ISONICS CORPORATION
Exhibit 2 to Form 8-K reporting an event of July 29, 1999
Form of Subscription Agreement
FOR SERIES A CONVERTIBLE PREFERRED STOCK
AND WARRANTS
SUBSCRIPTION AGREEMENT (the "AGREEMENT") dated as of July 29, 1999
among ISONICS CORPORATION, a California corporation ("COMPANY"), and the
persons who execute this agreement as investors (the "INVESTORS").
WHEREAS, the Company desires to sell to the Investors, and the
Investors desire to purchase, up to 1,500,000 shares of the Company's Series
A Convertible Preferred Stock, no par value (the "SERIES A PREFERRED STOCK"),
having the terms set forth in the Amended and Restated Certificate of
Determination of Preferences and Rights of Series A Convertible Preferred
Stock attached hereto as EXHIBIT 1 (the "CERTIFICATE") and 1,500,000 three
year warrants, each exercisable to purchase one share of the Company's Common
Stock, no par value, in substantially the form attached hereto as EXHIBIT 2
(the "WARRANTS"); and
WHEREAS, in connection with the completion of the offering of the
Series A Preferred Stock to the Investors as described in the previous
paragraph, the Company has obtained agreement from five creditors of the
Company described on Exhibit 6A to convert $425,000 into Units on the terms
stated in this Subscription Agreement; and
WHEREAS, in connection with the completion of the offering of the
Series A Preferred Stock to the Investors, the Company has obtained an
agreement from Isoserve to convert disputed contractual obligations into
shares of the Series A Preferred Stock as described on Exhibit 6B on the
terms stated in this Subscription Agreement; and
WHEREAS, in connection with the completion of the offering of the
Series A Preferred Stock to the Investors, the Company has obtained an
agreement from two creditors to extend the maturity on certain payment
obligations as described on Exhibit 6C.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties agree as follows:
1. PURCHASE AND SALE OF STOCK.
1.1. SALE AND ISSUANCE OF PURCHASED SECURITIES. The Company
shall sell to the Investors and the Investors shall purchase from the
Company, up to 1,500,000 units, each consisting of one share of Series A
Preferred Stock and one Warrant, at a price of $1.50 per unit, or a total of
up to 1,500,000 shares of Series A Preferred Stock (the "PURCHASED SHARES")
and up to 1,500,000 Warrants (the "PURCHASED WARRANTS"), for an aggregate
purchase price of up to $2,250,000. The Purchased Shares and Purchased
Warrants are referred to herein collectively as the "PURCHASED SECURITIES".
The number of Purchased Shares and Purchased Warrants to be purchased by each
Investor from the Company is set forth opposite the name of such Investor on
the signature page hereof, subject to acceptance, in whole or in part, by the
Company.
1.2. CLOSING. The purchase and sale of the Purchased Shares
hereunder shall take place at a closing (the "FIRST CLOSING"; the date on
which the First Closing occurs is hereinafter referred to as the "FIRST
CLOSING DATE"); provided that at least $2,000,000 of Purchased Shares are
purchased. If less than all Purchased Shares are sold at the First Closing,
the purchase and sale of additional Purchased Shares hereunder shall take
place at one or more additional closings within 10 days after the First
Closing (each an "ADDITIONAL CLOSING", and with the First Closing, a
"CLOSING"). Each Closing shall take place concurrently with the execution
and delivery of this Agreement by the Investors purchasing Purchased Shares
at such Closing. At each Closing:
(a) the Investors purchasing Purchased Shares at such Closing
shall deliver to the Company or its designees by wire transfer, cashier's
check or certified checks from a bank acceptable to the Company, or such
other method of payment as the Company shall approve, an amount equal to
the purchase price of the portion of the Purchased Securities, as set
forth opposite its name on the signature pages hereof;
(b) the Company shall issue and deliver to each Investor
purchasing Purchased Shares at such Closing (i) a certificate or
certificates for its portion of the Purchased Shares and (ii) warrants for
the portion of the Purchased Warrants to be issued by the Company and
purchased by such Investor, as set forth opposite such Investor's name on
the signature pages hereof;
(c) the Company and such Investors shall execute and deliver a
Registration Rights Agreement in the form attached as Exhibit 8 with
respect to the Underlying Shares (as hereafter defined);
(d) at the First Closing only, the Company shall (i) execute
and deliver an investment banking agreement with ▇▇▇▇ ▇▇▇▇▇ & Company, Inc.
in the form attached as Exhibit 9 providing for compensation of 500,000
warrants in the same form as the Purchased Warrants (the "INVESTMENT
BANKING WARRANTS") and (ii) deliver to the Investors purchasing Shares at
such Closing copies of the agreements described on EXHIBIT 6; and
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(e) the Company shall deliver to the Investors an Opinion of
Counsel with respect to the matters set forth on EXHIBIT 4.
All certificates shall have all necessary stock transfer tax stamps
(purchased at the expense of the Company) affixed.
The parties agree that for purposes of allocating the price paid
for the Purchased Securities, the Purchased Warrants have a nominal value.
The Company acknowledges the materiality of the agreements
described on EXHIBIT 6 To the investment made hereunder by the Investors and
covenants that it will close each transaction covered by such agreements as
promptly as practicable after the First Closing.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to the Investors as follows:
2.1. CORPORATE ORGANIZATION; AUTHORITY; DUE AUTHORIZATION.
(a) The Company (i) is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation, (ii) has the corporate power and authority to own or lease
its properties as and in the places where such business is now conducted and
to carry on its business as now conducted and (iii) is duly qualified and in
good standing as a foreign corporation authorized to do business in every
jurisdiction where the failure to so qualify, individually or in the
aggregate, would have a material adverse effect on the operations, prospects,
assets, liabilities, financial condition or business of the Company (a
"COMPANY MATERIAL ADVERSE EFFECT").
(b) The Company (i) has the requisite corporate power
and authority to execute, deliver and perform this Agreement and the other
agreements contemplated hereby to which it is a party and to incur the
obligations herein and therein and (ii) has been authorized by all necessary
corporate action to execute, deliver and perform this Agreement and the other
agreements contemplated hereby to which it is a party and to consummate the
transactions contemplated hereby and thereby (the "CONTEMPLATED
TRANSACTIONS"). This Agreement and each of the other agreements contemplated
hereby to which the Company is a party is a valid and binding obligation of
the Company enforceable in accordance with its terms.
2.2. CAPITALIZATION. Immediately prior to the First Closing,
the authorized capital of the Company consisted of (i) 20,000,000 shares of
Common Stock, no par value (the "COMMON STOCK"), of which 6,215,612 shares of
Common Stock are outstanding, and (ii) 10,000,000 shares of Preferred Stock,
no par value, of which no shares are outstanding. Immediately after the First
Closing and the closing of the transactions described on EXHIBIT 6, the
number of shares Series A Preferred Stock Outstanding will be as set forth on
EXHIBIT 7. The Certificate has been duly filed with and recorded by the
Secretary of State of the State of California. All outstanding shares were
issued in compliance with all applicable Federal and
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state securities laws. Except as contemplated by this Agreement or as set
forth in the disclosure letter delivered to the Investors prior to the
execution of this Agreement (the "COMPANY DISCLOSURE LETTER", which letter is
referenced in Exhibit 10), 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 the
Company (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 the Company, including the Purchased Securities and the
shares of Common Stock which the Purchased Warrants and Investment Banking
Warrants are exercisable to purchase and for which the Purchased Shares are
convertible into, 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 the Company's knowledge, except as set forth in the
Company Disclosure Letter, 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 Company Disclosure Letter, 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
the Company on any matter.
2.3. VALIDITY OF PURCHASED SHARES. The issuance of the
Purchased Shares has been duly authorized, and when issued, sold and
delivered in accordance with the terms and for the consideration expressed
herein, the Purchased Shares shall be validly issued, fully paid and
non-assessable.
2.4. COMMON STOCK ISSUABLE UPON CONVERSION OF PURCHASED
SHARES AND EXERCISE OF PURCHASED WARRANTS AND INVESTMENT BANKING WARRANTS.
The issuance of the shares of Common Stock (the "UNDERLYING SHARES") issuable
upon conversion of the Purchased Shares or upon exercise of the Purchased
Warrants has been duly authorized and the Underlying Shares have been, and at
all times prior to such conversion or exercise will have been, duly reserved
for issuance upon such conversion or exercise and, when so issued, will be
validly issued, fully paid and non-assessable.
2.5. PRIVATE OFFERING. Neither the Company nor anyone acting
on its behalf has within the last 12 months issued, sold or offered any
security of the Company to any person or organization under circumstances
that would cause the issuance and sale of the Purchased Securities, as
contemplated by this Agreement, or the issuance of the Investment Banking
Warrants to be subject to the registration requirements of the Securities Act
of 1933, as amended (the "SECURITIES ACT"). The Company agrees that neither
the Company nor anyone acting on its behalf will offer the Purchased
Securities or Investment Banking Warrants or any part thereof or any similar
securities for issuance or sale to, or solicit any offer to acquire any of
the same from, anyone so as to make the issuance and sale of the Purchased
Securities or the issuance of the Investment Banking Warrants subject to the
registration requirements of Section 5 of the Securities Act.
2.6. BROKERS AND FINDERS. The Company has not retained any
investment banker, broker or finder in connection with the Contemplated
Transactions.
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2.7. SUBSIDIARIES.
(a) Except as set forth in the Company Disclosure
Letter, the Company has no Subsidiaries and does not otherwise directly or
indirectly control any other business entity. As used in this Agreement,
"SUBSIDIARY" means any corporation or other organization, whether
incorporated or unincorporated, of which the Company directly or indirectly
owns or controls at least a majority of the securities or other interests
having by their terms ordinary voting power to elect a majority of the board
of directors or others performing similar functions with respect to such
corporation or other organization, or any organization of which the Company
is a general partner or any limited liability company of which the Company is
a manager.
(b) Each Subsidiary of the Company (each, a "COMPANY
SUBSIDIARY" and collectively, "COMPANY SUBSIDIARIES") 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 Company Material Adverse Effect. The copies of
the Certificates of Incorporation and Bylaws of the Company and the Company
Subsidiaries previously made available to the Purchaser are true and correct.
(c) Except as set forth in the Company Disclosure
Letter, the Company 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 the Company. Except
as set forth in the Company Disclosure Letter, each of the outstanding shares
of capital stock of each Company Subsidiary is owned, directly or indirectly,
by the Company 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 or 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 Company
Disclosure Letter sets forth the following information for each Company
Subsidiary, if applicable: (i) its name and jurisdiction of incorporation or
organization; (ii) its authorized
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capital stock or share capital; (iii) the number of issued and outstanding
shares of capital tock or share capital, and (iv) the percentage of such
shares owned by the Company.
2.8. OTHER INTEREST. Except as set forth in the Company
Disclosure Letter, except for interests in the Company Subsidiaries, neither
the Company nor any Company Subsidiary owns directly or indirectly any
interest or investment (whether equity or debt) in any corporation,
partnership, joint venture, business, trust or entity.
2.9. USE OF PROCEEDS. The Company will use the proceeds from
the sale of the Purchased Securities as set forth on EXHIBIT 5 attached
hereto.
2.10. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by the
Company do not, and the consummation by the Company of the transactions
contemplated hereby will not, (i) conflict with or violate the Certificate of
Incorporation or By-Laws or equivalent organizational documents of (x) the
Company or (y) any Company Subsidiary, (ii) conflict with or violate any
law, rule, regulation, order, judgment or decree applicable to the Company or
any Company Subsidiary or by which any property or asset of the Company or
any Company Subsidiary is bound or affected, or (iii) except as set forth in
the Company Disclosure Letter, result in any breach of or constitute a
default (or an event which with notice or lapse of time or both would become
a default) under, result in the loss of a material benefit under, or give to
others any right of purchase or sale, or any right of termination, amendment,
acceleration, increased payments or cancellation of, or result in the
creation of a lien or other encumbrance on any property or asset of the
Company or any Company Subsidiary pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any Company Subsidiary is a
party or by which the Company or any Company Subsidiary or any property or
asset of the Company or any Company Subsidiary is bound or affected, except,
in the case of clauses (i)(y), (ii) and (iii), for any such conflicts,
violations, breaches, defaults or other occurrences which would not prevent
or delay consummation of any of the Contemplated Transactions in any material
respect, or otherwise prevent the Company from performing its obligations
under this Agreement in any material respect, and would not, individually or
in the aggregate, have a Company Material Adverse Effect. The execution and
delivery of this Agreement by the Company do not, and the consummation by the
Company of the Contemplated Transactions will not, result in any material
breach of or constitute a material default (or an event which with notice or
lapse of time or both would become a material default) under, result in the
loss of a material benefit under, or give to others any right of purchase or
sale, or any right of termination amendment, acceleration, increased payments
or cancellation of, or result in the creation of a lien or other encumbrance
on any property or asset of the Company or any Company Subsidiary pursuant
to, any Company Material Contract (as hereafter defined).
(b) The execution and delivery of this Agreement by the
Company do not, and the performance of this Agreement and the consummation by
the Company of the transactions contemplated hereby will not, require any
consent, approval,
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authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, domestic or foreign (each a
"GOVERNMENTAL ENTITY") except for applicable requirements, if any, of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT") or any state
securities or "blue sky" laws ("BLUE SKY LAWS").
2.11. COMPLIANCE. Except as set forth in the Company
Disclosure Letter neither the Company nor any Company Subsidiary is in
conflict with, or in default or violation of (i) any law, rule, regulation,
order, judgment or decree applicable to the Company or any Company Subsidiary
("LEGAL REQUIREMENT") or by which any property or asset of the Company or any
Company Subsidiary is bound or affected, or (ii) any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any Company Subsidiary is a
party or by which the Company or any Company Subsidiary or any property or
asset of the Company or any Company Subsidiary is bound or affected, in each
case except for any such conflicts, defaults or violations that would not,
individually or in the aggregate, have a Company Material Adverse Effect.
Neither the Company nor any Company Subsidiary has received any notice or
other communication from any Governmental Body regarding any actual or
possible violation of, or failure to comply with, any Legal Requirement. The
Company and the Company Subsidiaries have obtained all licenses, permits, and
other authorizations and have taken all actions required by applicable law or
governmental regulations in connection with their business as now conducted,
where the failure to obtain any such item or to take any such action would
have, individually or in the aggregate, a Company Material Adverse Effect.
None of the Company, any Company Subsidiary or, to the knowledge of Company,
any director, officer, agent, employee or other person acting on behalf of
any of the foregoing has used any corporate funds for unlawful contributions,
payments, gifts or entertainment or for the payment of other unlawful
expenses relating to political activity, or made any direct or indirect
unlawful payments to governmental or regulatory officials or others. For
purposes of this Agreement "GOVERNMENTAL BODY" shall mean any: (a) nation,
state, commonwealth, province, territory, county, municipality, district or
other jurisdiction of any nature; (b) federal, state, local, municipal,
foreign or other government; or (c) governmental or quasi-governmental
authority of any nature (including any governmental division, department,
agency, commission, instrumentality, official, organization, unit, body or
entity and any court or other tribunal).
2.12. SEC DOCUMENTS.
(a) The Company 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, together with the
1999 Form 10-KSB defined below, the "COMPANY REPORTS"). As of their
respective dates, the Company 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
Company Report filed prior to the date of this
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Agreement which was superseded by a subsequent Company Report filed prior to
the date of this Agreement. The Company has provided to the Investors a draft
of the Form 10-KSB for its fiscal year ended April 30, 1999 which will be
filed with the SEC on or before August 13, 1999 and which is not expected to
be materially different from that provided to the Investors (except to the
extent amended to reflect the transactions contemplated hereby) (the "1999
10-KSB"). When filed with the SEC, the 1999 Form 10-KSB (i) will comply 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) will 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. No Company Subsidiary is required to file any
report, form or other document with the SEC. Except as set forth in the
Company Disclosure Letter neither the Company 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 Company Report that
is not described in or filed as an exhibit to such Company Report as required
by the Securities Act or the Exchange Act, as the case may be. No event has
occurred prior to the date hereof as a consequence of which the Company 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 the Company with the SEC after the date hereof shall be provided to
the Purchaser no later than the date of such filing.
(b) Each of the consolidated balance sheets of Company
included in or incorporated by reference into the Company Reports (including
the related notes and schedules) fairly presents the consolidated financial
position of the Company and the Company Subsidiaries as of its date, and each
of the consolidated statements of income, retained earnings and cash flows of
Company included in or incorporated by reference into the Company Reports
(including any related notes and schedules) fairly presents the results of
operations, retained earnings or cash flows, as the case may be, of the
Company 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 generally accepted accounting principles consistently applied
during the periods involved, except as may be noted therein. Neither the
Company 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 the Company or in the notes thereto, prepared in
accordance with generally accepted accounting principles 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
the Company as of April 30, 1999; (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 Company
Material Adverse Effect.
2.13. LITIGATION. Except as set forth in the Company Disclosure
Letter
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there are no claims, actions, suits, investigations, inquiries or proceedings
pending against the Company or the Company Subsidiaries or, to the knowledge
of the Company, threatened against the Company or the Company Subsidiaries,
or any officer, director, employee or agent thereof in his or her capacity as
such, at law or in equity, or before or by any court, tribunal, arbitrator,
mediator or any federal or state commission, board, bureau, agency or
instrumentality, that, individually or in the aggregate, are reasonably
likely to have a Company Material Adverse Effect.
2.14. ABSENCE OF CERTAIN CHANGES. Except as specifically
contemplated by this Agreement or set forth in the Company Disclosure Letter,
since January 31, 1999, there has not been (i) any event, occurrence, fact,
condition, change, development or effect ("EVENT") that would reasonably be
expected to have a Company Material Adverse Effect; (ii) any declaration,
payment or setting aside for payment of any dividend (except to Company or a
Company Subsidiary wholly owned by Company) or other distribution or any
redemption, purchase or other acquisition of any shares of capital stock or
securities of Company or any Company Subsidiary; (iii) any return of any
capital or other distribution of assets to stockholders of Company or any
Company Subsidiary (except to Company or a Company Subsidiary wholly owned by
Company); (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 Company or any Company Subsidiary that, if
taken or done on or after the date hereof would reasonably be expected to
have a Company Material Adverse Effect; or (vi) any material change in its
accounting principles, practices or methods. Without limiting foregoing,
since April 30, 1999, there has been no Company Material Adverse Effect
affecting the Company's financial condition as of July 29, 1999 or results of
operation through that date which would be reflected in its unaudited
financial statements to be prepared for and through July 31, 1999.
2.15. TAXES.
(a) Each of the Company and the Company Subsidiaries has
filed all material tax returns and reports required to be filed by it, or
requests for extensions to file such returns or reports have been timely
filed and granted and have not expired, and all tax returns and reports are
complete and accurate in all respects, except to the extent that such
failures to file, have extensions granted that remain in effect or be
complete and accurate in all respects, as applicable, individually or in the
aggregate, would not have a Company Material Adverse Effect. The Company and
each of the Company Subsidiaries has paid (or the Company has paid on its
behalf) all taxes shown as due on such tax returns and reports. The most
recent financial statements contained in the Company Reports reflect an
adequate reserve for all taxes payable by the Company and the Company
Subsidiaries for all taxable periods and portions thereof accrued through the
date of such financial statements, and no deficiencies for any taxes have
been proposed, asserted or assessed against the Company or any Company
Subsidiary that are not adequately reserved for, except for inadequately
reserved taxes and inadequately reserved deficiencies that would not,
individually or in the aggregate, have a Company Material Adverse Effect. No
requests for waivers of the time to assess any taxes against the Company or
any Company Subsidiary have been granted or are pending, except for requests
with respect to such taxes that have been adequately reserved for in the most
recent financial statements contained in
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the Company Reports, or, to the extent not adequately reserved, the
assessment of which would not, individually or in the aggregate, have a
Company Material Adverse Effect.
(b) As used in this Section 2.15, "taxes" shall include
all Federal, state, local and foreign income, franchise, property, sales,
use, excise and other taxes, including obligations for withholding taxes from
payments due or made to any other person and any interest, penalties or
additions to tax.
2.16. EMPLOYEE BENEFIT PLANS. Except as would not,
individually or in the aggregate, have a Company Material Adverse Effect, (i)
all employee benefit plans or programs maintained for the benefit of the
current or former employees or directors of the Company or any Company
Subsidiary that are sponsored, maintained or contributed to by the Company or
any Company Subsidiary, or with respect to which the Company or any Company
Subsidiary has any liability, including without limitation any such plan that
is an "employee benefit plan" as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974 ("ERISA"), are in compliance with all
applicable requirements of law, including ERISA and the Code, and (ii)
neither the Company nor any Company Subsidiary has any liabilities or
obligations with respect to any such employee benefit plans or programs,
whether accrued, contingent or otherwise, nor to the knowledge of the Company
are any such liabilities or obligations expected to be incurred. The
execution of, and performance of the transactions contemplated in, this
Agreement will not (either alone or upon the occurrence of any additional or
subsequent events) constitute an event under any benefit plan, policy,
arrangement or agreement or any trust or loan that will or may result in any
payment (whether of severance pay, bonus, golden parachute or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any employee. The
only severance agreements or severance policies applicable to the Company or
the Company Subsidiaries are the agreements and policies specifically
referred to in the Company Disclosure Letter.
2.17. LABOR MATTERS. Neither the Company nor any of the
Company Subsidiaries has any material obligations, contingent or otherwise,
under any employment, severance or consulting agreement, any collective
bargaining agreement or any other contract with a labor union or other labor
or employee group. To the knowledge of Company, as of the date of this
Agreement, there are no negotiations, demands or proposals which are
presently pending or overtly threatened by or on behalf of any labor union
with respect to the unionizing of employees of Company or any Company
Subsidiary. There is no labor strike, labor dispute, work slowdown, stoppage
or lockout actually pending, or to the knowledge of the Company, threatened
against or affecting the Company or any Company Subsidiary, except as would
not, individually or in the aggregate, have a Company Material Adverse
Effect. There is no unfair labor practice or labor arbitration proceeding
pending or, to the knowledge of the Company, threatened against the Company
or its Subsidiaries relating to their business, except for any such
proceeding which would not have a Company Material Adverse Effect.
2.18. CONTRACTS. Except as set forth in the Company Reports or
the Company Disclosure Letter or in Exhibit 6, neither the Company nor any
Company Subsidiary is
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a party or is subject to, and their property and assets are not bound or
affected by, any of the following (each, a "COMPANY MATERIAL CONTRACT"):
(a) any agreement or understanding with an affiliate of the Company
or of a Company Subsidiary;
(b) any contract relating to the acquisition, transfer, use,
development, sharing or license of any technology or any Proprietary Asset
(as hereafter defined);
(c) any single note, bond, mortgage, indenture, contract, lease,
license, agreement, understanding, instrument, bid or proposal pursuant to
which the financial obligation of the Company or a Company Subsidiary
thereunder or applicable to the assets or properties of the Company or a
Company Subsidiary subject thereto could exceed $10,000 after the First
Closing Date;
(d) any single contract, bid or offer to which the Company or a
Company Subsidiary is a party or by which the Company or a Company
Subsidiary is bound to provide services to third parties which provides for
recurring monthly revenues to the Company or a Company Subsidiary in excess
of $10,000;
(e) any contract creating or involving any agency relationship,
distribution arrangement or franchise relationship;
(f) any contract which includes any exclusivity restrictions
applicable to the Company or a Company Subsidiary or imposes any
restriction on the Company's right or ability (A) to compete with any
person, (B) to acquire any product or other asset or any services from any
other person, to sell any product or other asset to or perform any services
for any other person or to transact business or deal in any other manner
with any other person, or (C) develop or distribute any technology;
(g) any contract relating to the acquisition, issuance or transfer of
any securities, except as contemplated hereunder;
(h) any contract involving or incorporating any guaranty, any pledge,
any performance or completion bond, any indemnity or any surety
arrangement;
(i) any contract creating or relating to any partnership or joint
venture or any sharing of revenues, profits, losses, costs or liabilities;
(j) any contract constituting or relating to a Government Contract
(as hereafter defined) or Government Bid (as hereafter defined);
(k) any contract that was entered into outside the ordinary course of
business or was inconsistent with the Company's or a Company Subsidiary's
past practices;
11
(l) any other Company Contract that has a term of more than 120 days
and that may not be terminated by the Company (without penalty) within 120
days after the delivery of a termination notice by the Company; or
(m) any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation that is
material to the ownership or operation of any of the Company or a Company
Subsidiary.
The Company has made available to the Investors true and accurate copies of
the Company Material Contracts. Except as set forth in the Company
Disclosure Letter all such Company Material Contracts, including without
limitation the agreements described on EXHIBIT 6, 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 the Company
Disclosure Letter 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 Company Material
Adverse Effect. Neither the Company nor any Company Subsidiary is in
violation or breach of or default under any such Company Material Contract,
nor to the Company's 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.
2.19. ENVIRONMENTAL MATTERS. As of the date of this
Agreement, (i) the Company and the Company Subsidiaries are in compliance
with all applicable Environmental Laws (as hereinafter defined), (ii) there
is no civil, criminal or administrative judgment, action, suit, demand,
claim, hearing, notice of violation, investigation, proceeding, notice or
demand letter pending or, to the knowledge of the Company, threatened against
the Company, a Company Subsidiary or any of their respective properties
pursuant to Environmental Laws, and (iii) there are no past or present Events
which, reasonably may be expected to prevent compliance with, or which have
given rise to or will give rise to liability on the part of the Company or a
Company Subsidiary under, Environmental Laws, except, in each case, for any
deviations from the foregoing which, individually or in the aggregate, do not
and would not reasonably be expected to have a Company Material Adverse
Effect. The Company has provided or made available to the Investors prior to
the date of this Agreement true, accurate and complete copies of all
environmental reports in the possession of the Company or a Company
12
Subsidiary relating to any of their respective past or present properties.
As used herein, the term "ENVIRONMENTAL LAWS" shall mean laws relating to
pollution, waste control, the generation, presence or disposal of asbestos,
hazardous or toxic wastes or substances, the protection of the environment,
environmental activity or public health and safety.
2.20. PROPRIETARY ASSETS. (a) For purposes of this Agreement
"PROPRIETARY ASSETS" shall mean any: (i) patent, patent application,
trademark (whether registered or unregistered), trademark application, trade
name, fictitious business name, service mark (whether registered or
unregistered), service mark application, copyright (whether registered or
unregistered), copyright application, maskwork, maskwork application, trade
secret, know-how, customer list, franchise, system, computer software,
computer program, invention, design, blueprint, engineering drawing,
proprietary product, technology, proprietary right or other intellectual
property right or intangible asset; or (ii) right to use or exploit any of
the foregoing.
(b) The Company Disclosure Letter sets forth, with
respect to each Proprietary Asset of the Company or a Company Subsidiary
registered with any Governmental Body or for which an application has been
filed with any Governmental Body, (i) a brief description of such Proprietary
Asset and (ii) the names of the jurisdictions covered by the applicable
registration or application. The Company Disclosure Letter identifies and
provides a brief description of all other Proprietary Assets owned by the
Company or a Company Subsidiary, and identifies and provides a brief
description of each Proprietary Asset licensed to the Company or a Company
Subsidiary by any person (except for any Proprietary Asset that is licensed
to the Company or a Subsidiary under any third party software license
generally available to the public at a cost of less than $10,000), and
identifies the license agreement under which such Proprietary Asset is being
licensed to the Company or a Company Subsidiary. Except as set forth in the
Company Disclosure Letter, the Company or a Company Subsidiary: has good,
valid and marketable title to all of the Proprietary Assets identified in the
Company Disclosure Letter, free and clear, of all liens and other
encumbrances; has a valid right to use all Proprietary Assets identified in
the Company Disclosure Letter; and is not obligated to make any payment to
any person for the use of any Proprietary Asset. Except as set forth in the
Company Disclosure Letter, neither the Company nor any Company Subsidiary has
developed jointly with any other person any Proprietary Asset with respect to
which such other person has any rights.
(c) The Company and the Company Subsidiaries have taken
all measures and precautions necessary to protect and maintain the
confidentiality and secrecy of all Proprietary Assets of the Company and the
Company Subsidiaries (except Proprietary Assets whose value would be
unimpaired by public disclosure) and otherwise to maintain and protect the
value of all Proprietary Assets of the Company and the Company Subsidiaries.
Except as set forth in the Company Disclosure Letter, the Company and the
Company Subsidiaries have not (other than pursuant to license agreements
identified in the Company Disclosure Letter) disclosed or delivered to any
person, or permitted the disclosure or delivery to any person of, (i) the
source code, or any portion or aspect of the source code, of any Proprietary
Asset, or (ii) the object code, or any portion or aspect of the object code,
of any Proprietary Asset of the Company or a Company Subsidiary.
13
(d) To the best of the knowledge of the Company, none of
the Proprietary Assets of the Company or a Company Subsidiary infringes or
conflicts with any Proprietary Asset owned or used by any other Person. The
Company and the Company Subsidiaries are not infringing, misappropriating or
making any unlawful use of, and the Company and the Company Subsidiaries have
not at any time infringed, misappropriated or made any unlawful use of, or
received any notice or other communication (in writing or otherwise) of any
actual, alleged, possible or potential infringement, misappropriation or
unlawful use of, any Proprietary Asset owned or used by any other Person. To
the best of the knowledge of the Company, no other Person is infringing,
misappropriating or making any unlawful use of, and no Proprietary Asset
owned or used by any other person infringes or conflicts with, any
Proprietary Asset of the Company or a Company Subsidiary.
(e) Except as set forth in the Company Disclosure
Letter, there has not been any claim by any customer or other person alleging
that any Proprietary Asset of the Company or a Company Subsidiary (including
each version thereof that has ever been licensed or otherwise made available
by the Company or a Company Subsidiary to any person) does not conform in all
material respects with any specification, documentation, performance
standard, representation or statement made or provided by or on behalf of the
Company or a Company Subsidiary, and, to the best of the knowledge of the
Company, there is no basis for any such claim.
(f) The Proprietary Assets of the Company and the
Company Subsidiaries constitute all the Proprietary Assets necessary to
enable the Company and the Company Subsidiaries to conduct their businesses
in the manner in which such businesses have been and are being conducted.
Except as set forth in the Company Disclosure Letter (i) the Company and the
Company Subsidiaries have not licensed any of their Proprietary Assets to any
person on an exclusive, semi-exclusive or royalty-free basis, and (ii) the
Company and the Company Subsidiaries have not entered into any covenant not
to compete or contract limiting their ability to exploit fully any of their
Proprietary Assets or to transact business in any market or geographical area
or with any person.
2.21. NO ADVERSE ACTIONS. Except as set forth in the Company
Disclosure Letter there is no existing, pending or, to the knowledge of the
Company, threatened termination, cancellation, limitation, modification or
change in the business relationship of Company or any of the Company
Subsidiaries, with any supplier, customer or other person except such as
would not reasonably be expected, individually or in the aggregate, to have a
Company Material Adverse Effect.
2.22. INSURANCE. The Company maintains with sound and
reputable insurance companies all insurance customarily maintained by
comparable companies.
2.23. DISCLOSURE. No representation or warranty of the
Company herein and no information contained or referenced in the Company
Reports or Company Disclosure Letter contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary in order to make the statements contained herein or therein not
14
misleading.
3. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS. Each Investor
represents and warrants to the Company as follows:
3.1. AUTHORIZATION. When executed and delivered by such
Investor, this Agreement will constitute the valid and binding obligation of
such Investor.
3.2. BROKERS AND FINDERS. Such Investor has not retained any
investment banker, broker or finder in connection with the Contemplated
Transactions.
4. SECURITIES LAWS.
4.1. SECURITIES LAWS REPRESENTATIONS AND COVENANTS OF
INVESTORS.
(a) This Agreement is made with each Investor in
reliance upon such Investor's representation to the Company, which by such
Investor's execution of this Agreement such Investor hereby confirms, that
the Purchased Securities to be received by such Investor will be acquired for
investment for such Investor's own account, not as a nominee or agent, and
not with a view to the resale or distribution of any part thereof such that
such Investors would constitute an "underwriter" under the Securities Act,
and that such Investor has no present intention of selling, granting any
participation in or otherwise distributing the Purchased Securities. By
executing this Agreement, each Investor further represents that such Investor
does not have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participations to such person or to any
third person with respect to, any of the Purchased Securities.
(b) Each Investor understands and acknowledges that the
offering of the Purchased Securities pursuant to this Agreement will not be
registered under the Securities Act or qualified under any Blue Sky Laws on
the grounds that the offering and sale of the Purchased Securities are exempt
from registration and qualification, respectively, under the Securities Act
and the Blue Sky Laws, and that the Company's reliance upon such exemption is
predicated upon such Investor's representations set forth in this Agreement.
(c) Each Investor covenants that, unless the Purchased
Shares, the Purchased Warrants, the Underlying Shares or any other shares of
capital stock of the Company received in respect of the foregoing have been
registered pursuant to the Registration Rights Agreement being entered into
among the Company and the Investors, such Investor will not dispose of such
securities unless and until such Investor shall have notified the Company of
the proposed disposition and shall have furnished the Company with an opinion
of counsel reasonably satisfactory in form and substance to the Company to
the effect that (x) such disposition will not require registration under the
Securities Act and (y) appropriate action necessary for compliance with the
Securities Act and any applicable state, local or foreign law has been taken;
PROVIDED, HOWEVER, that an Investor may dispose of such securities without
providing the opinion referred to above if the Company has been provided with
adequate
15
assurance that such disposition is made in compliance with Rule 144 under the
Securities Act (or any similar or analogous rule) and any applicable state,
local or foreign law.
(d) In connection with the investment representations
made herein, each Investor represents that (i) such Investor is able to fend
for itself in the Contemplated Transactions; (ii) such Investor has such
knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of such Investor's prospective investment
in the Purchased Securities; (iii) such Investor has the ability to bear the
economic risks of such Investor's prospective investment and can afford the
complete loss of such investment; (iv) such Investor has been furnished with
and has had access to such information as is in the Company Disclosure Letter
together with the opportunity to obtain such additional information as it
requested to verify the accuracy of the information supplied; and (v) such
Investor has had access to officers of the Company and an opportunity to ask
questions of and receive answers from such officers and has had all questions
that have been asked by such Investor satisfactorily answered by the Company.
(e) Each Investor further represents by execution of
this Agreement that such Investor qualifies as an "accredited investor" as
such term is defined under Rule 501 promulgated under the Securities Act.
Any Investor that is a corporation, a partnership, a trust or other business
entity further represents by execution of this Agreement that it has not been
organized for the purpose of purchasing the Purchased Securities.
(f) By acceptance hereof, each Investor agrees that the
Purchased Shares, the Purchased Warrants, the Underlying Shares and any
shares of capital stock of the Company received in respect of the foregoing
held by it may not be sold by such Investor without registration under the
Securities Act or an exemption therefrom, and therefore such Investor may be
required to hold such securities for an indeterminate period.
4.2. LEGENDS. All certificates for the Purchased Shares,
Purchased Warrants and the shares of Common Stock issued upon conversion or
exercise thereof, and each certificate representing any shares of capital
stock of the Company received in respect of the foregoing, whether by reason
of a stock split or share reclassification thereof, a stock dividend thereon
or otherwise and each certificate for any such securities issued to
subsequent transferees of any such certificate (unless otherwise permitted
herein) shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE [SECURITIES
REPRESENTED BY THIS WARRANT] HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
SUCH SHARES [WARRANTS] MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID
ACT."
In addition, such certificates shall bear any legend that, in the opinion of the
Company's counsel, is required pursuant to any state, local or foreign law
governing the Purchased Shares, the
16
Purchased Warrants or the Underlying Shares.
5. ADDITIONAL COVENANTS OF THE COMPANY.
5.1. REPORTS, INFORMATION, SHARES.
(a) The Company shall cooperate with each Investor in
supplying such information as may be reasonably requested by such Investor to
complete and file any information reporting forms presently or hereafter
required by the SEC as a condition to the availability of an exemption,
presently existing or hereafter adopted, from the Securities Act for the sale
of any of the Purchased Shares, the Purchased Warrants, the Underlying Shares
and shares of capital stock of the Company received in respect of the
foregoing.
(b) The Company shall deliver to each Investor,
contemporaneously with delivery to other holders of Common Stock, a copy of
each report of the Company delivered to holders of Common Stock.
(c) The Company shall keep reserved for issuance a
sufficient number of authorized but unissued shares of Common Stock so that
the Purchased Warrants may be exercised to purchase, and the Purchased Shares
may be converted into, Common Stock at any time.
5.2. EXPENSES; INDEMNIFICATION.
(a) The Company agrees to pay on the First Closing Date
(and in the event of Additional Closings on the date of each Additional
Closing) and save the Investors harmless against liability for the payment of
any stamp or similar taxes (including interest and penalties, if any) that
may be determined to be payable in respect of the execution and delivery of
this Agreement, the issue and sale of any Purchased Securities, the expense
of preparing and issuing the Purchased Securities, the cost of delivering the
Purchased Securities purchased by each Investor to such Investor's home
office, insured to such Investor's satisfaction, and the costs and expenses
incurred in the preparation of all certificates and letters on behalf of the
Company and of the Company's performance and compliance with all agreements
and conditions contained herein on its part to be performed or complied with.
Each Investor shall be responsible for its out-of-pocket expenses arising in
connection with the Contemplated Transactions, including, without limitation,
fees and disbursements of counsel to the Investors and due diligence expenses
of the Investors.
(b) The Company hereby agrees and acknowledges that the
Investors have been induced to enter into this Agreement and to purchase the
Purchased Securities hereunder, in part, based upon the representations,
warranties and covenants of the Company contained herein. The Company hereby
agrees to pay, indemnify and hold harmless the Investors and any director,
officer or employee of any Investor against all claims, losses and
17
damages resulting from any and all legal or administrative proceedings,
including without limitation, reasonable attorneys' fees and expenses
incurred in connection therewith (collectively, "LOSS"), resulting from a
breach by the Company of any representation or warranty of the Company
contained herein or the failure of the Company to perform any covenant made
herein.
(c) As soon as reasonably practicable after receipt by
an Investor of notice of any Loss in respect of which the Company may be
liable under this Section 5.2, the Investor shall give notice thereof to the
Company. Each Investor may, at its option, claim indemnity under this Section
5.2 as soon as a claim has been threatened by a third party, regardless of
whether an actual Loss has been suffered, so long as counsel for such
Investor shall in good faith determine that such claim is not frivolous and
that such Investor may be liable or otherwise incur a Loss as a result
thereof and shall give notice of such determination to the Company. Each
Investor shall permit the Company, at the Company's option and expense, to
assume the defense of any such claim by counsel mutually and reasonably
satisfactory to the Company and the Investors who are subject to such claim,
and to settle or otherwise dispose of the same; PROVIDED, HOWEVER, that each
Investor may at all times participate in such defense at such Investor's
expense; and PROVIDED, FURTHER, that the Company shall not, in defense of any
such claim, except with the prior written consent of each Investor subject to
such claim, (i) consent to the entry of any judgment that does not include as
an unconditional term thereof the giving by the claimant or plaintiff in
question to each Investor and its subsidiaries of a release of all
liabilities in respect of such claims, or (ii) consent to any settlement of
such claim. If the Company does not promptly assume the defense of such
claim irrespective of whether such inability is due to the inability of the
afore-described Investors and the Company to mutually agree as to the choice
of counsel, or if any such counsel is unable to represent an investor due to
a conflict or potential conflict of interest, then an Investor may assume
such defense and be entitled to indemnification and prompt reimbursement from
the Company for its costs and expenses incurred in connection therewith,
including without limitation, reasonable attorneys' fees and expenses. Such
fees and expenses shall be reimbursed to the Investors as soon as practicable
after submission of invoices to the Company.
5.3. AMENDMENT OF THE CERTIFICATE. (a) The Company
covenants to amend the definition of "Applicable Percentage" in the
Certificate as soon as practicable after the date hereof to read as follows:
"Applicable Percentage shall mean 25%." The undersigned shareholder hereby
consents to a resolution of shareholders necessary to approve the foregoing
change to the Certificate, and specifically grants ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ a proxy
to cast the undersigned's vote as shareholder for such a resolution at any
meeting of the holders of Series A Preferred Stock called to consider such an
amendment, and appoints ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ as the undersigned's
attorney-in-fact to execute in the name of the undersigned a statement of
consent of the holders of Series A Preferred Stock approving such a
resolution.
(b) The Company further agrees that if, for any reason,
such amendment is not made prior to the occurrence of a Silicon Isotope
Transaction (as defined in the Certificate), the holders of the Series A
Preferred Stock shall have the same rights and shall receive the same
benefits (including Exchange Interests and Transaction Cash Proceeds, as
defined in the Certificate) as if such amendment had been accomplished.
18
6. MISCELLANEOUS.
6.1. ENTIRE AGREEMENT; SUCCESSORS AND ASSIGNS. This
Agreement, the Warrants and the Registration Rights Agreement constitute the
entire contract between the parties relative to the subject matter hereof and
no party shall be liable or bound to the other in any manner by any
warranties, representations or covenants except as specifically set forth
herein. Any previous agreement among the parties with respect to the sale of
the Purchased Securities is superseded by this Agreement. The terms and
conditions of this Agreement shall inure to the benefit of and be binding
upon the respective executors, administrators, heirs, successors and assigns
of the parties. Except as expressly provided herein, nothing in this
Agreement, expressed or implied, is intended to confer upon any party, other
than the parties hereto, any rights, remedies, obligations or liabilities
under or by reason of this Agreement.
6.2. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
Notwithstanding any right of the Investors fully to investigate the affairs
of the Company and notwithstanding any knowledge of facts determined or
determinable by any Investor pursuant to such right of investigation or right
of investigation, each Investor has the right to rely fully upon the
representations, warranties, covenants and agreements of the Company
contained in this Agreement or in any documents delivered pursuant to this
Agreement. All such representations and warranties of the Company shall
survive the execution and delivery of this Agreement and each Closing
hereunder and shall continue in full force and effect for six months after
any applicable statute of limitations (taking into account any waiver or
tolling thereof) with respect to claims which may arise thereunder or relate
thereto shall have run and the provisions of this Section 6.2 shall
constitute a waiver by the Company of any such applicable statute of
limitations.
6.3. GOVERNING LAW; JURISDICTION. This Agreement shall be
governed by and construed in accordance with the laws of the State of New
York without regard to principles of conflicts of law. Each party hereby
irrevocably consents and submits to the jurisdiction of any New York State or
United States Federal Court sitting in the State of New York, County of New
York, over any action or proceeding arising out of or relating to this
Agreement and irrevocably consents to the service of any and all process in
any such action or proceeding by registered mail addressed to such party at
its address specified in Section 8(b). Each party further waives any
objection to venue in New York and any objection to an action or proceeding
in such state and county on the basis of forum non conveniens. Each party
also waives any right to trial by jury.
6.4. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
6.5. HEADINGS. The headings of the sections of this
Agreement are for convenience and shall not by themselves determine the
interpretation of this Agreement.
19
6.6. NOTICES. Any notice required or permitted hereunder
shall be given in writing and shall be deemed effectively given upon personal
delivery and if a fax number has been provided, upon delivery (with
answerback confirmed), addressed to a party at its address and the fax
number, if any, shown below or at such other address and fax number as such
party may designate by three days advance notice to the other party.
Any notice to the Investors shall be sent to the addresses set forth on
EXHIBIT 3, with a copy to:
▇▇▇▇ & Hessen LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Fax Number: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Any notice to the Company shall be sent to:
Isonics Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax Number: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, President
with a copy to:
▇▇▇▇▇▇ - ▇▇▇▇▇▇▇▇, LLC
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax Number: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
6.7. RIGHTS OF TRANSFEREES. Any and all rights and
obligations of Investors herein incident to the ownership of Purchased
Securities shall pass successively to all subsequent transferees of such
Purchased Securities until extinguished pursuant to the terms hereof.
6.8. SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be deemed
prohibited or invalid under such applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, and such
prohibition or invalidity shall not invalidate the remainder of such
provision or any other provision of this Agreement.
20
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the day and year first above written.
(signatures)
21
EXHIBITS AND SCHEDULES
TO THE SUBSCRIPTION AGREEMENT
(exhibits and schedules are not included in filing with the Form 8-K)
Exhibit 1: Certificate of Determination of Preferences and Rights of Series
A Convertible Preferred Stock
Exhibit 2: Form of Warrants
Exhibit 3: Name, Address and Fax of Investors
Exhibit 4: Legal Opinion
Exhibit 5: Use of Proceeds
Exhibit 6: Required Agreements
Exhibit 7: Series A Preferred Stock to be Outstanding Post-Closing.
Exhibit 8: Registration Rights Agreement
Exhibit 9: Investment Banking Agreement
Exhibit 10: Disclosure Letter
22