of, the
courts of the State of California.
10.10 Successors and Assigns. This Agreement shall be binding upon: the
Company and its successors and assigns (if any); Seller and its personal
representatives, executors, administrators, estates, heirs, successors and
assigns (if any); and Purchaser and its successors
34.
and assigns (if any). Purchaser may freely assign any or all of its rights under
this Agreement (including its indemnification rights under Section 9), in whole
or in part, to any other Person without obtaining the consent or approval of any
other party hereto or of any other Person.
10.11 Remedies Cumulative; Specific Performance. The rights and
remedies of the parties hereto shall be cumulative (and not alternative). The
parties to this Agreement agree that, in the event of any breach or threatened
breach by any party to this Agreement of any covenant, obligation or other
provision set forth in this Agreement for the benefit of any other party to this
Agreement, such other party shall be entitled (in addition to any other remedy
that may be available to it) to (a) a decree or order of specific performance or
mandamus to enforce the observance and performance of such covenant, obligation
or other provision, and (b) an injunction restraining such breach or threatened
breach.
10.12 Waiver.
(a) No failure on the part of any Person to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of any
Person in exercising any power, right, privilege or remedy under this Agreement,
shall operate as a waiver of such power, right, privilege or remedy; and no
single or partial exercise of any such power, right, privilege or remedy shall
preclude any other or further exercise thereof or of any other power, right,
privilege or remedy.
(b) No Person shall be deemed to have waived any claim arising out
of this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or remedy is
expressly set forth in a written instrument duly executed and delivered on
behalf of such Person; and any such waiver shall not be applicable or have any
effect except in the specific instance in which it is given.
10.13 Amendments. This Agreement may not be amended, modified, altered
or supplemented other than by means of a written instrument duly executed and
delivered on behalf of all of the parties hereto.
10.14 Severability. In the event that any provision of this Agreement,
or the application of any such provision to any Person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
to Persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
10.15 Parties in Interest. None of the provisions of this Agreement is
intended to provide any rights or remedies to any Person other than the parties
hereto and their respective successors and assigns (if any).
10.16 Entire Agreement. This Agreement and the other agreements
referred to herein set forth the entire understanding of the parties hereto
relating to the subject matter hereof and thereof and supersede all prior
agreements and understandings among or between any of the parties relating to
the subject matter hereof and thereof
35.
10.17 Construction
(a) For purposes of this Agreement, whenever the context requires:
the singular number shall include the plural, and vice versa; the masculine
gender shall include the feminine and neuter genders; the feminine gender shall
include the masculine and neuter genders; and the neuter gender shall include
the masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and "including,"
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "without limitation."
(d) Except as otherwise indicated, all references in this Agreement
to "Sections" and "Exhibits" are intended to refer to Sections and Exhibits of
and to this Agreement.
36.
The parties hereto have caused this Agreement to be executed and
delivered as of the date first written above.
ISONICS CORPORATION,
a California corporation
By: /s/ Xxxxx X. Xxxxxxxxx
---------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: President and Chief
Executive Officer
METALLURGY INTERNATIONAL, INC.,
a Nevada corporation
By: /s/ Xxxxxx X. Xxxxxxxx
---------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: President
INTERNATIONAL PROCESS RESEARCH
CORPORATION,
a Colorado corporation
By: /s/ Xxxxxx X. Xxxxxxxx
---------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: President
37.
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
Acquisition Transaction. "Acquisition Transaction" shall mean any
transaction involving:
(a) the sale, license, disposition or acquisition of all or a
material portion of the Company's business or assets;
(b) the issuance, disposition or acquisition of (i) any capital
stock or other equity security of the Company, (ii) any option, call, warrant or
right (whether or not immediately exercisable) to acquire any capital stock or
other equity security of the Company, or (iii) any security, instrument or
obligation that is or may become convertible into or exchangeable for any
capital stock or other equity security of the Company; or
(c) any merger, consolidation, business combination, reorganization
or similar transaction involving the Company.
Agreement. "Agreement" shall mean the Stock Purchase Agreement to which
this Exhibit A is attached (including the Disclosure Schedule), as it may be
amended from time to time.
Company Contract. "Company Contract" shall mean any Contract: (a) to
which the Company is a party; (b) by which the Company or any of its assets is
or may become bound or under which the Company has, or may become subject to,
any obligation; or (c) under which the Company has or may acquire any right or
interest.
Company Proprietary Asset. "Company Proprietary Asset" shall mean any
Proprietary Asset owned by or licensed to the Company or otherwise used by the
Company.
Consent. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
Contract. "Contract" shall mean any written, oral or other agreement,
contract, subcontract, lease, understanding, instrument, note, warranty,
insurance policy, benefit plan or legally binding commitment or undertaking of
any nature.
Damages. "Damages" shall include any loss, damage, injury, decline in
value, lost opportunity, liability, claim, demand, settlement, judgment, award,
fine, penalty, Tax, fee (including reasonable attorneys' fees), charge, cost
(including costs of investigation) or expense of any nature.
A-1
Disclosure Schedule. "Disclosure Schedule" shall mean the schedule
(dated as of the date of the Agreement) separately delivered to Purchaser on
behalf of Seller.
Xx. Xxxxxxxx. "Xx. Xxxxxxxx" shall mean Xxxxxx X. Xxxxxxxx, Ph.D., on
the date of this Agreement the President of the Company.
Encumbrance. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, claim, infringement,
interference, option, right of first refusal, preemptive right, community
property interest or restriction of any nature (including any restriction on the
voting of any security, any restriction on the transfer of any security or other
asset, any restriction on the receipt of any income derived from any asset, any
restriction on the use of any asset and any restriction on the possession,
exercise or transfer of any other attribute of ownership of any asset).
Entity. "Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm or other enterprise,
association, organization or entity.
Escrow Agent. "Escrow Agent" shall mean the Escrow Agent as defined in
the Escrow Agreement.
Escrow Agreement. "Escrow Agreement" shall mean the Escrow Agreement
among Purchaser, Seller, the Escrow Agent and the Seller's Agent, in the form
attached hereto as Exhibit B.
Exchange Act. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
Government Bid. "Government Bid" shall mean any quotation, bid or
proposal submitted to any Governmental Body or any proposed prime contractor or
higher-tier subcontractor of any Governmental Body.
Government Contract. "Government Contract" shall mean any prime
contract, subcontract, letter contract, purchase order or delivery order
executed or submitted to or on behalf of any Governmental Body or any prime
contractor or higher-tier subcontractor, or under which any Governmental Body or
any such prime contractor or subcontractor otherwise has or may acquire any
right or interest.
Governmental Authorization. "Governmental Authorization" shall mean
any: (a) permit, license, certificate, franchise, permission, clearance,
registration, qualification or authorization issued, granted, given or otherwise
made available by or under the authority of any Governmental Body or pursuant to
any Legal Requirement; or (b) right under any Contract with any Governmental
Body.
Governmental Body. "Governmental Body" shall mean any: (a) nation,
state, commonwealth, province, territory, county, municipality, district or
other jurisdiction of any
A-2
nature; (b) federal, state, local, municipal, foreign or other government; or
(c) governmental or quasi-governmental authority of any nature (including any
governmental division, department, agency, commission, instrumentality,
official, organization, unit, body or Entity and any court or other tribunal).
Knowledge or Known. "Knowledge," "Known" or such other similar terms,
when used to refer to the knowledge of Seller, shall include (i) the actual
knowledge of Xx. Xxxxxxxx or any other officer of the Company, or (ii) with
respect to such matters as could have a Material Adverse Effect on the Company,
such knowledge that any of the above persons would be expected to have obtained
after reasonable investigation.
Legal Proceeding. "Legal Proceeding" shall mean any action, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, inquiry, audit,
examination or investigation commenced, brought, conducted or heard by or
before, or otherwise involving, any court or other Governmental Body or any
arbitrator or arbitration panel.
Legal Requirement. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, constitution, principle of
common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling
or requirement issued, enacted, adopted, promulgated, implemented or otherwise
put into effect by or under the authority of any Governmental Body.
Material Adverse Effect. A violation or other matter will be deemed to
have a "Material Adverse Effect" on the Company if such violation or other
matter (considered together with all other matters that would constitute
exceptions to the representations and warranties set forth in the Agreement but
for the presence of "Material Adverse Effect" or other materiality
qualifications, or any similar qualifications, in such representations and
warranties) would have a material adverse effect on the Company's business,
condition, assets, liabilities, operations, financial performance or prospects.
Person. "Person" shall mean any individual, Entity or Governmental
Body.
Proprietary Asset. "Proprietary Asset" shall mean any: (a) patent,
patent application, trademark (whether registered or unregistered), trademark
application, trade name, fictitious business name, service xxxx (whether
registered or unregistered), service xxxx application, copyright (whether
registered or unregistered), copyright application, maskwork, maskwork
application, trade secret, know-how, customer list, franchise, system, computer
software, computer program, invention, design, blueprint, engineering drawing,
proprietary product, technology, proprietary right or other intellectual
property right or intangible asset; or (b) right to use or exploit any of the
foregoing.
Representatives. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.
SEC. "SEC" shall mean the United States Securities and Exchange
Commission.
A-3
Securities Act. "Securities Act" shall mean the Securities Act of 1933,
as amended.
Seller's Agent. "Seller's Agent" shall have the meaning assigned it in
Section 10.1 hereof.
Tax. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, gross receipts tax, value-added tax, surtax, excise tax, ad
valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax, business
tax, withholding tax or payroll tax), levy, assessment, tariff, duty (including
any customs duty), deficiency or fee, and any related charge or amount
(including any fine, penalty or interest), imposed, assessed or collected by or
under the authority of any Governmental Body.
Tax Return. "Tax Return" shall mean any return (including any
information return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information filed
with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection
or payment of any Tax or in connection with the administration, implementation
or enforcement of or compliance with any Legal Requirement relating to any Tax.
A-4
EXHIBIT B
ESCROW AGREEMENT
This ESCROW AGREEMENT is entered into as of May [_], 1998 (the "Closing
Date"), by and among: ISONICS CORPORATION, a California corporation ("Isonics");
METALLURGY INTERNATIONAL, INC., a Nevada corporation ("Seller");
[________________], a [_________] corporation (the "Escrow Agent"); and XXXXXX
X. XXXXXXXX (in his capacity as agent for Seller, the "Seller's Agent").
RECITALS
A. Isonics, Seller and International Process Research Corporation, a
Colorado corporation (the "Company"), have entered into a Stock Purchase
Agreement, dated April 30, 1998, (the "Purchase Agreement"), pursuant to which
Isonics is purchasing all of the outstanding capital stock of the "Company, all
of which are held beneficially and of record by Seller, in exchange for shares
of Common Stock, no par value, of Isonics (the "Isonics Stock").
B. The Purchase Agreement contemplates the establishment of an escrow
arrangement to secure the indemnification and other obligations of Seller under
the Purchase Agreement.
AGREEMENT
The parties to this Escrow Agreement, intending to be legally bound,
agree as follows:
SECTION 1. DEFINED TERMS
Capitalized terms used and not otherwise defined in this Escrow
Agreement shall have the meanings assigned to them in the Purchase Agreement.
SECTION 2. ESCROW
2.1 Shares and Stock Powers to be Placed in Escrow. On the Closing
Date, (i) Isonics shall issue certificates for an aggregate of 176,991 shares of
Isonics Stock (the "Escrow Shares") in the name of Seller, evidencing the shares
of Isonics Stock to be held in escrow in accordance with this Escrow Agreement,
and deliver such stock certificates to the Escrow Agent, and (ii) Seller shall
deliver to the Escrow Agent five "assignments separate from certificate" ("Stock
Powers") endorsed by Seller in blank, each signature guaranteed by a national
bank or New York Stock Exchange member firm. The shares and Stock Powers
referred to in this Section 2.1 shall be held by the Escrow Agent in escrow (the
"Escrow") in accordance with the provisions of this Escrow Agreement and shall
not be subject to any lien, attachment, trustee process or any other judicial
process of any creditor of any party hereto.
2.2 Indemnification. Seller has agreed in Section 9.2 of the Purchase
Agreement to indemnify and hold harmless the Indemnitees from and against
Damages. Seller agrees that the Escrow Shares shall be security for such
indemnity obligation, subject to the limitations, and in the manner provided in
this Agreement.
2.3 Voting of Shares. The record owners of the Escrow Shares shall be
entitled to exercise all voting rights with respect to such Escrow Shares.
2.4 Dividends, Etc. Any cash, securities or other property
distributable (whether by way of dividend, stock split or otherwise) in respect
of or in exchange for any Escrow Shares shall not be distributed to the record
owner of such Escrow Shares, or if distributed to Seller shall be immediately
delivered by Seller to the Escrow Agent, shall be held by the Escrow Agent in
the Escrow. At the time any Escrow Shares are required to be released from the
Escrow to any Person pursuant to this Escrow Agreement, any cash, securities or
other property previously distributed in respect of or in exchange for such
Escrow Shares shall be released from the Escrow to such Person.
2.5 Transferability. The interests of Seller in the Escrow and in the
Escrow Shares shall not be assignable or transferable, other than by operation
of law. No transfer of any of such interests by operation of law shall be
recognized or given effect until Isonics shall have received written notice of
such transfer.
2.6 Fractional Shares. No fractional shares of Isonics Stock shall be
retained in or released from the Escrow pursuant to this Escrow Agreement. In
connection with any release of Escrow Shares from the Escrow, Seller, which
would otherwise be entitled to receive a fraction of a share of Isonics Stock
(after aggregating all fractional shares of Isonics Stock issuable to Seller)
shall be paid in cash the dollar amount (rounded to the nearest whole cent),
without interest, determined by multiplying such fraction by $2.26, and such
fractional share shall be released to Isonics.
SECTION 3. CLAIM PROCEDURES
3.1 Claim Notice. If Isonics determines in good faith that there is or
has been a possible breach by Seller of any representation, warranty, covenant
or other provision set forth in the Purchase Agreement (collectively, a
"Breach"), and if Isonics wishes to make a claim against the Escrow with respect
to such possible Breach, then Isonics may deliver to the Seller's Agent and the
Escrow Agent a written notice of such possible Breach (a "Claim Notice") setting
forth (i) a reasonably detailed description of the circumstances supporting
Isonics's belief that such possible Breach exists or has occurred, and (ii) a
non-binding, preliminary, good faith estimate of the aggregate dollar amount of
all Damages that have arisen and may arise as a direct or indirect result of
such possible Breach (such aggregate amount being referred to as the "Claim
Amount").
3.2 Response Notice. Within 30 calendar days after the delivery of a
Claim Notice to the Seller's Agent, the Seller's Agent shall deliver to Isonics
and the Escrow Agent a written notice (the "Response Notice") containing: (i)
instructions to the effect that Escrow Shares having a Fair Market Value (as
defined in Section 5 of this Escrow Agreement) equal to the entire Claim Amount
set forth in such Claim Notice are to be released from the Escrow to
2
Isonics; or (ii) instructions to the effect that Escrow Shares having a Fair
Market Value equal to a specified portion (but not the entire amount) of the
Claim Amount set forth in such Claim Notice are to be released from the Escrow
to Isonics, together with a statement that the remaining portion of such Claim
Amount is being disputed; or (iii) a statement that the entire Claim Amount set
forth in such Claim Notice is being disputed. If no Response Notice is received
by Isonics and the Escrow Agent from the Seller's Agent within 45 calendar days
after the delivery of a Claim Notice to the Seller's Agent, then the recipient
of such Claim Notice shall be deemed to have given instructions that Escrow
Shares having a Fair Market Value equal to the entire Claim Amount set forth in
such Claim Notice are to be released to Isonics from the Escrow.
3.3 Release of Escrow Shares to Isonics.
(a) If the Seller's Agent gives (or is deemed to have given)
instructions to the Escrow Agent that Escrow Shares having a Fair Market Value
equal to the entire Claim Amount set forth in a Claim Notice are to be released
from the Escrow to Isonics, then the Escrow Agent shall be authorized to use a
Stock Power held in the Escrow to transfer to Isonics, from the Escrow, Escrow
Shares having a Fair Market Value equal to such Claim Amount.
(b) If a Response Notice delivered by the Seller's Agent in
response to a Claim Notice contains instructions to the effect that Escrow
Shares having a Fair Market Value equal to a specified portion (but not the
entire amount) of the Claim Amount set forth in such Claim Notice are to be
released from the Escrow to Isonics, then (i) the Escrow Agent shall be
authorized to use a Stock Power held in the Escrow to transfer to Isonics, from
the Escrow, Escrow Shares having a Fair Market Value equal to such specified
portion of such Claim Amount, and (ii) the procedures set forth in Section
3.3(c) of this Escrow Agreement shall be followed with respect to the remaining
portion of such Claim Amount.
(c) If a Response Notice delivered by the Seller's Agent in
response to a Claim Notice contains a statement that all or a portion of the
Claim Amount set forth in such Claim Notice is being disputed (such Claim Amount
or the disputed portion thereof being referred to as the "Disputed Amount"),
then, notwithstanding anything contained in Section 4 of this Escrow Agreement,
the Escrow Agent shall continue to hold in the Escrow (in addition to any other
Escrow Shares permitted to be retained in the Escrow, whether in connection with
any other dispute, pursuant to Section 4.1 of this Escrow Agreement, or
otherwise) Escrow Shares having a Fair Market Value equal to 100% of the
Disputed Amount. Such Escrow Shares shall continue to be held in the Escrow
until such time as (i) Isonics and the Seller's Agent execute and deliver to the
Escrow Agent a settlement agreement containing instructions regarding the
release of such shares, or (ii) the Escrow Agent receives a copy of a court or
arbitration final order containing instructions to the Escrow Agent regarding
the release of such Escrow Shares, and Escrow Agent shall be entitled to rely
conclusively on such final order. The Escrow Agent shall thereupon release such
Escrow Shares from the Escrow in accordance with the instructions set forth in
such settlement agreement or court or arbitration order.
3
SECTION 4. RELEASE OF SHARES TO SELLER
4.1 Shares to be Released. On the date 12 months after the Closing
Date, the Escrow Agent shall release to Seller from the Escrow all Escrow Shares
then held in the Escrow, except for any Escrow Shares necessary to satisfy a
claim set forth in a Claim Notice which has been given and for which a Response
Notice has not been received or deemed to have been receive, or that are to be
retained in the Escrow in accordance with Section 3.3(c) of this Escrow
Agreement.
4.2 Procedures for Releasing Shares. Any release of shares to Seller
pursuant to Section 4.1 of this Escrow Agreement may be effected by mailing a
stock certificate to Seller certified mail, return receipt requested.
SECTION 5. VALUATION OF SHARES HELD IN ESCROW
For purposes of this Escrow Agreement, the "Fair Market Value" of the
Escrow Shares shall be deemed to be equal to the number of Escrow Shares
multiplied by $2.26 (adjusted as appropriate to reflect any stock split, reverse
stock split, stock dividend or similar transaction effected by Isonics after the
Closing Date).
SECTION 6. FEES AND EXPENSES
Seller shall reimburse the Seller's Agent and the Escrow Agent for all
reasonable fees and expenses (including attorneys' fees) incurred by the
Seller's Agent and the Escrow Agent in connection with the performance of his
duties hereunder.
SECTION 7. LIMITATION OF ESCROW AGENT'S LIABILITY
7.1 Limitation. The Escrow Agent shall incur no liability with respect
to any action taken or suffered by it in reliance upon any notice, direction,
instruction, consent, statement or other documents believed by it to be genuine
and duly authorized, nor for other action or inaction except its own willful
misconduct or negligence. The Escrow Agent shall not be responsible for the
validity or sufficiency of this Agreement. In all questions arising under the
Escrow Agreement, the Escrow Agent may rely on the advice of counsel, and for
anything done, omitted or suffered in good faith by the Escrow Agent based on
such advice the Escrow Agent shall not be liable to anyone. The Escrow Agent
shall not be required to take any action hereunder involving any expense unless
the payment of such expense is made or provided for in a manner reasonably
satisfactory to it.
7.2 Indemnification of Escrow Agent. Isonics and Seller, jointly and
severally, shall indemnify the Escrow Agent for, and hold it harmless against,
any loss, liability or expense incurred without negligence or willful misconduct
on the part of Escrow Agent, arising out of or in connection with its carrying
out of its duties hereunder, including any extraordinary fees and expenses that
may arise, such as fees of counsel and court costs. As among themselves, each of
Isonics and Seller shall be liable for one-half (1/2) of such amounts. The
Escrow Agent has a first and prior lien on the Escrow Shares to secure any such
fees and expenses. The Escrow
4
Agent is authorized to deduct any such fees and expenses from the Escrow Shares.
Any fees and expenses owed but unpaid shall secure interest at the rate of 12%
per annum.
7.3 Non-Liability. The Escrow Agent shall not be liable for any act it
may do or omit to do as the Escrow Agent while acting in good faith and in the
exercise of its own best judgment. Any act done or omitted by the Escrow Agent
pursuant to the advice of its attorneys shall be conclusive evidence of such
good faith. The Escrow Agent shall have the right to consult with counsel
whenever any question arises concerning the Escrow Agreement and shall incur no
liability whatsoever, for any delay reasonably required to obtain such advice of
counsel.
7.4 Other Contract or Agreements. The Escrow Agent is not a party to or
bound by any agreement between Isonics, Seller and Seller's Agent other than
this The Escrow Agreement, whether or not an original copy of such agreement is
held by Escrow Agent or is in the files of the Escrow Agent.
7.5 Validity and Sufficiency of the Escrow. The Escrow Agent assumes no
responsibility for the validity and/or sufficiency of any funds, securities,
instruments or instructions held as Escrow Shares.
SECTION 8. SUCCESSOR ESCROW AGENT
In the event the Escrow Agent becomes unavailable or unwilling to
continue in its capacity herewith, the Escrow Agent may resign and be discharged
from its duties or obligations hereunder by giving resignation to the parties to
this Escrow Agreement, specifying not less than 60 calendar days' prior written
notice of the date when such resignation shall take effect. Isonics may appoint
a successor Escrow Agent without the consent of the Agent so long as such
successor is a bank with assets of at least $100 million, and may appoint any
other successor Escrow Agent with the consent of the Agent, which consent shall
not be unreasonably withheld. If, within such notice period, Isonics provides to
the Escrow Agent written instructions with respect to the appointment of a
successor Escrow Agent and directions for the transfer of any Escrow Shares then
held by the Escrow Agent to such successor, the Escrow Agent shall act in
accordance with such instructions and promptly transfer such Escrow Shares to
such designated successor.
SECTION 9. GENERAL
9.1 Confirmation of Appointment. Seller confirms the appointment and
authority of the Seller's Agent as set forth in Section 10.1 of Purchase
Agreement with respect to all matters relating to this Escrow Agreement. Any
successor to the Seller's Agent who is appointed in accordance with the
provisions of Section 10.1 of the Purchase Agreement shall be deemed to be the
"Seller's Agent" for purposes of this Escrow Agreement. Any document executed or
action taken by the Seller's Agent shall be binding upon Seller.
9.2 Other Agreements. Nothing in this Escrow Agreement is intended to
limit any of Isonics's rights, or any obligation of Seller, under the Purchase
Agreement or under any other
5
agreement entered into in connection with the transactions contemplated under
the Purchase Agreement.
9.3 Notices. Any notice required or permitted to be given under this
Escrow Agreement shall be in writing and shall be deemed effective: (a) upon
personal delivery; (b) two (2) business days after it is deposited in a
regularly maintained depository of the United States Postal Service, registered
or certified mail, postage prepaid, return receipt requested and properly
addressed; (c) on the next business day after having been sent either by
overnight delivery courier service (including, but not limited to Federal
Express), or (d) upon receipt if by facsimile transmission on machine capable of
verifying receipt, and addressed or sent, to the parties at the addresses and/or
facsimile numbers set forth below:
if to Isonics:
Isonics Corporation
0000 Xxxxxxxx Xxxxxx
Xxxxx 000
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
Attention: President
With a copy to:
Cooley Godward LLP
0000 Xxxx Xxxx Xxxx
Xxxxxxxx 0, Xxxxx 000
Xxxxx Xxxx, XX 00000-0000
Fax: (000) 000-0000
Attention: Xxxx X. Xxxxxxx, Esq.
if to the Seller's Agent:
Xxxxxx X. Xxxxxxxx
0000 XxXxxxxx Xxxxxx
Xxxxxx, XX 00000
Fax: (000) 000-0000
With a copy to:
Xxxxxxx & Xxxxx, P.C.
0000 Xxxxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxx X. Xxxxx III, Esq.
6
if to the Escrow Agent:
Colorado Business Bank
Attn: Community Trust Division, Xxxxx Xxxxx
000 00xx Xxxxxx, Xxxxxx Xxxxx
Xxxxxx, XX 00000
Fax: (303) 293 -0700
9.4 Counterparts; Facsimile Signatures. This Escrow 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. A
facsimile copy, including a facsimile copy of a signature, shall have the same
force and effect as an original.
9.5 Headings. The underlined headings contained in this Escrow
Agreement are for convenience of reference only, shall not be deemed to be a
part of this Escrow Agreement and shall not be referred to in connection with
the construction or interpretation of this Escrow Agreement.
9.6 Governing Law; Arbitration.
(a) This Agreement shall be construed in accordance with, and
governed in all respects by, the internal laws of the State of Colorado (without
giving effect to principles of conflicts of laws).
(b) Any dispute, claim or controversy of any nature arising
out of or relating to this Agreement, including without limitation any action or
claim based on tort, contract, statute, or for any other cause of action, and
which relates in any way to the interpretation, effect, termination, validity,
enforcement, performance and/or breach of this Agreement, shall be resolved by
final binding arbitration administered by the American Arbitration Association
("AAA"). The arbitration shall be conducted before a panel of three arbitrators
under the commercial arbitration rules of the AAA and shall be held at an AAA
facility in Denver, Colorado, or if no such facility exists then at any location
in Jefferson or Denver Counties, Colorado, as the parties hereto shall
reasonably agree. The parties hereto agree that all arbitrators serving on such
panel must be available to serve on the panel in accordance with the timetable
of the arbitration.
(c) Not for the adjudication of any matters (other than
judicial review for fraud or undisclosed bias), but for the enforcement of an
arbitration award or the granting of injunctive relief, the parties hereto
irrevocably elect as the sole judicial forum for the adjudication of any matters
arising under or in connection with this Agreement, and consent to the
jurisdiction of, the courts of the State of Colorado.
7
9.7 Successors and Assigns; Parties in Interest.
(a) Subject to Sections 2.5 and 9.8(b) of this Escrow
Agreement, this Escrow Agreement shall be binding upon: the Seller's Agent and
Seller and their respective estates, successors and assigns (if any); and
Isonics and its successors and assigns (if any). This Escrow Agreement shall
inure to the benefit of: Seller; Isonics; the other Indemnitees; and the
respective successors (if any) of the foregoing.
(b) Isonics may freely assign any or all of its rights under
this Escrow Agreement, in whole or in part, to any other Person without
obtaining the consent or approval of any other party hereto or of any other
Person. Isonics may not delegate its obligations under this Escrow Agreement to
any other Person without the prior consent of the Seller's Agent. Neither Seller
nor the Seller's Agent shall be permitted to assign any of his, her or its
rights or delegate any of his, her or its obligations under this Escrow
Agreement without Isonics's prior written consent.
9.8 Waiver.
(a) No failure on the part of any Person to exercise any
power, right, privilege or remedy under this Escrow Agreement, and no delay on
the part of any Person in exercising any power, right, privilege or remedy under
this Escrow Agreement, shall operate as a waiver of such power, right, privilege
or remedy; and no single or partial exercise of any such power, right, privilege
or remedy shall preclude any other or further exercise thereof or of any other
power, right, privilege or remedy.
(b) No Person shall be deemed to have waived any claim arising
out of this Escrow Agreement, or any power, right, privilege or remedy under
this Escrow Agreement, unless the waiver of such claim, power, right, privilege
or remedy is expressly set forth in a written instrument duly executed and
delivered on behalf of such Person; and any such waiver shall not be applicable
or have any effect except in the specific instance in which it is given.
9.9 Amendments. This Escrow Agreement may not be amended, modified,
altered or supplemented other than by means of a written instrument duly
executed and delivered on behalf of Isonics and the Seller's Agent.
9.10 Severability. In the event that any provision of this Escrow
Agreement, or the application of any such provision to any Person or set of
circumstances, shall be determined to be invalid, unlawful, void or
unenforceable to any extent, the remainder of this Escrow Agreement, and the
application of such provision to Persons or circumstances other than those as to
which it is determined to be invalid, unlawful, void or unenforceable, shall not
be impaired or otherwise affected and shall continue to be valid and enforceable
to the fullest extent permitted by law.
9.11 Entire Agreement. This Escrow Agreement and the Purchase Agreement
and the other agreements contemplated in the Purchase Agreement set forth the
entire understanding of the parties relating to the subject matter hereof and
thereof and supersede all prior agreements and understandings among or between
any of the parties relating to the subject matter hereof and thereof.
8
9.12 Construction.
(a) For purposes of this Escrow Agreement, whenever the
context requires: the singular number shall include the plural, and vice versa;
the masculine gender shall include the feminine and neuter genders; the feminine
gender shall include the masculine and neuter genders; and the neuter gender
shall include the masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to
the effect that ambiguities are to be resolved against the drafting party shall
not be applied in the construction or interpretation of this Escrow Agreement.
(c) As used in this Escrow Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
(d) Except as otherwise indicated, all references in this
Escrow Agreement to "Sections" are intended to refer to Sections of this Escrow
Agreement.
9
IN WITNESS WHEREOF, the parties have executed this Escrow Agreement as
of the date first above written.
ISONICS, INC.,
a California corporation
By:__________________________________________
Name:
Title:
METALLURGY INTERNATIONAL, INC.,
a Nevada corporation
By:__________________________________________
Name:
Title:
COLORADO BUSINESS BANK
a Colorado corporation
By:__________________________________________
Name: Xxxxx Xxxxx
Title:
_____________________________________________
Xxxxxx X. Xxxxxxxx,
as Seller's Agent
10
EXHIBIT C
SELLER'S GENERAL RELEASE
This SELLER'S GENERAL RELEASE ("General Release") is being executed and
delivered as of [_______], 1998 on behalf of the parties identified on the
signature page hereto (all of whom are referred to collectively as the
"Releasors," and each of whom is referred to individually as a "Releasor") to
and in favor of, and for the benefit of, INTERNATIONAL PROCESS RESEARCH
CORPORATION, a Colorado corporation (the "Company"), ISONICS CORPORATION, a
California corporation ("Purchaser"), and the other Releasees (as defined in
Section 2).
RECITALS
A. Contemporaneously with the execution and delivery of this General
Release, one of the Releasors is selling its shares of the capital stock of the
Company to Purchaser pursuant to a Stock Purchase Agreement dated as of April
30, 1998 (the "Purchase Agreement").
B. Purchaser has required, as a condition to consummating the
transactions contemplated by the Purchase Agreement, that the Releasors execute
and deliver this General Release.
AGREEMENT
In order to induce Purchaser to consummate the transactions
contemplated by the Purchase Agreement, and for other valuable consideration
(the receipt and sufficiency of which are hereby acknowledged by the Releasors),
the Releasors hereby covenant and agree as follows:
1. Release. Each Releasor, for himself and for each of such Releasor's
Associated Parties (as defined in Section 2), hereby generally, irrevocably,
unconditionally and completely releases and forever discharges each of the
Releasees (as defined in Section 2) from, and hereby irrevocably,
unconditionally and completely waives and relinquishes, each of the Released
Claims (as defined in Section 2).
2. Definitions.
(a) The term "Associated Parties," when used herein with
respect to a Releasor, shall mean and include: (i) such Releasor's predecessors,
successors, executors, administrators, heirs and estate; (ii) such Releasor's
past, present and future assigns, agents and representatives; (iii) each entity
that such Releasor has the power to bind (by such Releasor's acts or signature)
or over which such Releasor directly or indirectly exercises control; and (iv)
each entity of which such Releasor owns, directly or indirectly, at least 50% of
the outstanding equity, beneficial, proprietary, ownership or voting interests.
(b) The term "Releasees" shall mean and include: (i)
Purchaser; (ii) the Company; (iii) each of the direct and indirect subsidiaries
of the Company; (iv) each other affiliate of the Company; and (v) the successors
and past, present and future assigns, directors, officers, employees, agents,
attorneys and representatives of the respective entities identified or otherwise
referred to in clauses "(i)" through "(iv)" of this sentence, other than the
Releasors.
(c) The term "Claims" shall mean and include all past, present
and future disputes, claims, controversies, demands, rights, obligations,
liabilities, actions and causes of action of every kind and nature, including:
(i) any unknown, unsuspected or undisclosed claim; (ii) any claim or right that
may be asserted or exercised by a Releasor in such Releasor's capacity as a
stockholder, director, officer or employee of the Company or in any other
capacity; and (iii) any claim, right or cause of action based upon any breach of
any express, implied, oral or written contract or agreement.
(d) The term "Released Claims" shall mean and include each and
every Claim that (i) any Releasor or any Associated Party of any Releasor may
have had in the past, may now have or may have in the future against any of the
Releasees, and (ii) has arisen or arises directly or indirectly out of, or
relates directly or indirectly to, any circumstance, agreement, activity,
action, omission, event or matter occurring or existing on or prior to the date
of this General Release (excluding only such Releasor's rights, if any, under
(i) the Purchase Agreement, (ii) the other agreements executed in connection
with the closing of the transactions contemplated under the Purchase Agreement
and attached as exhibits thereto, and (iii) the Letter of Understanding dated as
of April 30, 1998 among Purchaser, the Company and certain of the other parties
hereto.
3. Civil Code ss.1542. Each Releasor (a) represents, warrants and
acknowledges that such Releasor has been fully advised by his attorney of the
contents of Section 1542 of the Civil Code of the State of California, and (b)
hereby expressly waives the benefits thereof and any rights such Releasor may
have thereunder. Section 1542 of the Civil Code of the State of California
provides as follows:
"A general release does not extend to claims which
the creditor does not know or suspect to exist in his favor at
the time of executing the release, which if known by him must
have materially affected his settlement with the debtor."
Each Releasor also hereby waives the benefits of, and any rights such Releasor
may have under, any statute or common law principle of similar effect in any
jurisdiction.
2
4. Representations and Warranties. Each Releasor represents and
warrants that:
(a) such Releasor has not assigned, transferred, conveyed or
otherwise disposed of any Claim against any of the Releasees, or any direct or
indirect interest in any such Claim, in whole or in part;
(b) to the best of such Releasor's knowledge, no other person
or entity has any interest in any of the Released Claims;
(c) no Associated Party of such Releasor has or had any Claim
against any of the Releasees;
(d) no Associated Party of such Releasor will in the future
have any Claim against any Releasee that arises directly or indirectly from or
relates directly or indirectly to any circumstance, agreement, activity, action,
omission, event or matter occurring or existing on or before the date of this
General Release;
(e) this General Release has been duly and validly executed
and delivered by such Releasor;
(f) this General Release is a valid and binding obligation of
such Releasor and such Releasor's Associated Parties, and is enforceable against
such Releasor and each of such Releasor's Associated Parties in accordance with
its terms;
(g) there is no action, suit, proceeding, dispute, litigation,
claim, complaint or investigation by or before any court, tribunal, governmental
body, governmental agency or arbitrator pending or, to the best of the knowledge
of such Releasor, threatened against such Releasor or any of such Releasor's
Associated Parties that challenges or would challenge the execution and delivery
of this General Release or the taking of any of the actions required to be taken
by such Releasor under this General Release;
(h) neither the execution and delivery of this General Release
nor the performance hereof will (i) result in any violation or breach of any
agreement or other instrument to which such Releasor or any of such Releasor's
Associated Parties is a party or by which such Releasor or any of such
Releasor's Associated Parties is bound, or (ii) result in a violation or any
law, rule, regulation, treaty, ruling, directive, order, arbitration award,
judgment or decree to which such Releasor or any of such Releasor's Associated
Parties is subject; and
(i) no authorization, instruction, consent or approval of any
person or entity is required to be obtained by such Releasor or any of such
Releasor's Associated Parties in connection with the execution and delivery of
this General Release or the performance hereof.
3
5. Indemnification. Without in any way limiting any of the rights or
remedies otherwise available to any Releasee, each Releasor shall indemnify and
hold harmless each Releasee against and from any loss, damage, injury, harm,
detriment, lost opportunity, liability, exposure, claim, demand, settlement,
judgment, award, fine, penalty, tax, fee, charge or expense (including
attorneys' fees) that is directly or indirectly suffered or incurred at any time
by such Releasee, or to which such Releasee otherwise becomes subject at any
time, and that arises directly or indirectly out of or by virtue of, or relates
directly or indirectly to, (a) any failure on the part of such Releasor to
observe, perform or abide by, or any other breach of, any restriction, covenant,
obligation, representation, warranty or other provision contained herein, or (b)
the assertion or purported assertion of any of the Released Claims by such
Releasor or any of such Releasor's Associated Parties.
6. Miscellaneous.
(a) This General Release sets forth the entire understanding
of the parties relating to the subject matter hereof and supersedes all prior
agreements and understandings among or between any of the Releasors and
Releasees relating to the subject matter hereof.
(b) If any provision of this General Release or any part of
any such provision is held under any circumstances to be invalid or
unenforceable in any jurisdiction, then (i) such provision or part thereof
shall, with respect to such circumstances and in such jurisdiction, be deemed
amended to conform to applicable laws so as to be valid and enforceable to the
fullest possible extent, (ii) the invalidity or unenforceability of such
provision or part thereof under such circumstances and in such jurisdiction
shall not affect the validity or enforceability of such provision or part
thereof under any other circumstances or in any other jurisdiction, and (iii)
such invalidity or enforceability of such provision or part thereof shall not
affect the validity or enforceability of the remainder of such provision or the
validity or enforceability of any other provision of this General Release. If
any provision of this General Release or any part of such provision is held to
be unenforceable against any Releasor, then the unenforceability of such
provision or part thereof against such Releasor shall not affect the
enforceability thereof against any other Releasor. Each provision of this
General Release is separable from every other provision of this General Release,
and each part of each provision of this General Release is separable from every
other part of such provision.
(c) This General Release shall be construed in accordance
with, and governed in all respects by, the laws of the State of California
(without giving effect to principles of conflicts of laws). Any dispute, claim
or controversy of any nature arising out of or relating to this Agreement,
including without limitation any action or claim based on tort, contract,
statute, or for any other cause of action, and which relates in any way to the
interpretation, effect, termination, validity, enforcement, performance and/or
breach of this Agreement, shall be resolved by final binding arbitration
administered by the American Arbitration Association ("AAA"). The arbitration
shall be conducted before a panel of three arbitrators under the commercial
arbitration rules of the AAA and shall be held at an AAA facility in Santa Xxxxx
County, California. The parties hereto agree that all arbitrators serving on
such panel must be available to serve on the panel in accordance with the
timetable of the arbitration. Not for the adjudication of any matters (other
than judicial review for fraud or undisclosed bias), but for the
4
enforcement of an arbitration award or the granting of injunctive relief, the
parties hereto irrevocably elect as the sole judicial forum for the adjudication
of any matters arising under or in connection with this Agreement, and consent
to the jurisdiction of, the courts of the State of California.
(e) This General Release may be executed in several
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement. A facsimile copy, including a
facsimile copy of a signature, shall have the same force and effect as an
original.
(f) Each Releasor shall execute and/or cause to be delivered
to each Releasee such instruments and other documents, and shall take such other
actions, as such Releasee may reasonably request for the purpose of carrying out
or evidencing any of the actions contemplated by this General Release.
(g) If any legal action or other legal proceeding relating to
this General Release or the enforcement of any provision hereof is brought by
any Releasor or Releasee, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements to the extent actually
incurred (in addition to any other relief to which the prevailing party may be
entitled).
(h) This General Release shall be effective with respect to,
and shall be binding upon and enforceable against, each Releasor who executes
this General Release, regardless of whether any of the other Releasors executes
this General Release.
(i) Whenever required by the context, the singular number
shall include the plural, and vice versa; the masculine gender shall include the
feminine and neuter genders; and the neuter gender shall include the masculine
and feminine genders.
(j) Any rule of construction to the effect that ambiguities
are to be resolved against the drafting party shall not be applied in the
construction or interpretation of this General Release.
(k) As used in this General Release, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, and shall be deemed to be followed by the words "without
limitation."
5
IN WITNESS WHEREOF, the Releasors have caused this General Release to
be executed as of the date first above written.
RELEASORS:
METALLURGY INTERNATIONAL, INC.,
a Nevada corporation
By:__________________________________________
Name:
Title:
METALLURGY PTY,
an Australian corporation
By:__________________________________________
Name:
Title:
_____________________________________________
Xxxxxx X. Xxxxxxxx,
_____________________________________________
Xxxxxxxx X. Xxxxxxxx
6
EXHIBIT D
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is dated as of _______, 1998
and is entered into by and between ISONICS CORPORATION, a California corporation
("Employer"), and XXXXXX X. XXXXXXXX ("Officer").
1. Employment; Duties. Subject to the terms and conditions of this
Agreement, during the term of this Agreement Officer agrees to be employed by
Employer and to serve as President of Employer's subsidiary, International
Process Research Corporation ("Interpro"), located in Golden, Colorado, and
during the term of this Agreement Employer agrees to employ Officer in such
capacity. Officer shall devote substantially all of his business time, energy,
and skill to the affairs of Interpro to perform the duties of such positions.
Notwithstanding the foregoing, Officer may devote reasonable amounts of time for
educational, charitable, or professional activities if those activities do not
interfere significantly with the services required under this Agreement.
2. Term of Employment; Termination.
2.1 Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:
(a) "Termination For Cause" shall mean termination by Employer of
Officer's employment by Employer by reason of any of the following:
(i) Officer's conviction for commission of a felony;
(ii) Any gross negligence or willful misconduct in the
performance of Officer's duties which results in material detriment to the
business, assets, properties, prospects, financial condition or operations of
Employer (the "Business");
(iii) Officer's intentional failure or a refusal to comply in
any material respect with the lawful policies, standards or regulations of
Employer or reasonable directives of the Board of Directors of Employer, which
failure or refusal results in material detriment to the Business; or
(iv) Officer's material breach of the Proprietary Information
and Invention Assignment Agreement entered into between Officer and Employer
which results in material detriment to the Business.
(b) "Termination Other Than For Cause" shall mean termination by
Employer of Officer's employment (other than in a Termination For Cause, or a
termination by reason of Officer's death or disability) and shall, without
limitation, include termination of Officer's employment by reason of the failure
of Employer to renew the term of this Agreement at any time after the Contract
Period Expiration Date, as described in Section 2.2 below.
1.
(c) "Voluntary Termination" shall mean termination by Officer of
Officer's employment other than (i) Constructive Termination or (ii) termination
by reason of Officer's death or disability as described in Sections 2.5 and 2.6.
(d) "Constructive Termination" shall mean (i) termination by
Officer of Officer's employment (other than in a Voluntary Termination) by
reason of material breach of this Agreement by Employer, which has not been
cured (if the breach is capable of being cured) within ten (10) days after the
date that Officer delivers a notice of such breach to Employer, such
constructive termination to be effective upon notice from Officer to Employer of
such constructive termination, or, if the breach is capable of being cured, ten
(10) days after delivery of such notice if the breach has not been cured, or
(ii) termination by Officer of Officer's employment (other than in a Voluntary
Termination) for Good Reason.
(e) "Change in Control" shall mean any of the following events:
(i) as a result of or in connection with any cash tender
offer, merger, or other business combination, sale of assets, sale or transfer
of Employer's stock or other equity securities, or contested election, or
combination of the foregoing, the persons who were directors of Employer just
before such event shall cease to constitute a majority of the directors; or
(ii) the closing of (A) a merger, consolidation or
reorganization of Employer with or into another corporation in which the holders
of Employer's common stock immediately before such merger, consolidation or
reorganization do not, immediately following such merger, consolidation or
reorganization, hold as a group on a fully diluted basis both the ability to
elect at least a majority of the directors of the surviving corporation (or its
parent) and at least a majority in value of the surviving corporation's (or its
parent's) outstanding equity securities, or (B) a sale or other disposition of
all or substantially all of the assets of Employer, unless Employer owns 50% or
more of the outstanding voting securities or other equity interests of the
transferee at the time of the transfer.
(f) "Good Reason" means, with respect to Officer, that Employer
has, without his written consent (and except For Cause):
(i) employed Officer in a position other than President of
Interpro or has materially reduced the nature and scope of the Officer's duties
and responsibilities with Employer, other than following a Change of Control; or
(ii) there has occurred a Change of Control and Officer's
duties and responsibilities with Employer following such Change of Control have
been materially reduced in nature and scope from such duties and
responsibilities as they existed immediately before the Change of Control; or
(iii) reduced Officer's base salary from that provided for in
this Agreement; or
(iv) required Officer to be relocated to anywhere other than
Employer's offices located in or near the Denver, Colorado metropolitan area
("Denver") or, if
2.
Officer's then-present location is other than Denver, then to a location more
than 50 miles from such then-present location (except for required travel on
Employer's business to an extent substantially consistent with Officer's
then-present business travel obligations); or
(v) failed to met annual financial support guidelines of
Interpro set forth in Exhibit A attached hereto and incorporated by reference
herein.
2.2 Basic Term: The term of employment of Officer by Employer pursuant
to this Agreement shall be for the period (the "Contract Period") commencing on
May [_], 1998 and ending on May [ ], 2003 (such ending date referred to as the
"Contact Period Expiration Date") unless the term of this Agreement is sooner
terminated pursuant to the provisions hereof. The term of employment of Officer
by Employer pursuant to this Agreement shall be renewed automatically after the
Contract Period Expiration Date for successive one year renewal terms unless
either party gives notice of non-renewal to the other party not less than thirty
(30) days prior to the expiration of the then current term. (The term of
Officer's employment by Employer pursuant to this Agreement will sometimes be
referred to as the "Term").
2.3 Basic Consequences of Termination. Upon a Termination for Cause,
Termination Other Than For Cause, Termination by Reason by Disability,
Termination by Reason of Death, Voluntary Termination, or Constructive
Termination, all as described in this Section 2, Employer immediately shall pay
to Officer all accrued salary, bonus compensation to the extent earned
(provided, however, that nothing in this Agreement shall be construed as
establishing any right to any bonus compensation or any pro rata or accrual
rights to bonus compensation for partial years of employment), vested deferred
compensation (other than pension plan or profit sharing plan benefits which will
be paid in accordance with the applicable plan), any benefits under any plans of
Employer in which Officer is a participant to the full extent of Officer's
rights under such plans, accrued vacation pay and any appropriate business
expenses incurred by Officer in connection with Officer's duties hereunder, all
to the date of termination. Except for Voluntary Termination or Termination for
Cause, in addition to payment of the foregoing amounts and any severance to
which Officer is entitled hereunder, the Company shall also immediately pay to
Officer, in lieu of any incentive or bonus compensation, an amount equal to 25%
of Officer's annual prevailing salary in the year in which termination occurs.
2.4 Termination for Cause. Employer may effect a Termination For Cause
at any time during the term of this Agreement by written notice to Officer. Upon
Termination For Cause, Officer shall be entitled to receive the compensation
described in Section 2.3 above, but Officer shall not be paid any other
compensation or reimbursement of any kind, including without limitation,
severance compensation.
2.5 Termination Other Than For Cause. Notwithstanding anything else in
this Agreement, Employer may effect a Termination Other Than For Cause at any
time during the term of this Agreement, such termination to be effective upon
delivery of written notice to Officer. Upon Termination Other Than For Cause,
Officer shall be entitled to receive the compensation described in Section 2.3
above, and all severance compensation provided in Section 4.1 upon a Termination
Other Than For Cause, but Officer shall not be paid any other compensation or
reimbursement of any kind.
3.
2.6 Termination by Reason of Disability. If during the term of this
agreement, Officer, in the reasonable judgment of the Board of Directors of
Employer (with Officer not participating in such decision, if Officer is a
director of Employer), has failed to perform Officer's essential duties, with or
without reasonable accommodation, under this Agreement on account of a non-work
related illness or physical or mental incapacity, and such illness or incapacity
continues for a period of more than six (6) months, Employer shall have the
right to terminate Officer's employment hereunder by written notice to Officer
("Termination by Reason of Disability"). Upon Termination by Reason of
Disability, Officer shall be entitled to receive the compensation described in
Section 2.3 above, but no other compensation or reimbursement of any kind,
including without limitation, severance compensation.
2.7 Termination by Reason of Death. In the event of Officer's death
during the term of this Agreement, Officer's employment shall be deemed to have
terminated as of the date on which his death occurred ("Termination by Reason of
Death"). Upon a Termination by Reason of Death, Officer shall be entitled to
receive the compensation described in Section 2.3 above, but no other
compensation or reimbursement of any kind, including without limitation,
severance compensation.
2.8 Voluntary Termination. Notwithstanding anything else in this
Agreement, Officer may effect a Voluntary Termination at any time during the
term of this Agreement, such termination to be effective upon delivery of
written notice to Employer. In the event of a Voluntary Termination, Officer
shall be entitled to receive the compensation described in Section 2.3 above,
but no other compensation or reimbursement of any kind, including without
limitation, severance compensation.
2.9 Constructive Termination. Officer may effect a Constructive
Termination at any time during the term of this Agreement, such termination to
be effective upon delivery of written notice to Employer (subject to the cure
period described in Section 2.1 (d). In the event of a Constructive Termination,
Officer shall be entitled to receive the compensation described in Section 2.3
above, and all severance compensation provided in Section 4.1 upon a
Constructive Termination, but no other compensation or reimbursement of any
kind.
2.10 No Severance Compensation Upon Other Termination. In the event of
a Voluntary Termination, Termination For Cause, Termination by Reason of
Disability, or Termination by Reason of Death, Officer or Officer's estate shall
not be entitled by virtue of this Agreement to receive any severance
compensation.
2.11 Parachute Payments. If acceleration of the vesting of any option
would (i) constitute a "parachute payment" within the meaning of Section 280G of
the Code and (ii) but for this Section 2.11 be subject to the excise tax imposed
by Section 4999 of the Code (the "Excise Tax"), then such acceleration will be
either (A) for all shares subject to this option that are then unvested, or (B)
such lesser number of shares as would result in no portion of the acceleration
being subject to the Excise Tax, whichever of the foregoing amounts, taking into
account the applicable federal, state, and local employment taxes, income taxes,
and the Excise Tax results in Officer's receipt, on an after-tax basis, of the
greatest value notwithstanding that all or some portion of the acceleration may
be subject to the Excise Tax. The foregoing
4.
determination will be made by Employer and Officer jointly, in good faith, and
will be conclusive and binding upon Employer and Officer.
3. Salary, Benefits and Bonus Compensation.
3.1 Base Compensation. In consideration of the services to be rendered
by Officer to Employer under this Agreement, Employer shall pay Officer a salary
of at least $100,000 per year, payable monthly or otherwise pursuant to
Employer's normal payroll procedures. In years 3 through 5 of this agreement
Employer shall pay office a salary of at least $125,000. Employer shall review
annually Officer's compensation in accordance with Employer's established
administrative practices for adjusting salaries for similarly situated
employees; provided, however, that nothing in this Section 3 shall impose any
obligation on Employer to increase Officer's base compensation; and provided
further, that Employee's salary shall not be reduced during the term of this
Agreement to an amount less than $100,000 per year or $125,000 as appropriate.
3.2 Benefits. Officer shall be entitled to a minimum of three weeks of
paid vacation leave per annum. Officer shall be entitled to three weeks of paid
vacation per year, to accrue monthly, and to carry over and accrue unused
vacation in any year for use in the following year; provided, however, that
Officer shall cease to accrue paid vacation leave at any time at which accrued
and unused paid vacation leave equals or exceeds four weeks, until such time as
accrued and unpaid vacation leave no longer equals or exceeds four weeks. As
Officer becomes eligible therefor, Officer shall have the right to participate
in and receive officer benefits including, without limitation, health insurance
benefits and life insurance benefits pursuant to the terms of all present and
future benefit plans specified in Employer's policies (as such policies may be
amended from time to time) and generally made available to similarly situated
officers of Employer. The amount and extent of benefits to which Officer is
entitled shall be governed by the specific benefit plan, as amended. Except as
otherwise provided in this Agreement, nothing contained in this Agreement shall
prevent Employer from changing or eliminating any benefit(s) during the Contract
Period as Employer, in its sole discretion, may deem necessary or desirable;
provided, however, any such changes or elimination's of benefits shall be
applicable to all similarly situated officers. All compensation and comparable
payments to be paid to Officer pursuant to this Agreement shall be less
withholdings required by law.
3.3 Incentive Compensation. Officer shall be eligible to receive
incentive compensation up to 25% of Officer's annual prevailing salary in the
year to which such award relates, as approved from time to time by the Employer
on the terms and conditions and subject to the limitations of the Employees
Executive Compensation Plan, as the same may be amended by Employer in its
discretion from time to time.
3.4 Expenses. Employer shall reimburse Officer for reasonable
out-of-town travel and other business expenses incurred by Officer in the
performance of Officer's duties, in accordance with Employer's policies, as such
policies may be amended from time to time in Employer's sole discretion.
4. Severance Compensation.
5.
4.1 Termination Other Than For Cause. If Officer's employment is
terminated in a Termination Other Than For Cause, then Employer shall continue
to pay Officer an amount equal to his base salary under Section 3 of this
Agreement, less applicable withholding taxes, payable on the Company's normal
payroll dates, in the following amounts:
(a) If the Termination Other Than For Cause occurs before 18 months
from the Contract Period Expiration Date, then 18 months of base salary;
(b) If the Termination Other Than For Cause occurs within 18 months
before expiration of the Contract Period Expiration Date, then a number of
months of base salary equal to the remaining number of months between the date
of termination and the Contract Period Expiration Date, but no less than six (6)
months of base salary; and
(c) If the Termination Other Than For Cause occurs after the
Contract Period Expiration Date, then six (6) months of base salary.
If Officer secures other employment during the period that payments
pursuant to this Section 4.1 are payable, the Company will be entitled to set
off, dollar for dollar, whatever is earned in such employment against the
amount owed to Officer hereunder. During the period that severance
compensation is payable hereunder, Officer shall notify Employer of any such
employment and any such other earnings. In addition, Officer shall have the
option, at Officer's own expense, to extend the health insurance coverage that
was provided by Employer to Officer as an employee of Employer immediately
before the date of termination, for a period of eighteen (18) months from the
date of termination pursuant to the terms and conditions of COBRA. Officer
shall have sixty (60) days from the date of termination to notify Employer in
writing of Officer's election to so continue Officer's health insurance
coverage. Should Officer so elect, Employer shall reimburse Officer for the
cost of the premiums under such health insurance plans under COBRA for a
period of six (6) months after the termination date. After such time, until
eighteen (18) months from the date of termination, Officer may, if Officer so
elects, participate in Employer's health insurance plans to the extent
permitted by COBRA and the terms of such plans, but any such participation
shall be at Officer's sole expense.
4.2 Termination Obligations.
(a) Officer agrees that all of Employer's property (including,
without limitation, all Employer's equipment, tangible items containing Employer
Proprietary Information (as described below), documents, books, records,
reports, notes, contracts, lists, computer disks (and other computer-generated
files and data), and copies thereof, created on any medium) furnished to,
obtained by, or prepared by Officer in the course of or incident to Officer's
employment shall be returned promptly to Employer upon termination of Officer's
employment.
(b) The parties' respective representations, warranties, and
obligations contained in this Agreement shall survive the termination of
Officer's employment.
(c) Following any termination of the Officer's employment, Officer
shall fully cooperate with Employer in reasonable respects in all matters
relating to Officer's continuing obligations under this Agreement.
6.
(d) A Termination for Cause shall not affect or impair the rights
or remedies against Officer.
5. Employer Confidential Information.
5.1 Definition of "Employer Confidential Information." "Employer
Confidential Information" is all information, ideas, and concepts in whatever
form, tangible or intangible, pertaining in any manner to the business of
Employer, or any person or entity that directly or indirectly controls, is
controlled by, or is under common control with, Employer (an "affiliate") or the
respective officers, clients, customers, suppliers, consultants, or business
associates of Employer or any affiliate of Employer, which information, idea(s),
or concept(s) have been, or shall have been, produced by any officer or employee
of, or consultant to, Employer in the course of his or her employment or
otherwise produced or acquired by or on behalf of Employer, that is not
generally known outside of Employer's organization or is so known only through
improper means. Without limiting the foregoing definition, Employer Confidential
Information shall include, but not be limited to, the following, to the extent
confidential or proprietary to Employer: (i) confidential or proprietary
formulas, manufacturing processes, teaching and development techniques,
processes, trade secrets, computer programs, electronic codes, inventions,
improvements, and research projects; (ii) information about costs, profits,
markets, or sales, and lists of vendors, suppliers, customers, or clients; (iii)
business, marketing, and strategic plans; and (iv) officer personnel files and
compensation information.
5.2 General Restrictions on Use. While employed by Employer, Officer
shall use and disclose Employer Confidential Information only for the benefit of
Employer and as is necessary to carry out Officer's responsibilities under this
Agreement. Following termination of Officer's employment with Employer, Officer
shall not use or disclose any Employer Confidential Information, except as
expressly authorized in writing by Employer. The restrictions contained above in
this Section 5.2 shall be inapplicable to any Employer Confidential Information
to the extent that such information: (i) is or becomes publicly known through no
wrongful act of Officer; (ii) is rightfully received by Officer from a third
party without breach of any obligation to Employer; (iii) is approved for
release by written authorization of Employer; or (iv) is distributed or made
available to others by Employer without restriction as to use or disclosure.
Officer shall have no right or license, express, implied or by estoppel, under
any trademark, copyright patent or other intellectual property right now or
hereafter owned or controlled by Employer.
5.3 Third-Party Information. Officer acknowledges that Employer has
received, and in the future will receive, from third parties such parties'
confidential information subject to a duty on Employer's part to maintain the
confidentiality of such information and to use it only for certain limited
purposes. Officer agrees that Officer owes Employer and such third parties,
while employed by Employer and thereafter, a duty to hold all such confidential
information in confidence and not to disclose or use it, except as necessary to
perform Officer's obligations hereunder and as is consistent with Employer's
agreements with such third parties.
7.
6. Miscellaneous.
6.1 Notices. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed effective: (a) upon personal
delivery; (b) two (2) business days after it is deposited in a regularly
maintained depository of the United States Postal Service, registered or
certified mail, postage prepaid, return receipt requested and properly
addressed; (c) on the next business day after having been sent either by
overnight delivery courier service (including, but not limited to Federal
Express), or (d) upon receipt if by facsimile transmission on machine capable of
verifying receipt, and addressed or sent, to the parties at the addresses and/or
facsimile numbers set forth below:
if to Employer:
Isonics Corporation
0000 Xxxxxxxx Xxxxxx
Xxxxx 000
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
Attention: President
With a copy to:
Xxxxxx Godward LLP
0000 Xxxx Xxxx Xxxx
Xxxxxxxx 0, Xxxxx 000
Xxxxx Xxxx, XX 00000-0000
Fax: (000) 000-0000
Attention: Xxxx X. Xxxxxxx, Esq.
if to Officer:
Xxxxxx X. Xxxxxxxx
0000 XxXxxxxx Xxxxxx
Xxxxxx, XX 00000
Fax: (000) 000-0000
With a copy to:
Xxxxxxx & Xxxxx, P.C.
0000 Xxxxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxx X. Xxxxx III, Esq.
6.2 Action by Employer. All actions required or permitted to be taken
under this Agreement by Employer including, without limitation, exercise of
discretion, consents,
8.
waivers, and amendments to this Agreement shall be made and authorized only with
approval of the Board of Directors.
6.3 Integration. This Agreement is intended to be the final, complete,
and exclusive statement of the terms of Officer's employment by Employer. This
Agreement may not be contradicted by evidence of any prior or contemporaneous
statements or agreements. To the extent that the practices, policies, or
procedures of Employer, now or in the future, apply to Officer and are
inconsistent with the terms of this Agreement, the provisions of this Agreement
shall control.
6.4 Amendments; Waivers. This Agreement may not be modified, amended,
or terminated except by an instrument in writing signed by Officer and signed by
an officer of Employer specifically authorized by the Board of Directors to
execute such instrument. No failure to exercise, and no delay in exercising, any
right, remedy, or power under this Agreement shall operate as a waiver thereof,
and no single or partial exercise of any right, remedy, or power under this
Agreement shall preclude any other or further exercise thereof or the exercise
of any other right, remedy, or power provided herein or at law or in equity.
6.5 Assignment; Successors and Assigns. Officer agrees that Officer
will not assign, sell, transfer, delegate, or otherwise dispose of, whether
voluntarily or involuntarily, or by operation of law, any rights or obligations
under this Agreement. Any such purported assignment, transfer, or delegation
shall be null and void. Nothing in this Agreement shall prevent the
consolidation of Employer with, or its merger into, any other entity, or the
sale by Employer of all or substantially all of its assets, or the assignment by
Employer of any rights or obligations under this Agreement; provided, however,
no assignment by Employer shall release or discharge Employer from any of its
obligations under this Agreement. Subject to the foregoing, this Agreement shall
be binding upon and shall inure to the benefit of the parties and their
respective heirs, legal representatives, successors, and permitted assigns and
shall not benefit any person or entity other than those specifically enumerated
in this Agreement.
6.6 Severability. If any provision of this Agreement, or its
application to any person, place, or circumstance, is held by a court of
competent jurisdiction to be invalid, unenforceable, or void, such provision
shall be enforced to the greatest extent permitted by law and the remainder of
this Agreement and such provision as applied to other persons, places, and
circumstances shall remain in full force and effect.
6.7 Attorneys' Fees. In any legal action, or proceeding brought to
enforce the terms of this Agreement, the prevailing party in such legal action
or proceeding shall be entitled to recover its reasonable attorneys' fees and
costs from the other party.
6.8 Injunctive Relief. If either party breaches or threatens to breach
any of his or its respective obligations under Sections 4.2 and 5 of this
Agreement, the parties acknowledge that the damage or imminent damage would be
irreparable and extremely difficult to estimate, making any remedy at law or for
damages inadequate. Accordingly, in such circumstances a party shall be entitled
to injunctive relief against the other party in the event of any such breach or
threatened breach in addition to any other relief (including damages) available
under this Agreement or at law.
9.
6.9 Governing Law; Arbitration.
(a) This Agreement shall be construed in accordance with, and
governed in all respects by, the internal laws of the State of California
(without giving effect to principles of conflicts of laws).
(b) Any dispute, claim or controversy of any nature arising out of
or relating to this Agreement, including without limitation any action or claim
based on tort, contract, statute, or for any other cause of action, and which
relates in any way to the interpretation, effect, termination, validity,
enforcement, performance and/or breach of this Agreement, shall be resolved by
final binding arbitration administered by the American Arbitration Association
("AAA"). The arbitration shall be conducted before a panel of three arbitrators
under the commercial arbitration rules of the AAA and shall be held at an AAA
facility in the City and County of Denver, Colorado. The parties hereto agree
that all arbitrators serving on such panel must be available to serve on the
panel in accordance with the timetable of the arbitration.
(c) Not for the adjudication of any matters (other than judicial
review for fraud or undisclosed bias), but for the enforcement of an arbitration
award or the granting of injunctive relief, the parties hereto irrevocably elect
as the sole judicial forum for the adjudication of any matters arising under or
in connection with this Agreement, and consent to the jurisdiction of, the
courts of the State of Colorado.
6.10 Counterparts; Facsimile Signatures. This Agreement may be executed
in one or more counterparts, each of which shall constitute an original, but all
of which taken together shall constitute one and the same Agreement. A facsimile
copy, including a facsimile copy of a signature, shall have the same force and
effect as an original.
6.11 Officer Acknowledgment. Officer acknowledges that Officer has had
the opportunity to consult legal counsel with respect to this agreement, that
Officer has read and understands this Agreement, that Officer is fully aware of
its legal effect, and that Officer has entered into this Agreement freely and
voluntarily and based on Officer's own judgment and not on any representations
or promises other than those contained in this Agreement.
10.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.
EMPLOYER OFFICER
ISONICS CORPORATION
__________________________________
Xxxxxx X. Xxxxxxxx,
By: _______________________________
Title: ____________________________
11.
EXHIBIT A
INTERPRO FINANCIAL SUPPORT GUIDELINES
In each year during the term of the Employment Agreement in which Interpro meets
its revenue and earnings growth projections of 20 percent per year, Isonics
agrees, at its election, to either (a) advance funds up to $200,000 per year as
requested by Interpro or (b) guarantee bank or other loans designed to provide
the needed working capital to Interpro. If the revenue and earnings growth is
less than 20 percent per year, Isonics has the option to reduce such funding
proportionately, i.e., if revenue growth is 15 percent and earnings growth is 10
percent then advances or guarantees are reduced to $100,000, or if revenue
growth is 10 percent and earnings growth is 15 percent then advances or
guarantees are reduced to $100,000. In any event, Isonics agrees to fund
Interpro with no less than $50,000 per year of working capital annually, for a
period of five years, assuming Interpro has positive earnings before income
taxes, depreciation and amortization.
12.
EXHIBIT E
NONCOMPETITION AGREEMENT
This NONCOMPETITION AGREEMENT is being executed and delivered as of May
[__], 1998 by XXXXXX X. XXXXXXXX (the "Stockholder") in favor of, and for the
benefit of: ISONICS CORPORATION, a California corporation (the" Purchaser");
INTERNATIONAL PROCESS RESEARCH CORPORATION, a Colorado corporation (the
"Company"); and the other "Indemnitees" (as hereinafter defined). Certain
capitalized terms used in this Noncompetition Agreement are defined in Section
21.
RECITALS
A. As a major stockholder of Metallurgy International, Inc., a Nevada
corporation and the sole shareholder of the Company ("MII"), and an employee of
the Company, the Stockholder has obtained extensive and valuable knowledge and
confidential information concerning the businesses of the Company and its
subsidiaries
B. Pursuant to a Stock Purchase Agreement dated as of April 30, 1998
among the Purchaser, MII and the Company (the "Purchase Agreement"), MII is
selling all of the outstanding stock of the Company to the Purchaser
contemporaneously with the execution and delivery of this Noncompetition
Agreement. As a result of the Purchaser's acquisition of all of the outstanding
stock of the Company, the Company will become a subsidiary of the Purchaser. The
Stockholder, as the majority stockholder of MII, has approved the Purchase
Agreement and the transactions contemplated thereby, and as the majority
shareholder of MII is a beneficiary thereof.
C. In connection with the acquisition by the Purchaser of all of the
outstanding stock of the Company pursuant to the Purchase Agreement (and as a
condition to the consummation of such acquisition), and to enable the Purchaser
to secure more fully the benefits of such acquisition, the Purchaser has
required that the Stockholder enter into this Noncompetition Agreement; and the
Stockholder is entering into this Noncompetition Agreement in order to induce
the Purchaser to consummate the acquisition contemplated by the Purchase
Agreement.
D. The Purchaser and the Stockholder are executing an Employment
Agreement (the "Employment Agreement") contemporaneously with the execution and
delivery of this Noncompetition Agreement. Pursuant to the Employment Agreement,
the Stockholder is becoming a key employee of the Purchaser and will accordingly
obtain extensive and valuable knowledge and confidential information concerning
the businesses of the Purchaser, the Company and the Purchaser's other
subsidiaries.
E. The Purchaser, the Company and the Purchaser's other subsidiaries
have conducted and are conducting their respective businesses on a national
basis.
AGREEMENT
In order to induce the Purchaser to consummate the transactions
contemplated by the Purchase Agreement, and for other good and valuable
consideration, the Stockholder agrees as follows:
1. Restriction On Competition. The Stockholder agrees that, during the
Noncompetition Period, the Stockholder shall not:
(a) engage directly or indirectly in Competition in any
Restricted Territory; or
(b) directly or indirectly be or become an officer, director,
stockholder, owner, co-owner, Affiliate, partner, promoter, employee,
agent, representative, designer, consultant, advisor, manager,
licensor, sublicensor, licensee or sublicensee of, for or to, or
otherwise be or become associated with or acquire or hold (of record,
beneficially or otherwise) any direct or indirect interest in, any
Person that engages directly or indirectly in Competition in any
Restricted Territory;
provided, however, that the Stockholder may, without violating this Section 1,
own, as a passive investment, shares of capital stock of a publicly-held
corporation that engages in Competition if (i) such shares are actively traded
on an established national securities market in the United States, (ii) the
number of shares of such corporation's capital stock that are owned beneficially
(directly or indirectly) by the Stockholder and the number of shares of such
corporation's capital stock that are owned beneficially (directly or indirectly)
by the Stockholder's Affiliates collectively represent less than one percent of
the total number of shares of such corporation's capital stock outstanding, and
(iii) neither the Stockholder nor any Affiliate of the Stockholder is otherwise
associated directly or indirectly with such corporation or with any Affiliate of
such corporation.
2. No Hiring or Solicitation Of Employees. The Stockholder agrees that,
during the Noncompetition Period, the Stockholder shall not, and shall not
permit any of his Affiliates to: (a) hire any Specified Employee, or (b)
directly or indirectly, personally or through others, encourage, induce, attempt
to induce, solicit or attempt to solicit (on the Stockholder's own behalf or on
behalf of any other Person) any Specified Employee or any other employee of
Purchaser, the Company or any of the Purchaser's other subsidiaries to leave his
or her employment with the Purchaser, the Company or any of the Purchaser's
other subsidiaries. (For purposes of this Section 2, "Specified Employee" shall
mean any individual who (i) is or was an employee of the Company on the date of
this Noncompetition Agreement or during the 180-day period ending on the date of
this Noncompetition Agreement, and (ii) remains or becomes an employee of the
Purchaser, the Company or any of the Purchaser's other subsidiaries on the date
of this Noncompetition Agreement or at any time during the Noncompetition
Period.)
3. Confidentiality. The Stockholder agrees that he shall hold all
Confidential Information in strict confidence and shall not at any time (whether
during or after the Noncompetition Period): (a) reveal, report, publish,
disclose or transfer any Confidential Information to any Person (other than the
Purchaser or the Company), except in the performance of his obligations under
the Employment Agreement; (b) use any Confidential Information for
2
any purpose, except in the performance of his obligations under the Employment
Agreement; or (c) use any Confidential Information for the benefit of any Person
(other than the Purchaser or the Company).
4. Representations and Warranties. The Stockholder represents and
warrants, to and for the benefit of the Indemnitees, that: (a) he has full power
and capacity to execute and deliver, and to perform all of his obligations
under, this Noncompetition Agreement; and (b) to the best of his knowledge
neither the execution and delivery of this Noncompetition Agreement nor the
performance of this Noncompetition Agreement will result directly or indirectly
in a violation or breach of (i) any agreement or obligation by which the
Stockholder or any of his Affiliates is or may be bound, or (ii) any law, rule
or regulation. The Stockholder's representations and warranties shall survive
the expiration of the Noncompetition Period for a period of one year.
5. Specific Performance. The Stockholder agrees that, in the event of
any breach or threatened breach by the Stockholder of any covenant or obligation
contained in this Noncompetition Agreement, each of the Purchaser, the Company
and the other Indemnitees shall be entitled (in addition to any other remedy
that may be available to it, including monetary damages) to seek and obtain (a)
a decree or order of specific performance to enforce the observance and
performance of such covenant or obligation, and (b) an injunction restraining
such breach or threatened breach. The Stockholder further agrees that no
Indemnitee shall be required to obtain, furnish or post any bond or similar
instrument in connection with or as a condition to obtaining any remedy referred
to in this Section 5, and the Stockholder irrevocably waives any right he may
have to require any Indemnitee to obtain, furnish or post any such bond or
similarly instrument.
6. Indemnification. Without in any way limiting any of the rights or
remedies otherwise available to any of the Indemnitees, the Stockholder shall
indemnify and hold harmless each Indemnitee against and from any loss, damage,
injury, harm, detriment, lost opportunity, liability, exposure, claim, demand,
settlement, judgment, award, fine, penalty, tax, fee (including reasonable
attorneys' fees), charge or expense (including third-party claims relating to
this Noncompetition Agreement) that is directly or indirectly suffered or
incurred at any time (whether during or after the Noncompetition Period) by such
Indemnitee, or to which such Indemnitee otherwise becomes subject at any time,
and that arises directly or indirectly out of or by virtue of, or relates
directly or indirectly to, (a) any inaccuracy in or breach of any representation
or warranty contained in this Noncompetition Agreement, or (b) any failure on
the part of the Stockholder to observe, perform or abide by, or any other breach
of, any restriction, covenant, obligation or other provision contained in this
Noncompetition Agreement.
7. Non-Exclusivity. The rights and remedies of the Purchaser, the
Company and the other Indemnitees under this Noncompetition Agreement are not
exclusive of or limited by any other rights or remedies which they may have,
whether at law, in equity, by contract or otherwise, all of which shall be
cumulative (and not alternative). Without limiting the generality of the
foregoing, the rights and remedies of the Purchaser, the Company and the other
Indemnitees under this Noncompetition Agreement, and the obligations and
liabilities of the Stockholder under this Noncompetition Agreement, are in
addition to their respective rights, remedies, obligations and liabilities under
the law of unfair competition, under laws relating to
3
misappropriation of trade secrets, under other laws and common law requirements
and under all applicable rules and regulations. Nothing in this Noncompetition
Agreement shall limit any of the Stockholder's obligations, or the rights or
remedies of the Purchaser, the Company or any of the other Indemnitees, under
the Purchase Agreement or the Employment Agreement; and nothing in the Purchase
Agreement or the Employment Agreement shall limit any of the Stockholder's
obligations, or any of the rights or remedies of the Purchaser, the Company, or
any of the other Indemnitees, under this Noncompetition Agreement. No breach on
the part of the Purchaser, the Company or any other party of any covenant or
obligation contained in the Purchase Agreement, the Employment Agreement or any
other agreement shall limit or otherwise affect any right or remedy of the
Purchaser, the Company or any of the other Indeminitees under this
Noncompetition Agreement.
8. Severability. If any provision of this Noncompetition Agreement or
any part of any such provision is held under any circumstances to be invalid or
unenforceable in any jurisdiction, then (a) such provision or part thereof
shall, with respect to such circumstances and in such jurisdiction, be deemed
amended to conform to applicable laws so as to be valid and enforceable to the
fullest possible extent, (b) the invalidity or unenforceability of such
provision or part thereof under such circumstances and in such jurisdiction
shall not affect the validity or enforceability of such provision or part
thereof under any other circumstances or in any other jurisdiction, and (c) the
invalidity or unenforceability of such provision or part thereof shall not
affect the validity or enforceability of the remainder of such provision or the
validity or enforceability of any other provision of this Noncompetition
Agreement. Each provision of this Noncompetition Agreement is separable from
every other provision of this Noncompetition Agreement, and each part of each
provision of this Noncompetition Agreement is separable from every other part of
such provision.
9. Governing Law; Arbitration.
(a) This Agreement shall be construed in accordance with, and
governed in all respects by, the internal laws of the State of California
(without giving effect to principles of conflicts of laws).
(b) Any dispute, claim or controversy of any nature arising
out of or relating to this Agreement, including without limitation any action or
claim based on tort, contract, statute, or for any other cause of action, and
which relates in any way to the interpretation, effect, termination, validity,
enforcement, performance and/or breach of this Agreement, shall be resolved by
final binding arbitration administered by the American Arbitration Association
("AAA"). The arbitration shall be conducted before a panel of three arbitrators
under the commercial arbitration rules of the AAA and shall be held at an AAA
facility in the City and County of Denver, Colorado. The parties hereto agree
that all arbitrators serving on such panel must be available to serve on the
panel in accordance with the timetable of the arbitration.
(c) Not for the adjudication of any matters (other than
judicial review for fraud or undisclosed bias), but for the enforcement of an
arbitration award or the granting of injunctive relief, the parties hereto
irrevocably elect as the sole judicial forum for the adjudication of any matters
arising under or in connection with this Agreement, and consent to the
jurisdiction of, the courts of the State of Colorado.
4
10. Waiver. No failure on the part of the Purchaser, the Company or any
other Indemnitee to exercise any power, right, privilege or remedy under this
Noncompetition Agreement, and no delay on the part of the Purchaser, the Company
or any other Indemnitee in exercising any power, right, privilege or remedy
under this Noncompetition Agreement, shall operate as a waiver of such power,
right, privilege or remedy; and no single or partial exercise of any such power,
right, privilege or remedy shall preclude any other or further exercise thereof
or of any other power, right, privilege or remedy. No Indemnitee shall be deemed
to have waived any claim of such Indemnitee arising out of this Noncompetition
Agreement, or any power, right, privilege or remedy of such Indemnitee under
this Noncompetition Agreement, unless the waiver of such claim, power, right,
privilege or remedy is expressly set forth in a written instrument duly executed
and delivered on behalf of such Indemnitee; and any such waiver shall not be
applicable or have any effect except in the specific instance in which it is
given.
11. Successors and Assigns. Each of the Purchaser, the Company and the
other Indemnitees may freely assign any or all of its rights under this
Noncompetition Agreement, at any time, in whole or in part, to any Person
without obtaining the consent or approval of the Stockholder or of any other
Person. This Noncompetition Agreement shall be binding upon the Stockholder and
his heirs, executors, estate, personal representatives, successors and assigns,
and shall inure to the benefit of the Purchaser, the Company and the other
Indemnitees.
12. Further Assurances. The Stockholder shall (at the Stockholder's
sole expense) execute and/or cause to be delivered to each Indemnitee such
instruments and other documents, and shall (at the Stockholder's sole expense)
take such other actions, as such Indemnitee may reasonably request at any time
(whether during or after the Noncompetition Period) for the purpose of carrying
out or evidencing any of the provisions of this Noncompetition Agreement.
13. Attorneys' Fees. If any legal action or other legal proceeding
relating to this Noncompetition Agreement or the enforcement of any provision of
this Noncompetition Agreement is brought against the Stockholder, the prevailing
party shall be entitled to recover reasonable attorneys' fees, costs and
disbursements (in addition to any other relief to which the prevailing party may
be entitled).
14. Captions. The captions contained in this Noncompetition Agreement
are for convenience of reference only, shall not be deemed to be a part of this
Noncompetition Agreement and shall not be referred to in connection with the
construction or interpretation of this Noncompetition Agreement.
15. Construction. Whenever required by the context, the singular number
shall include the plural, and vice versa; the masculine gender shall include the
feminine and neuter genders; and the neuter gender shall include the masculine
and feminine genders. Any rule of construction to the effect that ambiguities
are to be resolved against the drafting party shall not be applied in the
construction or interpretation of this Noncompetition Agreement. Neither the
drafting history nor the negotiating history of this Noncompetition Agreement
shall be used or referred to in connection with the construction or
interpretation of this Noncompetition Agreement. As used in this Noncompetition
Agreement, the words "include" and "including,"
5
and variations thereof, shall not be deemed to be terms of limitation, and shall
be deemed to be followed by the words "without limitation." Except as otherwise
indicated in this Noncompetition Agreement, all references in this
Noncompetition Agreement to "Sections" are intended to refer to Sections of this
Noncompetition Agreement.
16. Survival of Obligations. Except as specifically provided herein,
the obligations of the Stockholder under this Noncompetition Agreement
(including his obligations under Sections 3, 6 and 12) shall survive the
expiration of the Noncompetition Period. The expiration of the Noncompetition
Period shall not operate to relieve the Stockholder of any obligation or
liability arising from any prior breach by the Stockholder of any provision of
this Noncompetition Agreement.
17. Obligations Absolute. The Stockholder's obligations under this
Noncompetition Agreement are absolute and shall not be terminated or otherwise
limited by virtue of any breach (on the part of the Purchaser, the Company, any
other Indemnitee or any other Person) of any provision of the Purchase Agreement
or any other agreement, or by virtue of any failure to perform or other breach
of any obligation of the Purchaser, the Company, any other Indemnitee or any
other Person.
18. Notices. Any notice required or permitted to be given under this
Noncompetition Agreement shall be in writing and shall be deemed effective: (a)
upon personal delivery; (b) two (2) business days after it is deposited in a
regularly maintained depository of the United States Postal Service, registered
or certified mail, postage prepaid, return receipt requested and properly
addressed; (c) on the next business day after having been sent either by
overnight delivery courier service (including, but not limited to Federal
Express), or (d) upon receipt if by facsimile transmission on machine capable of
verifying receipt, and addressed or sent, to the parties at the addresses and/or
facsimile numbers set forth below:
if to Purchaser:
Isonics Corporation
0000 Xxxxxxxx Xxxxxx
Xxxxx 000
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
Attention: President
With a copy to:
Xxxxxx Godward LLP
0000 Xxxx Xxxx Xxxx
Xxxxxxxx 0, Xxxxx 000
Xxxxx Xxxx, XX 00000-0000
Fax: (000) 000-0000
Attention: Xxxx X. Xxxxxxx, Esq.
6
if to Stockholder:
Xxxxxx X. Xxxxxxxx
0000 XxXxxxxx Xxxxxx
Xxxxxx, XX 00000
Fax: (000) 000-0000
With a copy to:
Xxxxxxx & Xxxxx, P.C.
0000 Xxxxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxx X. Xxxxx III, Esq.
19. Amendment. This Noncompetition Agreement may not be amended,
modified, altered or supplemented other than by means of a written instrument
duly executed and delivered on behalf of the Stockholder, the Purchaser (or any
successor to the Purchaser) and the Company (or any successor to the Company).
20. Counterparts; Facsimile Signatures. This Noncompetition Agreement
may be executed in several counterparts, each of which shall constitute an
original and all of which, when taken together, shall constitute one agreement.
A facsimile copy, including a facsimile copy of a signature, shall have the same
force and effect as an original.
21. Defined Terms. For purposes of this Noncompetition Agreement:
(a) "Affiliate" means, with respect to any specified Person,
any other Person that, directly or indirectly, through one or more
intermediaries, controls, is controlled by or is under common control with such
specified Person.
(b) "Competing Product" means: (i) any product utilized in the
metallurgical and mineral processing industries that has been sold or produced
or evaluated for sale or production by the Company during the period of
Stockholder's employment with the Company or (ii) any product similar to a
product described in (i) above.
(c) "Competing Service" means any contract research and
development in the metallurgical, mineral processing and environmental
industries, including environmental test work and consulting services,
laboratory test work, pilot plant trials and consulting assignments in mineral
processing, hydrometallurgy, pyrometallurgy, high purity and specialty mineral
products, and environmental remediation of soils, wastes, and water, or any
similar service; provided, however, that "Competing Service" shall not include
professional services, including consulting services, which Stockholder may
provide to "permitted clients" in his capacity as an individual consultant not
affiliated with any firm or organization whose business includes as a
7
material portion of its business, providing services similar to those provided
by the Company. For purposes of this subparagraph 21(c), "permitted clients"
means all individuals, firms and organizations (i) not clients of the Company
and which have not been clients of the Company in the past two years and (ii)
whose business does not include as a material portion of its business, providing
services similar to those provided by the Company.
(d) A Person shall be deemed to be engaged in "Competition"
if: (a) such Person is engaged directly or indirectly in the design,
development, manufacture, assembly, promotion, sale, supply, distribution,
resale, installation, support, maintenance, repair, refurbishment, licensing,
sublicensing, financing, leasing or subleasing of any Competing Product; or (b)
such Person is engaged directly or indirectly in providing, performing or
offering any Competing Service.
(e) "Confidential Information" means any non-public
information (whether or not in written form and whether or not expressly
designated as confidential) relating directly or indirectly to the Purchaser,
the Company or any of the Purchaser's other subsidiaries or relating directly or
indirectly to the business, operations, financial affairs, performance, assets,
technology, processes, products, contracts, customers, licensees, sublicensees,
suppliers, personnel, consultants or plans of the Purchaser, the Company or any
of the Purchaser's other subsidiaries (including any such information consisting
of or otherwise relating to trade secrets, know-how, technology, inventions,
prototypes, designs, drawings, sketches, processes, license or sublicense
arrangements, formulae, proposals, research and development activities, customer
lists or preferences, pricing lists, referral sources, marketing or sales
techniques or plans, operations manuals, service manuals, financial information,
projections, lists of consultants, lists of suppliers or lists of distributors);
provided, however, that "Confidential Information" shall not be deemed to
include information of the Company that was already publicly known and in the
public domain prior to the time of its initial disclosure to the Stockholder.
(f) "Indemnitees" shall include: (i) the Purchaser; (ii) the
Company; and (iii) the successors and assigns of each of the Persons referred to
in clauses "(i)" and "(ii)" of this sentence.
(g) "Noncompetition Period" shall mean the period commencing
on the date of this Noncompetition Agreement and ending on the earlier to occur
of (i) the fifth anniversary of the date of this Noncompetition Agreement or
(ii) the termination of Stockholder's employment with the Purchaser constituting
a "Termination Other Than for Cause" or "Constructive Termination" as such terms
are defined in the Employment Agreement.
(h) "Person" means any: (i) individual; (ii) corporation,
general partnership, limited partnership, limited liability partnership, trust,
company (including any limited liability company or joint stock company) or
other organization or entity; or (iii) governmental body or authority.
(i) "Restricted Territory" means each county or similar
political subdivision of each State of the United States of America (including
each of the counties in the States of California and Colorado), and each State,
territory or possession of the United States of America.
8
IN WITNESS WHEREOF, the Stockholder has duly executed and delivered
this Noncompetition Agreement as of the date first above written.
_____________________________________________
Xxxxxx X. Xxxxxxxx
9
EXHIBIT F
OPINION OF XXXXXXX & XXXXX, P.C.
International Process Research Corporation ("Interpro")
Metallurgy International, Inc. ("MII")
1. Interpro has been duly incorporated and is a validly existing
corporation in good standing under the laws of the State of Colorado.
2. Interpro has the requisite corporate power to conduct its business
as it is currently being conducted.
3. The execution and delivery of the Agreement by MII and the delivery
of shares of the common stock of Interpro to Isonics pursuant to the Agreement
do not violate any provision of Interpro's Restated Articles of Incorporation or
Bylaws, as amended, and do not constitute a material default under the
provisions of any material agreement known to us to which MII or Interpro is a
party or by which MII or Interpro is bound, and do not violate or contravene (a)
any governmental statute, rule or regulation applicable to MII or Interpro or
(b) any order, writ, judgment, injunction, decree, determination or award which
has been entered against MII or Interpro and of which we are aware, the
violation or contravention of which would materially and adversely affect
Interpro, its assets, financial condition or operations.
4. To the best of our knowledge, there is no action, proceeding or
investigation pending or overtly threatened against MII or Interpro before any
court or administrative agency that questions the validity of the Agreement.
1.
EXHIBIT G
OPINION OF COOLEY GODWARD LLP
1. Isonics has been duly incorporated and is a validly existing
corporation in good standing under the laws of the State of California.
2. The Agreement has been duly and validly authorized, executed and
delivered by Isonics and constitutes a valid and binding agreement of Isonics
enforceable against Isonics in accordance with its terms, except as rights to
indemnity under Section 9 of the Agreement may be limited by applicable laws and
except as enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, arrangement, moratorium or other similar laws affecting
creditors' rights, and subject to general equity principles and to limitations
on availability of equitable relief, including specific performance.
3. The execution and delivery of the Agreement by Isonics and the
delivery of shares of the common stock of Isonics to Metallurgy pursuant to the
Agreement do not violate any provision of Isonics's Restated Articles of
Incorporation or Bylaws, as amended, and do not violate or contravene (a) any
governmental statute, rule or regulation applicable to Isonics or (b) any order,
writ, judgment, injunction, decree, determination or award which has been
entered against Isonics and of which we are aware, the violation or
contravention of which would materially and adversely affect Isonics, its
assets, financial condition or operations.
4. To the best of our knowledge, there is no action, proceeding or
investigation pending or overtly threatened against Isonics before any court or
administrative agency that questions the validity of the Agreement.
5. The 353,982 shares of Isonics Common Stock to be issued pursuant to
Section 1.3 of the Agreement will be, upon issuance pursuant to the terms of the
Agreement, duly authorized, validly issued, fully paid and nonassessable.
1.
EXHIBIT H
PURCHASER'S GENERAL RELEASE
This PURCHASER'S GENERAL RELEASE ("General Release") is being executed
and delivered as of [________], 1998, on behalf of the parties identified on the
signature page hereto (all of whom are referred to collectively as the
"Releasors," and each of whom is referred to individually as a "Releasor") to
and in favor of, and for the benefit of, METALLURGY INTERNATIONAL, INC., a
Nevada corporation ("MII"), and the other Releasees (as defined in Section 2).
RECITALS
A. Contemporaneously with the execution and delivery of this General
Release, MII is selling its shares of the capital stock of International Process
Research Corporation, a Colorado corporation (the "Company"), to Isonics
Corporation, a California corporation, pursuant to a Stock Purchase Agreement
dated as of April 30, 1998 (the "Purchase Agreement").
B. MII has required, as a condition to consummating the transactions
contemplated by the Purchase Agreement, that the Releasors execute and deliver
this General Release.
AGREEMENT
In order to induce MII to consummate the transactions contemplated by
the Purchase Agreement, and for other valuable consideration (the receipt and
sufficiency of which are hereby acknowledged by the Releasors), the Releasors
hereby covenant and agree as follows:
1. Release. Each Releasor, for himself and for each of such Releasor's
Associated Parties (as defined in Section 2), hereby generally, irrevocably,
unconditionally and completely releases and forever discharges each of the
Releasees (as defined in Section 2) from, and hereby irrevocably,
unconditionally and completely waives and relinquishes, each of the Released
Claims (as defined in Section 2).
2. Definitions.
(a) The term "Associated Parties," when used herein with
respect to a Releasor, shall mean and include: (i) such Releasor's predecessors,
successors, executors, administrators, heirs and estate; (ii) such Releasor's
past, present and future assigns, agents and representatives; (iii) each entity
that such Releasor has the power to bind (by such Releasor's acts or signature)
or over which such Releasor directly or indirectly exercises control; and (iv)
each entity of which such Releasor owns, directly or indirectly, at least 50% of
the outstanding equity, beneficial, proprietary, ownership or voting interests.
(b) The term "Releasees" shall mean and include: (i) MII; (ii)
Xxxxxx X. Xxxxxxxx; (iii) Xxxxxxxx X. Xxxxxxxx; (iv) Metallurgy PTY, an
Australian corporation; and (v) the successors and past, present and future
assigns, directors, officers, employees, agents, attorneys and representatives
of the respective entities identified or otherwise referred to in clauses "(i)"
through "(iv)" of this sentence, other than the Releasors.
(c) The term "Claims" shall mean and include all past, present
and future disputes, claims, controversies, demands, rights, obligations,
liabilities, actions and causes of action of every kind and nature, including:
(i) any unknown, unsuspected or undisclosed claim; (ii) any claim or right that
may be asserted or exercised by a Releasor in such Releasor's capacity as a
stockholder of the Company or in any other capacity; and (iii) any claim, right
or cause of action based upon any breach of any express, implied, oral or
written contract or agreement.
(d) The term "Released Claims" shall mean and include each and
every Claim, other than Claims based upon knowing or intentional misconduct,
that (i) any Releasor or any Associated Party of any Releasor may have had in
the past, may now have or may have in the future against any of the Releasees,
and (ii) has arisen or arises directly or indirectly out of, or relates directly
or indirectly to, any circumstance, agreement, activity, action, omission, event
or matter occurring or existing on or prior to the date of this General Release
(excluding only such Releasor's rights, if any, under (i) the Purchase
Agreement, (ii) the other agreements executed in connection with the closing of
the transactions contemplated under the Purchase Agreement and attached as
exhibits thereto, and (iii) the Letter of Understanding dated as of April 30,
1998 among MII, the Releasors and certain other parties thereto.
3. Civil Code ss.1542. Each Releasor (a) represents, warrants and
acknowledges that such Releasor has been fully advised by his attorney of the
contents of Section 1542 of the Civil Code of the State of California, and (b)
hereby expressly waives the benefits thereof and any rights such Releasor may
have thereunder. Section 1542 of the Civil Code of the State of California
provides as follows:
"A general release does not extend to claims which
the creditor does not know or suspect to exist in his favor at
the time of executing the release, which if known by him must
have materially affected his settlement with the debtor."
Each Releasor also hereby waives the benefits of, and any rights such Releasor
may have under, any statute or common law principle of similar effect in any
jurisdiction.
2
4. Representations and Warranties. Each Releasor represents and
warrants that:
(a) such Releasor has not assigned, transferred, conveyed or
otherwise disposed of any Claim against any of the Releasees, or any direct or
indirect interest in any such Claim, in whole or in part;
(b) to the best of such Releasor's knowledge, no other person
or entity has any interest in any of the Released Claims;
(c) no Associated Party of such Releasor has or had any Claim
against any of the Releasees;
(d) no Associated Party of such Releasor will in the future
have any Claim against any Releasee that arises directly or indirectly from or
relates directly or indirectly to any circumstance, agreement, activity, action,
omission, event or matter occurring or existing on or before the date of this
General Release;
(e) this General Release has been duly and validly executed
and delivered by such Releasor;
(f) this General Release is a valid and binding obligation of
such Releasor and such Releasor's Associated Parties, and is enforceable against
such Releasor and each of such Releasor's Associated Parties in accordance with
its terms;
(g) there is no action, suit, proceeding, dispute, litigation,
claim, complaint or investigation by or before any court, tribunal, governmental
body, governmental agency or arbitrator pending or, to the best of the knowledge
of such Releasor, threatened against such Releasor or any of such Releasor's
Associated Parties that challenges or would challenge the execution and delivery
of this General Release or the taking of any of the actions required to be taken
by such Releasor under this General Release;
(h) neither the execution and delivery of this General Release
nor the performance hereof will (i) result in any violation or breach of any
agreement or other instrument to which such Releasor or any of such Releasor's
Associated Parties is a party or by which such Releasor or any of such
Releasor's Associated Parties is bound, or (ii) result in a violation or any
law, rule, regulation, treaty, ruling, directive, order, arbitration award,
judgment or decree to which such Releasor or any of such Releasor's Associated
Parties is subject; and
(i) no authorization, instruction, consent or approval of any
person or entity is required to be obtained by such Releasor or any of such
Releasor's Associated Parties in connection with the execution and delivery of
this General Release or the performance hereof.
3
5. Indemnification. Without in any way limiting any of the rights or
remedies otherwise available to any Releasee, each Releasor shall indemnify and
hold harmless each Releasee against and from any loss, damage, injury, harm,
detriment, lost opportunity, liability, exposure, claim, demand, settlement,
judgment, award, fine, penalty, tax, fee, charge or expense (including
attorneys' fees) that is directly or indirectly suffered or incurred at any time
by such Releasee, or to which such Releasee otherwise becomes subject at any
time, and that arises directly or indirectly out of or by virtue of, or relates
directly or indirectly to, (a) any failure on the part of such Releasor to
observe, perform or abide by, or any other breach of, any restriction, covenant,
obligation, representation, warranty or other provision contained herein, or (b)
the assertion or purported assertion of any of the Released Claims by such
Releasor or any of such Releasor's Associated Parties.
6. Miscellaneous.
(a) This General Release sets forth the entire understanding
of the parties relating to the subject matter hereof and supersedes all prior
agreements and understandings among or between any of the Releasors and
Releasees relating to the subject matter hereof.
(b) If any provision of this General Release or any part of
any such provision is held under any circumstances to be invalid or
unenforceable in any jurisdiction, then (i) such provision or part thereof
shall, with respect to such circumstances and in such jurisdiction, be deemed
amended to conform to applicable laws so as to be valid and enforceable to the
fullest possible extent, (ii) the invalidity or unenforceability of such
provision or part thereof under such circumstances and in such jurisdiction
shall not affect the validity or enforceability of such provision or part
thereof under any other circumstances or in any other jurisdiction, and (iii)
such invalidity or enforceability of such provision or part thereof shall not
affect the validity or enforceability of the remainder of such provision or the
validity or enforceability of any other provision of this General Release. If
any provision of this General Release or any part of such provision is held to
be unenforceable against any Releasor, then the unenforceability of such
provision or part thereof against such Releasor shall not affect the
enforceability thereof against any other Releasor. Each provision of this
General Release is separable from every other provision of this General Release,
and each part of each provision of this General Release is separable from every
other part of such provision.
(c) This General Release shall be construed in accordance
with, and governed in all respects by, the laws of the State of California
(without giving effect to principles of conflicts of laws). Any dispute, claim
or controversy of any nature arising out of or relating to this Agreement,
including without limitation any action or claim based on tort, contract,
statute, or for any other cause of action, and which relates in any way to the
interpretation, effect, termination, validity, enforcement, performance and/or
breach of this Agreement, shall be resolved by final binding arbitration
administered by the American Arbitration Association ("AAA"). The arbitration
shall be conducted before a panel of three arbitrators under the commercial
arbitration rules of the AAA and shall be held at an AAA facility in Santa Xxxxx
County, California. The parties hereto agree that all arbitrators serving on
such panel must be available to serve on the panel in accordance with the
timetable of the arbitration. Not for the adjudication of any matters (other
than judicial review for fraud or undisclosed bias), but for the
4
enforcement of an arbitration award or the granting of injunctive relief, the
parties hereto irrevocably elect as the sole judicial forum for the adjudication
of any matters arising under or in connection with this Agreement, and consent
to the jurisdiction of, the courts of the State of California.
(e) This General Release may be executed in several
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement. A facsimile copy, including a
facsimile copy of a signature, shall have the same force and effect as an
original.
(f) Each Releasor shall execute and/or cause to be delivered
to each Releasee such instruments and other documents, and shall take such other
actions, as such Releasee may reasonably request for the purpose of carrying out
or evidencing any of the actions contemplated by this General Release.
(g) If any legal action or other legal proceeding relating to
this General Release or the enforcement of any provision hereof is brought by
any Releasor or Releasee, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements to the extent actually
incurred (in addition to any other relief to which the prevailing party may be
entitled).
(h) This General Release shall be effective with respect to,
and shall be binding upon and enforceable against, each Releasor who executes
this General Release, regardless of whether any of the other Releasors executes
this General Release.
(i) Whenever required by the context, the singular number
shall include the plural, and vice versa; the masculine gender shall include the
feminine and neuter genders; and the neuter gender shall include the masculine
and feminine genders.
(j) Any rule of construction to the effect that ambiguities
are to be resolved against the drafting party shall not be applied in the
construction or interpretation of this General Release.
(k) As used in this General Release, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, and shall be deemed to be followed by the words "without
limitation."
5
IN WITNESS WHEREOF, the Releasors have caused this General Release to
be executed as of the date first above written.
RELEASORS:
ISONICS CORPORATION,
a California corporation
By:__________________________________________
Name:
Title:
INTERNATIONAL PROCESS RESEARCH CORPORATION,
a Colorado corporation
By:__________________________________________
Name:
Title:
6
