EXHIBIT 10.6
ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT is entered into effective as of March 13,
2000, by and among TSET, Inc., a Nevada corporation ("TSET"); High Voltage
Integrated, LLC, a Washington limited liability company ("HVI"); Xxxxxx
Xxxxxxxx, an individual; Igor Krichtafovitch, an individual; Xxxxxx X. Xxxxxxxx
XX, an individual; and Xxxx Xxxxxxx, an individual (Xxxxxx Xxxxxxxx, Xxxx
Krichtafovitch, Xxxxxx X. Xxxxxxxx XX, and Xxxx Xxxxxxx are hereinafter
collectively referred to as the "Principals").
WHEREAS, HVI and the Principals have developed and own certain patents
pending and all other related intellectual property rights relating to a certain
high voltage technology innovation known as the "electron wind generator"
(including any and all improvements and derivatives, the "Technology");
WHEREAS, on December 27, 1999, TSET, HVI, and the Principals entered
into a Letter of Intent for the purpose of, among other things, setting forth
the main terms pursuant to which TSET would acquire all of the shares of a new
corporation into which would be transferred the Intellectual Property Rights (as
defined in Exhibit 2B attached hereto and made a part hereof for all purposes)
and the Technology, and other elements of the relationship of the parties;
WHEREAS, TSET, HVI, and the Principals desire to pursue the business
purposes described in Section IA hereof (all such activities described in such
Section 1A hereof are hereinafter collectively referred to as the "Corporate
Business");
WHEREAS, TSET is willing and able, among other things, to provide and
assist in the provision of working capital necessary to the furtherance of the
Corporate Business, and HVI and the Principals are willing, among other things,
to contribute the Intellectual Property Rights and the Technology and continue
to exert their best efforts in conducting the Corporate Business; and
WHEREAS, the parties hereto desire to conduct the Corporate Business in
the form and through the instrumentality of a new corporation to be known as
"Kronos Technologies, Inc." ("Kronos"), as described herein.
NOW, THEREFORE, for and in consideration of the premises and mutual
covenants, promises, representations, and warranties set forth herein, and for
other good and valuable consideration, the sufficiency, delivery, and receipt of
which are hereby acknowledged, the parties hereto agree as follows:
1. FORMATION OF BUSINESS ENTITY. As soon as practicable following the
execution and delivery of this Agreement by the parties, TSET shall, at its own
expense, cause to occur all steps necessary for the incorporation of Kronos
under the laws of the State of Nevada. Kronos' authorized capital shall consist
of 100,000,000 shares of common stock, par value $0.001 per share (the "Kronos
Shares"). Following incorporation, all costs, expenses, fees, taxes, licenses,
and other charges of maintaining corporate existence, good standing, foreign
qualifications, operations, and conduct of the Corporate Business shall be for
the account of, and shall be borne by, Kronos. The Principals shall retain the
discretion whether to continue the corporate existence of HVI and their
respective ownership interests therein; provided, however, that if the corporate
existence of HVI is terminated, the Principals, as the owners thereof, shall
bear continuing responsibility for the truth and accuracy of all of HVI's
representations, warranties, and fulfillment of all of HVI's undertakings set
forth herein.
1A. STATEMENT OF THE CORPORATE BUSINESS. The parties agree that the
Corporate Business of Kronos shall be, among other things:
(a) to own the Intellectual Property Rights and the
Technology, and all improvements thereto and derivatives thereof;
(b) to diligently and aggressively apply the Intellectual
Property Rights and the Technology for the further advancement, development,
improvement, enhancement, deployment, maximization of value, and exploitation
thereof in global markets by, among other things, developing prototypes and
production-model devices embodying the Intellectual Property Rights and the
Technology for the Initial Applications and making the same available to
commercial and other markets globally, and to conduct all such activities with a
view to generating profits;
(c) to take such reasonable and prudent steps as may be
necessary and advisable to:
(i) ensure good faith best efforts are taken to
protect, preserve, enhance, expand, and defend the Intellectual Property Rights
and the Technology by, among other things, establishing appropriate
confidentiality and security arrangements for protecting Kronos's non-public,
proprietary information and trade secrets;
(ii) aggressively monitor developments in the field
of the Intellectual Property Rights and the Technology and employ good faith
best efforts in policing against and preventing infringements or illicit uses
thereof, and enforcing Kronos' rights relating thereto including, without
limitation, the initiation of legal proceedings with respect thereto;
(d) expand the scope and application of the Intellectual
Property Rights and the Technology, through diligently conducting the Corporate
Business, continuing research and development activities for enhancing,
improving, and creating derivative manifestations thereof, diligently pursuing
such patent applications as are already filed, and seeking additional patents
and other legal protections for the Initial Applications (and any and all
improvements thereto and derivatives thereof); and
(e) to establish programs, procedures, and mechanisms whereby
the Principals will benefit economically and have appropriate incentives to
diligently and properly conduct the Corporate Business and seek at all times to
advance Kronos' best interests, and maximize Kronos' profitability and success
for the benefit of TSET; and
(f) to pursue such other activities as Kronos' board of
directors may direct or establish.
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2. TRANSFER OF INTELLECTUAL PROPERTY RIGHTS. Immediately following the
incorporation of Kronos, HVI and the Principals shall execute and deliver to
Kronos any and all necessary and appropriate documents, instruments, and
certificates of assignment, transfer, and conveyance described in Exhibit 2A
attached hereto and made a part hereof for all purposes (collectively, the
"Transfer Documents") relating to the Intellectual Property Rights (as described
in Exhibit 2B attached hereto and made a part hereof for all purposes), such
that all right, title, and interest in and to the Intellectual Property Rights
shall be vested in Kronos for all purposes, free and clear of any and all liens,
claims, encumbrances, and charges thereon. Any Intellectual Property Rights
arising out of future developments, improvements, derivatives, or devices
embodying or including the Intellectual Property Rights or the Technology, and
any patents or other similar legal protections and ownership rights relating
thereto, shall be the property of Kronos.
3. INITIAL ISSUANCE OF THE KRONOS SHARES. Immediately following the
transfer of the Intellectual Property Rights to Kronos as described in Section 2
hereof, Kronos' board of directors shall approve, authorize, and cause to be
issued to HVI and the Principals their respective pro rata number of Kronos
Shares as follows:
HVI -0- shares
Xxxxxx Xxxxxxxx 450,000 shares
Igor Krichtafovitch 1,125,000 shares
Xxxxxx X. Xxxxxxxx, XX 450,000 shares
Xxxx Xxxxxxx 225,000 shares
Upon issuance, the Kronos Shares shall be deemed fully paid and non-assessable.
4. EXCHANGE OF SHARES. (a) Immediately following the transfer of the
Intellectual Property Rights to Kronos and the issuance of the Kronos Shares to
HVI and the Principals, and in exchange for all of the Kronos Shares owned by
each of them, TSET shall deliver to HVI and each of the Principals certificates
representing "investment" shares of TSET's common stock, par value $0.001 per
share (the "TSET Shares"), with HVI and each Principal and the finders
identified below with an asterisk by their names (collectively, the "Finders")
receiving the following allocation of the TSET Shares:
HVI -0- shares
To be held in Escrow 250,000 shares
In Trust 360,000 shares
Xxxxxx Xxxxxxxx 288,000 shares
Igor Krichtafovitch 720,000 shares
Xxxxxx X. Xxxxxxxx, XX 288,000 shares
Xxxx Xxxxxxx 144,000 shares
F. Xxxxxx XxXxxxxx* 180,000 shares
Xxxxx Xxxxxxx* 20,000 shares
The aggregate number of TSET Shares to be issued to HVI and the Principals
pursuant to this Section 4 shall be 2,250,000 shares (the "Aggregate Shares"),
calculated as shown in Exhibit 4 attached hereto and made a part hereof for all
purposes, as sole compensation for the Kronos Shares. HVI and the Principals
understand and acknowledge that the TSET Shares shall be subject to, and HVI and
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the Principals agree to at all times observe and comply with any and all
conditions, limitations, and restrictions noted on the certificates representing
the TSET Shares, in addition to any other restrictions set forth in applicable
federal and state securities laws. Any taxes, levies, or other charges assessed
against, or in connection with the acquisiton of, the TSET Shares pursuant to
this Subsection (a) shall be for the account of, and shall be borne solely by,
HVI and the Principals.
(b) Any compensation or finder's fee payable by HVI or the
Principals (or any of them) to any person (including, without limitation, the
Finders) relating to the transactions contemplated by this Agreement shall be
paid out of the Aggregate Shares, the parties agreeing that TSET shall have no
financial or other responsibility whatsoever for payment of any such
compensation.
(c) The TSET Shares received by the Finders do not constitute
any ownership interest in Kronos.
5. MANAGEMENT. (a) Kronos' initial board of directors, to be appointed
by the Principals in connection with the incorporation of Kronos, shall be
comprised of the following individuals:
Xxxxxx Xxxxxxxx
Igor Krichtafovitch
Xxxxxx X. Xxxxxxxx, XX
Xxxx Xxxxxxx
Xxxxxxx X. Xxxxxx (serving as chairman of the board
of directors and representing TSET)
Such directors shall serve in accordance with Kronos' bylaws and applicable law.
(b) Kronos' initial officer and executive management shall be
comprised as follows:
Xxxx Xxxxxxx - Chief Executive Officer and President
Igor Krichtafovitch - Vice President
Xxxxxx Xxxxxxxx - Secretary
Xxxxxx X. Xxxxxxxx, XX - Treasurer
(c) The parties agree that the primary responsibility for
Kronos' day-to-day management, business development, finances and the
administration thereof, budgets (capital, research and development, operations,
and others), and the conduct of the Corporate Business, shall belong to Kronos'
board of directors, but with such consultations and determinations as are
consistent with TSET's ownership of Kronos and subject to the obligations
described in Section l5 hereof. In carrying out such responsibilities and
conducting all elements of the Corporate Business, Kronos' board of directors
shall at all times conduct themselves according to the highest fiduciary
standards of good faith and sound business judgment, exerting their individual
and collective best efforts to exploit and maximize the value of the
Intellectual Property Rights and the Technology, seeking to advance the best
interests of Kronos, complying with all laws, rules, and regulations applicable
to the Corporate Business, and keeping available to Kronos the services of
Kronos' directors, officers, and key employees. The Corporate Business shall be
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conducted by Kronos' board of directors in the regular and ordinary course in
substantially the manner heretofore conducted by the Principals in and through
HVI. The Principals, individually and collectively, shall dedicate necessary
time attention and efforts to the conduct of the Corporate Business, except as
may be otherwise permitted under Section 6(c) and (d) hereof.
(d) Without limiting the scope of responsibilities described
in this Section 5 or elsewhere herein, or as may be provided in Kronos' articles
of incorporation, bylaws, or under applicable law, Kronos shall ensure that
long-term employment agreements are entered into with its key employees and that
"key-person" insurance is obtained upon commercially reasonable terms as soon as
practicable following the execution and delivery of this Agreement by the
parties, with all costs, premiums, and other associated expenses to be borne by
Kronos.
(e) Wherever in this Agreement reference is made to actions to
be taken by Kronos necessary to implement the transactions and matters
contemplated herein or in the Transfer Documents, the parties agree that they
shall vote their respective Kronos Shares, or cause their representative on
Kronos' board of directors to act, so that all such actions are expeditiously
and fully taken.
(f) The parties acknowledge that they are unable to anticipate
and provide herein for every situation and contingency which may arise during
the conduct of the Corporate Business. Accordingly, the parties agree that
principles of good faith and fair dealing will govern their conduct at all times
and that best efforts will be exerted to amicably and expeditiously resolve any
dispute arising hereafter, all with a view to seeking to advance Kronos' best
interests and to maximize the economic value of the Intellectual Property Rights
and the Technology.
6. INITIAL APPLICATIONS. (a) As a statement of corporate policy which
shall govern all elements of the relationship of the parties hereunder and the
conduct of the Corporate Business, the parties intend that all development,
advancement, maximization of value, and exploitation of the Intellectual
Property Rights and the Technology shall occur and be conducted through the
instrumentality of Kronos pursuant to this Agreement; and
(b) The parties agree that Kronos' primary initial efforts and
funding shall focus upon the further development and exploitation of the
hospital/medical clinic, automotive, medical equipment, residential/business,
and hotel applications of the Technology (collectively, and including any and
all improvements thereto and derivatives thereof, the "Initial Applications"),
and to engage in such business development activities as are necessary and
proper to establish markets, licenses, sales, and other activities and
arrangements for the realization of maximum economic return thereon.
7. FUTURE APPLICATIONS. In keeping with the corporate policy described
in Section 6(a) hereof, the parties intend that potential military applications
of the Intellectual Property Rights and the Technology be conducted through
Kronos; provided, however, that TSET understands and acknowledges that a
contract containing a no-shop provision (the "Military Contract") currently
exists between HVI and Bath Iron Works/General Dynamics Corporation ("BIW/GD"),
covering certain dimensions of the Technology as specified in Exhibit 7 attached
hereto and made a part hereof for all purposes. TSET shall place 250,000 TSET
shares in an escrow account (the "Escrow Shares") for distribution to a trust to
be established by the Principals (as referenced in Section 4 hereof) (the
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"Trust") for the purpose of receiving issuance the Escrow Shares in the event
the no-shop provision of the Military Contract is adjusted, waived, or
renegotiated in such a manner that enables such military applications to be
conducted through Kronos. HVI believes in good faith that the Military Contract
can be contributed to Kronos within 60 days of the date of this Agreement.
Should such contribution not occur within such 60-day period, the Escrow Shares
may, at TSET's sole option, be returned to TSET, or TSET may, at its sole
option, extend the time period for the Military Contract to be contributed to
Kronos, with the Escrow Shares to remain in such escrow account until released
to the Trust pursuant to the renegotiation of the Military Contract to enable
the Military Contract and all such military applications to be contributed, and
the contribution thereof, to Kronos. All parties agree that the release of the
Escrow Shares to the Trust shall be the sole compensation for the renegotiation
and contribution of the Military Contract and all other military applications of
the Intellectual Property Rights and the Technology, with the allocation of the
Escrow Shares to the Trust to be specified by HVI and the Principals at the time
of the release thereof pursuant to this Section 7.
8. CONTRIBUTIONS BY TSET. (a)(i) TSET shall assist and support Kronos'
capital-raising efforts and shall provide and make available to Kronos working
capital in the aggregate amount of $500,000.00 (the "Initial Funding") over the
six-month period next following the execution and delivery of this Agreement and
the Transfer Documents (the "Funding Period"). To the extent required, TSET
shall use its own shares in order to arrange for, procure, and ensure
availability of the Initial Funding; provided, however, that TSET's obligation
to provide the Initial Funding shall not be construed as or constitute any
assumption of any obligation regarding any indebtedness, operating expenses, or
other financial liabilities of HVI or any of the Principals, other than those
potential liabilities identified in Exhibit 8A. Provision of the Initial Funding
shall be the sole financial obligation owed by TSET to Kronos; provided,
however, that TSET may elect, but is not obligated, to provide to Kronos funding
in addition to the Initial Funding in appropriate cases to be determined by TSET
in its sole and absolute discretion. Within 10 days of the execution and
delivery of this Agreement and the Transfer Documents, Kronos' board of
directors shall establish an operating budget, including provision for, among
other things, the prudent expenditure and conservation of funds for working
capital, the development of working prototype devices embodying the Technology
to enable demonstration thereof in, and the perfection and policing of the
Intellectual Property Rights, all with a view to the efficient and profitable
conduct of the Corporate Business.
(ii) The parties agree that the Initial Funding shall be
released by TSET to Kronos pursuant to schedule attached as Exhibit 8B and made
a part of this Agreement for all purposes. Should TSET fail to release funds
pursuant to Exhibit 8B, TSET shall be in default of this Agreement and Section
8(b)(i) of this Agreement shall apply.
(iii) In addition to providing the Initial Funding, TSET shall
also assist Kronos in arranging manufacturing for devices embodying the
Technology, as well as assistance and support in business development and
marketing activities as may be requested by Kronos from time to time.
(b) The parties acknowledge that TSET's undertaking to provide
the Initial Funding is a significant inducement to HVI and the Principals to
enter into the Transfer Documents and consummate the transactions contemplated
herein and therein, and that on or before the lapse of the Funding Period TSET
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shall have provided to Kronos the entire amount of the Initial Funding in the
amounts and at the times specified in Exhibit 8B. In the event TSET provides
less than all of any installment of the Initial Funding pursuant to Exhibit 8B
within 5 business days of the due date therefor, Kronos shall provide immediate
written notice to TSET that an event of default has occurred hereunder (the
"Default Notice"). If TSET fails to provide the unpaid portion of such
installment to Kronos within 15 days of TSET's receipt of the Default Notice
(the "Cure Period"), the number of Kronos Shares owned by TSET shall be reduced
to reflect the proportionate value of the Initial Funding provided by TSET to
Kronos, with the number of the Kronos Shares deducted from TSET's holding to be
transferred to and distributed among HVI and the Principals on a pro rata basis
(the "Share Adjustment"). The Share Adjustment shall occur within 10 days
following lapse of the Cure Period if TSET fails during the Cure Period to
provide the unpaid portion of the Initial Funding installment in question. If
TSET fails to provide four consecutive installments of the Initial Funding
pursuant to Schedule 8B prior to the lapse of the Cure Period for the final of
such four installments, this Agreement and the Transfer Documents shall be
terminated and deemed null and void and the Intellectual Property Rights shall
be assigned, transferred, and conveyed by Kronos to HVI and the Principals, as
they may direct in writing to TSET.
(c) If TSET fails to provide any Initial Funding (or any
installment thereof) as described in Subsection (b) above, the sole remedy of
HVI and the Principals shall be the Share Adjustment, or the termination of this
Agreement and the Transfer Documents and assignment, transfer, and conveyance to
HVI and the Principals of the Intellectual Property Rights, as the case may be,
all as described in Subsection (b) above.
No party shall have any liability to the other for monetary damages of any
description whatsoever including, without limitation, incidental, consequential,
or punitive damages.
9. OPTIONS AND OTHER PROGRAMS. HVI and the Principals understand and
acknowledge that, as of the date hereof, neither TSET nor Kronos has adopted any
stock option, incentive, profit-sharing, savings, or other similar programs
(collectively, the "Programs"), but that adoption of the Programs as soon as
practicable after the date hereof is an objective of both TSET and Kronos. The
terms and conditions of participation, contribution, matching, vesting, and
other elements of the Programs shall be established by the respective boards of
directors of TSET and Kronos. The Principals shall be entitled to participate in
Programs adopted by TSET, subject to any conditions or restrictions imposed on
such participation by TSET's board of directors. As an additional inducement to
the Principals and to ensure participation by the Principals in the future
success of Kronos, TSET, as sole stockholder of Kronos, hereby agrees to reserve
20% of Kronos' authorized capital stock to be used in Programs to be adopted by
Kronos' board of directors and consents to the full participation of the
Principals therein, subject to the terms for such participation established by
Kronos' board of directors; provided, however, that the final terms of the
Programs adopted by Kronos' board of directors shall be subject to TSET's prior
written consent, which consent shall not be unreasonably withheld, conditioned,
or delayed.
10. FUTURE EVENTS. TSET, HVI, and the Principals intend that, at an
appropriate and mutually agreed time in the future, due and good faith
consideration be given to effecting a transaction pursuant to which Kronos may
become a publicy-owned entity (the "Reconstitutive Decision"); provided,
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however, that the parties' decision to retain Kronos as a wholly- or
majority-owned subsidiary of TSET or effect a transaction pursuant to which
Kronos' ownership materially changes but it remains privately held shall not be
deemed a breach of this Section 10. Notwithstanding the foregoing, the parties
agree that a Reconstitutive Decision shall not occur earlier than twenty four
months following the date of this Agreement. In the event of any Reconstitutive
Decision, TSET (or its nominees) shall retain not less than a non-dilutible 20%
ownership interest therein for a period of two years and no single shareholder
shall hold any greater percentage than TSET for a period of two years.
11. EMPLOYMENT AGREEMENTS. TSET and Principals agree to cause Kronos to
enter into employment agreements with the Principals in a form substantially
similar to the Employment Agreement attached to this Agreement as Exhibit 11,
the parties understanding that the final terms and conditions thereof shall be
the result of negotiations between Kronos and each of the Principals; provided,
however, that Kronos shall not execute any such employment agreement without
TSET's prior written consent, which consent shall not be unreasonably withheld,
conditioned, or delayed.
12. REPRESENTATIONS AND WARRANTIES OF HVI AND THE PRINCIPALS. HVI and
each of the Principals, jointly and severally, hereby represent and warrant to
TSET as follows:
(a) HVI is duly organized, validly existing, and in good
standing under the laws of the State of Washington and has all requisite power,
authorizations, consents, and approvals necessary to own its assets and carry on
its business as now being conducted, and to consummate the transactions
contemplated herein and in the Transfer Documents.
(b) Except as disclosed in Exhibit 12(b) attached hereto and
made a part hereof for all purposes, neither the execution of this Agreement or
the Transfer Documents nor the performance of its obligations hereunder and
thereunder does or will conflict with or violate any provision of HVI's
constituent documents; violate, conflict with, or result in the breach or
termination of, or constitute a default, event of default (or an event which
with notice, lapse of time, or both, would constitute a default or event of
default), under the terms of any material agreement to which HVI or any of the
Principals is a party or by which HVI or any the Principals or any of their
respective or collective securities, properties, or businesses are bound;
constitute a violation by HVI or any of the Principals of any laws or judgments
(other than any violation, conflict, breach, or default that would not prevent
HVI or any of the Principals from consummating the transactions contemplated
herein and in the Transfer Documents or otherwise performing its or their
individual or collective obligations thereunder); or result in the creation of
any lien, claim, or encumbrance upon HVI, any of the Principals, the
Intellectual Property Rights, or the Technology.
(c) Except as disclosed in Exhibit 12(c) attached hereto and
made a part hereof for all purposes, there are no legal or arbitral proceedings
(whether or not the defense thereof or liability with respect thereto is covered
by policies of insurance) pending or, to the best knowledge of HVI and any of
the Principals, threatened, against HVI or any of the Principals which could
reasonably be expected to prevent HVI or any of the Principals from consummating
the transactions contemplated herein or in the Transfer Documents.
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(d) Except as disclosed in Exhibit 12(d) attached hereto and
made a part hereof for all purposes, all negotiations relating to this Agreement
and the Transfer Documents and the transactions contemplated herein and therein
have been carried on without the intervention of any party acting in behalf of
HVI or any of the Principals in such manner as to give rise to any valid claim
against HVI or any of the Principals, individually or collectively, for any
broker's or finder's fee or similar compensation (whether payable in cash,
Kronos Shares, interest in HVI or the Outside Business, or otherwise) in
connection therewith.
(e) HVI has all necessary corporate power and authority, and
each of the Principals have the power, legal capacity, and authority, to
execute, deliver, and perform its and their respective obligations hereunder and
under the Transfer Documents; and the execution, delivery, and performance by
HVI and each of the Principals of this Agreement and the Transfer Documents to
which HVI is a party has been duly authorized by all necessary corporate action
on its part or is within the authority of the person executing and delivering
the same, and is within the authority of each of the Principals. This Agreement
arid the Transfer Documents to which HVI and the Principals are a party
constitute the legal, valid, and binding obligations of each of them,
enforceable against any and all of them in accordance with the terms thereof,
except as may be limited by applicable bankruptcy, insolvency, reorganization,
or other similar laws affecting creditors' rights and general principles of
equity.
(f) Except as disclosed in Exhibit 12(f) attached hereto and
made a part hereof for all purposes, HVI and the Principals have filed all tax
returns and all other tax documentation that are required to be filed by any of
them, and have paid all taxes due pursuant to such returns or pursuant to any
assessment received by any of them, except for such taxes as are being contested
in good faith by appropriate proceedings and for which adequate reserves are
being maintained.
(g) Except as disclosed in Exhibit 12(g) attached hereto and
made a part hereof for all purposes, no authorizations, approvals, or consents
of, and no filings or registrations with, any governmental agency or authority
are necessary for the execution, delivery, and performance by HVI and each of
the Principals of this Agreement and each of the Transfer Documents to which
they are a party or for the validity or enforceability thereof.
(h) No material statement, information, or exhibit disclosed
or otherwise furnished to TSET by HVI or any of the Principals in connection
with the negotiations among the parties or any representations upon which TSET
may have relied, contains any material misstatement of fact or omits to state a
material fact or any fact necessary to make the statement made not misleading.
(i) HVI and each of the Principals shall at all times
hereunder comply with all conditions, restrictions, and limitations applicable
to the TSET Shares and the provisions of all federal and state securities laws
applicable to the ownership and transfer thereof.
(j) No oral or written compensation arrangement or agreement
exists, and no shares or units (or warrants or options to acquire the same), or
revenue interests, or royalties have been granted, orally or in writing, or are
owned by, HVI's advisory board members.
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(k) Except as disclosed in Exhibit l2(k) attached hereto and
made a part hereof for all purposes:
(i) HVI and the Principals own full right, title, and
interest in and to the Intellectual Property Rights that are being assigned,
transferred, and conveyed to Kronos pursuant to this Agreement and the Transfer
Documents, free and clear of any and all liens, claims, encumbrances, and
charges, and no licenses or other superior claims, rights, or entitlements exist
or have been granted or suffered to exist by HVI and the Principals in favor of
any other person with respect thereto; and
(ii) HVI and the Principals are unaware of any
infringements or illicit uses of the Intellectual Property Rights or the
Technology by any person.
13. BATTELLE. TSET hereby acknowledges and agrees that HVI has
disclosed to TSET, and that TSET fully understands, the circumstances of HVI's
dispute with Battelle Memorial Institute ("Battelle") concerning Battelle's
unauthorized disclosures to third parties related to HVI's proprietary
technology and know-how, at least part of which includes in the Intellectual
Property Rights and the Technology. HVI hereby represents to TSET that Battelle
has made an offer to settle the dispute, which offer is unacceptable to HVI. HVI
further represents that HVI and Battelle are, as of this date hereof, engaged in
good faith negotiations concerning the terms and conditions of a settlement
acceptable to HVI. Based on the foregoing and other factors, including
correspondence and other materials requested from and supplied to HVI by
Battelle, HVI believes in good faith that HVI's position in the dispute is
strong and that HVI will be able to settle its differences with Battelle without
resorting to formal legal proceedings. Accordingly, TSET agrees that its sole
remedy and recourse, in the event that Battelle makes any claim in formal legal
proceedings or otherwise, or with respect to any of HVI's representations and
warranties herein, shall be against HVI directly and not to any Principal.
14. REPRESENTATIONS AND WARRANTIES OF TSET. TSET hereby represents and
warrants to HVI and each of the Principals as follows:
(a) TSET is duly organized, validly existing, and in good
standing under the laws of the State of Nevada and has all requisite power,
authorizations, consents, and approvals necessary to own its assets and carry on
its business as now being conducted, and to consummate the transactions
contemplated herein and in the Transfer Documents.
(b) Neither the execution of this Agreement or the Transfer
Documents nor the performance of its obligations hereunder and thereunder does
or will conflict with or violate any provision of TSET's articles of
incorporation or bylaws; violate, conflict with, or result in the breach or
termination of, or constitute a default, event of default (or an event which
with notice, lapse of time, or both, would constitute a default or event of
default), under the terms of any material agreement to which TSET is a party or
by which TSET or its securities, properties, or businesses are bound; or
constitute a violation by TSET of any laws or judgments (other than any
violation, conflict, breach, or default that would not prevent TSET from
consummating the transactions contemplated herein and in the Transfer Documents
or otherwise performing its obligations thereunder).
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(c) There is no proceeding (whether or not the defense thereof
or liability with respect thereto is covered by policies of insurance) pending
or, to TSET's best knowledge, threatened, against TSET which could reasonably be
expected to prevent TSET from consummating the transactions contemplated herein
or in the Transfer Documents.
(d) TSET has all necessary corporate power and authority to
execute, deliver, and perform its obligations hereunder and under the Transfer
Documents; and the execution, delivery, and performance by TSET of this
Agreement and the Transfer Documents to which it is a party has been duly
authorized by all necessary corporate action on its part or is within the
authority of the person execution and delivering the same. This Agreement and
the Transfer Documents to which TSET is a party constitute the legal, valid, and
binding obligations of TSET, enforceable against it in accordance with the terms
thereof, except as may be limited by applicable bankruptcy, insolvency,
reorganization, or other similar laws affecting creditors' rights and general
principles of equity.
15. PAR STOCK PURCHASE. TSET shall have the right (the "Share Purchase
Right") to purchase any and all authorized but unissued shares of Kronos'
capital stock (the "Unissued Shares") at a per share purchase price equal to the
par value thereof ($0.001 par value per share); provided, however, that the
Share Purchase Right shall not apply to the shares of Kronos' capital stock
reserved for issuance in connection with Programs to be adopted by Kronos as
contemplated in Section 9 hereof. TSET shall be entitled to exercise the Share
Purchase Right at any time it feels its interests would be served by so doing,
upon not less than 5 days' prior written notice to Kronos (the "Exercise
Notice"), without the need to obtain any further consent from HVI, the
Principals, or Kronos, or to provide any further justification therefor. Upon
receipt of the Exercise Notice, Kronos shall not offer, solicit any offer to
buy, sell, assign, transfer, or convey any of the Unissued Shares without TSET's
prior written consent, which consent may be withheld in the sole and absolute
discretion thereof. The Principals, in their capacities as directors of Kronos,
agree to take all actions requested by TSET in order to give effect to this
Section 14 in the event TSET elects to purchase the Unissued Shares pursuant
hereto. TSET shall pay the purchase price for that number of the Unissued Shares
to be acquired pursuant to exercise of the Share Purchase Right within 30 days
of the date of the Exercise Notice. Upon confirmed receipt of the purchase price
therefor, Kronos' board of directors shall cause certificates representing that
number of Unissued Shares purchased by TSET pursuant to the Share Purchase Right
to be issued and delivered to TSET in such denominations as TSET may request.
TSET shall be entitled to immediately exercise the Share Purchase Right if any
transaction contemplated by Kronos may involve the sale, assignment, or transfer
of more than 50% of Kronos' authorized capital to any person not owned or
controlled by TSET. TSET and the Principals shall cause Kronos' board of
directors to ratify this Section 14, such that no further action thereof shall
be required relating to the issuance of the Unissued Shares to TSET, other than
instructions issued by TSET to any executive officer of Kronos pursuant to the
Exercise Notice. The Share Purchase Rights shall survive any recapitalization of
Kronos and shall apply to any additional shares of Kronos' capital stock which
may be newly authorized pursuant to any future amendment of Kronos' articles of
incorporation or which may remain unsold following any transactions with
prospective investors or strategic business or financial partners of Kronos
involving such newly-issued shares.
Page 11
15. BOOKS, RECORDS, AND AUDIT RIGHTS. (a) The Principals, in their
capacities as directors and executive officers of Kronos, shall cause Kronos to
keep complete, accurate, and secure original physical and electronic books and
records of all financial, business, legal, and other transactions. Financial
books and records shall be made, kept, and maintained on a calendar year basis
in accordance with generally accepted accounting principles applied on a
consistent, uniform, and non-discriminatory basis and applicable to the
Corporate Business.
(b) The books and records of Kronos, together with all
documents and other information pertaining to Kronos' business, shall be kept at
Kronos' principal place of business, and shall at all reasonable times (and for
a period of 3 years following any termination of this Agreement and the Transfer
Documents) be available for physical inspection, examination, and audit and may
be copied and excerpts may be taken therefrom, by any duly authorized
representative of TSET. TSET shall at all times be entitled to, among other
things, exercise TSET's audit rights, verify any information provided to TSET by
Kronos pursuant to this Section 15 or otherwise, and monitor Kronos' compliance
with its obligations.
(c) At all times (and for a period of 3 years following any
termination of this Agreement and the Transfer Documents), TSET shall have the
right, at its own expense, to audit Kronos' books and records. Kronos shall make
such books and records available for physical inspection, review, and audit
during normal business hours and upon 48 hours' prior written notice from TSET,
to any authorized representative, certified public accountant, or legal counsel
designated by TSET.
(d) Kronos's board of directors shall do the following, at
Kronos' expense:
(i) deliver to TSET on or before March 15 of each
year cause an annual report containing an audited balance sheet and profit and
loss and cash flow statements to be prepared by Kronos' auditors; and
(ii) deliver to TSET on or before the fifteenth day
following the end of each calendar month, cause to be prepared on a monthly
basis an unaudited balance sheet and unaudited profit and loss and cash flow
statements for the month and cumulatively for the calendar year to date (to be
certified by Kronos' president and chief financial officer as being true and
correct to the best of their knowledge).
16. DISTRIBUTION OF PROFITS. The parties agree that, as the sole
stockholder of Kronos, all profits resulting from the conduct of the Corporate
Business shall belong to TSET, and that TSET shall be entitled to distribution
thereof from Kronos on a regular basis. The Principals, in their capacity as
directors of Kronos, agree to vote in favor of such distributions as requested
from time to time by TSET. TSET hereby covenants that it shall, in connection
with any request for such distribution, ensure that sufficient cash remains
allocated to Kronos to provide for three months operating and working capital
needs for the continuation and advancement of the Corporate Business, funding of
Programs relating to profit-sharing or other benefits plans in favor of the
Principals according to the terms thereof, plus reasonable reserves for
contingencies or extraordinary items. In connection with any request by TSET for
a cash distribution, TSET and Kronos' board of directors shall consult to
determine Kronos' reasonable cash needs, as provided above.
Page 12
17. INDEMNIFICATION. (a) HVI shall indemnify, defend, and hold harmless
TSET and Kronos from and against any and all third party claims of patent,
intellectual property, or proprietary rights infringement (and including any and
all damages, losses, fines, penalties, royalties, costs and expenses arising out
of or associated therewith, including reasonable attorney's fees, hereinafter
collectively referred to as "losses") which may be asserted against TSET or
Kronos on the grounds that the Intellectual Property Rights, the Technology, or
any device or other manifestation thereof, infringe upon such third party's
rights, provided that such claim arises out of any event, fact or circumstance
occurring prior to the transfer of the Intellectual Property Rights to Kronos.
HVI shall not enter into any settlement or compromise of any such claim or
action without TSET's prior written consent. TSET and Kronos shall be entitled
to participate in or conduct the defense of any such claims, with the cost
thereof to be for the account of HVI and HVI and shall pay to TSET and Kronos,
as the case may be, the amount of any losses and reimburse the expense of any
defense undertaken by TSET or Kronos within 10 days after receipt of written
notice therefor. Any claims arising after the transfer of the Intellectual
Property Rights to Kronos shall be the sole responsibility of Kronos and TSET.
(b) Anything in this Agreement to the contrary
notwithstanding, TSET hereby acknowledges and agrees that the Principals are
parties to this Agreement for the purpose of, among other things, assigning the
Intellectual Property Rights and the Technology to Kronos and effecting the
exchange of stock described in this Agreement, and that TSET's sole remedy and
recourse, in the event of any breach of any representation, warranty or covenant
by HVI set forth herein, shall be to HVI directly and not to any Principal.
(c) TSET and HVI shall indemnify, defend and hold harmless
each other from and against any and all third party losses arising from any
breach hereunder or in the event any representation or warranty made by either
of them herein is untrue or misleading in any material respect and, as a result
thereof, either TSET or HVI, as the case may be, suffers a loss. The Principals
shall have the indemnification obligation described in this Section 17 to the
extent of any breach by them of any of their obligations hereunder including,
without limitation, those obligations described in Section 5 hereof, or in the
event any representation or warranty made by them is untrue or misleading in any
material respect and, as a result thereof, a loss is suffered by TSET; provided,
however, that only the individual Principal that has committed a breach of this
Agreement or has made an untrue or misleading representation or warranty to TSET
shall have the indemnification obligation described in this Section 17.
18. ARBITRATION. (a) In the event of any default or dispute between,
breach by, or other controversy involving, the parties hereto regarding the
subject matter of this Agreement or the Transfer Documents (in any case, a
"Dispute"), the parties shall exert their respective good faith best efforts to
amicably resolve and settle the same. Toward this end, the parties shall consult
and negotiate with each other in good faith and understanding their mutual best
interests to reach a just and equitable solution reasonably satisfactory to
them. In the event the Dispute cannot be amicably resolved and settled through
good faith negotiations, the parties agree to submit the Dispute to arbitration
rather than litigation.
(b) All arbitration proceedings instituted by the parties
hereunder shall take place in Clackamas County, Oregon and shall be governed by
the rules of the American Arbitration Association (the "AAA") applicable to
contracts of this type. If the parties to the Dispute cannot agree on the
Page 13
appointment of an arbitrator, the parties agree that the AAA shall appoint an
independent arbitrator, whose decision shall be final and binding upon the
parties and not subject to appeal to any court or government agency or
authority, and shall be enforceable in any court of competent jurisdiction;
provided, however, that the arbitrator shall not award or require the payment
of, and the parties shall not seek, incidental, consequential, or punitive
damages except in cases of bad faith breach of this Agreement or the Transfer
Documents, gross negligence, or willful misconduct. The parties shall not seek
to delay or prevent the implementation of any decision of the arbitrator. The
prevailing party in any arbitration brought hereunder shall be entitled to
recover reasonable attorney's fees and related costs and expenses of the
arbitration.
(c) The parties each acknowledge that their agreement to
resolve Disputes through arbitration constitutes a waiver of their right to
resolve Disputes in any court, and that in arbitration proceedings the parties
may not be entitled to all of the rights that would otherwise be available to
them in court proceedings.
19. GENERAL PROVISIONS.
(a) INTEGRATION AND AMENDMENT. This Agreement and the Transfer
Documents constitute the entire agreement between the parties with respect to
the subject matter hereof and supercedes all prior agreements and understandings
with respect hereto and thereto. No other agreement, whether oral or written,
shall be used to modify or contradict the provisions hereof or of any
Transaction Document unless the same is in writing, signed by the parties, and
states that it is intended to amend the provisions of this Agreement or any
Transaction Document.
(b) COUNTERPARTS. This Agreement and the Transfer Documents
may be executed in multiple counterparts (and by facsimile signature, to be
followed by manual signature), each of which shall be deemed an original, and
all of which shall be deemed to constitute a single agreement, document,
instrument, or certificate, as the case may be.
(c) BINDING EFFECT. This Agreement and the Transfer Documents
shall be binding upon and inure to the benefit of the heirs, successors, and
permitted assigns of the parties hereto; provided, however, that HVI and the
Principals shall not assign any of their respective rights or delegate any of
their respective responsibilities without the prior written consent of Kronos
and TSET, which consent may be withheld in the sole and absolute discretion
thereof.
(d) WAIVER. No failure by any party to this Agreement or any
Transfer Document to exercise, no delay in exercising, and no course of dealing
with respect to, any right, power, or privilege hereunder or any other document,
instrument, or certificate relating hereto, shall operate as a waiver or any
relinquishment for the future thereof; and no single or partial exercise of any
right, power, or privilege hereunder or any other document, instrument, or
certificate relating hereto shall preclude any other or further exercise thereof
or the exercise of any other right, power, or privilege.
(e) SEVERABILITY. If any provision (or portion thereof) of
this Agreement or any Transfer Document is adjudged illegal or unenforceable by
a court of competent jurisdiction, the remaining provisions shall nevertheless
continue in full force and effect. In any such case, the provision deemed
illegal or unenforceable shall be remade or interpreted by the parties in a
Page 14
manner that such provision shall be enforceable to preserve, to the maximum
extent possible, the original intention and meaning thereof.
(f) NOTICES. All notices or other communications given or made
hereunder or under any Transfer Document shall be in writing and may be
delivered personally, by express, registered, or certified mail (return receipt
requested), by special courier, or by facsimile transmission (to be followed by
delivery of a written original notice in the most expeditious manner possible,
as aforesaid), all postage, fees, and charges prepaid, to TSET, Kronos, HVI, or
any of the Principals, as the case may be, to the following addresses (which may
be changed by the parties from time to time upon written notice given as
aforesaid):
TO TSET: 000 Xxxxx Xxxxx Xxxxxx, XXX 000
Xxxx Xxxxxx, XX 00000
Tel: 000.000.0000
Fax: 000.000.0000 and
503.293.7233
Attn: Xxxxxxx X. Xxxxxx
Chairman and Chief Executive Officer
TO HVI: 00000 X.X. 00xx Xxxxxx
Xxxxxxxx, XX 00000
Tel: 000.000.0000
Fax: 000.000.0000
TO XXXXXX XXXXXXXX: 00000 X.X. 00xx Xxxxxx
Xxxxxxxx, XX 00000
Tel: 000.000.0000
Fax: 000.000.0000
TO XXXXXX X. XXXXXXXX XX: 00000 X.X. 00xx Xxxxxx
Xxxxxxxx, XX 00000
Tel: 000.000.0000
Fax: 000.000.0000
TO DR. IGOR KRICHTAFOVITCH: 000 X.X. 000xx Xxxxxx
Xxxxxxx, XX 00000
Tel: 000.000.0000
Fax: 000.000.0000
TO XXXX XXXXXXX: 0000 Xxxxx 000 Xxxx
Xxxxx, XX 00000
Tel: 000.000.0000
Fax: 000.000.0000
Page 15
Notices hereunder shall be deemed given when delivered in person, upon
confirmation of successful transmission when sent by telex or facsimile (to be
followed by delivery by express or regular mail), or 5 days after being mailed
by express, registered, or certified mail (return receipt requested), postage
prepaid.
(g) HEADINGS. The headings in this Agreement are solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
(h) COSTS, EXPENSES, AND TAXES. Each party shall bear its own
costs, expenses, and taxes incurred or associated with the transactions
contemplated herein and in the Transfer Documents.
(i) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Oregon, exclusive of its
conflicts of laws principles.
[SIGNATURES APPEAR ON NEXT PAGE]
Page 16
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement effective as of the date first written above.
TSET, Inc.
By: /s/ Xxxxxxx X. Xxxxxx
----------------------------------------------------------
Xxxxxxx X. Xxxxxx
Chairman and Chief Executive Officer
HIGH VOLTAGE INTEGRATED, LLC
By: /s/ Xxxx Xxxxxxx
----------------------------------------------------------
Name: Xxxx Xxxxxxx
-----------------------------------------------
Authorized Signatory
/s/ Xxxxxx Xxxxxxxx
--------------------------------------------------------------
Xxxxxx Xxxxxxxx, individually
/s/ Igor Krichtafovitch
--------------------------------------------------------------
Igor Krichtafovitch, individually
/s/ Xxxxxx X. Xxxxxxxx XX
--------------------------------------------------------------
Xxxxxx X. Xxxxxxxx XX, individually
/s/ Xxxx Xxxxxxx
--------------------------------------------------------------
Xxxx Xxxxxxx, individually
Page 17
LIST OF EXHIBITS
EXHIBIT 2A -- DESCRIPTION OF TRANSFER DOCUMENTS
EXHIBIT 2B -- INTELLECTUAL PROPERTY RIGHTS
EXHIBIT 4 -- CALCULATION OF THE AGGREGATE SHARES
EXHIBIT 7 -- FUTURE APPLICATIONS
EXHIBIT 8A -- SCHEDULE OF POTENTIAL LIABILITIES
EXHIBIT 8B -- SCHEDULE OF INITIAL FUNDING PAYMENTS
EXHIBIT 11 -- FORM OF EMPLOYMENT AGREEMENT
EXHIBIT 12(b) -- DEFAULTS AND BREACHES
EXHIBIT 12(c) -- LITIGATION
EXHIBIT 12(c) -- FINDERS AND BROKERS
EXHIBIT 12(f) -- TAXES
EXHIBIT 12(g) -- CONSENTS AND APPROVALS
EXHIBIT 12(k) -- ENCUMBRANCES, LIENS, OR SUPERIOR CLAIMS UPON
THE INTELLECTUAL PROPERTY RIGHTS AND THE
TECHNOLOGY; INFRINGEMENTS
Page 18
EXHIBIT 2A
DESCRIPTION OF TRANSFER DOCUMENTS
ASSIGNMENT OF INVENTION
(United States Patent Application Serial No. 09/419,720)
from
HIGH VOLTAGE INTEGRATED, L.L.C.
to
KRONOS TECHNOLOGIES, INC.
In consideration of the payment by ASSIGNEE to ASSIGNOR of the sum of
One Dollar ($1.00) and for other good and valuable consideration the receipt of
which is hereby acknowledged, HIGH VOLTAGE INTEGRATED, L.L.C. ("ASSIGNOR"), a
Washington limited liability company, of 00000 X. X. 00xx Xxxxxx, Xxxxxxxx,
Xxxxxxxxxx 00000, Xxxxxx Xxxxxx of America, hereby sells, assigns, and transfers
to KRONOS TECHNOLOGIES, INC. ("ASSIGNEE"), a Nevada corporation, whose address
is 00000 X. X. 00xx Xxxxxx, Xxxxxxxx, Xxxxxxxxxx 00000, Xxxxxx Xxxxxx of
America, and the successors, assigns, and legal representatives of the ASSIGNEE,
the entire right, title, and interest for the United States and its territorial
possessions and for all foreign countries, including all rights to claim
priority, in and to any and all inventions that are disclosed in the patent
application which is entitled "Electrostatic Fluid Accelerator," I.E., United
States Patent Application Serial No. 09/419,720, filed on October 14, 1999, and,
in and to, all Letters Patent to be obtained for said invention and, as to
letters patent, any reissue, re-examination, or extension thereof and any
related statutorily provided periods of market exclusivity.
ASSIGNOR hereby represents and warrants that no assignment, sale,
agreement, or encumbrance has been, or will be, made or entered which would
conflict with or be prior in right to this Assignment.
ASSIGNOR further covenants that ASSIGNEE will, upon its request, be
promptly provided with all pertinent facts and documents relating to said
invention and said Letters Patent and legal equivalents as may be known and
accessible to ASSIGNOR and that ASSIGNOR will testify as to the same in any
interference, litigation, or other proceeding related thereto and will promptly
execute and deliver to ASSIGNEE or its legal representatives any and all papers,
instruments, or affidavits required to apply for, obtain, maintain, issue, and
enforce said Letters Patent and said equivalents thereof which may be necessary
or desirable to accomplish the purposes thereof or of this Assignment.
ASSIGNOR additionally warrants that this Assignment is an authorized
act of ASSIGNOR.
ASSIGNMENT OF INVENTION (United States
Patent No. 5,359,103) Page 1 of 2
IN WITNESS WHEREOF, I have hereunto set hand and seal this ______ day
of March, 1998.
ASSIGNOR:
HIGH VOLTAGE INTEGRATED, L.L.C.
By /s/ Xxxx Xxxxxxx
-----------------------------------
Xxxx Xxxxxxx
Its Manager
Acknowledgment
STATE OF WASHINGTON )
: ss
County of King )
The foregoing instrument, I.E., Assignment of Invention (United States
Patent Application Serial No. 09/419,720), was acknowledged before me this
______ day of March, 2000, by Xxxxxx X. Xxxxxxxx, Xx., who is the manager of
High Voltage Integrated, L.L.C.
-----------------------------------------
NOTARY PUBLIC:
Residing at:
My commission expires:
ASSIGNMENT OF INVENTION (United States
Patent No. 5,359,103) Page 2 of 2
EXHIBIT 7
FUTURE APPLICATIONS
Shipbuilding (military/commercial - foreign/domestic)
Aircraft (military/commercial - foreign/domestic
Military Vehicles (foreign/domestic)
