Exhibit 10.1
AGREEMENT OF PURCHASE AND SALE OF ASSETS
THIS AGREEMENT OF PURCHASE AND SALE OF ASSETS (this "Agreement"), is
entered into this September 7, 2004, between JMAR Technologies, Inc., a Delaware
corporation ("JMAR"), on the one hand, and Xxxxxxx X. Xxxxx ("Xxxxx") and Xxxxx
X. Xxxxx ("Xxxxx"), doing business as The LXT Group, on the other hand (Xxxxx
and Drake are referred to herein collectively as "Sellers").
WITNESSETH:
WHEREAS, the parties entered into a letter agreement, dated April 16, 2004
("Letter Agreement") and an Alliance Agreement, dated June 10, 2004 ("Alliance
Agreement"), both of which provide for the execution of a definitive agreement
to fund the development of the proof of concept model and beta models of the
CORTS system and, upon the satisfaction of certain conditions, to purchase the
CORTS Business; and
WHEREAS, JMAR desires to purchase and acquire from Sellers, and Sellers
desire to sell, transfer and assign to JMAR, for the purchase price and upon the
terms and subject to the conditions hereinafter set forth, substantially all of
the assets of the CORTS Business; and
NOW, THEREFORE, in consideration of the representations, warranties,
covenants, agreements and undertakings hereinafter set forth in this Agreement,
the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 "CORTS" shall mean a continuous online real-time surveillance system
that uses light scattering for detection of microorganism contamination of
water.
1.2 "CORTS Technology" shall mean the technology related to the CORTS
system, including the technology described in the Provisional Patent Application
prepared by Xxxxx and Xxxxx and filed with the U.S. Patent & Trademark Office on
January 8, 2004 (the "Provisional Application"), and all designs,
specifications, build list, software, algorithms and related technology.
1.2 "CORTS Business" shall mean all of the tangible and intangible
assets or other rights owned by Xxxxx and/or Drake related to the CORTS system
and the CORTS Technology.
1.3 "Seed Stage" shall mean the activities performed during the period
from April 19, 2004 until January 5, 2005.
ARTICLE II
PURCHASE AND SALE OF ASSETS;
CONSIDERATION AND TERMS OF PAYMENT
2.1 Sale of Assets. On the terms and subject to the conditions set forth
in this Agreement, at the Closing (as defined in Section 5.1 hereof), Sellers
will sell, transfer, convey, assign and deliver to JMAR, and JMAR will purchase
and acquire from Sellers, all right, title and interest of Sellers in, to and
under all of Seller's respective rights, assets, and properties related to, used
in or necessary for the CORTS Business, of every kind, nature, character and
description, tangible and intangible (including goodwill), real, personal, and
mixed (including fixtures and improvements), known and unknown, and wherever
located, whether accrued, contingent or otherwise and whether now existing or
hereafter acquired prior to the Closing Date (collectively the "Purchased
Assets"). The Purchased Assets will include, without limitation, the following
assets and properties of the Sellers related to, used in or necessary for the
CORTS Business:
(a) all machinery, equipment, furniture, furnishings, office supplies and
similar property;
(b) all inventories of raw materials, work in process, finished products,
goods, products, including the Proof of Concept, Alpha models and Beta
Models, spare parts, replacement and component parts, and office and other
supplies (collectively, the "Inventories");
(c) all rights to unfilled customer orders;
(d) all of the rights of Sellers under all contracts, arrangements,
confidentiality agreements, patent assignments, license and technology
agreements, leases and other agreements;
(e) all accounts receivable and other receivables and all prepaid
expenses, prepayments and deposits;
(f) (i) all patents throughout the world and applications therefor
including the Provisional Application and all applications for patents
filed between the date hereof and the Closing Date, (ii) all trademarks,
service marks and trade names throughout the world, including
registrations and applications for registration thereof, including
"BioSentry," and (iii) all copyright registrations throughout the world
and applications therefor, and any other non-registered copyrights;
(g) all designs, software, algorithms, drawing packages, plans, trade
secrets, inventions, processes, procedures, research records,
manufacturing know-how and manufacturing formulae;
(h) all books, records, manuals and other materials, including, without
limitation, all lists of customers, distribution lists, production data,
sales and promotional materials and
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records, research and development files, data and laboratory books, patent
disclosures and accounting records, excluding professional books and
published papers owned by Sellers prior to April 1, 2004; and
(i) to the extent their transfer is permitted by law, all governmental and
other licenses, permits and approvals and license applications relating
specifically to the Purchased Assets.
At the Closing, Sellers will transfer, convey, assign and deliver all of the
Purchased Assets to JMAR free and clear of all liabilities, obligations,
security interests, liens, charges, encumbrances and claims.
2.2 Assumption of Liabilities. On the terms and subject to the
conditions set forth in this Agreement, at the Closing JMAR will assume and
agree to pay, perform or discharge all of the liabilities, obligations and
commitments arising out of or requiring performance under agreements, contracts
or commitments entered into after April 16, 2004 that are included in the
Purchased Assets (the "Assumed Liabilities"). At the Closing, JMAR will execute
and deliver to Sellers an assumption agreement for the Assumed Liabilities (the
"Assumption Agreement"). JMAR's assumption of the Assumed Liabilities shall not
abrogate any representation, warranty or covenant by Sellers relating to any of
the Assumed Liabilities and shall not exclude or interfere with any
indemnification to which JMAR may be entitled pursuant to Section 11.1.
2.3 Excluded Liabilities. JMAR shall not assume any liabilities,
obligations or commitments of Sellers (collectively, the "Excluded Liabilities")
relating to or arising out of the business, products, services, operations,
assets, properties, taxes or deferred taxes of Sellers on or prior to the
Closing, or based on any omission or state of facts or events existing or
occurring on or prior to the Closing, other than the Assumed Liabilities.
2.4 Purchase Price. In consideration for the sale, transfer, conveyance,
assignment and delivery by Sellers of all of the Purchased Assets to JMAR, at
the Closing JMAR will pay or cause to be paid to Sellers the total Purchase
Price as follows:
(a) JMAR will pay the Sellers a total of $250,000 in cash, divided
equally between Xxxxx and Xxxxx. One-half of the payment shall be
made in the form of cancellation of the $125,000 loan made by JMAR
to Sellers pursuant to the Alliance Agreement (the "Loan");
(b) JMAR will issue and deliver 90,000 shares of JMAR common stock to
Xxxxx and 90,000 shares to Drake. If Xxxxx'x employment with JMAR
terminates for any reason other than (i) termination upon the death
or disability of Xxxxx as provided in the form of Employment
Agreement attached as Exhibit A hereto, (ii) termination by JMAR for
Cause (as defined in Exhibit A), (iii) termination by JMAR because
the CORTS Business has been discontinued in substantial part or (iv)
termination by Xxxxx without Good Reason (as defined in Exhibit A),
then all of Xxxxx'x unvested shares shall immediately vest.
Otherwise, if Xxxxx is employed by JMAR at the end of the first year
after the Closing Date, one-third
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of his shares shall thereupon vest, with an additional one-third
vesting if he is so employed at the end of the second year after the
Closing Date and the remaining one-third shall vest if he is
employed at the end of the third year after the Closing Date. If
Drake's employment with JMAR terminates for any reason other than
(i) termination upon the death or disability of Drake as provided in
Exhibit A, (ii) termination by JMAR for Cause (as defined in Exhibit
A), (iii) termination by JMAR because the CORTS Business has been
discontinued in substantial part or (iv) termination by Drake
without Good Reason (as defined in Exhibit A), then all of Drake's
unvested shares shall immediately vest. Otherwise, if Drake is
employed by JMAR at the end of the first year after the Closing
Date, one-third of his shares shall thereupon vest, with an
additional one-third vesting if he is so employed at the end of the
second year after the Closing Date and the remaining one-third shall
vest if he is employed at the end of the third year after the
Closing Date. Except as set forth above in this paragraph, upon the
termination of employment of Xxxxx or Xxxxx, as the case may be, the
unvested shares, if any, held by such person shall be forfeited; and
(c) On the Closing Date, JMAR will grant to each of Xxxxx and Xxxxx
one-half of the right to receive an annual payment (the "Future
Payment Right") calculated as follows:
(i) 2% of the revenue of the CORTS Business for 2004 and for each
of the five full fiscal years after the Closing Date;
(ii) 1% of the revenue of the CORTS Business for each of the next
two fiscal years;
(iii) 25% of the "Residual Income" generated by the CORTS Business
for 2004 and for each of the five full fiscal years after the
Closing Date; and
(iv) 4% of Residual Income for the next five full fiscal years.
The Future Right Payment will be evidenced by a Future Payment Right
Certificate executed by JMAR and delivered to Sellers at the
Closing.
(d) The "Residual Income" of the CORTS Business for a given fiscal year
shall be defined as the Net Income of the CORTS Business for that
fiscal year (computed in accordance with generally accepted
accounting principles ("GAAP")), less interest imputed on the
average amount of the Total Investment (as defined in Section 2.4(e)
below) as of the last day of each fiscal quarter during that fiscal
year. The imputed interest for a given fiscal quarter shall be equal
to (i) the average of the "prime rate" for that fiscal quarter, plus
(ii) six percent (referred to herein as the "Applicable Rate").
(e) The Future Payment Right shall be calculated within 60 days after
the end of each fiscal year, shall accrue and shall be deemed to
have been earned by Xxxxx
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and Drake, but no payment of the Future Payment Right will be made
to Xxxxx or Xxxxx unless and until the Cumulative Cash (as defined
below) is sufficient to repay JMAR's Total Investment in the CORTS
Business, plus interest accrued at the Applicable Rate. If the
Cumulative Cash is sufficient to repay JMAR's Total Investment in
the CORTS Business, plus interest accrued at the Applicable Rate,
then Xxxxx and Xxxxx shall be paid in the aggregate the lesser of
(i) one-half of the Cumulative Cash after deduction of the Total
Investment and said accrued interest for the applicable fiscal year
or (ii) the total unpaid accrued Future Payment Right. "Total
Investment" shall mean all amounts contributed by JMAR under Section
7.2(a) prior to the Closing Date, plus all cash, direct costs paid
by JMAR on behalf of the CORTS Business and all other assets
contributed by JMAR to the CORTS Business after the Closing Date.
JMAR will deliver a statement to Sellers setting forth the Total
Investment amount as of the Closing Date and will provide an update
of the Total Investment on a quarterly basis thereafter. "Cumulative
Cash" shall mean cash or cash equivalents at the end of the subject
period minus any outstanding working capital line of credit
attributable directly to the CORTS Business.
(f) The maximum total payment to Sellers as a group under the Future
Payment Right shall be $20,000,000 ("Maximum Future Payment").
(g) Schedule 2.4 hereto sets forth an illustration of the calculations
to be made pursuant to this Section 2.4.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
Each of the Sellers represents and warrants on the date hereof and as of
the Closing Date to JMAR as follows:
3.1 Authority Relative to this Alliance Agreement. Each of the Sellers
has the full power and authority to execute and deliver this Agreement and the
other documents to be executed in connection herewith and to consummate the
transactions contemplated hereby. This Agreement and the other documents to be
executed in connection herewith have been duly and validly executed and
delivered by Sellers and constitute the legal, valid and binding agreement and
obligation of Sellers, enforceable against Sellers in accordance with their
respective terms, except as enforceability may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting creditors' rights
generally or by general principles of equity, including principles governing the
availability of equitable remedies.
3.2 Consents and Approvals; No Violation. Neither the execution and
delivery of this Agreement and related agreements by Sellers nor the
consummation of the transactions contemplated hereby will (i) require any
consent, approval, authorization or permit from, or filing with or notification
to, any governmental or regulatory authority or other third party, except for
any such consents, approvals, authorizations, permits, filings or notifications,
the absence of which
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would not have a material adverse effect on the assets, properties, business or
financial condition of the CORTS Business; (ii) conflict with or result in a
violation of any provision of (A) any statute, rule, regulation or ordinance
which conflict or violation might have a material adverse effect on the assets,
properties, business or financial condition of the CORTS Business, or (B) any
material order, injunction, judgment, award or decree applicable to Sellers or
the CORTS Business; or (iii) result in or require the creation or imposition of
any lien upon or with respect to any of the properties or assets of the Sellers
related to the CORTS Business.
3.3 Patents, Trademarks, Trade Names, Etc. Schedule 3.3 hereto is a
complete and correct list of (i) all patents, technology, know-how and
processes, trademarks, service marks, trade names and copyrights (including all
applications for the registration thereof) and all licenses and other agreements
relating thereto, and (ii) all agreements relating to third party technology,
know-how and processes (collectively the "Intellectual Property"), which are
used or are proposed to be used in the CORTS Business and are owned or held by
or registered in the name of Sellers or in which Sellers have any rights as
licensor, licensee or otherwise. The Intellectual Property is owned by Sellers
and Sellers do not have actual knowledge that any Intellectual Property is not
valid or in full force and effect, nor have Sellers received any notice or claim
that any of the Intellectual Property is invalid or unenforceable. The
Intellectual Property which is owned by Sellers is owned free and clear of any
license, sublicense, agreement, right, judgment, order, lien, adverse claim,
charge or encumbrance of any nature whatsoever. [REDACTED] Sellers own, are
licensed, have rights under or have the right to use all patents, trademarks,
trade names, copyrights, licenses, technology, know-how, processes and other
intellectual property used in or necessary to operate the CORTS Business as it
is proposed to be operated. None of the Intellectual Property or any of the
technology covered thereby or any of the know-how included therein has been
misappropriated from any person, and Sellers are not infringing upon or
otherwise acting illegally with regard to any such property owned by any other
person, and there is no claim or action by any person pending, or to the
knowledge of Sellers threatened, with respect thereto.
3.4 Litigation. Except for the receipt by JMAR of communications from
PointSource Technologies, Inc. ("PST") inquiring into the possibility of JMAR's
or Seller's use of PST proprietary information, Sellers have not been served
with or otherwise received notice of any pending or threatened claim, legal
action, suit, arbitration, governmental investigation or other legal or
administrative proceeding relating to the CORTS Business or the CORTS
Technology, the Letter Agreement, the Alliance Agreement or the transactions
contemplated hereby, and Sellers do not know of any basis therefor. No
unsatisfied order, decree or judgment is in effect with respect to the CORTS
Business, the CORTS Technology, the Alliance Agreement or the transactions
contemplated hereby. No citations, fines or penalties have been asserted against
Sellers or the CORTS Business under any federal, state or local law relating to
air or water pollution or other environmental protection matters, or relating to
occupational health or safety.
3.5 Properties and Related Matters. Sellers have good and marketable
title to, or a valid leasehold interest in, or a valid license to use, all of
the tangible personal property used in or material to the business, operations
or financial condition of the CORTS Business, in each case free and clear of all
security interests, mortgages, deeds of trust, claims, liens, pledges, charges
or other encumbrances or adverse claims of any nature whatsoever. To the best of
Sellers' knowledge, all of the tangible personal property included in the
Purchased Assets is in good order and operating
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condition, ordinary wear and tear excepted, and free from any defects, except
such minor defects which do not substantially interfere with the continued use
thereof in the conduct of normal operations in the manner and to the extent such
assets are presently being used, or are intended to be used.
3.6 Contracts. Sellers have made available to JMAR complete and correct
copies of all written agreements, contracts and commitments, whether written or
oral, that relate to the CORTS Business and (i) to which Sellers are a party or
by which either or both is bound, or (ii) by which any of the assets, properties
or business of the CORTS Business are bound, together with all amendments
thereto (collectively, the "Material Contracts"), and accurate descriptions of
all oral Material Contracts. Such Material Contracts are in full force and
effect and there does not exist thereunder any material default or event or
condition which, after notice or lapse of time or both, would constitute a
material default thereunder by Sellers or, to the best knowledge of Sellers, by
any other party thereto. No consent by any third party is required under any of
the Material Contracts as a result of or in connection with the execution,
delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby.
3.7 Compliance with Laws and Regulations. Sellers are in compliance, in
all material respects, with all existing laws, rules, regulations, ordinances,
orders, judgments and decrees now applicable to the business, properties or
operations of the CORTS Business as presently conducted. All of permits,
concessions, grants, franchises, licenses, filings and other governmental
authorizations and approvals which are necessary for the operation by Sellers of
the CORTS Business have been duly made or obtained and are in full force and
effect, and there are no proceedings pending or, to Sellers' knowledge,
threatened which may result in the revocation, cancellation or suspension, or
any adverse modification, of any thereof which might have a material adverse
impact on JMAR or the CORTS Business in JMAR's hands.
3.8 Environmental Matters.
(a) To the best of Sellers' knowledge, Sellers are not in violation
of, and have not violated, in any material respect, any applicable
federal, state, county or local statutes, laws, regulations, rules,
ordinances, codes, licenses and permits of any governmental authorities
relating to environmental matters including biological safety in
connection with the ownership, use, maintenance or operation of any of the
Purchased Assets or conduct of the CORTS Business.
(b) To the best of Sellers' knowledge, with respect to the CORTS
Business and facilities, Sellers have complied in all material respects
with all applicable environmental, health and safety statutes, ordinances,
orders, rules, regulations and requirements that are applicable to the
receipt, handling, use, storage, treatment, shipment and disposal of
hazardous and toxic substances (including biological substances) and
waste.
(c) To the best of Sellers' knowledge, except for federal guidelines on
BioSafety Level 2 laboratory fabrication, there are no statutes, orders,
rules or regulations relating to environmental matters including
biological safety requiring any work, repairs, construction or capital
expenditures of a material nature with respect to any of the properties,
plant or
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equipment of Sellers used in connection with the CORTS Business.
(d) To the best of Sellers' knowledge, no hazardous or toxic materials,
substances, pollutants, contaminants or wastes (including biological
active substances) have been released into the environment, or deposited,
discharged, placed or disposed of at, on or near any of the properties,
plant, or equipment of the CORTS Business, nor have any of such properties
been used at any time as a landfill or a waste disposal site except in
compliance in all material respects with all applicable environmental
health or safety statutes, ordinances, rules or regulations.
(e) To the best of Sellers' knowledge, no notices of any violation of
any of the matters referred to in subsections (a) through (d) of this
Section 3.8 relating to any of the properties, plant, equipment or assets
of Sellers included within the Purchased Assets, have been received by
Sellers or any of their respective affiliates.
3.9 Expertise and Prior Experience. Xxxxx has investigated light
scattering techniques as applied to particle detection since 1980. Xxxxx holds a
Ph.D. from UCSB in Physics, a BS degree from Yale and several patents covering
particle detection systems. Xxxxx has been developing microorganism detection
systems for commercial application since 1995. Xxxxx is currently a member of
the board of directors of the Xxxxxx Del Diablo Water District and serves as
Xxxxxx'x representative to the San Diego County Water Authority (SDCWA). Xxxxx
has recently published a peer reviewed paper with the American Water Works
Association Research Foundation concerning light scattering for Cryptosporidium
detection. Drake has been active in signal processing, radar and data
acquisition systems since 1974. Drake has a BSEE from Caltech and holds patents
in cryptography and light scattering detection. Drake has served for nine years
as the representative from the City of Escondido to the SDCWA. Drake has served
in engineering management for 25 years. Xxxxx and Xxxxx have successfully
fielded light scattering microorganism detection systems at a major water
supplier and at the Super Bowl 2003 in San Diego.
3.10 CORTS Capabilities. Previous versions of the CORTS system have been
characterized by raw false positive rates and the identification rate as
measured against all events. To the best of Sellers' knowledge, the proof of
concept instrument will have a raw false positive rate for 1, 2 and 4 micron PSL
spheres at or below 1 part in a thousand in purified water. To the best of
Sellers' knowledge, the identification rate of such spheres will be at or
greater than 95% as measured against all events.
3.11 Investment in JMAR Shares. Each of the Sellers acknowledges and
agrees that with respect to JMAR Shares to be acquired hereunder: (i) JMAR
Shares are being acquired by each Seller for his own account without the
participation of any other person, with the intent of holding such shares for
investment and without the intent of participating, directly or indirectly, in a
distribution of JMAR Shares and not with a view to, or for resale in connection
with, any distribution of such shares or any portion thereof; (ii) JMAR Shares
are not being acquired based upon any oral representation by any person with
respect to the future value of such shares but rather upon an independent
examination and judgment as to the prospects of JMAR; (iii) JMAR Shares to
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be received were not offered to the Sellers by means of publicly disseminated
advertisements or sales literature; (iv) each Seller agrees to continue to bear
the economic risk of the investment in JMAR Shares for an indefinite period and
will not offer for sale, sell or transfer JMAR Shares other than pursuant to an
effective registration statement under or exemption from the Securities Act of
1933 (the "Securities Act") and applicable state securities laws, with evidence
of compliance therewith satisfactory to JMAR. JMAR shall be entitled to rely
upon an opinion of counsel satisfactory to it with respect to compliance with
the above laws; (v) JMAR may refuse to permit the transfer of JMAR Shares held
by a Seller unless the transfer is pursuant to an effective registration under
the Securities Act or unless the request to transfer is accompanied by an
opinion of counsel acceptable to JMAR to the effect that neither the sale nor
the proposed transfer will result in a violation of the Securities Act or the
securities laws of any state or other jurisdiction; and (vi) a legend indicating
that JMAR Shares have not been registered under United States federal or state
securities laws and referring to the restrictions on transferability and sale of
such shares contained herein may be placed on the certificate or certificates
evidencing such shares delivered to each Seller or any substitute therefore and
any transfer agent of JMAR may be instructed to require compliance therewith.
3.12 Disclosure. No representation or warranty by Sellers contained in
this Agreement nor any statement or certificate furnished or to be furnished by
Sellers to JMAR or its representatives in connection herewith or pursuant hereto
contains or will contain any untrue statement of a material fact, or omits or
will omit to state any material fact required to make the statements herein or
therein contained not misleading; provided, however, nothing in this Section
3.12 shall be deemed to imply that any statement contained in a draft document
was true or complete, or that any estimate or projection will prove to be true
or complete after the date made. The representations and warranties contained in
this Article III or elsewhere in this Agreement or any document delivered
pursuant hereto shall not be affected or deemed waived by reason of the fact
that JMAR and/or its representatives knew or should have known that any such
representation or warranty is or might be inaccurate in any respect.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF JMAR
JMAR represents and warrants to Sellers as follows:
4.1 Organization. JMAR is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to own, lease and operate its
properties and assets and to carry on its business as now being conducted.
4.2 Qualification. JMAR is duly qualified to do business as a foreign
corporation and in good standing in the State of California.
4.3 Authorization of Agreement. JMAR has the requisite corporate power
and authority to enter into and deliver this Agreement and to carry out its
obligations hereunder. The execution and delivery by JMAR of this Agreement, the
performance by JMAR of its obligations hereunder
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and the consummation by JMAR of the transactions contemplated hereby have been
or by the Closing will be duly authorized by all necessary corporate action on
its part. This Agreement has been duly and validly executed and delivered by
JMAR and is the legal, valid and binding agreement and obligation of JMAR,
enforceable against it in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency, moratorium or other similar laws
affecting creditors' rights generally or by general principles of equity,
including principles governing the availability of equitable remedies.
4.4 Consents and Approvals; No Violations. Neither the execution and
delivery of this Agreement or related agreements by JMAR nor the consummation of
the transactions contemplated hereby or compliance with any of the provisions
hereof will (i) conflict with or result in any breach of any provision of the
Certificate of Incorporation or Bylaws of JMAR, each as amended to date; (ii)
require any consent, approval, authorization or permit from, or filing with or
notification to, any governmental or regulatory authority or other third party,
except for any such consents, approvals, authorizations, permits, filings or
notifications, the absence of which would not have a material adverse effect on
the assets, properties, business or financial condition of JMAR; (iii) result in
a breach of the terms, conditions or provisions of, or constitute a default (or
an event which, upon notice or lapse of time or both, would constitute a
default) under or cause, permit or give rise to any right of termination,
cancellation or acceleration under any of the terms, conditions or provisions of
any material note, bond, deed of trust, mortgage, indenture, lease, license,
joint venture, loan or credit agreement or any other material agreement or other
material instrument or obligation to which JMAR is a party or by which JMAR or
any of its assets may be bound; (iv) conflict with or result in a violation of
any provision of (A) any statute, rule, regulation or ordinance which conflict
or violation might have a material adverse effect on the assets, properties,
business or financial condition of JMAR or (B) any material order, injunction,
judgment, award or decree applicable to JMAR or any of its properties or assets;
or (v) result in or require the creation or imposition of any lien upon or with
respect to any of the properties or assets of JMAR.
4.5 JMAR Shares. JMAR Shares will, when issued, have been duly
authorized and when delivered on the Closing Date, will be duly and validly
issued, fully paid and nonassessable shares of Common Stock and will not have
been issued in violation of any preemptive or other right of any other person.
The issuance of JMAR Shares will be exempt from registration under the
Securities Act pursuant to Section 4(2) thereof.
4.6 SEC Reports, Etc. The common stock of JMAR is registered pursuant to
Section 12(g) of the Securities Exchange Act of 1934 ("Exchange Act") and JMAR
has timely filed all proxy statements, reports, schedules, forms, statements and
other documents required to be filed by it under the Exchange Act. JMAR has
furnished Sellers with copies of (i) its Annual Reports on Form 10-K for the
fiscal year ended December 31, 2003 and (ii) its Quarterly Report on Form 10-Q
for the fiscal quarter ended June 30, 2004 (collectively, the "SEC Reports").
Each SEC Report was, at the time of its filing, in substantial compliance with
the requirements of its respective form and none of the SEC Reports, nor the
financial statements (and the notes thereto) included in the SEC Reports, as of
their respective filing dates, contained any untrue statement of material fact
or omitted to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. The financial statements of JMAR included in the SEC
Reports comply as to form in all material respects with
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applicable accounting requirements and the published rules and regulations of
the Securities and Exchange Commission or other applicable rules and regulations
with respect thereto. Such financial statements have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto or (ii) in the case of unaudited
interim statements, to the extent that they may not include footnotes or may be
condensed) and fairly present in all material respects the financial position of
JMAR as of the dates thereof and the results of operations and cash flows for
the periods then ended (subject, in the case of unaudited statements, to normal
year-end adjustments).
4.7 No Omissions or Misrepresentations. None of the statements,
representations or warranties made by JMAR in this Agreement, or in any Exhibit
or Schedule hereto or in any agreement entered into pursuant hereto, contains
any untrue statement of any material fact or omits to state any material fact
necessary to be stated in order to make the statements, representations or
warranties contained herein or therein not misleading. The representations and
warranties contained in this Section 4.7 or elsewhere in this Agreement or any
document delivered pursuant hereto shall not be affected or deemed waived by
reason of the fact that Sellers and/or its representatives know or should have
known that any such representation or warranty is or might be inaccurate in any
respect.
ARTICLE V
THE CLOSING
5.1 Time and Place of Closing. Upon the terms and subject to the
satisfaction of the conditions contained in this Agreement, the closing of the
sale and purchase contemplated by this Agreement (the "Closing") will take place
at the offices of LXT or JMAR on January 7, 2005 or at such time and place as
the parties may agree upon. The date upon and time at which the Closing actually
occurs is herein referred to as the "Closing Date".
5.2 Deliveries by Sellers. At the Closing, Sellers will deliver the
following to JMAR:
(i) The instruments of conveyance contemplated by Section 6.1(h);
(ii) The certificate contemplated by Section 6.1(c);
(iii) Evidence of having obtained consents and releases required by
Sellers pursuant to Section 6.1(i);
(iv) The books and records of Sellers included in the Purchased
Assets;
(v) The Employment Agreements executed by Xxxxx and Xxxxx; and
(vi) All other agreements, documents, instruments and writings
required to be delivered by Sellers at the Closing pursuant to this
Agreement.
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5.3 Deliveries by JMAR. At the Closing, JMAR will deliver the following
to Sellers:
(i) Two checks in the total amount of $125,000;
(ii) Cancelled original Promissory Notes executed by Sellers,
together with Security Agreements, UCC Termination Statements and
other documents and instruments evidencing cancellation of the Loan;
(iii) A stock certificate for 90,000 shares of JMAR common stock
issued in the name of Xxxxx and a stock certificate for 90,000
shares of JMAR common stock issued in the name of Drake;
(iv) A Future Payment Right Certificate executed by JMAR in favor
of the Sellers;
(v) The certificate contemplated by Section 6.2(c);
(vi) The Assumption Agreement executed by JMAR;
(vii) The legal opinion contemplated by Section 6.2(d);
(viii) The Employment Agreements executed by JMAR; and
(ix) All other agreements, documents, instruments and writings
required to be delivered by JMAR at the Closing pursuant to this
Agreement.
ARTICLE VI
CLOSING CONDITIONS
6.1 Conditions to Obligations of JMAR. The obligations of JMAR to
perform this Agreement and its obligations hereunder are subject to the
satisfaction on or prior to the Closing Date of each of the following
conditions, unless waived by JMAR:
(a) All representations and warranties of Sellers contained in the
Alliance Agreement and in Article III hereof shall be true and correct
when made and on and as of the Closing Date as though made on and as of
the Closing Date;
(b) All covenants, agreements and obligations required by the terms of
this Agreement to be performed by Sellers at or before the Closing Date
shall have been duly and properly performed.
(c) There shall be delivered to JMAR a certificate executed by Sellers
as of the Closing Date, certifying that the conditions set forth in
paragraphs (a) and (b) of this Section have been fulfilled.
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(d) JMAR shall be satisfied with all intellectual property matters,
including having determined that any modifications to the design of the
Proof of Concept, alpha or beta products that are required in order to
avoid infringement of the PointSource patents can be made without
significant adverse impact on the operation or economics of those units.
The satisfaction of this condition shall not operate as a waiver of the
representations of Sellers in Section 3.3 above.
(e) JMAR's Board of Directors shall have approved the execution by JMAR
of this Agreement and the performance by JMAR of the transactions
contemplated herein.
(f) Xxxxx and Xxxxx shall have entered into Employment Agreements with
JMAR in the form of Exhibit A hereto.
(g) All of the Milestones (as defined in Section 7.2(a) hereof) that are
required to have been satisfied as of the Closing Date shall have been
satisfied.
(h) JMAR shall have received from Sellers:
(i) a xxxx of sale and assignment, in form and substance
satisfactory to JMAR and Sellers, conveying good and
marketable title to the Purchased Assets to JMAR, free and
clear of all encumbrances;
(ii) assignments, in form and substance satisfactory to JMAR, of
the contracts, agreements, licenses, instruments (including
purchase and sales orders), leases, joint venture agreements,
claims, rights, copyrights, patents, trade secrets, other
intangible properties, included in the Purchased Assets
pursuant to Section 2.1;
(iii) such other good and sufficient instruments of conveyance,
assignment and transfer, satisfactory in form and substance to
JMAR, as shall be effective to vest in JMAR valid, good and
marketable title to the Purchased Assets free and clear of all
encumbrances.
(i) All licenses, permits, authorizations, consents and approvals of and
filing with or notification to any United States or foreign governmental
or regulatory body required to be obtained or made in connection with the
consummation of the transactions contemplated by this Agreement shall have
been duly obtained or made by or on behalf of Sellers or JMAR, as the case
may be, and all consents of other third parties required to have been
obtained in connection with the consummation of such transactions shall
have been obtained by or on behalf of Sellers or JMAR, as the case may be.
6.2 Conditions to Obligations of Sellers. The obligations of Sellers to
perform this Agreement and their respective obligations hereunder are subject to
the satisfaction on or prior to the Closing Date of each of the following
conditions, unless waived by the Sellers:
(a) All representations and warranties of JMAR contained in Article IV
hereof shall be true and correct when made and on and as of the Closing
Date as though made on and
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as of the Closing Date.
(b) All covenants, agreements and obligations required by the terms of
this Agreement to be performed by JMAR at or before the Closing shall have
been duly and properly performed.
(c) There shall be delivered to Sellers a certificate executed by an
officer of JMAR, dated as of the Closing Date, certifying that the
conditions set forth in paragraphs (a) and (b) of this Section have been
fulfilled.
(d) Sellers shall have received an opinion letter of Xxxxxx X. Xxxxxxxx,
General Counsel of JMAR, dated as of the Closing Date, in form and
substance agreed to by the parties.
(e) JMAR shall have entered into Employment Agreements with Xxxxx and
Drake in the form of Exhibit A hereto.
ARTICLE VII
COVENANTS OF THE PARTIES
7.1 Funding of Seed Stage. Subject to JMAR's maximum financial
commitment set forth in Section 7.2 below and the satisfaction of the Milestones
(as defined in Section 7.2(a) below), during the Seed Stage JMAR agrees to
provide funding and other resources to complete the activities set forth on
Schedule 7.2(a) hereto. These activities include the design, construction and
testing of a proof of concept model of the CORTS system, two alpha models and
five beta models.
7.2 Maximum Funding Commitment.
(a) JMAR's total financial commitment during the Seed Stage shall not
exceed $1,000,000, including cash outlay, cost of labor (including applicable
overhead and general and administrative burden), consulting fees paid to Xxxxx
and Xxxxx and to other consultants (including those directly engaged by JMAR
with Sellers' consent), the cost of facility improvements, equipment and
materials and the value of assets contributed directly by JMAR. JMAR agrees to
continue to provide the monetary and non-monetary contributions described above
during the Seed Stage for so long as (i) the milestones listed on Schedule
7.2(a) hereto ("Milestones") are met in accordance with the schedule set forth
thereon, and (ii) the costs to complete the Seed Stage have not exceeded, and
are not expected by JMAR to exceed, the total budgeted costs set forth on
Schedule 7.2(b) hereto (the "Budgeted Costs"). In the event that the Milestones
are not met in accordance with Schedule 7.2(a) or the total costs of the Seed
Stage are expected to exceed the Budgeted Costs, then JMAR shall have the right
to terminate this Agreement pursuant to Section 9.1(b) below. The total
financial commitment described above shall be exclusive of the Loan.
(b) JMAR agrees to make available to Sellers certain of its engineering
and other
14
technical personnel and other staff to support completion of the Seed Stage
activities. The specific personnel and scheduling of such personnel shall be
determined by JMAR in its sole discretion. In the event that the personnel
required to complete the Seed Stage tasks are not available from JMAR, JMAR and
Sellers shall work together to identify and retain appropriate consultants or
other employees for the performance of the required tasks.
7.3 No Shop Provision. Until the termination of this Agreement, Sellers
agree that neither Sellers nor any of their respective agents, representatives
or affiliates will, directly or indirectly, solicit, encourage, negotiate or
enter into any transaction with any other person with respect to the sale or
license of, or other transfer of rights to, the CORTS Business or the CORTS
Technology, nor will Sellers participate in any negotiations regarding or
furnish to any other person any information with respect to, or otherwise
cooperate in any way with, or assist or participate in, facilitate or encourage,
any effort or attempt by any other person to do or seek to do any of the
foregoing. In the event of a material violation of any of the provisions of this
Section 7.3 by one or both of the Sellers resulting in the failure to consummate
the transactions contemplated by this Agreement, Sellers will reimburse JMAR for
all of its actual costs incurred after the execution of the Letter Agreement and
before the termination of this Agreement.
7.4 D&O Indemnification and Insurance Coverage. JMAR agrees that as
officers and/or employees of JMAR, Xxxxx and Xxxxx shall be entitled to the same
indemnification protections that are generally available to JMAR employees and
officers, as the case may be, as well as the benefits of any applicable JMAR's
directors and officers liability insurance coverage as in effect from time to
time. Prior to the Closing Date, JMAR will provide Sellers with a summary of the
terms of its then current directors and officers insurance coverage and other
information relevant to its obligations to indemnify its employees for their
actions in the course of their employment.
7.5 Subsequent Sale of Business. In the event that after the Closing
JMAR sells the CORTS Business, then JMAR will pay Sellers the lesser of (i) 50%
of the gain (calculated in accordance with GAAP) over JMAR's Total Investment in
the CORTS Business or (ii) the remaining unpaid amount of the Maximum Future
Payment (defined in Section 3.5(f) above). If after the Closing Date JMAR
decides to discontinue its support or otherwise dispose of the CORTS Business,
then it will first offer to sell the assets of the CORTS Business (including
Intellectual Property) to Xxxxx and Xxxxx on terms that will include the
repayment to JMAR of its Total Investment in the CORTS Business, plus interest
accrued at the Applicable Rate (as defined in Section 3.5(d)), either in the
form of a purchase price payment, the payment of a royalty of 5% of future
revenues from the sale of systems using the CORTS Technology, or some
combination of purchase price and royalty. In the event of a sale, merger or
other transfer of the stock or assets of JMAR, the acquiring party (or surviving
party in a merger) shall be required to assume JMAR's obligations under this
Agreement.
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7.6 Further Agreements of Sellers and JMAR. Sellers shall, upon the
reasonable request of JMAR from time to time, execute and deliver to JMAR such
further bills of sale, endorsements and other good and sufficient instruments of
title, conveyance, transfer and assignment, as may be necessary or desirable in
order to vest in JMAR all right, title and interest in and to any and all of the
Purchased Assets to the extent contemplated by this Agreement. Sellers and JMAR
agree to cooperate in order to obtain all necessary consents to the transfer to
JMAR of any rights constituting part of the Purchased Assets.
ARTICLE VIII
NON-COMPETITION PROVISIONS
As additional consideration for and a material inducement to JMAR to enter
into this Agreement and in order to assure JMAR that it will receive the full
value of its purchase of the CORTS Business, each of the Sellers hereby makes
the following covenants to JMAR:
8.1 Without the prior consent of JMAR, each of the Sellers agrees that
he shall not, as a partner, employee, officer, director, manager, agent,
associate, investor, or otherwise, directly or indirectly, own, purchase,
organize or take preparatory steps for the organization of, build, finance,
acquire, lease, operate, manage, or invest in any business, or permit his name
to be used or employed in connection with any business primarily involving the
scattering of light to detect particles in fluids; provided, however, that the
foregoing shall not prohibit the ownership of securities of corporations which
are listed on a national securities exchange or traded in the national
over-the-counter market in an amount which shall not exceed 5% of the
outstanding shares of any such corporation.
8.2 The covenants and other provisions contained herein shall cover the
activities of each of the Sellers in every part of the world.
8.3 The covenants contained in this Article VIII shall be effective as
to each of the Sellers until the fifth anniversary of the Closing Date.
8.4 The covenants contained in this Article VIII shall be construed as
if each covenant is divided into separate and distinct covenants in respect of
the CORTS Business, each capacity in which each of the Sellers is prohibited
from competing and each part of the Territory in which the CORTS Business is
carrying on its business. Each such covenant shall constitute separate and
several covenants distinct from all other such covenants.
8.5 Each of the Sellers recognizes that the territorial restrictions
contained in this Article VIII are properly required for the adequate protection
of the CORTS Business and that in the event any covenant or other provision
contained in this Article VIII shall be deemed to be illegal, unenforceable, or
unreasonable by a court or other tribunal of competent jurisdiction with respect
to any part of the Territory, such covenant or provision shall not be affected
with respect to any other part of the Territory, and each of the Sellers agrees
and submits to the reduction of
16
said territorial restriction to such an area as said court shall deem
reasonable.
8.6 Each of the Sellers acknowledges that (i) the covenants and the
restrictions contained in this Article VIII are necessary, fundamental, and
required for the protection of the CORTS Business; (ii) such covenants relate to
matters which are a special, unique, and extraordinary character that gives each
of such covenants a special, unique, and extraordinary value; and (iii) a breach
of any of such covenants or any other provision of this Article VIII will result
in irreparable harm and damages to JMAR which cannot be adequately compensated
by a monetary award. Accordingly, it is expressly agreed by each of the Sellers
that in addition to all other remedies available at law or in equity, JMAR shall
be entitled to the immediate remedy of a temporary restraining order,
preliminary injunction, or such other form of injunctive or equitable relief as
may be used by any court of competent jurisdiction to restrain or enjoin each of
the Sellers from breaching any such covenant or provision or to specifically
enforce the provisions hereof.
ARTICLE IX
TERMINATION OF AGREEMENT
9.1 Termination. This Agreement may be terminated at any time prior to the
Closing by:
(a) The mutual consent of Sellers, on the one hand, and JMAR, on the
other hand; or
(b) JMAR, if the Milestones have not been achieved in accordance with
Schedule 7.2(b) hereto, or if the costs have exceeded, or if the costs are
projected by Sellers and JMAR to exceed, the Budgeted Costs (as defined in
Section 7.2(b)); or
(d) JMAR or the Sellers, if the Closing has not occurred by January 7,
2005 through no fault of the terminating party; or
(e) JMAR, if Sellers shall have materially breached or failed in any
material respect to comply with any of their obligations under this
Agreement, or any representation or warranty of Sellers contained in the
Alliance Agreement or in this Agreement shall have been inaccurate when
made in any material respect; or
(f) Sellers, if JMAR shall have materially breached or failed in any
material respect to comply with any of its obligations under this
Agreement, or any representation or warranty of JMAR contained in the
Alliance Agreement or in this Agreement shall have been inaccurate when
made in any material respect.
9.2 Procedure and Effect of Termination.
(a) In the event of termination of this Agreement by either or both of
Sellers or JMAR, pursuant to Section 9.1, written notice thereof shall
forthwith be given by the terminating party to the other party hereto, and
this Agreement shall thereupon terminate and shall become void and have no
effect, and the transactions contemplated hereby and
17
thereby shall be abandoned, without further action by either of the
parties hereto.
(b) In the event that JMAR terminates this Agreement pursuant to Section
9.1(a), (b), (c) or (d) above, or in the event that Sellers terminate this
Agreement pursuant to Section 9.1(f) above, then JMAR shall assign and
transfer all property and rights acquired or created during the Seed Stage
to Sellers and shall confirm Sellers' ownership of all of the intellectual
property and other rights to the CORTS Technology. In consideration for
said transfer and confirmation of rights, Sellers will grant JMAR a
royalty of 5% of future revenues from the sale of systems using the CORTS
Technology until JMAR's Total Investment (as defined in Section 2.4(e)
above) in the Seed Stage is repaid. In the event that JMAR terminates this
Agreement pursuant to Section 9.1(e) above, then JMAR shall retain all
property and rights that it provided or otherwise contributed to the CORTS
Business during the Seed Stage.
ARTICLE X
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
OF SELLERS AND JMAR
All representations and warranties of JMAR, on the one hand, and Sellers, on the
other, in this Agreement or in any document or other papers delivered pursuant
to or in connection with this Agreement shall survive the Closing and shall
expire and be deemed terminated and extinguished on the second anniversary of
the Closing Date.
ARTICLE XI
INDEMNIFICATION
11.1 Obligation of Sellers. Subject to the limitation on Sellers'
liability under Section 11.4 below, each of the Sellers, jointly and severally,
agrees to indemnify, defend and hold harmless JMAR and its directors, officers,
employees, agents, subsidiaries and affiliates, and their respective successors
and assigns from and against all losses, liabilities, damages, deficiencies,
costs or expenses, including interest, penalties and reasonable attorneys' fees
and disbursements ("Losses") which any of them shall incur or suffer based upon,
arising out of or otherwise in respect of or involving (a) any inaccuracy in or
any breach of any representation, warranty, covenant or agreement of Sellers
contained in this Agreement or in any document or other papers delivered by
Sellers pursuant to this Agreement which was not waived by JMAR prior to
Closing, or (b) any liability, obligation, debt or commitment of Sellers, not
included in the Assumed Liabilities, or (c) any third-party claim or claims made
or threatened against JMAR or affecting any portion of the Purchased Assets
which arise out of the operation of the CORTS Business prior to the execution of
the Letter Agreement.
11.2 Obligation of JMAR to Indemnify. JMAR agrees to indemnify, defend and
hold harmless Sellers and their respective successors and assigns from and
against all Losses which any of them shall incur or suffer based upon, arising
out of or otherwise in respect of or involving (a) any inaccuracy in or breach
of any representation, warranty, covenant or agreement of JMAR
18
contained in this Agreement or in any document or other papers delivered by JMAR
pursuant to this Agreement which was not waived by Sellers prior to Closing, or
(b) any liability, obligation, debt or commitment included in the Assumed
Liabilities, or (c) any third-party claim or claims made or threatened against
Sellers which arise out of or involve the operation of the CORTS Business after
the execution of the Letter Agreement; provided, however, JMAR shall not be
obligated to indemnify Sellers for Losses which are finally judicially
determined to have resulted from the gross negligence or willful misconduct of
Sellers, including Losses arising from the misappropriation of the trade secrets
of another person. JMAR shall have no obligation to indemnify Sellers against
Losses arising from their pursuit of the CORTS Business or their use of the
CORTS Technology after termination of this Agreement.
11.3 Notice and Opportunity to Defend.
(a) Notice of Asserted Liability. Promptly after receipt by any party
hereto (the "Indemnitee") of notice of any demand, claim or circumstances
that would give rise to a claim or the commencement (or threatened
commencement) of any action, proceeding or investigation (an "Asserted
Liability") that may result in a claim for indemnification under Section
11.1 or 11.2, the Indemnitee shall give notice thereof (the "Claims
Notice") to the party obligated to provide indemnification pursuant to
Section 11.1 or 11.2 (the "Indemnifying Party"). The Claims Notice shall
describe the Asserted Liability in reasonable detail, and shall indicate
the amount (estimated, if necessary) of the loss or damage that has been
or may be suffered by the Indemnitee.
(b) Opportunity to Defend. The Indemnifying Party may elect to compromise
or defend, at its own expense and by its own counsel, any Asserted
Liability. If the Indemnifying Party elects to compromise or defend such
Asserted Liability, it shall within 30 days of receipt of the Claims
Notice notify the Indemnitee of its intent to do so, and the Indemnitee
shall cooperate in the compromise of, or defense against, such Asserted
Liability. The Indemnifying Party shall reimburse the Indemnitee for all
out-of-pocket costs incurred by the Indemnitee in connection with such
cooperation. If the Indemnifying Party elects not to compromise or defend
the Asserted Liability, fails to notify the Indemnitee of its election as
herein provided or contests its obligation to indemnify under this
Agreement, the Indemnitee may pay, compromise or defend such Asserted
Liability. Notwithstanding the foregoing, neither the Indemnifying Party
nor the Indemnitee may settle or compromise any claim over the objection
of the other, provided, however, that consent to settlement or compromise
shall not be unreasonably withheld. In any event, the Indemnitee and the
Indemnifying Party may participate, at their own expense, in the defense
of such Asserted Liability. If the Indemnifying Party chooses to defend
any claim, the Indemnitee shall make available to the Indemnifying Party
any books, records or other documents within its control that are
necessary or appropriate for such defense, subject to reasonable
confidentiality protections.
11.4 Limitation of Liability. The Sellers' liability for indemnification
under Section 11.1 hereof shall be limited to an offset by JMAR against payments
to Sellers under the Future Payment Right (as defined in Section 2.4(c) above).
19
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 Waiver and Amendment. Any term or provision of this Agreement may be
waived at any time by the party which is entitled to the benefits thereof, but
only in a writing signed by such party, and this Agreement may be amended or
supplemented at any time, but only by written agreement of Sellers and JMAR. Any
such waiver with respect to a failure to observe any such provision shall not
operate as a waiver of any subsequent failure to observe such provision unless
otherwise expressly provided in such waiver.
12.2 Expenses. Except as otherwise provided in this Agreement, Sellers and
JMAR shall pay their respective expenses separately incurred in connection with
this Agreement and the transactions contemplated hereby and thereby.
12.3 Entire Agreement. This Agreement and the additional written
agreements called for herein together contain the entire agreement between
Sellers and JMAR with respect to the purchase and sale of the business and
assets of the CORTS Business and the related transactions and supersede all
prior arrangements or understandings with respect thereto, including the Letter
Agreement, dated April 16, 2004, between JMAR and the Sellers and the Alliance
Agreement, dated June 10, 2004, between JMAR and the Sellers. There have been no
oral representations or warranties and neither party has relied on any
representation not contained herein.
12.4 Assignment. This Agreement and each other agreement entered into
pursuant hereto and all of the provisions hereof and thereof shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder and thereunder, shall be assigned by
either party hereto or thereto without the prior written consent of the other
party. Sellers hereby agree that notwithstanding the foregoing or the fact that
this Agreement shall have been executed by JMAR directly, JMAR may, at its
option, cause the transactions contemplated hereby to be consummated by (i) a
newly-formed subsidiary or subsidiaries of JMAR to be organized for the purpose
of consummating this transaction or (ii) any other affiliated corporation of
JMAR; provided, however, that JMAR's obligations shall be retained or guaranteed
by JMAR. This Agreement is not intended to confer upon any other party, except
the parties hereto, any rights or remedies hereunder.
12.5 Counterparts. This Agreement may be executed in any number of
counterparts, each of which independently shall have the same effect as if it
were the original and all of which taken together shall constitute one and the
same document. Executed signature pages which are transmitted by facsimile to
the other party shall be deemed to have been delivered on the date so
transmitted provided that an originally executed signature is delivered to the
other party within 3 business days thereafter.
12.6 Notices. All notices, consents, requests, instructions, approvals and
other communications provided for herein shall be validly given, made or served,
if in writing and delivered personally, sent by registered or certified mail,
postage prepaid, sent by established
20
overnight delivery service, or transmitted by fax (except for legal process) to:
If to JMAR:
JMAR Technologies, Inc.
0000 Xxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: General Counsel
Fax: 000-000-0000
If to Sellers:
Xxxxxxx X. Xxxxx
0000 Xxxxx Xxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Fax: 000-000-0000
Xxxxx X. Xxxxx
000 Xxxx Xxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Fax: 000-000-0000
With a copy to:
Xxxxxxx X. Xxxxxxxxxx, Esq.
Xxxxxxx Xxxx Seidenwurm & Xxxxx, LLP
000 X Xxxxxx, Xxxxx 0000
Xxx Xxxxx, XX 00000
Fax: 000-000-0000
or to such other address or fax number as any party hereto may, from time to
time, designate in a written notice given in a like manner. Notice given by mail
as set out above shall be deemed delivered three days after the date it is
postmarked. Notice given by overnight delivery service shall be deemed delivered
when received. Notice given by fax shall be deemed given when transmitted,
provided that the sender retains a written confirmation of such transmission and
mails an original thereof to the other party within one business day after said
transmission.
12.7 Arbitration. Any dispute, claim or controversy arising out of or
relating to this Agreement or breach, termination, enforcement, interpretation
or validity thereof, including the determination of the scope or applicability
of this Agreement to arbitrate, shall be determined by arbitration in San Diego
County, California, before a sole arbitrator, in accordance with the laws of the
State of California for agreements made in and to be performed in that State.
The arbitration shall be administered by JAMS pursuant to its Streamlined
Arbitration Rules and Procedures. Judgment on the Award may be entered in any
court having jurisdiction.
21
12.8 Interpretation. The parties acknowledge that this Agreement has been
negotiated by both parties and that neither this Agreement nor any of its
provisions should be interpreted for or against any party on the basis said
party or its attorney drafted the Agreement or the provision in question.
12.9 Severability. If any provision of this Agreement is declared by a
court of competent jurisdiction or arbitrator to be invalid, void or
unenforceable, the remaining provisions of this Agreement nevertheless will
continue in full force and effect without being impaired or invalidated in any
way.
12.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
12.11 Attorneys' Fees. In the event suit is commenced to enforce or
contest this Agreement, or any portion thereof, the prevailing party in such
suit shall be entitled to recover from the non-prevailing party all fees, costs
and expenses of enforcing any right of such prevailing party under and with
respect to this Agreement, including without limitation, such reasonable fees
and expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals.
12.12 Force Majeure. Whenever a period of time is prescribed for action by
a party hereunder, such party shall not be responsible for, and there will be
excluded from the computation for such period of time, any delays due to an
event of force majeure, including but not limited to strikes, riots, acts of
God, war, governmental laws, regulations or restrictions of general application
to the public at large, or any other causes beyond the control of such party.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
JMAR TECHNOLOGIES, INC.
By: /s/ XXXXXX X. XXXXXX
Xxxxxx X. Xxxxxx, President and
Chief Executive Officer
/s/ XXXXXXX X. XXXXX
Xxxxxxx X. Xxxxx, doing business as The LXT Group
/s/ XXXXX X. XXXXX
Xxxxx X. Xxxxx, doing business as The LXT Group
22
List of Schedules
Schedule 2.4 - Calculation of Residual Income (Illustration)
Schedule 3.3 - List of Intellectual Property
Schedule 7.2(a) - Seed Stage Activities and Seed Stage Milestones
Schedule 7.2(b) - Budgeted Costs
Exhibits:
Exhibit A - Form of Employment Agreement
23
EXHIBIT A
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (herein "Agreement") is entered into as of
January ___, 2005, by and between JMAR Technologies, Inc. ("JMAR" or the
"Company") and [Xxxxxxx Xxxxx] [or] [Xxxxx Xxxxx] ("Executive").
Recitals
WHEREAS, JMAR desires to retain the services of Executive; and
WHEREAS, Executive desires to be employed by JMAR.
NOW, THEREFORE, JMAR and Executive agree as follows:
1. Employment/Title/Responsibilities. The Company hereby employs Executive,
and Executive hereby accepts such employment as [Chief Scientist] [or]
[Chief Engineer] of the Company. Executive shall do and perform such other
services, acts or things as shall be required of him from time to time by
the Company, including those functions and responsibilities described on
Schedule 1 hereto, and shall comply with the directives, policies,
procedures and requirements issued or established from time to time by the
Company. Executive shall at all times during his employment by the Company
(unless otherwise agreed in writing by the Company) devote his entire
productive time, energies, ability and attention to the business of the
Company and perform faithfully and diligently such duties and
responsibilities to the best of his abilities; provided, however, that
Executive shall be entitled to vacation time and time off for sickness and
disability in accordance with the policies of the Company in effect from
time to time. [For Xxxxx Agreement: Company acknowledges that Executive
is, and may continue to be, a director of Xxxxxx Del Diablo Municipal
Water District and San Diego County Water District and that acting as such
and receiving compensation therefor shall not constitute a violation of
any provision of this Agreement.]
2. Compensation/Benefits.
2.1 As compensation for the services provided by Executive under this
Agreement, JMAR will pay him an annual salary of $150,000 (Base Pay),
payable in accordance with JMAR's usual payroll procedures. Executive's
base pay shall be reviewed at least annually by JMAR's Chief Executive
Officer, and in the Chief Executive Officer's sole discretion, may be
increased at any time.
2.2 Executive shall have the right to participate in such pension,
profit sharing, bonus, group insurance or similar employee benefit plans
established by the Company for the benefit of senior management of the
Company, for so long as any such plan is maintained in effect for the
benefit of such class, with Executive's participation or share therein
being
24
determined by the provisions and requirements of the respective plan.
Executive shall commence accruing vacation at the rate of four weeks per
year and beginning after his sixth year of service shall accrue one
additional day of vacation for each additional year of service up to a
maximum of five weeks per year. A summary of the Company's benefits plans
has been provided to Executive.
2.3 All payments from the Company to Executive pursuant to this
Agreement, including salary or other amounts paid pursuant to Sections 2.1
above or otherwise, shall be subject to such payroll tax, withholding,
social security and other deductions as may be required by any Federal,
state or local law, rule or regulation, which the Company may reasonably
deem to be applicable thereto.
2.4 The Company shall pay or reimburse Executive for all reasonable
expenses incurred by Executive on the business of the Company and for the
promotion of its business, provided such expenses are pre-approved in
writing by the Company or are consistent with the written policies and
guidelines approved by the Company and in effect from time to time.
3. Term of Agreement. This Agreement shall be for a three (3) year period
(the "Employment Period") beginning on the date first mentioned above, and
if not previously terminated pursuant to the terms of this Agreement, the
Employment Period shall end three (3) years later.
4. Termination of Agreement.
(a) Without Cause or for Good Reason. In the event that Executive's
employment is terminated by the Company without Cause, or is terminated by
Executive for Good Reason, the Company shall continue to pay the Base Pay
to Executive on a bi-weekly basis for the remainder of the Employment
Period.
(b) Cause. Notwithstanding the provisions of Section 3 of this
Agreement, this Agreement shall terminate automatically for Cause (as
defined herein) upon written notice from the Board of Directors of Company
to Executive. If this Agreement is terminated for Cause, all of
Executive's rights under this Agreement shall cease as of the effective
date of such termination and all of the Company's compensation and
employment obligations under this Agreement shall terminate.
(c) Voluntary Termination. Notwithstanding the provisions of Section 3
of this Agreement, in the event that Executive voluntarily terminates his
employment not for Good Reason, all of Executive's rights under this
Agreement shall cease as of the effective date of termination and all of
the Company's compensation and employment obligations under this Agreement
shall terminate.
(d) Disability. Notwithstanding the provisions of Section 3 of this
Agreement, if, as a result of physical or mental injury or impairment,
Executive is unable to perform all of the essential job functions of his
position on a full time basis, taking into account any
25
reasonable accommodation required by law, and without posing a direct
threat to himself and others, for a period up to one hundred eighty (180)
days, all obligations of the Company to pay Executive the compensation as
set forth in this Agreement are suspended. Executive further agrees that
should he remain unable to perform all of the essential functions of his
position on a full time basis, taking into account any reasonable
accommodation required by law, and without posing a direct threat to
himself or others, after one hundred eighty (180) days, the Company will
suffer an undue hardship by continuing Executive in his position. Upon
this event, all compensation and employment obligations of the Company
under this Agreement shall cease (except Executive's rights under the
Company's then existing short term and/or long term disability plans, if
any), and this Agreement shall terminate.
(e) Death. Notwithstanding the provisions of Section 3 of this
Agreement, this Agreement shall terminate automatically upon Executive's
death and Executive's rights under this Agreement shall cease as of the
date of such termination.
5. Definitions
5.1 Good Reason: For purposes of this Agreement, "Good Reason" means that
any of the following are undertaken without Executive's express written
consent: (a) the assignment to Executive of any duties or responsibilities
which result in any diminution or adverse change of Executive's position,
status or circumstances of employment; (b) a reduction by the Company in
Executive's Base Salary; (c) the taking of any action by the Company which
would adversely affect Executive's participation in, or reduce Executive's
benefits under, the Company's benefit plans (including equity benefits) as
of the time this Agreement is executed, except to the extent the benefits
of all other executive officers of the Company are similarly reduced; (d)
a relocation of Executive's principal office to a location outside of San
Diego County, California; (e) any breach by the Company of any material
provision of this Agreement; or (f) a Change of Control.
5.2 Cause: For the purposes of this Agreement, "Cause" means: (i) an
intentional action or intentional failure to act by Executive which was
performed in bad faith and to the material detriment of the Company; (ii)
Executive intentionally refuses or intentionally fails to act in
accordance with any lawful and proper direction or order of the Chief
Executive Officer or the Board; (iii) Executive willfully and habitually
neglects the duties of employment or violates Section 9 of this Agreement;
or (iv) Executive intentionally violates the provisions of the Employee
Confidentiality and Inventions Agreement or Section 8 of this Agreement;
provided, however, that in the event that any of the foregoing events
under clauses (i), (ii), (iii) and (iv) above is capable of being cured,
the Company shall provide written notice to Executive describing the
nature of such event and Executive shall thereafter have ten (10) business
days to cure such event.
5.3 Change of Control: For purposes of this Agreement, a Change of
Control means: (a) any sale, merger, consolidation, tender offer or
similar acquisition of shares, as a result of which at least a majority of
the voting power of the Company is not held, directly or indirectly, by
the persons or entities who held the Company's securities with voting
26
power before such transaction, or (b) a sale or other disposition of all
or a substantial part of the Company's assets.
6. Confidential Information. Concurrently herewith, Executive shall enter
into an Employee Confidentiality and Inventions Agreement with JMAR in the
form provided to Executive.
7. No Violation of Other Contracts. Executive represents and warrants that
the execution, delivery and performance of this Agreement by Executive
does not and will not result in a breach of or violation of, or constitute
a default under, any agreement to which Executive is a party or by which
Executive is bound.
8. No Conflicts of Interest. Unless agreed to by Company, Executive does not
now, and during the term of his employment, will not have any financial
interest, whether by stock ownership or otherwise, in any entity which is
a supplier, customer or competitor of the Company; provided, however, that
the foregoing shall not prohibit the ownership of securities of
corporations which are listed on a national securities exchange or traded
in the national over-the-counter market in an amount which shall not
exceed 1% of the outstanding shares of any such corporation.
9. Compliance with JMAR's Rules. Executive agrees to comply with all of the
rules, regulations and standard practices of JMAR as in effect from time
to time. JMAR will provide Executive with all such current rules,
regulations and standard practices and all future updates.
10. General Provisions.
10.1 Assignment. Neither the rights nor obligations under this Agreement
may be assigned, transferred, pledged or hypothecated by any party hereto,
except that this Agreement shall be binding upon and inure to the benefit
of any successor of JMAR.
10.2 Notices. Any notice required or permitted to be given under this
Agreement shall be deemed to have been duly given if in writing and if
personally delivered or sent by registered or certified mail, return
receipt requested, with postage prepaid:
if to JMAR:
JMAR Technologies, Inc.
0000 Xxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Attn: General Counsel
If to the Employee:
[Xxxxxxx Xxxxx] [or] [Xxxxx Xxxxx]
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Any party may change the address to which notices are to be sent to it or
him by giving ten days' written notice of such change of address to the
other party in the manner above provided for giving notice. Notices will
be considered delivered on the date of personal delivery or on the date of
deposit in the United States mail in the manner above provided for giving
notice by mail.
10.3 Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled by arbitration in
San Diego County, California, in accordance with the Commercial
Arbitration Rules of the American Arbitration Association, and judgment
upon the award of the arbitrator(s) shall be entered in any court with
appropriate jurisdiction as the final binding judgment. The provisions of
California Code of Civil Procedure Section 1283.05 (related to the
availability of certain discovery procedures) are hereby incorporated into
and made applicable to this Agreement. In addition to any other relief as
may be granted, the prevailing party shall be entitled to reasonable
attorneys' fees in such arbitration, with the amount thereof to be
determined by the arbitrator or the court.
10.4 Counterparts. This Agreement may be executed in several
counterparts, and all counterparts so executed shall constitute one
agreement binding on all of the parties hereto notwithstanding that all
parties are not signatory to the original or same counterpart.
10.5 Entire Agreement. This Agreement constitutes the entire agreement
and understanding between Executive and JMAR with respect to the
employment of Executive, and supersedes all other agreements, written or
oral, regarding such employment. This Agreement may be altered or amended
only by a written instrument executed by each of the parties hereto.
10.6 Severability. If any provision of this Agreement or the application
thereof to any person or circumstance shall be invalid or unenforceable to
any extent, the remainder of this Agreement and the application of such
provisions to other persons or circumstances shall not be affected thereby
and shall be enforced to the greatest extent permitted by law.
10.7 Interpretation of Agreement. In the event of any arbitration or
other dispute, neither this Agreement nor any provision hereof shall be
interpreted for or against any party on the basis said party or its
attorney drafted the Agreement or provision in question.
10.8 Waiver. The waiver by any party hereto of a breach of any of the
provisions of this Agreement by the other party shall not operate or be
construed as a waiver of any subsequent breach hereof by such party.
10.9 California Law. This Agreement shall be governed by and considered
in accordance with the laws of the State of California.
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10.10 Headings. The subject headings of the Sections of this Agreement are
included for the purposes of convenience only and shall not affect the
construction or interpretation of any term or provision hereof.
AGREED TO AND ACCEPTED BY:
Employer: Employee:
JMAR TECHNOLOGIES, INC.
By: DRAFT DRAFT
Xxxxxx X. Xxxxxxxx, Senior Vice [Xxxxxxx Xxxxx] [or]
President and General Counsel [Xxxxx Xxxxx]
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Schedule 1
(Specific Responsibilities)
30
