<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: December 1, 1999
ISONICS CORPORATION
(Name of small business issuer as specified in its charter)
CALIFORNIA 001-12531 77-0338561
- ---------- --------- ----------
State of Commission File IRS Employer
Incorporation Number Identification No.
5906 MCINTYRE STREET, GOLDEN, COLORADO 80403
Address of principal executive offices
303-279-7900
------------
Telephone number, including
Area code
NOT APPLICABLE
Former name or former address if changed since last report
<PAGE>
ITEM 2 - ACQUISITION OR DISPOSITION OF ASSETS
GENERAL. On December 1, 1999, Isonics Corporation ("Isonics" or the
"Company") completed a sale of its depleted zinc (DZ) business to
Eagle-Picher Technologies, LLC for $8.2 million dollars, including $1.5
million to be paid over a period of three years, which amount is subject to
certain contingencies. Isonics received $6,730,303.00 from E-P at the
closing, of which approximately $1,150,570.00 was used to pay certain accrued
liabilities. DZ is used to prevent corrosion in nuclear power plants.
Corrosion is a cause of high radiation fields in nuclear power plants and can
result in radiation exposure to workers. DZ also reduces environmental
cracking in certain kinds of nuclear reactors which, if not controlled, can
require extremely costly repairs or possibly result in premature shutdown and
de-commissioning of the facility.
The Agreement executed between Isonics and Eagle-Picher (E-P)
provides for: (1) Isonics' sale of the DZ Business to E-P for a purchase
price including approximately $6,700,000 in cash plus three additional
payments of $500,000 over a three year period, (2) for E-P's sale to Isonics
of 200 kilograms of Silicon-28 in consideration for a 42 month warrant grant
to E-P for the purchase of 4,000,000 shares of Isonics common stock at a
purchase price of $3.75 per share. The Warrant is subject to a registration
rights agreement.
Related to, but separate from, the sale of the depleted zinc
business, Isonics contemporaneously signed a ten year supply agreement by
which Isonics will have the exclusive right to purchase quantities of
isotopically pure Silicon-28, Silicon-29 and Silicon-30 and a non-exclusive
right to purchase quantities of Carbon-12 and Carbon-13 produced by E-P from
its pilot plant under construction in Oklahoma for a ten year period. The
Supply Agreement locks in what Isonics believes is a favorable purchase price
for the isotopes. As partial consideration for the exclusivity provisions,
Isonics agreed to pay E-P a fee equal to 3% of the net revenues from all
sales made by Isonics of products incorporating Silicon-28, Silicon-29 or
Silicon-30 supplied by E-P. The ability of E-P to produce isotopes meeting
the specifications of the supply agreement is contingent upon E-P
successfully bringing its pilot production plant online as scheduled in March
of 2000.
In addition, Isonics purchased 200 kilograms of Silicon-28 from E-P
in consideration of a warrant to purchase 4,000,000 shares of Isonics common
stock exercisable by E-P for $3.75 per share through May 30, 2003. Isonics
granted E-P certain registration rights related to the shares of its common
stock issuable upon exercise of the warrant. E-P has an obligation to deliver
the Silicon-28 during calendar year 2000 or, if it fails to do so, it will
reduce the warrant proportionately. One of the properties of isotopically
pure Silicon-28 is its high thermal conductivity, which Isonics is currently
developing for semiconductor applications.
Isonics is an advanced materials and technology company which
develops and commercializes products based on enriched stable isotopes.
Stable isotopes can be thought of as ultra-ultra pure materials. This high
degree of purification provides enhanced performance properties compared to
normal materials. Stable isotopes have commercial uses in several areas,
including energy; research, medical diagnostics, and drug development;
product tagging and stewardship; semiconductors; lasers; and optical
materials.
<PAGE>
Except for historical information contained herein, this document
contains forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements involve known and
unknown risks and uncertainties that may cause the Company's actual results
or outcomes to be materially different from those anticipated and discussed
herein. Further, the Company operates in industries where securities values
may be volatile and may be influenced by regulatory and other factors beyond
the Company's control. Other important factors that the Company believes
might cause such differences are discussed in the risk factors detailed in
the Company's 10-KSB for the year ended April 30, 1999 filed with the
Securities and Exchange Commission, which include the Company's cash flow
difficulties, dependence on significant customers, and rapid development of
technology, among other risks. In assessing forward-looking statements
contained herein, readers are urged to carefully read all cautionary
statements contained in the Company's filings with the Securities and
Exchange Commission.
INFORMATION REQUIRED BY ITEM 701 OF REGULATION S-B.
SECURITIES SOLD. The sale described in the preceding paragraphs
occurred on December 1, 1999. The securities sold consists of one restricted
warrant ("Warrant") to purchase 4,000,000 shares of restricted common stock
issued at an exercise price of $3.75 per share.
UNDERWRITERS AND OTHER PURCHASERS.
No underwriters, agents, or placement agents participated in the
private placement.
The warrant was issued to a single accredited investor as
consideration for the purchase of assets.
The Warrant was issued in consideration for the purchase of 200
kilograms of Silicon-28 pursuant to an Asset Purchase Agreement executed
between Isonics and E-P.
The transactions were exempt from registration under the Securities
Act of 1933, as amended by reason of Sections 4(2) and 4(6) of the Securities
Act of 1933.
Terms of conversion or exercise are as follows:
The Warrant granted to E-P may be exercised to purchase 4,000,000
shares of restricted common stock issued on a warrant-for-share basis
with the Company's common stock (subject to dilution adjustment) for a
purchase price of $3.75 per share through the expiration date, May 30,
2003
The Company also entered into a registration rights agreement
relating to the shares of common stock underlying the Warrant.
The Company intends to use the 200 kilograms of Silicon-28 from the
issuance of the Warrant for the continued development and commercialization
of Silicon-28 wafers for the semiconductor industry.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Financial statements of businesses acquired. NOT APPLICABLE.
Pro forma financial statements will be filed by amendment to this
Form 8-K no later than February 15, 2000.
Exhibits:
10.1 Asset Purchase Agreement
10.2 Form of Warrant
10.3 Form of Registration Rights Agreement
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized, on the 15th day of December 1999.
ISONICS CORPORATION
By: /s/ JAMES E. ALEXANDER
-------------------------------------
James E. Alexander
President and Chief Executive Officer
<PAGE>
ASSET PURCHASE AGREEMENT
Dated as of November 30, 1999
By and Among
ISONICS CORPORATION
a California corporation,
and
EAGLE-PICHER TECHNOLOGIES, LLC
a limited liability company formed under Delaware law
and
EAGLE-PICHER INDUSTRIES, INC.
an Ohio corporation
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
I. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
II. PURCHASE AND SALE OF ZINC ASSETS . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 Zinc Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 Assumed Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.4 Net Current Asset Value and Closing Purchase Price Adjustment. . . . . 3
2.5 Allocation of Purchase Price . . . . . . . . . . . . . . . . . . . . . 5
2.6 Assignment of Contracts and Rights . . . . . . . . . . . . . . . . . . 5
2.7 Availability of Personnel. . . . . . . . . . . . . . . . . . . . . . . 6
2.8 Parent Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
III. SILICON TRANSACTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.1 Silicon Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
IV. REPRESENTATIONS AND WARRANTIES OF ISONICS. . . . . . . . . . . . . . . . . . . 7
4.1 Representations and Warranties of ISONICS. . . . . . . . . . . . . . . 7
V. REPRESENTATIONS AND WARRANTIES OF E-P . . . . . . . . . . . . . . . . . . . . . 7
5.1 Representations and Warranties of E-P. . . . . . . . . . . . . . . . . 7
VI. COVENANTS AND AGREEMENTS OF ISONICS. . . . . . . . . . . . . . . . . . . . . . 7
6.1 Corporate and Other Action . . . . . . . . . . . . . . . . . . . . . . 7
6.2 Access to Information. . . . . . . . . . . . . . . . . . . . . . . . . 7
6.3 Conduct of Business to Closing . . . . . . . . . . . . . . . . . . . . 7
6.4 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.5 Covenant Not to Compete. . . . . . . . . . . . . . . . . . . . . . . . 10
6.6 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.7 Access to Information; Cooperation After Closing . . . . . . . . . . . 10
VII. COVENANTS AND AGREEMENTS OF E-P . . . . . . . . . . . . . . . . . . . . . . . 11
7.1 Corporate and Other Action . . . . . . . . . . . . . . . . . . . . . . 11
7.2 Assumed Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.3 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.4 Nonsolicitation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.5 Agreement Concerning Acquisition and Voting of ISONICS Common
Stock or Derivative Securities . . . . . . . . . . . . . . . . . . . . 11
7.6 Agreement Not To Cause a Rule 13e-3 Transaction. . . . . . . . . . . . 12
7.7 Compliance with SEC Reporting Requirements . . . . . . . . . . . . . . 12
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VIII. SURVIVAL; INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.1 Survival of Representations, Warranties and Covenants. . . . . . . . . 13
8.2 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.3 Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.4 Limitations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
IX. CONDITIONS OF E-P'S OBLIGATIONS. . . . . . . . . . . . . . . . . . . . . . . . 15
9.1 Representations and Warranties True. . . . . . . . . . . . . . . . . . 15
9.2 Covenants and Agreements--No Default . . . . . . . . . . . . . . . . . 15
9.3 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . 15
9.4 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
9.5 Closing Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
9.6 Adverse Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . 16
X. CONDITIONS OF OBLIGATIONS OF ISONICS. . . . . . . . . . . . . . . . . . . . . . 16
10.1 Representations and Warranties True. . . . . . . . . . . . . . . . . . 16
10.2 Covenants and Agreements; No Default . . . . . . . . . . . . . . . . . 16
10.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
10.4 Closing Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
10.5 Adverse Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . 17
XI. CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
11.1 Time and Place of Closing. . . . . . . . . . . . . . . . . . . . . . . 17
11.2 Performance by ISONICS . . . . . . . . . . . . . . . . . . . . . . . . 17
11.3. Performance by E-P . . . . . . . . . . . . . . . . . . . . . . . . . . 18
XII. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
12.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
12.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . . . . 19
XIII. MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 19
13.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
13.2 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . 20
13.3 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
13.4 References and Construction. . . . . . . . . . . . . . . . . . . . . . 21
13.5 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
13.6 No Public Announcement . . . . . . . . . . . . . . . . . . . . . . . . 22
13.7 Counterparts; Effectiveness. . . . . . . . . . . . . . . . . . . . . . 22
13.8 Severability of Provisions . . . . . . . . . . . . . . . . . . . . . . 22
13.9 Exhibits and Schedules . . . . . . . . . . . . . . . . . . . . . . . . 22
13.10 Waivers and Amendments . . . . . . . . . . . . . . . . . . . . . . . . 22
13.11 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . 23
13.12 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
13.13 Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . 23
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<PAGE>
EXHIBIT A DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
EXHIBIT B REPRESENTATIONS AND WARRANTIES OF ISONICS. . . . . . . . . . . . . . . . 1
EXHIBIT C REPRESENTATIONS AND WARRANTIES OF E-P. . . . . . . . . . . . . . . . . . 1
</TABLE>
SCHEDULES:
A - Zinc Assets
2.2 - Assumed Liabilities
2.4(a) - Inventory
2.5 - Tax Allocation
3.1(a) - Specifications and delivery schedule for Silicon - 28
3.1(b) - Form of Warrant
11.2(a) - Form of Bill of Sale
11.2(b) - Form of Assignment and Assumption Agreement
11.2(c) - Opinion of Counsel to Isonics
11.2(g) - Form of Registration Rights Agreement
11.3(c) - Form of Bill of Sale - Silicon-28
11.3(d) - Opinion of counsel to E-P
B1.2 - Capitalization
B2.2 - Consents of ISONICS
B5 - Lawsuits
B6.1 - Subsidiaries
B6.3 - Organization of Subsidiaries
B6.4 - Investments
B8 - Licenses and Permits
B12 - Environmental Matters
B15 - Tax Matters
B21 - Contracts
C4 - Consents of E-P
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<PAGE>
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement") is made as of this
30th day of November 1999 by and among EAGLE-PICHER TECHNOLOGIES, LLC, a
limited liability company formed under Delaware law ("E-P"), EAGLE-PICHER
INDUSTRIES, INC., an Ohio corporation ("EPI"), and ISONICS CORPORATION, a
California corporation ("ISONICS").
R E C I T A L S
A. ISONICS has been engaged in the business of selling depleted zinc directly
or indirectly to commercial and governmental operators of nuclear power
plants as described in more detail in ISONICS's annual report on Form
10-KSB for the year ended April 30, 1999 (the "DZ Business") and owns
certain assets (including inventory and certain contract rights)
associated with the DZ Business (which assets are more specifically
described on SCHEDULE A);
B. ISONICS desires to sell, assign and convey all of the Zinc Assets to E-P
and EPI, and E-P and EPI are willing to purchase the Zinc Assets and
assume certain specified liabilities relating to the DZ Business, all as
more fully described and upon the terms and conditions contained in this
Agreement (collectively referred to as the "DZ Transaction"); and
C. ISONICS desires to purchase 200 kilograms of Silicon-28 from E-P (the
"Silicon Purchase"), and E-P is willing to enter into the Silicon Purchase
in exchange for a warrant (the "Warrant") to purchase 4,000,000 shares of
ISONICS common stock, all as more fully described and upon the terms and
conditions contained in this Agreement (collectively referred to as the
"Silicon Transaction").
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties contained herein, and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties,
intending to be legally bound, agree as follows:
I.
DEFINITIONS
1.1. DEFINITIONS. Capitalized terms in this Agreement shall have the
meanings specified in this Agreement or in Exhibit A.
II.
PURCHASE AND SALE OF ZINC ASSETS
2.1 ZINC ASSETS. On the Closing Date and on the terms and subject to
the conditions set forth in this Agreement, ISONICS will sell, transfer,
assign and deliver to E-P and EPI, or either of them, as they may direct,
free and clear of any Encumbrance, other than the Assumed
<PAGE>
Liabilities (as defined in Section 2.2), and E-P and EPI, or one of them, as
they may direct, will purchase, acquire and accept from ISONICS, all right,
title and interest in and to the Zinc Assets. Except for the express
representations and warranties set forth in this Agreement, the sale of the
Zinc Assets will be "as is, where is" and without warranties of
merchantability or fitness for any particular purpose, and FOB ISONICS'
facility in Golden, Colorado; E-P and EPI will pay for the packaging and
delivery of the Zinc Assets to E-P's facility.
2.2 ASSUMED LIABILITIES. Upon the terms of and subject to the
conditions set forth in this Agreement, E-P shall assume at Closing and
accept only the liabilities and obligations of ISONICS listed on SCHEDULE 2.2
to this Agreement (the "Assumed Liabilities"). Neither E-P nor EPI shall
assume any other liabilities of ISONICS.
2.3 PURCHASE PRICE.
2.3(a). Subject to adjustment as contemplated by Section 2.4, the
aggregate consideration to be received by ISONICS for the Zinc Assets (the
"Purchase Price") consists of (i) cash equal to (A) $5,000,000 (the "Cash
Portion"), PLUS (B) an estimate of Net Current Asset Value (as calculated
pursuant to Section 2.4(a) at the Closing Date); (ii) the Additional
Payments described in Section 2.3(b) and (iii) the assumption by E-P of
the Assumed Liabilities.
2.3(b). Subject to the terms and conditions set forth herein, the
Purchase Price shall be payable as follows:
(i) At the Closing, E-P and EPI, jointly and severally,
shall pay ISONICS cash equal to the Cash Portion and the estimated
Net Current Asset Value by wire transfer of immediately available
funds to such account or accounts as ISONICS shall specify in
writing at least two Business Days prior to Closing.
(ii) FIRST ADDITIONAL PAYMENT.
(A) Not later than November 30, 2000, E-P and EPI,
jointly and severally, will pay ISONICS $500,000, unless there
is a Supplier Non-Performance during the period from the date
hereof to November 30, 2000. AO Techsnabexport/
Electrochemical Plant is the "Supplier." The term "Supplier
Non-Performance" is defined to mean the Supplier's failure to
supply to E-P or EPI, as the case may be, the quantities of
zinc oxide powder required by the Supply Contract upon the
terms and conditions, including price, set forth in the Supply
Contract, unless the reason for the Supplier's failure is a
breach of the Supply Contract by E-P or EPI, as the case may
be. The term "Supply Contract" means that certain contract
#08843672/70034-02D dated February 10, 1997, as amended,
between ISONICS and the Supplier for the supply of zinc oxide
powder in accordance with the terms of such contract (which
contract will be assigned to E-P or EPI, as the case may be,
at the Closing).
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<PAGE>
(B) If the Supplier partially performs under the
Supply Contract but such partial performance constitutes a
Supplier Non-Performance, the First Additional Payment will be
pro-rated, based on the amount of zinc oxide powder actually
provided by the Supplier upon the terms and conditions of the
Supply Contract divided by the amount of zinc oxide powder
required to be provided under the Supply Contract (the
"Additional Payment Pro-ration").
(C) E-P or EPI, as the case may be, may only declare a
Supplier Non-Performance under this Section 2.3(b)(ii),
Section 2.3(b)(iii) or Section 2.3(b)(iv), or claim a partial
performance if E-P or EPI, as the case may be, gives ISONICS
prompt notice of and information with respect to the Supplier
Non-Performance and an opportunity for ISONICS to assist E-P
or EPI, as the case may be, in correcting or seeking to remedy
the Supplier Non-Performance.
(iii) SECOND ADDITIONAL PAYMENT.
(A) Not later than November 30, 2001, E-P and EPI,
jointly and severally, will pay ISONICS an additional
$500,000, unless there is a Supplier Non-Performance for the
period from December 1, 2000 to November 30, 2001.
(B) If during the period for which the Second Additional
Payment is calculated, the Supplier partially performs under
the Supply Contract but such partial performance constitutes a
Supplier Non-Performance, E-P and EPI, jointly and severally,
will pay ISONICS an amount calculated pursuant to the
Additional Payment Pro-ration.
(iv) THIRD ADDITIONAL PAYMENT.
(A) Not later than November 30, 2002, E-P and EPI,
jointly and severally, will pay ISONICS an additional
$500,000, unless there is a Supplier Non-Performance for the
period from December 1, 2001 to November 30, 2002.
(B) If during the period for which the Third Additional
Payment is calculated, the Supplier partially performs under
the Supply Contract but such partial performance constitutes a
Supplier Non-Performance, E-P and EPI, jointly and severally,
will pay ISONICS an amount calculated pursuant to the
Additional Payment Pro-ration.
2.4 NET CURRENT ASSET VALUE AND CLOSING PURCHASE PRICE ADJUSTMENT.
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<PAGE>
2.4(a). Not later than five Business Days prior to the Closing
Date, ISONICS shall prepare and submit to E-P a closing statement
estimating Net Current Asset Value for the DZ Business (the "Estimated
Closing Statement"), and setting forth, in reasonable detail, ISONICS'
estimation of the inventory less accounts payable of the DZ Business as of
the Closing Date (the "Estimated Net Current Asset Amount"). For
purposes of calculating the Estimated Net Current Asset Amount and the
Final Net Current Asset Amount (as defined below), (x) inventory
("Inventory") shall be valued as set forth in SCHEDULE 2.4(a) and (y)
accounts payable shall consist only of current accounts payable incurred
in the ordinary course of the DZ Business ("Accounts Payable"). The
Estimated Closing Statement shall be accompanied by such supporting
documentation as E-P may reasonably request.
(i) If E-P disputes the correctness of the Estimated Net
Current Asset Amount, E-P shall (not later than the second Business
Day prior to the Closing Date) notify ISONICS of its objections and
shall set forth, in writing and reasonable detail, the reasons for
E-P's objections and the amount E-P estimates for the Estimated Net
Current Asset Amount. If E-P and ISONICS differ on the amount of
the Estimated Net Current Asset Value and are unable to resolve
their differences prior to the Closing Date, the amount to be
included in the Purchase Price will be the Estimated Net Current
Asset Value as estimated by ISONICS.
(ii) If E-P fails to deliver a notice of objections within
the timeframe set forth in Section 2.4(a)(i), E-P shall be deemed to
have accepted ISONICS' calculation for the purpose of the payment of
the Purchase Price as of the Closing Date.
2.4(b). Promptly following the Closing Date, but in no event later
than 60 days after the Closing Date, E-P shall prepare and submit to
ISONICS a closing statement of Net Current Assets for the DZ Business (the
"Closing Statement"), setting forth, in reasonable detail, E-P's
calculation of the actual Inventory and Accounts Payable of the DZ
Business as of the Closing Date (the "Final Net Current Asset Amount").
The Closing Statement shall be accompanied by such supporting
documentation as ISONICS may reasonably request.
(i) If ISONICS disputes the correctness of the Final Net
Current Asset Amount, ISONICS shall notify E-P of its objections
within 20 days after the receipt of the Closing Statement and shall
set forth, in writing and reasonable detail, the reasons for
ISONICS' objections. E-P and ISONICS shall endeavor in good faith
to resolve any disputed items within 20 days after E-P's receipt of
ISONICS' notice of objections. If they are unable to do so, E-P and
ISONICS shall select a nationally known independent accounting firm
(the "Independent Accountants") to resolve the dispute, and the
determination of such firm in respect of the correctness of each
item remaining in dispute shall be conclusive and binding on ISONICS
and E-P. ISONICS and E-P shall cooperate with the Independent
Accountants and shall provide the Independent Accountants with
-4-
<PAGE>
such background materials and other information as the Independent
Accountants shall request. The fees and expenses, if any, of the
Independent Accountants shall be paid one-half by ISONICS and
one-half by E-P.
(ii) If ISONICS fails to deliver a notice of objections
within such time, ISONICS shall be deemed to have accepted E-P's
calculation.
(iii) If the Final Closing Statement reflects a Net Current
Asset Value higher than included in the Estimated Closing Statement,
E-P and EPI, jointly and severally, will pay ISONICS the difference
within seven Business Days; if the Final Closing Statement reflects
a Net Current Asset Value lower than included in the Estimated
Closing Statement, ISONICS will pay E-P or EPI, as they may direct,
the difference within seven Business Days. If there is any dispute
as to the Final Closing Statement, final payment, if any, will be
made within seven Business Days after the resolution of the dispute.
2.4(c). The Closing Statement and the Final Net Current Asset
Amount shall be determined in accordance with GAAP, except that Inventory
shall be valued as set forth in SCHEDULE 2.4(a).
2.5 ALLOCATION OF PURCHASE PRICE. E-P and ISONICS agree to allocate
the Purchase Price and the components of the Purchase Price consideration
among the Zinc Assets pursuant to the tax allocation schedule set forth on
SCHEDULE 2.5 attached hereto. E-P and ISONICS shall not take any position on
their respective Tax Returns that is inconsistent with such allocation of the
Purchase Price and the components of the Purchase Price consideration
pursuant to SCHEDULE 2.5, and ISONICS and E-P shall prepare and timely file
such reports and information returns as may be required to report the
allocation of the Purchase Price pursuant to this Section 2.5. Within 20
Business Days after the determination of the Final Net Current Asset Amount,
ISONICS and E-P shall adjust SCHEDULE 2.5 to be consistent with the amount
of, and the components of, the Final Net Current Asset Amount.
2.6 ASSIGNMENT OF CONTRACTS AND RIGHTS. Anything in this Agreement
to the contrary notwithstanding, this Agreement shall not constitute an
agreement to assign any Zinc Asset or any claim or right or any benefit
arising thereunder or resulting therefrom if an attempted assignment thereof,
without the consent of a third party thereto, would constitute a breach or
other contravention thereof or in any way would adversely affect the rights
of E-P or EPI thereunder. ISONICS will use its best efforts to obtain the
consent of the other parties to any such Zinc Asset or any claim or right or
any benefit arising thereunder for the assignment thereof to E-P or EPI as
E-P or EPI may reasonably request. If such consent is not obtained, or if an
attempted assignment thereof would be ineffective or would adversely affect
the rights of E-P or EPI or E-P or EPI would not in fact receive all such
rights, ISONICS and E-P or EPI will cooperate in a mutually agreeable
arrangement under which ISONICS would provide to E-P or EPI the benefits
thereunder in accordance with the intent of this Agreement, including
subcontracting, sub-licensing, or sub-leasing to E-P or EPI, or under which
ISONICS would enforce for the benefit of E-P or EPI any and all rights of
ISONICS against a third party thereto.
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From and after the Closing, ISONICS will pay to E-P or EPI within five (5)
Business Days of receipt all monies received by ISONICS in respect of any
Zinc Asset or any claim or right or any benefit arising thereunder. The
covenants of each of ISONICS and E-P or EPI set forth in this Section 2.6
shall survive the Closing until the assignment or novation of all Contracts
that constitute a portion of the Zinc Assets to E-P or EPI. Nothing in this
Section 2.6 will limit the applicability of the condition set forth in
Section 9.4.
2.7 AVAILABILITY OF PERSONNEL. ISONICS will make the services of
Boris Rubizhevsky available as an independent consultant at times and place
reasonably requested by E-P (not to exceed 160 hours in any 12 month period)
to assist E-P in its dealings with the Supplier. E-P shall pay directly or
reimburse ISONICS for expenses incurred by Mr. Rubizhevsky in the performance
of his duties requested by E-P, and compensate ISONICS for Mr. Rubizhevsky's
services at the rate of $107 per hour.
III.
SILICON TRANSACTION
3.1 SILICON PURCHASE.
3.1(a). On the terms and subject to the conditions set forth in
this Agreement and for the consideration set forth in Section 3.2, E-P
will sell, transfer, assign and deliver to ISONICS, free and clear of any
Encumbrance, and ISONICS will purchase, acquire and accept from E-P, all
right, title and interest in and to 200 kilograms of Silicon-28 meeting
the specifications set forth on SCHEDULE 3.1(a), and subject to the
delivery obligations set forth in SCHEDULE 3.1(a) (the "Silicon
Purchase"). The Silicon-28 included in the Silicon Purchase will be
packaged in a manner meeting the regulations of the U.S. Department of
Transportation for transportation over interstate highways and made
available for ISONICS FOB E-P's facility in Oklahoma. E-P represents and
warrants that it will use all commercially reasonable efforts to cause its
pilot plant to meet the delivery commitments for the Silicon-28 set forth
on SCHEDULE 3.1(a) (including without limitation if necessary and if
available on commercially reasonable terms obtaining enrichment of its
Silicon-28 production to meet such specifications), which representation
and warranty will survive the Closing until the delivery commitments have
been met. E-P will keep ISONICS informed of its progress in producing the
Silicon-28 and will consult and co-operate with ISONICS in seeking to
perform its obligations under this Section 3.1(a). Notwithstanding the
foregoing, E-P shall not be liable for any failure to meet such delivery
commitments if and to the extent that such failure results from any fire,
flood, windstorm, strike or labor unrest, shortage of raw materials, act
of God or other cause beyond the reasonable control of E-P.
3.1(b). CONSIDERATION. On the Closing Date, and only after the
completion of the DZ Transaction between the Parties, ISONICS will pay E-P
in full for the Silicon Purchase (for which E-P will receive payment in
full upon receipt of the Warrant) by issuing to E-P the Warrant in the
form attached hereto as SCHEDULE 3.1(b).
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3.1(c). REMEDY. Notwithstanding any other provision of this
Agreement, ISONICS' sole remedy for any breach by E-P of its obligation
under this ARTICLE III shall be as follows: (i) If after using
commercially reasonable efforts (including using third parties to enrich
the Silicon-28 where reasonable), and after regular consultation with and
advice from ISONICS, E-P's pilot plant is incapable of producing and
beneficiating (or providing for the beneficiation of) Silicon-28, and if
E-P gives written notice to such effect to ISONICS on or before March 31,
2000, E-P may cancel its obligation to deliver Silicon-28 to ISONICS on or
before December 31, 2000, in accordance with this Article III. If E-P
cancels its obligation under this Article III pursuant to this Clause
3.1(c)(i), E-P must return the Warrant and the Registration Rights
Agreement to ISONICS for cancellation. In such case, E-P will be liable
for no additional damages to ISONICS; and (ii) If E-P does not cancel its
obligation under this Article III in accordance with Clause 3.1(c)(i), E-P
must deliver the Silicon-28 to ISONICS in accordance with this Article III
or be liable to ISONICS for damages in accordance with Section 12.2.
IV.
REPRESENTATIONS AND WARRANTIES OF ISONICS
4.1 REPRESENTATIONS AND WARRANTIES OF ISONICS. ISONICS represents and
warrants to E-P as set forth on Exhibit B.
V.
REPRESENTATIONS AND WARRANTIES OF E-P
5.1 REPRESENTATIONS AND WARRANTIES OF E-P. E-P represents and warrants
to ISONICS as set forth on Exhibit C.
VI.
COVENANTS AND AGREEMENTS OF ISONICS
6.1 CORPORATE AND OTHER ACTION. ISONICS shall take all action,
corporate or otherwise, which is necessary or reasonably appropriate to
complete the Contemplated Transactions, including the execution and delivery
of all documents and instruments that are necessary to effect the
Contemplated Transactions and obtaining all consents of third parties.
6.2 ACCESS TO INFORMATION. Except as prohibited or limited by law or
regulation, ISONICS shall, from and after the date of this Agreement and
until the Closing Date, give E-P and its employees, counsel, accountants and
other representatives full and complete access upon reasonable notice during
normal business hours, to all officers, employees, offices, properties,
Contracts, records and affairs of ISONICS and the DZ Business, and will
provide copies of such
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information concerning ISONICS and the DZ Business as E-P may reasonably
request.
6.3 CONDUCT OF BUSINESS TO CLOSING. Except with the prior written
consent of E-P or as otherwise provided in this Agreement, from the date of
this Agreement until the Closing Date, ISONICS shall conduct the DZ Business
in the ordinary course consistent with historical and customary operating
practices and shall use its reasonable commercial efforts to preserve the
Zinc Assets and the DZ Business, and maintain the relations and goodwill with
suppliers, landlords, creditors, agents, customers and others having business
relationships with ISONICS, and ISONICS shall not:
6.3(a). make any individual capital expenditure, or group of
related capital expenditures, relating to the DZ Business in excess of
$5,000;
6.3(b). sell or dispose of more than an aggregate of $5,000 of
assets that would constitute Zinc Assets if owned, held or used by ISONICS
on the Closing Date except sales of inventory by ISONICS in the ordinary
course of its business;
6.3(c). sell, transfer, license or otherwise dispose of, any
Intellectual Property that would constitute Zinc Assets if owned, held or
used by ISONICS on the Closing Date;
6.3(d). terminate or materially reduce the coverage of any policies
of title, liability, fire, workers' compensation, property and any other
form of insurance covering the Zinc Assets or the operations of ISONICS or
the DZ Business;
6.3(e). settle any material lawsuit, claim or other material
dispute nor settle any other lawsuit, claim or other dispute if such
settlement imposes a continuing non-monetary obligation on the DZ Business
or any of the Zinc Assets or any material monetary obligation that will
not be satisfied prior to the Closing;
6.3(f). except as contemplated by this Agreement, grant or
implement any new or modified severance, termination or other employee
benefit or compensation arrangement or increase or accelerate any benefits
payable under the severance or termination pay policies or other employee
benefit or compensation arrangements (including increasing the rate at
which any Employee accrues vacation) with respect to any Employee;
6.3(g). except as otherwise may be permitted or required by this
Agreement or Applicable Law, adopt or amend in any material respect any
Employee Plan or Benefit Arrangement in respect of any Employee or
increase the compensation or fringe benefits of any such Employee or pay
any benefit not required by any Employee Plan or Benefit Arrangement with
respect to such Employee as in effect on the date hereof;
6.3(h). fail to keep the equipment, machinery and systems used in
the DZ Business in compliance, in all material respects, with all
Applicable Laws and with all licenses and permits, and reasonably maintain
all such assets and replace any thereof which shall be worn out, lost,
stolen, or destroyed, in accordance with past practices
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(other than assets that are no longer necessary for the operation of the
DZ Business);
6.3(i). fail to maintain the files and records of the DZ Business
in the usual, regular and ordinary manner, consistent with past practices
or change its accounting systems;
6.3(j). fail to manage or cause to be managed the collection and
payment of the accounts receivable and accounts payable of the DZ Business
and otherwise maintain and manage its inventories and other current assets
and current liabilities in the ordinary course of business and consistent
with past practice, including making payment with respect to all of their
respective accounts payable, current maturities of long term debt and
other current payables in a timely manner and in accordance with the terms
of such payable or such indebtedness, as the case may be, provided that no
such indebtedness (other than intercompany indebtedness) shall be prepaid
or otherwise retired in whole or in part prior to the date on which such
indebtedness or portion thereof is due to be repaid, it being understood
that the covenant set forth in this Section 6.3 shall not prohibit ISONICS
from disputing any accounts payable in good faith, in the ordinary course
of business and consistent with past practice;
6.3(k). fail to take commercially reasonable steps to protect all
Intellectual Property and use commercially reasonable efforts to prevent
any Intellectual Property from falling into the public domain;
6.3(l). enter into any agreement, contract, lease, license,
commitment or instrument (or series of related agreements, contracts,
leases, licenses, commitments or instruments) that would be required to be
listed on SCHEDULE B21 or accelerate, terminate, modify or cancel in a
manner adverse to the DZ Business any agreement, contract, lease, license,
commitment or instrument (or series of related agreements, contracts,
leases, licenses, commitments or instruments) that is required to be
listed on SCHEDULE B21;
6.3(m). impose any Encumbrance upon any of the Zinc Assets;
6.3(n). enter into any consulting or other agreement which requires
payment of commissions based on the performance of the DZ Business; or
6.3(o). commit to any of the foregoing.
6.4 CONSENTS. ISONICS shall use its best efforts to:
6.4(a). obtain all consents, waivers and authorizations and make
all filings with and give all notices that may be necessary or reasonably
required to complete the Contemplated Transactions, and
6.4(b). cause each of the conditions precedent to the obligations
of E-P to be satisfied.
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6.5 COVENANT NOT TO COMPETE. ISONICS agrees that for a period
beginning on the Closing Date and ending on the fifth anniversary of the
Closing Date (the "Noncompete Period"), it will not directly or indirectly,
own, manage, operate, join, control or participate in the ownership,
management, operation or control of, any business whether in corporate,
limited liability company, proprietorship or partnership form or otherwise as
more than a five percent owner in such business if such business is
competitive with the DZ Business as of the Closing Date. The parties hereto
specifically acknowledge and agree that the remedy at law for any breach of
the foregoing will be inadequate and that E-P, in addition to any other
relief available to it, shall be entitled to temporary and permanent
injunctive relief without the requirement of bond. In the event that the
provisions of this Section 6.5 should ever be deemed to exceed the limitation
provided by applicable law, then the parties agree that such provisions shall
be reformed to set forth the maximum limitations permitted.
6.6 CONFIDENTIALITY. During the Noncompete Period, ISONICS will, and
will cause its Affiliates to, treat and hold as confidential any confidential
information relating to the operations or affairs of E-P or the DZ Business.
If ISONICS or any of its Affiliates is requested or required (by oral or
written request for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand or similar process or by
Applicable Law) to disclose any such confidential information then ISONICS
shall notify E-P promptly of the request or requirement so that E-P, at its
expense, may seek an appropriate protective order or waive compliance with
this Section. If, in the absence of a protective order or receipt of a
waiver hereunder, ISONICS or any of its Affiliates is, on the advice of
counsel, compelled to disclose such confidential information, ISONICS or any
of its Affiliates, as the case may be, may so disclose the confidential
information, provided that ISONICS or any of its Affiliates, as the case may
be, shall use reasonable commercial efforts to obtain reliable assurance that
confidential treatment will be accorded to such confidential information. No
obligation of confidentiality shall apply to any confidential information of
E-P that ISONICS (i) can reasonably demonstrate in writing was already known
or in ISONICS' possession, (ii) can reasonably demonstrate in writing was
developed independently by ISONICS or (iii) ISONICS rightfully receives from
a third party without knowledge of a violation of any obligation of
confidentiality, provided, however, that if ISONICS later learns that any
such information was received in violation of any obligation of
confidentiality, from that point ISONICS shall treat such information
pursuant to the terms of this Agreement. In addition, no obligation of
confidentiality shall apply to any information that is known to, or becomes
generally available to, the public without breach of this Agreement.
6.7 ACCESS TO INFORMATION; COOPERATION AFTER CLOSING. On and after
the Closing Date, ISONICS shall, at E-P's expense, (i) afford E-P reasonable
access upon reasonable prior notice during normal business hours to all
employees, offices, properties, contracts, records, books and affairs of
ISONICS to the extent relating to the conduct of the DZ Business prior to the
Closing, and (ii) cooperate fully with E-P with respect to matters relating
to the conduct of the DZ Business prior to the Closing, including, without
limitation, in the defense or pursuit of any Zinc Asset or Assumed Liability
or any claim or action that relates to occurrences involving the DZ Business
prior to the Closing Date.
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VII.
COVENANTS AND AGREEMENTS OF E-P
7.1 CORPORATE AND OTHER ACTION. E-P shall take all action, corporate
or otherwise, which is necessary or reasonably appropriate to complete the
Contemplated Transactions, including the execution and delivery of all
documents and instruments that are necessary to effect the Contemplated
Transactions.
7.2 ASSUMED LIABILITIES. E-P shall pay and discharge the Assumed
Liabilities in accordance with its normal business practices.
7.3 CONFIDENTIALITY. For a period of five years from and after the
Closing Date, E-P will, and will cause its Affiliates to, treat and hold as
confidential, any confidential information relating to the operations or
affairs of ISONICS other than the DZ Business or the Zinc Assets. In the
event that E-P, or any of its Affiliates, is requested or required (by oral
or written request for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand or similar process or by
Applicable Law) to disclose any such confidential information then E-P shall
notify ISONICS promptly of the request or requirement so that ISONICS, at its
expense, may seek an appropriate protective order or waive compliance with
this Section. If, in the absence of a protective order or receipt of a
waiver hereunder, E-P, or any of its Affiliates, is, on the advice of
counsel, compelled to disclose such confidential information, E-P, or its
Affiliates, as the case may be, may so disclose the confidential information,
provided that E-P, or its Affiliates, as the case may be, shall use
reasonable commercial efforts to obtain reliable assurance that confidential
treatment will be accorded to such confidential information. No obligation
of confidentiality shall apply to any confidential information of ISONICS
that E-P (i) can reasonably demonstrate in writing was already known or in
E-P's possession, (ii) can reasonably demonstrate in writing was developed
independently by E-P or (iii) E-P rightfully receives from a third party
without knowledge of a violation of any obligation of confidentiality,
provided, however, that if E-P later learns that any such information was
received in violation of any obligation of confidentiality, from that point
E-P shall treat such information pursuant to the terms of this Agreement. In
addition, no obligation of confidentiality shall apply to any information
that is known to, or becomes generally available to, the public without
breach of this Agreement.
7.4 NONSOLICITATION. In the event that the Closing does not occur
for any reason, for a period of one year after the termination of this
Agreement, without the prior consent of ISONICS, E-P will not solicit the
employment of any person who is employed by ISONICS; provided, that the
foregoing shall not apply to responses to or follow-up hiring in respect of
general solicitations or advertisements for job positions not specifically or
generally directed to any employee of ISONICS.
7.5 AGREEMENT CONCERNING ACQUISITION AND VOTING OF ISONICS COMMON
STOCK OR DERIVATIVE SECURITIES. E-P, on behalf of itself and its Affiliates,
agrees that it (including its
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Affiliates) will not acquire a beneficial interest in shares of common stock
of ISONICS in public transactions or private transactions except pursuant to
the exercise of the Warrant. In addition, to the extent E-P or any Affiliate
owns, or acquires any ISONICS common stock (whether through the exercise of
the Warrant or otherwise, whether or not in violation of this Agreement):
7.5(a). E-P will vote any and all Company Voting Securities owned
of record by E-P, and shall cause any and all Company Voting Securities
owned beneficially by E-P, to be voted with respect to the election or
removal of directors of ISONICS in accordance with the recommendations of
a majority of the Board of Directors of ISONICS;
7.5(b). E-P will not form, join, or in any other way participate in
a partnership, pooling agreement, syndicate, voting trust, or other
"group" with respect to Company Voting Securities or enter into any
agreement or arrangement or otherwise act in concert with any other person
for the purpose of acquiring, holding, voting, or disposing of Company
Voting Securities.
7.5(c). E-P shall be present, in person or by proxy, at all
meetings of stockholders of ISONICS so that any and all Company Voting
Securities owned of record or beneficially owned by E-P may be counted for
the purpose of determining the presence of a quorum at such meetings. E-P
shall not directly or indirectly take any action, along or in concert with
any other person to circumvent the limitations of this Agreement.
7.5(d). E-P will use its best efforts to cause its Affiliates to
act in accordance with the requirements of Paragraphs (a), (b), and (c) of
this Section 7.5 as though they were each a party to this Agreement and
bound by such provisions.
These covenants shall survive the Closing or termination of this Agreement
for a period of two years.
7.6 AGREEMENT NOT TO CAUSE A RULE 13e-3 TRANSACTION. E-P agrees that
it will not take, directly or indirectly (and it will not cause or permit any
Affiliate to take, directly or indirectly) actions to cause ISONICS to
accomplish a going-private transaction or other transaction of the type
described in Rule 13e-3 under the Securities Exchange Act of 1934, as
amended. This covenant shall survive the Closing or termination of this
Agreement for a period of two years.
7.7 COMPLIANCE WITH SEC REPORTING REQUIREMENTS. E-P acknowledges
that the acquisition of the Warrant will result in it becoming the beneficial
holder of more than 10% of the outstanding common stock of ISONICS. E-P
further acknowledges its understanding that the common stock of ISONICS is
registered under the Securities Exchange Act of 1934, as amended. E-P hereby
covenants and agrees that it will comply with the reporting requirements of
Section 13(d) and Section 16(a) of the Securities Exchange Act of 1934 (and
the rules thereunder) to the extent such requirements are applicable to E-P
and its Affiliates.
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VIII.
SURVIVAL; INDEMNIFICATION
8.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations and warranties made in this Agreement by ISONICS and E-P,
respectively, shall survive the Closing until the second anniversary of
Closing (or, if applicable, for the period set forth in the particular
representation or warranty), provided that the representations and warranties
set forth in B2, B14 and C2 shall survive for the applicable statute of
limitations.
8.2 INDEMNIFICATION.
8.2(a). E-P shall defend, hold harmless and indemnify ISONICS and
its Affiliates (each a "Seller Indemnified Party") from and against any
and all Damages to which a Seller Indemnified Party may become subject
insofar as the Damages (or actions in respect thereof) arise out of or are
based upon (i) any failure by E-P to perform its obligations under this
Agreement; (ii) the failure of E-P to satisfy the Assumed Liabilities; or
(iii) any breach by E-P of its representations, warranties, covenants and
agreements set forth in this Agreement (provided that a notice
contemplated by Section 8.3 of a claim for indemnification is provided to
the Indemnitor (as defined in Section 8.3) on or prior to the time of the
expiration of the applicable representation or warranty).
8.2(b). ISONICS shall defend, hold harmless and indemnify E-P and
its Affiliates (each, a "Buyer Indemnified Party") from and against any
and all Damages, to which a Buyer Indemnified Party may become subject,
insofar as the Damages (or actions in respect thereof) arise out of or are
based upon (i) any failure by ISONICS to perform its obligations under
this Agreement; (ii) any breach by ISONICS of any of the representations,
warranties, covenants and agreements set forth in this Agreement (provided
that a notice contemplated by Section 8.3 of a claim for indemnification
is provided to the Indemnitor on or prior to the time of the expiration of
the applicable representation or warranty), (iii) any liability of ISONICS
other than the Assumed Liabilities or (iv) any liability of ISONICS under
Environmental Laws incurred prior to the Closing Date.
8.3 PROCEDURES.
8.3(a). Promptly after receipt by a party eligible for
indemnification under this ARTICLE VIII (an "Indemnified Party") of notice
of the commencement of any action, arbitration proceeding, governmental
investigation or any other claim (a "Third Party Claim"), the Indemnified
Party shall, if a claim in respect thereof is to be made against a party
liable for indemnification under this ARTICLE VIII (an "Indemnitor"),
notify the Indemnitor of the commencement thereof; PROVIDED, HOWEVER, that
the failure of the Indemnified Party to notify the Indemnitor shall not
relieve the Indemnitor from any liability under this ARTICLE VIII, except
to the extent and only to the extent it is proved that the Indemnitor
suffered actual prejudice from the failure to notify in connection with or
in defending against such Third Party Claim.
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8.3(b). If any action is brought against an Indemnified Party and
the Indemnified Party notifies the Indemnitor of the commencement thereof,
the Indemnitor shall be entitled to participate in and, to the extent that
the Indemnitor may wish, to assume the defense of the action, with counsel
reasonably satisfactory to the Indemnified Party (who shall not, except
with the consent of the Indemnified Party, be counsel to the Indemnitor),
and after notice from the Indemnitor to the Indemnified Party of its
election to assume the defense, the Indemnitor shall not be liable to the
Indemnified Party under this ARTICLE VIII for any legal fees or legal
expenses subsequently incurred by the Indemnified Party in connection with
the defense thereof other than reasonable costs of investigation.
Notwithstanding anything in this Section 8.3 to the contrary, if the
Indemnitor does not assume the defense and control of any such Third Party
Claim as provided in this Section 8.3, the Indemnified Party shall have
the right to defend such Third Party Claim in such manner as it may deem
appropriate.
8.3(c). The Indemnitor shall be authorized to consent to a
settlement of, or the entry of any judgment arising from, any Third Party
Claim, and the Indemnified Party shall consent to such settlement of, or
the entry of any such judgment arising from, such Third Party Claim;
provided, however, that the Indemnitor shall:
(i) pay or cause to be paid all amounts arising out of such
settlement or judgment concurrently with the effectiveness thereof;
(ii) not encumber any of the assets of the Indemnified Party
or agree to any restriction or condition that would apply to the
Indemnified Party or to the conduct of the Indemnified Party"s
business; and
(iii) obtain, as a condition of any settlement or other
resolution, a complete release of each Indemnified Party.
8.3(d). Except to the extent of the foregoing, no settlement or
entry of judgment in respect of any Third Party Claim shall be consented
to by any Indemnitor or Indemnified Party without the express written
consent of the other party. If the Indemnified Party fails to give its
consent to a proposed compromise or settlement of a claim that would
otherwise be permitted pursuant to this Section 8.3, the Indemnitor shall
have no obligation whatsoever to the Indemnified Party with respect to
Damages related to such claim in an amount in excess of the proposed
compromise or settlement.
8.3(e). The parties agree to cooperate fully with each other in
connection with the defense, negotiation or settlement of any prospective
claim and to provide each other with all materials, information and data
that is reasonably requested by the other in connection with a prospective
claim.
8.4 LIMITATIONS. Notwithstanding the foregoing, an Indemnitor shall
have no liability under this ARTICLE VIII for any breach of representation or
warranty unless and until the
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aggregate amount of Damages directly or indirectly suffered or incurred by an
Indemnified Party equals or exceeds One Hundred Thousand Dollars ($100,000)
(the "Threshold Amount"). At such time as the aggregate Damages directly or
indirectly suffered or incurred by an Indemnified Party equals or exceeds the
Threshold Amount, the Indemnified Party shall be indemnified to the extent
such Damages exceed the Threshold Amount. Furthermore, an Indemnitor shall
have no liability under this ARTICLE VIII for any indirect or consequential
damages.
IX.
CONDITIONS OF E-P'S AND EPI'S OBLIGATIONS
The obligations of E-P and EPI to complete the Contemplated
Transactions which are to be completed on the Closing Date and to perform the
other covenants and agreements in accordance with the terms and conditions of
this Agreement are subject to satisfaction of each of the following
conditions which, if not satisfied, may be waived, but only in a writing
executed by E-P, it being understood and agreed that any such waiver by E-P
shall not be deemed to constitute a waiver of a claim for Damages in respect
of any matter for which indemnification is provided under ARTICLE VIII.
9.1 REPRESENTATIONS AND WARRANTIES TRUE. Except for representations
and warranties that by their terms speak only as of a specified date, each of
the representations and warranties of ISONICS contained in this Agreement
shall have been true and complete when made and shall be true and complete in
all material respects on and as of the Closing Date as if made on and as of
the Closing Date, and E-P shall have received a certificate to that effect
from the President of ISONICS.
9.2 COVENANTS AND AGREEMENTS--NO DEFAULT. ISONICS shall not be in
default in respect of any material obligation under this Agreement and shall
have performed or complied in all respects with all covenants and agreements
required by this Agreement to be performed or complied with by ISONICS prior
to or as of the Closing Date, and E-P shall have received a certificate to
that effect from the President of ISONICS.
9.3 NO MATERIAL ADVERSE CHANGE. Since July 31, 1999, ISONICS shall
not have suffered a Material Adverse Effect on its business (including the DZ
Business) or financial condition, and E-P shall have received a certificate
to such effect from the President of ISONICS. E-P acknowledges that the
continuing losses reported by ISONICS in the ISONICS 1934 Act Reports do not
constitute a Material Adverse Effect. E-P also acknowledges that the pro
forma and actual impact on ISONICS and its financial statements as a result
of the sale of the DZ Business to E-P will result in increased operating
losses and other impacts, none of which individually or in the aggregate will
constitute a Material Adverse Effect on ISONICS.
9.4 CONSENTS. E-P shall have received all third-party and
governmental consents, novations, waivers, authorizations and approvals
identified on SCHEDULE B2.2 OR C4 and shall have made all filings and given
all notices required in connection with the Contemplated Transactions that
are referenced in Section 7.1 or are set forth on SCHEDULE B2.2 OR C4.
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9.5 CLOSING DOCUMENTS. ISONICS shall have provided E-P with duly
executed copies of all of the documents required by Section 11.2 to be
delivered at Closing by ISONICS.
9.6 ADVERSE PROCEEDINGS. No action, proceeding or governmental
investigation shall have been instituted or threatened against the completion
of the Contemplated Transactions.
X.
CONDITIONS OF OBLIGATIONS OF ISONICS
The obligations of ISONICS to complete the Contemplated Transactions
which are to be completed on the Closing Date and to perform the other
covenants and agreements in accordance with the terms and conditions of this
Agreement are subject to satisfaction of each of the following conditions
which, if not satisfied, may be waived, but only in a writing executed by
ISONICS, it being understood and agreed that any such waiver by ISONICS shall
not be deemed to constitute a waiver of a claim for Damages in respect of any
matter for which indemnification is provided under ARTICLE VIII.
10.1 REPRESENTATIONS AND WARRANTIES TRUE. Except as otherwise
permitted or contemplated by this Agreement and except for representations
and warranties that by their terms speak only as of a specified date, each of
the representations and warranties of E-P contained herein shall have been
true and complete when made and shall be true and complete in all material
respects on and as of the Closing Date as if made on and as of the Closing
Date and ISONICS shall have received a certificate to such effect from an
authorized officer of E-P.
10.2 COVENANTS AND AGREEMENTS; NO DEFAULT. Neither E-P nor EPI shall
be in default in respect of any material obligation under this Agreement and
E-P or EPI shall have performed or complied in all respects with all material
covenants and agreements required by this Agreement to be performed or
complied with by E-P or EPI, as the case may be, prior to or as of the
Closing Date, and ISONICS shall have received a certificate to such effect
from an authorized officer of E-P.
10.3 CONSENTS. ISONICS shall have obtained all of the third-party and
governmental consents, novations, waivers, authorizations and approvals
identified on SCHEDULE B2.2 and shall have made all material filings and
given all notices required in connection with the Contemplated Transactions
that are referenced in Section 6.1 or are set forth in SCHEDULE B2.2.
10.4 CLOSING DOCUMENTS. E-P shall have provided ISONICS with duly
executed copies of all of the documents required by Section 11.3 to be
delivered at Closing by E-P.
10.5 ADVERSE PROCEEDINGS. No action, proceeding or governmental
investigation shall have been instituted or threatened against the completion
of the Contemplated Transactions.
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XI.
CLOSING
11.1 TIME AND PLACE OF CLOSING.
11.1(a). The closing of the Contemplated Transactions (the
"Closing") shall take place at 11:00 a.m. (local time) on November 30,
1999, or at such other time and date as may be mutually agreed upon in
writing, upon fulfillment of (a) all the conditions set forth in
ARTICLE IX, which have not been waived in writing by E-P, and (b) all the
conditions set forth in ARTICLE X, which have not been waived by ISONICS.
If such conditions have not been fulfilled or waived by November 30, 1999,
the Closing shall take place within five Business Days after fulfillment
or waiver of all such conditions but in no event later than December 31,
1999, unless otherwise mutually agreed in writing by E-P and ISONICS. The
Closing shall be deemed to be effective as of the close of business on the
Closing Date.
11.1(b). All proceedings to be taken and all documents to be
executed and delivered by ISONICS in connection with the completion of the
Contemplated Transactions shall be reasonably satisfactory in form and
substance to E-P and its counsel. All proceedings to be taken and all
documents to be executed and delivered by E-P in connection with the
completion of the Contemplated Transactions shall be reasonably
satisfactory in form and substance to ISONICS and its counsel. All
proceedings to be taken and all documents to be executed and delivered at
the Closing shall be deemed to have been taken and executed
simultaneously, and no proceedings shall be deemed taken nor any documents
executed or delivered until all have been taken, executed or delivered.
11.2 PERFORMANCE BY ISONICS. At the Closing, ISONICS shall deliver or
cause to be delivered to E-P or EPI, as they may direct, the following:
11.2(a). A bill of sale for the Zinc Assets in the form set forth
on SCHEDULE 11.2(a) (the "Bill of Sale").
11.2(b). An assignment and assumption agreement executed in
counterpart by ISONICS in the form set forth on SCHEDULE 11.2(B) (the
"Assignment and Assumption Agreement"), together with all required
consents to assignments in respect of Zinc Assets and the issuance of the
Warrant (the "Consents").
11.2(c). An opinion of counsel to ISONICS substantially in the form
set forth on SCHEDULE 11.2(c).
11.2(d). The Warrant.
11.2(e). A release of the lien of Coast Business Credit and any
other Encumbrances on the Zinc Assets.
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11.2(f). Intentionally omitted.
11.2(g). A registration rights agreement (the "Registration Rights
Agreement") in the form set forth on SCHEDULE 11.2(g) executed by ISONICS.
11.2(h). Such other documents, articles of transfer, instruments or
agreements as may be reasonably requested by E-P to effectuate the
Contemplated Transactions.
11.3. PERFORMANCE BY E-P. At or prior to the Closing, E-P and EPI,
jointly and severally, shall deliver, or cause to be delivered, to ISONICS the
following:
11.3(a). A wire transfer of funds to ISONICS in the aggregate
amount equal to the Cash Portion and the Estimated Net Current Asset
Amount.
11.3(b). The Assignment and Assumption Agreement executed in
counterpart by E-P.
11.3(c). A bill of sale and undertaking by E-P to supply the
Silicon Purchase meeting the specifications and pursuant to the delivery
schedule set forth in SCHEDULE 11.3(c).
11.3(d). An opinion of counsel to E-P and EPI substantially in the
form set forth on SCHEDULE 11.3(d).
11.3(e). Such other documents, articles of transfer, instruments or
agreements as may be reasonably requested by ISONICS to effectuate the
Contemplated Transactions.
XII.
TERMINATION
12.1 TERMINATION. This Agreement may be terminated at any time prior to
the Closing only as follows:
12.1(a). by mutual written agreement of E-P and ISONICS;
12.1(b). by either E-P or ISONICS if there shall be any law or
regulation that makes completion of the Contemplated Transactions illegal
or otherwise prohibited or if completion of the Contemplated Transactions
would violate any nonappealable final order, decree or judgment of any
court or Governmental Authority having competent jurisdiction;
12.1(c). by either E-P or ISONICS if the Closing shall not have
been completed by December 31, 1999; provided, however, that neither E-P
nor ISONICS may terminate
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this Agreement pursuant to this Section 12.1(c) if the Closing shall not
have been completed by December 31, 1999, by reason of the failure of
such party or any of its Affiliates to perform in any material respects
any of its or their respective covenants or agreements contained in this
Agreement.
Any party desiring to terminate this Agreement pursuant to this Section 12.1
shall give written notice of such termination to the other parties to this
Agreement.
12.2 EFFECT OF TERMINATION. If this Agreement is terminated as permitted
by Section 12.1, such termination shall be without liability of any party (or
any Affiliate, shareholder, director, officer, employee, agent, consultant or
representative of such party) to any other party to this Agreement; provided,
however, that if the Contemplated Transactions fail to close as a result of a
breach by ISONICS on the one hand, or E-P on the other hand, such breaching
party shall be fully liable for any and all actual damages incurred or suffered
by the other party as a result of all such breaches. Notwithstanding the
foregoing, the provisions of Sections 6.6, 7.3, 7.4, 7.5 and this Section 12.2
shall survive any termination hereof pursuant to Section 12.1.
XIII.
MISCELLANEOUS PROVISIONS
13.1 EXPENSES. Except as otherwise provided herein, ISONICS on the
one hand, and E-P and EPI on the other hand, shall bear and pay for their own
legal, accounting and other costs and fees incurred in connection with the
Contemplated Transactions. All sales, use and other transfer Taxes resulting
from or relating to the transfer of any of the Zinc Assets and the Silicon-28
shall be split equally between E-P and ISONICS.
13.2 FURTHER ASSURANCES. Each party shall execute and deliver such
additional documents or take such additional actions as may be requested by
another party to this Agreement if such requested document or action is
reasonably necessary to effect the Contemplated Transactions.
13.3 NOTICES. Any notice, request, instruction or other document or
communication required or permitted to be given under this Agreement shall be
in writing and shall be deemed given upon delivery in person; upon being
deposited in the mail, postage prepaid, for mailing by certified or
registered mail; or upon being transmitted by facsimile, as follows:
If to E-P or EPI, delivered or mailed to:
Boron Department
Eagle-Picher Technologies LLC
798 Highway 69A
Quapaw, OK 74363
Attention: Vice President and General Manager
Facsimile: 918-673-1052
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Telephone: 918-673-2201
with copies delivered or sent by facsimile to:
Taft, Stettinius & Hollister LLP
1800 Firstar Tower
425 Walnut Street
Cincinnati, OH 45202-3957
Attention: Gerald S. Greenberg, Esq.
Facsimile: (513) 381-0205
Telephone: (513) 381-2838
and
Eagle-Picher Industries Inc.
250 East Fifth Street, Suite 500
Cincinnati, Ohio 45202
Attention: Vice President and General Counsel
Facsimile: (513) 629-2572
Telephone: (513) 629-2417
If to ISONICS, delivered or mailed to:
Isonics Corporation
5906 McIntyre Street
Golden, CO 80403
Attention: James E. Alexander, President
Facsimile 303-279-7300
Telephone: 303-279-7900
with a copy (which does not constitute notice) delivered or sent by
facsimile to:
Herrick K. Lidstone, Jr.
Norton A. Lidstone, P.C.
The Quadrant
5445 DTC Parkway
Suite 850
Englewood, Colorado 80111
Facsimile: 303-221-5553
Telephone: 303-221-5552
or to such other address or addresses as may be specified in writing from
time to time by any party to the other parties.
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13.4 REFERENCES AND CONSTRUCTION.
13.4(a). References in this Agreement to Sections or Schedules are
to sections of or schedules to this Agreement unless otherwise indicated
and references to clauses are to clauses of the Section in which the
reference appears unless specifically noted otherwise.
13.4(b). When used in this Agreement, the word "including" shall
have its normal common meaning and any list of items that may follow such
word shall not be deemed to represent a complete list of the content of
the referent of the subject.
13.4(c). Unless the context otherwise requires, the singular shall
include the plural and vice versa, references to any gender shall include
all other genders and references to persons shall include individuals,
bodies corporate, unincorporated associations, partnerships and other
entities in each case whether or not having a separate legal personality.
13.4(d). The parties have participated jointly in the negotiation
and drafting of this Agreement. If any ambiguity or question of intent
arises, no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any of the provisions
of this Agreement.
13.4(e). Section headings are for convenience only and shall not
limit or otherwise affect any of the provisions of this Agreement.
13.4(g). Except as set forth in the following sentence, this
Agreement is not intended to and shall not be construed so as to create
any rights in any third party beneficiary. The Affiliates of E-P are
intended to be express third-party beneficiaries of the terms contained in
this Agreement.
13.5 ENTIRE AGREEMENT. This Agreement, the Schedules and Exhibits to
this Agreement and any other agreements contemplated by this Agreement
(including the Confidentiality Agreement) constitute the entire agreement and
understanding of the parties hereto with respect to the matters herein set
forth, and all prior negotiations, writings and understandings relating to
the subject matter of this Agreement are merged herein and are superseded and
canceled by this Agreement.
13.6 NO PUBLIC ANNOUNCEMENT. No party shall make any press release or
other public announcement regarding this Agreement or the Contemplated
Transactions, without prior consultation with and consent of the other party,
which consent may not unreasonably be withheld.
13.7 COUNTERPARTS; EFFECTIVENESS. This Agreement may be executed in
one or more counterparts, each of which shall be deemed to be an original
copy of this Agreement and all of which, when taken together, shall be deemed
to constitute one in the same agreement. This
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Agreement shall become effective when each party hereto shall have received a
counterpart hereof signed by the other parties hereto.
13.8 SEVERABILITY OF PROVISIONS. If a court in any proceeding holds
any provisions of this Agreement or its application to any person or
circumstance invalid, illegal or unenforceable, the remainder of this
Agreement, or the application of such provisions to Persons or circumstances
other than those to which it was held to be invalid, illegal or enforceable,
shall be not affected, and shall be valid, legal and enforceable to the
fullest extent permitted by law, but only if and to the extent such
enforcement would not materially and adversely frustrate the parties'
essential objectives as expressed in this Agreement. Furthermore, in lieu of
any such invalid or unenforceable term or provision, the parties intend that
the court add to this Agreement a provision as similar in terms to such
invalid or unenforceable provision as may be valid and enforceable, so as to
effect the original intent of the parties to the greatest extent possible.
13.9 EXHIBITS AND SCHEDULES. All Exhibits and Schedules to this
Agreement shall constitute part of this Agreement and shall be deemed to be
incorporated in this Agreement by reference and made a part of this Agreement
as if set out in full at the point where first mentioned.
13.10 WAIVERS AND AMENDMENTS. Any of the terms or conditions of this
Agreement may be waived but only in writing by the party which is entitled to
the benefit thereof, and this Agreement may be amended or modified in whole
or in part only by an agreement in writing, executed by all the parties to
this Agreement.
13.11 SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties and their respective
successors and assigns; provided that no party may assign, delegate or
otherwise transfer any of its rights or obligations under this Agreement
without the consent, which consent shall not be unreasonably withheld, of E-P
in the case of ISONICS, and ISONICS in the case of E-P.
13.12 GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Delaware (without
regard to the choice of law provisions thereof).
13.13 DISPUTE RESOLUTION.
13.13(a) . SENIOR OFFICERS TO RESOLVE. All claims, disputes or
other controversies arising out of, or relating to, this Agreement or the
Contemplated Transactions (hereinafter collectively referred to as a
"Dispute") shall initially be submitted to a senior officer from each
party for resolution by mutual agreement between said officers. Any
mutual determination by the senior officers shall be final and binding
upon the parties. However, should such senior officers fail to arrive at
a mutual decision as to the Dispute within 20 days after notice to both
parties of the Dispute, the parties shall then attempt to resolve such
Dispute by mediation in accordance with the terms and provisions set forth
in the following paragraph.
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13.13(b) . MEDIATION. Notice of the demand for mediation for any
Dispute which has not been resolved in accordance with the previous
paragraph shall be filed with the other party to this Agreement, and shall
be made within a reasonable time after such party is permitted to mediate
the Dispute as provided herein. All mediation proceedings shall take
place in Dallas, Texas and shall be conducted in accordance with rules
mutually determined by the parties. The mediator shall be an individual
mutually selected by ISONICS and E-P, which individual shall (i) have at
least 10 years experience in the discipline which is the subject of the
Dispute, or (ii) be an attorney of at least 10 years of experience in the
realm of business transactions or commercial litigation. Any mutual
decision by the parties pursuant to any such mediation shall be final and
binding upon the parties. However, should the parties fail to arrive at a
mutual decision as to the Dispute within 30 days after commencement of the
mediation proceedings, the parties shall then be entitled to refer such
Dispute to arbitration as provided in the following paragraph.
13.13(c) . ADDITIONAL PROCEEDINGS. To the extent that any Dispute
continues to exist after the mediation provided for in the preceding
paragraph, the parties agree to resolve the Dispute by binding
arbitration, unless the remedy sought is injunctive relief. Respecting
any Disputes which ultimately become the subject of court proceedings
wherein the remedy sought is injunctive relief, the parties irrevocably
agree that (i) the venue and jurisdiction for such proceedings shall be in
any court of competent jurisdiction, and (ii) trial by jury is waived by
both parties. Arbitration of disputes shall be conducted in Dallas, Texas
and shall apply the substantive law governing this Agreement. The
arbitration proceedings will be conducted by a panel of three arbitrators
in accordance with the Rules of Commercial Arbitration of the American
Arbitration Association ("AAA") and under the professional administration
of the AAA, except that the parties shall have the rights of discovery as
to one another such as are provided by Federal Rules of Civil Procedure 26
through 37 in effect at the time of the arbitration and rights of
discovery as to third parties in effect at the time of the arbitration as
are provided by law. The arbitration award shall be binding upon the
parties.
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IN WITNESS WHEREOF, the parties hereto caused this Agreement to be duly
executed on the day and year first above written.
EAGLE-PICHER TECHNOLOGIES, LLC
By:
--------------------------------------
Name: Dallas Mayfield
Title:
ISONICS CORPORATION
By:
--------------------------------------
James E. Alexander, President
EAGLE-PICHER INDUSTRIES, INC.
By:
--------------------------------------
Name:
Title:
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EXHIBIT A
DEFINITIONS
I. Terms defined in the Agreement shall have the meaning ascribed to such
terms in the Agreement. In addition, the following terms have the
following meanings:
A. "Accounts Payable" shall have the meaning set forth in Section
2.4(a).
B. "Affiliate" means, with respect to any Person, (i) any Person
directly or indirectly controlling, controlled by, or under common
control with such other Person, and (ii) any family member of a
party to this Agreement. For purposes of determining whether a
Person is an Affiliate, the term "control" shall mean the
possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether
through ownership of securities, contract or otherwise.
C. "Applicable Law" means, with respect to any Person, any domestic or
foreign, federal, state or local statute, law, ordinance, rule,
administrative interpretation, regulation, order, writ, injunction,
directive, judgment, decree or other requirement of any Governmental
Authority (including any environmental law) applicable to such
Person or any of its properties, assets, officers, directors,
employees, consultants or agents (in connection with such officer's,
director's, employee's, consultant's or agent's activities on behalf
of such Person).
D. "Business Day" means any day other than a Saturday, Sunday or other
day on which commercial banks in New York, New York are authorized
or required by law to close.
E. "Closing Date" means the date of Closing.
F. "Closing Statement" shall have the meaning set forth in Section
2.4(b).
G. "Company Subsidiary" means any Subsidiary of ISONICS.
H. "Company Voting Securities" shall mean, collectively, common stock,
any preferred stock of ISONICS that is entitled to vote generally
for the election of directors, any other class or series of ISONICS
securities that is entitled to vote generally for the election of
directors, and any other securities, warrants, options or rights of
any nature (whether or not issued by ISONICS) that are convertible
into or exchangeable for, or exercisable for the purchase of or
otherwise give the holder thereof any rights in respect of, ISONICS
common stock, ISONICS preferred stock that is entitled to vote
generally for the election of directors, or any other class or
series of ISONICS securities that is entitled to vote generally for
the election of directors.
EXHIBIT A
<PAGE>
I. "Contemplated Transactions" means the transactions contemplated by
this Agreement.
J. "Contracts" means all contracts, agreements, leases, licenses,
commitments, sales, consulting and independent contractor
arrangements and purchase orders, whether written or oral, that
relate to or arise out of the DZ Business.
K. "Damages" means all demands, claims, actions or causes of action,
assessments, losses, damages, costs, expenses, liabilities,
judgments, awards, fines, sanctions, penalties, charges and amounts
paid in settlement, including, without limitation, reasonable costs,
fees and expenses of attorneys, experts, accountants, appraisers,
consultants, witnesses, investigators and any other agents or
representatives of such Person (with such amounts to be determined
net of any resulting tax benefit and net of any refund or
reimbursement of any portion of such amounts, including, without
limitation, reimbursement by way of insurance or third party
indemnification but subject to the increase in cost of insurance
attributable to such reimbursement).
L. "DZ Business" shall have the meaning set forth in Recital A.
M. "Encumbrance" means any liability, obligation, mortgage, lien
(including, but not limited to, Tax liens), pledge, charge, security
interest, encumbrance, claim or similar right.
N. "Environmental Laws" means any and all past, present or future
federal, state, local and foreign statutes, laws, regulations,
ordinances, judgments, orders, codes, or injunctions, which relate
to or otherwise impose liability for or standards of conduct
concerning discharges or releases of any pollutants, contaminants or
hazardous or toxic wastes, substances or materials into ambient air,
water or land, or otherwise relating to the manufacture, processing,
generation, distribution, use, treatment, storage, disposal,
cleanup, transport or handling of Hazardous Materials including (but
not limited to), The Resource Conservation and Recovery Act of 1976,
as amended, The Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, The Superfund Amendment and
Reauthorization Act of 1984, as amended, The Toxic Substances
Control Act, as amended ("TSCA"), and any other so-called
"Superfund" or "Superlien" law, the Clean Water Act, Clear Air Act,
or any other similar federal, state or local statutes in the United
States or elsewhere.
O. "Estimated Closing Statement" shall have the meaning set forth in
Section 2.4(a).
P. "Estimated Net Current Asset Amount" shall have the meaning set
forth in Section 2.4(a).
Q. "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
EXHIBIT A
<PAGE>
R. "Final Net Current Asset Amount" shall have the meaning set forth in
Section 2.4(b).
S. "GAAP" means United States generally accepted accounting principles
as in effect on the date of this Agreement.
T. "Governmental Authority" means any foreign, domestic, federal,
territorial, state or local governmental authority,
quasi-governmental authority, instrumentality, court, government or
self-regulatory organization, commission, tribunal or organization
or any regulatory, administrative or other agency, or any political
or other subdivision, department or branch of any of the foregoing.
U. "Hazardous Materials" means any flammable explosives, radioactive
materials, hazardous waste, toxic substances or related materials,
including, without limitation, asbestos, PCBs, petroleum product,
ureaformaldehyde (in situations where considered hazardous or
toxic), radon and any substances defined as "hazardous substances,"
"hazardous materials" or "hazardous waste" in The Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended, and The Resource Conservation and Recovery Act of 1976, as
amended, those substances defined as "hazardous wastes" in the
regulations adopted and publications promulgated pursuant to said
laws, those substances defined as "toxic substances" in The Toxic
Substances Control Act, as amended, and any other substance,
pollutant, contaminant, chemical, or industrial toxin or hazardous
substance or waste, including without limitation hazardous
materials, which by law is prohibited or otherwise regulated.
V. "Inventory" shall have the meaning set forth in Section 2.4(a).
W. "Intellectual Property" means any patent, trademark, copyright,
tradename, or trade secret or any rights relating thereto, including
any license.
X. "IRS" means the Internal Revenue Service.
Y. "ISONICS 1934 Act Reports" means the report on Form 10-KSB filed by
ISONICS with the Securities and Exchange Commission for the year
ended April 30, 1999, as such report may be amended, together with
all reports ISONICS has filed with the Securities and Exchange
Commission subsequent to that date.
Z. "Material Adverse Effect" means (i) with respect to the DZ Business,
a material adverse effect on the assets, properties, business,
financial condition or results of operations of the DZ Business
taken as a whole, or (ii) with respect to any other Person, a
material adverse effect on the assets, properties, business,
financial condition or results of operations of such Person and its
Subsidiaries taken as a whole.
AA. "Person" means any individual, corporation, unincorporated
association, business
EXHIBIT A
<PAGE>
trust, estate, partnership, limited liability company, trust,
nation, political subdivision or agency thereof or any other entity.
BB. "Securities Act" means the Securities Act of 1933, as amended.
CC. "Silicon Purchase" shall have the meaning set forth in Section 3.1.
DD. "Subsidiary" as it relates to any Person, means another Person
controlled by or under common control with such Person. For
purposes of this definition, "control" shall mean the legal,
beneficial, or equitable ownership, directly or indirectly, of 50%
or more of the shares eligible to vote for the election of directors
or similar right to elect the governing body of such Person.
EE. "Successor" means any Person who assumes the place of either of the
parties hereto, whether by merger, consolidation, assignment,
acquisition of all or any substantial portion of the assets of such
party or otherwise.
FF. "Warrant Shares" means the shares of common stock of ISONICS or
other securities to be issued upon exercise of the Warrant.
GG. "Yale License" means the License Agreement dated October 21, 1997
between ISONICS and Yale University.
HH. "Zinc Assets" means all inventory, equipment, and Contracts held or
used by ISONICS at the Closing Date primarily in the conduct of the
DZ Business. Zinc Assets do not include cash, accounts receivable,
or assets used by ISONICS in any other line of business.
II. Unless otherwise specifically provided, "knowledge," "to the
knowledge," "known by" or "known" (and any similar phrase) means (i) with
respect to E-P, to the actual knowledge after reasonable inquiry of the
executive officers of its Boron Division, or any of them, and (ii) with
respect to ISONICS, to the actual knowledge after reasonable inquiry of its
executive officers, or any of them, as of the date of this Agreement.
III. Unless otherwise specifically provided, "including" (and any
similar phrase) is inclusive, without limitation, and is not intended to be
exclusive to the list set forth.
EXHIBIT A
<PAGE>
EXHIBIT B
REPRESENTATIONS AND WARRANTIES OF ISONICS
ISONICS hereby represents and warrants to E-P as follows:
1. ORGANIZATION, GOOD STANDING AND CAPITALIZATION.
1.1 ISONICS (i) is a corporation duly organized, validly existing
and in good standing under the laws of the State of California, (ii) has
full power and authority to own, operate and lease its properties, to
carry on the DZ Business as now being conducted, and to enter into this
Agreement and perform its obligations hereunder and (iii) and is duly
qualified and in good standing as a foreign corporation authorized to do
business in every jurisdiction where the failure so to qualify,
individually or in the aggregate, would have a Material Adverse Effect.
1.2 The authorized capital of ISONICS consists of 20,000,000
shares of Common Stock, no par value ("Common Stock"), of which 6,607,670
shares are outstanding, and 10,000,000 shares of Preferred Stock, no par
value, of which 1,830,000 shares are outstanding. All outstanding shares
were, and the Warrant Shares when issued will be, issued in compliance
with all applicable Federal and State securities laws. Except as set
forth in the ISONICS 1934 Act Reports or on SCHEDULE B1.2, there are (i)
no outstanding subscriptions, warrants, options, conversion privileges or
other rights or agreements to purchase or otherwise acquire or issue any
shares of capital stock of ISONICS (or shares reserved for such purpose),
(ii) no preemptive rights or rights of first refusal with respect to the
issuance of additional shares of capital stock of ISONICS, including the
Warrant Shares and (iii) no commitments or understandings (oral or
written) of the Company to issue any shares, warrants, options or other
rights. To the best of ISONICS knowledge, except as set forth in the
ISONICS 1934 Act Reports or on SCHEDULE B1.2, none of the shares of Common
Stock are subject to any shareholders' agreement, voting trust agreement
or similar arrangement or understanding. Except as set forth in the
ISONICS 1934 Act Reports or on SCHEDULE B1.2, the Company has no
outstanding bonds, debentures, notes or other obligations the holders of
which have the right to vote (or which are convertible into or exercisable
for securities having the right to vote) with the stockholders of ISONICS
on any matter.
1.3 The issuance of the Warrant Shares has been duly authorized
and the Warrant Shares have been, and at all times prior to exercise will
have been, duly reserved for issuance and, when so issued, will be validly
issued, fully paid and non-assessable.
EXHIBIT B
<PAGE>
2. EXECUTION AND EFFECT OF AGREEMENT.
2.1 The execution, delivery and performance of this Agreement, the
Registration Rights Agreement and the Warrant and the completion of the
Contemplated Transactions, including, without limitation, the sale,
transfer and assignment of the Zinc Assets to E-P and the Silicon
Purchase, have been duly and effectively authorized by all necessary
action on the part of ISONICS. This Agreement has been, and at the
Closing the Warrant and Registration Rights Agreement will have been, duly
executed and delivered by ISONICS and constitutes, or will constitute,
legal, valid and binding obligations of ISONICS enforceable in accordance
with their terms subject to limitations on enforceability under bankruptcy
and insolvency laws and principles of equity.
2.2 Except as set forth on SCHEDULE B2.2, and subject to receiving
the Consents listed thereon, neither the execution, delivery and
performance of this Agreement, the Warrant or the Registration Rights
Agreement nor the completion of the Contemplated Transactions, with or
without the passage of time, or the giving of notice, or both, will (i)
violate or conflict with any of the provisions of the organizational
documents of ISONICS, (ii) violate the provisions of any Applicable Law,
(iii) result in the creation of any Encumbrance upon any of the Zinc
Assets, (iv) conflict with or result in a breach of or give rise to the
right of termination of, or constitute a default of, or accelerate the
performance required by, the terms of any judgment, court order, consent
decree, or any agreement, indenture, mortgage, deed of trust, lease,
Contract, note, bond, license, permit, authorization or other instrument,
or any statute, ordinance, regulation or any other restriction of any kind
or character, to which ISONICS, any of the Company Subsidiaries or any of
the Zinc Assets is bound (with the understanding that an existing loan to
ISONICS from Coast Business Credit which includes substantially all of
ISONICS" assets as collateral will be repaid at the Closing from the
proceeds to be paid to ISONICS from the Contemplated Transactions), or (v)
cause ISONICS or any of the Company Subsidiaries to lose the benefit of
any legal right that it presently enjoys or require the consent of any
third party.
2.3 Except as set forth on SCHEDULE B2.2 or as described in
ISONICS' 1934 Act Reports, there are no loan agreements, credit
agreements, guarantees, notes, mortgages, deeds of trust, subordination
agreements, pledges, powers of attorney, consents, assignments, Contracts,
notices, leases, security agreements or similar agreements or arrangements
by which ISONICS, any of the Company Subsidiaries or the Zinc Assets are
bound or in any way affected and neither ISONICS nor any of the Company
Subsidiaries is not in breach or default of any such agreements or
arrangements.
EXHIBIT B
<PAGE>
3. SEC DOCUMENTS
3.1 FILED DOCUMENTS. ISONICS has filed all forms, reports and
documents required to be filed by it with the Securities and Exchange
Commission (the "SEC") since its formation (collectively, the "ISONICS SEC
Reports"). As of their respective dates, except as set forth in SCHEDULE
B3.1, the ISONICS SEC Reports filed prior to the date hereof (i) complied
as to form in all material respects with the applicable requirements of
the Securities Act, the Exchange Act, and the rules and regulations
thereunder and (ii) did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. The
representation in clause (ii) of the preceding sentence shall not apply to
any misstatement or omission in any ISONICS SEC Report filed prior to the
date of this Agreement which was superseded by a subsequent ISONICS SEC
Report filed prior to the date of this Agreement. No Company Subsidiary
is required to file any report, form or other document with the SEC.
Except as set forth in SCHEDULE B3.1 neither ISONICS nor any Company
Subsidiary is a party or is subject to any note, bond, mortgage,
indenture, contract, lease, license, agreement, understanding, instrument,
bid or proposal that is required to be described in or filed as an exhibit
to any ISONICS SEC Report that is not described in or filed as an exhibit
to such ISONICS SEC Report as required by the Securities Act or the
Exchange Act, as the case may be. Except as disclosed on SCHEDULE B3.1,
no event has occurred prior to the date hereof as a consequence of which
ISONICS would be required to file a Current Report on Form 8-K pursuant to
the requirements of the Exchange Act as to which such a report has not
been timely filed with the SEC. Any reports, statements and registration
statements and amendments thereto (including, without limitation, Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports
on Form 8-K, as amended) filed by ISONICS with the SEC after the date
hereof shall be provided to E-P no later than the date of such filing.
3.2 FINANCIAL STATEMENTS. Each of the consolidated balance sheets
of ISONICS included in or incorporated by reference into the ISONICS SEC
Reports (including the related notes and schedules) fairly presents the
consolidated financial position of ISONICS and the Company Subsidiaries as
of its date, and each of the consolidated statements of income, retained
earnings and cash flows of ISONICS included in or incorporated by
reference into the ISONICS SEC Reports (including any related notes and
schedules) fairly presents the results of operations, retained earnings or
cash flows, as the case may be, of ISONICS and the Company Subsidiaries
for the periods set forth therein (subject, in the case of unaudited
statements, to normal year-end audit adjustments which would not be
material in amount or effect), in each case in accordance with GAAP
consistently applied during the periods involved, except as may be noted
therein. Neither ISONICS nor any of the Company Subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) that would be required to be reflected on, or
reserved against in, a balance sheet of ISONICS or in the notes thereto,
prepared in accordance with GAAP consistently applied, except for (i)
liabilities or obligations that were so reserved on, or reflected in
(including the notes to), the consolidated balance sheet of ISONICS as of
April 30, 1999;
EXHIBIT B
<PAGE>
(ii) liabilities or obligations arising in the ordinary course of
business since April 30, 1999 and (iii) liabilities or obligations which
would not, individually or in the aggregate, have a Material Adverse
Effect.
3.3 ABSENCE OF CERTAIN CHANGES. Since July 31, 1999, except as
disclosed in the ISONICS 1934 Act Reports, there has not been (i) any
event, occurrence, fact, condition, change, development or effect
("Event") that has had a Material Adverse Effect on ISONICS or the DZ
Business; (ii) any declaration, payment or setting aside for payment of
any dividend (except to ISONICS or a Company Subsidiary wholly owned by
ISONICS) or other distribution or any redemption, purchase or other
acquisition of any shares of capital stock or securities of ISONICS or any
Company Subsidiary; (iii) any return of any capital or other distribution
of assets to stockholders of ISONICS or any Company Subsidiary (except to
ISONICS or a Company Subsidiary wholly owned by ISONICS); (iv) any
acquisition (by merger, consolidation, acquisition of stock or assets or
otherwise) of any person or business; (v) any other action or agreement or
undertaking by ISONICS or any Company Subsidiary that, if taken or done on
or after the date hereof would reasonably be expected to have a Material
Adverse Effect; (vi) any material change in ISONICS' accounting
principles, practices or methods; or (vii) any material loss or
destruction of, or material amount of damage to, the Zinc Assets.
4. BOOKS AND RECORDS. The regular books of account of ISONICS fairly
and accurately reflect all transactions since July 31, 1999, and are true,
correct and complete.
5. LAWSUITS AND PROCEEDINGS. Except as set forth in the ISONICS 1934
Act Reports or on SCHEDULE B5, there is no suit, claim, action, civil or
criminal investigation or proceeding before or involving any court (at law or in
equity), arbitration or mediation panel, or Governmental Authority involving
ISONICS or any of Company Subsidiaries, and ISONICS is not aware of the
existence of facts or circumstances the consequence of which reasonably could be
expected to lead to any such suit, claim, action, audit or investigation,
pending or threatened against ISONICS or any of the Company Subsidiaries
including but not limited to, OSHA claims, workers' compensation claims,
employment discrimination claims, wage and hour claims, claims arising from or
relating to the violation of Environmental Laws or the handling of or disposal
of Hazardous Materials, claims arising out of laws, rules or regulations
relating to government contractors generally or under any government contract
laws or claims involving disputes between employees and ISONICS. Neither
ISONICS nor any Company Subsidiaries is in default with respect to any decree,
injunction or other order of any court or Governmental Authority.
EXHIBIT B
<PAGE>
6. SUBSIDIARIES.
6.1 Except as set forth in the ISONICS 1934 Act Reports or
SCHEDULE B6.1, ISONICS has no Subsidiaries and does not otherwise directly
or indirectly control any other business entity.
6.2 Each Company Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction
of its incorporation, has the corporate power and authority to own its
properties and to carry on its business as it is now being conducted, and
is duly qualified to do business and is in good standing in each
jurisdiction in which the ownership of its property or the conduct of its
business requires such qualification, except for jurisdictions in which
such failure to be so qualified or to be in good standing would not,
individually or in the aggregate, have a Material Adverse Effect. The
copies of the Certificates of Incorporation and Bylaws of ISONICS and the
Company Subsidiaries previously made available to E-P are true and
correct.
6.3 Except as set forth in the ISONICS 1934 Act Reports SCHEDULE
B6.3, ISONICS owns directly or indirectly all of the outstanding shares of
capital stock (or other ownership interests having by their terms ordinary
voting power to elect a majority of directors or others performing similar
functions with respect to such Company Subsidiary) of each of the Company
Subsidiaries. Each of the outstanding shares of capital stock of each of
the Company Subsidiaries is duly authorized, validly issued, fully paid
and nonassessable, and is owned, directly or indirectly, by ISONICS.
Except as set forth in SCHEDULE B6.3, each of the outstanding shares of
capital stock of each Company Subsidiary is owned, directly or indirectly,
by ISONICS free and clear of all liens, pledges, security interests,
claims or other encumbrances other than liens imposed by local law which
are not material. There are no irrevocable proxies, voting agreements or
similar obligations with respect to such capital stock of the Company
Subsidiaries, and no equity securities or other interests of any of the
Company Subsidiaries are or may become required to be issued or purchased
by reason of any options, warrants, rights to subscribe to, puts, calls,
reservation of shares of commitments of any character whatsoever relating
to, or securities or rights convertible into or exchangeable for, shares
of any capital stock of any Company Subsidiary, and there are no
contracts, commitments, understandings or arrangements by which any
Company Subsidiary is bound to issue additional shares of its capital
stock, or options, warrants or rights to purchase or acquire any
additional shares of its capital stock or securities convertible into or
exchangeable for such shares. The ISONICS 1934 Act Reports or SCHEDULE
B6.3, sets forth the following information for each Company Subsidiary, if
applicable: (i) its name and jurisdiction of incorporation or
organization; (ii) its authorized capital stock or share capital;
(iii) the number of issued and outstanding shares of capital stock or
share capital, and (iv) the percentage of such shares owned by ISONICS.
6.4 Except as set forth in the ISONICS 1934 Act Reports or
SCHEDULE B6.4, except for interests in the Company Subsidiaries, neither
ISONICS nor any Company Subsidiary owns directly or indirectly any
interests or investment (whether equity or debt) in any corporation,
partnership, joint venture, business, trust or entity.
EXHIBIT B
<PAGE>
7. COMPLIANCE WITH LAWS. Each of ISONICS and each Company
Subsidiary has, in all material respects, conducted its business (including
the DZ Business) and maintained its assets (including the Zinc Assets) in
compliance with all (and has not received notice of a claimed violation of
any) Applicable Laws and all orders, judgments and decrees of any court or
Governmental Authority applicable to, binding upon or affecting ISONICS or
any of its assets. All equipment owned, leased or used by ISONICS or any
Company Subsidiary, including the Zinc Assets, conforms in all material
respects with all Applicable Laws (including, without limitation all fire,
health and safety regulations). No ordinance or law, administrative
regulation or any other impediment of any kind prohibits, interferes with,
limits or impairs, or could, if enforced, prohibit, interfere with, limit or
impair the use, operation or maintenance of the Zinc Assets or the conduct of
the DZ Business.
8. LICENSES AND PERMITS. ISONICS and the Company Subsidiaries
possess all licenses, permits, and other governmental consents, certificates,
approvals, or other authorizations (the "Permits") necessary for the
operation of their business at the locations and in the manner presently
operated. Except as set forth on SCHEDULE B8, (a) ISONICS and each of the
Company Subsidiaries have complied with the terms and conditions of all
Permits and all such Permits are in full force and effect and (b) there has
occurred no event nor is any event, action, investigation or proceeding
pending or threatened which could cause or permit revocation or suspension of
or otherwise adversely affect the maintenance of any Permits. Except with
respect to the Encumbrances created by the loan agreement with Coast Business
Credit (which will be repaid, and which Encumbrances will be released, at the
Closing with the proceeds to be paid to ISONICS), there are no provisions in,
or other Contracts to which ISONICS or any of the Company Subsidiaries is a
party relating to, any Permits which would preclude or limit E-P from
acquiring and operating the Zinc Assets substantially as they are now
operated. ISONICS has delivered to E-P copies of all filings made by it in
connection with the TSCA registration of depleted zinc oxide.
9. INSURANCE. ISONICS and each of the Company Subsidiaries have in
force and effect policies of fire, casualty, liability, worker's
compensation, life and other forms of insurance standard for its industries.
Neither ISONICS nor any of the Company Subsidiaries is in default with
respect to any provision contained in any insurance policy nor has ISONICS or
any of the Company Subsidiaries failed to give any notice or present any
claim thereunder in due and timely fashion and no cancellation or non-renewal
has been threatened or occurred with respect to any policy. ISONICS and each
of the Company Subsidiaries have currently, and during each of its two past
fiscal years have had, in full force and effect, all insurance coverages
required by Applicable Law and have not been denied any insurance coverage
for which they have applied.
10. INTELLECTUAL PROPERTY. The Yale License is the only Intellectual
Property material to ISONICS and the Company Subsidiaries. To the knowledge
of ISONICS, the Yale License is valid and enforceable and does not infringe
upon, conflict with, or violate the rights of others, and neither ISONICS nor
any Company Subsidiary has received any notice or claim, and no proceedings
are pending or threatened, that the Yale License is not valid or enforceable
or that ISONICS or any Company Subsidiary has infringed upon, conflicted with
or violated any Intellectual Property of any third party. Neither ISONICS
nor any Company Subsidiary has
EXHIBIT B
<PAGE>
given any notice to a third party, and is not aware, that any Intellectual
Property has been infringed upon, conflicted with or violated. The use by
ISONICS and the Company Subsidiaries of the Yale License as it is presently
used does not violate the terms thereof and the Yale License is adequate and
enforceable and in full force and effect.
11. BROKER AND FINDER FEES. Neither ISONICS nor any Company
Subsidiary has engaged any broker or finder in connection with this
transaction, and no action by any of the foregoing will cause or support any
claim to be asserted against E-P by any broker, finder or intermediary in
connection with the Contemplated Transactions.
12. ENVIRONMENTAL MATTERS. Except as set forth on SCHEDULE B12 or in
the ISONICS 1934 Act Reports, to the knowledge of ISONICS:
12.1 The facilities occupied or used by ISONICS or any Company
Subsidiary and any real property presently or formerly owned by, used by
or leased to or by ISONICS or any Company Subsidiary or any predecessor of
ISONICS or any Company Subsidiary (collectively, the "Property"), the
existing and prior uses of such Property and all operations of the
businesses of ISONICS and each Company Subsidiary comply and have at all
times complied in all material respects with all Environmental Laws, and
ISONICS and each Company Subsidiary is not in violation of nor has it
violated, in connection with the ownership, use, maintenance or operation
of such Property or the conduct of its business, any Environmental Law.
12.2 ISONICS and each Company Subsidiary have all permits,
registrations, approvals and licenses required by any Governmental
Authority or Environmental Law.
12.3 There has been no spill, discharge, leak, emission, injection,
disposal, escape, dumping or release of any kind on, beneath or above such
Property or into the environment surrounding such Property of any
Hazardous Materials or any other similar event or condition which has
given rise to or will give use to liability on the part of ISONICS or any
Company Subsidiary.
13. ENVIRONMENTAL REPRESENTATIONS. Except as set forth in SCHEDULE B13:
13.1 There has been no past, and there is no current or anticipated
storage, disposal, generation, manufacture, refinement, transportation,
production or treatment of any Hazardous Materials at, upon or from such
Property. No asbestos-containing materials, underground storage tanks or
polychlorinated biphenyls ("PCBs") are located on such Property.
13.2 There are no claims, notices of violations, notice letters,
investigations, inquiries or other proceedings now pending or threatened
by any Governmental Authority or third party with respect to the DZ
Business, the other businesses of ISONICS or any Company Subsidiary, or
any Property in connection with any actual or alleged failure to comply
with any requirement of any Environmental Law.
EXHIBIT B
<PAGE>
14. ZINC ASSETS. ISONICS has good and marketable title to the Zinc
Assets, free and clear of all Encumbrances except for the Encumbrance to
Coast Business Credit (which will be released at Closing), and Encumbrances
for personal property taxes not yet due and payable. The Zinc Assets
constitute all operating assets owned by ISONICS or any of its Subsidiaries
which are necessary to conduct the DZ Business in the manner previously
conducted by ISONICS.
15. TAX RETURNS AND TAXES.
15.1 All Tax Returns required to be filed by or on behalf of
ISONICS or any Company Subsidiary have been duly filed and such Tax
Returns are complete and accurate in all material respects. All Taxes
with respect to ISONICS and each Company Subsidiary or its assets shown to
be payable on the Returns or on subsequent assessments with respect
thereto have been paid in full, and no other Taxes are payable by ISONICS
with respect to ISONICS or its assets. There are no liens on any of
ISONICS' assets with respect to Taxes, other than liens for Taxes not yet
due and payable. For the purposes of the foregoing:
(a) "Returns" means all reports, estimates, declarations of
estimated tax, information statements and returns relating to, or required
to be filed in connection with, any Taxes, including information returns
or reports with respect to backup withholding and other payments to third
parties; and
(b) "Tax" means any tax imposed of any nature including federal,
state, local or foreign net income tax, alternative or add-on minimum tax,
profits or excess profits tax, franchise tax, gross income, adjusted gross
income or gross receipts tax, employment related tax (including employee
withholding or employer payroll tax, FICA, or FUTA), real or personal
property tax or ad valorem tax, sales or use tax, excise tax, stamp tax or
duty, any withholding or backup withholding tax, value added tax,
severance tax, prohibited transaction tax, premiums tax, occupation tax,
together with any interest or any penalty, addition to tax or additional
amount imposed by any governmental authority responsible for the
imposition of any such tax.
15.2 Except as disclosed in SCHEDULE B15, there are no agreements,
waivers of statutes of limitations, or other arrangements providing for
extensions of time in respect of the assessment or collection of any unpaid
Taxes against ISONICS or any Company Subsidiary.
16. ERISA AND EMPLOYEE BENEFIT PLANS.
16.1 REPRESENTATIONS.
(a) No Employee of ISONICS or any Company Subsidiary is a member
of any collective bargaining unit; neither ISONICS nor any Company
Subsidiary is a party to any union agreement covering the Employees and no
union organizing activities are taking place or have taken place within
the past two years; nor does ISONICS or any Company Subsidiary have any
employment agreements with any of its Employees except as described in the
ISONICS 1934 Act Reports.
EXHIBIT B
<PAGE>
(b) Except as set forth in the ISONICS 1934 Act Reports and the
Financial Statements contained therein, neither ISONICS nor any Company
Subsidiary is liable for any arrearage of wages, any accrued or vested
vacation pay or any tax or penalty for failure to comply with any
applicable local, state or federal law relating to employment or labor,
and there is not a controversy pending, threatened or in prospect between
ISONICS or any Company Subsidiary and its Employees nor does ISONICS or
any Company Subsidiary have knowledge that there is any basis for such a
controversy.
(c) Completion of the Contemplated Transactions will not (A)
entitle any individual to any bonus, incentive or severance pay or
payments, (B) accelerate the time of payment or vesting of any benefit
under any Plan, increase the amount of compensation due to any individual
following Closing, or increase any benefits otherwise payable under any
Employee Plan, or (C) result in the payment of an amount subject to the
provisions of Section 280G of the Internal Revenue Code of 1986 (the
"Code").
(d) Each of ISONICS and the Company Subsidiaries is in compliance
in all material respects with all laws respecting occupational health and
safety, employment, employment practices, and terms and conditions of
employment, wages and hours, and is not engaged in any unfair labor
practice and there is not now pending or threatened any charge or
complaint against ISONICS or any Company Subsidiary by any governmental
labor or employment agency or any representative thereof, and the
completion of the Contemplated Transactions will not result in any such
charge or complaint.
(e) Each of ISONICS or any Company Subsidiary is in compliance in
all material respects with the provisions of ERISA related to the
operation and maintenance of Employee Benefit Plans. Each Benefit
Arrangement is in material compliance with its terms and with the
requirements prescribed by any and all statutes, orders, rules and
regulations which are applicable to such Benefit Arrangement, including
without limitation the Code.
16.2 For the purposes of the foregoing, the following definitions
apply:
(a) "Benefit Arrangement" means each employment, severance,
continuation pay, termination pay, layoff, or other similar written
contract, arrangement or policy and each written plan or arrangement
providing for health, medical, life or other welfare or fringe benefit
coverage (including any insurance, self-insurance or other arrangements),
workers' compensation, severance pay, retention agreements, disability
benefits, supplemental unemployment benefits, holiday, education or
vacation benefits, retirement benefits or deferred compensation,
profit-sharing, benefits in the event of a sale of ISONICS or any Company
Subsidiary or other change in the control, management or the ownership of
ISONICS or any Company Subsidiary, bonuses, stock options, stock
appreciation rights and other forms of incentive compensation or
post-retirement insurance, compensation or benefits which (i) is not an
Employee Plan, (ii) is or has been entered into, maintained, administered
or contributed to, as the case may be, by ISONICS or any of its Affiliates
and (iii) covers any Employee and/or Beneficiary or for which an
EXHIBIT B
<PAGE>
Employee of ISONICS or any Company Subsidiary would be eligible upon
retirement or other termination of service.
(b) "Beneficiary" means any Person who, at Closing, is not an
Employee of ISONICS or any Company Subsidiary but who is the spouse,
former spouse, dependent or beneficiary of an Employee if that spouse,
dependent or beneficiary is or may become entitled to any coverage or
benefit (whether or not contingent) provided under any Employee Plan or
Benefit Arrangement as a result of that Person's relationship to an
Employee.
(c) "Employee" means any Person who is actively employed as a
common law employee or as an independent contractor by ISONICS or any
Company Subsidiary or who, with respect to ISONICS or any Company
Subsidiary, is on vacation, approved illness absence, long-term
disability, authorized leave of absence (including leave under the Family
and Medical Leave Act) or military service leave of absence as of the
Closing Date.
(d) "Employee Plan" means each "employee benefit plan", as such
term is defined in Section 3(3) of ERISA, which (i) is subject to any
provision of ERISA, (ii) is or has been entered into, maintained,
administered or contributed to by ISONICS or any of its Affiliates, and
(iii) covers any Employee, Beneficiary or both, or for which an Employee
would be eligible upon retirement or other termination of service.
(e) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
17. ADVERSE BUSINESS CONDITIONS. Except as disclosed in the ISONICS
1934 Act Reports, ISONICS has no knowledge or information of any conditions,
facts, developments or circumstances which would have a Material Adverse
Effect upon ISONICS and its Subsidiaries, taken as a whole. Except as
disclosed in the ISONICS 1934 Act Reports, without limiting the foregoing,
ISONICS has no knowledge of any written or oral communication, fact, event or
action that exists or has occurred that would tend to indicate that (i) any
customer will terminate its business relationship with ISONICS or any Company
Subsidiary or, following Closing, E-P in respect of the DZ Business, or (ii)
any current supplier to ISONICS or any Company Subsidiary will terminate its
business relationship with ISONICS or any Company Subsidiary or, following
Closing, E-P in respect of the DZ Business.
18. YEAR 2000. All of the computer software programs, databases and
compilations, computer hardware (whether general or special purpose), and
other similar or related items of automated, computerized, and software
system that are used or relied on by ISONICS or a Company Subsidiary in the
conduct of its business will not malfunction, will not cease to function,
will not generate incorrect data, and will not provide incorrect results when
processing, providing, or receiving date-related data into and between the
twentieth and twenty-first centuries, except for such problems which
collectively would not have a Material Adverse Effect.
19. NO DISCRIMINATION. Neither ISONICS (or any Company Subsidiary)
nor any
EXHIBIT B
<PAGE>
Employee of ISONICS (or any Company Subsidiary) has (i) committed any unfair
labor practice, (ii) discriminated against any Employee or any other Person
whether or not an Employee, based on that Employee's or Person's age, race,
creed, color, sex, religion, handicap or disability, or (iii) received any
complaints or notices from any Employee, other Person, or any Governmental
Authority alleging any such act.
20. EMPLOYMENT OBLIGATIONS. Except as described in the ISONICS 1934
Act Reports, neither ISONICS nor any of the Company Subsidiaries has any
material obligations, contingent or otherwise, under any employment,
severance or consulting agreement.
21. CONTRACTS. Except as set forth in the ISONICS 1934 Act Reports or
SCHEDULE B21, neither ISONICS nor any Company Subsidiary is a party or is
subject to, and their property and assets are not bound or affected by, any
contract which is material to the business or financial condition of ISONICS,
the DZ Business or the DZ Assets (a "Company Material Contract"). Except as
set forth in SCHEDULE B21, all Company Material Contracts are or will be
valid and binding and are or will be in full force and effect and enforceable
in accordance with their respective terms. Except as set forth in SCHEDULE
B21, no consent of any person is needed in order that each such Company
Material Contract shall continue in full force and effect in accordance with
its terms without penalty, acceleration or rights of early termination by
reason of the consummation of the transactions contemplated by this
Agreement, except for consents the absence of which, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse
Effect. Neither ISONICS nor any Company Subsidiary is in violation or breach
of or default under any such Company Material Contract, nor to ISONICS'
knowledge is any other party to any such Company Material Contract in
violation or breach of or default under any such Company Material Contract,
in each case where such violation or breach would give rise to a right of
termination or modification. For purposes of this Agreement "Government Bid"
shall mean any quotation, bid or proposal submitted to any Governmental Body
or any proposed prime contractor or higher-tier subcontractor of any
Governmental Body. For purposes of this Agreement "Government Contract"
shall mean any prime contract, subcontract, letter contract, purchase order
or delivery order executed or submitted to or on behalf of any Governmental
Body or any prime contractor or higher-tier subcontractor, or under which any
Governmental Body or any such prime contractor or subcontractor otherwise has
or may acquire any right or interest.
22. FULL DISCLOSURE. The representations and warranties made herein
by ISONICS do not contain any untrue statement of material fact and do not
omit to state any material fact necessary to make any statement, in light of
the circumstances under which the statement is made, not misleading.
EXHIBIT B
<PAGE>
EXHIBIT C
REPRESENTATIONS AND WARRANTIES
OF E-P
E-P hereby represents and warrants to ISONICS as follows:
1. ORGANIZATION AND GOOD STANDING. E-P is a limited liability
company duly organized, validly existing and in good standing under the laws
of the State of Delaware and has full power and authority to carry on its
business as it is now being conducted.
2. EXECUTION AND EFFECT OF AGREEMENT. E-P has the power and
authority to enter into this Agreement and to perform the obligations to be
performed by E-P hereunder, and the execution and delivery of this Agreement
and the completion of the Contemplated Transactions hereby have been duly
authorized by all necessary action. This Agreement has been duly executed
and delivered by E-P and constitutes a legal, valid and binding obligation of
E-P, enforceable against E-P in accordance with its terms, subject to
limitations on enforceability under bankruptcy and insolvency laws and
principles of equity.
3. RESTRICTIONS. Neither the execution and delivery of this
Agreement nor the completion of the Contemplated Transactions hereby will
violate any of the provisions of the Certificate of Formation and Operating
Agreement of E-P.
4. CONSENTS. Except as set forth on SCHEDULE C4, no consent or
approval of any court, governmental agency or other public authority, or of
any other person, corporation or entity is required as a condition to (a) the
validity or enforceability of this Agreement or any other instruments to be
executed by E-P to effectuate this Agreement, or (b) the completion or
validity of any of the transactions contemplated by this Agreement, except
for consents or approvals contemplated by this Agreement.
5. LAWSUITS AND PROCEEDINGS. There is no suit, claim, action, civil
or criminal investigation or proceeding before or involving any court (at law
or in equity), arbitration or mediation panel or Governmental Authority
involving E-P or any of its Affiliates and, to E-P's knowledge, no such
proceeding is threatened, that would limit or prohibit its ability to perform
its ability to execute, deliver and perform this Agreement and the
Contemplated Transactions.
6. BROKER AND FINDER FEES. Neither E-P nor any Affiliate of E-P has
engaged any broker or finder in connection with this transaction, and no
action by E-P or any Affiliate will cause or support any claim to be asserted
against ISONICS by any broker, finder or intermediary in connection with the
Contemplated Transactions.
7. RISKS OF FUTURE OPERATIONS. E-P understands that the future
conduct of ISONICS' business is dependent upon a number of factors, including
historic working capital shortages, an existing default in the indebtedness
owed to Coast Business Credit, and the other factors set forth in the ISONICS
SEC Reports and elsewhere herein, and there is no assurance that ISONICS
will be able to conduct its operations as contemplated in this Agreement or
any other information given to E-P. In that connection, E-P understands that
certain statements
EXHIBIT C
<PAGE>
contained herein, in the ISONICS SEC Reports, and which have been given to
E-P using the terms "may", "expects to", and other terms denoting future
possibilities, are forward-looking statements. The accuracy of these
statements cannot be guaranteed as they are subject to a variety of risks
which are beyond ISONICS' ability to predict or control. These risks may
cause actual results to differ materially from the projections or estimates
contained in this report. These risks include, but are not limited to, the
possibility that the described operations or other activities will not be
completed on economic terms, if at all, and the other risks described herein
and the other documents incorporated herein or attached hereto. It is
important that E-P understands the significant risks which accompany the
establishment of a new business and the proposed conduct of ISONICS' future
operations.
8. REVIEW OF INFORMATION.
8.1 E-P represents and warrants that it has reviewed the ISONICS
SEC Reports and such other information regarding ISONICS which E-P, its
management and advisors, have deemed necessary or appropriate in
connection with the Silicon Purchase and the acquisition of the warrant to
purchase ISONICS common stock. E-P acknowledges that information about
ISONICS is available on the EDGAR Web site maintained by the Securities
and Exchange Commission (http://www.sec.gov), although all of such
information is subject to the qualifications set forth therein. E-P
acknowledges that ISONICS will continue to file reports with the
Securities and Exchange Commission and that such reports will contain more
current information regarding ISONICS than set forth above. E-P
acknowledges that such information will be available on the Web sites
described above, and ISONICS will provide E-P copies of such information
upon telephonic or written request.
8.2 E-P represents that it has conducted such due diligence
investigation of the market for depleted zinc and the DZ Business, and
that in determining to purchase the DZ Business it has relied solely on
its own investigation into the DZ Business and on the express
representations and warranties of ISONICS in this Agreement.
8.3 ISONICS has given E-P the opportunity to ask questions of and
to receive answers from persons acting on ISONICS' behalf concerning
ISONICS, its business, management, financial condition, and the ISONICS
SEC Reports, and the opportunity to obtain any additional information
regarding ISONICS, its business and financial condition which ISONICS
possesses or can acquire without unreasonable effort or expense including
(without limitation) all minutes of meetings of the Board of Directors of
the Company or committees thereof, and other relevant documents requested
by E-P. In addition, E-P has (or prior to the Closing will have)
conducted such other financial or other inquiry as E-P deems necessary or
appropriate in the conduct of E-P's due diligence investigation and has
not relied on due diligence of any other party in connection herewith.
8.4 E-P acknowledges and understands, however, that ISONICS has
not authorized any person to make any statements on its behalf which would
in any way contradict any of the information which ISONICS has provided to
E-P in writing,
EXHIBIT C
<PAGE>
including the information set forth in this Agreement or documents which
are incorporated herein, and E-P further represents to ISONICS that E-P
has not relied upon any such representations regarding ISONICS, its
business or financial condition, or this transaction in making any
decision to acquire the Warrant or to complete the Contemplated
Transactions.
8.5 E-P has reviewed the terms of this Agreement and all of the
documents delivered in connection herewith or otherwise referenced herein
with its legal, investment, tax, and financial advisors, and E-P has also
consulted with such advisors with regard to the advisability of this
investment to the extent E-P deems such consultation to be appropriate.
E-P acknowledges that ISONICS has advised E-P that it recommends that E-P
obtain such advice and consultation. E-P further acknowledges that it has
neither sought nor received any advice from ISONICS or any of its agents
or affiliates with respect to any aspect of this Agreement or completion
of the Contemplated Transactions.
9. LACK OF LIQUIDITY. E-P acknowledges and understands that
although ISONICS common stock is currently trading on the over-the-counter
market and is quoted on the OTC Bulletin Board operating by the National
Association of Securities Dealers, Inc. (the "OTCBB"), such market is
extremely limited and volatile, and the continuation of that market on the
OTCBB or elsewhere is dependent on a number of factors beyond the control of
ISONICS and, consequently, there can be no assurance that the market for
ISONICS's common stock will continue. Because ISONICS's common stock is
traded on the OTCBB, many broker-dealers will not participate in the market
for ISONICS's common stock and those that do participate may do so only in
compliance with the limitations established by strict rules promulgated by
the SEC (including without limitation Rule 15c2-6) and the National
Association of Securities Dealers, Inc. (the "NASD"), which rules may change
from time-to-time as deemed necessary or appropriate by the SEC or the NASD
to protect the public interest as such agencies determine "public interest"
to be.
10. ACCREDITED INVESTOR. E-P has reviewed the definition of the term
"accredited investor" contained in Section 2(a)(15) of the Securities Act and
in Rules 215 and 501(a) thereunder. Based on that review and the advice of
its legal advisors, E-P represents and warrants that it is an accredited
investor as defined in those provisions.
11. INVESTMENT REPRESENTATION. E-P is acquiring the Warrant pursuant
to this Agreement for its own account and not on behalf of any other Person
or entity, or with a view to or for sale in connection with any distribution
other than in accordance with federal and state securities laws. E-P has
received all information regarding ISONICS that has been requested. E-P
further represents that it has had an opportunity to ask questions and
receive answers from ISONICS regarding the terms and conditions of the
proposed acquisition of the Warrant. E-P has experience as an investor in
securities of companies and acknowledge that it can bear the economic risk of
its investment in the ISONICS Warrant. E-P has, by reason of its business or
financial experience or financial experience of its professional advisors who
are unaffiliated with, and who are not compensated by, ISONICS or any
Affiliate thereof, directly or indirectly, the capacity to protect its
interest in connection with the acquisition of the Warrant. E-P has the
EXHIBIT C
<PAGE>
financial capacity to bear the risk of its investment.
12. RESTRICTED NATURE OF UNDERLYING COMMON STOCK. E-P understands
that the shares of ISONICS common stock issuable upon exercise of the Warrant
are not, and will not be, registered. Therefore, E-P will only be able to
exercise the Warrant to the extent an exemption from registration for the
exercise exists under federal law and applicable state law at the time of
exercise. Consequently, should E-P exercise the Warrant E-P will be acquiring
shares of common stock which are "restricted" and E-P will be required to
execute an appropriate investment letter as a condition to the exercise of
the Warrant. ISONICS may, in its discretion, require E-P to make additional
representations and warranties which are, in its reasonable judgment,
necessary to establish the availability of an appropriate exemption from
registration.
13. LEGENDS AND STOP TRANSFER INSTRUCTION.
13.1 The Warrant and any certificates representing shares of common
stock issuable upon exercise of the Warrant will bear a legend
substantially similar to the following:
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or any state or foreign
securities laws and are therefore (and will continue to be) restricted
securities within the meaning of Rule 144 of the General Rules and
Regulations promulgated under the Securities Act of 1933, as amended (the
"Act"), and applicable state statutes. The securities cannot be sold
unless they are registered under the Act and any applicable state
securities laws or unless an exemption from such registration requirements
is available. The availability of such an exemption must be established
to the satisfaction of ISONICS. Consequently, the holder must bear the
economic risks of the investment in the securities for an indefinite
period of time because they have not been registered under the Act or any
state securities laws. ISONICS is the only person which may register the
securities under the Act and state securities statutes and ISONICS has not
made any representations to the holder regarding the registration of the
securities or compliance with Regulation A or some other exemption under
the Act. The holder will not sell or attempt to sell the securities
without registration under the Act and any applicable state securities
laws, unless exemptions from such registration requirements are available
and the undersigned has satisfied ISONICS that an exemption is available
for such sale.
13.2 ISONICS shall have the right to issue stop transfer
instructions to its transfer agent to bar the transfer of any of the
certificates representing the Warrant and the ISONICS common stock
issuable upon exercise of the Warrant except in accordance with the Act.
14. FULL DISCLOSURE. The representations and warranties made herein
by E-P do not contain any untrue statement of material fact and do not omit
to state any material fact necessary to make any statement, in light of the
circumstances under which the statement is made, not misleading.
EXHIBIT C
<PAGE>
Void after December 1, 2003 Warrant No. EP-1
Eagle-Picher Technologies, LLC to acquire 4,000,000 shares
This Warrant and any shares acquired upon the exercise of this
Warrant have not been registered under the Securities Act of 1933.
This Warrant and such shares may not be sold or transferred in the
absence of such registration or an exemption therefrom under said
Act which exemption must be established to the reasonable
satisfaction of the Company. This Warrant and such shares may not
be transferred except upon the conditions specified in this Warrant,
and no transfer of this Warrant or such shares shall be valid or
effective unless and until such conditions shall have been complied
with.
ISONICS CORPORATION
COMMON STOCK PURCHASE WARRANT
Isonics Corporation (the "Company"), having its principal office at
5906 McIntyre Street, Golden, Colorado, 80403 hereby certifies that, for
value received, EAGLE-PICHER TECHNOLOGIES, LLC, or permitted assigns, is
entitled, subject to the terms set forth below, to purchase from the Company
at any time on or from time to time after the date hereof (the "Original
Issue Date") and before 5:00 P.M., New York City time, on May 30, 2003, or as
otherwise defined herein (the "Expiration Date"), 4,000,000 fully paid and
non-assessable shares of Common Stock of the Company, at the initial Purchase
Price per share (as defined below) of $3.75. The number and character of
such shares of Common Stock and the Purchase Price per share are subject to
adjustment as provided herein.
1. DEFINITIONS. As used herein the following terms, unless the
context otherwise requires, have the following respective meanings:
The term "Affiliate" means, with respect to any Person, (i) any
Person directly or indirectly controlling, controlled by, or under common
control with another Person, including, without limitation, any director or
executive officer thereof, or (ii) any family member of such controlling
Person. For purposes of determining whether a Person is an Affiliate, the
term ?control? shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through ownership of securities, contract or otherwise.
The term "Company" includes the Company and any corporation which
shall succeed to or assume the obligations of the Company hereunder.
The term "Common Stock" includes all stock of any class or
classes (however designated) of the Company, authorized upon the Original
Issue Date or thereafter, the holders of
<PAGE>
which shall have the right, without limitation as to amount, either to all or
to a share of the balance of current dividends and liquidating dividends
after the payment of dividends and distributions on any shares entitled to
preference, and the holders of which shall ordinarily, in the absence of
contingencies, be entitled to vote for the election of a majority of
directors of the Company (even though the right so to vote has been suspended
by the happening of such a contingency).
The term "Exchange Act" means the Securities Exchange Act of 1934
as the same shall be in effect at the time.
The term "Expiration Date" means the date set forth in the first
paragraph above.
The term "Holder" means any record owner of this Warrant or
Underlying Securities.
The term "Nasdaq" shall mean the Nasdaq Small Cap Market or other
principal market on which the Common Stock is traded.
The term "Original Issue Date" shall mean November 30, 1999.
The term "Person" shall mean any person or entity.
The term "Purchase Price per share" shall be the then applicable
exercise price for one share of Common Stock.
The term "Securities Act" means the Securities Act of 1933 as the
same shall be in effect at the time.
The term "Underlying Securities" shall mean any Common Stock or
other securities issued or issuable upon exercise of Warrants.
The term "Warrant" shall mean, as applicable, this Warrant or
each right as set forth in this Warrant to purchase one share of Common
Stock, as adjusted.
2. EXERCISE OF WARRANT.
2.1 EXERCISE IN FULL. Subject to the provisions hereof, this
Warrant may be exercised in full by the Holder hereof by surrender of this
Warrant, with the form of subscription at the end hereof duly executed by such
Holder, to the Company at its principal office accompanied by payment, in cash
or by certified or official bank check payable to the order of the Company, in
the amount obtained by multiplying the number of shares of Common Stock called
for on the face of this Warrant (without giving effect to any adjustment
therein) by the Purchase Price per share.
2.2 PARTIAL EXERCISE. Subject to the provisions hereof, this
Warrant may be
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<PAGE>
exercised in part by surrender of this Warrant in the manner and at the place
provided in Section 2.1 except that the amount payable by the Holder upon any
partial exercise shall be the amount obtained by multiplying (a) the number
of shares of Common Stock (without giving effect to any adjustment therein)
designated by the Holder in the subscription at the end hereof by (b) the
Purchase Price per share. No partial exercise may be accomplished for fewer
than 1,000,000 shares. Upon any such partial exercise, the Company at its
expense will forthwith issue and deliver to or upon the order of the Holder
hereof a new Warrant or Warrants of like tenor, in the name of the Holder
hereof or (upon payment by such Holder of any applicable transfer taxes) as
such Holder may request, calling in the aggregate on the face or faces
thereof for the number of shares of Common Stock equal (without giving effect
to any adjustment therein) to the number of such shares called for on the
face of this Warrant minus the number of such shares designated by the Holder
in the subscription at the end hereof.
2.3 EXERCISE BY SURRENDER OF WARRANT OR SHARES OF COMMON STOCK.
In addition to the method of payment set forth in Sections 2.1 and 2.2 and in
lieu of any cash payment required thereunder, the Holder of the Warrants
shall have the right at any time and from time to time to exercise the
Warrants in full or in part by surrendering shares of Common Stock or the
Warrant Certificate in the manner and at the place specified in Section 2.1
as payment of the aggregate Purchase Price per share for the Warrants to be
exercised. The number of Warrants or shares of Common Stock to be
surrendered in payment of the aggregate Purchase Price for the Warrants to be
exercised shall be determined by multiplying the number of Warrants to be
exercised by the Purchase Price per share, and then dividing the product
thereof by an amount equal to the Market Price (as defined below). As used
herein, the phrase "Market Price" at any date shall be deemed to be (i) if
the principal trading market for such securities is any exchange, the last
reported sale price, or, in case no such reported sale takes place on such
date, the last reported sale prices for the previous ten (10) trading days in
which a sale was reported, in either case as officially reported on any
consolidated tape, (ii) if the principal market for such securities is the
over-the-counter market, the high bid price on such trading days as set forth
by Nasdaq or, (iii) if the security is not quoted on Nasdaq, the high bid
price as set forth in the National Quotation Bureau sheet listing such
securities for such day. Notwithstanding the foregoing, if there is no
reported closing price or high bid price, as the case may be, on any of the
ten trading days preceding the event requiring a determination of Market
Price hereunder, then the Market Price shall be determined in good faith by
resolution of the Board of Directors of the Company, based on the best
information available to it.
2.4 EXERCISE PURSUANT TO EXEMPTION. The Holder may only
exercise the Warrant if, at the time of exercise, there is an exemption
available for the exercise of the warrant established under federal and
applicable state laws regulating the offer and sale of securities. The
Company agrees to cooperate with the Holder in establishing such exemption,
and the Company will provide the Holder with an investment letter prior to
the time of exercise to assist the Holder in establishing the availability of
appropriate exemptions.
3. DELIVERY OF STOCK CERTIFICATES, ETC., ON EXERCISE. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within fifteen business days thereafter, the Company at its own expense
(including the payment by it of any applicable issue taxes) will
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<PAGE>
cause to be issued in the name of and delivered to the Holder hereof, or as
such Holder (upon payment by such Holder of any applicable transfer taxes)
may direct, a certificate or certificates for the number of fully paid and
non-assessable shares of Common Stock to which such Holder shall be entitled
upon such exercise, plus, in lieu of any fractional share to which such
Holder would otherwise be entitled, cash equal to such fraction multiplied by
the then current Market Price of one full share, together with any other
stock or other securities and property (including cash, where applicable) to
which such Holder is entitled upon such exercise pursuant to Section 4 or
otherwise.
4. ADJUSTMENT FOR DIVIDENDS AND STOCK SPLITS. If the Company
shall at any time or from time to time while the Warrant is outstanding, pay
a dividend or make a distribution on its Common Stock in shares of Common
Stock, subdivide its outstanding shares of Common Stock into a greater number
of shares or combine its outstanding shares into a smaller number of shares
or issue by reclassification (or by way of a forward or reverse stock split)
of its outstanding shares of Common Stock any shares of its capital stock,
then the number of Warrant Shares purchasable upon exercise of the Warrant
and the Purchase Price per share in effect immediately prior to the date
upon which such change shall become effective, shall be adjusted by the
Company so that the Holder thereafter exercising the Warrant shall be
entitled to receive the number of shares of Common Stock or other capital
stock which the Holder would have received if the Warrant had been exercised
immediately prior to such event. Such adjustment shall be made successively
whenever any event listed above shall occur. An adjustment shall become
effective immediately after the record date in the case of each dividend or
distribution and immediately after the effective date of each other event
which requires an adjustment.
5. MERGER. If notice has been given as provided in Section 9, this
Warrant shall terminate upon the occurrence of a transaction described in
Section 9(b) with an entity which is not an Affiliate of the Company and in
which the stock of the Company is changed into the right to receive cash,
property or the securities of the other entity.
6. OTHER ADJUSTMENTS.
6.1 GENERAL. In any case in which Section 4 hereof is not
applicable, where the Company shall issue or sell shares of its Common Stock
after the Original Issue Date to any Affiliate of the Company (an ?Affiliate
Sale?) for a consideration per share less than the Purchase Price per share
then in effect (the "Prior Exercise Price") then the Purchase Price per share
in effect hereunder shall be decreased to an amount equal to the Prior
Exercise Price multiplied by a fraction, the numerator of which is the sum of
(x) the total number of shares of Common Stock outstanding immediately prior
to such issuance and (y) the number of shares of Common Stock which the
aggregate consideration received from Affiliates in the Affiliate Sale would
purchase at the Prior Exercise Price, and the denominator of which is the sum
of (a) the total number of shares of Common Stock outstanding immediately
prior to the Affiliate Sale plus (b) the number of shares of Common Stock
issued or deemed to be issued to Affiliates in the Affiliate Sale. In the
event of an adjustment to the Purchase Price per share under this Section
6.1, the number of shares of Common Stock issuable upon exercise hereof shall
be increased so that the aggregate exercise price of this Warrant is not
reduced as a result of such reduction of
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<PAGE>
Purchase Price per share.
6.2 CONVERTIBLE SECURITIES. (a) In case the Company shall
issue or sell any securities convertible into Common Stock of the Company
which would result in an adjustment pursuant to Section 4 or 6.1, above
("Convertible Securities") after the date hereof, there shall be determined
the price per share for which Common Stock is issuable upon the conversion or
exchange thereof, such determination to be made by dividing (a) the total
amount received or receivable by the Company as consideration for the issue
or sale of such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the conversion
or exchange thereof, by (b) the maximum number of shares of Common Stock of
the Company issuable upon the conversion or exchange of all of such
Convertible Securities.
(b) If the price per share so determined is nominal or zero,
then this Warrant shall be adjusted pursuant to Section 4 above. If the
price per share so determined is less than Prior Exercise Price and the
issuance is subject to Section 6.1 above, then the Warrant shall be adjusted
pursuant to Section 6.1 above, provided further, that upon the expiration of
such rights of conversion or exchange of such Convertible Securities, if any
thereof shall not have been exercised, the adjusted Purchase Price per share
shall forthwith be readjusted and thereafter be the price which it would have
been had an adjustment been made on the basis that the only shares of Common
Stock so issued or sold were issued or sold upon the conversion or exchange
of such Convertible Securities, and that they were issued or sold for the
consideration actually received by the Company upon such conversion or
exchange, plus the consideration, if any, actually received by the Company
for the issue or sale of all of such Convertible Securities which shall have
been converted or exchanged.
6.3 RIGHTS AND OPTIONS. (a) In case the Company shall grant
any rights or options to subscribe for, purchase or otherwise acquire Common
Stock, there shall be determined the price per share for which Common Stock
is issuable upon the exercise of such rights or options, such determination
to be made by dividing (i) the total amount, if any, received or receivable
by the Company as consideration for the granting of such rights or options,
plus the minimum aggregate amount of additional consideration payable to the
Company upon the exercise of such rights or options, by (ii) the maximum
number of shares of Common Stock of the Company issuable upon the exercise of
such rights or options.
(b) If the price per share so determined is nominal or zero,
then this Warrant shall be adjusted pursuant to Section 4 above. If the
price per share so determined is less than Prior Conversion Price and the
issuance is subject to Section 6.1 above, then the Warrant shall be adjusted
pursuant to Section 6.1 above, provided that, if such rights or options shall
by their terms provide for an increase or increases or decrease or decreases,
with the passage of time, in the amount of additional consideration payable
to the Company upon the exercise thereof, the adjusted Purchase Price per
share shall, forthwith upon any such increase or decrease becoming effective,
be readjusted and thereafter be the price which it would have been had an
adjustment been made on the basis that the only shares of Common Stock so
issued or sold were those issued or sold upon the exercise of such rights or
options and that they were issued or sold for the
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<PAGE>
consideration actually received by the Company upon such exercise, plus the
consideration, if any, actually received by the Company for the granting of
all such rights or options, whether or not exercised.
(c) The provisions of this Section 6.3 and Section 6.1 shall
not apply to any stock option, warrant or convertible security issued to an
Affiliate prior to the date hereof or any stock option hereafter issued to an
Affiliate at an exercise price per share not less than the Market Price on
the date of grant.
6.4 SILICON PURCHASE. If the Holder fails to perform in whole
or in part its obligations under Article III of the Asset Purchase Agreement
dated as of November 30, 1999 between the Holder and the Company, and such
failure continues for a period of 30 days after notice from the Company to
the Holder, the number of Underlying Securities shall be multiplied by a
fraction, the numerator of which is the quantity (in kiligrams) of Silicon-28
actually delivered in accordance with the provisions of such Article III and
the denominator of which is 200.
7. FURTHER ASSURANCES. The Company will take all such actions as
may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and non-assessable shares of stock upon the exercise
of all Warrants from time to time outstanding.
8. ACCOUNTANTS' CERTIFICATE AS TO ADJUSTMENTS. In each case of any
adjustment or readjustment in the shares of Common Stock issuable upon the
exercise of the Warrants, the Company at its expense will promptly cause the
Company's regularly retained auditor to compute such adjustment or
readjustment in accordance with the terms of the Warrants and prepare a
certificate setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based, and the
number of shares of Common Stock outstanding or deemed to be outstanding.
The Company will forthwith mail a copy of each such certificate to each
Holder.
9. NOTICES OF RECORD DATE, ETC. In the event of
(a) any taking by the Company of a record of the Holders of any
class of securities for the purpose of determining the Holders thereof who
are entitled to receive any dividend or other distribution, or any right
to subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any other right,
or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company
or any transfer of all or substantially all the assets of the Company to
or consolidation or merger of the Company with or into any other Person,
or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
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<PAGE>
then and in each such event the Company will mail or cause to be mailed to
each Holder of a Warrant a notice specifying
(i) the date on which any such record is to be taken for the
purpose of such dividend, distribution or right, and stating
the amount and character of such dividend, distribution or
right,
(ii) the date on which any such reorganization, reclassification,
recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up is to take place, and
the time, if any, as of which the Holders of record of
Underlying Securities (if the Warrant were exercised prior to
such date) shall be entitled to exchange their shares of
Underlying Securities for securities or other property
deliverable upon such reorganization, reclassification,
recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up, and
(iii) the amount and character of any stock or other securities, or
rights options with respect thereto, proposed to be issued or
granted, the date of such proposed issue or grant and the
Persons or class of Persons to whom such proposed issue or
grant is to be offered or made.
Such notice shall be mailed at least 20 days prior to the date therein
specified.
10. RESERVATION OF STOCK, ETC., ISSUABLE ON EXERCISE OF WARRANTS.
The Company will at all times reserve and keep available, solely for issuance
and delivery upon the exercise of the Warrants, all shares of Common Stock
(or other securities) from time to time issuable upon the exercise of the
Warrants.
11. LISTING ON SECURITIES EXCHANGES. In furtherance and not in
limitation of any other provision of this Warrant, if the Company at any time
shall list any Common Stock on any national securities exchange and shall
register such Common Stock under the Exchange Act, the Company will, at its
expense, simultaneously list the Underlying Securities on such exchange or
Nasdaq, upon official notice of issuance upon the exercise of the Warrants,
and maintain such listing of all shares of Common Stock from time to time
issuable upon the exercise of the Warrants; and the Company will so list on
any national securities exchange or Nasdaq, will so register and will
maintain such listing of, any Other Securities if and at the time that any
securities of like class or similar type shall be listed on such national
securities exchange or Nasdaq by the Company.
12. EXCHANGE OF WARRANTS. Subject to the provisions of Section 17,
upon surrender for exchange of any Warrant, properly endorsed, to the
Company, as soon as practicable (and in any event within three business days)
the Company at its own expense will issue and deliver to or upon the order of
the Holder thereof a new Warrant or Warrants of like tenor, in the name of
such Holder or as such Holder (upon payment by such Holder of any applicable
transfer taxes)
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<PAGE>
may direct, calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock called for on the face or faces of the
Warrant or Warrants so surrendered.
13. REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
any Warrant and, in the case of any such loss, theft or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount
to the Company or, in the case of any such mutilation, upon surrender and
cancellation of such Warrant, the Company at is expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
14. WARRANT AGENT. The Company may, by written notice to each Holder
of a Warrant, appoint an agent having an office in New York, New York or
Denver, Colorado, for the purpose of issuing Common Stock (or Other
Securities) upon the exercise of the Warrants pursuant to Section 2, exchange
of Warrants pursuant to Section 12, and replacement of Warrants pursuant to
Section 13, or any of the foregoing, and thereafter any such issuance,
exchange or replacement, as the case may be, shall be made at such office by
such agent.
15. REMEDIES. The Company stipulates that the remedies at law of the
Holder of this Warrant in the event of any default or threatened default by
the Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific performance of any
agreement contained herein or by an injunction against a violation of any of
the terms hereof or otherwise.
16. NOTICES, ETC. All notices and other communications from the
Company to the Holder of this Warrant shall be mailed by first class
registered or certified mail, postage prepaid, or overnight carrier service,
at such address as may have been furnished to the Company in writing by such
Holder, or, until an address is so furnished, to and at the address of the
last Holder of this Warrant who has so furnished an address to the Company.
17. COMPLIANCE WITH THE SECURITIES ACT OF 1933. Any transfer of this
Warrant or the Underlying Securities must be made in conformity with the
Securities Act of 1933, as amended, and then only against receipt of an
agreement of such Person to whom such offer or sale is made to comply with
the provisions of this Section 17 with respect to any resale or other
disposition of such security. The Company may cause the legend set forth on
the first page of this Warrant to be set forth on each Warrant or similar
legend on any security issued or issuable upon exercise of this Warrant,
unless counsel for the Company is of the opinion as to any such security that
such legend is unnecessary.
18. PAYMENT OF TAXES. The Company will not be obligated to pay or
provide for any income or other taxes which are assessable or which may
accrue on the exercise of the Warrant. The Holder shall be solely
responsible for income taxes due under federal or state law, if any such tax
is due.
19. OPTIONAL REDEMPTION OF WARRANTS
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<PAGE>
(a) The Company, at its option, may call the Warrants
represented by this Agreement, in whole or in part, for redemption upon not
less than 20 days' notice nor more than 60 days' notice at any time after the
Market Price shall have equaled or exceeded $7.50 per share for 20
consecutive trading days. The Redemption Price is and will be $.10 per
Warrant.
(b) In the event that fewer than all the outstanding Warrants
are to be redeemed, the shares to be redeemed will be determined pro rata or
by lot, in the sole discretion of the Company.
(c) The notice required by Subsection (a), above (the
"Redemption Notice"), must be in writing, and must set forth: (i) the
Redemption Date (which may be no less than 20 days nor more than 60 days
after the notice); (ii) the address to which any notification of exercise of
the Warrant prior to the Redemption Date must be sent; and (iii) other
information the Company determines to include in such notification.
(d) On or before any Redemption Date, the Holder must either
(i) exercise the Warrant in accordance with the terms hereof; or (ii)
surrender the Warrant for redemption to the Company in accordance with the
terms of the Redemption Notice.
(e) On the Redemption Date, regardless whether the Warrants
have been surrendered for redemption, all Warrants issued pursuant to this
Agreement which are subject to redemption pursuant to the Redemption Notice
and which have not been properly exercised prior to the Redemption Date shall
be deemed cancelled and of no further force and effect.
(f) On the first business day following the Redemption Date,
the Company shall pay or deliver to any Holder who has not exercised the
Warrant in accordance with the terms thereof (or who has only exercised the
Warrant in part) and who has delivered the Warrant to the Company in
accordance with the terms of the Redemption Notice, the full Redemption Price
due such Holder in cash.
(g) If fewer than all the Warrants represented by any Warrant
Agreement are to be redeemed, a new Warrant shall be issued representing the
unredeemed Warrants, without cost to the Holder.
(h) If any Holder whose Warrants are called for redemption
fails to surrender the Warrant representing such Warrants, such Holder shall
not be entitled to receive payment of the Redemption Price until the Warrant
has been surrendered for cancellation. Such Holder will not be entitled to
receive any interest on the Redemption Price from the Redemption Date.
20. MISCELLANEOUS. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by
the party against which enforcement of such change, waiver, discharge or
termination is sought. This Warrant is being delivered in the State of
Colorado and shall be construed and enforced in accordance with and governed
by the laws of the State of Delaware. The headings in this Warrant are for
purposes of
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<PAGE>
reference only, and shall not limit or otherwise affect any of the terms
hereof.
21. REGISTRATION, ETC. The Holder shall have the rights to
registration of Underlying Securities issuable upon exercise of the Warrants
that are set forth in the Registration Rights Agreement, dated the date
hereof between the Company and the first Holder of this Warrant (the
"Registration Rights Agreement").
22. SALE OR EXERCISE WITHOUT REGISTRATION. If, at the time of any
exercise, transfer or surrender for exchange of a Warrant or of Underlying
Securities previously issued upon the exercise of Warrants, such Warrant or
Underlying Securities shall not be registered under the Securities Act, the
Company may require, as a condition of allowing such exercise, transfer of
exchange, that the Holder or transferee of such Warrant or Underlying
Securities, as the case may be, furnish to the Company a satisfactory opinion
of counsel to the effect that such exercise, transfer or exchange may be made
without registration under the Securities Act, provided that the disposition
thereof shall at all times be within the control of such Holder or
transferee, as the case may be, and provided further that nothing contained
in this Section 21 shall relieve the Company from complying with any request
for registration pursuant to the Registration Rights Agreement. The first
Holder of this Warrant, by acceptance hereof, represents to the Company that
it is acquiring the Warrants for investment and not with a view to the
distribution thereof.
23. COMPANY TO REAFFIRM OBLIGATIONS. The Company will, at the time
of any exercise of this Warrant, upon the request of the Holder hereof,
acknowledge in writing its continuing obligation to afford to such Holder
hereof, acknowledge in writing its continuing obligation to afford to such
Holder any rights (including, without limitation, any right to registration
of the Underlying Securities) to which such Holder shall continue to be
entitled after such exercise in accordance with the provisions of this
Warrant, provided that if the Holder of this Warrant shall fail to make any
such request, such failure shall not affect the continuing obligation of the
Company to offer such Holder any such rights.
24. EXTENDED EXPIRATION. The right to exercise this Warrant shall
expire at 5:00 P.M., New York City time, on the Expiration Date, provided,
however, that if the Holders of Warrants issued hereunder have, in accordance
with the terms thereof, requested a registration statement pursuant to the
Registration Rights Agreement of ninety (90) days or more prior to the
Expiration Date and such registration statement has not become effective
prior to the Expiration Date then the right to exercise this Warrant shall be
extended and shall expire 30 days after the effective date of such
registration statement. Alternatively, in the Company?s sole discretion, the
Company may redeem the Warrants in accordance with Section 19 above, but the
Redemption Price per Warrant in such case will be equal to the difference
between Market Price (as determined pursuant to Section 2.3 above) for the
period ending on the Expiration Date and the Purchase Price per share.
Dated: November 30, 1999
ISONICS CORPORATION
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<PAGE>
By:
------------------------------
James E. Alexander,
President
[Corporate Seal]
Attest:
------------------------------
Brantley, J. Halstead,
Secretary
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<PAGE>
FORM OF SUBSCRIPTION
(To be signed only upon exercise of Warrant)
To: ISONICS CORPORATION
The undersigned, the Holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, __*_____ shares of Common Stock of Isonics Corporation, and
herewith makes payment of $ * therefor, and requests that the certificates for
such shares be issued in the name of, and delivered to, ,
whose address is
Dated:
--------------------------------------------
(Signature must conform in all
respects to name of Holder as
specified on the face of the
Warrant)
--------------------------------------------
(Address)
* Insert here the number of shares called for on the face of the Warrant
(or, in the case of a partial exercise, the portion thereof as to which
the Warrant is being exercised), in either case without making any
adjustment for additional Common Stock or any other stock or other
securities or property or cash which, pursuant to the adjustment
provisions of the Warrant, may be deliverable upon exercise.
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<PAGE>
FORM OF ASSIGNMENT
(To be signed only upon transfer of Warrant)
For value received, the undersigned hereby sells, assigns and transfers
unto ___________________________ the right represented by the within Warrant
to purchase ___________________ shares of Common Stock of Isonics Corporation
to which the within Warrant relates, and appoints __________________ Attorney
to transfer such right on the books of Isonics Corporation with full power of
substitution in the premises.
Dated:
--------------------------------------------
(Signature must conform in all
respects to name of Holder as
specified on the face of the
Warrant)
--------------------------------------------
(Address)
- ----------------------------------
Signature guaranteed by a Bank
or Trust Company having its
principal office in New York City
or by a Member Firm of the New
York or American Stock Exchange
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<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
entered into this 30th day of November, 1999, by and between Isonics
Corporation, a California corporation (the "Company"), and Eagle-Picher
Technologies, LLC, a Delaware limited liability company ("E-P").
BACKGROUND. The Company has entered into an Asset Purchase Agreement
dated as of November 30, 1999 (as amended, the "Asset Purchase Agreement")
with E-P pursuant to which the Company will issue to E-P a common stock
purchase warrant (the "Warrants"), entitling the holder thereof to purchase
four million (4,000,000) shares of common stock of the Company. In addition,
simultaneously with the closing of the Asset Purchase Agreement, the Company
and E-P will enter into an "Isotope Supply Agreement." An aggregate of
4,000,000 authorized but unissued shares of common stock, no par value per
share, of the Company ("Common Stock") are reserved for issuance upon
exercise of the Warrants.
In consideration of the completion of the transactions set forth in
the Asset Purchase Agreement and the other documents and agreements entered
into at the completion of those transactions, and the mutual covenants and
agreements herein set forth, the parties to this Agreement hereby agree,
effective at the Effective Date (as defined below), subject to the terms and
conditions hereinafter set forth, as follows:
1. DEFINITIONS. As used herein, unless the context otherwise
requires, the following terms have the following respective meanings:
AGREEMENT: As defined in the introductory paragraph of this Agreement.
ASSET PURCHASE AGREEMENT: As defined in the paragraph of this Agreement
entitled "Background."
COMMISSION: The U.S. Securities and Exchange Commission or any other
governmental authority at the time administering the Securities Act or the
Exchange Act.
COMMON STOCK: As defined in the paragraph of this Agreement entitled
"Background."
COMPANY: As defined in the introductory paragraph of this Agreement.
EFFECTIVE DATE: The date on which the Warrants are issued to E-P.
E-P: As defined in the introductory paragraph of this Agreement.
EXCHANGE ACT: The U.S. Securities Exchange Act of 1934, as amended, or
any similar or successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
Reference to a particular section of the Exchange
<PAGE>
Act shall include a reference to the comparable section, if any, of any such
similar or successor federal statute.
PERSON: A corporation, an association, a partnership, a limited
liability company, an individual, a joint venture, a trust or estate, an
unincorporated organization, or a government or any department or agency
thereof.
REGISTRABLE SECURITIES: (a) Any shares of Common Stock issued or
issuable upon exercise of the Warrant and (b) any securities issued or
issuable with respect to any Common Stock referred to in the foregoing
clauses by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise. As to any particular Registrable Securities,
once issued, such securities shall cease to be Registrable Securities when
(v) they may be sold without restriction pursuant to Rule 144(k) (or any
successor provision) under the Securities Act, (w) a registration statement
with respect to the sale of such securities in the United States shall have
become effective under the Securities Act and such securities shall have been
disposed of in accordance with such registration statement, (x) they shall
have been transferred pursuant to Rule 144 (or any successor provision) under
the Securities Act, (y) they shall have been otherwise transferred, new
certificates for them not bearing a legend restricting further transfer shall
have been delivered by the Company and subsequent disposition of them shall
not require registration or qualification under the Securities Act or any
similar state law then in force, or (z) they shall have ceased to be
outstanding. While the Warrants outstanding from time to time are not
Registrable Securities for the purpose of registration, holders of Warrants
shall, for purposes of giving of notices or the calculation of percentages of
Registrable Securities, be treated as the holders of the Registrable
Securities issuable upon exercise of their Warrants. In addition, for
purposes of calculation of percentages of Registrable Securities, all
Warrants shall be treated as if they were the number of shares of Common
Stock which may be purchased upon exercise thereof.
REGISTRABLE SECURITIES - JULY 1999: Securities defined as
"Registrable Securities" in the registration rights agreement dated the 29th
day of July, 1999, by and among the Company, Adam Smith & Company, Inc.
("ASC"), and the individuals and trusts whose names are set forth on the
signature pages thereof, in the form filed by the Company as an exhibit to
its current report on Form 8-K reporting an event of July 29, 1999.
REGISTRATION EXPENSES: All expenses incident to the Company's
performance of or compliance with Section 2 of this Agreement, including,
without limitation, all registration, filing and listing or Nasdaq fees, all
fees and expenses of complying with securities or blue sky laws, all word
processing, duplicating and printing expenses, all messenger and delivery
expenses, the fees and disbursements of counsel for the Company and of its
independent public accountants, including without limitation the expenses of
any special audits or "cold comfort" letters required by or incident to such
performance and compliance, premiums and other costs of policies of
insurance, if any, against liabilities arising out of the public offering of
the Registrable Securities being registered, and any fees and disbursements
of underwriters for the Company customarily paid by issuers of securities,
but excluding underwriting discounts and commissions, transfer taxes, if any,
and the fees and disbursements of any counsel and accountants retained by
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<PAGE>
the holder or holders of the Registrable Securities being registered.
SECURITIES ACT: The U.S. Securities Act of 1933, as amended, or any
similar or successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
References to a particular section of the Securities Act shall include a
reference to the comparable section, if any, of any such similar or successor
federal statute.
WARRANTS: As defined in the paragraph of this Agreement entitled
"Background."
2. Registration under Securities Act
2.1. (a) REGISTRATION ON REQUEST. Upon the written request of E-P
which can only be made after one year following the date of this Agreement
(or, if earlier, commencing on the date the Company calls the Warrants for
redemption pursuant to Section 19 of the Warrants), or the holder or holders
of a majority or more of the Registrable Securities, that the Company effect
the registration of all or part of such holders' Registrable Securities under
the Securities Act in connection with a sale of such shares in the United
States and specifying the intended method of disposition thereof (including
whether or not such disposition is intended to be effected as an underwritten
offering), the Company will promptly give written notice of such requested
registration to all other holders of Registrable Securities and thereupon the
Company will use its best efforts to effect the registration under the
Securities Act of:
(i) the Registrable Securities which the Company has
been so requested to register by the holder or holders submitting the
request, and
(ii) all other Registrable Securities which the Company
has been requested to register by the holder or holders thereof by
written request given to the Company within fifteen (15) days after the
giving of such written notice by the Company (which request shall specify
the intended method of disposition of such Registrable Securities), all
to the extent requisite to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities so
to be registered.
(b) PRIORITY IN REQUESTED REGISTRATIONS. If a requested
registration pursuant to this Section 2.1 involves an underwritten offering,
and the managing underwriter shall advise the Company in writing (with a copy
to each holder of Registrable Securities requesting registration) that, in
its opinion, the number of Registrable Securities and other securities of the
Company held by any other party requested to be included in such registration
exceeds the number which can be sold in (or during the time of) such offering
within a price range acceptable to the holders of a majority (by number of
shares) of the Registrable Securities requested to be included in such
registration, the Company will include in such registration all Registrable
Securities and Registrable Securities - July 1999 requested to be included in
such registration (unless the provisions of the following sentence apply) and
will include in such registration other securities of the Company (including
any securities proposed to be issued and sold by the Company) held by any
other party only to the extent that the number of
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<PAGE>
shares which the Company is advised can be so sold in (or during the time of)
such offering exceeds the number of Registrable Securities and Registrable
Securities - July 1999 to be included in such registration. If, after
application of the preceding sentence, the number of Registrable Securities
and Registrable Securities - July 1999 still exceed such maximum number, such
Registrable Securities and Registrable Securities - July 1999 will be
included in such registration only to the extent of the number of shares
which the Company is advised can be so sold in (or during the time of) such
offering; the Registrable Securities and the Registrable Securities - July
1999 to be included in such registration shall be taken up pro rata from the
holders of Registrable Securities and the Registrable Securities - July 1999
requesting such registration on the basis of the percentage of Registrable
Securities and Registrable Securities - July 1999 requested to be included in
such registration; and all shares proposed to be sold by the Company or any
other party shall be deleted from such registration prior to effecting any
reduction of Registrable Securities and Registrable Securities - July 1999
under this paragraph (b).
(c) REGISTRATION STATEMENT FORM. Registrations under this
Section 2.1 shall accomplished by the Company on such appropriate
registration form of the Commission (i) for which the Company qualifies, and
which the Company's counsel (after consultation with counsel or counsels for
the holders of the Registrable Securities) deems appropriate, and (ii) as
shall permit the disposition of such Registrable Securities in accordance
with the intended method or methods of disposition specified in the request
for such registration. The Company agrees to include in any such registration
statement all information as to the holders of the Registrable Securities to
be registered which the holders of the Registrable Securities being
registered shall reasonably request or which shall be required by applicable
law.
(d) EXPENSES. Except as provided in paragraph (g) of this
Section 2.1 the Company will pay all Registration Expenses incurred in
connection with any registration requested pursuant to this Section 2.1 which
the Company is obligated to effect, whether or not such registration is
effected.
(e) EFFECTED REGISTRATION STATEMENT. A registration
requested pursuant to this Section 2.1 shall not be deemed to have been
effected unless a registration statement with respect thereto has become
effective except: (i) if the registration statement is withdrawn prior to
its effectiveness pursuant to the request of a majority of the holders of
Registrable Securities who have requested the inclusion in such registration
statement of some or all of their Registrable Securities or one or more of
the holders of Registrable Securities have not paid the Registration Expenses
relating thereto in accordance with paragraph (g) of this Section 2.1, (ii)
if, after the registration statement has become effective, such registration
is interfered with by any stop order, injunction or other order or
requirement of the Commission or other governmental agency or court for any
reason, and such stop order, injunction or other order or requirement results
from any action or inaction of a holder or holders of Registrable Securities,
or (iii) if the conditions to closing specified in the purchase agreement or
underwriting agreement entered into in connection with such registration are
not satisfied due to a failure by a holder of Registrable Securities to
satisfy a condition required to be satisfied by such holder pursuant to the
purchase agreement or underwriting agreement and one or more of the holders
of Registrable Securities have not paid the Registration Expenses relating
thereto in accordance with paragraph
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<PAGE>
(g) of this Section 2.1.
(f) SELECTION OF UNDERWRITER. If a requested registration
pursuant to this Section 2.1 involves an underwritten offering, the
underwriter or underwriters thereof shall be selected by the holders of a
majority of the Registrable Securities to be so registered.
(g) LIMITATION ON REGISTRATIONS. The Company's obligations
under this Section 2.1 shall be limited to effecting a single registration
within the meaning of paragraph (e) of this Section 2.1; provided, however,
that (i) if all of the holders who have requested the inclusion of
Registrable Securities held by them in a registration requested under this
Section 2.1 withdraw such request prior to the time the registration
statement has become effective and any or all of such persons pay all
Registration Expenses relating thereto, such proposed registration shall not
count as the registration provided for by this Section 2.1; (ii) if a
registration is deemed to be effected pursuant to paragraph (e) of this
Section 2.1 because a condition to closing specified in the purchase
agreement or underwriting agreement entered into in connection with such
registration is not satisfied due to a failure by a holder of Registrable
Securities to satisfy a condition required to be satisfied by such holder
pursuant to such agreement and one or more of the holders of Registrable
Securities elects to pay (and shall actually have paid) all Registration
Expenses relating to the registration statement, such registration shall not
count as the registration provided for by this Section 2.1; and (iii) if as a
result of the application of the last sentence of Section 2.1(b), less than
67% of the number of Registrable Securities requested to be included in such
registration were included, such registation shall not count as the
registration provided for by this Section 2.1..
(h) COMPANY'S RIGHT TO DELAY REGISTRATION. Notwithstanding
the foregoing provisions of this Section 2.1, the Company shall not be
obligated to effect a registration pursuant to this Section 2.1 within a
period of one (1) year after the effective date of a registration statement
previously filed as a result of a request pursuant to this Section 2.1. In
addition, if the Company has issued and sold to the public, pursuant to a
registration statement filed under the Securities Act, any of its securities
within three (3) months prior to the date of its receipt of a request for
registration pursuant to this Section 2.1, and the Company's investment
banker has advised the Company in writing that the registration of
Registrable Securities would materially adversely affect the market for the
Common Stock, the Company shall have the right, which may not be exercised
more than once in a twelve (12) month period, to delay the requested
registration of Registrable Securities for such period as the investment
banker may so advise, but no more than one hundred twenty (120) days after
the date on which such request was made.
(i) LIMITATION ON SALES. Notwithstanding the foregoing
provisions of this Section 2.1, no Registrable Securities may be sold
pursuant to a registration requested under this Section 2.1 until twelve (12)
months after the date of this Agreement.
2.2. INCIDENTAL REGISTRATION.
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<PAGE>
(a) RIGHT TO INCIDENTAL REGISTRATION. If the Company at any
time after twenty-four (24) months from the date of this Agreement proposes
to register any of its securities under the Securities Act (other than by a
registration on Form S-8 or Form S-4 or any successor or similar form and
other than pursuant to Section 2.1 of this Agreement), whether or not for
sale for its own account, it will each such time give prompt written notice
to all holders of Registrable Securities of its intention to do so and of
such holders' rights under this Section 2.2. Upon the written request of any
such holder made within fifteen (15) days after any such notice (which
request shall specify the Registrable Securities intended to be disposed of
by such holder and the intended method of disposition thereof), the Company
will use its best efforts to effect the registration under the Securities Act
in connection with a sale of such shares in the United States of all
Registrable Securities which the Company has been so requested to register by
the holders of Registrable Securities, to the extent requisite to permit the
disposition (in accordance with the intended methods thereof as aforesaid) of
the Registrable Securities so to be registered, provided that if, at any time
after giving written notice of its intention to register any securities and
prior to the effective date of the registration statement filed in connection
with such registration, the Company shall determine for any reason, the
Company may, at its election, give written notice of such determination to
each holder of Registrable Securities and, thereupon, (i) in the case of a
determination not to register, shall be relieved of its obligation to
register any Registrable Securities in connection with such registration (but
not from its obligation to pay the Registration Expenses in connection
therewith), without prejudice, however, to the rights of any holder or
holders of Registrable Securities entitled to do so to request that such
registration be effected as a registration under Section 2.1 above, and (ii)
in the case of a determination to delay rgistering, shall be permitted to
delay registering any Registrable Securities for the same period as the delay
in registering such other securities. No registration effected under this
Section 2.2 shall relieve the Company of its obligation to effect any
registration upon request under Section 2.1 above. The Company will pay all
Registration Expenses in connection with each registration of Registrable
Securities requested pursuant to this Section 2.2.
(b) PRIORITY IN INCIDENTAL REGISTRATIONS. If (i) a
registration pursuant to this Section 2.2 involves an underwritten offering
of the securities so being registered, whether or not for sale for the
account of the Company, and (ii) the managing underwriter of such
underwritten offering shall inform the Company and the holders of the
Registrable Securities requesting such registration by letter of its belief
that the number of securities requested to be included in such registration
exceeds the number which can be sold in (or during the time of) such
offering, then (A) in the case of an offering for the account of the Company
or which was demanded by the holders of the Registrable Securities - July
1999 pursuant to the rights of the holders of the Registrable Securities -
July 1999, registration for the Registrable Securities shall be cut back such
that (i) no holder of Registrable Securities shall be entitled to participate
in such underwritten public offering unless all shares of Common Stock
proposed to be sold by the Company for its own account have been included in
such underwritten public offering, and (ii) after the Company has included
its own shares of Common Stock, the holders of Registrable Securities and the
holders of other securities as to which the Company has granted registration
rights including (without limitation) the Registrable Securities - July 1999
("Other Registrable Securities"), including incidental registration rights,
shall be entitled to include their Registrable Securities and Other
Registrable Securities in an amount up to the
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<PAGE>
amount that such managing underwriter or underwriters advise may be included
therein (allocated among the holders of Registrable Securities and the
holders of other Registrable Securities pro rata on the basis of the number
of securities requested to be included therein by each such holder) and (B)
in the case of an offering that was commenced as a result of the exercise of
demand registration rights by Persons other than E-P or other holders of
Registrable Securities, the Persons commencing such registration and the
holders of Registrable Securities shall be entitled to include their
Registrable Securities and Other Registrable Securities in an amount up to
the amount such managing underwriters or underwriters advise may be included
therein (allocated among the persons commencing such registration and the
holders of Registrable Securities pro rata on the basis of the number of
securities requested to be so included therein by each such person or
holder). If, however, the registration was initiated by the Company within
one hundred twenty (120) days of a requested registration and is in lieu
thereof, then the Company shall include in the registration all Registrable
Securities requested to be included in such registration and shall decrease
the number of securities proposed to be sold by the Company and to be
included in such registration to the extent necessary to reduce the number of
securities to be included in the registration to the level recommended by the
managing underwriter.
2.3. REGISTRATION PROCEDURES. If and whenever the Company is
required to use its best efforts to effect the registration of any
Registrable Securities under the Securities Act as provided in Section 2.1 or
2.2 above, the Company will, as expeditiously as possible:
(i) prepare and (as soon thereafter as possible or in any event
no later than seventy-five (75) days after the end of the period within
which requests for registration may be given to the Company (ninety (90)
days in the case of requests for registration made during the last
quarter of a fiscal year or the first fifteen (15) days of the first
quarter of any fiscal year) or such longer period as the Company shall in
good faith require to produce the financial statements required in
connection with such registration) file with the Commission the requisite
registration statement to effect such registration and thereafter use its
best efforts to cause such registration statement to become effective,
provided that the Company may discontinue any registration of its
securities which are not Registrable Securities (and, under the
circumstances specified in Section 2.2(a) above, its securities which are
Registrable Securities) at any time prior to the effective date of the
registration statement relating thereto;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities
Act with respect to the disposition of all securities covered by such
registration statement until such time as all of such securities have
been disposed of in accordance with the intended methods of disposition
by the seller or sellers thereof as set forth in such registration
statement but in no event for a period which would exceed one hundred
twenty (120) days from the date on which the registration statement
became effective;
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<PAGE>
(iii) furnish to each seller of Registrable Securities covered by
such registration statement such number of conformed copies of such
registration statement and of each amendment and supplement thereto (in
each case including all exhibits), such number of copies of the
prospectus contained in such registration statement (including each
preliminary prospectus and any summary prospectus) and any other
prospectus filed under Rule 424 under the Securities Act, in conformity
with the requirements of the Securities Act, and such other documents, as
such seller may reasonably request;
(iv) use its best efforts to register or qualify all Registrable
Securities and other securities covered by such registration statement
under such other securities or blue sky laws of such jurisdictions in the
United States as each seller thereof shall reasonably request, to keep
such registration or qualification in effect for so long as such
registration statement remains in effect, and take any other action which
may be reasonably necessary or advisable to enable such seller to
consummate the disposition in such jurisdictions of the securities owned
by such seller, except that the Company shall not for any such purpose be
required to either qualify generally to do business as a foreign
corporation, or subject itself to taxation or to general service of
process in any jurisdiction wherein it would not, but for the
requirements of this clause (iv), be obligated to be so qualified or
subject to taxation or service of process, other than as to matters and
transactions related to such registration or qualification;
(v) use its best efforts to cause all Registrable Securities
covered by such registration statement to be registered with or approved
by such other United States governmental agencies or authorities as may
be necessary to enable the seller or sellers thereof to consummate the
disposition of such Registrable Securities;
(vi) furnish to each seller of Registrable Securities a copy of
each of the following, if any, addressed to the underwriters:
(A) an opinion of counsel for the Company, dated
the effective date of such registration statement (and, if such
registration includes an underwritten public offering, dated the
date of the closing under the underwriting agreement) reasonably
satisfactory in form and substance to such seller, and
(B) a "comfort" letter, dated the effective date
of such registration statement (and, if such registration includes
an underwritten public offering, dated the date of the closing
under the underwriting agreement), signed by the independent
public accountants who have certified the Company's financial
statements included in such registration statement, covering
substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case
of the accountants' letter, with respect to events subsequent to
the date of such financial statements, as are customarily covered
in opinions of issuer's counsel and in accountants' letters
delivered to the underwriters in underwritten public offerings of
securities and, in the case of the accountants, letter, such other
financial matters, and, in the case of the legal
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<PAGE>
opinion, such other legal matters, as such seller (or the
underwriters, if any) may reasonably request;
(vii) (A) notify each seller of Registrable Securities covered
by such registration statement, their counsel and the managing
underwriters, if any, promptly, and (if requested in writing by any such
Person), confirm such notice in writing: (1) when a registration
statement or any amendment thereto has been filed, and, with respect to a
registration statement or any post-effective amendment, when the same has
become effective, (2) of any request by the Commission or any other
Federal or state governmental authority for amendments or supplements to
a registration statement or related prospectus or for additional
information, (3) of the issuance by the Commission of any stop order
suspending the effectiveness of a registration statement or the
initiation of any proceedings for that purpose, (4) if at any time the
representations and warranties of the Company contained in any agreement
(including any underwriting agreement) contemplated by this Section 2
cease to be true and correct, (5) of the receipt by the Company of any
notification with respect to the suspension of the qualification or
exemption from qualification of any of the Registrable Securities for
sale in any jurisdiction, or the initiation or threatening of any
proceeding for such purpose, and (6) of the happening of any event that
makes any statement made in such registration statement or related
prospectus or any document incorporated or deemed to be incorporated
therein by reference untrue in any material respect or that requires the
making of any changes to such registration statement, prospectus or
documents so that, in the case of the registration statement, it will not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, not misleading, and that in the case of the
prospectus, it will not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances unde which they were
made, not misleading, and (B)at the request of any such seller promptly
prepare and furnish to such seller a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary (and
a post-effective amendment to such registration statement as may be
necessary in connection therewith) so that, as thereafter delivered to
the purchasers of such securities, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances under which they were
made;
(viii) Use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of a registration statement, or the lifting
of any suspension of the qualification (or exemption from qualification)
of any of the Registrable Securities for sale in any jurisdiction;
(ix) If requested by the managing underwriters, if any, or the
Holders of a majority in interest of the Registrable Securities being
sold in connection with an underwritten offering, promptly include in a
prospectus supplement or post-effective amendment such information as the
managing underwriters, if any, and such Holders may
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<PAGE>
reasonably request in order to permit the intended method of distribution
of such securities and make all required filings of such prospectus
supplement or such post-effective amendment as soon as practicable after
the Company has received such request;
(x) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to
its security holders, as soon as reasonably practicable, a historical
earnings statement covering the period of at least twelve (12) months,
but not more than eighteen (18) months, beginning with the first month of
the first full fiscal quarter after the effective date of such
registration statement, which earnings statement shall satisfy the
provisions of Section 11 (a) of the Securities Act, and will furnish to
each such seller at least five business days prior to the filing thereof
a copy of any amendment or supplement to such registration statement or
prospectus and shall not file any thereof to which any such seller shall
have reasonably objected on the grounds that such amendment or supplement
does not comply in all material respects with the requirements of the
Securities Act or the rules or regulations thereunder;
(xi) provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by such registration
statement from and after a date not later than the effective date of such
registration statement;
(xii) use its best efforts to list all Registrable Securities
covered by such registration statement on any securities exchange or
trading system on which any of the Common Stock is then listed;
(xiii) cooperate with the selling holders of Registrable
Securities and the managing underwriters, if any, to facilitate the
timely preparation and delivery of certificates representing Registrable
Securities to be sold, which certificates shall be in a form eligible for
deposit with The Depository Trust Company; and enable such Registrable
Securities to be in such denominations and registered in such names as
the managing underwriters, if any, or holders may request in writing at
least two (2) business days prior to any sale of Registrable Securities;
(xiv) make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of any registration statement at
the earliest possible moment; and
(xv) cooperate and assist in any filings required to be made
with the NASD and in the performance of any due diligence investigation
by any underwriter (including any "qualified independent underwriter"
that is required to be retained in accordance with the rules and
regulations of the NASD).
The Company may require each seller of Registrable Securities as to which
any registration is being effected to furnish the Company such information
regarding such seller and
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<PAGE>
the distribution of such securities as the Company may from time to time
reasonably request in writing.
Each holder of Registrable Securities agrees that, upon receipt of any
notice from the Company of the happening of any event of the kind described
in clause (vii) (A) (3) or (6) of this Section 2.3, such holder will
forthwith discontinue such holder's disposition of Registrable Securities
pursuant to the registration statement relating to such Registrable
Securities until such holder's receipt of the copies of the supplemented or
amended prospectus contemplated by clause (vii) of this Section 2.3 and, if
so directed by the Company, will deliver to the Company (at the Company's
expense) all copies, other than permanent file Copies, then in such holder's
possession of the prospectus relating to such Registrable Securities current
at the time of receipt of such notice.
2.4. UNDERWRITTEN OFFERINGS. (a) COOPERATION; UNDERWRITING
AGREEMENTS. If requested by the underwriters for any underwritten offering
by holders of Registrable Securities pursuant to a registration requested
under Section 2.1 above, the Company will enter into an underwriting
agreement with such underwriters for such offering, such agreement to contain
such representations and warranties by the Company and such other terms as
are generally prevailing in agreements of this type, including, without
limitation, indemnities to the effect and to the extent provided in Section
2.6 below. The holders of the Registrable Securities will reasonably
cooperate with the Company in the negotiation of the underwriting agreement,
provided that nothing herein contained shall diminish the foregoing
obligations of the Company. The holders of Registrable Securities to be
distributed by such underwriters shall be parties to such underwriting
agreement and any necessary or appropriate custody agreements and execute
appropriate powers of attorney, and may, at their option, require that any or
all of the representations and warranties by, and the other agreements on the
part of, the Company to and for the benefit of such underwriters shall also
be made to and for the benefit of such holders of Registrable Securities and
that any or all of the conditions precedent to the obligations of such
underwriters under such underwriting agreement be conditions precedent to the
obligations of such holders of Registrable Securities. Any such holder of
Registrable Securities shall not be required to make any representations or
warranties to or agreements with the Company or the underwriters other than
representations, warranties or agreements regarding such holder, such
holder's Registrable Securities and such holder's intended method of
distribution and any other representation required by law.
(b) INCIDENTAL UNDERWRITTEN OFFERINGS. If the Company at
any time proposes to register any of its securities under the Securities Act,
as contemplated by Section 2.2 above, and such securities are to be
distributed by or through one or more underwriters, the Company will, if
requested by any holder of Registrable Securities as provided in said Section
2.2 and subject to the provisions of Section 2.2(b), arrange for such
underwriters to include all the Registrable Securities to be offered and sold
by such holder among the securities to be distributed by such underwriters.
The holders of Registrable Securities to be distributed by such underwriters
shall be parties to the underwriting agreement between the Company and such
underwriters and any necessary or appropriate custody agreements and execute
appropriate powers of attorney, and may, at their option, require that any or
all of the
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<PAGE>
representations and warranties by, and the other agreements on the part of,
the Company to and for the benefit of such underwriters shall also be made to
and for the benefit of such holders of Registrable Securities and that any or
all of the conditions precedent to the obligations of such underwriters under
such underwriting agreement be conditions precedent to the obligations of
such holders of Registrable Securities. Any such holder of Registrable
Securities shall not be required to make any representations or warranties to
or agreements with the Company or the underwriters other than
representations, warranties or agreements regarding such holder, such
holder's Registrable Securities and such holder's intended method of
distribution and any other representation required by law.
2.5. PREPARATION; REASONABLE INVESTIGATION. In connection with the
preparation and filing of each registration statement under the Securities
Act pursuant to this Agreement, the Company will give the holders of
Registrable Securities registered under such registration statement, the
underwriters, if any, and their respective counsel and accountants, the
opportunity to participate in the preparation of such registration statement,
each prospectus included therein or filed with the Commission, and each
amendment thereof or supplement thereto, and will give each of them such
access to its books and records and such opportunities to discuss the
business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be
necessary, in the opinion of such holders' and such underwriters' respective
counsel, to conduct a reasonable investigation within the meaning of the
Securities Act.
2.6. INDEMNIFICATION. (a) INDEMNIFICATION BY THE COMPANY. In the
event of any registration of any securities of the Company under the
Securities Act, the Company will, and hereby does, indemnify and hold
harmless the seller of any Registrable Securities covered by such
registration statement, its directors and officers, each other Person who
participates as an underwriter in the offering or sale of such securities and
each other Person, if any, who controls such seller or any such underwriter
within the meaning of the Securities Act, against any losses, claims, damages
or liabilities, joint or several, to which such seller or any such director
or officer or underwriter or controlling Person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in any registration
statement under which such securities were registered under the Securities
Act, any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, or any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and the
Company will reimburse such seller and each such director, officer,
underwriter and controlling Person for any legal or any other expenses
incurred by them in connection with investigating or defending any such loss,
claim, liability, action or proceeding; provided that the Company shall not
be liable in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense arises out
of or is based upon an untrue statement or omission made in such registration
statement, any such preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement in reliance upon and inconformity with
written information furnished to the Company through an instrument
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<PAGE>
duly executed by such seller specifically stating that it is for use in the
preparation thereof and, provided further that the Company shall not be
liable to any Person who participates as an underwriter in the offering or
sale of Registrable Securities or any other Person, if any, who controls such
underwriter within the meaning of the Securities Act, in any such case to the
extent that any such loss, claim, damage, liability (or action or proceeding
in respect thereof) or expense arises out of such Person's failure to send or
give a copy of the final prospectus, as the same may be then supplemented or
amended, to the Person asserting an untrue statement or alleged untrue
statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such Person if such
statement or omission was corrected in such final prospectus. Such indemnity
shall remain in full force and effect, regardless of any investigation made
by or on behalf of such seller or any such director, officer, underwriter or
controlling Person and shall survive the transfer of such securities by such
seller and the termination or expiration of this Agreement.
(b) INDEMNIFICATION BY THE SELLERS. The Company may
require, as a condition to including any Registrable Securities in any
registration statement filed pursuant to Section 2.3 above, that the Company
shall have received an undertaking reasonably satisfactory to it from the
prospective seller of such securities, to indemnify and hold harmless (in the
same manner and to the same extent as set forth in subparagraph (a) of this
section 2.6) the Company, each director of the Company, each officer of the
Company and each other Person, if any, who controls the Company within the
meaning of the Securities Act, with respect to any statement or alleged
statement in or omission or alleged omission from such registration
statement, any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, if such statement
or alleged statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company
through an instrument duly executed by such seller specifically stating that
it is for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement.
Such indemnity shall remain in full force and effect, regardless of any
investigation made by or on behalf of the Company or any such director,
officer or controlling Person and shall survive the transfer of such
securities by such seller and the termination or expiration of this
Agreement. The obligations of any seller under this subparagraph (b) shall
be limited to the net proceeds to such seller of the Registrable Securities
sold pursuant to the registration statement to which the loss, claim, damage,
judgment, expense or liability relates.
(c) CONTRIBUTION. If the indemnification provided for in
subparagraphs (a) and (b) above for any reason is held by a court of
competent jurisdiction to be unavailable to an indemnified party in respect
of any losses, claims, damages, judgments, expenses or liabilities referred
to therein, then each indemnifying party under such paragraph, in lieu of
indemnifying such indemnified party thereunder, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, judgments, expenses or liabilities in such proportion as is
appropriate to reflect the relative fault, if any, of the Company and the
other selling holders in connection with the statements or omissions which
resulted in such losses, claims, damages, expenses or liabilities, as well as
any other relevant equitable considerations. The relative fault of the
Company and the selling holders shall be determined by
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<PAGE>
reference to, among other things, whether the untrue statement or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company or the
selling holders and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company, the holders, and the underwriters agree that it would not be
just and equitable if contribution pursuant to this subparagraph (c) were
determined by pro rata or per capita allocation or by any other method of
allocation which does not take account of the equitable considerations
referred to in the immediately preceding sentence. The obligations of any
seller under this subparagraph (c) are several, not joint, and shall be
limited to an amount equal to the net proceeds to such seller of Registrable
Securities sold pursuant to the registration statement to which the loss,
claim, damage, judgment expense or liability relates. No person found guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of
theSecurities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
(d) NOTICES OF CLAIMS AND PROCEDURES. Promptly after
receipt by an indemnified Person of notice of the commencement of any action
or proceeding involving a claim referred to in the preceding subparagraphs of
this Section 2.6, such indemnified Person will, if a claim in respect thereof
is to be made against an indemnifying party, give written notice to the
latter of the commencement of such action, provided that the failure of any
indemnified Person to give notice as provided herein shall not relieve the
indemnifying party of his, her or its obligations under the preceding
subparagraphs of this Section 2.6, except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice. In case any
such action is brought against an indemnified Person, unless in such
indemnified Person's reasonable judgment a conflict of interest between such
indemnified Person and such indemnifying party may exist in respect of such
claim, the indemnifying party shall be entitled to participate in and to
assume the defense thereof, jointly with any other indemnifying party
similarly notified to the extent that it may wish, with counsel reasonably
satisfactory to such indemnified Person, and after notice from the
indemnifying party to such indemnified Person of its election so to assume
the defense thereof, the indemnifying party shall not be liable to such
indemnified Person for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof other than reasonable costs
of investigation. No indemnifying party shall, without the consent of the
indemnified Person, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such indemnified Person of a release from all
liability in respect to such claim or litigation and otherwise in form and
substance reasonably satisfactory to the indemnified Person.
(e) INDEMNIFICATION PAYMENTS. The indemnification required
by this Section 2.6 shall be made by prompt payments of the amount thereof
during the course of the investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred.
(f) NOT EXCLUSIVE. The indemnification and contribution
provisions of Section 2.6 are in addition to any other rights to
indemnification or contribution that an indemnified party may have under law
or contract.
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<PAGE>
2.7. ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. The Company will
not effect or permit to occur any combination or subdivision of shares which
would materially adversely affect the ability of the holders of Registrable
Securities to include such Registrable Securities in any registration of its
securities contemplated by this Section 2 or the marketability of such
Registrable Securities under any such registration.
3. RULES 144 AND 144A. The Company will file the reports required
to be filed by it under the Securities Act and the Exchange Act and the rules
and regulations adopted by the Commission thereunder (or, if the Company is
not required to file such reports, the Company will, upon the request of any
holder of Registrable Securities, make publicly available other information)
and will take such further action as any holder of Registrable Securities may
reasonably request, all to the extent required from time to time to enable
such holder to sell Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by (a) Rules
144 and 144A under the Securities Act, as such Rules may be amended from time
to time, or (b) any similar rule or regulation hereafter adopted by the
Commission. Upon the request of any holder of Registrable Securities, the
Company will deliver to such holder a written statement as to whether it has
complied with such requirements.
4. REPRESENTATIONS OF THE COMPANY. The Company hereby represents
and warrants to E-P that the execution, delivery and performance of this
Agreement will not conflict with, result in a breach of, constitute a default
under, or require the consent or waiver of another under, any other agreement
to which the Company is a party, except for those consents or waivers which
have been obtained prior to the date hereof.
5. AMENDMENTS AND WAIVERS. This Agreement may be amended and the
Company may take any action herein prohibited or omit to perform any act
herein required to be performed by it, only if the Company shall have
obtained the written consent to such amendment, action or omission to act, of
the holder or holders of fifty-one percent (51%) or more of the Registrable
Securities at the time outstanding. Each holder of Registrable Securities at
the time or thereafter outstanding shall be bound by a consent authorized by
this Section 5.
6. NOMINEES FOR BENEFICIAL OWNERS. In the event that any
Registrable Securities are held by a nominee for the beneficial owner
thereof, the beneficial owner thereof may, at his, her or its election, be
treated as the holder of such Registrable Securities for purposes of any
request or other action by any holder or holders of Registrable Securities
pursuant to this Agreement or any determination of any number or percentage
of shares of Registrable Securities held by any holder or holders of
Registrable Securities contemplated by this Agreement. If the beneficial
owner of any Registrable Securities so elects, the Company may require
assurances reasonably satisfactory to it of such owner's beneficial ownership
of such Registrable Securities.
7. NOTICES. All notices and other communications required or
permitted hereunder shall be in writing, and shall be deemed to have been
delivered on the date delivered by hand, telegram, facsimile or by similar
means, on the third (3rd) day following the day when sent by recognized
courier or overnight delivery service (fees prepaid), or on the fifth (5th)
day following the day when deposited in the mail, registered or certified
(postage prepaid), addressed
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<PAGE>
(a) if to E-P, to its attention at the address set forth in Section 13.3 of
the Asset Purchase Agreement or in the stock records of the Company, or to
the attention of such other Person or Persons, as E-P shall have furnished to
the Company in writing, or (b) if to the Company, Isonics Corporation, 5906
McIntyre Street, Golden, Colorado 80403, Attention: President, fax: (303)
279-7300, with a copy to Herrick K. Lidstone, Jr., Esq., Norton-Lidstone,
P.C., 5445 DTC Parkway, Suite 850, Englewood, Colorado 80111, fax: (303)
221-5553, or such other address, or to the attention of such other Person or
Persons, as the Company shall have furnished to each holder of Registrable
Securities at the time outstanding; provided, however, that any such
communication to the Company may also, at the option of E-P, be delivered to
any officer of the Company.
8. ASSIGNMENT. This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the parties hereto and their respective
successors and assigns. In addition, and whether or not any express
assignment shall have been made, the provisions of this Agreement which are
for the benefit of E-P shall also be for the benefit of and enforceable by
any subsequent holder of any Registrable Securities who has executed a copy
of this Agreement or otherwise indicated its agreement to be bound hereby,
subject to the provisions respecting the minimum numbers or percentages of
shares of Registrable Securities required in order to be entitled to certain
rights or take certain actions contained herein.
9. CONSISTENT INTERPRETATION. The parties acknowledge that this
agreement requires delivery of certain documents in connection with the
Company's performance of its obligations under this agreement which may also
be required under other registration rights agreements to which the Company
is a party including (without limitation) the agreements establishing the
rights for the Registrable Securities - July 1999. Where this agreement
provides for the delivery of a document "reasonably satisfactory to the
seller" or other words to a similar import and where other registration
rights agreement require the delivery of similar documents pursuant to its
terms, the seller agrees that the holders of securities defined as
"Registrable Securities" under similar registration rights agreements which
are dated prior to the date of this agreement will determine the form and
substance of any opinion or other document required under this Agreement.
The Company shall not at any time grant registration rights to any other
holder of the Company's capital stock which conflict with the rights of the
Registrable Securities set forth herein.
10. DESCRIPTIVE HEADINGS. The descriptive headings of the several
sections and paragraphs of this Agreement are inserted for reference only and
shall not limit or otherwise affect the meaning hereof.
11. GOVERNING LAW. This Agreement shall be construed and enforced
in accordance with, and the rights of the parties shall be governed by, the
laws of the State of Delaware, U.S.A., without regard to principles of
conflicts of laws.
12. COUNTERPARTS. This Agreement may be executed simultaneously in
any number of counterparts, each of which shall be deemed an original, but
all such counterparts shall together constitute one and the same instrument.
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<PAGE>
13. TERMINATION. This Agreement shall terminate only upon written
consent of the Company and E-P. Notwithstanding the foregoing, the Company
may unilaterally terminate this Agreement if E-P fails to meet its
requirements to deliver Silicon-28 under Article III of the Asset Purchase
Agreement to the extent such breach is material and continues for 30 days
after notice of such breach from ISONICS or from another person on behalf of
ISONICS..
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement, or have caused this Agreement to be executed and delivered by
their respective duly authorized officers, on the date first above written.
ISONICS CORPORATION
By:
-------------------------------------
James E. Alexander, President
EAGLE-PICHER TECHNOLOGIES, LLC
By:
-------------------------------------
Dallas Mayfield, General Manager-Boron
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