CONTRACT OF SALE AND LEASEBACK
This Contract of Sale and Leaseback (the "Contract"), dated as of June
10, 1997 is made and entered into between Earth Search Sciences, Inc., a Utah
corporation (hereinafter referred to as "Seller") and Accuprobe, Inc., a New
York corporation (hereinafter referred to as "Buyer").
RECITALS
A. Seller has entered into an agreement to purchase two duplications of
the ESSI Probe 1 (the first such probe is hereinafter individually referred to
as a "Probe," and both probes are collectively referred to as the "Probes").
B. Seller wishes to sell the Probe to Buyer and simultaneously enter
into a long-term lease of the Probe (such lease is hereinafter referred to as
the "Equipment Lease"). The Equipment Lease shall be substantially in the form
attached hereto as Exhibit A.
C. Buyer wishes to enter into a contract to purchase and leaseback to
Seller the Probe on the terms hereinafter set forth.
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements hereinafter set forth, the parties agree as follows:
ARTICLE I
Defined Terms
1.1 Definitions. As used herein, the following terms shall have the
meanings given:
(a) "Business Day" means any Monday through Friday on which business is
transacted by banks in Boise, Idaho.
(b) "Closing" means the consummation of the purchase of the Probe by Buyer from
Seller in accordance with the terms and provisions of Article VII.
(c) "Closing Date" means the date on which the Closing occurs.
(d) "Contract" means the Supply Contract dated September 11, 1995, between
Manufacturer and Seller.
(e) "Effective Date" means the date on which a counterpart of this Agreement has
been fully executed and delivered by Buyer and Seller.
(f) "Manufacturer" shall mean Integrated Spectronics Pty Ltd, A.C.N 003 873 443,
a company incorporated under the laws of New South Wales, Australia.
(g) "Operators" shall mean Quasar Resources, Inc., a Wyoming corporation, Bear
Creek Exploration, Inc., a Nevada corporation, and such other entities to which
seller licenses the right to use the Probe during the term of the Equipment
Lease.
(h) "Purchase Price" means the total consideration to be paid by Buyer to Seller
for the purchase of each Probe, as specified in Section 3.1 hereof.
(i) "Warrants" means the common stock purchase warrants described in Section
4.1.
1.2 Other Defined Terms Certain other defined terms shall have the
respective meanings assigned to them elsewhere in this Agreement.
ARTICLE II
Agreement of Purchase and Sale
On the terms and conditions stated in this Agreement, Seller hereby agrees to
sell and convey the Probe to Buyer and lease it from Buyer, and Buyer agrees to
purchase, and acquire the Probe from Seller and lease it to Seller.
ARTICLE III
Purchase Price
3.1 Purchase Price. The Purchase Price to be paid by Buyer to Seller
for the Probe shall be $2,500,000. Except for $200,000 being held by Buyer for
payment at the Closing, the parties acknowledge that Buyer has previously paid
the Purchase Price in full. Seller represents and warrants that it has paid
Manufacturer in full for the Probe, and that no amounts remain owing or will
become owing by Seller to Manufacturer under the Contract.
3.2 Assignment of Contract. Seller hereby assigns to Buyer all of
Seller's right, title and interest in and to the Contract, subject however to
Seller's rights under the Equipment Lease. This assignment is intended to secure
Buyer's right to acquire the Probe at the Closing subject to the Equipment
Lease. Attached hereto as exhibit D is a consent to such assignment executed
by the Manufacturer.
3.3 Advance. Buyer has previously advanced to Seller, in addition to
the Purchase Price, the sum of ONE MILLION TWO HUNDRED THOUSAND DOLLARS
($1,200,000) to fund the purchase of an additional Probe. Upon execution of this
Agreement, Seller shall deliver to Buyer a promissory note and collateral
assignment substantially in the forms set forth as Exhibits B and C,
respectively, attached hereto, to reflect the terms of Seller's obligation to
repay such advances.
ARTICLE IV
Issuance of Warrants
4.1 Issuance of Warrants. Upon the signing of this Agreement and in
consideration of Buyer's purchase of the Probe, Seller shall issue to Buyer
1,000,000 shares of unregistered common stock of Seller. At Closing, in
consideration of Buyer's purchase of the Probe, ESSI shall isssue to Buyer a
warrant the form annexed hereto as Exhibit E entitling Buyer to purchase up to
1,000,000 shares of unregistered common stock of Seller at an exercise price of
$2.00 per share, which warrant shall be exercisable at any time on or before
5:00 p.m. McCall, Idaho time on April 10, 2000.
ARTICLE V
Representations, Warranties, and Agreements of Seller
5.2 Representations and Warranties of Seller. Seller represents and
warrants to Buyer as of the Effective Date and as of each Closing Date, except
where specific reference is made to another date or dates, that:
(a) Seller has the full right, power, and authority to sell
and convey the Probe as provided in this Agreement and to carry out Seller's
obligations hereunder and under any other documents and instruments executed by
Seller pursuant hereto, and all requisite action necessary to authorize Seller
to enter into this Agreement and to carry out Seller's obligations hereunder and
under any other documents and instruments executed by Seller pursuant hereto has
been, or on the Closing Date, will have been, taken;
(b) Seller is in good standing in the State of Idaho and in
each state in which it transacts business and it is authorized to do business in
each state in which it transacts business; and
(c) Pursuant to this Agreement, Buyer is acquiring all of
Seller's right, title and interest in and to the Probe free and clear of any
liens. Seller has, or will have prior to closing date for each Probe paid the
Manufacture in full for the Probe.
ARTICLE VI
Representations, Warranties and Agreements of Buyer
Buyer represents, warrants and agrees with Seller as of the Effective
Date and as of each Closing Date, except where specific reference is made to
another date or dates, that:
(a) Buyer has the full right, power, and authority to purchase
and lease back the Probe as provided in this Agreement and to carry out Buyer's
obligations hereunder and under any other documents and instruments executed by
Buyer pursuant hereto, and all requisite action necessary to authorize Buyer to
enter into this Agreement and to carry out Buyer's obligations hereunder and
under any other documents and instruments executed by Buyer pursuant here to has
been, or on the Closing Date, will have been, taken;
(b) Buyer has the financial capacity to complete the
transactions described in this Agreement and Buyer's commitment to proceed is in
no way contingent upon Buyer's ability to obtain external financing for this
transaction;
(c) Buyer is an "accredited investor" as defined in Rule
501 under the Securities Act of 1933; and
(d) Buyer and Buyer's shareholders shall deliver to Seller a
complete and accurate Confidential Investor Questionnaire, in the form attached
as Exhibit F, and will provide Seller any additional information or
documentation reasonably necessary to demonstrate to Seller's satisfaction that
Buyer and Buyer's shareholders are "accredited investor," as defined in Rule 501
under the Securities Act of 1933.
ARTICLE VII
CLOSING
7.1 Date and Place of Closing. The Closing with respect to the Probe
shall take place on the date of delivery of the Probe to Seller from
Manufacturer pursuant to the Contract at Sydney, Australia or such other place
as is mutually acceptable to Manufacturer and Seller, although Buyer and Seller
need not be physically present at the Closing.
7.2 Items to be Delivered at the Closing.
(a) Seller. At the Closing, Seller shall deliver or cause to
be delivered to Buyer, at Seller's sole cost and expense (except as provided to
the contrary), the following items duly executed:
(i) A Bill of Sale acknowledged by Seller,
conveying the Probe to Buyer;
(ii) An executed Equipment Lease with respect to
the Probe;
and
(iii) The Warrants.
(iv) The executed promissory note and collateral
assignment in the forms attached hereto as Exhibit B and C,
respectively.
(b) Buyer. At the Closing, Buyer, in addition to the
balance of the Purchase Price as referenced in Section 3.1, shall deliver to
Seller:
(i) An executed Equipment Lease with respect to
the Probe;
and
(ii) An acknowledgment of receipt of title to the
Probe.
(c) Seller and Buyer. At the Closing and thereafter if
requested by either party, the parties shall execute such other documents and
take such other actions as may be reasonably requested by the requesting party
to effectuate the intent and purposes of this Agreement and the Equipment
Leases.
7.3 Delivery and Closing. The Probes shall be delivered to the
applicable Operator for use after the Closing. Title to the Probe shall pass to
Buyer at the same point of delivery that Seller takes delivery of the Probe from
Manufacturer at the Closing subject to the rights of Seller as tenant under the
Equipment Lease.
7.4 Cost of Closing. Each party is responsible for paying the legal
fees of its counsel in negotiating, preparing, and closing the transaction
contemplated by this Agreement. Seller is responsible for paying fees, costs,
and expenses identified herein as being the responsibility of Seller, including,
but not limited to the cost of acquiring and delivering the Probe. This Section
7.5 shall survive the Closing for all purposes.
ARTICLE VIII
Risk of Loss
Risk of loss, damage or destruction to the Probe shall be borne by
Seller until the Closing is completed on the Closing Date. In the event of such
loss, damage or destruction, Seller shall have a reasonable period of time to
effect repair or replacement of the lost, damaged or destroyed Probe.
ARTICLE IX
Defaults and Remedies
If either party shall default in the performance of any of its
obligations hereunder, and if such default is not cured within ten (10) days
after written notice to the defaulting party specifying such default, the
nondefaulting party shall have all rights and remedies to which it may be
entitled by law and under this Agreement (including the right of the
nondefaulting party to obtain specific performance against the defaulting
party).
ARTICLE X
Miscellaneous
10.1 Notices. All notices required or permitted hereunder shall
be in writing and shall be served on the parties at the following addresses:
If to Seller: Earth Search Sciences, Inc.
502 North 3rd Street
McCall, Idaho 83638
Attention: Larry F. Vance, Chairman
Telephone: (208) 634-7080
Fax: (208) 634-2978
If to Buyer: Accuprobe, Inc.
Longwood Road
Sands Point, NY 11050
Attention: Dr. Jan Arnett
Telephone:
Fax:
Copy to: Shea & Nornes
1393 Veterans Memorial Highway, Suite 100
Hauppauge, NY 11788
Attention: J. Timothy Shea
Telephone: (516) 366-3666
Fax: (516) 366-3671
Any such notice shall be either (a) sent by certified mail, return receipt
requested, in which case notice shall be deemed delivered three (3) Business
Days after deposit, postage prepaid, in the U.S. Mail, (b) sent by overnight
delivery using a nationally recognized overnight courier, in which case it shall
be deemed delivered one (1) Business Day after deposit with such courier, (c)
sent by facsimile, in which case notice shall be deemed delivered upon
transmission of such notice to the appropriate Fax number above, or (d) sent by
personal delivery. The above addresses may be changed by written notice to the
other party. Copies of notices are for informational purposes only and a failure
to give or receive copies of any notice shall not be deemed a failure to give
notice.
10.2 Governing Law. This Agreement is being executed, delivered, and is
intended to be performed in the State of Idaho and the laws of Idaho shall
govern the validity, construction, enforcement, and interpretation of this
Agreement, unless otherwise specified herein.
10.3 Entirety and Amendments. This Agreement embodies the entire
agreement between the parties and supersedes all prior agreements and
understandings, if any, relating to the Probes, and may be amended or
supplemented only by an instrument in writing executed by the party against whom
enforcement is sought.
10.4 Right to Inspect. Buyer shall have the right to inspect Seller's
records for the purpose of auditing the use of the Probe and any Royalties due
under the Lease, subject to such restriction as Seller may reasonably impose to
protect the confidentiality of the records. Such inspections shall be made
during reasonable business hours as may be set by Seller.
10.5 Parties Bound. This Agreement is binding on and inures to
the benefit of Seller and Buyer and their respective successors and permitted
assigns.
10.6 Further Acts. In addition to the acts and deeds recited in this
Agreement and contemplated to be performed, executed, and/or delivered under
this Agreement, Seller and Buyer agree to perform, execute and/or deliver or
cause to be performed, executed and/or delivered at the Closing or after the
Closing all further acts, deeds and assurances reasonably necessary to
consummate the transactions contemplated hereby, including without limitation
any documents or assurances necessary to accommodate the reasonable requests of
either party with respect to tax treatment of the transactions contemplated by
this Agreement.
10.7 Multiple Counterparts. This Agreement may be executed in
any number of counterparts, all of which taken together shall constitute one
and the same contract and any of the parties to this Agreement may execute the
Agreement by signing any of the counterparts.
10.8 Exhibits. The exhibits which are referenced in, and attached
to, this Agreement are incorporated in, and made, a part of, this Agreement
for all purposes.
10.9 Assignment. Neither party shall have the right to assign its
rights under this Agreement to any person or entity without the prior written
consent of the other party. The giving or withholding of such which consent
shall be in the sole discretion of that party.
10.10 Attorney's Fees. If either party hereto employs an attorney to
enforce or defend its rights hereunder, the prevailing party shall be entitled
to recover its reasonable attorney's fees.
10.11 No Third Party Beneficiary. This Agreement is not intended
to give or confer any benefits, rights, privileges, claims, actions or
remedies to any person or entity as a third party beneficiary.
10.12 Time. Time is of the essence in the performance of each and
every term, condition and covenant contained in this Agreement.
10.13 Construction. The parties acknowledge that the parties and their
counsel have reviewed and negotiated this Agreement and that the normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement or
any exhibits or amendments hereto.
EXECUTED on the 10 day of June, 1997.
SELLER: BUYER:
EARTH SEARCH SCIENCES, INC. ACCUPROBE, INC.
a Utah Corporation A New York Corporation
By: /s/ Larry Vance By: /s/ Jan Arnett
Title: Chairman Title: President