Settlement and Equity Interest Purchase Agreement, dated April 6, 2011, between Liquidmetal Technologies, Inc. and SAGA S.p.A

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THIS SETTLEMENT AND EQUITY INTEREST PURCHASE AGREEMENT (the “Agreement”) is entered into effective as of the 6th day of April, 2011, by and among

 

SAGA S.p.A. (Tax ID and VAT no. IT00800300287), a company incorporated under the laws of Italy with registered offices at Cadoneghe, Padua (Italy), Via T. Edison no. 9, in the person of its President and legal representative, Mr. Aronne Meneghetti, duly authorized for the purposes hereof by the Board of Directors meeting dated March 25th 2011 attached hereto as Exhibit A (the “Seller”), and

 

LIQUIDMETAL TECHNOLOGIES, INC. (Tax ID no. 33-0264467), a Delaware corporation having its registered offices at 1209 Orange Street, City of Wilmington, County of New Castle, Delaware, 19801, and its principal place of business at 30452 Esperanza, Rancho Santa Margarita, California, 92688, in the person of its Chief Executive Officer and legal representative, Mr. Thomas Steipp duly authorized for the purposes hereof by Written Consent of the Board of Directors dated March 21, 2011, attached hereto as Exhibit B (the “Buyer”) and

 

LIQUIDMETAL SAGA ITALY S.r.l. (Tax ID and VAT no. IT04104670288), an Italian limited liability company  with registered offices at Cadoneghe, Padua (Italy), Via T. Edison no. 9, in the person of its President and legal representative Mr. Aronne Meneghetti duly authorized for the purposes hereof by the Board of Directors meeting dated March 25th 2011 attached hereto as Exhibit C (the “Company”).

 

The Buyer, the Company and the Seller are referred to collectively herein as the “Parties.”

 

 

WHEREAS, pursuant to that certain Joint Venture Agreement between the Buyer and the Seller, dated as of June 26, 2006 (as amended through the date hereof, the “JVA”) and that certain Shareholders Agreement between the Buyer and Seller, dated as of June 26, 2006 (as amended through the date hereof, the “Shareholders Agreement”), Buyer and Seller acquired respectively:

 

Buyer	19.9%
Seller	80.1%
Total	100.0%

 

of the Company’s stated capital (the “Stated Capital”); and

 

WHEREAS, in the conduct of the Parties’ common business the Company suffered in 2008 losses exceeding the amount of its equity and reserves, which required according to Italian corporate laws calling an extraordinary quotaholders’ meeting aimed at covering the losses, deliberating the zeroing of the balance, and the contextual reissuance of the Company’s minimum capital; and

 

WHEREAS, upon Buyer’s failure to fund the Company in proportion to its participation, Seller agreed, upon the terms and conditions set forth in an amendment agreement entered into between the Parties in July 2009, to fund the Company entirely for an interim period, thus rendering Seller as the sole and 100% quotaholder of the Company and contributor of its Stated Capital, while granting for a certain period of time to the Buyer an option to become again quota-holder of the Company; and

 

 

WHEREAS, LLPG, Inc., a Delaware corporation (“LLPG”), and the Seller entered into that certain Equipment Purchase Agreement, dated as of April 21, 2006 (as amended through the date hereof, the “Equipment Purchase Agreement”), whereby LLPG sold three 150-ton Liquidmetal Alloy casting machines and the two vacuum induction melting (“VIM”) machines to the Seller for ultimate use by the Company (the “Equipment”); and

 

WHEREAS, the Buyer and the Company are parties to that certain License Agreement, dated as of June 26, 2006 (as amended through the date hereof and a true and correct copy of which is attached hereto as Exhibit D), (the “License Agreement”, which, together with the JVA, the Shareholders Agreement and Equipment Purchase Agreement, shall be collectively, including all amendments thereto, referred to as the “Prior Agreements”), whereby the Buyer licensed certain patents and technical information to the Company (the “Licensee”); and

 

WHEREAS, the Parties seek to resolve and settle certain actions pending in (1) the Orange County California Superior Court Case number 30-2010-00396881 (the “OC Case”) and (2) that Arbitration matter no. 4/2010 filed in Italy on June 14, 2010 before the Camera Arbitrale Di Padova, by the Seller and the Company (the “Italian Case”, which, together with the OC Case shall be referred to as the “Actions”); and

 

WHEREAS, the amounts claimed by Seller (and disputed by Buyer) in the Actions exceed $3,000,000 and could exceed $6,000,000; and

 

WHEREAS, the Parties disagree as to the obligations owed by and between the Parties under the Prior Agreements, including as a result of the June 9, 2010 notice of termination; and

 

WHEREAS, the Parties desire to resolve the status of the Prior Agreements and the rights and duties between them, which were put at issue in the Actions, and thereby to facilitate an orderly settlement thereof; and

 

WHEREAS, in settlement of the Actions the Seller desires to transfer all of its right, title, equity and Stated Capital in the Company (the “Purchased Interest”) to Buyer, and the Buyer desires to purchase the Purchased Interest from the Seller subject to the terms and conditions of this Agreement; and

 

WHEREAS, following the consummation of the transactions contemplated hereby, the Prior Agreements shall be terminated except as otherwise provided herein, and except as otherwise provided herein, the parties thereunder shall have no further obligations or rights pursuant to such agreements;

 

NOW THEREFORE, in consideration of the premises and the mutual covenants expressed herein and for other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged by the parties, the parties agree as follows:

 

 

The transactions contemplated by this Agreement shall constitute, if and when duly performed, full settlement and release of all claims that are the subject of the Actions, and of any and all past, present, or future claims, demands, obligations, or causes of action and also any and all claims, causes of action and liabilities arising from or related to the Prior Agreements and the transactions contemplated thereby for compensatory or punitive damages, costs, losses, expenses, and compensation, whether based on tort, contract, or other theories of recovery, that the Parties or their predecessors and successors in interest, heirs, and assigns have or may have against each other arising from the subject of the Actions and the Prior Agreements and the transactions contemplated by the Prior Agreements, and agree that this compromise and settlement shall constitute a bar to all such claims. In connection herewith, and to effectuate this full settlement and release, the Seller shall sell the Purchased Interest to the Buyer, and the Buyer shall purchase the Purchased Interest from the Seller, subject to the provisions of this Agreement.  Following the sale and purchase of the Purchased Interest, the Buyer shall own all of the Stated Capital of the Company.

 

 

1.    Discontinuance of Proceedings. Upon the full performance of the transactions set forth under Article IV hereof, the Parties agree to discontinue the Actions and any other legal proceedings concerning matters covered by the Prior Agreements, and further agree that no legal proceedings will be commenced pertaining to any matters covered thereby, except as provided herein for the enforcement of this Agreement. The discontinuance by Seller as provided for above shall constitute a “rinuncia agli atti e rinuncia all’azione” for the purposes of Italian law. This Agreement shall be enforced only as set forth under Article IX, below, entitled “Enforcement of Agreement.”

 

2.    No Admission of Liability.  The Parties understand and acknowledge that this Agreement does not constitute an admission of liability and shall not be used or construed as such in any legal or administrative proceeding.

 

3.    Waiver under Section 68 of the Italian Professional Code. The attorneys hereby agree to waive their rights under section 68 of the Italian Professional Code, releasing the Parties from joint and several liability with respect to attorneys’ fees.

 

4.    Stipulated rights.  Notwithstanding the existing disputes concerning the effectiveness and status of the Prior Agreements, the Parties hereby stipulate and agree that, in order to clarify tax and capitalization issues in Italy, immediately prior to the mediation between the Parties which was resolved by agreement by the Parties on March 19, 2011 (see Article IX, below), the Prior Agreements were and are in full force and effect, the License was and is owned by the Company, and the Company is deemed to have continued in operation and effect with the Parties owning the Stated Capital as set forth above.

 

 

In consideration for settlement of the disputes between them, the parties covenant and agree as set forth in this agreement, and additionally, for the sale of the Purchased Interest by Sellers to the Buyer, the Buyer shall pay Two Million Eight Hundred Thousand and No/100 Dollars ($2,800,000) (the “Purchase Price”) at Closing (as defined in Article IV).  The  Buyer shall pay the Purchase Price to the Seller in the form of 4,496,429 newly issued, fully paid, and non-assessable shares of the Buyer’s common stock, par value $0.001 per share (the “Shares”), at a per-share price of $0.622716 (U.S Dollars) (the “Base Price”), which is calculated by determining the average daily volume-weighted average price of the Buyer’s common stock on the trading market on which the Buyer’s common stock is then listed or quoted for trading as reported by Bloomberg L.P. for the thirty (30) consecutive trading days before a certain date (the “Average Market Price”). In the case of the Base Price, the calculation date shall be April 6, 2011.

 

 

The closing of the purchase and sale of the Purchased Interest contemplated by this Agreement (the “Closing”) shall take place at 9:00 a.m., Pacific Daylight Time on April 8, 2011, or as close thereto as is practicable (the “Closing Date”), at (i) the Buyer’s executive offices in Rancho Santa Margarita, California and (ii) at the offices of the Notary Public, Mr. Nicola Cassano at Via Trieste n. 32, Padua (Italy).  At the Closing, (i) the Buyer, or the Buyer’s duly appointed nominee, shall deliver the Shares to the Seller or the Seller’s attorney, and (ii) the Seller and the Buyer, or the Buyer’s duly appointed nominee, shall execute the quota purchase agreement for the Purchased Interests.

 

 

1.    Assumption of Liabilities and Customers.  Seller represents, warrants, and agrees that, prior to the date hereof, Seller has assumed, and has caused the Company to assign and transfer to Seller, all Liabilities of the Company as of the date of this Agreement.  The term “Liabilities” shall mean any and all direct or indirect indebtedness, guaranty, endorsement, claim, loss, damage, deficiency, cost, expense (including capital improvements), fine, penalty, obligation or responsibility, fixed or unfixed, known or unknown, asserted or unasserted, liquidated or unliquidated, contingent or otherwise, and secured or unsecured.  Seller further represents and warrants that, prior to the date hereof, the Company has transferred and assigned to Seller all assets of the Company other than the Company’s rights and entitlements under the License Agreement, which shall remain in full force and effect after Closing, and other Prior Agreements.

 

2.    Sale of Products to Existing Customers.  Seller shall, after the date hereof, have the right to continue to sell and supply to certain current customers, namely Pure Fishing America (directly and through the affiliate Ningbo Beilun Haibo Machinery Co. Ltd), and Socket Mobile Inc. (the “Current Customers”) only, and not to any new customers, of the Company, those Licensed Products (as defined in the License Agreement and subsequent amendments thereto, if applicable) being made or sold by the Company to the Current Customers as of the date of this Agreement, provided that this right shall be limited to Licensed Products that are the same design and model number as Licensed Products that have been sold and shipped by the Company to Current Customers prior to Closing (such products shall be referred to as “Existing Products”).  Buyer hereby grants to Seller an irrevocable, limited, paid-up, royalty free, non-exclusive, non-transferrable license (the “Limited License”) under the Licensed Patents (as defined in the License Agreement) solely for the limited purpose of the exercise by Seller of its rights under this paragraph, which Limited License shall terminate automatically when the Current Customers no longer require the Existing Products, and the Limited License may not be thereafter revived. In the event that the Seller requires alloy sourcing information in order to supply the Current Customers, the Buyer shall in good faith provide such alloy sourcing information to the Seller. In the event that the Seller intends to stop supplying the Current Customers, the Seller can refer the Current Customers to the Buyer, and which point the Buyer may, in its sole and absolute discretion, decide whether to supply the Current Customers.

 

3.    Termination of Prior Agreements.  Upon performance of the transactions to be carried out on the Closing Date, the Parties acknowledge termination of their obligations under the Prior Agreements, and, except as specifically incorporated herein for purposes of this Agreement or as otherwise set forth in this Agreement, acknowledge that all of the rights, duties and obligations of the Parties under the Prior Agreements are extinguished.

 

 

4.    Continuing Obligations under the Prior Agreements.  Notwithstanding Article V, Section 3, following termination of the Prior Agreements, Seller and its affiliates shall continue to be bound by the Seller’s obligations set forth in, and Buyer shall continue to have Buyer’s rights set forth in: (a) Section 10 of the JVA, (b) Article 11 of the License Agreement, and (c) Article II of the Equipment Purchase Agreement, together with any other provisions of the foregoing agreements that relate to such sections and articles of the foregoing agreements (the “Continuing Obligations”).  The respective rights of Buyer and obligations of the Seller set forth in such provisions of such Prior Agreements shall continue in full force and effect, and the Continuing Obligations shall continue to be binding on the Seller notwithstanding anything else herein to the contrary, except in case of: (i) failure by Buyer, in the event Buyer elects to redeem the Stock pursuant hereto, to pay the Redemption Price as provided in Section 6; (ii) failure by Buyer to timely issue or make payment pursuant to the promissory note provided for under Section 7, if required in accordance with the terms hereof; or (iii) failure by Buyer in accordance with Article VI Section 8 to issue the relevant certificates without the restriction legend mentioned thereunder, if required in accordance with the terms hereof (assuming, of course, that Seller timely tenders the legended certificates to the buyer’s transfer agent).  In case of the above events of breach or default by Buyer, and after 10 days failure to cure such breach or default following written notice by Seller to Buyer to cure such breach or default, Seller shall be released from the Continuing Obligations, and Buyer shall not have the right to enforce Section 10.2 of the JVA, and Buyer shall not act to prevent such competition using other provisions of the Prior Agreements.

 

5.    Remittance of Equipment.  After the Closing, the Equipment (as defined below) may be used by Seller solely for the purpose of exercising its rights under Section 2 of this Article V.  After such rights have terminated or expired, the Seller shall use commercially reasonable efforts to promptly (i) sell the Equipment to an authorized licensee of the Buyer approved in writing by Buyer or as otherwise approved by in writing by Buyer, or, (ii) if no such authorized licensee of the Buyer is available or willing to acquire the Equipment, to liquidate the Equipment by sale for scrap to a dealer or liquidator approved in writing by Buyer. The net proceeds from such sale, after deducting the direct third party costs or commissions of such sale, shall be shared one-half by Buyer and one-half by Seller.  In the event that Seller liquidates rather than sells the Equipment to an approved licensee, as set forth above, and there is a net cost of liquidation of the Equipment, then the Buyer and Seller shall share equally in such cost. In the event of liquidation of the Equipment other than by sale to an authorized licensee of the Buyer, Seller agrees to remove, alter, or destroy any proprietary components of the Equipment, to the written satisfaction of the Buyer, so as to prevent any third parties from obtaining any intellectual property or proprietary information of the Buyer.  Seller agrees that the features and design of the Equipment are “Confidential Information” within the meaning of Section 10.1 of the JVA.  Nevertheless, by approving of the sale or transfer of the Equipment as set forth herein, Buyer agrees that Seller’s action aimed at the sale of the Equipment in accordance with the terms hereof shall not constitute a violation of Section 10.2 of the JVA. Attached hereto as Exhibit E is a declaration from LLPG that two of the three 150-ton Liquidmetal Alloy casting machines should have become LLPG property, that LLPG waives any rights to said two machines, and that these two machines remain property of the Company free of charge.

 

(a) If, on the Determination Date, the Average Market Price is greater than or equal to One Hundred Ten Percent (110%) of the Base Price, the Redemption Price shall equal One Hundred Ten Percent (110%) of the Base Price; or

(b) If, on the Determination Date, the Average Market Price is greater than or equal to the Base Price, but less than One Hundred Ten Percent (110%) of the Base Price, the Redemption Price shall equal the Average Market Price; or

(c) If, on the Determination Date, the Average Market Price is less than the Base Price, then the Buyer may, at its option, redeem the Shares at the Base Price, or the Parties shall proceed as set forth in Section 7 below.

 

In the event that Buyer does not elect to redeem the Shares, then the Buyer must, on the first business day after the Determination Date, instruct its transfer agent to re-issue the Shares to Seller in unrestricted form, without a restrictive legend thereon, upon the tender by the Seller of the original certificates representing the Shares to the transfer agent.  Seller may, following expiration of the Determination Date, retain or dispose of any or all of the unredeemed Shares as it sees fit, subject to applicable securities laws. Upon the payment of the Redemption Price, Seller shall transfer and assign the Shares to Buyer upon the terms and conditions of this Agreement free and clear of any liens, claims, or encumbrances and will execute any assignments or stock powers reasonably requested by Buyer to effectuate such transfer.

 

7.    Issuance of Note.  If, on the Determination Date, the Average Market Price is less than the Base Price, the Buyer shall, within three (3) business days after the Determination Date, issue to Seller a promissory note, in substantially the form attached hereto as Exhibit F (the “Note”).  The principal amount of the Note shall equal the product of (a) the aggregate number of Shares issued by the Buyer to the Seller on the Closing Date pursuant to this Agreement, multiplied by (b) the difference between the Base Price and the Average Market Price as of the Determination Date.

 

8.    Additional Seller Covenant.  Seller agrees that neither Seller, nor its affiliates, consultants, nor anyone acting on their behalf, will at any time on or prior to the Determination Date, engage in any transactions in the Buyer’s common stock, including without limitation short-sales, dispositions, or hedging transactions.

 

9.    Additional Buyer Covenant; Security.  In the event that, after the Closing Date and before the latest to occur of (i) the Redemption Price is paid in full or (ii) the Shares are registered for resale under the Securities Act or the relevant certificates are issued without the restrictive legend (so long as Seller timely tenders the original certificates to the Buyer’s transfer agent) or (iii), the Note issued in accordance with Article V, Section 6 and is paid in full (as the case may be), the Buyer grants to any non-affiliate third party any license (a “Third-Party License”) under the Licensed Patents (as defined in the License Agreement and amendments thereto and listed in Exhibit D) to make, offer, and/or sell Licensed Products (as defined in the License Agreement and amendments thereto, if applicable), then Buyer hereby covenants that it shall deposit any consideration, license fees or royalties received by Buyer under such Third-Party License (net of the Buyer’s out-of-pocket costs relating to such consideration, licensee fees or royalties) into a separate bank account (the “Segregated Account”) as security for the performance of Buyer’s obligations under (i), (ii) and (iii) above. In case of default by Buyer under the obligations set forth under (i), (ii) and (iii) above, the Seller shall be entitled to receive from the Segregated Account, regardless of any objection raised by Buyer, any deficiency or unpaid amount up to and until the total cumulative amount of $2,800,000.00 has been received by the Seller plus any unpaid amount under the Note to be issued under Section 7 of this Article V. In event of such default, the Seller must make written demand to the escrow agent, or to such other person or entity entrusted with the Segregated Account, with notice to the Buyer, stating that the Buyer is in breach of this Settlement Agreement and specifying the kind of breach and the relevant amount owed thereunder, without prejudice for the Seller’s right to seek any remedy under applicable law to obtain compensation for any and all damages suffered due to such breach. The Buyer agrees to enter into any escrow account, account control agreement, or blocked account control agreement for the duration and at the terms and conditions as may be necessary to provide for such payments or security contemplated by this paragraph. Funds in the Segregated Account may be applied toward payment of the Redemption Price, and once either the Redemption Price or the amount of the Note is fully paid, the Segregated Account shall be released without further claim by the Seller to the full control of the Buyer.

 

 

10.              Additional Buyer Covenant; Liquidation and Winding Down of the Company.  Promptly after the Closing Date and Buyer’s purchase of the Purchased Interests, Buyer shall take any and all steps necessary or reasonable to dissolve the Company in accordance with applicable laws. Seller shall cooperate with Buyer in good faith in such efforts.

 

 

As an inducement to Buyer to execute and deliver this Agreement, the Seller makes the following representations and warranties to Buyer, each of which is true and correct on the date hereof, and shall survive the consummation of the transactions contemplated hereby.

 

1.    Authorization of Transaction.  The Seller has full power and authority to execute and deliver this Agreement and to perform its obligations hereunder.  This Agreement constitutes the valid and legally binding obligation of the Seller, enforceable in accordance with its terms and conditions.  The Seller need not give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government, governmental agency, any lender, financial institution, person, or entity in order to consummate the transactions contemplated by this Agreement, save for any deposit customary for compulsory registration of the purchase agreement relating to the Purchased Interest with the competent Company’s Registrar.

 

2.    Noncontravention.  Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (a) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which the Seller is subject or (b) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, instrument, or other arrangement to which the Seller is a party or by which it is bound or to which any of its assets are subject.

 

4.    No Liabilities.  Prior to the Closing, the Seller shall have either assumed all of the Company’s Liabilities, known or unknown, or shall have otherwise transferred all such Liabilities from the Company, such that as of the Closing Date, the Company shall not have any Liabilities.

 

5.    Investment Experience.  The Seller has substantial experience in evaluating and investing in securities in companies similar to the Buyer such that the Seller is capable of evaluating the merits and risks of the Seller’s investment in the Buyer and has the capacity to protect its own interests.  The Seller is an “Accredited Investor” as defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933, as amended (the “Securities Act”).

 

6.    Investment Purposes.  The Seller is acquiring the Shares for investment for the Seller’s own account, not as a nominee or agent, and not with the view to, or for resale in connection with, any distribution thereof.  The Seller understands that the Shares have not been, and will not be when delivered hereunder, registered under the Securities Act by reason of a specific exemption from the registration provisions of the Securities Act, the availability of which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the representations as expressed herein.

 

7.    Restrictions.  The Seller understands that: (a) the Shares have not been and are not being registered under the Securities Act or any state securities laws, and may not be offered for sale, sold, assigned or transferred unless (i) subsequently registered thereunder, or (ii) the Buyer has been advised by its legal counsel that such Shares to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such registration, such as Rule 144 or Rule 144A promulgated under the Securities Act (or a successor rule thereto) (collectively, “Rule 144” ); (b) any sale of the Shares made in reliance on Rule 144 may be made only in accordance with the terms of Rule 144; and (c) the Buyer is not under any obligation to register the Shares under the Securities Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder.

 

 

8.    Legends.  The Seller understands that the certificates or other instruments representing the Shares shall bear any legend as required by the “blue sky” laws of any state and a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of such stock certificates):

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

The legend set forth above shall be removed and the Buyer shall issue a certificate without such legend to the holder of the Shares upon which it is stamped, if, unless otherwise required by state securities laws, (a) such Shares are registered for resale under the Securities Act or (b) the Buyer does not exercise its right to redeem the Shares in accordance with the provisions of Article V, Section 6.

 

9.    Cooperation.  The Seller agrees to fully cooperate with Buyer in the preparation, execution, filing, recordation, and transfer of any and all documentation as may be required under Italian law to fully carry out or memorialize the purposes of this agreement, and also in the winding up and liquidation of the Company. The Seller shall participate in Company's shareholder meetings to vote on an agenda dealing with the financial statement for the Company's approval and with the Company's dissolution. The Seller shall vote in accordance with the Buyer’s instructions.  Seller assumes responsibility for the approved budget and its contents as provided for in Article V, Section 1.

 

 

As an inducement to Seller to execute and deliver this Agreement, the Buyer makes the following representations and warranties to the Seller, each of which is true and correct on the date hereof, and shall survive the consummation of the transactions contemplated hereby.

 

1.    Authorization of Transaction.  The Buyer has full power and authority to execute and deliver this Agreement and to perform its obligations hereunder.  This Agreement constitutes the valid and legally binding obligation of the Buyer, enforceable in accordance with its terms and conditions.  The Buyer need not give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order to consummate the transactions contemplated by this Agreement.

 

2.    Noncontravention.  Neither the execution and the delivery of this Agreement, nor the consummation or the transactions contemplated hereby, will (a) violate any constitution, statute, regulation, rule injunction, judgment, order, decree, ruling, charge, or other restriction or any government, governmental agency, or court to which the Buyer is subject or any provision of its charter or bylaws or (b) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, instrument, or other arrangement to which the Buyer is a party or by which he or it is bound or to which any of his or its assets is subject.

 

3.    Issuance of Shares.  The Shares are duly authorized and, upon issuance in accordance with the terms hereof, shall be fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue thereof.  Buyer is, and will agree to remain at all times relevant hereto, current on periodic reporting requirements of the Securities Act to the extent required by Rule 144 of the Securities Act.   Assuming the accuracy of each of the representations and warranties of the Seller contained in Article VI, the issuance by the Buyer of the Shares is exempt from the registration requirements of Section 5 of the Securities Act.

 

 

4.    Validity of License.  Buyer agrees and understands that immediately prior to the mediation between the Parties which was resolved by agreement by the Parties on March 19, 2011 (see Article IX, below) and at all times thereafter

through the Closing Date: (a) the License was, and is now, owned by the Company; (b) Buyer was, and is now, not aware of any legal deficiencies of the License or underlying patents existing; (c) Buyer has no knowledge of any rights of third parties which have priority over the License or which encumber the License; and, (d) Seller’s transfer of the License does not infringe third parties' rights or does not cause damages to third parties.

 

 

1.    Indemnification by Seller.  The Seller shall indemnify and hold harmless the Buyer and its current and former directors, officers, employees, agents, representatives, affiliates, successors and assigns (collectively, “Buyer Indemnified Parties”), from and against any and all losses, liabilities, damages, demands, claims, suits, actions, judgments or causes of action, assessments, reasonable costs and reasonable expenses (whether or not involving a third party claim), including, without limitation, reasonable attorneys’ fees, any and all reasonable expenses incurred in investigating, preparing or defending against any actions and/or suits (commenced or threatened), demands, assessments, judgments, or any claim whatsoever, and any and all amounts paid in settlement of any of the aforementioned, asserted against, resulting to, imposed upon, or incurred or suffered by any Buyer Indemnified Party, directly or indirectly, as a result of, in respect of, connected with, or arising from (a) any inaccuracy or breach of any representation or warranty of Seller contained in or made pursuant to this Agreement, (b) the nonfulfillment or breach of any covenants or agreements made by Seller in this Agreement, (c) any Liabilities of the Company arising from or relating to any period of time prior to the Closing, including without limitation the Liabilities referred to in Article V, Section 1, of this Agreement, and (d) any tax Liabilities or other Liabilities arising from or relating to the asset and liability transfers described in Article V, Section 1, of this Agreement.

 

2.    Indemnification by Buyer.  Buyer shall indemnify and hold harmless Seller and its current and former directors, officers, employees, agents, representatives, affiliates, successors and assigns (collectively, the “Seller Indemnified Parties”), from and against any and all losses, liabilities, damages, demands, claims, suits, actions, judgments or causes of action, assessments, reasonable costs and reasonable expenses (whether or not involving a third party claim), including, without limitation, reasonable attorneys’ fees, any and all reasonable expenses incurred in investigating, preparing or defending against any actions and/or suits (commenced or threatened), demands, assessments, judgments, or any claim whatsoever, and any and all amounts paid in settlement of any of the aforementioned, asserted against, resulting to, imposed upon, or incurred or suffered by any Seller Indemnified Party, directly or indirectly, as a result of, in respect of, connected with, or arising from (a) any inaccuracy or breach of any representation or warranty of Buyer contained in or made pursuant to this Agreement, (b) the nonfulfillment or breach of any covenants or agreements made by Buyer in this Agreement, and (c) any Liabilities of the Company arising after the Closing.

 

 

3.    Unknown Claims.  The Parties hereby acknowledge and agree that the release set forth in Article I is a general release that applies to all claims for injuries, damages, or losses which they may have against each other of any kind, whether known or unknown, foreseen or unforeseen, or patent or latent, and that they hereby waive application of California Civil Code Section 1542. The Parties certify that they have read the following provisions of Civil Code Section 1542:

 

"A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor."

 

The Parties understand and acknowledge that in consequence of this waiver of Civil Code Section 1542, even if they should eventually suffer additional damages arising out of the facts referred to in the Actions, they will not be able to make any claim for those damages. Furthermore, the Parties acknowledges that they intend these consequences even as to claims for damages that may exist as of the date of this release but that they do not know exist, and that, if known, would materially affect their decision to execute this release, regardless of whether their lack of knowledge is the result of ignorance, oversight, error, negligence, or any other cause.

 

 

1.    Mediation and Judgment.  This Agreement is the final agreement between the parties, replacing and incorporating the terms of an initial written settlement agreement executed by the Parties on March 19, 2011, following mediation assisted by Hon. Leo S. Papas, Ret. This Agreement shall be admissible pursuant to California Evidence Code Section 1123, and may, but only following good faith attempt to resolve any disputes pertaining hereto informally by Judge Leo S. Papas, Ret. before approaching the court, be enforced by motion of any party pursuant to CCP §664.6 before the Superior Court of Orange County, following notice of default with 5 days’ time to cure such default. The Parties agree that the OC Case shall be dismissed by the parties with prejudice, but that the Court shall retain jurisdiction for purpose of enforcement of this Settlement Agreement, which the Parties stipulate and agree may, in the event that a default is not cured, include an order by the Court that Judgment be entered for any remaining unpaid deficiency or that performance may be otherwise specifically ordered. In the event of any motion or action to enforce this Agreement the prevailing party shall be entitled to reimbursement of its attorney’s fees and costs.

 

 

1.    Entire Agreement.  This Agreement (including the documents referred to herein) constitutes the entire agreement among the Parties and supersedes any prior understandings, agreements, or represen­tations by or among the Parties, written or oral, to the extent they have related in any way to the subject matter hereof.  The representations and warranties of the Parties hereunder shall survive the Closing.

 

2.    Good Faith. The Parties agree to act in good faith to create, complete and execute all documents necessary to effectuate this agreement.

 

3.    Confidentiality. The Parties agree to keep the terms of this Agreement confidential to the extent permissible under California, U.S. Federal, or Italian law, as the case may be.  The Parties may discuss the terms hereof only (i) within the signatories’ or their officers’ or directors’ immediate family members or significant others; or (ii) within the Parties’ respective organizations on a need-to-know basis; or (iii) with their attorneys, tax advisors, financial advisors or any government agency, entity or person so long as reasonably required by the law; or (iv) where required to disclose such terms pursuant to a valid court order for testimony at trial or deposition so long as all other affected parties receive reasonable notice and opportunity to object; or (v) if a modification to the confidentiality is agreed upon in writing and signed by the parties affected; or (vi) as necessary to complete performance of this Agreement.

 

 

4.    Defamation. The Parties agree that each of them will not defame or disparage the other, or any of its affiliates, related entities, or any past or present officers, directors or employees.

 

5.    No Reliance. The Parties agree that by entering into this Agreement each of them is not relying on any representations other than those set forth in this Agreement.

 

6.    Successors and Assignment.  This Agreement shall be binding upon and insure to the benefit of the Parties named herein and their respective successors and permitted assigns.  No Party, prior to Closing, may assign either this Agreement or any of its rights, interests, or obligations hereunder without the prior written approval of the other Parties, and any assignment attempted without such prior written approval shall be void.

 

7.    Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitutes one and the same instrument.  Facsimile or electronic mail copies of the signature pages shall constitute originals.

 

8.    Descriptive Headings.  The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement.

 

9.    Amendments and Waivers.  No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by all of the Parties hereto.  No waiver by any Party of any default, misrepresentation, or breach of warrant or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior to subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence.

 

10.      Notice. Any notice required to be given under this agreement shall be valid if made by first class mail, facsimile, email, or overnight or special delivery service, and shall be effective upon receipt by either Party at that Party’s executive offices or valid email address.

 

11.      Severability.  Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction.

 

12.      Governing Law; Venue.  This Agreement shall be governed by and construed in accordance with the domestic laws of the State of California without giving effect to any choice or conflict of law provision or rule (whether of the State of California or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of California.  All disputes arising under or relating to this Agreement shall be resolved exclusively in the state or federal courts located in the State of California.

 

 

13.      Construction.  Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise.  The word “including” means including without limitation.  The Parties have participated jointly in the negotiation and drafting of this Agreement.  In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and 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.  This Agreement is written in the English language, and in the event that any translation of this Agreement into a language other than English conflicts with the English-language version, then the English-language version shall control.

 

IN WITNESS WHEREOF, the parties have executed this Agreement to be effective as of the date set forth above.

 

 

 

 

Waiver under Section 68 of the Italian Professional Law. The attorneys in Italy hereby waive their rights under section 68 of the Italian Professional Law, thereby releasing the Parties from joint and several liability with respect to the attorneys’ fees.

________________

Evelyne Povoleri

Attorney for Seller

________________ 

Ilaria Bartolucci

Attorney for Buyer

________________

Silvia Gagno

Attorney for Buyer

 

EXHIBIT A

 

EXHIBIT B

 

EXHIBIT C

 

EXHIBIT D

 

EXHIBIT E

 

EXHIBIT F