________________________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
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Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
INTERNATIONAL ISOTOPES INC.
(Exact Name of Registrant as Specified In Its Charter)
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previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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________________________________________________________________________________
INTERNATIONAL ISOTOPES INC.
4137 Commerce Circle
Idaho Falls, Idaho 83401
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 14, 2005
Time and Date: 2:00 p.m., Mountain Time, on Thursday, July 14, 2005
Place: International Isotopes Inc.
Shilo Inn Convention Center
780 Lindsay Blvd
Idaho Falls, Idaho 83402
Items of Business
1. To elect three directors to serve for a term of one year and until
their successors are elected and qualified.
2. To ratify the appointment of Hansen, Barnett & Maxwell as the
independent auditors for the fiscal year ending December 31, 2005.
3. To adopt the Company's Employee Stock Purchase Plan.
4. To approve the Second Amended and Restated Articles of Incorporation,
which amend and restate the Company's Restated Articles of
Incorporation, as amended, to increase the number of authorized shares
of common stock; and
5. To consider any other business that may properly come before the
meeting.
Adjournments and Postponements
Any action on the items of business described above may be considered at the
annual meeting at the time and on the date specified above or at any time and
date to which the annual meeting may be properly adjourned and postponed.
Record Date
You are entitled to vote only if you were an International Isotopes shareholder
as of the close of business on April 15, 2005.
Voting
Your vote is very important. Whether or not you plan to attend the annual
meeting, we encourage you to read this proxy statement and to submit your proxy
or voting instructions as soon as possible. You may submit your proxy or voting
instructions for the annual meeting by completing, signing, dating and returning
your proxy card or voting instructions in the pre-addressed envelope provided.
For specific instructions on how to vote your shares, please refer to the
section entitled Questions and Answers beginning on page 3 of this proxy
statement and the instructions on the proxy card or voting instruction card. You
may attend the meeting in person even though you have sent in your proxy or
voting instruction card.
BY ORDER OF THE BOARD OF DIRECTORS,
Steve T. Laflin
President and Chief Executive Officer
Idaho Falls, Idaho
April 15, 2005
This notice of annual meeting and proxy statement and form of proxy are being
distributed on or about May 16, 2005.
INTERNATIONAL ISOTOPES INC.
4137 Commerce Circle
Idaho Falls, Idaho 83401
__________________
PROXY STATEMENT
__________________
For Annual Meeting of Shareholders
To Be Held on July 14, 2005
QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL MEETING
Q: Why am I receiving these materials?
A: The Board of Directors of International Isotopes Inc. is providing these
proxy materials for you in connection with International Isotopes' annual
meeting of shareholders, which will take place on Thursday, July 14, 2005.
As a shareholder, you are invited to attend the annual meeting and are
entitled to and requested to vote on the items of business described in
this proxy statement.
Q: What information is contained in this proxy statement?
A: The information included in this proxy statement relates to the proposals
to be voted on at the annual meeting, the voting process, the compensation
of directors and most highly paid executive officers, and certain other
required information.
Q: How may I obtain International Isotopes' annual report to shareholders and
Form 10-KSB?
A: A copy of our 2004 annual report (which contains our Form 10-KSB) is
enclosed.
Shareholders may request any exhibit to the Form 10-KSB, for the year ended
December 31, 2004, by specifically requesting a copy from:
International Isotopes Inc.
Attn: Steve T. Laflin
4137 Commerce Circle
Idaho Falls, Idaho 83401
(208) 524-5300
Copies of the 2004 Annual Report on Form 10-KSB are also available in the
Investor Center section of our website at www.intisoid.com and at the SEC's
EDGAR database on the SEC's website at www.sec.gov.
Q: What items of business will be voted on at the annual meeting?
A: The items of business scheduled to be voted on at the annual meeting are:
o The election of directors;
o The ratification of the independent auditors for the 2005 fiscal year;
o The approval of the Employee Stock Purchase Plan.
o The second amendment and restatement of the Amended and Restated
Articles of Incorporation.
We will also consider any other business that properly comes before the annual
meeting.
Q: How does the Board recommend that I vote?
A: Our Board recommends that you vote your shares "FOR" each of the nominees
to the Board, "FOR" the ratification of the independent auditors for the
2005 fiscal year, "FOR" the approval of the Employee Stock Purchase Plan;
and "FOR" the approval of the Second Amended and Restated Articles of
Incorporation.
Q: What shares can I vote?
A: Each share of International Isotopes common stock issued and outstanding as
of the close of business on April 15, 2005, the Record Date, is entitled to
be voted on all items being voted upon at the annual meeting. You may vote
all shares owned by you as of this time, including (1) shares held directly
in your name as the shareholder of record, and (2) shares held for you as
the beneficial owner through a broker, trustee or other nominee such as a
bank. On the Record Date we had approximately 183,567,348 shares of common
stock issued and outstanding.
Q: What is the difference between holding shares as a shareholder of record
and as a beneficial owner?
A: Most shareholders hold their shares through a broker or other nominee
rather than directly in their own name. As summarized below, there are some
distinctions between shares held of record and those owned beneficially.
Shareholder of Record
If your shares are registered directly in your name with International
Isotopes' transfer agent, American Stock Transfer & Trust Company, you are
considered, with respect to those shares, the shareholder of record, and
these proxy materials are being sent directly to you by International
Isotopes. As the shareholder of record, you have the right to grant your
voting proxy directly to International Isotopes or to vote in person at the
meeting. International Isotopes has enclosed or sent a proxy card for you
to use.
Beneficial Owner
If your shares are held in a brokerage account or by another nominee, you
are considered the beneficial owner of shares held in street name, and
these proxy materials are being forwarded to you together with a voting
instruction card. As the beneficial owner, you have the right to direct
your broker, trustee or nominee how to vote and are also invited to attend
the annual meeting.
Since a beneficial owner is not the shareholder of record, you may not vote
these shares in person at the meeting unless you obtain a "legal proxy"
from the broker, trustee or nominee that holds your shares, giving you the
right to vote the shares at the meeting. Your broker, trustee or nominee
has enclosed or provided voting instructions for you to use in directing
the broker, trustee or nominee how to vote your shares.
Q: How can I attend the annual meeting?
A: You are entitled to attend the annual meeting only if you were an
International Isotopes shareholder or joint holder as of the close of
business on April 15, 2005 or you hold a valid proxy for the annual
meeting. You should be prepared to present photo identification for
admittance. In addition, if you are a shareholder of record, your name will
be verified against the list of shareholders of record on the record date
prior to your being admitted to the annual meeting. If you are not a
shareholder of record but hold shares through a broker or nominee (i.e., in
street name), you should provide proof of beneficial ownership on the
record date, such as your most recent account statement prior to April 15,
2005, a copy of the voting instruction card provided by your broker,
trustee or nominee, or other similar evidence of ownership. If you do not
provide photo identification or comply with the procedures outlined above
upon request, you will not be admitted to the annual meeting. The meeting
will begin promptly at 2:00 p.m., Mountain time.
Q: How can I vote my shares in person at the annual meeting?
A: Shares held in your name as the shareholder of record may be voted in
person at the annual meeting. Shares held beneficially in street name may
be voted in person only if you obtain a legal proxy from the broker,
trustee or nominee that holds your shares giving you the right to vote the
shares. Even if you plan to attend the annual meeting, we recommend that
you also submit your proxy or voting instructions as described below so
that your vote will be counted if you later decide not to attend the
meeting.
Q: How can I vote my shares without attending the annual meeting?
A: Whether you hold shares directly as the shareholder of record or
beneficially in street name, you may direct how your shares are voted
without attending the meeting. If you are a shareholder of record, you may
vote by submitting a proxy. If you hold shares beneficially in street name,
you may vote by submitting voting instructions to your broker, trustee or
nominee. For directions on how to vote, please refer to the instructions
below and those included on your proxy card or, for shares held
beneficially in street name, the voting instruction card provided by your
broker, trustee or nominee.
2
Shareholders of record of International Isotopes common stock may submit
proxies by completing, signing and dating their proxy cards and mailing
them in the accompanying pre-addressed envelopes. International Isotopes
shareholders who hold shares beneficially in street name may vote by mail
by completing, signing and dating the voting instruction card provided and
mailing it in the accompanying pre-addressed envelope.
Q: Can I change my vote?
A: You may change your vote at any time prior to the vote at the annual
meeting. If you are the shareholder of record, you may change your vote by
granting a new proxy bearing a later date (which automatically revokes the
earlier proxy), by providing a written notice of revocation to
International Isotopes' Secretary prior to your shares being voted, or by
attending the annual meeting and voting in person. Attendance at the
meeting will not cause your previously granted proxy to be revoked unless
you specifically so request. For shares you hold beneficially in street
name, you may change your vote by submitting new voting instructions to
your broker, trustee or nominee, or, if you have obtained a legal proxy
from your broker or nominee giving you the right to vote your shares, by
attending the meeting and voting in person.
Q: Who can help answer my questions?
A: If you have any questions about the annual meeting or how to vote or revoke
your proxy, you should contact:
International Isotopes Inc.
Attn: Steve T. Laflin
4137 Commerce Circle
Idaho Falls, Idaho 83401
(208) 524-5300
Q: Is my vote confidential?
A. Proxy instructions, ballots and voting tabulations that identify individual
shareholders are handled in a manner that protects your voting privacy.
Your vote will not be disclosed either within International Isotopes or to
third parties, except: (1) as necessary to meet applicable legal
requirements, (2) to allow for the tabulation of votes and certification of
the vote, and (3) to facilitate a successful proxy solicitation.
Occasionally, shareholders provide written comments on their proxy card,
which are then forwarded to International Isotopes management.
Q: How many shares must be present or represented to conduct business at the
annual meeting?
A: The quorum requirement for holding the annual meeting and transacting
business is that holders of a majority of shares of International Isotopes
common stock entitled to vote must be present in person or represented by
proxy. Abstentions, votes withheld and broker non-votes are counted for the
purpose of determining the presence of a quorum.
Q: How are votes counted?
A. In the election of directors, you may vote "FOR" all of the nominees or
your vote may be "WITHHELD" with respect to one or more of the nominees.
For the other items of business, you may vote "FOR," "AGAINST" or
"ABSTAIN." Abstentions and votes withheld have the same effect as a vote
"AGAINST." Broker non-votes have no effect. If you provide specific
instructions with regard to a certain item, your shares will be voted as
you instruct on such items. If you sign your proxy card or voting
instruction card without giving specific instructions, your shares will be
voted in accordance with the recommendations of the Board ("FOR" all of
International Isotopes' nominees to the Board, "FOR" ratification of the
independent auditors, "FOR" the approval of the 2005 Employee Stock
Purchase Plan, "FOR" the amendment of the Amended and Restated Articles of
Incorporation and in the discretion of the proxy holders on any other
matters that properly come before the meeting).
3
Q: What is the voting requirement to approve each of the proposals?
A: In the election of directors, the three persons receiving the highest
number of "FOR" votes at the annual meeting will be elected. The other
proposals require the affirmative "FOR" vote of a majority of those shares
present in person or represented by proxy and entitled to vote on that
proposal at the annual meeting. If you hold shares beneficially in street
name and do not provide your broker with voting instructions, your shares
may constitute "broker non-votes." Generally, broker non-votes occur on a
matter when a broker is not permitted to vote on that matter without
instructions from the beneficial owner and instructions are not given.
Brokers are not permitted to vote on the proposal to approve the Employee
Stock Purchase Plan or the Second Amended and Restated Articles of
Incorporation. In tabulating the voting result for any particular proposal,
shares that constitute broker non-votes are not considered entitled to vote
on that proposal.
Q: Is cumulative voting permitted for the election of directors?
A: No. International Isotopes does not allow you to cumulate your vote in the
election of directors. For all matters proposed for shareholder action at
the annual meeting, each share of common stock outstanding as of the close
of business on April 15, 2005 is entitled to one vote.
Q: What happens if additional matters are presented at the annual meeting?
A. Other than the four items of business described in this proxy statement, we
are not aware of any other business to be acted upon at the annual meeting.
If you grant a proxy, the persons named as proxy holders, Ralph M. Richart
and Steve T. Laflin, will have the discretion to vote your shares on any
additional matters properly presented for a vote at the meeting. If for any
unforeseen reason any of our nominees is not available as a candidate for
director, the persons named as proxy holders will vote your proxy for such
other candidate or candidates as may be nominated by the Board.
Q: Who will serve as inspector of elections?
A: The inspector of elections will be a representative of International
Isotopes Inc., and will be appointed at the annual meeting.
Q: What should I do if I receive more than one set of voting materials?
A: You may receive more than one set of voting materials, including multiple
copies of this proxy statement and multiple proxy cards or voting
instruction cards. For example, if you hold your shares in more than one
brokerage account, you may receive a separate voting instruction card for
each brokerage account in which you hold shares. If you are a shareholder
of record and your shares are registered in more than one name, you will
receive more than one proxy card. Please complete, sign, date and return
each International Isotopes proxy card and voting instruction card that you
receive.
Q: How may I obtain a separate set of voting materials?
A: If you share an address with another shareholder, you may receive only one
set of proxy materials (including our annual report to shareholders and
proxy statement) unless you have provided contrary instructions. If you
wish to receive a separate set of proxy materials now or in the future, you
may write or call us to request a separate copy of these materials from:
International Isotopes Inc.
Attn: Steve T. Laflin
4137 Commerce Circle
Idaho Falls, Idaho 83401
(208) 524-5300
Similarly, if you share an address with another shareholder and have
received multiple copies of our proxy materials, you may write or call us
at the above address and phone number to request delivery of a single copy
of these materials.
4
Q: Who will bear the cost of soliciting votes for the annual meeting?
A: International Isotopes is making this solicitation and will pay the entire
cost of preparing, assembling, printing, mailing and distributing these
proxy materials and soliciting votes. In addition to the mailing of these
proxy materials, the solicitation of proxies or votes may be made in
person, by telephone or by electronic communication by our directors,
officers and employees, who will not receive any additional compensation
for such solicitation activities. Upon request, we will reimburse brokerage
houses and other custodians, nominees and fiduciaries for forwarding proxy
and solicitation materials to shareholders.
Q: Where can I find the voting results of the annual meeting?
A: We intend to announce preliminary voting results at the annual meeting and
publish final results in our report on Form 10-QSB for the third quarter of
fiscal 2005.
Q: What is the deadline to propose actions for consideration at next year's
annual meeting of shareholders or to nominate individuals to serve as
directors?
A: You may submit proposals, including director nominations, for consideration
at future shareholder meetings.
Shareholder Proposals: For a shareholder proposal to be considered for
inclusion in International Isotopes proxy statement for the annual meeting
next year, the written proposal must be received by International Isotopes'
Secretary at our principal executive offices no later than January 15,
2006. If the date of next year's annual meeting is moved more than 30 days
before or after the anniversary date of this year's annual meeting, the
deadline for inclusion of proposals in International Isotopes proxy
statement is instead a reasonable time before the company begins to print
and mail its proxy materials. Such proposals must also comply with SEC
regulations regarding the inclusion of shareholder proposals in
company-sponsored proxy materials. Proposals should be addressed to:
International Isotopes Inc.
Attn: Steve T. Laflin
4137 Commerce Circle
Idaho Falls, Idaho 83401
(208) 524-5300
For a shareholder proposal that is not intended to be included in
International Isotopes' proxy statement as described above, the shareholder
must deliver a proxy statement and form of proxy to holders of a sufficient
number of shares of International Isotopes common stock to approve that
proposal and give notice to International Isotopes' Secretary no later than
April 1, 2006.
Nomination of Director Candidates: You may propose director candidates for
consideration by the Board. Any such recommendations should include the
nominee's name and qualifications for Board membership and should be
directed to International Isotopes' Secretary at the address of our
principal executive offices set forth above.
Q: How may I communicate with International Isotopes' Board or the
non-management directors on International Isotopes' Board?
A: You may submit any communication intended for International Isotopes' Board
or the non-management directors by directing the communication by mail
addressed to:
Ralph M. Richart, Chairman of the Board
350 Shore Drive
Oakdale, NY 11769
or
Christopher Grosso
480 Broadway, Suite 310
Saratoga Springs, NY 12866
5
CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS
International Isotopes is committed to having sound corporate governance
principles, which are essential to running our business efficiently and
maintaining our integrity in the marketplace. International Isotopes' Code of
Ethics is available at www.intisoid.com.
Board Independence
The Board has determined that none of the current directors or nominees, other
than Steve T. Laflin, President and Chief Executive Officer, has a material
relationship with International Isotopes and that each such director and
nominee, other than Mr. Laflin, is independent under the standards of the
Securities and Exchange Commission and Nasdaq. Furthermore, the Board has
determined that none of the members of any of International Isotopes' standing
committees has a material relationship with International Isotopes (either
directly, through a family member or as a partner, executive officer or
controlling shareholder of any organization that receives or makes payments from
or to International Isotopes) and each is "independent" within the meaning of
International Isotopes' director independence standards and applicable listing
standards.
Board Structure and Committee Composition
As of the date of this proxy statement, our Board has three directors and the
following two committees: (1) Audit, and (2) Compensation. The 2004 membership
and the function of each of the committees are described below. The Audit
Committee operates under a written charter adopted by the Board, which is
available on International Isotopes' website at www.intisoid.com. The
Compensation Committee does not have a written charter. During fiscal 2004, the
Board held four meetings. Each director attended at least 75% of all Board and
applicable Committee meetings. Directors are encouraged to attend annual
meetings of International Isotopes shareholders. All directors attended the last
annual meeting of shareholders.
________________________________________________________________________________
Name of Director | Audit | Compensation
__________________________________|_____________________|_______________________
| |
Non-Employee Directors: | |
__________________________________|_____________________|_______________________
| |
Ralph M. Richart | X | X *
__________________________________|_____________________|_______________________
| |
Christopher Grosso | X * | X
__________________________________|_____________________|_______________________
| |
Employee Directors: | |
__________________________________|_____________________|_______________________
| |
Steve. T. Laflin | |
__________________________________|_____________________|_______________________
| |
Number of Meetings in Fiscal | |
2004 | 1 | 4
__________________________________|_____________________|_______________________
X = Committee member; * = Chair
Audit Committee
The Audit Committee was first established in January 1997. Each member of the
Audit Committee is an "independent director" under NASD Rule 4200(a)(15) as may
be modified from time to time. The Board of Directors has adopted a written
charter for the Audit Committee. The Audit Committee is directly responsible for
the appointment, compensation, and oversight of the Company's independent
auditors. The independent auditing firm reports directly to the Audit Committee.
The responsibility of the Audit Committee includes resolving disagreements
between Company management and the auditor related to financial reporting. The
Audit Committee is responsible for establishing procedures for receipt of
complaints relating to accounting, internal control, and auditing and
confidential, anonymous information submitted by employees relating to
questionable accounting or auditing matters. The Audit Committee has the
authority to employ independent counsel and other advisors in connection with
its duties. Mr. Richart is an "audit committee financial expert." Mr. Grosso
qualifies as an "audit committee financial expert" based on his experience as
disclosed in his biography on page 8.
6
The report of the Audit Committee is included on page 20of this proxy statement.
The charter of the Audit Committee is attached as Appendix A.
Compensation Committee.
The Compensation Committee was established in January 1997. The Compensation
Committee reviews the compensation and benefits of all officers of the Company,
makes recommendations to the Board of Directors and reviews general policy
matters relating to compensation and benefits of employees of the Company,
including administration of the Company's 2002 Long Term Incentive Plan.
Nominating Committee.
International Isotopes does not have a standing nominating committee or
committee performing similar functions. The Board of Directors believes it is
appropriate not to have such a committee because both of the Company's
independent Board members, Ralph M. Richart and Christopher Grosso, participate
in the consideration of director nominees. Dr. Richart and Mr. Grosso are both
"independent" under NASD Rule 4200(a)(15), as may be modified from time to time.
The Board will continue to assess the necessity of a nominating committee and
will establish one if necessary in the future. The Board of Directors will
consider nominees recommended by shareholders.
Consideration of Director Nominees
Shareholder Nominees. The Board does not have a formal policy regarding the
consideration of director candidates nominated by shareholders because the Board
is small and there is low turnover among its members.
Director Qualifications. Board members should have high standards of
professional and personal ethics, integrity and values. They should have
relevant experience and ability with respect to making and overseeing policy in
business, technology, government or education sectors. They should be committed
to acting in International Isotopes' best interests and to objectively assessing
Board, committee and management performance. They should have sufficient time to
carry out their duties and should have the willingness and ability to serve
multiple terms to develop a deeper understanding of International Isotopes'
business affairs. Board members should be willing to avoid activities or
interests that may create a conflict of interest with the director's
responsibilities and duties to International Isotopes.
Identifying and Evaluating Nominees for Directors. The Board will use a variety
of methods for identifying and evaluating nominees for director. In the event of
a vacancy on the Board, various potential candidates for director will be
considered. Candidates may come to the Board's attention through current Board
members, professional search firms, shareholders or other persons. These
candidates will be evaluated at regular or special meetings of the Board, and
may be considered at any point during the year. As noted above, properly
submitted shareholder nominations for candidates to the Board will be
considered. Following verification of the shareholder status of persons
proposing candidates, recommendations will be aggregated and considered by the
Board at a regularly scheduled meeting. If any materials are provided by a
shareholder in connection with the nomination of a director candidate, such
materials will be forwarded to the Board. In evaluating nominees, the Board will
seek to achieve a balance of knowledge, experience and capability on the Board.
DIRECTOR COMPENSATION
The following paragraph describes compensation and reimbursement provided to
International Isotopes' non-employee directors. International Isotopes' employee
director does not receive any separate compensation for his Board activities.
NON-EMPLOYEE DIRECTOR COMPENSATION FOR FISCAL 2004
Both of International Isotopes' non-employee directors were reimbursed for their
costs associated with attending Board and committee meetings during 2004.
Reimbursement ranged from $1,000 to $2,000. In addition, both directors received
an option to purchase 1,000,000 shares of International Isotopes common stock on
June 2, 2003 at an exercise price of $.03. The option was 25% vested on the
grant date and vests 25% each year.
7
PROPOSALS TO BE VOTED ON
PROPOSAL NO. 1
ELECTION OF DIRECTORS
International Isotopes' Board of Directors currently consists of three
directors. At the 2004 Annual Meeting, each current director will be elected
annually to serve until the next annual meeting and until his or her successor
is elected and qualified. Information regarding the business experience of each
nominee to the Board is provided below. There are no family relationships among
our executive officers and directors.
If you sign your proxy or voting instruction card, but do not give instructions
with respect to the voting of directors, your share will be voted "FOR" the
three persons recommended by the Board. If you wish to give specific
instructions with respect to the voting of directors, you may do so by
indicating your instructions on your proxy or voting instruction card.
The Board expects that all of the nominees will be available to serve as
directors. In the event that any nominee should become unavailable, however, the
proxy holders, Steve T. Laflin and Ralph M. Richart, will vote for a nominee or
nominees designated by the Board, unless the Board chooses to reduce the number
of directors serving on the Board.
Our Board recommends a vote "FOR" the election to the Board of each of the
following nominees:
Ralph M. Richart, M.D., age 71, was elected to the Board of Directors on January
22, 2002. The other directors elected him to serve as Chairman on April 24,
2002. Dr. Richart is a professor and Vice Chairman of the Department of
Pathology at Columbia University College of Physicians and Surgeons, where he
has been employed since 1963. Dr. Richart has previously served on the Board of
Directors of several publicly held companies and multiple corporate medical
advisory Boards as well as serving as Chief Executive Officer of several
privately held companies in the fields of medicine and electronics. Additionally
his extensive experience also includes leading clinical trials resulting in FDA
product approval and he has served as an advisor to medical device and
pharmaceutical companies as well as the Food and Drug Administration.
Steve T. Laflin, age 48, was elected to the Board of Directors in June 2001. Mr.
Laflin was President and General Manager of International Isotopes' subsidiary,
International Isotopes Idaho Inc., from 1996 until 2001. In August 2001 Mr.
Laflin was promoted to President and Chief Executive Officer of the Company. Mr.
Laflin has a BS degree in Physics from Idaho State University and has been
employed in various senior engineering and management positions in the nuclear
industry since 1992.
Christopher Grosso, age 37, was elected to the Board of Directors on April 24,
2002. He is currently a principal of Kershner Grosso, Inc., a New York based
money management and investment banking firm. During his 14 years at Kershner
Grosso, Mr. Grosso has been Senior Research Analyst and Portfolio Manager and
has led the firm's investment banking and venture capital activities. Prior to
joining Kershner Grosso, Mr. Grosso was with Howe and Rusling Investment
Management and Chase Manhattan Bank. Mr. Grosso received his B.S. in business
administration from Skidmore College.
8
PROPOSAL NO. 2
RATIFICATION OF INDEPENDENT AUDITORS
The Audit Committee of the Board has appointed Hansen, Barnett & Maxwell as
independent auditors to audit International Isotopes' consolidated financial
statements for the fiscal year ending December 31, 2005. During fiscal 2004,
Hansen, Barnett & Maxwell served as International Isotopes' independent
auditors. See "Independent Auditors" on page 21. Representatives of Hansen,
Barnett & Maxwell are expected to attend the meeting, where they are expected to
be available to respond to appropriate questions and, if they desire, to make a
statement.
Our Board recommends a vote "FOR" the ratification of the appointment of Hansen,
Barnett & Maxwell as International Isotopes' independent auditors for the 2005
fiscal year. If the appointment is not ratified, the Audit Committee will
consider whether it should select other independent auditors.
9
PROPOSAL NO. 3
APPROVAL OF INTERNATIONAL ISOTOPES INC.
EMPLOYEE STOCK PURCHASE PLAN
We are asking shareholders to approve the International Isotopes Inc. Employee
Stock Purchase Plan (the "Employee Stock Purchase Plan"), which allows employees
to purchase shares of our common stock at a discount.
Our Board adopted the Employee Stock Purchase Plan on September 30, 2004,
subject to shareholder approval. If the Employee Stock Purchase Plan is not
approved by our shareholders, the Employee Stock Purchase Plan will be
terminated and any payments made to date will be refunded.
The Employee Stock Purchase Plan provides for the issuance of up to two million
shares of our common stock. A copy of the Employee Stock Purchase Plan is
attached to this proxy statement as Appendix B. The description herein is a
summary and not intended to be a complete description of the Employee Stock
Purchase Plan. Please read the Employee Stock Purchase Plan for more detailed
information.
Description of the Employee Stock Purchase Plan
The purpose of the Employee Stock Purchase Plan is to provide employees of
International Isotopes and those subsidiaries designated to participate in the
Employee Stock Purchase Plan with an opportunity to purchase shares of our
common stock.
Shareholder approval of the Employee Stock Purchase Plan enables employees to
receive special tax treatment provided by the Internal Revenue Code (the
"Code"). The Employee Stock Purchase Plan is intended to qualify as an "employee
stock purchase plan" under Section 423 of the Code. The provisions of the
Employee Stock Purchase Plan, accordingly, will be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
A total of two million shares of our common stock will be available for issuance
and purchase under the Employee Stock Purchase Plan. If any purchase right
terminates for any reason without having been exercised, the shares of common
stock not purchased under such purchase right shall again become available for
the Employee Stock Purchase Plan.
The Employee Stock Purchase Plan will be administered by a committee appointed
by our Board to administer the Employee Stock Purchase Plan (the "Committee").
Currently, the Compensation Committee serves as the Committee for the Plan. The
Committee has the full and exclusive discretionary authority to construe and
interpret the Employee Stock Purchase Plan and the rights granted under it and
to establish and change rules and regulations for the administration of the
Employee Stock Purchase Plan and to amend the Employee Stock Purchase Plan to
reduce or eliminate any unfavorable accounting consequences to the extent it
deems appropriate.
Eligibility
Generally, all employees of International Isotopes and its designated
subsidiaries whose customary employment is for more than 20 hours per week (or
such lesser number determined by the Committee) and more than 5 months per year
(or such lesser period determined by the Committee) with International Isotopes
or any subsidiary are eligible to participate in the Employee Stock Purchase
Plan. However, any employee who would own or have options to acquire five
percent (5%) or more of the total combined voting power or value of all classes
of stock of International Isotopes or any subsidiary is excluded from
participating in the Employee Stock Purchase Plan. As of April 15, 2005, there
were approximately 19 employees of International Isotopes eligible to
participate in the Employee Stock Purchase Plan.
Purchase of Shares of Common Stock
Pursuant to procedures established by the Committee, eligible employees may
purchase shares of common stock including by means of having payroll
withholding. Purchase periods are established (currently contemplated to be
successive three-month periods) and purchases of shares of common stock are made
on the last trading day of the purchase period with contributions made by or
compensation amounts withheld from employees during the purchase period.
Pursuant to procedures established by the Committee, employees may suspend the
amount of contributions or compensation being withheld during a purchase period
or may withdraw prior to the end of the purchase period any amounts previously
contributed or withheld during the purchase period, without interest.
10
On each purchase date (the last trading day of each purchase period), any
amounts contributed or withheld from compensation during the applicable purchase
period for purposes of the Employee Stock Purchase Plan will be used to purchase
the greatest number of whole shares of common stock that can be purchased with
such amounts. The purchase price for a share of common stock will be set by the
Committee but will not be less than eighty-five percent (85%) of the lesser of
the fair market value of a share of common stock on the purchase date or the
first day of the applicable purchase period. For purposes of the Employee Stock
Purchase Plan, "fair market value" generally means the average of the high asked
and low bid price of a share of common stock for the day as reported on the Over
the Counter Bulletin Board. As of April 8, 2005, that price was $0.11 per share.
The Code limits the aggregate fair market value of the shares of common stock
(determined as of the beginning of the purchase period) that any employee may
purchase under the Employee Stock Purchase Plan during any calendar year to
$25,000. Subject to the overall Employee Stock Purchase Plan limit, the
Committee determines the number of shares of common stock employees may purchase
under the Employee Stock Purchase Plan. The Committee may impose restrictions or
limitations on the resale of shares of common stock purchased under the Employee
Stock Purchase Plan.
International Isotopes may deduct or withhold or require employees to pay to
International Isotopes any federal, state, local and other taxes International
Isotopes is required to withhold with respect to any event arising as a result
of the Employee Stock Purchase Plan. International Isotopes may also deduct
those amounts from wages or compensation.
Effect of Certain Corporate Events
The Employee Stock Purchase Plan provides for adjustment of the number of shares
of common stock which may be granted under the Employee Stock Purchase Plan as
well as the purchase price per share of common stock and the number of shares of
common stock covered by each purchase right for any increase or decrease in the
number of shares of common stock resulting from a stock split, reverse stock
split, stock dividend, extraordinary cash dividend, combination or
reclassification of the common stock or recapitalization, reorganization,
consolidation, split-up, spin-off or any other increase or decrease in the
number of shares of common stock effected without receipt of consideration by
International Isotopes.
In the event of a proposed sale of all or substantially all of the assets of
International Isotopes or the merger of International Isotopes with or into
another corporation, outstanding rights to purchase shares will be assumed or an
equivalent right to purchase shares substituted by the successor corporation or
a parent or affiliate of the successor corporation. If the successor corporation
refuses to assume or substitute the right to purchase shares, any purchase
period then in progress will be shortened by setting a new purchase date and any
purchase period then in progress will end on the new purchase date.
In the event of any corporate transaction, the Committee may make such
adjustment it deems appropriate to prevent dilution or enlargement of rights in
the Employee Stock Purchase Plan, in the number, class of or price of shares of
common stock available for purchase under the Employee Stock Purchase Plan and
in the number of shares of common stock which an employee is entitled to
purchase and any other adjustments it deems appropriate. In the event of any
transaction, the Committee may elect to have the purchase rights under the
Employee Stock Purchase Plan assumed or such purchase rights substituted by a
successor entity, to terminate all outstanding purchase rights either prior to
their expiration or upon completion of the purchase of shares of common stock on
the next purchase date, or to take such other action deemed appropriate by the
Committee.
Amendment or Termination
The Board may amend the Employee Stock Purchase Plan at any time, provided such
amendment does not cause rights issued under the portion of the Employee Stock
Purchase Plan to fail to meet the requirements of Section 423 of the Code.
Moreover, any amendment for which shareholder approval is required under Section
423 of the Code or such securities exchange must be submitted to the
shareholders for approval. The Board may terminate the Employee Stock Purchase
Plan any time.
11
U.S. Federal Income Tax Consequences
The following discussion is only a brief summary of the United States federal
income tax consequences to International Isotopes and employees under the
Employee Stock Purchase Plan. It is based on the Code as in effect as of the
date of this proxy statement. The discussion relates only to United States
federal income tax treatment; state, local, foreign, estate, gift and other tax
consequences are not discussed. The summary is not intended to be a complete
analysis or discussion of all potential tax consequences.
The amounts deducted from an employee's pay pursuant to the Employee Stock
Purchase Plan will be included in the employee's compensation and be subject to
federal income and employment tax. Generally, no additional income will be
recognized by the employee either at the beginning of the purchase period when
purchase rights are granted pursuant to the Employee Stock Purchase Plan or at
the time the employee purchases shares of common stock pursuant to the Employee
Stock Purchase Plan.
If the shares of common stock are disposed of at least two years after the first
day of the purchase period to which the shares of common stock relate and at
least one year after the shares of common stock were acquired under the Employee
Stock Purchase Plan (the "Holding Period"), or if the employee dies while
holding the shares of common stock, the employee (or in the case of the
employee's death, the employee's estate) will recognize ordinary income in the
year of disposition or death in an amount equal to the lesser of (a) the excess
of the fair market value of the shares of common stock on the first trading day
of the purchase period over the purchase price of the share of common stock or
(b) the excess of fair market value of the shares of common stock at the time of
such disposition over the purchase price of the shares of common stock.
If the shares of common stock are sold or disposed of (including by way of most
gifts) before the expiration of the Holding Period, the employee will recognize
ordinary income in the year of sale or disposition in an amount equal to the
excess of the sales price over the purchase price. Even if the shares of common
stock are sold for less than their fair market value on the purchase date, the
same amount of ordinary income is included in income.
In addition, the employee generally will recognize capital gain or loss in an
amount equal to the difference between the amount realized upon the sale of
shares of common stock and the employee's tax basis in the shares of common
stock (generally, the amount the employee paid for the shares of common stock
plus the amount, if any, taxed as ordinary income). Capital gain or loss
recognized on a disposition of shares of common stock will be long term capital
gain or loss if the employee's holding period for the shares of common stock
exceeds one year. The purchase date begins the holding period for determining
whether the gain or loss realized is short or long term.
If the employee disposes of shares of common stock purchased pursuant to the
Employee Stock Purchase Plan after the Holding Period, International Isotopes
will not be entitled to any federal income tax deduction with respect to the
shares of common stock issued under the Employee Stock Purchase Plan. If the
employee disposes of such shares of common stock prior to the expiration of the
Holding Period, International Isotopes generally will be entitled to a federal
income tax deduction in an amount equal to the amount of ordinary income
recognized by the employee as a result of such disposition.
New Plan Benefits
Participation in the Employee Stock Purchase Plan is entirely within the
discretion of the eligible employees. Neither our executive officers, nor our
non-employee directors are eligible to participate in the Employee Stock
Purchase Plan. Because International Isotopes cannot presently determine the
participation levels by employees, the rate of contributions by employees and
the eventual purchase price under the Employee Stock Purchase Plan, it is not
possible to determine the value of benefits which may be obtained by other
employees under the Employee Stock Purchase Plan.
Our Board recommends a vote "FOR" the approval of the International Isotopes
Inc. Employee Stock Purchase Plan.
12
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth certain information with respect to the shares of
our common stock that were authorized for issuance under our 2002 Long Term
Incentive Plan, the only equity compensation plan in effect as of the end of our
last fiscal year. The table does not include shares that will be authorized
pursuant to the Employee Stock Purchase Plan (the "Purchase Plan") submitted to
the stockholders for approval at the Annual Meeting.
_________________________________________________________________________________________________________________
| (a) | (b) | (c)
________________________|__________________________|___________________________|_________________________________
| | | Number of securities remaining
| Number of securities to | Weighted-average exercise | available for future issuance
| be issued upon exercise | price of outstanding | under equity compensation plans
| of outstanding options, | options, warrants and | (excluding securities reflected
Plan Category | warrants and rights | rights | in column (a))
________________________|__________________________|___________________________|_________________________________
| | |
Equity compensation | 18,000,000 | $0.04 | 2,000,000
plans approved by | | |
security holders | | |
________________________|__________________________|___________________________|_________________________________
| | |
Equity compensation | 0 | n/a | 0
plans not approved by | | |
security holders | | |
________________________|__________________________|___________________________|_________________________________
13
PROPOSAL NO. 4
SECOND AMENDMENT AND RESTATEMENT OF
AMENDED AND RESTATED ARTICLES OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF CAPITAL STOCK
The Board of Directors has authorized, and recommends for your approval,
International Isotopes' Second Amended and Restated Articles of Incorporation,
which increase the number of authorized shares of common stock from 250 million
to 500 million shares, par value $.01 per share. The Board has also authorized a
restatement of the Restated Articles of Incorporation, as amended, to
consolidate all previous amendments to the Restated Articles of Incorporation,
as amended, into one document. The restatement does not make substantive changes
and does not require shareholder approval.
A copy of the proposed Second Amended and Restated Articles of Incorporation is
attached to this proxy statement as Appendix C.
On April 15, 2005, of the 255 million authorized shares of the Company, a total
of 183,567,348 shares of common stock were outstanding, 20,000,000 shares of
common stock were reserved for potential issuance in connection with our 2002
Long Term Incentive Plan and 2,000,000 are proposed to be reserved for potential
issuance under our Employee Stock Purchase Plan. A total of 49,432,652, shares
of common stock are authorized, unissued and not reserved for issuance. 850
shares of preferred stock are currently outstanding and 4,999,150 authorized
shares of preferred stock are authorized, unissued and not reserved for
issuance.
Although there are sufficient shares available to permit all presently
contemplated issuances, the Board believes that the proposed amendment is in the
best interests of the Company and its shareholders because the Company currently
has a limited number of authorized and unissued shares of common stock that are
not reserved for issuance. The proposed increase in International Isotopes'
authorized share capital will provide International Isotopes with flexibility of
action in the future by assuring there will be sufficient authorized but
unissued shares of common stock available for issuance in connection with
primary offerings of common stock, stock splits, acquisitions of the stock or
assets of another company, employee benefit plans and other general corporate
purposes without the necessity of further shareholder action at any special or
annual meeting. The Board will determine whether, when and on what terms the
issuance of shares of common stock may be warranted in connection with any of
the foregoing purposes. International Isotopes has no immediate plans,
arrangements, commitments or understandings with respect to the issuance of any
of the additional shares of common stock that would be authorized by the
proposed amendment.
An increase in the authorized shares of common stock could, under certain
circumstances, have an anti-takeover effect. For example, if the Board issues
additional shares in the future, such issuance could dilute the voting power of
a person seeking control of the Company, thereby deterring or rendering more
difficult a merger, a tender offer, proxy contest or an extraordinary
transaction opposed by the Board of Directors. This proposal to increase the
number of authorized shares is prompted by business and financial reasons and is
not in response to any effort of which the Company is aware to accumulate the
Company's stock or obtain control of the Company. Nevertheless, shareholders
should be aware that approval of the proposal could facilitate future efforts by
the Company to deter or prevent changes in control of the Company, including
transactions in which shareholders might otherwise receive a premium for their
shares over current market prices.
If the proposed amendment is approved, the additional shares of stock will be
available for issuance from time to time without further action by shareholders
(unless required by applicable law, regulatory agencies or by the rules of any
stock market on which International Isotopes' shares of common stock may then be
listed) and without first offering more shares to shareholders. Shareholders do
not have pre-emptive rights with respect to the additional shares of stock to be
authorized.
The proposed amendment provides that the first paragraph of Article IV of the
Company's Amended and Restated Articles of Incorporation be amended in its
entirety to read as follows:
The total number of shares of all classes of capital stock which the
Corporation shall have authority to issue is FIVE HUNDRED FIVE MILLION
(505,000,000), of which (a) FIVE HUNDRED MILLION (500,000,000) shares
will be designated as Common Stock, par value $.01 per shares; and (b)
FIVE MILLION (5,000,000) shares will be designated as Preferred Stock,
par value $.01 per share.
14
Approval of the proposed amendment requires the affirmative vote of a majority
of the outstanding shares of common stock entitled to vote at the Annual
Meeting. Neither an abstention nor a broker non-vote is an affirmative vote.
Therefore, both abstentions and broker non-votes will have the effect of votes
cast against the proposed amendment. If the proposed amendment and restatement
is approved by shareholders, it will become effective upon the filing of the
Second Amended and Restated Articles of Incorporation with the Secretary of
State of the State of Texas, which International Isotopes plans to file as soon
as practicable following the Annual Meeting. The Board of Directors has
unanimously approved the proposed amendment and believes it to be in the best
interests of the Company and the shareholders.
Our Board recommends a vote "FOR" the approval of the
Second Amended and Restated Articles of Incorporation.
15
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows common stock ownership on April 15, 2005, the record
date, except as otherwise noted, by:
o each person who beneficially owned more than 5% of International
Isotopes common stock on that date;
o each of the current executive officers named in the Summary
Compensation Table on page 18 and each of the current directors;
and
o all current International Isotopes executive officers, directors
and director nominees as a group.
The number of shares beneficially owned by each person is determined under the
rules of the SEC. The information is not necessarily indicative of beneficial
ownership for other purposes. Under such rules, beneficial ownership includes
any shares as to which the individual has the sole or shared voting power or
investment power and also any shares that the individual has the right to
acquire as of June 15, 2005 through the exercise of any stock option or other
right.
Name and address of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership(1) Class(1)
___________________________________________ _______________________ ___________
Marie C. Keane and James J. Keane(2) 16,235,740 8.8%
Fifty Broadway
New York, NY 10004
John M. McCormack(3) 54,510,664 29.7%
1303 Campbell Road
Houston, TX 77055
William Nicholson(4) 20,473,653 11.1%
121 Post Oak Lane, #2105
Houston, TX 77024
Walter O'Hearn(5) 15,527,141 8.5%
Fifty Broadway
New York, NY 10004
Christopher Grosso(6) 10,060,069 5.5%
480 Broadway, Suite 310
Saratoga Springs, NY 12866
Steve T. Laflin(7) 11,000,125 6%
Dr. Ralph M. Richart(8) 49,105,430 26.75%
630 West 168th Street
New York, NY 10032
All Executive Officers and Directors as a 70,165,624 38.22%
Group (3 persons)
_____________________
(1) Unless otherwise indicated, to the knowledge of the Company, all shares are
owned directly.
(2) Includes 206,500 shares owned by Keane Securities Co. Inc. of which Mr.
Keane is a principal. Also includes 1,772,706 shares subject to warrants
and 405,555 shares issuable upon conversion of an outstanding convertible
note.
(3) Includes an aggregate of 24,121,689 shares and warrants beneficially owned
by Mr. McCormack's children's trusts. Also includes 5,361,236 shares
subject to warrants and 902,777 shares issuable upon conversion of an
outstanding convertible note.
(4) Includes 3,416,164 shares subject to warrants and 725,000 shares issuable
upon conversion of an outstanding convertible note.
(5) Includes 206,500 shares owned by Keane Securities Co. Inc. of which Mr.
O'Hearn is a principal. Also includes 1,747,506 shares subject to warrants
and 405,555 shares issuable upon conversion of an outstanding convertible
note.
(6) Includes 1,078,700 shares subject to warrants, 750,000 shares subject to
stock options and 144,444 shares issuable upon conversion of an outstanding
convertible note. Also includes 4,064,873 shares and warrants held by Mr.
Grosso's family members.
(7) Mr. Laflin's address is that of the Company. Includes 11,000,000 shares
subject to stock options.
16
(8) Includes 18,662,534 shares subject to warrants, 750,000 shares subject to
stock options and 866,866 shares issuable upon conversion of an outstanding
convertible note.
17
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth compensation information for International
Isotopes' President and Chief Executive Officer during fiscal years 2004, 2003
and 2002. International Isotopes has no other executive officers.
_________________________________________________________________________________________
| | Long-Term
| Annual Compensation | Compensation
_____________________________|_____________________________________|_____________________
Name and Principal Position | Year | Salary ($) | Bonus ($) | Securities
| | | | Underlying Options
| | | | (#)
_____________________________|________|______________|_____________|_____________________
_____________________________|________|______________|_____________|_____________________
| | | |
Steve T. Laflin | 2004 | 131,250 | 12,000 | -
President & Chief Executive | 2003 | 125,000 | 10,000 | -
Officer | 2002 | 120,000 | - | 10,000,000
_____________________________|________|______________|_____________|_____________________
Aggregated Option Exercises in Fiscal Year and Fiscal Year-End Option Values
The following table indicates the number of shares acquired upon exercise of
options during the last fiscal year and the value realized, the number of shares
subject to exercisable (vested) and unexercisable (unvested) options as of April
15, 2005, and the value of exercisable and unexercisable "in-the-money" options.
_____________________________________________________________________________________________________________________
| | | Number of Securities Underlying | Value of Unexercised
Name | | | Unexercised | In-the-Money Options at
| | | Options at Fiscal Year-End | Fiscal Year-End ($)(1)
| | |___________________________________|________________________________
| Shares | Value | | | |
| Acquired On | Received | | | |
| Exercise (#) | ($)(2) | Exercisable | Unexercisable | Exercisable | Unexercisable
_________________|________________|_____________|_________________|_________________|_______________|________________
Steve T. Laflin | 0 | 0 | 11,000,000 | 0 | 604,000 |
_________________|________________|_____________|_________________|_________________|_______________|________________
18
EMPLOYMENT AGREEMENTS
In February 2001, the Company entered into an Employment Agreement with Steve T.
Laflin to serve as the Company's President and Chief Executive Officer at a base
salary of $120,000. The terms of the agreement may be reset after 36 months and
the parties may agree to extend the term of the agreement. If the terms are not
reset, the parties will operate under the original terms and the agreement will
remain in place until February 28, 2007. Mr. Laflin is entitled to bonus
compensation at the discretion of the Board of Directors and the Compensation
Committee and is entitled to benefits generally made available to other
executives. Mr. Laflin is subject to nonsolicitation and noncompetition
provisions in favor of the Company.
19
AUDIT COMMITTEE REPORT
The following is the report of the Audit Committee with respect to International
Isotopes' audited financial statements for the fiscal year ended December 31,
2004 (the "Audited Financial Statements"). The information contained in this
report shall not be deemed to be "soliciting material" or to be "filed" with the
SEC, nor shall such information be incorporated by reference into any future
filing under the Securities Act of 1933 or the Securities Exchange Act of 1934
except to the extent that International Isotopes specifically incorporates it by
reference in such filing.
Report of the Audit Committee
The Audit Committee has: (i) reviewed and discussed the audited financial
statements of the Company with Company management; (ii) discussed with the
Company's independent auditors the matters required to be discussed by Statement
on Auditing Standards No. 61 as may be modified or supplemented; and (iii)
received the written disclosures and the letter from the independent accountants
from the auditors regarding the auditors' independence as required by the
Independence Standards Board Standard No. 1, as may be modified or supplemented,
and (iv) discussed with the auditors the auditors' independence.
Based on the review and discussions referred to above, the Audit Committee
recommended to the Board of Directors that the audited financial statements be
included in the Company's Annual Report on Form 10-KSB for the fiscal year 2004
for filing with the Securities and Exchange Commission.
Audit Committee Report Submitted by:
Christopher Grosso, Chairman
Ralph M. Richart
20
INDEPENDENT AUDITORS
The Audit Committee has appointed Hansen, Barnett & Maxwell as International
Isotopes' independent auditors for the fiscal year ending December 31, 2005.
Representatives of Hansen, Barnett & Maxwell are expected to be present at the
annual meeting, will have the opportunity to make a statement, if they so
desire, and will be available to respond to appropriate questions.
The Audit Committee approved the engagement of the independent auditors to
provide audit services prior to the engagement.
Fees billed by Hansen, Barnett & Maxwell in fiscal years 2004 and 2003 were as
follows:
_______________________________________________________________________________
| Fees
|_____________________________________
| |
Services Rendered | FY2004 | FY2003
_________________________________________|___________________|_________________
| |
Audit Fees (1) | $56,939.00 | $65,496.00
_________________________________________|___________________|_________________
| |
Audit-Related Fees | 0 | 0
_________________________________________|___________________|_________________
| |
Tax Fees | 0 | 0
_________________________________________|___________________|_________________
| |
All Other Fees | 0 | 0
_________________________________________|___________________|_________________
| |
Total | $56,939.00 | $65,496.00
_________________________________________|___________________|_________________
(1) For professional services for auditing International Isotopes' annual
financial statements and reviewing the financial statements included in
International Isotopes' Quarterly Reports on Form 10-Q.
21
APPENDIX A
AMENDED AND RESTATED
AUDIT COMMITTEE CHARTER
INTERNATIONAL ISOTOPES INC.
COMMITTEE ROLE
The purpose of the Audit Committee (the "Committee") is to assist the Board of
Directors (the "Board") in monitoring (1) the integrity of the financial
statements of the Company, (2) the independent auditor's qualifications and
independence, (3) the performance of the Company's internal audit function and
independent auditor, and (4) the compliance by the Company with legal and
regulatory requirements.
The Committee is also charged with responsibility to oversee all material
aspects of the Company's reporting, control and audit functions, except those
specifically related to the responsibilities of another standing committee of
the Board. The Committee's role includes a particular focus on the qualitative
aspects of financial reporting to shareholders and on Company processes for the
management of business/financial risk and for compliance with significant
applicable legal, ethical, and regulatory requirements.
The role also includes coordination with other Board committees and maintenance
of strong, positive working relationships with management, independent and
internal independent auditors, counsel and other Committee advisors.
COMMITTEE MEMBERSHIP
The Committee shall consist of at least two members. All Committee members shall
meet the independence and experience requirements of Section 10A(m)(3) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations of the Securities and Exchange Commission (the "Commission") and
any exchange on which the Company's common stock may then be listed. At least
one member, preferably the chairperson, shall be a financial expert as defined
by the Commission. Committee appointments shall be approved annually by the full
Board upon recommendation of the nominating Committee. The Committee chairperson
shall be selected by the Committee members or by the nominating Committee.
COMMITTEE MEETINGS
The Committee shall meet as often as it determines, but not less frequently than
one times annually. The Committee shall meet periodically with management, the
internal independent auditor and the independent auditor in separate sessions.
The Committee may request any officer or employee of the Company, or the
Company's outside counsel or independent auditor, to attend a meeting of the
Committee or to meet with any member of, or consultants to, the Committee.
COMMITTEE OPERATING PRINCIPALS
The Committee shall fulfill its responsibilities within the context of the
following overriding principles:
Communications: The chairperson and others on the Committee shall, to the extent
the Committee deems appropriate, have contact throughout the year with
management, other committee chairpersons and independent legal, accounting or
other advisors to strengthen the Committee's knowledge of relevant current and
prospective business issues.
Committee Education/Orientation: The Committee, along with management, shall
develop and participate in a process for review of important financial and
operating topics that present potential significant risk to the Company.
Additionally, individual Committee members are encouraged to participate in
relevant and appropriate self-study education to assure understanding of the
business and environment in which the Company operates.
22
Annual Plan: The Committee, with input from management and other independent
advisors, shall develop an annual plan responsive to the "Primary Committee
Responsibilities" detailed herein. The annual plan shall be reviewed and
approved by the full board.
Meeting Agenda: Committee meeting agendas shall be the responsibility of the
Committee chairperson, with input from Committee members. It is expected that
the chairperson would also ask for management, independent advisors and perhaps
others, to participate in this process.
Committee Expectations and Information Needs: The Committee shall communicate
its expectations and the nature, timing, and extent of the Committee's
information needs to management and external parties, including the independent
auditor. Written materials, including key performance indicators and measures
related to key business and financial risks, shall be received from management,
the independent auditor and others at least one week in advance of meeting
dates. Meeting conduct will assume board members have reviewed written materials
in sufficient depth to participate in dialogue between the Committee and the
Board.
External Resources: The Committee shall have the authority to retain independent
legal, accounting or other consultants to advise the Committee. The Company
shall provide appropriate funding, as determined by the Committee, for
compensating the independent auditor and any advisors employed by the Committee.
The Committee may request any officer or employee of the Company, or the
Company's outside counsel or independent auditor, to attend a meeting of the
Committee or to meet with any members of, or consultants to, the Committee. The
Committee may also meet with the Company's investment bankers or financial
analysts who follow the Company.
Committee Meeting Attendees: The Committee shall request members of management,
outside counsel and the independent auditor, as applicable, to participate in
Committee meetings, as necessary, to carry out the Committee responsibilities.
As the Committee deems necessary, but not less than annually, Committee shall
meet in private session with only the Committee members. It shall be understood
that the independent auditor or outside counsel may, at any time, request a
meeting with the Committee or Committee chairperson with or without management
attendance. In any case, the Committee shall meet in executive sessions
separately with the independent auditor, at least annually.
Whistleblower Procedures: The Committee shall establish procedures to address
"whistleblower" communications. These procedures shall include the method of
receipt, retention and treatment of complaints received by the Company regarding
questionable accounting, internal accounting controls, or auditing matters. The
procedures shall also allow for the confidential, anonymous submission by
Company employees of concerns regarding questionable accounting or auditing
matters.
Reporting to the Board of Directors: The Committee, through the Committee
chairperson, shall report periodically, as deemed necessary, but at least
semi-annually, to the Board. In addition, summarized minutes from Committee
meetings, separately identifying monitoring activities from approvals, shall be
available to each Board member at least one week prior to the subsequent Board
meeting.
Committee Self Assessment: The Committee shall annually review, discuss and
assess its own performance as well as the Committee role and responsibilities
and its charter, seeking input from management, the Board and others. Changes in
role and/or responsibilities, if any, shall be recommended to the Board for
approval.
Independent Board Members: The Board shall be composed of executive and
non-executive members. Independent members are members who meet the independence
requirements of Section 10A(m)(3) of the Exchange Act.
REPORTING TO SHAREHOLDERS
The Committee shall make available to shareholders a summary report on the scope
of its activities. This report may be identical to the report that appears in
the Company's annual report.
COMMITTEE'S RELATIONSHIP WITH INDEPENDENT AUDITOR
The Committee shall have sole authority to appoint or replace the independent
auditor (subject to stockholder ratification, if applicable), and shall be
directly responsible for the compensation, retention and oversight of the work
by the independent auditor (including resolution of disagreements between
management and the independent auditor regarding financial reporting) for the
purpose of preparing or issuing an audit report or related work. The independent
auditor shall report directly to the Committee, and the Committee shall approve
all audit engagement fees and terms and all significant non-audit engagement
with the independent auditor.
23
The Committee shall pre-approve all audit services and permitted non-audit
services (including the fees and terms thereof) to be performed by the Company's
independent auditor, subject to the de minimis exceptions contained in Section
10(A)(1)(B) of the Exchange Act for non-audit services which are approved by the
Committee prior to the completion of the audit. The Committee shall consult with
management but shall not delegate these responsibilities.
The independent auditor shall be responsible to the Board and the Committee as
representatives of the stockholders.
As the independent auditor reviews financial reports, it will be reporting to
the Committee. It shall report all relevant issues to the Committee responsive
to agreed-on Committee expectations. In executing its oversight role, the board
or Committee should review the audit plan and work of independent auditor.
The Committee shall annually review the performance (effectiveness, objectivity,
and independence) of the independent auditor. The Committee shall ensure receipt
of a formal written statement from the independent auditor consistent with
standards set by the Independence Standards Board. Additionally, the Committee
shall discuss with the auditor relationships or services that may affect auditor
objectivity or independence. If the Committee is not satisfied with the
independent auditor's assurances of independence, it shall take or recommend to
the full Board appropriate action to ensure the independence of the independent
auditor.
If the independent auditor identifies significant issues relative to the overall
Board responsibility that have been communicated to management but, in their
judgment, have not been adequately addressed, they should communicate these
issues to the Committee chairperson.
The Committee shall discuss with the independent auditor certain matters
required to be discussed by "Statement on Auditing Standards No. 61," relating
to the conduct of the audit.
PRIMARY COMMITTEE RESPONSIBILITIES
The Committee shall review and assess:
CEO/CFO Certification: The involvement by the Chief Executive Officer and Chief
Financial Officer in the accounting and reporting for the Company enabling them
to make the certifications required by the Sarbanes-Oxley Act of 2002.
Risk Management: The Company's business risk management process, including the
adequacy of the Company's overall control environment and controls in selected
areas representing significant financial and business risk.
Annual Reports and Other Major Regulatory Filings: All audited financial
statements in advance of filing or distribution. The Committee's review should
include discussion with management and the independent auditor of significant
issues regarding accounting principles, practices and judgments.
Internal Controls and Regulatory Compliance: The Company's system of internal
controls for detecting accounting and reporting financial errors, fraud and
defalcations, legal violations and noncompliance with the corporate code of
conduct. The Committee shall also establish procedures for the receipt,
retention and treatment of complaints received by the Company regarding
accounting, internal accounting controls or auditing matters, and the
confidential, anonymous submission by employees of concerns regarding
questionable accounting or auditing matters.
Regulatory Examinations: Commission inquiries and the results of examinations by
other regulatory authorities in terms of important findings, recommendations and
management's response.
External Audit Responsibilities: Auditor independence and the overall scope and
focus of the annual/interim audit, including the scope and level of involvement
with unaudited quarterly or other interim-period information.
Financial Reporting and Controls: Key financial statement issues and risks,
their impact or potential effect on reported financial information, the
processes used by management to address such matters, related auditor views, and
the basis for audit conclusions. Important conclusions on interim and/or
year-end audit work in advance of the public release of financials.
24
Auditor Recommendations: Important independent auditor recommendations on
financial reporting, controls, other matters, and management's response. The
views of management and independent auditor on the overall quality of annual and
interim financial reporting.
The Committee should review, assess, and approve:
o The Company's code of ethical conduct.
o Changes in important accounting principles and the application
thereof in both interim and annual financial reports.
o Significant conflicts of interest and related-party transactions.
o Independent auditor performance and changes in independent audit
firm (subject to ratification by the Board). The Committee shall
ensure the rotation of the lead (or coordinating) audit partner
having primary responsibility for the audit and the audit partner
responsible for reviewing the audit as required by law. Consider
whether, in order to assure continuing auditor independence, it is
appropriate to adopt a policy of rotating the independent auditing
firm on a regular basis.
25
APPENDIX B
INTERNATIONAL ISOTOPES INC.
EMPLOYEE STOCK PURCHASE PLAN
ARTICLE 1. PURPOSE
The purpose of this Plan is to provide employees of the Company and its
Designated Subsidiaries with an opportunity to purchase Common Stock of the
Company. It is the intention of the Company to have the Plan qualify as an
"employee stock purchase plan" under Section 423 of the Code. The provisions of
this Plan, accordingly, shall be construed so as to extend and limit
participation in a manner consistent with the requirements of that Section of
the Code.
ARTICLE 2. DEFINITIONS
Certain terms used in this Plan have the meanings set forth in Appendix
I.
ARTICLE 3. ELIGIBILITY REQUIREMENTS
3.1 Initial Eligibility. Except as provided in Section 3.2, each
Employee shall become eligible to participate in the Plan in accordance with
Article 4 on the first Enrollment Date on or following the later of (a) the date
such individual becomes an Employee; or (b) the Effective Date. Participation in
the Plan is entirely voluntary.
3.2 Limitations on Eligibility. The following Employees are not
eligible to participate in the Plan:
(a) Employees whose customary employment is twenty (20) hours
or less per week or any lesser number of hours established
by the Committee;
(b) Employees whose customary employment is for not more than
five (5) months in any calendar year or any lesser period
in a calendar year established by the Committee; and
(c) Employees who, immediately upon purchasing Shares under
the Plan, would own directly or indirectly, an aggregate
of five percent (5%) or more of the total combined voting
power or value of all outstanding shares of all classes of
stock of the Company or any Subsidiary (and for purposes
of this paragraph, the rules of Section 424(d) of the Code
shall apply, and stock which the Employee may purchase
under outstanding options shall be treated as stock owned
by the Employee).
ARTICLE 4. ENROLLMENT
Any Eligible Employee may enroll in the Plan for any Offering Period by
completing and signing an enrollment election form or by such other means as the
Committee shall prescribe and submitting such enrollment election to the Company
in accordance with procedures established by the Committee on or before the
Cut-Off Date with respect to such Offering Period. Unless otherwise determined
by the Committee, the enrollment election and the designated rate of payroll
deduction shall continue for future Offering Periods unless the Participant
changes or cancels the enrollment election or designated rate of payroll
deduction prior to the Cut-Off Date in accordance with procedures established by
the Committee.
ARTICLE 5. GRANT OF OPTIONS ON ENROLLMENT
5.1 Option Grant. Enrollment by an Eligible Employee in the Plan as
of an Enrollment Date will constitute the grant by the Company to such
Participant of an option on such Enrollment Date to purchase Shares from the
Company pursuant to the Plan.
B-1
5.2 Option Expiration. An option granted to a Participant pursuant
to this Plan shall expire, if not terminated for any reason first, on the
earliest to occur of (a) the end of the Offering Period in which such option was
granted; (b) the completion of the purchase of Shares under the option under
Article 7; or (c) the date on which participation of such Participant in the
Plan terminates for any reason.
5.3 Purchase of Shares. An option granted to a Participant under the
Plan shall give the Participant a right to purchase on a Purchase Date the
largest number of whole Shares, as determined by the Committee, which the funds
accumulated in the Participant's Account as of such Purchase Date will purchase
at the applicable Purchase Price; provided, however, that the Committee may, in
its discretion, limit the number of Shares purchased by each Participant in any
Purchase Period.
Notwithstanding anything to the contrary herein, to the extent required
by Section 423 of the Code, no Employee shall be granted an option under the
Plan (or any other plan of the Company or a Subsidiary intended to qualify under
Section 423 of the Code) which would permit the Employee to purchase Shares
under the Plan (and such other plan) in any calendar year with a Fair Market
Value (determined at the time such option is granted) in excess of $25,000 and
any payments made by a Participant in excess of this limitation shall be
returned to the Participant in accordance with procedures established by the
Committee.
ARTICLE 6. PAYMENT
The Committee may designate the time and manner for payment of Shares
to be purchased during the Purchase Period, including, but not limited to,
through payroll deductions from Compensation, the terms and conditions of which
are designated by the Committee. Payment amounts shall be credited on a
bookkeeping basis to a Participant's Account under this Plan. All payment
amounts may be used by the Company for any purpose and the Company shall have no
obligation to segregate such funds. No interest accrues on payments by
Participants.
ARTICLE 7. PURCHASE OF SHARES
7.1 Option Exercise. Any option held by the Participant which was
granted under this Plan and which remains outstanding as of a Purchase Date
shall be deemed to have been exercised on such Purchase Date for the number of
whole Shares, as determined by the Committee, which the funds accumulated in the
Participant's Account as of the Purchase Date will purchase at the applicable
Purchase Price (but not in excess of the number of Shares for which options have
been granted to the Participant pursuant to Section 5.3). Options for other
Shares for which options have been granted which are not purchased on the last
Purchase Date during the Offering Period shall terminate. Shares shall not be
issued with respect to an option unless the exercise of such option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
applicable provisions of law, domestic or foreign, including, without
limitation, the Securities Act of 1933, as amended, the Securities Exchange Act
of 1934, as amended, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the Shares may then be listed. As
a condition to the exercise of an option, the Committee may require the person
exercising such option to represent and warrant at the time of any such exercise
that the Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares.
7.2 Refund of Excess Amount. If, after a Participant's exercise of
an option under Section 7.1, an amount remains credited to the Participant's
Account as of a Purchase Date, then the remaining amount shall be (a) if no
further Purchase Periods are immediately contemplated by the Committee,
distributed to the Participant as soon as administratively feasible, or (b) if
another Purchase Period is contemplated by the Committee, carried forward in the
Account for application to the purchase of Shares on the next following Purchase
Date.
7.3 Employees of Designated Subsidiaries. In the case of
Participants employed by a Designated Subsidiary, the Committee may provide for
Shares to be sold through the Subsidiary to such Participants, to the extent
consistent with Section 423 of the Code.
7.4 Pro Rata Allocation. If the total number of Shares for which
options are or could be exercised on any Purchase Date in accordance with this
Article 7, when aggregated with all Shares for which options have been
previously exercised under this Plan, exceeds the maximum number of Shares
reserved in Article 12, the Company shall allocate the Shares available for
delivery and distribution in the ratio that the balance in each Participant's
Account bears to the aggregate balances of all Participants' Accounts, and the
remaining balance of the amount credited to the Account of each Participant
under the Plan shall be returned to him or her as promptly as possible.
B-2
7.5 Notice of Disposition. If a Participant or former Participant
sells, transfers, or otherwise makes a disposition of Shares purchased pursuant
to an option granted under the Plan within two (2) years after the date such
option is granted or within one (1) year after the date such Shares were
transferred to the Participant, and if such Participant or former Participant is
subject to United States federal income tax, then such Participant or former
Participant shall notify the Company or a member of the Employer in writing of
such sale, transfer or other disposition within ten (10) days of the
consummation of such sale, transfer, or other disposition.
ARTICLE 8. WITHDRAWAL FROM THE PLAN, TERMINATION OF EMPLOYMENT, AND
LEAVE OF ABSENCE
8.1 Withdrawal from the Plan. A Participant may withdraw all funds
accumulated in the Participant's Account from the Plan during any Purchase
Period by delivering a notice of withdrawal to the Company or a member of the
Employer (in a manner prescribed by the Committee) at any time up to thirty (30)
days prior to the Purchase Date next following the date such notice of
withdrawal is delivered, or at such shorter time in advance of such Purchase
Date as the Committee may permit. If notice of complete withdrawal as described
in the preceding sentence is timely received, all funds then accumulated in the
Participant's Account shall not be used to purchase Shares, but shall instead be
distributed to the Participant as soon as administratively feasible and the
Company or member of the Employer will cease the Participant's payroll
withholding for the Plan in accordance with timing and other procedures
established by the Committee. An Employee who has withdrawn during a Purchase
Period may not return funds to the Company or a member of the Employer during
the same Purchase Period and require the Company or member of the Employer to
apply those funds to the purchase of Shares. Any Eligible Employee who has
withdrawn from the Plan may, however, re-enroll in the Plan on the next
subsequent Enrollment Date, if any.
8.2 Termination of Participation. Unless otherwise determined by the
Committee, participation in the Plan terminates when a Participant ceases to be
employed by the Company or a member of the Employer for any reason whatsoever or
otherwise ceases to be an Eligible Employee. Unless otherwise determined by the
Committee, such Participant shall be deemed to have elected a withdrawal from
the Plan in accordance with Section 8.1 and all funds accumulated in the
Participant's Account shall be distributed to the Participant.
8.3 Leave of Absence. If a Participant takes a leave of absence,
such Participant shall have the right, in accordance with procedures prescribed
by the Committee, to elect to withdraw from the Plan in accordance with Section
8.1. To the extent determined by the Committee or required by Section 423 of the
Code, certain leaves of absence may be treated as cessations of employment for
purposes of the Plan.
ARTICLE 9. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION,
LIQUIDATION, MERGER OR ASSET SALE
9.1 Adjustments Upon Changes in Capitalization. Subject to any
required action by the shareholders of the Company, the right to purchase Shares
of Common Stock covered by a current Offering Period and the number of Shares
which have been authorized for issuance under the Plan for any future Offering
Period, the maximum number of Shares each Participant may purchase each Offering
Period (pursuant to Section 5.3 hereof), as well as the price per Share and the
number of Shares covered by each right under the Plan which have not yet been
purchased shall be proportionately adjusted in the sole discretion of the
Committee for any increase or decrease in the number of issued Shares resulting
from a stock split, reverse stock split, stock dividend, extraordinary cash
dividend, combination or reclassification of the Common Stock, or
recapitalization, reorganization, consolidation, split-up, spin-off, or any
other increase or decrease in the number of Shares effected without receipt of
consideration by the Company. Except as expressly provided otherwise by the
Committee, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of Shares.
B-3
9.2 Adjustments Upon Dissolution or Liquidation. In the event of the
proposed dissolution or liquidation of the Company, the Offering Period then in
progress shall be shortened by setting a new Purchase Date (hereinafter the "New
Purchase Date"), and shall terminate immediately prior to the consummation of
such proposed dissolution or liquidation, unless provided otherwise by the
Committee. The New Purchase Date shall be before the date of the Company's
proposed dissolution or liquidation. Each Participant will be notified in
writing that the Purchase Date for the Participant's right to purchase shares
has been changed to the New Purchase Date and that the applicable number of
Shares will automatically be purchased on the New Purchase Date, unless prior to
such date the Participant has withdrawn from the Plan as provided in Section 8.1
hereof.
9.3 Adjustment Upon Merger or Asset Sale. In the event of a proposed
sale of all or substantially all of the assets of the Company, or the merger of
the Company with or into another corporation, each outstanding right to purchase
shares shall be assumed or an equivalent right to purchase shares substituted by
the successor corporation or a parent or affiliate of the successor corporation.
In the event that the successor corporation refuses to assume or substitute the
right to purchase shares, any Offering Period then in progress shall be
shortened by setting a New Purchase Date and any Offering Period then in
progress shall end on the New Purchase Date. The New Purchase Date shall be
before the date of the Company's proposed sale or merger. Each Participant will
be notified in writing that the Purchase Date has been changed to the New
Purchase Date and that the applicable number of shares will be purchased
automatically on the New Purchase Date, unless prior to such date the
Participant has withdrawn from the Plan as provided in Section 8.1 hereof.
9.4 Committee Adjustment. Without limitation on the preceding
provisions, in the event of any corporate transaction, the Committee may make
such adjustment it deems appropriate to prevent dilution or enlargement of
rights in the number and class of Shares which may be delivered under Article
12, in the number, class of or price of Shares available for purchase under the
Plan and in the number of Shares which an Employee is entitled to purchase and
any other adjustments it deems appropriate. Without limiting the Committee's
authority under this Plan, in the event of any transaction, the Committee may
elect to have the options hereunder assumed or such options substituted by a
successor entity, to terminate all outstanding options either prior to their
expiration or upon completion of the purchase of Shares on the next Purchase
Date, or to take such other action deemed appropriate by the Committee.
ARTICLE 10. DESIGNATION OF BENEFICIARY
Each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively) to
whom the amount in his or her Account is to be paid in case of his or her death
before he or she receives any or all of such benefit. Each such designation
shall revoke all prior designations by the same Participant, shall be in a form
prescribed by the Committee, and will be effective only when filed by the
Participant in writing with the Committee during the Participant's lifetime. In
the absence of any such designation, any Account balance remaining unpaid at the
Participant's death shall be paid to the Participant's estate or the Committee,
in its sole discretion, may pay such Account balance to the Participant's spouse
or to any one or more dependents or relatives of the Participant or to such
other person as the Committee may designate.
ARTICLE 11. ADMINISTRATION
11.1 Administration by Committee. The Plan shall be administered by
the Committee. The Committee shall have the authority to delegate duties to
officers, directors or employees of the Company.
11.2 Authority of Committee. The Committee shall have the full and
exclusive discretionary authority to construe and interpret the Plan and options
granted under it; to establish, amend, and revoke rules and regulations for
administration of the Plan (including, without limitation, the determination and
change of Offering Periods, Purchase Periods and payment procedures, the
requirement that Shares be held by a specified broker, and the establishment of
the exchange ratio applicable to amounts withheld in a currency other than U.S.
dollars); to determine all questions of eligibility, disputed claims and policy
that may arise in the administration of the Plan; to make any changes to the
Plan or its operations to reduce or eliminate any unfavorable accounting
consequences to the extent deemed appropriate by the Committee; to permit
payroll withholding adjustments to adjust for delays or mistakes in processing
of withholding elections; to establish administrative procedures; and,
generally, to exercise such powers and perform such acts as the Committee deems
necessary or expedient to promote the best interests of the Company, including,
but not limited to, designating from time to time which Subsidiaries of the
Company shall be part of the Employer. The Committee's determinations as to the
interpretation and operation of this Plan shall be final and conclusive and each
action of the Committee shall be binding on all persons.
B-4
In exercising the powers described in the foregoing paragraph, the
Committee may adopt special or different rules for the operation of the Plan
including, but not limited to, rules which allow employees of any foreign
Subsidiary to participate in, and enjoy the tax benefits offered by, the Plan;
provided that such rules shall not result in any grantees of options having
different rights and/or privileges under the Plan in violation of Section 423 of
the Code nor otherwise cause the Plan to fail to satisfy the requirements of
Section 423 of the Code and the regulations thereunder.
11.3 Administrative Modification. The Plan provisions relating to the
administration of the Plan may be amended by the Committee from time to time as
may be desirable to satisfy any requirements of or under the federal securities
and/or other applicable laws of the United States, to obtain any exemption under
such laws, or to reduce or eliminate any unfavorable accounting consequences.
ARTICLE 12. NUMBER OF SHARES
Two million (2,000,000) Shares are reserved for sale and authorized for
issuance pursuant to the Plan, subject to adjustment as set forth in Article 9.
If any option granted under the Plan shall for any reason terminate without
having been exercised, the Shares not purchased under such option shall again
become available for the Plan. If on a given Purchase Date, the number of Shares
with respect to which options are to be exercised exceeds the number of Shares
then available under the Plan, the Committee shall make a pro rata allocation of
the Shares remaining available for purchase in as uniform a manner as shall be
practical and as it shall determine to be equitable.
ARTICLE 13. MISCELLANEOUS
13.1 Restrictions on Transfer. Options granted under the Plan to a
Participant may not be exercised during the Participant's lifetime other than by
the Participant. Neither amounts credited to a Participant's Account nor any
rights with respect to the exercise of an option or to receive stock under the
Plan may be assigned, transferred, pledged, or otherwise disposed of in any way
by the Participant other than by will or the laws of descent and distribution.
Any such attempted assignment, transfer, pledge, or other disposition shall be
without effect, except that the Company may treat such act as an election to
withdraw from the Plan in accordance with Section 8.1.
13.2 Administrative Assistance. If the Committee in its discretion so
elects, it may retain a brokerage firm, bank, or other financial institution to
assist in the purchase of Shares, delivery of reports, or other administrative
aspects of the Plan. If the Committee so elects, each Participant shall (unless
prohibited by applicable law) be deemed upon enrollment in the Plan to have
authorized the establishment of an account on his or her behalf at such
institution. Shares purchased by a Participant under the Plan shall be held in
the Account in the Participant's name, or if the Participant so indicates in the
enrollment form, in the Participant's name together with the name of his or her
spouse in joint tenancy with right of survivorship or spousal community
property, or in certain forms of trust approved by the Committee.
13.3 Treatment of Non-U.S. Participants. Participants who are
employed by non-U.S. Designated Subsidiaries, who are paid in foreign currency,
and who contribute foreign currency to the Plan through contributions or payroll
deductions will have such contributions converted to U.S. dollars. The exchange
rate for such conversion will be determined as prescribed by the Committee. In
no event will any procedure implemented for dealing with exchange rate
fluctuations that may occur during an Offering Period result in a purchase price
below the Purchase Date Price permitted under the Plan. Each Participant shall
bear the risk of any currency exchange fluctuations (if applicable) between the
date on which any Participant contributions are converted to U.S. dollars and
the following Purchase Date.
13.4 Withholding. The Company or any member of the Employer shall
have the power and the right to deduct or withhold, or require a Participant to
remit to the Company or any member of the Employer, an amount sufficient to
satisfy Federal, state and local taxes, domestic or foreign, required by law or
regulation to be withheld with respect to any taxable event arising as a result
of this Plan.
B-5
13.5 Equal Rights and Privileges. Except as provided in Section 13.6,
all Eligible Employees shall have equal rights and privileges with respect to
the Plan so that the Plan qualifies as an "employee stock purchase plan" within
the meaning of Section 423 or any successor provision of the Code and the
related regulations. Notwithstanding the express terms of the Plan, any
provision of the Plan other than Section 13.6 which is inconsistent with Section
423 or any successor provision of the Code shall without further act or
amendment by the Company or the Committee be reformed to comply with the
requirements of Section 423 of the Code. This Section 13.5 shall take precedence
over all other provisions in the Plan except Section 13.6.
13.6 Eligible Employees in Other Countries. Without amending the
Plan, the Committee may grant options or establish other procedures to provide
benefits to Eligible Employees of Designated Subsidiaries with non-U.S.
employees on such terms and conditions different from those specified in this
Plan as may, in the judgment of the Committee, be necessary or desirable to
foster and promote achievement of the purposes of the Plan and shall have the
authority to adopt such modifications, procedures, subplans and the like as may
be necessary or desirable (a) to comply with provisions of the laws or
regulations or conform to the requirements to operate the Plan in a qualified or
tax or accounting advantageous manner in other countries or jurisdictions in
which the Company or any Designated Subsidiary may operate or have employees,
(b) to ensure the viability of the benefits from the Plan to Eligible Employees
employed in such countries or jurisdictions and (c) to meet the objectives of
the Plan. Notwithstanding anything to the contrary herein, any such actions
taken by the Committee with respect to Eligible Employees of any Designated
Subsidiary may be treated as a subplan outside of an "employee stock purchase
plan" under Section 423 of the United States Code and not subject to the
requirements of Section 423 set forth in the United States Code and this Plan.
13.7 Applicable Law. The Plan shall be governed by the substantive
laws (excluding the conflict of laws rules) of the State of Texas.
13.8 Amendment and Termination. The Board may amend, alter, or
terminate the Plan at any time; provided, however, that (1) the Plan may not be
amended in a way which will cause rights issued under the Plan to fail to meet
the requirements of Section 423 of the Code; and (2) no amendment which would
amend or modify the Plan in a manner requiring stockholder approval under
Section 423 of the Code or the requirements of any securities exchange on which
the Shares are traded shall be effective unless such stockholder approval is
obtained. In addition, the Committee may amend the Plan as provided in Section
11.3, subject to the conditions set forth in this Section 13.8.
If the Plan is terminated, the Committee may elect to terminate all
outstanding options either prior to their expiration or upon completion of the
purchase of Shares on the next Purchase Date, or may elect to permit options to
expire in accordance with their terms (and participation to continue through
such expiration dates). If the options are terminated prior to expiration, all
funds accumulated in Participants' Accounts as of the date the options are
terminated shall be returned to the Participants as soon as administratively
feasible.
13.9 No Right of Employment. Neither the grant nor the exercise of
any rights to purchase Shares under this Plan nor anything in this Plan shall
impose upon the Company or a member of the Employer any obligation to employ or
continue to employ any Employee. The right of the Company or a member of the
Employer to terminate any Employee shall not be diminished or affected because
any rights to purchase Shares have been granted to such Employee.
13.10 Rights as Shareholder. No Participant shall have any rights as
shareholder unless and until Shares of Common Stock have been issued to him or
her.
13.11 Governmental Regulation. The Company's obligation to sell and
deliver Shares of the Company's common stock under this Plan is subject to the
approval of any governmental authority required in connection with the
authorization, issuance, or sale of such Shares.
B-6
13.12 Gender. When used herein, masculine terms shall be deemed to
include the feminine, except when the context indicates to the contrary.
13.13 Condition for Participation. As a condition to participation in
the Plan, Eligible Employees agree to be bound by the terms of the Plan
(including, without limitation, the notification and holding requirements of
Section 7.5) and the determinations of the Committee.
B-7
APPENDIX I
DEFINITIONS
"Account" means a recordkeeping account maintained for a Participant to which
Participant contributions and payroll deductions, if applicable, shall be
credited.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the Compensation Committee or any other committee appointed by
the Board.
"Common Stock" means the Common Stock of the Company.
"Company" means International Isotopes Inc., a Texas corporation.
"Compensation" means gross earnings, including such amounts of gross earnings as
are deferred by an Eligible Employees (a) under a qualified cash or deferred
arrangement described in Section 401(k) of the Code or (b) under a plan
qualified under Section 125 of the Code. Compensation does not include severance
pay, equity compensation or gain from stock option exercises.
"Cut-Off Date" means the date established by the Committee from time to time by
which enrollment forms must be received prior to an Enrollment Date.
"Designated Subsidiary" means any Subsidiary which has been designated by the
Committee from time to time in its sole discretion as eligible to participate in
the Plan and which has adopted the Plan with the approval of the Committee in
its sole and absolute discretion.
"Eligible Employee" means an Employee eligible to participate in the Plan in
accordance with Article 3.
"Effective Date" means the effective date as determined by the Committee.
"Employee" means any individual who is an employee of the Employer for tax
purposes.
"Employer" means the Company or any Designated Subsidiary by which an Employee
is employed.
"Enrollment Date" means the first Trading Day of an Offering Period.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means, as of any date, the closing trading price for the
Common Stock on any given date during regular trading, or if not trading on that
date, such price on the last preceding date on which the Common Stock was
traded, unless determined otherwise by the Committee using such methods or
procedures as it may establish.
"Grant Date" means a date on which an Eligible Employee is granted an option
under the Plan pursuant to Article 5.
"Grant Price" means the Fair Market Value of a Share on the Grant Date for such
option.
"Offering Period" means each period, if any, designated by the Committee (which
period may be a calendar quarter or any other period designated by the
Committee); provided, that each period shall, in no event end later than
twenty-seven (27) months from the Grant Date. The Offering Period may but need
not be the same as the Purchase Period, as determined by the Committee.
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"Participant" means an Eligible Employee who has enrolled in the Plan pursuant
to Article 4.
"Plan" means this International Isotopes Inc. Employee Stock Purchase Plan.
"Purchase Date" with respect to a Purchase Period means the last Trading Day in
such Purchase Period.
"Purchase Date Price" means the Fair Market Value of a Share on the applicable
Purchase Date.
"Purchase Period" means the period beginning on the Effective Date and ending on
the date designated by the Committee and each period, if any, thereafter
designated by the Committee (which period may be a calendar quarter or any other
period designated by the Committee); provided, that each period shall, in no
event end later than twenty-seven (27) months from the Grant Date.
"Purchase Price" means the price designated by the Committee, at which each
Share may be purchased under any option, but in no event less than eighty-five
percent (85%) of the lesser of:
(1) The Grant Price and
(2) The Purchase Date Price.
"Shares" means shares of the Company's Common Stock.
"Subsidiary" means a corporation, domestic or foreign, of which not less than
50% of the combined voting power is held by the Company or a Subsidiary, whether
or not such corporation now exists or is hereafter organized or acquired by the
Company or a Subsidiary.
"Trading Day" means a day on which the OTC Bulletin Board, New York Stock
Exchange, Nasdaq stock market or other alternative exchange or service on which
the Common Stock is traded, listed or quoted is open for trading.
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APPENDIX C
Second Amended and Restated Articles of Incorporation
of
International Isotopes Inc.
International Isotopes Inc. (the "Corporation"), pursuant to the
provisions of Article 4.07 of the Texas Business Corporation Act, hereby adopts
the Second Amended and Restated Articles of Incorporation which set forth the
Articles of Incorporation and supersede the original Restated Articles of
Incorporation and all amendments thereto.
The Articles of Incorporation are hereby amended and restated as
follows:
ARTICLE I
The name of the Corporation is "International Isotopes Inc." (the
"Corporation").
ARTICLE II
The period of duration of the Corporation is perpetual.
ARTICLE III
The purpose for which the Corporation is organized is to transact any
and all lawful business for which a corporation may be incorporated under the
Texas Business Corporation Act.
ARTICLE IV
The total number of shares of all classes of capital stock which the
Corporation shall have authority to issue is Five Hundred Five Million
(505,000,000), of which (a) Five Hundred Million (500,000,000) shares shall be
designated as Common Stock, par value $.01 per share, and (b) Five Million
5,000,000) shares shall be designated as Preferred Stock, par value $.01 per
share.
The following is a statement of the designations, preferences,
limitations, and relative rights, including voting rights, in respect of the
classes of stock of the Corporation and of the authority with respect thereto
expressly vested in the Board of Directors of the Corporation:
COMMON STOCK
(1) Each share of Common Stock of the Corporation shall have identical
rights and privileges in every respect. The holders of shares of Common Stock
shall be entitled to vote upon all matters submitted to a vote of the
shareholders of the Corporation and shall be entitled to one vote for each share
of Common Stock held.
(2) Subject to the prior rights and preferences, if any, applicable to
shares of the Preferred Stock or any series thereof, the holders of shares of
the Common Stock shall be entitled to receive such dividends (payable in cash,
stock, or otherwise) as may be declared thereon by the Board of Directors at any
time and from time to time out of any funds of the Corporation legally available
therefore.
(3) In the event of any voluntary or involuntary liquidation,
dissolution, or winding-up of the Corporation, after distribution in full of the
preferential amounts, if any, to be distributed to the holders of shares of the
Preferred Stock or any series thereof, the holders of shares of the Common Stock
shall be entitled to receive all of the remaining assets of the Corporation
available for distribution to its shareholders, ratably in proportion to the
number of shares of the Common Stock held by them. A liquidation, dissolution,
or winding-up of the Corporation, as such terms are used in this Paragraph (3),
shall not be deemed to be occasioned by or to include any merger of the
Corporation with or into one or more corporations or other entities, any
acquisition or exchange of the outstanding shares of one or more classes or
series of the Corporation, or any sale, lease, exchange, or other disposition of
all or a part of the assets of the Corporation.
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PREFERRED STOCK
(1) Shares of the Preferred Stock may be issued from time to time in
one or more series, the shares of each series to have such designations,
preferences, limitations, and relative rights, including voting rights, as shall
be stated and expressed herein or in a resolution or resolutions providing for
the issue of such series adopted by the Board of Directors of the Corporation.
Each such series of Preferred Stock shall be designated so as to distinguish the
shares thereof from the shares of all other series and classes. The Board of
Directors of the Corporation is hereby expressly authorized, subject to the
limitations provided by law, to establish and designate series of the Preferred
Stock, to fix the number of shares constituting each series, and to fix the
designations and the preferences, limitations, and relative rights, including
voting rights, of the shares of each series and the variations of the relative
rights and preferences as between series, and to increase and to decrease the
number of shares constituting each series, provided that the Board of Directors
may not decrease the number of shares within a series to less than the number of
shares within such series that are then issued. The relative powers, rights,
preferences, and limitations may vary between and among series of Preferred
Stock in any and all respects so long as all shares of the same series are
identical in all respects, except that shares of any such series issued at
different times may have different dates from which dividends thereon cumulate.
The authority of the Board of Directors of the Corporation with respect to each
series shall include, but shall not be limited to, the authority to determine
the following:
(a) The designation of such series;
(b) The number of shares initially constituting such series;
(c) The rate or rates and the times at which dividends on the
shares of such series shall be paid, the periods in respect of which
dividends are payable, the conditions upon such dividends, the
relationship and preferences, if any, of such dividends to dividends
payable on any other class or series of shares, whether or not such
dividends shall be cumulative, partially cumulative, or noncumulative,
if such dividends shall be cumulative or partially cumulative, the date
or dates from and after which, and the amounts in which, they shall
accumulate, whether such dividends shall be share dividends, cash or
other dividends, or any combination thereof, and the other terms and
conditions, if any, applicable to dividends on shares of such series;
(d) Whether or not the shares of such series shall be
redeemable or subject to repurchase at the option of the Corporation or
the holder thereof or upon the happening of a specified event, if such
shares shall be redeemable, the terms and conditions of such
redemption, including but not limited to the date or dates upon or
after which such shares shall be redeemable, the amount per share which
shall be payable upon such redemption, which amount may vary under
different conditions and at different redemption dates, and whether
such amount shall be payable in cash, property, or rights, including
securities of the Corporation or another corporation;
(e) The rights of the holders of shares of such series (which
may vary depending upon the circumstances or nature of such
liquidation, dissolution, or winding up) in the event of the voluntary
or involuntary liquidation, dissolution, or winding up of the
Corporation and the relationship or preference, if any, of such rights
to rights of holders of stock of any other class or series. A
liquidation, dissolution, or winding up of the Corporation, as such
terms are used in this subparagraph (e), shall not be deemed to be
occasioned by or to include any merger of the Corporation with or into
one or more corporations or other entities, any acquisition or exchange
of the outstanding shares of one or more classes or series of the
Corporation, or any sale, lease, exchange, or other disposition of all
or a part of the assets of the Corporation;
(f) Whether or not the shares of such series shall have voting
powers and, if such shares shall have such voting powers, the terms and
conditions thereof, including, but not limited to, the right of the
holders of such shares to vote as a separate class either alone or with
the holders of shares of one or more other classes or series of stock
and the right to have more (or less) than one vote per share; provided,
however, that the right to cumulate votes for the election of directors
is expressly denied and prohibited;
(g) Whether or not a sinking fund shall be provided for the
redemption of the shares of such series and, if such a sinking fund
shall be provided, the terms and conditions thereof;
(h) Whether or not a purchase fund shall be provided for the
shares of such series and, if such a purchase fund shall be provided,
the terms and conditions thereof;
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(i) Whether or not the shares of such series, at the option of
either the Corporation or the holder or upon the happening of a
specified event, shall be convertible into stock of any other class or
series and, if such shares shall be so convertible, the terms and
conditions of conversion, including, but not limited to, any provision
for the adjustment of the conversion rate or the conversion price;
(j) Whether or not the shares of such series, at the option of
either the Corporation or the holder or upon the happening of a
specified event, shall be exchangeable for securities, indebtedness, or
property of the Corporation and, if such shares shall be so
exchangeable, the terms and conditions of exchange, including, but not
limited to, any provision for the adjustment of the exchange rate or
the exchange price; and
(k) Any other preferences, limitations, and relative rights as
shall not be inconsistent with the provisions of this Article IV or the
limitations provided by law.
(2) Except as otherwise required by law or in any resolution of the
Board of Directors creating any series of Preferred Stock, the holders of shares
of Preferred Stock and all series thereof who are entitled to vote shall vote
together with the holders of shares of Common Stock, and not separately by
class.
(3) The Corporation has designated up to 10,000 shares of Preferred
Stock as Series A Convertible Redeemable Preferred Stock. The designations,
preferences and rights of the Series A Convertible Redeemable Preferred Stock
are as set forth on Exhibit A.
(4) The Corporation has designated up to 14,300 shares of Preferred
Stock as Series B Convertible Redeemable Preferred Stock. The designations,
preferences and rights of the Series B Convertible Redeemable Preferred Stock
are as set forth on Exhibit B.
ARTICLE V
At each election of directors, each shareholder entitled to vote at
such election shall have the right to vote in person or by proxy the number of
shares owned by such shareholder for as many persons as there are directors to
be elected and for whose election such shareholder has a right to vote. No
shareholder shall have the right to cumulate their votes in any election of
directors.
ARTICLE VI
No holder of any shares of any class of stock of the corporation shall,
as such holder, have any preemptive or preferential right to receive, purchase
or subscribe to additional, unissued or treasury shares of any class of stock of
the corporation, or securities, obligations or evidences of indebtedness of the
corporation convertible into or carrying a right to subscribe to or purchase
such shares, or any other securities that may hereafter from time to time be
issued or sold by the corporation.
ARTICLE VII
The address of the initial registered office of the corporation is 3400
Chase Tower, 600 Travis, Houston, Texas, 77002 and the name of its registered
agent at such address is Curtis Ashmos.
ARTICLE VIII
The Corporation shall indemnify any person who was, is, or is
threatened to be made a named defendant or respondent in a proceeding (as
hereinafter defined) because the person (i) is or was a director or officer of
the Corporation or (ii) while a director or officer of the Corporation, is or
was serving at the request of the Corporation as a director, officer, partner,
venturer, proprietor, trustee, employee, agent, or similar functionary of
another foreign or domestic corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan, or other enterprise, to the
fullest extent that a corporation may grant indemnification to a director under
the Texas Business Corporation Act, as the same exists or may hereafter be
amended. Such right shall be a contract right and as such shall run to the
benefit of any director or officer who is elected and accepts the position of
director or officer of the Corporation or elects to continue to serve as a
director or officer of the Corporation while this Article X is in effect. Any
repeal or amendment of this Article X shall be prospective only and shall not
limit the rights of any such director or officer or the obligations of the
Corporation with respect to any claim arising from or related to the services of
such director or officer in any of the foregoing capacities prior to any such
repeal or amendment of this Article X. Such right shall include the right to be
paid or reimbursed by the Corporation for expenses incurred in defending any
such proceeding in advance of its final disposition to the maximum extent
permitted under the Texas Business Corporation Act, as the same exists or may
hereafter be amended. If a claim for indemnification or advancement of expenses
hereunder is not paid in full by the Corporation within 90 days after a written
claim has been received by the Corporation, the claimant may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim, and if successful in whole or in part, the claimant shall be entitled
to be paid also the expenses of prosecuting such claim. It shall be a defense to
any such action that such indemnification or advancement of costs of defense are
not permitted under the Texas Business Corporation Act, but the burden of
proving such defense shall be on the Corporation. Neither the failure of the
Corporation (including its Board of Directors or any committee thereof, special
legal counsel, or shareholders) to have made its determination prior to the
commencement of such action that indemnification of, or advancement of costs of
defense to, the claimant is permissible in the circumstances nor an actual
determination by the Corporation (including its Board of Directors or any
committee thereof, special legal counsel, or shareholders) that such
indemnification or advancement is not permissible, shall be a defense to the
action or create a presumption that such indemnification or advancement is not
permissible. In the event of the death of any person having a right of
indemnification under the foregoing provisions, such right shall inure to the
benefit of his heirs, executors, administrators, and personal representatives.
The rights conferred above shall not be exclusive of any other right which any
person may have or hereafter acquire under any statute, bylaw, resolution of
shareholders or directors, agreement, or otherwise.
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The Corporation may additionally indemnify any person covered by the
grant of mandatory indemnification contained above to such further extent as is
permitted by law and may indemnify any other person to the fullest extent
permitted by law.
To the extent permitted by then applicable law, the grant of mandatory
indemnification to any person pursuant to this Article X shall extend to
proceedings involving the negligence of such person.
As used herein, the term "proceeding" means any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal, administrative,
arbitrative, or investigative, any appeal in such an action, suit, or
proceeding, and any inquiry or investigation that could lead to such an action,
suit, or proceeding.
ARTICLE IX
Any action of the Corporation which, under the provisions of the Texas
Business Corporation Act or any other applicable law, is required to be
authorized or approved by the holders of any specified percentage which is in
excess of fifty percent of the outstanding shares (or of any class or series
thereof) of the Corporation shall, notwithstanding any law, be deemed
effectively and properly authorized or approved if authorized or approved by the
vote of the holders of more than fifty percent of the outstanding shares
entitled to vote thereon (or, if the holders of any class or series of the
Corporation's shares shall be entitled by the Texas Business Corporation Act or
any other applicable law to vote thereon separately as a class, by the vote of
the holders of more than fifty percent of the outstanding shares of each such
class or series). Without limiting the generality of the foregoing, the
foregoing provisions of this Article Ten shall be applicable to any required
shareholder authorization or approval of: (a) any amendment to these articles of
incorporation; (b) any plan of merger, share exchange, or reorganization
involving the Corporation; (c) any sale, lease, exchange, or other disposition
of all, or substantially all, the property and assets of the Corporation; and
(d) any voluntary dissolution of the Corporation.
ARTICLE X
Any action required by the Texas Business Corporation Act to be taken
at any annual or special meeting of shareholders, or any action which may be
taken at any annual or special meeting of shareholders, may be taken without a
meeting, without prior notice, and without a vote, if a consent or consents in
writing, setting forth the actions so taken, shall be signed by the holder or
holders of shares of the Corporation having not less than a minimum of votes
that would be necessary to take such action at a meeting at which the holders of
all shares of the Corporation entitled to vote on the action were present and
voted.
International Isotopes Inc.
By: /s/ Steve T. Laflin
---------------------------------
Steve T. Laflin, President and CEO
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EXHIBIT A
ARTICLE I
Designation, Amount, Par Value, Liquidation Value And Rank
1.1 The series of preferred stock shall be designated as Series A
Convertible Redeemable Preferred Stock, ("Series A Preferred Stock" or
"Preferred Stock"), and the number of shares so designated shall be up to 10,000
(which shall not be subject to increase without the consent of each of the
holders of the Series A Preferred Stock ("Holders")). Each share of Preferred
Stock, $.01 par value per share, shall have a liquidation value of $1,000 per
share (the "Liquidation Value").
1.2 The Series A Preferred Stock shall rank senior to the Junior
Securities upon liquidation, dissolution or winding up. No class of equity
securities of the Company shall be senior to the Series A Preferred Stock upon
liquidation, dissolution or winding up.
ARTICLE II
Dividends
2.1 Holders of Series A Preferred Stock shall be entitled to receive
dividends if, when and in such amounts as are declared by the Company's Board of
Directors from time to time, provided that Holders shall not be entitled to any
specified dividends and, unless declared by the Company, no dividends shall
accrue.
ARTICLE III
Voting Rights
3.1 Except as otherwise provided herein and as otherwise required by
law, the Preferred Stock shall have no voting rights. However, so long as any
shares of Preferred Stock are outstanding, the Company shall not and shall cause
its subsidiaries not to, without the affirmative vote of the Holders of more
than 75% of the shares of the Preferred Stock then outstanding, (a) alter or
change adversely the absolute or relative powers, preferences or rights given to
the Preferred Stock, (b) alter or amend this Certificate of Designation, (c)
amend its, or their, Certificate of Incorporation, bylaws or other charter
documents so as to affect adversely any rights of any Holders, (d) increase the
authorized number of shares of Preferred Stock, (e) sell all or substantially
all of its, or their, assets, (f) merge with or into another company, in the
event that the Company will not be the surviving entity or (g) enter into any
agreement with respect to the foregoing.
ARTICLE IV
Liquidation
4.1 Upon any liquidation, dissolution or winding-up of the Company,
whether voluntary or involuntary (a "Liquidation"), the Holders shall be
entitled to receive out of the assets of the Company legally available therefor,
whether such assets are capital or surplus, for each share of Preferred Stock an
amount equal to the Liquidation Value before any distribution or payment shall
be made to the Holders of any Junior Securities. If the assets of the Company
shall be insufficient to pay in full all amounts due to the Holders then the
entire assets to be distributed to the Holders and the Holders of all securities
ranking pari passu to the Preferred Stock ratably in accordance with the
respective amounts that would be payable on such shares if all amounts payable
thereon were paid in full. A sale, conveyance, lease, transfer or disposition of
all or substantially all of the assets of the Company or the consummation by the
Company of a transaction or series of related transactions in which more than
40% of the voting power of the Company is disposed of, or a consolidation or
merger of the Company with or into any other company or companies shall not be
treated as a Liquidation, but instead shall be subject to the provisions of
Article VII. The Company shall mail written notice of any such Liquidation, not
less than 45 days prior to the payment date stated therein, to each Holder.
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ARTICLE V
Conversion
5.1 Right of Holders to Convert Preferred Stock into Common Stock.
(a) Conversion Price. Subject to and upon compliance with the
provisions of this Section 5.1, each share of Preferred Stock at a price per
share equal to the purchase price as set forth in the Purchase Agreement plus
any and all accrued but unpaid dividends thereon may, at any time at or before
the close of business on May 31, 2022 be converted into duly authorized, validly
issued, fully-paid and nonassessable shares of Common Stock at a conversion
price of $2.00 per share to be adjusted as set forth in Article VII, and subject
to the provisions of this Article V (the "Conversion Price").
(b) Notice of Conversion. If an adjustment in the Conversion Price
and, if applicable, a change in the securities or other property issuable upon
conversion has taken place pursuant to Articles V or VII, then the conversion
described in Section 5.1(a) shall be at the applicable Conversion Price and in
such securities or other property as so adjusted. The Purchaser desiring to make
a conversion shall deliver to the Company, during usual business hours of the
Company's office, or, at the Purchaser's option, to the Company's transfer agent
during its usual business hours (with a copy to the Company), a written notice
of election to convert, as provided in the form attached hereto as Exhibit A (a
"Notice of Conversion"), accompanied, if required, by the stock certificate(s)
evidencing the shares of Preferred Stock which are to be converted.
5.2 Issuance of Shares Upon Conversion.
(a) As promptly as practicable, but in any event no later than five
(5) Trading Days after delivery of a Notice of Conversion and, if required, the
surrender, as herein provided, of any certificates for shares of Preferred Stock
for conversion, the Company shall deliver or cause to be delivered to the Holder
of the Preferred Stock delivering such Notice of Conversion, or such Holder's
designee, a certificate or certificates representing the number of duly
authorized, validly issued, fully-paid and nonassessable shares of Common Stock,
into which such shares of Preferred Stock may be converted in accordance with
the provisions of this Article V. Such conversion shall be deemed to have been
made at the time and on the date the Notice of Conversion is delivered to the
Company, as long as, if required, the Preferred Stock being converted are
promptly delivered to the Company and the rights of the Holder of such Preferred
Stock as a Holder (subject to the Company's satisfaction of its obligations
hereunder with respect to such conversion) shall cease at such time with respect
to the shares of Preferred Stock that such Holder would have held had the shares
of Preferred Stock converted into Underlying Shares not been so converted (the
"Converted Preferred Stock"), the Person or Persons entitled to receive the
shares of Common Stock, upon conversion of such Preferred Stock, shall be
treated for all purposes as having become the record holder or holders of such
shares of Common Stock at such time, and such conversion shall be at the
Conversion Price in effect at such time (the "Conversion Date"). Subject to
paragraph 5.2(b), if any certificated shares of Preferred Stock are converted in
part only, upon such conversion the Company shall execute and deliver to the
Holder thereof, as requested by such Holder, a new Preferred Stock certificate
for the number of shares of Preferred Stock equal to the unconverted portion of
such Preferred Stock certificate.
(b) Notwithstanding anything to the contrary set forth herein, upon
conversion of shares of Preferred Stock in accordance with the terms hereof, the
Holder shall not be required to physically surrender its certificate of
Preferred Stock to the Company unless the entire amount of shares of Preferred
Stock is so converted. The Holder and the Company shall maintain records showing
the number of shares of Preferred Stock already converted and the dates of such
conversions or shall use such other method, reasonably satisfactory to the
Holder and the Company, so as not to require physical surrender of the Preferred
Stock certificate(s) upon each such conversion. In the event of any dispute or
discrepancy, such records of the Company shall be controlling and determinative
in the absence of manifest error. Notwithstanding the foregoing, if any portion
of shares of a Preferred Stock certificate is converted, the Holder may not
transfer the Preferred Stock certificate unless the Holder first physically
surrenders the certificate to the Company, whereupon the Company shall promptly
issue and deliver upon the order of the Holder a new certificate of like tenor,
registered as the Holder (upon payment by the Holder of any applicable transfer
taxes) may request, representing the number of remaining unconverted shares of
Preferred Stock. The Holder and any assignee, by acceptance of the Preferred
Stock, acknowledge and agree that, by reason of the provisions of this
paragraph, following conversion of a portion of a Preferred Stock certificate,
the unpaid and unconverted shares of such Preferred Stock certificate may be
less than the amount stated on the face thereof.
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(c) In lieu of delivering physical certificates representing the
Conversion Shares, provided the Company's transfer agent is participating in the
Depositary Trust Company Fast Automated Securities Transfer ("FAST") program,
upon request of the Holder and in compliance with the provisions of Sections 5.1
and 5.2, the Company shall use its best efforts to cause its transfer agent to
electronically transmit the shares of Common Stock issuable upon conversion of
the Preferred Stock to the Holder by crediting the account of the Holder's Prime
Broker with DTC through its Deposit Withdrawal Agent Commission system. The time
period for delivery described in the immediately preceding paragraph shall apply
to the electronic transmittals described herein.
5.3 Mandatory Redemption on May 31, 2022.
(a) All outstanding and unconverted shares of Series A Preferred
Stock on May 31, 2022 shall be redeemed by the Company pursuant to this Section
5.3 from funds or shares of Common Stock legally available therefor at a price
per share equal to the purchase price as set forth in the Purchase Agreement.
Thereafter, all shares of Series A Preferred Stock shall cease to be outstanding
and shall have the status of authorized but undesignated preferred stock. The
Company, at its option, shall pay the redemption price either in cash or in
shares of Common Stock valued at the Average Price on May 31, 2002.
(b) If any portion of the applicable redemption price under Section
5.3(a) shall not be paid by the Company within seven (7) calendar days after the
date due, interest shall accrue thereon at the rate of 15% per annum until the
redemption price plus all such interest is paid in full (which amount shall be
paid as liquidated damages and not as a penalty).
ARTICLE VI
Registration Requirements
6.1 Reservation of Shares. The Company covenants that it will at all
times reserve and keep available out of its authorized shares of Common Stock,
free from preemptive rights, solely for the purpose of issue upon conversion of
the Preferred Stock as herein provided, such number of shares of the Common
Stock as shall then be issuable upon the conversion of all outstanding shares of
Preferred Stock into Common Stock (the "Reserved Amount"). The Company covenants
that all shares of the Common Stock issued upon conversion of the Preferred
Stock which shall be so issuable shall, when issued, be duly and validly issued
and fully paid and non-assessable.
ARTICLE VII
Adjustment of Conversion Price
7.1 Adjustment of Conversion Price. In addition to any adjustment to
the Conversion Price provided elsewhere in this Certificate of Designation, the
Conversion Price in effect at any time shall be subject to adjustment from time
to time upon the happening of certain events, as follows:
(a) Common Stock Dividends; Common Stock Splits; Reverse Common
Stock Splits. If the Company, at any time while the Preferred Stock is
outstanding, (a) shall pay a stock dividend on its Common Stock, (b) subdivide
outstanding shares of Common Stock into a larger number of shares, (c) combine
outstanding shares of Common Stock into a smaller number of shares, or (d) issue
by reclassification of shares of Common Stock any shares of Capital Stock of the
Company, the Conversion Price shall be multiplied by a fraction the numerator of
which shall be the number of shares of Common Stock (excluding treasury shares,
if any) outstanding before such event and the denominator of which shall be the
number of shares of Common Stock outstanding after such event. Any adjustment
made pursuant to this Section 7.1(a) shall become effective immediately after
the record date for the determination of stockholders entitled to receive such
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or re-classification.
(b) Rounding. All calculations under Section 7.1 shall be made to
the nearest cent or the nearest 1/100th of a share, as the case may be.
(c) Notice of Adjustment. Whenever the Conversion Price is adjusted
pursuant to paragraph 7.1(a), the Company shall promptly deliver to the Holder a
notice setting forth the Conversion Price after such adjustment and setting
forth a brief statement of the facts requiring such adjustment.
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7.2 Officer's Certificate. Whenever the number of shares purchasable
upon conversion shall be adjusted as required by the provisions of Section 7.1,
the Company shall forthwith file in the custody of its Secretary or an Assistant
Secretary at its principal office and with its stock transfer agent, if any, an
officer's certificate showing the adjusted number of shares determined as herein
provided, setting forth in reasonable detail the facts requiring such adjustment
and the manner of computing such adjustment. Each such officer's certificate
shall be signed by the chairman, president or chief financial officer of the
Company and by the secretary or any assistant secretary of the Company. Each
such officer's certificate shall be made available at all reasonable times for
inspection by any holder of the Preferred Stock and the Company shall, forthwith
after each such adjustment, deliver a copy of such certificate to the each of
the Holders.
7.3 Compliance With Governmental Requirements. The Company covenants
that if any shares of Common Stock required to be reserved for purposes of
conversion of Preferred Stock hereunder require registration with or approval of
any governmental authority under any Federal or state law, or any national
securities exchange, before such shares may be issued upon conversion, the
Company will use its best efforts to cause such shares to be duly registered or
approved, as the case may be.
7.4 Fractional Shares. Upon a conversion hereunder, the Company
shall not be required to issue stock certificates representing fractions of
shares of the Common Stock, but may if otherwise permitted, make a cash payment
in respect of any final fraction of a share based on the Per Share Market Value
at such time. If the Company elects not, or is unable, to make such a cash
payment, the holder shall be entitled to receive, in lieu of the final fraction
of a share, one whole share of Common Stock.
7.5 Payment of Tax Upon Issue or Transfer. The issuance of
certificates for shares of the Common Stock on conversion of the Preferred Stock
shall be made without charge to the Holders thereof for any documentary stamp or
similar taxes that may be payable in respect of the issue or delivery of such
certificate, provided that the Company shall not be required to pay any tax that
may be payable in respect of any transfer involved in the issuance and delivery
of any such certificate upon conversion in a name other than that of the Holder
of such Preferred Stock so converted and the Company shall not be required to
issue or deliver such certificates unless or until the Person or Persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that such
tax has been paid.
7.6 Notices. Any notice or other communication required or permitted
to be given hereunder shall be in writing and shall be deemed to have been
received (a) upon hand delivery (receipt acknowledged) or delivery by telex
(with correct answer back received), telecopy or facsimile (with transmission
confirmation report) at the address or number designated below (if received by
8:00 p.m. EST where such notice is to be received), or the first Business Day
following such delivery (if received after 8:00 p.m. EST where such notice is to
be received) or (b) on the second Business Day following the date of mailing by
express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications are (i) if to the Company to International Isotopes Inc.,
4137 Commerce Circle, Idaho Falls, Idaho 83401, Telephone: 208-524-5300,
Facsimile: 208-524-1411, Attention: Steve Laflin with copies to Locke Liddell &
Sapp, LLP, 100 Congress, Suite 300, Austin, Texas 78731, Attention: Curtis R.
Ashmos, and (ii) if to any Holder to the address set forth on Schedule II to the
Purchase Agreement or such other address as may be designated in writing
hereafter, in the same manner, by such Person.
7.7 Allocations of Reserved Amount. The Reserved Amount shall be
allocated pro rata among the Holders based on the number of shares of Preferred
Stock issued to each Holder. Each increase to the Reserved Amount shall be
allocated pro rata among the Holders based on the number of shares of Preferred
Stock held by each Holder at the time of the increase in the Reserved Amount. In
the event a Holder shall sell or otherwise transfer any of such Holder's
Preferred Stock, each transferee shall be allocated a pro rata portion of such
transferor's Reserved Amount. Any portion of the Reserved Amount which remains
allocated to any person or entity which does not hold any Preferred Stock shall
be allocated to the remaining Holders, pro rata, based on the number of shares
of Preferred Stock then held by such Holders.
7.8 Nasdaq Limitation. In no event shall the Company be required to
issue shares of Common Stock upon the conversion of Preferred Stock if such
issuance would violate the rules of Nasdaq.
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ARTICLE VIII
Optional Redemption
8.1 Optional Redemption.
(a) The shares of Preferred Stock are redeemable, in whole or in
part, at the option of the Company during the following time periods, from time
to time, under the following conditions and subject also to the conditions set
forth in Section 8.1(b) (the "Optional Redemption"):
(i) Prior to the first anniversary of the Original Issue Date,
the Company may redeem the shares of Preferred Stock subject to the
other conditions herein, if the average closing price of the Company's
Common Stock over twenty (20) consecutive Trading Days reaches over
200% of the Conversion Price as at the Original Issue Date;
(ii) During the period commencing on the first Business Day
immediately after the first anniversary of the Original Issue Date and
ending on the second anniversary of the Original Issue Date, the
Company may redeem the shares of Preferred Stock subject to the other
conditions herein, if the average closing price of the Company's Common
Stock over twenty (20) consecutive Trading Days reaches over 175% of
the Conversion Price as at the Original Issue Date; and
(iii) After the second anniversary of the Original Issue Date,
the Company may redeem the shares of Preferred Stock subject to the
other conditions herein, if the average closing price of the Company's
Common Stock over twenty (20) consecutive Trading Days reaches over
150% of the Conversion Price as at the Original Issue Date.
(b) Subject to the conditions set forth in Section 8.1(a), so long
as (i) any Registration Statement required to be filed and be effective pursuant
to the Registration Rights Agreement is then in effect and has been in effect
and sales of all of the Registrable Securities can be made thereunder for at
least twenty (20) days prior to the Redemption Notice Date (as defined below)
and (ii) the Company has a sufficient number of authorized shares of Common
Stock reserved for issuance upon full conversion of the Preferred Stock, upon
ten (10) Business Days prior written notice to the Holder (a "Redemption
Notice"), the full number of outstanding shares of Preferred Stock may be
redeemed by the Company, in whole at a price equal to the original purchase
price of the Preferred Stock (the "Redemption Price"), together with any
declared but unpaid dividends and all liquidated damages and other amounts due
in respect thereof up to the Redemption Date (as defined below) (subject to the
right of the Holder on the Record Date to receive dividends due on the Dividend
Payment Date).
8.2 Mechanics of Redemption. The Company shall exercise its right to
redeem by delivering its Redemption Notice by facsimile and overnight courier to
each Holder (such date that the notice is given, the "Redemption Notice Date").
Such Redemption Notice shall indicate (A) the Redemption Price, (B) each
Holder's pro rata allocation of such maximum amount, and (C) a confirmation of
the date ("Redemption Date") that the Company shall effect the redemption, which
date shall be not less than thirty (30) Business Days and not more than sixty
(60) calendar days after the Redemption Notice Date. Notwithstanding anything in
this Section 8.2, the Company shall convert any Preferred Stock pursuant to
Article VIII if the Conversion Notice for shares of Preferred Stock submitted
for conversion is (i) delivered before the Redemption Date, (ii) for a
Conversion Price greater than or equal to the Redemption Price (appropriately
adjusted in accordance with the terms hereof) or (iii) in excess of such
Holder's pro rata allocation of the maximum Redemption Price indicated in its
Redemption Notice.
8.3 Payment of Redemption Price. The Company shall pay the
applicable Optional Redemption Price to the Holder of the shares of Preferred
Stock being redeemed in cash on the Redemption Date. If the Company shall fail
to pay the applicable Redemption Price to such Holder on the Redemption Date, in
addition to any remedy such Holder may have under this Certificate of
Designation and the Purchase Agreement, such unpaid amount shall bear interest
at the rate of 2.0% per month until paid in full.
ARTICLE IX
Definitions
9.1 Definitions. For the purposes hereof, the following terms shall
have the following meanings:
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"Act" means the Securities Act of 1993, as amended.
"Affiliate" of any Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person. For the purposes of this definition, "control" when used with
respect to any Person means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Appraiser" means a nationally recognized or major regional investment
banking firm or firm of independent certified public accountants of recognized
standing.
"Authorization Date" has the meaning set forth in Section 6.2.
"Average Price" on any date means (x) the sum of the Per Share Market
Value for the five (5) Trading Days immediately preceding such date, divided by
(z) five (5).
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in the City of New York are authorized or required by law
to close.
"Change of Control" means the occurrence of any of (i) an acquisition
after the date hereof by an individual or legal entity or "group" (as described
in Section 13(d)(3) of the Exchange Act) of in excess of 40% of the voting
securities of the Issuer, (ii) a replacement of more than one-half of the
members of the Issuer's Board of Directors which is not approved by a majority
of those individuals who are members of the Board of Directors on the date
hereof, or their duly elected successors who are directors immediately prior to
such transaction, in one or a series of related transactions, (iii) the merger
of the Issuer with or into another entity, unless following such transaction,
the Holders of the Issuer's securities continue to hold at least 67% of such
securities following such transaction, (iv) the consolidation or sale of all or
substantially all of the assets of the Issuer in one or a series of related
transactions, or (v) the execution by the Issuer of an agreement to which the
Issuer is a party or by which it is bound, providing for any of the events set
forth above in (i), (ii), (iii) or (iv).
"Closing Date" means the date of the closing of the purchase and sale
of the Preferred Stock.
"Commission" means the United States Securities and Exchange
Commission, or any successor to such agency.
"Common Stock" means the Company's common stock, $.01 par value per
share, of the Company and stock of any other class into which such shares may
hereafter have been reclassified or changed.
"Conversion Date" has the meaning set forth in Section 5.3(a).
"Conversion Price" has the meaning set forth in Section 5.1.
"Conversion Shares" has the meaning set forth in the Purchase
Agreement.
"Converted Preferred Stock" has the meaning set forth in Section
5.3(a).
"DTC" means the Depositary Trust Corporation.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Holder" or other similar terms means the registered holder of any
share of Preferred Stock.
"Issuance Date" means the date of first issue of any shares of
Preferred Stock.
"Junior Securities" means the Common Stock and all other equity
securities of the Company which are junior in rights and liquidation preference
to Preferred Stock.
"Liquidation Value" has the meaning set forth in Section 1.1.
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"Nasdaq" means the Nasdaq Smallcap Market.
"Notice of Conversion" has the meaning set forth in Section 5.1(b).
"Original Issue Date" shall mean the date of the first issuance of any
shares of the Preferred Stock regardless of the number of transfers of any
particular shares of Preferred Stock and regardless of the number of
certificates which may be issued to evidence such Preferred Stock.
"Per Share Market Value" means (i) on any particular date the closing
bid price per share of the Common Stock on such date (as reported by Bloomberg
Information Services, Inc., or any successor reporting service) on Nasdaq or, if
the Common Stock is not then quoted on Nasdaq, any Subsequent Market on which
the Common Stock is then listed or if there is no such price on such date, then
the closing bid price on such exchange or quotation system on the date nearest
preceding such date or (ii) if the Common Stock is not listed then on Nasdaq or
any Subsequent Market, the closing bid price for a share of Common Stock in the
over-the-counter market, as reported by the National Quotation Bureau
Incorporated (or similar organization or agency succeeding to its functions of
reporting prices) at the close of business on such date, or (iii) if the Common
Stock is not then publicly traded the fair market value of a share of Common
Stock as determined by an Appraiser selected in good faith by the holder of this
Debenture; provided, however, that the Company, after receipt of the
determination by such Appraiser, shall have the right to select in good faith an
additional Appraiser, in which case, the fair market value shall be equal to the
average of the determinations by each such Appraiser; and provided, further that
all determinations of the Per Share Market Value shall be appropriately adjusted
for any stock dividends, stock splits or other similar transactions during such
period.
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
"Purchase Agreement" means the Securities Purchase Agreement, dated as
of the Original Issue Date, among the Company and the original Holders of the
Preferred Stock.
"Redemption Date" has the meaning set forth in Section 8.2.
"Redemption Notice" has the meaning set forth in Section 8.1(b).
"Redemption Notice Date" has the meaning set forth in Section 8.2. "Redemption
Price" has the meaning set forth in Section 8.1(b).
"Registrable Securities" has the meaning set forth in the Registration
Rights Agreement.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Original Issue Date, by and among the Company and the
original Holders.
"Registration Statement" has the meaning set forth in the Registration
Rights Agreement,
"Reserved Amount" has the meaning set forth in Section 6.1.
"Stock Option Plan" means any contract, plan or agreement which has
been approved by the Board of Directors of the Issuer, pursuant to which the
Issuer's securities may be issued to any employee, officer, director or
consultant.
"Subsidiary" means, with respect to any Person, any corporation or
other entity of which a majority of the Capital Stock or other ownership
interests having ordinary voting power to elect a majority of the Board of
Directors or other persons performing similar functions are at the time directly
or indirectly owned by such Person.
"Subsequent Market" means the New York Stock Exchange, American Stock
Exchange or Nasdaq National Market.
"Trading Day" means (a) a day on which the Common Stock is traded on
Nasdaq or, if the Common Stock is not then designated on Nasdaq, on such
Subsequent Market on which the Common Stock is then listed or quoted or (b) if
the Common Stock is not listed on Nasdaq or a Subsequent Market, a day on which
the Common Stock is traded in the over-the-counter Market, as reported by the
OTC Bulletin Board, or (c) if the Stock is not quoted on the OTC Bulletin Board,
a day on which the Common Stock is quoted in the over-the-counter market as
reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding its functions or reporting prices) provided,
however that in any event that the Common Stock is not listed or quoted as set
forth in (a), (b), or (c) hereof, then a Trading Day shall mean any Business
Day.
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"Underlying Shares" means the number of shares of Common Stock into
which the shares of Preferred Stock are convertible in accordance with the terms
hereof and the Purchase Agreement.
"Warrant" or "Warrants" has the meaning set forth in the Purchase
Agreement.
ARTICLE X
Miscellaneous
10.1 Modification of Certificate of Designation. This Certificate of
Designation may be modified without prior notice to any Holder upon the written
consent of the Company and the Holders of more than 75% of the shares of
Preferred Stock then outstanding. The Holders of more than 75% of the shares of
Preferred Stock then outstanding may waive compliance by the Company with any
provision of this Certificate of Designation without prior notice to any Holder.
However, without the consent of each Holder affected, an amendment, supplement
or waiver may not (1) reduce the number of shares of Preferred Stock whose
Holders must consent to an amendment, supplement or waiver, or (2) make any
shares of Preferred Stock payable in money or property other than as stated in
the Certificate of Designation.
10.2 Miscellaneous. This Certificate of Designation shall be governed
by and construed and enforced in accordance with the internal laws of the State
of New York without regard to the principles of conflicts of law thereof, except
for matters of corporate law, which shall be governed by the laws of the State
of Texas. Each party hereby irrevocably submits to the nonexclusive jurisdiction
of the state and federal courts sitting in the City of New York, Borough of
Manhattan, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is improper. The parties
hereto, including all guarantors or endorsers, hereby waive presentment, demand,
notice, protest and all other demands and notices in connection with the
delivery, acceptance, performance and enforcement of this Certificate of
Designation, except as specifically provided herein, and assent to extensions of
the time of payment, or forbearance or other indulgence without notice. The
Holder of Preferred Stock by acceptance of a share of Preferred Stock agrees to
be bound by the provisions of this Certificate of Designation which are
expressly binding on such Holder.
10.3 Preferred Stock Owned by Company Deemed Not Outstanding. In
determining whether the holders of the requisite number of shares of Preferred
Stock have concurred in any direction, consent or waiver under this Certificate
of Designation, shares of Preferred Stock which are owned by the Company or any
other obligor on the Preferred Stock or by any Person directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Company or any other obligor on the Preferred Stock shall be disregarded and
deemed not to be outstanding for the purpose of any such determination; provided
that any shares of Preferred Stock owned by the Purchasers shall be deemed
outstanding for purposes of making such a determination. Shares of Preferred
Stock so owned which have been pledged in good faith may be regarded as
outstanding if the pledgee establishes to the satisfaction of the Company the
pledgee's right so to act with respect to such shares of Preferred Stock and
that the pledgee is not the Company or any other obligor upon the Preferred
Stock or any Person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company or any other obligor on the
Preferred Stock.
10.4 Notice to Holders Prior to Taking Certain Types of Action. In
case:
(a) the Company shall authorize the issuance, at any time from and
after the Original Issue Date, to all holders of any class or series of its
Capital Stock, of rights or warrants to subscribe for or purchase shares of its
capital stock or of any other right;
(b) the Company shall authorize, at any time from and after the
Original Issue Date, the distribution to all holders of any class or series of
its Capital Stock, of evidences of its indebtedness or assets;
(c) the Company shall declare a dividend (or other distribution) on
its Common Stock or the Company shall declare a special nonrecurring dividend on
or a redemption of its Common Stock;
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(d) of any subdivision, combination or reclassification of any class
or series of Capital Stock of the Company at any time from and after the
Original Issue Date or of any consolidation or merger to which the Company is a
party and for which approval by the shareholders of the Company is required, or
of the sale or transfer of all or substantially all of the assets of the Company
or any compulsory share exchange whereby the Common Stock is converted into
other securities, cash or property; or
(e) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; then the Company shall cause to be mailed to the
Holders, at their last addresses as they shall appear upon the registration
books of the Company, at least 10 days prior to the applicable record date
hereinafter specified, a notice stating (i) the date as of which the holders of
record of such class or series of Capital Stock are to be entitled to receive
any such rights, warrants or distribution are to be determined, or (ii) the date
on which any such subdivision, combination, reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation, winding up or other action is
expected to become effective, and the date as of which it is expected that
holders of record of such class or series of Capital Stock record shall be
entitled to exchange their stock for securities or other property, if any,
deliverable upon such subdivision, combination, reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation, winding up or other action.
The failure to give the notice required by this Section 10.4 or any
defect therein shall not affect the legality or validity of any distribution,
right, warrant, subdivision, combination, reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation, winding up or other action, or
the vote upon any of the foregoing.
10.5 Effect of Headings. The Section headings herein are for
convenience only and shall not affect the construction hereof.
10.6 References. References to Sections and Articles are to Sections
and Articles of this Certificate of Designation, unless otherwise expressly
provided.
10.7 Failure or Indulgence Not Waiver. No failure or delay on the
part of the Holder in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privileges. All rights and remedies existing
hereunder are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
10.8 Lost or Stolen Certificates. Upon receipt by the Company of
evidence reasonably satisfactory to the Company (including any bond the
Company's transfer agent requires the Holders to post) of the loss, theft,
destruction or mutilation of any stock certificates representing Preferred
Stock, and, in the case of loss, theft or destruction, of any indemnification
undertaking by the Holder to the Company in customary form and, in the case of
mutilation, upon surrender and cancellation of such Series A Preferred Stock
certificate(s), the Company shall execute and deliver new preferred stock
certificate(s) of like tenor and date; provided, however, the Company shall not
be obligated to re-issue preferred stock certificates if the Holder
contemporaneously requests the Company to convert such Preferred Stock into
Common Stock.
10.9 Remedies Characterized; Other Obligations, Breaches and
Injunctive Relief. The remedies provided in this Certificate of Designation
shall be cumulative and in addition to all other remedies available under this
Certificate of Designation, at law or in equity (including a decree of specific
performance and/or other injunctive relief), no remedy contained herein shall be
deemed a waiver of compliance with the provisions giving rise to such remedy and
nothing herein shall limit a Holder's right to pursue actual damages for any
failure by the Company to comply with the terms of this Certificate of
Designation. The Company covenants to each Holder of Preferred Stock that there
shall be no characterization concerning this instrument other than as expressly
provided herein. The Company further covenants that it will not take any action
which might materially and adversely affect the rights of the Holders of
Preferred Stock. Amounts set forth or provided for herein with respect to
payments, conversion and the like (and the computation thereof) shall be the
amounts to be received by the Holder thereof and shall not, except as expressly
provided herein, be subject to any other obligation of the Company (or the
performance thereof). The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Holders of the
Preferred Stock and that the remedy at law in the event of any such breach may
be inadequate. The Company therefore agrees that, in the event of any such
breach or threatened breach, the Holders of the Preferred Stock shall be
entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.
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10.10 Specific Shall Not Limit General; Construction. No specific
provision contained in this Certificate of Designation shall limit or modify any
more general provision contained herein. This Certificate of Designation shall
be deemed to be jointly drafted by the Company and all Purchasers (as defined in
this Purchase Agreement) and shall not be construed against any person as the
drafter hereof.
10.11 Failure or Indulgence Not Waiver. No failure or delay on the
part of a Holder of Preferred Stock in the exercise of any power, right or
privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege.
10.12 Payment of Tax Upon Issue of Transfer. The issuance of
certificates for shares of the Common Stock upon conversion of the Preferred
Shares shall be made without charge to the Holders thereof for any documentary
stamp or similar taxes that may be payable in respect of the issue or delivery
of such certificate, provided that the Company shall not be required to pay any
tax that may be payable in respect of any transfer involved in the issuance and
delivery of any such certificate upon conversion in a name other than that of
the Holders so converted and the Company shall not be required to issue or
deliver such certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
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EXHIBIT A
NOTICE OF CONVERSION
AT THE ELECTION OF HOLDER
(To be Executed by the Registered Holder in
order to convert shares of Series A
Convertible Redeemable Preferred Stock)
The undersigned hereby elects to convert the number of shares of Series
A Convertible Redeemable Preferred Stock ("Series A Preferred Stock") indicated
below, into shares of common stock, par value $.01 per share (the "Common
Stock"), of International Isotopes Inc. (the "Company") according to the
conditions hereof, as of the date written below. If shares are to be issued in
the name of a person other than undersigned, the undersigned will pay all
transfer taxes payable with respect thereto and is delivering herewith such
certificates and opinions as reasonably requested by the Company in accordance
therewith. No fee will be charged to the Holder for any conversion, except for
such transfer taxes, if any.
Conversion calculations:
_____________________________________________
Date to effect conversion
_____________________________________________
Number of shares of Series A Preferred Stock
to be converted
_____________________________________________
Number of shares of Common Stock to be issued
_____________________________________________
Applicable Conversion Price
_____________________________________________
Signature
_____________________________________________
Name
_____________________________________________
Address
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EXHIBIT B
ARTICLE I
Designation, Amount, Par Value, Liquidation Value And Rank
1.1 The series of preferred stock shall be designated as Series B
Convertible Redeemable Preferred Stock, ("Series B Preferred Stock" or
"Preferred Stock"), and the number of shares so designated shall be up to 14,300
(which shall not be subject to increase without the consent of each of the
holders of the Series B Preferred Stock ("Holders")). Each share of Preferred
Stock, $.01 par value per share, shall have a liquidation value of $1,000 per
share (the "Liquidation Value").
1.2 The Series B Preferred Stock shall rank pari passu with the
Series A Preferred Stock and senior to all Junior Securities upon liquidation,
dissolution or winding up. No class of equity securities of the Company shall be
senior to the Series B Preferred Stock upon liquidation, dissolution or winding
up.
ARTICLE II
Dividends
2.1 Series B Preferred Stock shall be entitled to receive dividends
if, when and in such amounts as are declared by the Company's Board of Directors
from time to time, provided that Holders shall not be entitled to any specified
dividends and, unless declared by the Company, no dividends shall accrue.
Previous dividends shall cease to accrue as of December 1, 2001.
ARTICLE III
Voting Rights
3.1 Except as otherwise provided herein and as otherwise required by
law, the Preferred Stock shall have no voting rights. However, so long as any
shares of Preferred Stock are outstanding, the Company shall not and shall cause
its subsidiaries not to, without the affirmative vote of the Holders of more
than 75% of the shares of the Preferred Stock then outstanding, (a) alter or
change adversely the absolute or relative powers, preferences or rights given to
the Preferred Stock, (b) alter or amend this Certificate of Designation, (c)
amend its, or their, Articles of Incorporation, bylaws or other charter
documents so as to affect adversely any rights of any Holders, (d) increase the
authorized number of shares of Preferred Stock, (e) sell all or substantially
all of its, or their, assets, (f) merge with or into another company, in the
event that the Company will not be the surviving entity or (g) enter into any
agreement with respect to the foregoing.
ARTICLE IV
Liquidation
4.1 Upon any liquidation, dissolution or winding-up of the Company,
whether voluntary or involuntary (a "Liquidation"), the Holders shall be
entitled to receive out of the assets of the Company legally available therefor,
whether such assets are capital or surplus, for each share of Preferred Stock an
amount equal to the Liquidation Value, before any distribution or payment shall
be made to the Holders of any Junior Securities. If the assets of the Company
shall be insufficient to pay in full all amounts due to the Holders then the
entire assets to be distributed to the Holders and the Holders of all securities
ranking pari passu to the Preferred Stock ratably in accordance with the
respective amounts that would be payable on such shares if all amounts payable
thereon were paid in full. A sale, conveyance, lease, transfer or disposition of
all or substantially all of the assets of the Company or the consummation by the
Company of a transaction or series of related transactions in which more than
40% of the voting power of the Company is disposed of, or a consolidation or
merger of the Company with or into any other company or companies shall not be
treated as a Liquidation, but instead shall be subject to the provisions of
Article VII. The Company shall mail written notice of any such Liquidation, not
less than 45 days prior to the payment date stated therein, to each Holder.
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ARTICLE V
Conversion
5.1 Right of Holders to Convert Preferred Stock into Common Stock.
(a) Conversion Price. Subject to and upon compliance with the
provisions of this Section 5.1, each share of Preferred Stock at a price per
share equal to the Original Purchase Price as set forth in the Purchase
Agreement may, at any time at or before the close of business of the date the
Company pays the full redemption price therefor under Section 5.4(a), be
converted into duly authorized, validly issued, fully-paid and nonassessable
shares of Common Stock at a conversion price of $2.00 per share, subject to the
provisions of this Article V (the "Conversion Price").
(b) Notice of Conversion. If an adjustment in the Conversion Price
and, if applicable, a change in the securities or other property issuable upon
conversion has taken place pursuant to Articles V or VII, then the conversion
described in Section 5.1(a) shall be at the applicable Conversion Price and in
such securities or other property as so adjusted. The Purchaser desiring to make
a conversion shall deliver to the Company, or, at the Purchaser's option, to the
Company's transfer agent (with a copy to the Company), a written notice of
election to convert, as provided in the form attached hereto as Exhibit A (a
"Notice of Conversion"), accompanied, if required, by the stock certificate(s)
evidencing the shares of Preferred Stock which are to be converted.
5.2 Issuance of Shares Upon Conversion.
(a) As promptly as practicable, but in any event no later than five
(5) Trading Days after delivery of a Notice of Conversion and, if required, the
surrender, as herein provided, of any certificates for shares of Preferred Stock
for conversion, the Company shall deliver or cause to be delivered to the Holder
of the Preferred Stock delivering such Notice of Conversion, or such Holder's
designee, a certificate or certificates representing the number of duly
authorized, validly issued, fully-paid and nonassessable shares of Common Stock,
into which such shares of Preferred Stock may be converted in accordance with
the provisions of this Article V. Such conversion shall be deemed to have been
made at the time and on the date the Notice of Conversion is delivered to the
Company under Section 7.7 (the "Conversion Date"), as long as, if required, the
Preferred Stock being converted are promptly delivered to the Company and the
rights of the Holder of such Preferred Stock as a Holder (subject to the
Company's satisfaction of its obligations hereunder with respect to such
conversion) shall cease at such time with respect to the shares of Preferred
Stock that such Holder would have held had the shares of Preferred Stock
converted into Underlying Shares not been so converted (the "Converted Preferred
Stock"), the Person or Persons entitled to receive the shares of Common Stock,
upon conversion of such Preferred Stock, shall be treated for all purposes as
having become the record holder or holders of such shares of Common Stock at
such time, and such conversion shall be at the Conversion Price in effect at
such time. Subject to paragraph 5.2(b), if any certificated shares of Preferred
Stock are converted in part only, upon such conversion the Company shall execute
and deliver to the Holder thereof, as requested by such Holder, a new Preferred
Stock certificate for the number of shares of Preferred Stock equal to the
unconverted portion of such Preferred Stock certificate.
(b) Notwithstanding anything to the contrary set forth herein, upon
conversion of shares of Preferred Stock in accordance with the terms hereof, the
Holder shall not be required to physically surrender its certificate of
Preferred Stock to the Company unless the entire amount of shares of Preferred
Stock is so converted. The Holder and the Company shall maintain records showing
the number of shares of Preferred Stock already converted and the dates of such
conversions or shall use such other method, reasonably satisfactory to the
Holder and the Company, so as not to require physical surrender of the Preferred
Stock certificate(s) upon each such conversion. In the event of any dispute or
discrepancy, such records of the Company shall be controlling and determinative
in the absence of manifest error. Notwithstanding the foregoing, if any portion
of shares of a Preferred Stock certificate is converted, the Holder may not
transfer the Preferred Stock certificate unless the Holder first physically
surrenders the certificate to the Company, whereupon the Company shall promptly
issue and deliver upon the order of the Holder a new certificate of like tenor,
registered as the Holder (upon payment by the Holder of any applicable transfer
taxes) may request, representing the number of remaining unconverted shares of
Preferred Stock. The Holder and any assignee, by acceptance of the Preferred
Stock, acknowledge and agree that, by reason of the provisions of this
paragraph, following conversion of a portion of a Preferred Stock certificate,
the unpaid and unconverted shares of such Preferred Stock certificate may be
less than the amount stated on the face thereof.
(c) In lieu of delivering physical certificates representing the
Conversion Shares, provided the Company's transfer agent is participating in the
Depositary Trust Company Fast Automated Securities Transfer ("FAST") program,
upon request of the Holder and in compliance with the provisions of Sections 5.1
and 5.2, the Company shall use its best efforts to cause its transfer agent to
electronically transmit the shares of Common Stock issuable upon conversion of
the Preferred Stock to the Holder by crediting the account of the Holder's Prime
Broker with DTC through its Deposit Withdrawal Agent Commission system. The time
period for delivery described in the immediately preceding paragraph shall apply
to the electronic transmittals described herein.
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5.3 Mandatory Redemption on May 31, 2022.
(a) All outstanding and unconverted shares of Series B Preferred
Stock on May 31, 2022 shall be redeemed by the Company pursuant to this Section
5.3 from funds or shares of Common Stock legally available therefor at a price
per share equal to the purchase price as set forth in the Purchase Agreement.
Thereafter, all shares of Series B Preferred Stock shall cease to be outstanding
and shall have the status of authorized but undesignated preferred stock. The
Company, at its option, shall pay the redemption price either in cash or in
shares of Common Stock valued at the Average Price on May 31, 2022.
(b) If any portion of the applicable redemption price under Section
5.3(a) shall not be paid by the Company within seven (7) calendar days after the
date due, interest shall accrue thereon at the rate of 15% per annum until the
redemption price plus all such interest is paid in full (which amount shall be
paid as liquidated damages and not as a penalty).
ARTICLE VI
Registration Requirements
6.1 Reservation of Shares. The Company covenants that it will at all
times reserve and keep available out of its authorized shares of Common Stock,
free from preemptive rights, solely for the purpose of issue upon conversion of
the Preferred Stock as herein provided, such number of shares of the Common
Stock as shall then be issuable upon the conversion of all outstanding shares of
Preferred Stock into Common Stock (the "Reserved Amount"). The Company covenants
that all shares of the Common Stock issued upon conversion of the Preferred
Stock which shall be so issuable shall, when issued, be duly and validly issued
and fully paid and non-assessable.
ARTICLE VII
Adjustment of Conversion Price
7.1 Adjustment of Conversion Price. In addition to any adjustment to
the Conversion Price provided elsewhere in this Certificate of Designation, the
Conversion Price in effect at any time shall be subject to adjustment from time
to time upon the happening of certain events, as follows:
(a) Common Stock Dividends; Common Stock Splits; Reverse Common
Stock Splits. If the Company, at any time while the Preferred Stock is
outstanding, (a) shall pay a stock dividend on its Common Stock, (b) subdivide
outstanding shares of Common Stock into a larger number of shares, (c) combine
outstanding shares of Common Stock into a smaller number of shares, or (d) issue
by reclassification of shares of Common Stock any shares of Capital Stock of the
Company, the Conversion Price shall be multiplied by a fraction the numerator of
which shall be the number of shares of Common Stock (excluding treasury shares,
if any) outstanding before such event and the denominator of which shall be the
number of shares of Common Stock outstanding after such event. Any adjustment
made pursuant to this Section 7.1(a) shall become effective immediately after
the record date for the determination of stockholders entitled to receive such
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or re-classification.
(b) Rounding. All calculations under Section 7.1 shall be made to
the nearest cent or the nearest 1/100th of a share, as the case may be.
(c) Notice of Adjustment. Whenever the Conversion Price is adjusted
pursuant to paragraphs 7.1(a), the Company shall promptly deliver to the Holder
a notice setting forth the Conversion Price after such adjustment and setting
forth a brief statement of the facts requiring such adjustment.
7.2 Officer's Certificate. Whenever the number of shares purchasable
upon conversion shall be adjusted as required by the provisions of Section 7.1,
the Company shall forthwith file in the custody of its Secretary or an Assistant
Secretary at its principal office and with its stock transfer agent, if any, an
officer's certificate showing the adjusted number of shares determined as herein
provided, setting forth in reasonable detail the facts requiring such adjustment
and the manner of computing such adjustment. Each such officer's certificate
shall be signed by the chairman, president or chief financial officer of the
Company and by the secretary or any assistant secretary of the Company. Each
such officer's certificate shall be made available at all reasonable times for
inspection by any holder of the Preferred Stock and the Company shall, forthwith
after each such adjustment, deliver a copy of such certificate to the each of
the Holders.
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7.3 Compliance With Governmental Requirements. The Company covenants
that if any shares of Common Stock required to be reserved for purposes of
conversion of Preferred Stock hereunder require registration with or approval of
any governmental authority under any Federal or state law, or any national
securities exchange, before such shares may be issued upon conversion, the
Company will use its best efforts to cause such shares to be duly registered or
approved, as the case may be.
7.4 Fractional Shares. Upon a conversion hereunder, the Company
shall not be required to issue stock certificates representing fractions of
shares of the Common Stock, but may if otherwise permitted, make a cash payment
in respect of any final fraction of a share based on the Per Share Market Value
at such time. If the Company elects not, or is unable, to make such a cash
payment, the holder shall be entitled to receive, in lieu of the final fraction
of a share, one whole share of Common Stock.
7.5 Payment of Tax Upon Issue or Transfer. The issuance of
certificates for shares of the Common Stock on conversion of the Preferred Stock
shall be made without charge to the Holders thereof for any documentary stamp or
similar taxes that may be payable in respect of the issue or delivery of such
certificate, provided that the Company shall not be required to pay any tax that
may be payable in respect of any transfer involved in the issuance and delivery
of any such certificate upon conversion in a name other than that of the Holder
of such Preferred Stock so converted and the Company shall not be required to
issue or deliver such certificates unless or until the Person or Persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that such
tax has been paid.
7.6 Notices. Any notice or other communication required or permitted
to be given hereunder shall be in writing and shall be deemed to have been
received (a) upon hand delivery (receipt acknowledged) or delivery by telex
(with correct answer back delivered), telecopy or facsimile (with transmission
confirmation report) at the address or number designated below (if delivered by
8:00 p.m. CST where such notice is to be delivered), or the first Business Day
following such delivery (if delivered after 8:00 p.m. CST where such notice is
to be delivered) or (b) on the second Business Day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications are (i) if to the Company to International Isotopes Inc.,
4137 Commerce Circle, Idaho Falls, Idaho 83401, Telephone: 208-524-5300,
Facsimile: 208-524-1411, Attention: Steve Laflin with copies (which are not
required for a Conversion Notice to be effective)to Locke Liddell & Sapp, LLP,
100 Congress, Suite 300, Austin, Texas 78731, Attention: Curtis R. Ashmos, and
(ii) if to any Holder to the address set forth on Schedule II to the Purchase
Agreement or such other address as may be designated in writing hereafter, in
the same manner, by such Person.
7.7 Allocations of Reserved Amount. The Reserved Amount shall be
allocated pro rata among the Holders based on the number of shares of Preferred
Stock issued to each Holder. Each increase to the Reserved Amount shall be
allocated pro rata among the Holders based on the number of shares of Preferred
Stock held by each Holder at the time of the increase in the Reserved Amount. In
the event a Holder shall sell or otherwise transfer any of such Holder's
Preferred Stock, each transferee shall be allocated a pro rata portion of such
transferor's Reserved Amount. Any portion of the Reserved Amount which remains
allocated to any person or entity which does not hold any Preferred Stock shall
be allocated to the remaining Holders, pro rata, based on the number of shares
of Preferred Stock then held by such Holders.
7.8 Nasdaq Limitation. In no event shall the Company be required to
issue shares of Common Stock upon the conversion of Preferred Stock if such
issuance would violate the rules of Nasdaq.
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ARTICLE VIII
Optional Redemption
8.1 Optional Redemption.
(a) The shares of Preferred Stock are redeemable, in whole or in
part, at the option of the Company during the following time periods, from time
to time, under the following conditions and subject also to the conditions set
forth in Section 8.1(b) (the "Optional Redemption"):
(i) Prior to the first anniversary of the Original Issue Date,
the Company may redeem the shares of Preferred Stock subject to the
other conditions herein, if the average closing price of the Company's
Common Stock over five (5) consecutive Trading Days reaches over 200%
of the Conversion Price as at the Original Issue Date;
(ii) During the period commencing on the first Business Day
immediately after the first anniversary of the Original Issue Date and
ending on the second anniversary of the Original Issue Date, the
Company may redeem the shares of Preferred Stock subject to the other
conditions herein, if the average closing price of the Company's Common
Stock over five (5) consecutive Trading Days reaches over 175% of the
Conversion Price as at the Original Issue Date; and
(iii) After the second anniversary of the Original Issue Date,
the Company may redeem the shares of Preferred Stock subject to the
other conditions herein, if the average closing price of the Company's
Common Stock over five (5) consecutive Trading Days reaches over 150%
of the Conversion Price as at the Original Issue Date.
(b) Subject to the conditions set forth in Section 8.1(a), so long
as (i) any Registration Statement required to be filed and be effective pursuant
to the Registration Rights Agreement is then in effect and has been in effect
and sales of all of the Registrable Securities can be made thereunder for at
least twenty (20) days prior to the Redemption Notice Date (as defined below)
and (ii) the Company has a sufficient number of authorized shares of Common
Stock reserved for issuance upon full conversion of the Preferred Stock, upon
ten (10) Business Days prior written notice to the Holder (a "Redemption
Notice"), the full number of outstanding shares of Preferred Stock may be
redeemed by the Company, in whole at a price equal to the original purchase
price of the Preferred Stock (the "Redemption Price"), together with any
declared but unpaid dividends and all liquidated damages and other amounts due
in respect thereof up to the Redemption Date (as defined below) (subject to the
right of the Holder on the Record Date to receive dividends due on the Dividend
Payment Date).
8.2 Mechanics of Redemption. The Company shall exercise its right to
redeem by delivering its Redemption Notice by facsimile and overnight courier to
each Holder (such date that the notice is given, the "Redemption Notice Date").
Such Redemption Notice shall indicate (A) the Redemption Price, (B) each
Holder's pro rata allocation of such maximum amount, and (C) a confirmation of
the date ("Redemption Date") that the Company shall effect the redemption, which
date shall be not less than thirty (30) Business Days and not more than sixty
(60) calendar days after the Redemption Notice Date. Notwithstanding anything in
this Section 8.2, the Company shall convert any Preferred Stock pursuant to
Article VIII if the Conversion Notice for shares of Preferred Stock submitted
for conversion is (i) delivered before the Redemption Date, (ii) for a
Conversion Price greater than or equal to the Redemption Price (appropriately
adjusted in accordance with the terms hereof) or (iii) in excess of such
Holder's pro rata allocation of the maximum Redemption Price indicated in its
Redemption Notice.
8.3 Payment of Redemption Price. The Company shall pay the
applicable Optional Redemption Price to the Holder of the shares of Preferred
Stock being redeemed in cash on the Redemption Date. If the Company shall fail
to pay the applicable Redemption Price to such Holder on the Redemption Date, in
addition to any remedy such Holder may have under this Certificate of
Designation and the Purchase Agreement, such unpaid amount shall bear interest
at the rate of 2.0% per month until paid in full.
ARTICLE IX
Definitions
9.1 Definitions. For the purposes hereof, the following terms shall
have the following meanings:
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"Act" means the Securities Act of 1993, as amended.
"Affiliate" of any Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person. For the purposes of this definition, "control" when used with
respect to any Person means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Appraiser" means a nationally recognized or major regional investment
banking firm or firm of independent certified public accountants of recognized
standing
"Average Price" on any date means (x) the sum of the Per Share Market
Value for the five (5) Trading Days immediately preceding such date, divided by
(y) five (5).
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in the City of New York are authorized or required by law
to close.
"Change of Control" means the occurrence of any of (i) an acquisition
after the date hereof by an individual or legal entity or "group" (as described
in Section 13(d)(3) of the Exchange Act) of in excess of 40% of the voting
securities of the Issuer, (ii) a replacement of more than one-half of the
members of the Issuer's Board of Directors which is not approved by a majority
of those individuals who are members of the Board of Directors on the date
hereof, or their duly elected successors who are directors immediately prior to
such transaction, in one or a series of related transactions, (iii) the merger
of the Issuer with or into another entity, unless following such transaction,
the Holders of the Issuer's securities continue to hold at least 67% of such
securities following such transaction, (iv) the consolidation or sale of all or
substantially all of the assets of the Issuer in one or a series of related
transactions, or (v) the execution by the Issuer of an agreement to which the
Issuer is a party or by which it is bound, providing for any of the events set
forth above in (i), (ii), (iii) or (iv).
"Closing Date" means the date of the closing of the purchase and sale
of the Preferred Stock.
"Commission" means the United States Securities and Exchange
Commission, or any successor to such agency.
"Common Stock" means the Company's common stock, $.01 par value per
share, of the Company and stock of any other class into which such shares may
hereafter have been reclassified or changed.
"Conversion Date" has the meaning set forth in Section 5.2(a).
"Conversion Price" has the meaning set forth in Section 5.1.
"Converted Preferred Stock" has the meaning set forth in Section
5.2(a).
"DTC" means the Depositary Trust Corporation.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Holder" or other similar terms means the registered holder of any
share of Preferred Stock.
"Junior Securities" means the Common Stock and all other equity
securities of the Company which are junior in rights and liquidation preference
to Preferred Stock, but does not include the Series A Preferred Stock, which
shall be pari passu with the Preferred Stock.
"Liquidation Value" has the meaning set forth in Section 1.1.
"Nasdaq" means the Nasdaq Smallcap Market.
"Notice of Conversion" has the meaning set forth in Section 5.1(b).
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"Original Issue Date" shall mean the date of the first issuance of any
shares of the Preferred Stock regardless of the number of transfers of any
particular shares of Preferred Stock and regardless of the number of
certificates which may be issued to evidence such Preferred Stock.
"Original Purchase Price" shall mean the price per share paid for the
Preferred Stock on the Closing Date.
"Per Share Market Value" means (i) on any particular date the closing
bid price per share of the Common Stock on such date (as reported by Bloomberg
Information Services, Inc., or any successor reporting service) on Nasdaq or, if
the Common Stock is not then quoted on Nasdaq, any Subsequent Market on which
the Common Stock is then listed or if there is no such price on such date, then
the closing bid price on such exchange or quotation system on the date nearest
preceding such date or (ii) if the Common Stock is not listed then on Nasdaq or
any Subsequent Market, the closing bid price for a share of Common Stock in the
over-the-counter market, as reported by the National Quotation Bureau
Incorporated (or similar organization or agency succeeding to its functions of
reporting prices) at the close of business on such date, or (iii) if the Common
Stock is not then publicly traded the fair market value of a share of Common
Stock as determined by an Appraiser selected in good faith by the Holder;
provided, however, that the Company, after receipt of the determination by such
Appraiser, shall have the right to select in good faith an additional Appraiser,
in which case, the fair market value shall be equal to the average of the
determinations by each such Appraiser; and provided, further that all
determinations of the Per Share Market Value shall be appropriately adjusted for
any stock dividends, stock splits or other similar transactions during such
period.
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
"Purchase Agreement" means the Securities Purchase Agreement, dated as
of the Original Issue Date, among the Company and the original Holders of the
Preferred Stock.
"Redemption Date" has the meaning set forth in Section 8.2.
"Redemption Notice" has the meaning set forth in Section 8.1(b).
"Redemption Notice Date" has the meaning set forth in Section 8.2.
"Redemption Price" has the meaning set forth in Section 8.1(b).
"Registrable Securities" has the meaning set forth in the Registration
Rights Agreement.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Original Issue Date, by and among the Company and the
original Holders.
"Registration Statement" has the meaning set forth in the Registration
Rights Agreement.
"Reserved Amount" has the meaning set forth in Section 6.1.
"Series A Preferred Stock" means the Company's Convertible Redeemable
Preferred Stock.
"Stock Option Plan" means any contract, plan or agreement which has
been approved by the Board of Directors of the Issuer, pursuant to which the
Issuer's securities may be issued to any employee, officer, director or
consultant.
"Subsidiary" means, with respect to any Person, any corporation or
other entity of which a majority of the Capital Stock or other ownership
interests having ordinary voting power to elect a majority of the Board of
Directors or other persons performing similar functions are at the time directly
or indirectly owned by such Person.
"Subsequent Market" means the New York Stock Exchange, American Stock
Exchange or Nasdaq National Market.
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"Trading Day" means (a) a day on which the Common Stock is traded on
Nasdaq or, if the Common Stock is not then designated on Nasdaq, on such
Subsequent Market on which the Common Stock is then listed or quoted or (b) if
the Common Stock is not listed on Nasdaq or a Subsequent Market, a day on which
the Common Stock is traded in the over-the-counter Market, as reported by the
OTC Bulletin Board, or (c) if the Stock is not quoted on the OTC Bulletin Board,
a day on which the Common Stock is quoted in the over-the-counter market as
reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding its functions or reporting prices) provided,
however that in any event that the Common Stock is not listed or quoted as set
forth in (a), (b), or (c) hereof, then a Trading Day shall mean any Business
Day.
"Underlying Shares" means the number of shares of Common Stock into
which the shares of Preferred Stock are convertible in accordance with the terms
hereof and the Purchase Agreement.
"Warrant" or "Warrants" has the meaning set forth in the Purchase
Agreement.
ARTICLE X
Miscellaneous
10.1 Modification of Certificate of Designation. This Certificate of
Designation may be modified without prior notice to any Holder upon the written
consent of the Company and the Holders of more than 75% of the shares of
Preferred Stock then outstanding. The Holders of more than 75% of the shares of
Preferred Stock then outstanding may waive compliance by the Company with any
provision of this Certificate of Designation without prior notice to any Holder.
However, without the consent of each Holder affected, an amendment, supplement
or waiver may not (1) reduce the number of shares of Preferred Stock whose
Holders must consent to an amendment, supplement or waiver, or (2) make any
shares of Preferred Stock payable in money or property other than as stated in
the Certificate of Designation.
10.2 Miscellaneous. This Certificate of Designation shall be governed
by and construed and enforced in accordance with the internal laws of the State
of Texas without regard to the principles of conflicts of law thereof. Each
party hereby irrevocably submits to the nonexclusive jurisdiction of the state
and federal courts sitting in Denton, County, Texas, for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein, and hereby irrevocably waives, and agrees not to
assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, that such suit, action or
proceeding is improper. The parties hereto, including all guarantors or
endorsers, hereby waive presentment, demand, notice, protest and all other
demands and notices in connection with the delivery, acceptance, performance and
enforcement of this Certificate of Designation, except as specifically provided
herein, and assent to extensions of the time of payment, or forbearance or other
indulgence without notice. The Holder of Preferred Stock by acceptance of a
share of Preferred Stock agrees to be bound by the provisions of this
Certificate of Designation which are expressly binding on such Holder.
10.3 Preferred Stock Owned by Company Deemed Not Outstanding. In
determining whether the holders of the requisite number of shares of Preferred
Stock have concurred in any direction, consent or waiver under this Certificate
of Designation, shares of Preferred Stock which are owned by the Company or any
other obligor on the Preferred Stock or by any Person directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Company or any other obligor on the Preferred Stock shall be disregarded and
deemed not to be outstanding for the purpose of any such determination; provided
that any shares of Preferred Stock owned by the Purchasers shall be deemed
outstanding for purposes of making such a determination. Shares of Preferred
Stock so owned which have been pledged in good faith may be regarded as
outstanding if the pledgee establishes to the satisfaction of the Company the
pledgee's right so to act with respect to such shares of Preferred Stock and
that the pledgee is not the Company or any other obligor upon the Preferred
Stock or any Person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company or any other obligor on the
Preferred Stock.
10.4 Notice to Holders Prior to Taking Certain Types of Action. In
case:
(a) the Company shall authorize the issuance, at any time from and
after the Original Issue Date, to all holders of any class or series of its
Capital Stock, of rights or warrants to subscribe for or purchase shares of its
capital stock or of any other right;
(b) the Company shall authorize, at any time from and after the
Original Issue Date, the distribution to all holders of any class or series of
its Capital Stock, of evidences of its indebtedness or assets;
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(c) the Company shall declare a dividend (or other distribution) on
its Common Stock or the Company shall declare a special nonrecurring dividend on
or a redemption of its Common Stock;
(d) of any subdivision, combination or reclassification of any class
or series of Capital Stock of the Company at any time from and after the
Original Issue Date or of any consolidation or merger to which the Company is a
party and for which approval by the shareholders of the Company is required, or
of the sale or transfer of all or substantially all of the assets of the Company
or any compulsory share exchange whereby the Common Stock is converted into
other securities, cash or property; or
(e) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; then the Company shall cause to be mailed to the
Holders, at their last addresses as they shall appear upon the registration
books of the Company, at least 10 days prior to the applicable record date
hereinafter specified, a notice stating (i) the date as of which the holders of
record of such class or series of Capital Stock are to be entitled to receive
any such rights, warrants or distribution are to be determined, or (ii) the date
on which any such subdivision, combination, reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation, winding up or other action is
expected to become effective, and the date as of which it is expected that
holders of record of such class or series of Capital Stock record shall be
entitled to exchange their stock for securities or other property, if any,
deliverable upon such subdivision, combination, reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation, winding up or other action.
The failure to give the notice required by this Section 10.4 or any
defect therein shall not affect the legality or validity of any distribution,
right, warrant, subdivision, combination, reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation, winding up or other action, or
the vote upon any of the foregoing.
10.5 Effect of Headings. The Section headings herein are for
convenience only and shall not affect the construction hereof.
10.6 References. References to Sections and Articles are to Sections
and Articles of this Certificate of Designation, unless otherwise expressly
provided.
10.7 Failure or Indulgence Not Waiver. No failure or delay on the
part of the Holder in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privileges. All rights and remedies existing
hereunder are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
10.8 Lost or Stolen Certificates. Upon receipt by the Company of
evidence reasonably satisfactory to the Company (including any bond the
Company's transfer agent requires the Holders to post) of the loss, theft,
destruction or mutilation of any stock certificates representing Preferred
Stock, and, in the case of loss, theft or destruction, of any indemnification
undertaking by the Holder to the Company in customary form and, in the case of
mutilation, upon surrender and cancellation of such Series B Preferred Stock
certificate(s), the Company shall execute and deliver new preferred stock
certificate(s) of like tenor and date; provided, however, the Company shall not
be obligated to re-issue preferred stock certificates if the Holder
contemporaneously requests the Company to convert such Preferred Stock into
Common Stock.
10.9 Remedies Characterized; Other Obligations, Breaches and
Injunctive Relief. The remedies provided in this Certificate of Designation
shall be cumulative and in addition to all other remedies available under this
Certificate of Designation, at law or in equity (including a decree of specific
performance and/or other injunctive relief), no remedy contained herein shall be
deemed a waiver of compliance with the provisions giving rise to such remedy and
nothing herein shall limit a Holder's right to pursue actual damages for any
failure by the Company to comply with the terms of this Certificate of
Designation. The Company covenants to each Holder of Preferred Stock that there
shall be no characterization concerning this instrument other than as expressly
provided herein. The Company further covenants that it will not take any action
which might materially and adversely affect the rights of the Holders of
Preferred Stock. Amounts set forth or provided for herein with respect to
payments, conversion and the like (and the computation thereof) shall be the
amounts to be received by the Holder thereof and shall not, except as expressly
provided herein, be subject to any other obligation of the Company (or the
performance thereof). The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Holders of the
Preferred Stock and that the remedy at law in the event of any such breach may
be inadequate. The Company therefore agrees that, in the event of any such
breach or threatened breach, the Holders of the Preferred Stock shall be
entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.
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10.10 Specific Shall Not Limit General; Construction. No specific
provision contained in this Certificate of Designation shall limit or modify any
more general provision contained herein. This Certificate of Designation shall
be deemed to be jointly drafted by the Company and all Holders and shall not be
construed against any person as the drafter hereof.
10.11 Failure or Indulgence Not Waiver. No failure or delay on the
part of a Holder of Preferred Stock in the exercise of any power, right or
privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege.
10.12 Payment of Tax Upon Issue of Transfer. The issuance of
certificates for shares of the Common Stock upon conversion of the Preferred
Shares shall be made without charge to the Holders thereof for any documentary
stamp or similar taxes that may be payable in respect of the issue or delivery
of such certificate, provided that the Company shall not be required to pay any
tax that may be payable in respect of any transfer involved in the issuance and
delivery of any such certificate upon conversion in a name other than that of
the Holders so converted and the Company shall not be required to issue or
deliver such certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
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EXHIBIT A
NOTICE OF CONVERSION
AT THE ELECTION OF HOLDER
(To be Executed by the Registered Holder in
order to convert shares of Series B
Convertible Redeemable Preferred Stock)
The undersigned hereby elects to convert the number of shares of Series B
Convertible Redeemable Preferred Stock ("Series B Preferred Stock") indicated
below, into shares of common stock, par value $.01 per share (the "Common
Stock"), of International Isotopes Inc. (the "Company") according to the
conditions hereof, as of the date written below. If shares are to be issued in
the name of a person other than undersigned, the undersigned will pay all
transfer taxes payable with respect thereto and is delivering herewith such
certificates and opinions as reasonably requested by the Company in accordance
therewith. No fee will be charged to the Holder for any conversion, except for
such transfer taxes, if any.
Conversion calculations:
_____________________________________________
Date to effect conversion
_____________________________________________
Number of shares of Series B Preferred Stock
to be converted
_____________________________________________
Number of shares of Common Stock to be issued
_____________________________________________
Applicable Conversion Price
_____________________________________________
Signature
_____________________________________________
Name
_____________________________________________
Address
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