<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Bionutrics, Inc.
- --------------------------------------------------------------------------------
(Name of the Issuer)
Common Stock, par value $.01 per share
- --------------------------------------------------------------------------------
(Title of Class of Securities)
090946104
- --------------------------------------------------------------------------------
(CUSIP Number)
George E. Duck, Jr.
2425 E. Camelback Road, Suite 650
Phoenix, Arizona 85016
602/508-0112
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
August 14, 1998
- --------------------------------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1 (b)(3) or (4), check the following box [ ].
Page 1 of 7 Pages
Exhibit Index on Page 7
<PAGE> 2
CUSIP No. 090946104 13D Page 2 of 7 Pages
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------
1 NAMES OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
AC HUMKO CORP. (62-1611351)
- ------------------------------------------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)
(b) X
- ------------------------------------------------------------------------------------------------------------------------
3 SEC USE ONLY
- ------------------------------------------------------------------------------------------------------------------------
4 SOURCE OF FUNDS
WC
- ------------------------------------------------------------------------------------------------------------------------
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS [ ]
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
- ------------------------------------------------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- ------------------------------------------------------------------------------------------------------------------------
NUMBER 7 SOLE VOTING POWER
OF
SHARES 4,000,000
BENEFICIALLY --------------------------
OWNED 8 SHARED VOTING POWER
BY -0-
EACH --------------------------
REPORTING
PERSON 9 SOLE DISPOSITIVE POWER
WITH
4,000,000
--------------------------
10 SHARED DISPOSITIVE POWER
-0-
- ------------------------------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,000,000 shares of Common Stock and 2,000,000 shares of Common Stock underlying currently exercisable warrants
- ------------------------------------------------------------------------------------------------------------------------
12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [ ]
- ------------------------------------------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
17.9%
- ------------------------------------------------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
CO
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
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CUSIP No. 090946104 13D Page 3 of 7 Pages
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------
1 NAMES OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
The Garfield Weston Charitable Foundation
- ------------------------------------------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)
(b) x
- ------------------------------------------------------------------------------------------------------------------------
3 SEC USE ONLY
- ------------------------------------------------------------------------------------------------------------------------
4 SOURCE OF FUNDS
AF
- ------------------------------------------------------------------------------------------------------------------------
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS [ ]
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
- ------------------------------------------------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United Kingdom
- ------------------------------------------------------------------------------------------------------------------------
NUMBER 7 SOLE VOTING POWER
OF
SHARES -0-
BENEFICIALLY ---------------------------
OWNED 8 SHARED VOTING POWER
BY 4,000,000
EACH ---------------------------
REPORTING
PERSON 9 SOLE DISPOSITIVE POWER
WITH
-0-
---------------------------
10 SHARED DISPOSITIVE POWER
4,000,000
- ------------------------------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,000,000 shares of Common Stock and 2,000,000 shares of Common Stock underlying currently exercisable warrants
- ------------------------------------------------------------------------------------------------------------------------
12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [ ]
- ------------------------------------------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
17.9%
- ------------------------------------------------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
OO
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 4
CUSIP No. 090946104 13D Page 4 of 7 Pages
ITEM 1. SECURITY AND ISSUER.
This statement relates to the Common Stock, par value $.01 per share
(the "Common Stock"), of Bionutrics, Inc., a Nevada corporation (the "Issuer").
The address of the principal executive offices of the Issuer is 2425 E.
Camelback Road, Suite 650, Phoenix, Arizona 85016.
ITEM 2. IDENTITY AND BACKGROUND.
(a) This statement is being filed by (i) AC HUMKO CORP., a Delaware
corporation ("AC HUMKO"), with respect to the shares of Common Stock
beneficially owned by it and (ii) The Garfield Weston Charitable Foundation
(the "Foundation") with respect to the shares of Common Stock beneficially
owned by AC HUMKO. The foregoing persons are sometimes referred to herein as
the "Filing Persons." Any disclosure herein with respect to persons other than
the Filing Persons are made on information and belief after making inquiry to
the appropriate party.
AC HUMKO, a Delaware corporation, is a wholly-owned subsidiary in the
Foundation's ownership group. The Foundation is an English charitable trust
organized under the laws of the United Kingdom.
(b) The business address of AC HUMKO is 7171 Goodlett Farms Parkway,
Memphis, Tennessee 38101. The business address of the Foundation is Bowater
House - 68 Knightsbridge, London, SW1X 7LQ, England.
(c) The principal business of both AC HUMKO and the Foundation is food
processing and commodities.
(d) During the last five years, none of the persons referred to in
paragraph (a) has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors).
(e) During the last five years, none of the persons referred to in
paragraph (a) has been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction as a result of which he was or is
subject to a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities
laws or finding any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
On August 14, 1998, AC HUMKO entered into a Stock Purchase Agreement
(the "Agreement") dated as of August 14, 1998 with the Issuer pursuant to which
AC HUMKO acquired (i) 2,000,000 shares of Common Stock at $2.00 per share (the
"Shares") and (ii) warrants (the "Warrants") exercisable for 2,000,000 shares
of Common Stock at $2.00 per share, subject to adjustment, for an aggregate
purchase price of $4,000,000. The transaction was completed on August 14,
1998. AC HUMKO used funds supplied from its working capital.
ITEM 4. PURPOSE OF TRANSACTION.
The Filing Persons entered into the transaction for investment
purposes. The Filing Persons currently do not intend to acquire additional
shares materially above 17.9% of the Issuer. However, the Filing Persons
intend to review their investment in the Issuer on a continuing basis and,
depending upon the price of the Common Stock, subsequent developments affecting
the Issuer, the Issuer's business and prospects, general stock market and
economic conditions, tax considerations and other factors deemed relevant, may
decide to increase or decrease their investment in the Common Stock of the
Issuer.
On August 14, 1998, the Issuer, including certain of its subsidiaries,
and AC HUMKO entered into a technology transfer agreement and a supply
agreement for the purpose of transferring certain intellectual property assets
to AC HUMKO. In addition, the Issuer and AC HUMKO are in discussions regarding
the purchase and sale of certain related operating assets of the Issuer and its
subsidiaries to AC HUMKO. There can be no assurance, however, that the Filing
Persons and the Issuer will complete the contemplated asset sale transactions.
<PAGE> 5
CUSIP No. 090946104 13D Page 5 of 7 Pages
Pursuant to the Agreement, the Issuer and certain members of its
management agreed to nominate and vote for AC HUMKO's designee to the Issuer's
board of directors.
Except as set forth above in this Item 4, none of the Filing Persons
nor, to the best of each Filing Person's knowledge, none of the executive
officers or directors of such Filing Persons, as applicable, has any plans or
proposals that relate to or would result in any of the actions specified in
clauses (a) through (j) of Item 4 to Schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a) In addition to the 2,000,000 shares of Common Stock of the Issuer
purchased pursuant to the Agreement, the Filing Persons beneficially own the
right, in the form of currently exercisable warrants, to acquire 2,000,000
shares of Common Stock of the Issuer, which in the aggregate constitute 17.9%
of the Common Stock outstanding based on the number of securities outstanding
(20,329,381), which number is comprised of the Shares and the total number of
shares outstanding as contained in the Issuer's most recent filing on Form 10-Q
(filed June 15, 1998), and including as outstanding the 2,000,000 shares
issuable to AC HUMKO under the Warrants. Such securities were acquired
pursuant to the transactions described in Item 3 hereof.
(b) AC HUMKO has sole voting power and power to dispose of the shares
of Common Stock beneficially owned by the Filing Persons. The Foundation, as
the ultimate parent of AC HUMKO, has shared voting and dispositive power with
respect to such shares.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER
See Item 4 hereof.
Pursuant to the Agreement, the Issuer granted certain registration
rights to AC HUMKO with respect to the Shares and with respect to shares of
Common Stock acquired upon the exercise of the Warrants. These rights include
certain demand registration rights in addition to "piggy-back" registration
rights, each as set forth in the Agreement.
Pursuant to the Agreement, the Issuer granted certain rights of first
refusal to AC HUMKO to purchase additional securities of the Issuer, up to the
amount of AC HUMKO's pro rata share, and to purchase material assets or
subsidiaries of the Issuer that the Issuer may propose to sell or otherwise
transfer, each as described in the Agreement.
Pursuant to the Agreement, the Issuer and certain members of its
management agreed to nominate and vote for AC HUMKO's designee to the Issuer's
board of directors.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
1. Stock Purchase Agreement (Agreement, as defined above), dated as
of August 14, 1998, including Exhibits A, D and E thereto.
2. Joint Filing Agreement, dated as of August 21, 1998, among AC
HUMKO and the Foundation.
<PAGE> 6
CUSIP No. 090946104 13D Page 6 of 7 Pages
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
AC HUMKO CORP.
August 21, 1998 By: /s/ Wayne Briesemeister
- ------------------- ----------------------------------------
Date Wayne Briesemeister,
Vice President
THE GARFIELD WESTON CHARITABLE FOUNDATION
By: /s/ Garfield Howard Weston
---------------------------------------
Garfield Howard Weston,
Director
The original statement shall be signed by each person on whose behalf
the statement is filed or his authorized representative. If the statement is
signed on behalf of a person by his authorized representative (other than an
executive officer or general partner of this filing person), evidence of the
representative's authority to sign on behalf of such person shall be filed with
the statement, provided, however, that a power of attorney for this purpose
which is already on file with the Commission may be incorporated by reference.
The name and any title of each person who signs the statement shall be typed or
printed beneath his signature.
ATTENTION: INTENTIONAL MISSTATEMENTS OR OMISSIONS OF FACT CONSTITUTE
FEDERAL CRIMINAL VIOLATIONS (SEE 18 U.S.C. 1001)
<PAGE> 7
CUSIP No. 090946104 13D Page 7 of 7 Pages
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<S> <C>
1. Stock Purchase Agreement (Agreement, as defined above), dated as
of August 14, 1998, including Exhibits A, D and E thereto.
2. Joint Filing Agreement, dated as of August 21, 1998, among AC
HUMKO and the Foundation.
</TABLE>
<PAGE> 1
EXHIBIT 1
STOCK PURCHASE AGREEMENT
Between
BIONUTRICS, INC.,
a Nevada corporation
And
AC HUMKO CORP.
a Delaware corporation
As of August 14, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Authorization, Purchase and Sale of Shares; Purchase Price; Warrants . . . . . . . . . . . . . . . 1
1.1 Authorization of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Sale and Purchase of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Closing; Payment; Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 Closing Date and Place of Closing . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Payment and Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Representations of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.1 Organization and Corporate Power; Compliance With Laws . . . . . . . . . . . . . 2
3.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.4 Existing Stockholder List and Agreements . . . . . . . . . . . . . . . . . . . . 3
3.5 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.6 Financial Statements, Accounts Receivable and Inventories . . . . . . . . . . . . 3
3.7 Absence of Undisclosed Liabilities; Disclosure . . . . . . . . . . . . . . . . . 4
3.8 Absence of Certain Developments . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.9 Title to Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.10 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.11 Contracts and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.12 Intellectual Property Rights; Employee Restrictions . . . . . . . . . . . . . . . 5
3.13 Effect of Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.14 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.15 Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.16 Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.17 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.18 Environment Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.19 Information Supplied to Purchasers . . . . . . . . . . . . . . . . . . . . . . . 8
3.20 Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.21 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.22 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.23 Affiliated Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.24 Customers and Distributors . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
Section 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Representations and Warranties of Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.1 Experience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.2 Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 Access to Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.4 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.5 Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.6 Effect of Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Conditions to Closing of Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.1 Accuracy of Representations and Warranties . . . . . . . . . . . . . . . . . . . 11
5.2 Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.3 Opinion of Company Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.4 Legal Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.5 Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.6 Technology and Exclusive Supply Agreements . . . . . . . . . . . . . . . . . . . 11
5.7 Warrant Purchase Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.8 Proceedings and Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.9 Approvals and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.10 Proprietary Information and Inventions Agreements . . . . . . . . . . . . . . . . 12
5.11 Qualifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.12 Certificates and Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.13 Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.14 Director . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Conditions to Closing of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.1 Accuracy of Representations and Warranties . . . . . . . . . . . . . . . . . . . 13
6.2 Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.3 Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.4 Technology Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.5 Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Covenants of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.1 Basic Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.2 Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.3 Prompt Payment of Taxes, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.4 Maintenance of Properties and Leases . . . . . . . . . . . . . . . . . . . . . . 15
7.5 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.6 Accounts and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.7 Compliance With Requirements of Governmental Authorities . . . . . . . . . . . . 15
7.8 Maintenance of Corporate Existence, etc. . . . . . . . . . . . . . . . . . . . . 15
7.9 Availability of Common Stock for Warrant Exercise . . . . . . . . . . . . . . . . 16
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
7.10 Proprietary Information and Inventions Agreements . . . . . . . . . . . . . . . . 16
7.11 Legal Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.12 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.13 Compliance by Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.14 Indebtedness and Other Obligations . . . . . . . . . . . . . . . . . . . . . . . 16
7.15 Conduct of Business of the Company . . . . . . . . . . . . . . . . . . . . . . . 16
7.16 Valid Issuance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.17 Government Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.18 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.20 Notices of Certain Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.21 Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.22 Listing of Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.23 Right of First Refusal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.24 Purchaser's Director Nominee . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Restrictions on Transferability of Securities; Compliance With Securities Act . . . . . . . . . . 23
8.1 Restrictions on Transferability . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.2 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.3 Restrictive Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.4 Notice of Proposed Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.5 Information by Holder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.6 Rule 144 Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.7 "Market Stand-off" Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Registration under Securities Act, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.1 Registration of Registrable Securities on Request . . . . . . . . . . . . . . . . 25
9.2 Incidental Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.3 Registration Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.4 Underwritten Offerings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.5 Preparation; Reasonable Investigation . . . . . . . . . . . . . . . . . . . . . . 33
9.6 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.7 Rule 144 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.1 Obligation of the Company to Indemnify . . . . . . . . . . . . . . . . . . . . . 36
10.2 Obligation of Purchaser to Indemnify . . . . . . . . . . . . . . . . . . . . . . 37
10.3 Notice and Opportunity to Defend . . . . . . . . . . . . . . . . . . . . . . . . 37
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C>
Section 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11.1 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11.2 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11.3 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11.4 Entire Agreement; Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11.5 Notices, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11.6 Delays or Omissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11.7 Separability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11.8 No Broker . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11.9 Titles and Subtitles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>
Disclosure Schedule referenced in Section 3
Exhibits
A Warrant Purchase Agreements (referenced in section 1.4)
B Corporate Capitalization (referenced in section 3.4)
C Opinion of Counsel to Bionutrics, Inc. (referenced in section 5.3)
D Technology Agreement (referenced in section 5.6)
E Exclusive Supply Agreement (referenced in section 5.6)
F Form of Proprietary Information and Invention Agreement (referenced in
section 7.10)
G Agreement for Purchase and Sale of Assets (referenced in section 7.18)
iv
<PAGE> 6
Stock Purchase Agreement dated as of August 14, 1998 between
Bionutrics, Inc. (the "Company"), a Nevada corporation, having a
principal place of business at 2425 East Camelback Road, Suite 650,
Phoenix, Arizona 85016, and AC Humko Corp., a Delaware corporation,
having a principal place of business at 7171 Goodlett Farms Parkway,
Memphis, Tennessee 38101.
Whereas the Company wishes to issue and sell, and Purchaser wishes to
purchase, certain securities of the Company;
Now therefore the Company and Purchaser agree as follows:
Section 1
Authorization, Purchase and Sale of Shares; Purchase Price; Warrants
1.1 Authorization of Shares. The Company has authorized the sale
and issuance of two million shares (the "Shares") of its Common Stock (as
defined in section 3.3) and reserved an additional two million shares of Common
Stock for issuance upon exercise of the Warrant Agreement (as defined in
section 1.4)).
1.2 Sale and Purchase of Shares. At the Closing (as defined in
section 2.1), the Company shall, in reliance upon the representations,
warranties and agreements contained herein, and subject to this agreement,
issue and sell to Purchaser and Purchaser shall purchase from the Company the
Shares.
1.3 Purchase Price. The purchase price for the Shares is $4
million (the "Purchase Price").
1.4 Warrants. On the Closing Date (as defined in section 2.1),
the Company shall grant to Purchaser a warrant to purchase in the aggregate two
million shares of Common Stock for a purchase price of $4 million pursuant to
the form of warrant purchase agreement (the "Warrant Agreement") attached
hereto as exhibit A.
Section 2
Closing; Payment; Delivery
2.1 Closing Date and Place of Closing. The closing of the
purchase and sale of the Shares hereunder (the "Closing") shall be held
immediately following the execution and delivery of this agreement (the
"Closing Date"). The place of the Closing (including the place of delivery to
Purchaser by the Company of the certificates evidencing the Shares and the
place of payment to the Company by Purchaser of the Purchase Price) shall be at
the offices of Friedman Siegelbaum LLP, 399 Park Avenue, 20th Floor, New York,
New York 10022, or such other place including the offices of counsel to
Purchaser as Purchaser shall designate by notice to the Company at least five
business days prior to the Closing Date.
2.2 Payment and Delivery. At the Closing Purchaser shall pay the
Purchase Price to the Company by wire transfer, or such other form of payment
as shall be mutually agreed upon by the parties.
Section 3
Representations of the Company
Subject to the Disclosure Schedule attached hereto, the Company makes
the following representations and warranties to Purchaser:
3.1 Organization and Corporate Power; Compliance With Laws. The
Company and each of its subsidiaries are corporations duly organized, validly
existing and in good standing under the laws of their states of incorporation
as set forth in the Disclosure Schedule and are qualified to do business as
foreign corporations in each jurisdiction listed on the Disclosure Schedule,
which are all the jurisdictions in which such qualification is required.
<PAGE> 7
The Company and each of its subsidiaries have all required corporate power and
authority to own their property, to carry on their business as currently
conducted and in the case of the Company to enter into and perform this
agreement and the other agreements to be executed by the Company in connection
with this agreement (collectively, the "Investment Documents"), and generally
to carry out the transactions contemplated hereby. A copy of the certificate
of incorporation and by-laws of the Company, as amended to date, have been
furnished to Purchaser by the Company. Neither the Company nor any of its
subsidiaries is in violation of any term of its certificate of incorporation or
by-laws, or in violation of any term of any agreement (written or oral),
instrument, judgment, decree, order, authorization, law, statute, rule or
government regulation applicable to it or to which it is a party or by which it
is bound.
3.2 Authorization. The Investment Documents are valid and binding
obligations of the Company, enforceable in accordance with their terms, subject
to applicable bankruptcy, insolvency, reorganization, moratorium and other laws
applicable to creditors' rights and remedies and to the exercise of judicial
discretion in accordance with general principles of equity. The execution,
delivery and performance of the Investment Documents have been duly authorized
by all necessary corporate or other action of the Company. The issuance, sale
and delivery of the Shares in accordance with this agreement have been duly
authorized and issued or reserved for issuance as the case may be by all
necessary corporate action on the part of the Company. The Shares when issued,
sold and delivered against payment therefor in accordance with this agreement
will be duly and validly issued, fully paid and non-assessable. No consent,
approval or authorization of, or designation, declaration or filing with, any
governmental authority or any other person or entity is required of the Company
in connection with the execution and delivery of the Investment Documents and
the issuance and delivery of the Shares in accordance with this Agreement or
the consummation of any other transaction contemplated hereby or by the other
Investment Documents.
3.3 Capitalization. The authorized capital stock of the Company
consists of 45 million shares of common stock, $.001 par value ("Common
Stock"), of which 18,319,381 shares are issued and outstanding, and five
million shares of Preferred Stock, none of which is issued and outstanding.
All the issued and outstanding shares of Common Stock have been, and upon
issuance at the Closing the Shares will be, duly authorized and validly issued,
fully paid and nonassessable and issued in compliance with applicable federal
and state securities laws. Except as contemplated by the Investment Documents
(a) no subscription, warrant, option, convertible security or other right
(contingent or otherwise) to purchase or acquire any shares of capital stock of
the Company is authorized or outstanding, (b) there is no commitment or offer
of the Company to issue any subscription, warrant, option, convertible security
or other such right or to issue or distribute to holders of any shares of its
capital stock any evidence of indebtedness or assets of the Company, (c) the
Company has no obligation (contingent or otherwise) to purchase, redeem or
otherwise acquire any shares of its capital stock or any interest therein or to
pay any dividend or make any other distribution in respect thereof and (d)
there are no restrictions on the transfer of the Company's capital stock other
than those arising from securities laws. No person or entity is entitled to
(e) any preemptive or similar right with respect to the issuance of any capital
stock of the Company or (f) any rights with respect to the registration of any
capital stock of the Company under the Securities Act of 1933, as amended.
3.4 Existing Stockholder List and Agreements. Attached as exhibit
B is the capitalization table of the Company, prepared both on an outstanding
and fully diluted basis, showing the number of shares of Common Stock or other
securities, including options and warrants, of the Company held by any person
or entity as of the date of this agreement. There are no agreements, written
or oral, between the Company and any holder of its capital stock, or to the
knowledge of the Company between or among any holders of its capital stock,
relating to the acquisition, disposition or voting of the capital stock of the
Company.
1
<PAGE> 8
3.5 Subsidiaries. The Company's subsidiaries are set forth on the
Disclosure Schedule and are wholly owned either directly or indirectly by the
Company. Neither the Company nor its key executives owns or controls, directly
or indirectly, any other corporation, association or business entity.
3.6 Financial Statements, Accounts Receivable and Inventories.
(a) Included in the Disclosure Schedules are (i) the
consolidated, audited balance sheet of the Company (the "Audited Balance
Sheet") as of October 31, 1997, (the "Audited Balance Sheet Date") and the
consolidated related statements of operations, statements of stockholders'
equity and statements of cash flows for the 12-month period then ended and (ii)
an unaudited balance sheet of the Company (the "Interim Balance Sheet") as of
June 30, 1998, (the "Interim Balance Sheet Date") and the related statement of
operations for the eight-month period then ended (collectively, the "Financial
Statements"). The Financial Statements (including the footnotes thereto) were
prepared in accordance with generally accepted accounting principles
consistently applied during the period covered thereby, are in accordance with
the books and records of the Company and fairly present the financial position
of the Company on the dates of such statements and the results of its
operations for the periods covered thereby.
(b) All accounts receivable reflected on the Interim Balance
Sheet of the Company have arisen from bona fide transactions in the ordinary
course of business of the Company. Except as reserved for on the Interim
Balance Sheet, all accounts receivable reflected on the Interim Balance Sheet
are collectible in the ordinary course of business in the recorded amounts
thereof.
(c) The inventories of the Company as reflected on the
Interim Balance Sheet consist only of material in merchantable condition and
saleable or usable in the ordinary course of business.
3.7 Absence of Undisclosed Liabilities; Disclosure. Except as
disclosed on the Interim Balance Sheet, the Company does not have any
liabilities that would be required to be reflected on a balance sheet prepared
in accordance with generally accepted accounting principles, other than those
incurred since the Interim Balance Sheet Date in the ordinary course of
business consistently with past practice. The Company's filings made pursuant
to the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as of
their respective dates, did not contain any untrue statement of a material fact
and did not omit to state any material fact necessary in order to make the
statements contained therein not misleading in the light of the circumstances
under which they were made.
3.8 Absence of Certain Developments. Since the Interim Balance
Sheet Date there has been (a) no material adverse effect on the business,
operations, assets or financial condition of the Company (a "Material Adverse
Effect"), (b) no declaration, setting aside or payment of any dividend or other
distribution with respect to, or any direct or indirect redemption or
acquisition of, any of the capital stock of the Company, (c) no waiver of any
valuable right of the Company or cancellation of any debt or claim held by the
Company, (d) no loan by the Company to any officer, director, employee or
stockholder of the Company or any of its subsidiaries, or any agreement or
commitment therefor, (e) no increase, direct or indirect, in the compensation
paid or payable to an officer, director, employee or agent of the Company, (f)
no material loss, destruction or damage to any property of the Company insured
or not, (g) no labor dispute involving the Company and no material change in
the key management of the Company or the terms and conditions of their
employment, (h) no acquisition or disposition of material assets of (or any
contract or arrangement therefor), or any other material transaction by, the
Company except in the ordinary course of business and (i) no material
modification or amendment or cancellation of any material contract or
agreement.
2
<PAGE> 9
3.9 Title to Properties. The Company and each of its subsidiaries
have good and marketable title to, or a valid leasehold interest in, all its
properties and assets, free and clear of all liens or encumbrances, except as
disclosed in the Interim Balance Sheet. All machinery and equipment included
in such assets necessary to the business of the Company are in good condition
and repair, and all leases of real or personal property to which the Company is
a party are fully effective and afford the Company peaceful and undisturbed
possession of the leasehold interest. Neither the Company nor any of its
subsidiaries is in violation of any zoning, building or safety ordinance,
regulation or requirement or other law or regulation applicable to the
operation of its owned properties, if any. Neither the Company nor any of its
subsidiaries, in its capacity as lessee, is in violation of any zoning,
building or safety ordinance, regulation or requirement or other law or
regulation applicable to the operation of its leased properties. Neither the
Company nor any of its subsidiaries has received any notice of any such
violation with which it has not complied.
3.10 Tax Matters. The Company has filed all foreign, federal,
state and local income, excise or franchise tax returns, real estate and
personal property tax returns, sales and use tax returns and other tax returns
required to be filed by it and has paid all taxes shown thereon to be due or
assessed to date. All taxes and other assessments and levies that the Company
is required to withhold or collect have been withheld and collected and have
been paid over to the proper governmental authorities or been set aside or
reserved and will be paid over when due. With respect to the income tax
returns of the Company, the Company has not received written notice of any
audit or of any proposed deficiencies from any taxing authority, and no
controversy with respect to taxes of any type is pending or threatened. No
waivers of applicable statutes of limitations with respect to any taxes owed by
the Company for any year are in effect.
3.11 Contracts and Commitments. Included as part of the Disclosure
Schedule is a list of each agreement to which the Company or any of its
subsidiaries is a party or by which it or any of its properties is bound
material to the conduct and operations of its business. All such agreements
are valid and binding on the Company or such subsidiary and all other parties
thereto and are in full force and effect. Neither the Company nor any of its
subsidiaries is a party to any contract, obligation or commitment, nor does it
have any employment contract; stock redemption or purchase agreement or
financing agreement or license, distributor or sales representative agreement
or agreement with an officer, director, employee or stockholder of the Company
or person or organization related to or affiliated with any officer, director
or stockholder of the Company or pension, profit-sharing, retirement or stock
option plan. No key employee of the Company or any of its subsidiaries who has
been employed by the Company or any of its subsidiaries for the past 12 months
is a party to any outstanding contract, obligation or commitment with any prior
employer. Neither the Company including its subsidiaries nor any of its
employees, officers or directors is a party to any oral or written contract or
agreement prohibiting them from freely competing or engaging in the business of
the Company or such subsidiary. Neither the Company nor any of its
subsidiaries is in material default under any contract, obligation or
commitment and there is no state of facts that upon notice or lapse of time or
both would constitute such a default.
3.12 Intellectual Property Rights; Employee Restrictions.
(a) All patents (including but not limited to all continuation or
divisional applications, reissued and reexamined patents, any foreign
counterpart patents or foreign counterpart patent applications), trade secrets
(including but not limited to customer lists, invention disclosures,
experimental data, manufacturing processes, hardware designs, programming
processes, software and other confidential information), copyrights, copyright
applications, registered and unregistered trademarks, registered and
unregistered service marks, and tradenames owned by, under an obligation of
assignment to, or licensed to, the Company or its subsidiaries and used in the
conduct of the business of the Company or its subsidiaries (the "Intellectual
Property Rights") are set forth on the Disclosure Schedule. All registrations,
issued letters patent, and certificates for such Intellectual Property Rights
are in good standing, duly maintained, and in full force and effect.
3
<PAGE> 10
(b) All agreements between the Company and its subsidiaries, on
the one hand, and any third party on the other hand, granting the Company and
its subsidiaries or such third party, the right to use or practice any rights
under the Intellectual Property Rights, including without limitation patent or
trade secret licenses under third party owned patents, copyrights, or trade
secrets, (collectively referred to as "Third Party License Agreements") are set
forth on the Disclosure Schedule.
(c) The Company or its subsidiaries have exclusive ownership of,
or the exclusive license to use, free and clear of claims and rights of all
third parties, the Intellectual Property Rights. No present or former
director, consultant or employee of the Company or its subsidiaries has any
rights in or to any of the Intellectual Property Rights and there are no
pending or threatened Claims (as defined in section 3.12(d)) relating to the
scope, ownership or use of the Intellectual Property Rights. Nor do any of
the employees of the Company or the subsidiaries have any agreement or
arrangement with a former employer relating to patents, confidential
information, or trade secrets, and no activity of any employee on behalf of
the Company or any of its subsidiaries violates any agreement or arrangement
that such employee has with a former employer. The Company or its subsidiaries
own free and clear of any and all encumbrances, or are otherwise licensed to
use or have the right to use, the Intellectual Property Rights used in or
necessary for the conduct of its business, and can freely assign, license,
convey, or transfer such Intellectual Property Rights without alteration or
impairment of such rights.
(d) No claims, demands, suits and causes of action (the "Claims")
have been asserted and, to the Company's and its subsidiaries' knowledge, no
Claims have been threatened or are contemplated by any third party with respect
to the use of any Intellectual Property Right or challenging the validity or
enforceability of any Third Party License Agreement granting rights to the
Company or its subsidiaries to the Intellectual Property Rights, and to the
Company's knowledge, there exists no valid basis for any such Claim. The use
of such Intellectual Property Right and the conduct of the business of the
Company and its subsidiaries do not infringe, misappropriate, or otherwise
violate the patent, trade secret, trademark, or copyright of any third party,
and to the Company 's knowledge, no third party is infringing upon,
misappropriating or otherwise violating the Intellectual Property Rights of the
Company or any of its subsidiaries.
3.13 Effect of Transactions. The execution, delivery and
performance by the Company or any subsidiaries of the Investment Documents does
not and will not conflict with or result in any default or the acceleration of
any obligations under any contract to which the Company or any of its
subsidiaries is a party or to which the Company or any of its subsidiaries or
its properties or business is bound, or any charter provision, by-law or
corporate restriction of the Company or any of its subsidiaries or the creation
of any lien or encumbrance of any nature upon any of the properties or assets
of the Company or any of its subsidiaries, except as contemplated by the
Investment Documents, or violate any agreement, judgment, decree, order, law,
statute, rule or regulation of any federal, state or local government or agency
applicable to the Company or any of its subsidiaries.
3.14 Litigation. There is no litigation or governmental proceeding
or investigation pending or threatened (a) against the Company or any of its
subsidiaries affecting any of its properties or assets, or (b) that may
adversely affect the business, properties, assets or financial condition of the
Company or (c) that may challenge the validity or performance by the Company of
the Investment Documents.
3.15 Securities Laws. The offer, issuance and sale of the Shares
in accordance with this Agreement will be in compliance with applicable federal
and state securities laws.
4
<PAGE> 11
3.16 Business. The Company and each of its subsidiaries have all
necessary franchises, permits, licenses and other rights and privileges
necessary to permit it to own its property and to conduct its business as
presently conducted, all of which are listed on the Disclosure Schedule.
3.17 Books and Records. The stock ledger of the Company is
complete and reflects all issuances, transfers, repurchases and cancellations
of shares of capital stock of the Company.
3.18 Environment Compliance.
(a) The Company and each of its subsidiaries are currently in
compliance with all Environmental Laws (as defined below) applicable to its
business or the Facilities (as defined below) and has obtained all permits,
consents, approvals, authorizations, registrations, certificates and licenses
("Environmental Permits") required under or issued pursuant to Environmental
Laws necessary in order to conduct the Company's and its subsidiaries' business
as now conducted or to effect the transactions contemplated by the Investment
Documents. All such Environmental Permits are in full force and effect, the
Company and each of its subsidiaries are in material compliance therewith and
neither the Company nor any subsidiary has received any notice of pending or
threatened proceedings to revoke, suspend or deny the renewal of any
Environmental Permit.
(b) No lien has been imposed on or asserted against the
Facilities or other property of the Company or any subsidiary under any
Environmental Laws by any Governmental Entity (as defined below) arising from
or in connection with the presence, use, Release (as defined below), removal,
abatement or remediation of Hazardous Materials (as defined below).
(c) There is not now nor to the Company's knowledge has there
ever been located at any of the Facilities any underground storage tanks,
subsurface disposal units, surface impoundments, lagoons, landfills, disposal
sites, areas or vessels used or intended for the treatment, storage or disposal
of Hazardous Materials.
(d) As used in this agreement the following terms shall have
the following meanings:
"Environment Laws" means all federal, regional,
state, county or local laws, statutes or ordinances, decisional law, rules,
regulations, codes, orders, decrees, notices, directives, guidance and
judgments relating to public health or safety, pollution, damage to or
protection of the environment or the use, manufacture, processing,
distribution, treatment, storage, generation, disposal, transport or handling
of Hazardous Materials, including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Section
9601, et seq. ("CERCLA"), the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901, et seq., the Clean Water Act, 33 U.S.C. Section 1251, et seq.,
the Clean Air Act, 42 U.S.C. Section 7401, et seq., the Occupational Health
and Safety Act, 29 U.S.C. 653, 655 and 657, the Safe Drinking Water Act, U.S.C.
300F, et seq. and the laws and regulations administered by the Louisiana
Department of Environmental Quality and the Illinois EPA relating to the
business of Nutrition Technology Corporation and InCon Technologies, Inc.
"Facilities" means all plants, offices, manufacturing
or other facilities owned, operated, leased, managed, used, controlled or
occupied by the Company or any subsidiary in connection with its business.
"Governmental Entity" means each federal, state,
regional, county or local governmental agency, department, commission, board,
bureau, instrumentality and political subdivision thereof authorized or having
jurisdiction to enforce Environmental Laws.
5
<PAGE> 12
"Hazardous Materials" means any material or substance
defined as or included in the definition of pollutants, toxic substances, toxic
pollutants, hazardous materials, hazardous constituents, hazardous wastes,
hazardous substances or terms of similar import defined in or otherwise
regulated under any Environmental Law including asbestos and liquid petroleum
products.
"Release" means an intentional or unintentional
release, discharge, spill, leaking, pumping, pouring, emitting, emptying,
injection, disposal or dumping into the environment.
3.19 Information Supplied to Purchasers. Neither this agreement,
the Disclosure Schedule, exhibits attached hereto, the other Investment
Documents nor any other document or certificate to be furnished to Purchaser at
the Closing contains any untrue statement of a material fact or in the case of
the Disclosure Statement omits to state a material fact necessary in order to
make the statements contained herein relating to Section 3 or therein not
misleading.
3.20 Brokerage. There are no claims for and no person is entitled
to any brokerage commission, finder's fee or similar compensation in connection
with the transactions contemplated by this agreement based on any arrangement
or agreement made by or on behalf of the Company or any subsidiary or by which
it is bound.
3.21 Employee Benefit Plans. The Company is and has been in
material compliance with the provisions of all laws or rules or regulations
applicable to any employee benefit plan maintained or contributed to by the
Company for the benefit of its employees and there are no claims pending or
threatened with respect to any such employee benefit plan. The Company does
not maintain or contribute to, and has never maintained or contributed to, any
qualified retirement plan subject to the minimum funding requirements of
Section 412 of the Internal Revenue Code of 1986, as amended. There are no
unfunded obligations of the Company under any retirement, pension,
profit-sharing or deferred compensation plan or program. The Company is not
required to make any payment or contribution to any employee benefit plan
pursuant to any collective bargaining agreement. The Company has never
maintained or contributed to any employee benefit plan providing or promising
any health or other non-pension benefits to terminated employees. For the
purpose of this section, the term Company includes all entities that have
controlled, have been under the control of, or have been under common control
with, the Company.
3.22 Employees. Neither the Company nor any of its subsidiaries
has received notice that any director or key employee has any plan to terminate
his or her relationship with the Company or subsidiary. None of the employees
of the Company including its subsidiaries is represented by any labor union or
covered by any collective bargaining agreement, the Company is not aware of any
effort to certify a labor union or bargaining unit or similar organization
effort with respect to its employees and there is no labor strike or other
labor trouble pending or threatened with respect to the Company or any
subsidiary.
3.23 Affiliated Transactions. All transactions between the
Company, including it subsidiaries, and any officer, employee or stockholder of
the Company or subsidiary or persons controlled by or affiliated with such
officer, employee or stockholder, have been conducted on an arms-length basis.
Included in the Disclosure Schedule are all transactions with any such person
entered into during 1997 and 1998, whether or not in effect, and such
transactions currently in effect.
3.24 Customers and Distributors. Set forth on the Disclosure
Schedule are (a) the representatives or distributors of the services and
products of the Company including its subsidiaries (whether pursuant to a
commission, royalty or other arrangement) and (b) the ten customers who account
for the largest sales of the Company including its subsidiaries, or if larger
the number that accounts for 75% of such sales, for the 12-month period ending
June 30, 1998
6
<PAGE> 13
(collectively, the "Customers and Distributors"). No Customer or Distributor
has any plan to terminate its relationship with, or to materially reduce the
volume of business conducted with, the Company or any subsidiary.
Section 4
Representations and Warranties of Purchaser
Purchaser represents and warrants to the Company as follows:
4.1 Experience. Purchaser has such knowledge and experience that
it is capable of evaluating the risks and merits of an investment in the
Company.
4.2 Investment. Purchaser is acquiring the Shares for investment
for its own account and not with the view to, or for resale in connection with,
any distribution thereof. The parties stipulate that the Shares, and the
shares of Common Stock issuable under the Warrant Agreements have not been
registered under the Securities Act by reason of an exemption from the
registration provisions of the Securities Act that depends upon, among other
things, the bona fide nature of its investment intent as expressed herein.
4.3 Access to Data. Purchaser has had an opportunity to discuss
the Company's including each of its subsidiaries, business, management and
financial affairs with its management and has had the opportunity to review the
Company's and each subsidiaries' facilities.
4.4 Authority. Purchaser has full power and authority to execute,
deliver and perform this agreement in accordance with its terms. Purchaser has
been duly organized as a corporation under the laws of Delaware and is legally
existing and in good standing in such jurisdiction.
4.5 Enforceability. This agreement has been duly and validly
executed and delivered by Purchaser and constitutes the valid and binding
obligation of Purchaser enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
other laws applicable to creditors' rights and remedies and to the exercise of
judicial discretion in accordance with general principles of equity.
4.6 Effect of Transactions. The execution, delivery and
performance by Purchaser of the Investment Documents does not and will not
conflict with or result in any default or the acceleration of any obligations
under any material contract, obligation or commitment of Purchaser or the
creation of any lien, charge or encumbrance of any nature upon any of the
properties or assets of Purchaser, or violate any instrument, agreement,
judgment, decree, order, statute, rule or regulation of any federal, state or
local government or agency applicable to Purchaser.
Section 5
Conditions to Closing of Purchaser
The obligation of Purchaser to purchase the Shares at the Closing is
subject to the fulfillment to its satisfaction on or prior to the Closing Date
of each of the following conditions:
5.1 Accuracy of Representations and Warranties. The
representations and warranties made by the Company in section 3 shall be
correct when made, and shall be correct on the Closing Date with the same force
and effect as if made on and as of the Closing Date.
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5.2 Performance. All covenants, agreements and conditions
contained in this agreement to be performed or complied with by the Company on
or prior to the Closing Date shall have been performed or complied with.
5.3 Opinion of Company Counsel. Purchaser shall have received
from counsel to the Company an opinion addressed to it, dated the Closing Date,
in substantially the form attached as exhibit C.
5.4 Legal Investment. At the time of the Closing, the purchase of
the Shares by Purchaser shall be legally permitted by the laws and regulations
to which it and the Company are subject.
5.5 Compliance Certificate. The Company shall have delivered to
Purchaser a certificate of the chief executive officer and chief financial
officer of the Company, dated the Closing Date, certifying to the fulfillment
of the conditions specified in sections 5.1 and 5.2 of this agreement and other
matters that Purchaser may reasonably request.
5.6 Technology and Exclusive Supply Agreements. The parties shall
have entered into and closed under a technology agreement ("the Technology
Agreement") in substantially the form of exhibit D and exclusive supply
agreement (the "Supply Agreement") in substantially the form of exhibit E.
5.7 Warrant Purchase Agreements. The Company shall have executed
and delivered to Purchaser the Warrant Agreements.
5.8 Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated hereby and all
documents and instruments incident to such transactions shall be satisfactory
in substance and form to Purchaser and its counsel.
5.9 Approvals and Consents. The Company shall have duly received
all authorizations, consents, approvals, licenses, franchises, permits and
certificates by or of all federal, state and local governmental authorities, by
any third parties pursuant to the terms of any agreement to which the Company
is a party or by the National Association of Securities Dealers, Inc. or any
other body or agency with jurisdiction, by contract or otherwise, over the
Company, necessary for the issuance of the Shares by the Company and the
consummation of the transactions contemplated hereby, and all thereof shall be
in full force and effect at the time of the Closing. The Company shall have
delivered to the Purchaser an officer's certificate, dated the Closing Date, to
such effect.
5.10 Proprietary Information and Inventions Agreements. Each person
employed by the Company who has access to proprietary information concerning
the Company shall have executed and delivered to the Company a Proprietary
Information and Inventions Agreement in substantially the form of exhibit F.
5.11 Qualifications. All authorizations, approvals, or permits of
any governmental authority or regulatory body required in connection with the
lawful issuance and sale of the Shares pursuant to this agreement, and the
issuance of Common Stock pursuant to the Warrant Agreement shall have been duly
obtained and shall be effective on and as of the Closing.
5.12 Certificates and Documents. The Company shall have delivered
to Purchaser:
(a) a copy of the certificate of incorporation of the
Company, as in effect immediately prior to the Closing, certified within ten
days of the Closing Date by the Secretary of State of Nevada, and a
certificate, as of the most recent practicable date within five days of the
Closing Date, of the Secretary of State of Nevada as to the
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Company's corporate good standing and of the Secretaries of State of the
jurisdictions of organization of its subsidiaries as to their good standing;
and
(b) a certificate of the secretary of the Company dated as of
the Closing Date, certifying as to (i) the incumbency of the officers of the
Company executing the Investment Documents and all other documents executed and
delivered in connection herewith, (ii) the by-laws of the Company as in effect
as of the Closing Date and (iii) a copy of the resolutions of the board of
directors of the Company authorizing the Company's execution, delivery and
performance of the Investment Documents, all matters in connection with the
Investment Documents and the transactions contemplated thereby.
5.13 Other Matters. All corporate and other proceedings in
connection with the transactions contemplated at the Closing by this agreement,
and all documents and instruments incident to such transactions, shall be
reasonably satisfactory in substance and form to Purchaser, and Purchaser shall
have received all such counterpart originals or certified or other copies of
such documents as it may reasonably request. Purchaser shall have had an
opportunity to conduct and shall be satisfied with such further technical
audits and other due diligence investigations as it deems necessary in
connection with the investment contemplated hereby based upon the Investment
Documents All consents and approvals required to be obtained by the Company in
order to consummate the transactions contemplated hereby shall have been
obtained and shall be in full force and effect.
5.14 Directors. All such action shall have been taken as may be
necessary to elect the nominee designated by the Purchaser to the Company's
board of directors effective upon the Closing.
Section 6
Conditions to Closing of the Company
The Company's obligation to sell the Shares to be purchased at the
Closing is subject to the fulfillment to its satisfaction on or prior to the
Closing Date of each of the following conditions:
6.1 Accuracy of Representations and Warranties. The
representations and warranties made by Purchaser pursuant to section 4 shall be
correct when made and on the Closing Date.
6.2 Performance. All covenants, agreements and conditions
contained in this Agreement to be performed or complied with by Purchaser on or
prior to the Closing Date shall have been performed or complied with in all
respects.
6.3 Compliance Certificate. Purchaser shall have delivered to the
Company a certificate, dated the Closing Date, certifying to the fulfillment of
the conditions specified in sections 6.1 and 6.2.
6.4 Technology Agreements. Purchaser shall have executed and
delivered the Technology and Supply Agreement substantially in the forms
attached hereto as exhibit D and E and paid the $2 million of consideration
under the Technology Agreement.
6.5 Other Matters. All partnership proceedings on behalf of
Purchaser in connection with the transactions contemplated at the Closing by
this Agreement, and all documents and instruments incident to such
transactions, shall be reasonably satisfactory in substance and form to the
Company, and the Company shall have received all such counterpart originals or
certified or other copies of such documents as it may reasonably request.
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Section 7
Covenants of the Company
The Company covenants and agrees, so long as (except as otherwise
stated) Purchaser owns the Shares, as follows:
7.1 Basic Financial Information. The Company shall furnish the
following reports to Purchaser:
(a) As soon as practicable after the end of each fiscal year
of the Company, and in any event within 90 days thereafter, a consolidated
balance sheet of the Company and its subsidiaries as at the end of such fiscal
year, and consolidated statements of income and sources and applications of
funds of the Company and its subsidiaries for such year, prepared in accordance
with generally accepted accounting principles consistently applied and setting
forth in each case in comparative form the figures for the previous fiscal
year, all in reasonable detail and certified by independent public accountants
of recognized national standing selected by the Company.
(b) As soon as practicable after the end of the first, second
and third quarterly accounting periods in each fiscal year of the Company, and
in any event within 45 days thereafter, a consolidated balance sheet of the
Company and its subsidiaries as of the end of each such quarterly period, and
consolidated statements of income and sources and applications of funds of the
Company and its subsidiaries for such period and for the current fiscal year to
date, prepared in accordance with generally accepted accounting principles
consistently applied and setting forth in comparative form the figures for the
corresponding periods of the previous fiscal year, subject to changes resulting
from year-end audit adjustments, all in reasonable detail and certified by the
principal financial or accounting officer of the Company.
(c) Such other financial information as Purchaser may request
including certificates of the principal financial officer of the Company
concerning compliance with the covenants of the Company under this section 7.
7.2 Additional Information. The Company shall permit any
authorized representatives of Purchaser to visit and inspect any of the
properties of the Company and its subsidiaries, including its books of account,
and to discuss its affairs, finances and accounts with the Company's officers
and its independent public accountants, all at such reasonable times and as
often as any such person may reasonably request. The Company shall deliver to
each such authorized representative of Purchaser the following reports:
(a) For the first nine months after the Closing Date, as soon
as practicable after the end of each month and in any event within 30 days
thereafter, a consolidated balance sheet of the Company and its subsidiaries as
at the end of such month, and consolidated statements of income and of sources
and applications of funds of the Company and its subsidiaries, for each month
prepared (except for footnotes) in accordance with generally accepted
accounting principles consistently applied, together with a comparison of such
statements to the Company's operating plan then in effect and approved by its
Board of Directors, and certified, subject to changes resulting from year-end
audit adjustments, by the principal financial or accounting officer of the
Company.
(b) For the first nine months after the Closing Date, as soon
as available (but in any event within 60 days after the commencement of its
fiscal year) a summary of the financial plan of the Company, as contained in
its operating plan approved by the Company's board of directors. Any material
changes in such financial plan shall be submitted as promptly as practicable
after such changes have been approved by the board of directors.
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(c) With reasonable promptness, such other information and
data with respect to the Company and its subsidiaries as any such person may
form time to time reasonably request under disclosure and use conditions
reasonably imposed by the Company.
7.3 Prompt Payment of Taxes, etc. The Company shall promptly pay
and discharge, or cause to be paid and discharged, when due and payable, all
lawful taxes, assessments and governmental charges or levies imposed upon the
income, profits, property or business of the Company or any subsidiary provided
that any such tax, assessment, charge or levy need not be paid if the validity
thereof is contested in good faith by appropriate proceedings and if the
Company sets aside on its books adequate reserves with respect thereto and
provided further that the Company shall pay all such taxes, assessments,
charges or levies forthwith upon the commencement of proceedings to foreclose
any lien that may have attached as security therefor. The Company shall
promptly pay or cause to be paid when due, or in conformance with customary
trade terms, all other indebtedness incident to operations of the Company and
its subsidiaries.
7.4 Maintenance of Properties and Leases. The Company shall keep
its properties and those of its subsidiaries in good repair, working order and
condition, reasonable wear and tear excepted, and from time to time make all
necessary and proper repairs, renewals, replacements, additions and
improvements thereto. The Company and its subsidiaries shall at all times
comply with leases to which any of them is a party or under which any of them
occupies property if the breach thereof might have a material adverse effect on
the condition, financial or otherwise, or operations of the Company or such
subsidiary.
7.5 Insurance. The Company shall keep its assets and those of its
subsidiaries that are of an insurable character insured by financially sound
and reputable insurers against loss or damage by fire, extended coverage and
explosion in amounts sufficient to prevent the Company or any subsidiary from
becoming a co-insurer and not in any event less than 100% of the insurable
value of the property insured, and the Company shall maintain, with financially
sound and reputable insurers, insurance against other hazards and risks and
liability to persons and property to the extent and in the manner customary for
companies in similar businesses similarly situated.
7.6 Accounts and Records. The Company shall keep true records and
books of account in which full, true and correct entries are made of all
dealings or transactions in relation to its business and affairs in accordance
with generally accepted accounting principles applied on a consistent basis.
7.7 Compliance With Requirements of Governmental Authorities. The
Company and each of its subsidiaries shall meet all valid requirements of
governmental authorities relating to the conduct of their businesses or to
their property or assets.
7.8 Maintenance of Corporate Existence, etc. The Company and each
of its subsidiaries shall maintain in full force and effect its corporate
existence, rights and franchises and all licenses other rights to use patents,
processes, licenses, trademarks, trade names or copyrights owned or possessed
by it or any subsidiary and deemed by the Company to be necessary to the
conduct of its business.
7.9 Availability of Common Stock for Warrant Exercise. The
Company, from time to time, shall increase the authorized amount of Common
Stock if at any time the number of shares of Common Stock remaining unissued
and available for issuance is insufficient to permit exercise of the Warrant
Agreement.
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7.10 Proprietary Information and Inventions Agreements. The
Company and each person now or hereafter employed by it or any subsidiary with
access to confidential information shall enter into a Proprietary Information
and Inventions Agreement in substantially the form of exhibit E.
7.11 Legal Fees. Each party shall pay their own respective legal
fees and out-of-pocket expenses with respect to this agreement, and the Closing
documents and transactions contemplated hereby and thereby.
7.12 Use of Proceeds. The Company shall use the proceeds from the
sale of the Shares and the closing of the Technology Agreement and the other
cash received by the Company from Purchaser pursuant to that certain agreement
for purchase and sale of assets to be negotiated by Purchaser and the Company
based upon the form submitted by Purchaser and attached as exhibit G (the
"Asset Purchase Agreement") to satisfy outstanding balance sheet obligations of
the Company and for working capital as set forth on the Disclosure Schedule.
7.13 Compliance by Subsidiaries. The Company shall cause any
subsidiary that it may organize in the future to comply with this section 7.
7.14 Indebtedness and Other Obligations. Included as part of the
Disclosure Schedule is a true and complete list of all outstanding obligations,
specifically noting all dollar amounts due and owing, of the Company and/or its
subsidiaries, including without limitation, all trade payables, accounts
payables, promissory notes, guarantees and other borrowings of whatever nature
incurred or outstanding as of August 7, 1998.
7.15 Conduct of Business of the Company. During the period from
the date of this agreement to the Closing Date (except for transactions
contemplated by this agreement), the Company shall and shall cause its
subsidiaries to carry on their respective businesses in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted and,
to the extent consistent therewith, use commercially reasonable efforts to
preserve intact their current officers and employees and preserve their
relationships with customers, suppliers, licensors, licensees, distributors and
others having business dealings with them, in each case consistent with past
practice, to the end that their goodwill and ongoing businesses shall be
unimpaired to the fullest extent possible at the Closing Date. Without
limiting the generality of the foregoing, and except as otherwise expressly
contemplated by this agreement, the Company shall not, and shall not permit any
of its subsidiaries to, during such period:
(a) (A) declare, set aside or pay any dividends
on, or make any other distributions in respect of, any of its capital stock,
other than dividends and distributions by any direct or indirect wholly owned
subsidiary of the Company to the Company or a wholly owned subsidiary of the
Company, (B) split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect, in lieu of or
substitution for shares of its capital stock or (C) purchase, redeem or
otherwise acquire any shares of capital stock of the Company or any of its
subsidiaries or any other securities thereof or any rights, warrants or options
to acquire any such shares or other securities other than in connection with
the exercise of outstanding stock options and warrants and satisfaction of
withholding obligations under outstanding stock operations and restricted
stock;
(b) issue, deliver, sell, pledge or otherwise
encumber any shares of its capital stock, any other voting securities or any
securities convertible into, or any rights, warrants or options to acquire, any
such shares, voting securities or convertible securities other than, in the
case of the Company, the issuance of shares of Common Stock upon the exercise
of stock options and warrants outstanding on the date of this agreement in
accordance with their current terms;
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(c) amend its Articles of Incorporation, By-laws
or other comparable charter or organizational document;
(d) acquire or agree to acquire (A) by merging or
consolidating with, or by purchasing a substantial portion of the stock or
assets of, or by any other manner, any business or any corporation,
partnership, association, joint venture, limited liability company or other
entity or division thereof or (B) any assets that, in each case, would be
material, individually or in the aggregate, to the Company and its subsidiaries
taken as a whole, except purchases in the ordinary course of business
consistent with past practice;
(e) sell, lease, mortgage, pledge, grant a lien
on or otherwise encumber or dispose of any of its properties or assets, except
(A) sales or leases in the ordinary course of business consistent with past
practice and (B) other immaterial transactions not in excess of $100,000 in the
aggregate;
(f) (A) incur indebtedness for borrowed money or
guarantee any such indebtedness of another person, issue or sell any debt
securities or warrants or other rights to acquire any debt securities of the
company or any of its subsidiaries, guarantee any debt securities of another
person, enter into any "keep well" or other agreement to maintain any financial
statement condition of another person or enter into any arrangement having the
economic effect of any of the foregoing, except for working capital borrowings
under currently existing revolving credit facilities incurred in the ordinary
course of business, or (B) make any loans, advances or capital contributions
to, or investments in, any other person that would be material, individually or
in the aggregate, to the Company and its subsidiaries taken as a whole, other
than to the Company or any direct or indirect wholly owned subsidiary of the
Company;
(g) make or incur any new capital expenditure
(other than purchases in the ordinary course of business) that, singly or in
the aggregate with all other expenditures, would exceed $100,000;
(h) make any material election relating to taxes
or settle or compromise any material tax liability;
(i) pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction, in
the ordinary course of business consistent with past practice or in accordance
with their terms, of liabilities reflected or reserved against in, or
contemplated by, the most recent consolidated financial statements (or the
notes thereto) of the Company included in the Exchange Act documents or
incurred in the ordinary course of business consistent with past practice;
(j) waive the benefits of, or agree to modify in
any manner, any confidentiality, standstill or similar agreement to which the
Company or any of its subsidiaries is a party;
(k) adopt a plan of complete or partial
liquidation or resolutions providing for or authorizing such a liquidation or a
dissolution, merger, consolidation, restructuring, recapitalization or
reorganization;
(l) enter into any new collective bargaining
agreement;
(m) change any material accounting principle used
by it, except as required by regulations promulgated by the Securities and
Exchange Commission (the "Commission") or as mandated by accounting boards or
bodies;
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(n) settle or compromise any litigation (whether
or not commenced prior to the date of this agreement) other than settlements or
compromises: (A) of litigation where the amount paid in settlement or
compromise does not exceed $100,000, or (B) in consultation and cooperation
with the Purchaser, and, with respect to any such settlement, with the prior
written consent of the Purchaser, which shall not be unreasonably withheld or
delayed;
(o) except for those contracts and agreements
entered into in the ordinary course of business, without the consent of the
Purchaser, which consent shall not be unreasonably withheld or delayed, enter
into any joint venture or partnership contract or agreement;
(p) amend (except as may be required by law) any
bonus, profit sharing, compensation, stock option, pension, retirement,
deferred compensation, employment or other employee benefit plan, agreement,
trust, fund or other arrangement for the benefit or welfare of any employee,
director or former director or employee, increase the compensation or fringe
benefits of any officer of the Company or any of its subsidiaries, or, except
as provided in an existing benefit plan or in the ordinary course of business
consistent with past practice, increase the compensation or fringe benefits of
any employee or former employee or pay any benefit not required by any existing
plan, arrangement or agreement;
(q) grant any new or modified severance or
termination arrangement or increase or accelerate any benefits payable under
its severance or termination pay policies in effect on the date hereof;
(r) permit any of its subsidiaries to, take any
action that would, or that could reasonably be expected to, result (i) in any
of the representations and warranties of the Company set forth in this
agreement becoming untrue or (ii) in any of the covenants contained in this
agreement becoming unperformable. Pending the Closing the Company will
promptly advise the Purchaser of any action or event of which it becomes aware
that has the effect of making incorrect any of such representations or
warranties or that has the effect of rendering unperformable any of such
covenants;
(s) authorize any of, or commit or agree to take
any of, the foregoing actions;
7.16 Valid Issuance. the Company covenants that the Shares will,
upon issuance and upon full payment therefor in accordance with the terms
hereof, and the common stock underlying the Warrant Agreement will, upon
exercise thereof pursuant thereto, be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issuance thereof.
7.17 Government Regulations. The Company covenants that it will
comply, and will cause each of its subsidiaries to comply, with all applicable
governmental restrictions and regulations, the failure to comply with which
would have a material adverse effect on the business or financial condition of
the Company and its subsidiaries taken as a whole, and obtain and maintain in
good standing all licenses, permits and approvals from any and all governments,
governmental commissions, boards or agencies of jurisdictions in which it or
any of its subsidiaries carries on business required in respect of the
operations of the Company or any of its subsidiaries, the failure to comply
with which would have a material adverse effect on the business or financial
condition of the Company and its subsidiaries taken as a whole.
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7.18 Further Assurances. The Company covenants that it shall
cooperate with the Purchaser and execute such further instruments and documents
as the Purchaser shall request to carry out to the reasonably satisfaction of
the Purchaser the transactions contemplated by this agreement. The Company
further agrees to mutually negotiate in good faith and to finalize, execute and
deliver the Asset Purchase Agreement.
7.19 Securities Act Registration Statements. The Company covenants
that the Purchaser shall have the right, at any time when it may be deemed to
be a controlling person of the Company, to participate in the preparation of
any underwritten registration statement of the Company (regardless of whether
or not the Purchaser will be a selling security holder in connection with such
registration statement) and to request the insertion therein of material
furnished to the Company in writing that in the Purchaser's judgment should be
included. In connection with such registration statement the Company will
indemnify Purchaser, its members, officers and directors and each person, if
any, who controls the Purchaser within the meaning of Section 15 of the
Securities Act, against all losses, claims, damages, liabilities and expenses
caused by any untrue statement or alleged untrue statement of a material fact
contained in any registration statement or prospectus or any amendment thereof
or supplement thereto or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except insofar as such losses, claims, damages, liabilities or
expenses are caused by any untrue statement or alleged untrue statement or
omission or alleged omission written information furnished to the Company by
Purchaser expressly for use in such registration statement. If, in connection
with any such registration statement, Purchaser shall furnish written
information to the Company expressly for use in the registration statement,
Purchaser will indemnify the Company, its directors, each of its officers who
signs such registration statement and each person, if any, who controls the
Company within the meaning of the Securities Act against all losses, claims,
damages, liabilities and expenses caused by any untrue statement or alleged
untrue statement of a material fact or any omission or alleged omission of a
material fact required to be stated in the registration statement or prospectus
or any preliminary prospectors or any amendment thereto or supplement thereto
or necessary to make the statements therein not misleading, but only to the
extent that such untrue statement or alleged untrue statement or such omission
or alleged omission attributable to written information to the Company
expressly for use in the registration statement, Purchaser will indemnify the
Company, its directors, each of its officers who signs such registration
statement and each person, if any, who controls the Company within the meaning
of the Securities Act against all losses, claims, damages, liabilities and
expenses caused by any untrue statement or alleged untrue statement of a
material fact or any omission or alleged omission of a material fact required
to be stated in the registration statement or prospectus or any preliminary
prospectus or any amendment thereto or supplement thereto or necessary to make
the statements therein not misleading, but only to the extent that such untrue
statement or alleged untrue statement or such omission or alleged omission
attributable to information so furnished in writing by the Purchaser for use
therein.
7.20 Notices of Certain Events. The Company shall promptly give
notice to the Purchaser (i) of any default or event of default that has not
been cured within any applicable grace period under any indebtedness of the
Company or any of its subsidiaries, and contractual obligation of the Company
or any of its subsidiaries or (ii) of any pending or threatened litigation,
investigation or proceeding to which the Company or any of its subsidiaries is
or is threatened to be a party and of which the Company has been given notice;
provided that any such default litigation, investigation or proceeding would
have a material adverse effect on the business or financial condition of the
Company and its subsidiaries taken as a whole. Any notice delivered pursuant
to this Section 7.19 shall be accompanied by an officer's certificate
specifying the details of the occurrence referred to therein and stating what
action the Company proposes to take with respect thereto.
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7.21 Environmental Laws. The Company and its subsidiaries shall
comply with all applicable Environmental laws the failure to comply with which
would have a material adverse effect on the business or financial condition of
the Company and its subsidiaries taken as a whole. If the Company or any
subsidiary shall receive written notice that there exists a violation of
Environmental law with respect to its operations or any real property owned,
formerly owned, used, or leased thereby, which violation could have a material
adverse effect on the business or financial condition of the Company and its
subsidiaries taken as a whole, the Company shall immediately notify in writing
the Purchaser. Furthermore, if the Company or any subsidiary shall receive
written notice that there exists a violation of Environmental law with respect
to its operations or any real property owned, formerly owned, used or leased
thereby, which violation could have a material adverse effect on the business
or financial condition of the Company and its subsidiaries taken as a whole,
the Company shall within the time period permitted by the applicable
governmental authority (unless otherwise contested by the Company in good
faith) remove or remedy such violation in accordance with all applicable
Environmental Laws unless the board of directors of the Company determines that
it would be in the best interest of the Company to delay the remedy of such
violation.
7.22 Listing of Common Stock The Company warrants and agrees for
the benefit of the Purchaser that the Shares and the shares of Common Stock
issuable upon exercise of the warrants under the Warrant Agreement shall be
approved for listing, subject to official notice of issuance, on the NASDAQ
(National Market) as of the Closing Date.
7.23 Right of First Refusal.
(a) The Company hereby grants to Purchaser the right of first
refusal, effective so long as it owns the Shares, to purchase New Securities
(as defined in this section 7.23) that the Company may, from time to time,
propose to sell and issue up to the amount of Purchaser's pro rata share. A
pro rata share, for purposes of this right of first refusal, is the ratio that
the sum of the number of shares of Common Stock then held by Purchaser and the
number of shares of Common Stock issuable upon conversion or exercise of any
other securities convertible or exercisable into Common Stock then held by
Purchaser bears to the sum of the total number of shares of Common Stock then
outstanding and the number of shares of Common Stock issuable upon conversion
or exercise of any then outstanding other securities convertible or exercisable
into Common Stock (excluding all shares of Common Stock held as treasury shares
by the Company and all shares of Common Stock held by direct or indirect
subsidiaries of the Company). In the event of a public offering by the
Company, Purchaser shall be permitted to purchase at the public offering price
net of the underwriting discount directly from the Company either in a
separate transaction or if permitted under applicable securities laws as part
of the registered offering such pro rata amount of securities as provided
above.
(b) Except as set forth below, "New Securities" shall mean any
shares of capital stock of the Company, including Common Stock and voting
preferred stock, whether or not now authorized, and rights, options or warrants
to purchase such shares of Common Stock or preferred stock, and securities of
any type whatsoever that are, or may become, convertible into such shares of
Common Stock or preferred stock. Notwithstanding the foregoing, "New
Securities" does not include:
(i) the Shares or common stock issuable upon exercise of
the Warrant Agreement;
(ii) capital stock issued or issuable to officers,
directors or employees of or consultants to the Company, primarily for the
purpose of soliciting or retaining their services to the Company directly or
pursuant to a stock option plan, restricted stock purchase plan or other
arrangement approved by the compensation committee of the board of directors,
in such amount as shall be approved by such compensation committee, provided
that a majority of the members of which consist of individuals who are not
officers of, or consultants to the Company or any corporation controlling or
controlled by the Company or the Company's direct or indirect parent;
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(iii) capital stock issued pursuant to any rights or
agreements, including without limitation convertible securities, options and
warrants, provided that the rights of first refusal established by this section
7.23 apply with respect to the initial sale or grant by the Company of such
rights or agreements;
(iv) capital stock issued in connection with any stock
split, stock dividend or recapitalization by the Company; and
(v) securities issued pursuant to the acquisition of
another corporation by the Company by merger, purchase of substantially all of
the assets, or other reorganization whereby the Company owns not less than 50%
of the voting power of the surviving corporation.
(c) The Company further grants to Purchaser the right of first
offer, effective so long as it owns the Shares, to purchase any and all
material assets or any and all direct or indirect subsidiaries of the Company
("Assets Held for Sale") that the Company may, from time to time, propose to
sell or otherwise transfer.
(d) If subsections (a) and (c) apply in the event the Company
proposes to undertake an issuance of New Securities or dispose of Assets Held
for Sale, it shall promptly give Purchaser written notice of its intention,
describing the type of New Securities or the Assets Held for Sale, as
appropriate, and the price and general terms upon which the Company proposes to
issue or transfer the same. The Purchaser shall have twenty (20) business days
(or the greater of (x) five (5) business days or (y) such period as otherwise
mutually agreed to by the parties, in the case of New Securities offered solely
to officers or directors of the Company) from the date of receipt of any such
notice to agree to purchase up to its respective pro rata share of such New
Securities or the Assets Held for Sale, as appropriate, for the price and upon
the terms specified in the notice by giving written notice to the Company and,
in the case of New Securities, stating therein the quantify of New Securities
to be purchased.
(e) Purchaser's notice to the Company of exercise of its rights
under this Section 7.23 shall constitute Purchaser's irrevocable acceptance of
the Company's offer, subject to customary closing conditions.
(f) The purchase and sale of any securities or assets pursuant to
any offer made under this Section 7.23 that is accepted by the Purchaser shall
take place at such time and place as the Company and the Purchaser may mutually
agree. The purchase price shall be payable in such form as mutually agreed by
the Company and Purchaser or, in the case of New Securities, in such other form
as set forth in the terms to the new investors. The issuance of such shares
shall be conditioned upon compliance with applicable laws and regulations and
requirements of any applicable stock exchange and the absence of any order in
effect enjoining or restraining such exercise or issuance.
(g) In the event Purchaser fails to exercise the right of first
refusal or offer as the case may be within the period set forth in Section
7.23 (d), as appropriate, the Company shall have ninety (90) days thereafter to
sell or enter into an agreement (pursuant to which the sale of New Securities
or the Assets Held for Sale, as appropriate covered thereby shall be closed, if
at all, within sixty (60) days from the date of said agreement) to sell the New
Securities or the Assets Held for Sale, as appropriate, not elected to be
purchased by Purchaser at the price and upon terms no more favorable to the
purchasers of such securities or assets than specified in the Company's notice.
7.24 Purchaser's Director Nominee. The Company and the Key
Management Employee/Directors listed on the signature page hereto shall
nominate and vote for the Purchaser's designee to the board of directors of the
Company so long as Purchaser shall own the Shares or Common Stock underlying
the Warrant Agreement.
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Section 8
Restrictions on Transferability of
Securities; Compliance With Securities Act
8.1 Restrictions on Transferability. The Shares shall not be
transferable, except upon the conditions specified in this section 8, which
conditions are intended to insure compliance with the provisions of the
Securities Act of 1933, as amended (the "Securities Act"). Purchaser shall
cause any proposed transferee of Shares to agree to take and hold those
securities subject to the provisions and upon the conditions specified in this
section 8.
8.2 Certain Definitions. As used in this section 8, "Restricted
Securities" shall mean the securities of the Company required to bear or
bearing the legend set forth in section 8.3.
8.3 Restrictive Legend. Each certificate representing the Shares,
or shares of Common Stock issued upon exercise of the warrants under the
Warrant Agreement, or any other securities issued in respect of the Preferred
Shares or the Common Stock issued upon exercise of the warrants under the
Warrant Agreements, upon any stock split, stock dividend, recapitalization,
merger, consolidation or similar event, shall (unless otherwise permitted or
unless the securities evidenced by such certificate shall have been registered
under the Securities Act) be stamped or otherwise imprinted with a legend in
the following form (in addition to any legend required under applicable state
securities laws):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS.
THEY MAY NOT BE SOLD OR OFFERED FOR SALE IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
COVERING THE SECURITIES UNDER SUCH ACT AND ANY
APPLICABLE STATE SECURITIES LAW OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT
SUCH REGISTRATION IS NOT REQUIRED.
Upon request of Purchaser, the Company shall remove the foregoing legend from
the certificate or issue thereto a new certificate therefor free of any
transfer legend provided that the Company receives either the opinion referred
to in section 8.4(i) or the "no-action" letter referred to in section 8.4(ii)
to the effect that any transfer by Purchaser of the securities evidenced by
such certificate will not violate the Securities Act or applicable state
securities laws.
8.4 Notice of Proposed Transfers. The holder of each certificate
representing Restricted Securities by acceptance thereof agrees to comply with
this section 8.4. Prior to any proposed transfer of any Restricted Securities
the holder thereof shall give written notice to the Company of such holder's
intention to effect such transfer. Each such notice shall describe the manner
and circumstances of the proposed transfer in sufficient detail, and shall be
accompanied (except in transactions in compliance with Rule 144) by either (a)
a written opinion of legal counsel reasonably satisfactory to the Company,
addressed to the Company and reasonably satisfactory in form and substance to
the Company's counsel, to the effect that the proposed transfer of the
Restricted Securities may be effected without registration under the Securities
Act or (b) a "no action" letter from the Commission to the effect that the
distribution of such securities without registration will not result in a
recommendation by the staff of the Commission that action be taken with respect
thereto, whereupon the Holder of such Restricted Securities shall be entitled
to transfer such Restricted Securities in accordance with the terms of the
notice delivered by the holder to the Company. Each certificate evidencing the
Restricted Securities transferred as above provided shall bear the appropriate
restrictive legend set forth in section 8.3, except that such certificate shall
not bear such restrictive legend if the opinion of
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counsel or "no-action" letter referred to above is to the further effect that
such legend is not required in order to establish compliance with the Securities
Act.
8.5 Information by Holder. Each holder of Restricted Securities
shall furnish to the Company such information regarding the transfer or
distribution proposed by such holder as the Company may reasonably request in
writing.
8.6 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission that may permit the
sale of the Restricted Securities to the public without registration, the
Company shall (a) make and keep public information available as those terms
are understood and defined in Rule 144 under the Securities Act, (b) use its
best efforts to file with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Securities Exchange Act of 1934 (the "Exchange Act") and (c) so long as
Purchaser owns any Shares, furnish to Purchaser upon request a written
statement by the Company as to its compliance with the reporting requirements
of Rule 144 and of the Securities Act and Exchange Act and a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents so filed as it may reasonably request in availing itself of any rule
or regulation of the Commission allowing it to sell any such securities without
registration.
8.7 "Market Stand-off" Agreement. Purchaser shall agree, if
requested by the Company and the managing underwriter of Common Stock (or other
securities) of the Company, not to sell or otherwise transfer or dispose of any
Common Stock (or other securities) of the Company held by it during the 90-day
period following the effective date of a registration statement of the Company
filed under the Securities Act, provided that (a) such agreement shall apply
only to the first such registration statement of the Company including
securities to be sold on its behalf to the public in an underwritten offering
and (b) the officers and directors of the Company shall enter into similar
agreements. Such agreement shall be in writing in a form satisfactory to the
Company and such underwriter. The Company may impose stop-transfer
instructions with respect to the Shares (or securities) subject to the
foregoing restriction until the end of such 90-day period.
Section 9
Registration under Securities Act, etc.
9.1 Registration of Registrable Securities on Request.
(a) Request. At any time commencing 18 months from the date hereof, the
Purchaser (and any transferee of Purchaser's Registrable Securities (as defined
below)) shall have the right to request in writing specifying that such
request is made pursuant to this Section 9.1, that the Company effect an
underwritten registration under the Securities Act on form S-3 or such other
form of registration statement that the Company is otherwise eligible to use for
such purpose of all or part of such holders' Registrable Securities. The Company
shall be obligated to effect only two (2) registrations pursuant to this Section
9.1 with respect to all holders of Registrable Securities and only until the
earlier of the date that all Registrable Securities have been sold or the date
that all Registrable Securities are freely transferable without restriction
under the Securities Act. The Company will promptly give written notice of
such requested registration to all other holders of Registrable Securities,
which holders shall be entitled to include their Registrable Securities in such
registration subject to Section 9.1(b). Thereupon the Company will use its best
efforts to effect the registrations under the Securities Act of:
(i) the Registrable Securities which the Company has been
so requested to register by such holders making the demand pursuant to
this Section 9.1, and
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(ii) subject to Section 9.1(b), all other Registrable
Securities which the Company has been requested to register by the
holders thereof by written request given to the Company within 30 days
after the giving of such written notice by the Company (which request
shall specify the intended method of disposition of such Registrable
Securities) all to the extent requisite to permit the disposition of
the Registrable Securities so to be registered.
The Company will not grant to any person at any time on or after the
date hereof the right (a "Piggyback Right") to request the Company to register
any securities of the Company under the Securities Act by reason of the
exercise by any holder of its rights under this Section 9.1 unless such
Piggyback Right provides that such securities shall not be registered and sold
at the same time if the managing underwriter for the respective holders
believes that sale of such securities would adversely affect the amount of, or
price at which, the respective Registrable Securities being registered under
this Section 9.1 can be sold. For purposes of this agreement, "Registrable
Securities" shall mean the Shares and all other shares of Common Stock issuable
upon exercise of the warrants under the Warrant Agreement.
(b) Registration of Other Securities. Whenever the Company shall
effect a registration pursuant to this Section 9.1, no securities other than
Registrable Securities shall be included among the securities covered by such
registration unless (i) the managing underwriter of such offering shall have
advised each holder of Registrable Securities to be covered by such
registration in writing that the inclusion of such other securities would not
in the underwriter's reasonable judgment adversely affect such offering or (ii)
the holders of a majority of Registrable Securities to be covered by such
registration shall have consented in writing to the inclusion of such other
securities.
(c) Registration Statement Form. Registrations under this Section
9.1 shall be on such appropriate registration form or prospectus of the
Commission (i) as shall be selected by the Company and as shall be reasonably
acceptable to the holders of more than 50% (by number of shares then
outstanding) of the Registrable Securities so to be registered and (ii) as
shall permit the disposition of such Registrable Securities in accordance with
the intended method or methods of disposition specified in their request for
such registration. The Company agrees to include in any such registration
statement all information which holders of Registrable Securities being
registered shall reasonably request.
(d) Expenses. The Company will pay all Registration Expenses in
connection with the registration requests made pursuant to this Section 9.1,
provided, however, that the Company shall not be required to pay expenses of
any registration proceeding begun pursuant to Section 9.1 if the registration
is subsequently withdrawn (other than by reason of the Company's failure to
perform its obligations hereunder or a material adverse change in the Company's
financial position or business), unless the holder agrees to forfeit his right
to a demand registration under Section 9.1. If such registration is withdrawn
(other than by reason of the Company's failure to perform its obligations
hereunder or a material adverse change in the Company's financial position or
business), the holder shall have the option to pay the expenses of such
registration and preserve all of his rights to demand registrations under
Section 9.1.
No holder shall have the right to cause the Company to employ any
expert or professional to act on behalf of the Company other than any expert or
professional, such as an independent accountant, whose report or consent is
required to be included in a registration statement for the Registrable
Securities.
Effective Registration Statement. A registration requested pursuant to
this Section 9.1 shall not be deemed to have been effected and shall not count
as a requested registration pursuant to Section 9.1 (a) hereof (i) unless a
registration statement with respect thereto has become effective, (ii) if after
it has become effective, such registration
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<PAGE> 27
is interfered with by any stop order, injunction or other order or requirement
of the Commission or other governmental agency or court for any reason not the
fault of a holder of Registrable Securities and the Registrable Securities
covered hereby have not been sold, or (iii) if the conditions to closing
specified in the selling agreement or underwriting agreement entered into in
connection with such registration are not satisfied or waived by the parties
thereto other than a holder of Registrable Securities.
(f) Underwriters. Any registration effected pursuant to this
Section 9.1 shall at the election of the holders of at least 50% by number of
shares then outstanding of the Registrable Securities to be so registered by an
underwritten public offering on a firm commitment basis or a best efforts
basis. The managing underwriter or underwriters thereof shall be selected by
the Company, and such underwriter, as well as the price, terms and provisions
of the offering, shall be subject to the approval of the holders of more than
50% (by number of shares then outstanding) of the Registrable Securities to be
so registered.
(g) Apportionment in Registrations Requested. If, in connection
with a registration requested pursuant to this Section 9.1, the managing
underwriter shall advise the Company in writing (with a copy to each holder of
Registrable Securities requesting registration) that, in its opinion, the
number of securities requested to be included in such registration exceeds the
number which can be sold in such offering within a price range acceptable to
the holders of more than 50% (by number of shares then outstanding) of the
Registrable Securities requested to be included in such registration, the
Company will include in such registration, to the extent of the number which
the Company is so advised can be sold in such offering, Registrable Securities
requested to be included in such registration pro rata among the holders
thereof requesting such registration on the basis of the percentage of the
Registrable Securities of the Company held by the holders of Registrable
Securities which have requested that such Registrable Securities be included.
In connection with any registration as to which the provisions of this clause
(g) apply, no securities other than Registrable Securities shall be covered by
such registration and if the pro ration as aforesaid results in the exclusion
of in excess of 20% of the Registrable Securities originally sought to be
registered, the request shall not be counted for purposes of determining the
number of registrations pursuant to Section 9.1 hereof.
9.2 Incidental Registration. (a) Right to Include Registrable
Securities. If the Company at any time proposes to register any of its Common
Stock under the Securities Act (other than by a registration on Form S-4, Form
S-8 or any successor or similar form), whether or not for sale for its own
account, it will each such time give prompt written notice to all holders of
Registrable Securities of its intention to do so.
Upon the written request of any such holder made within 30 days after
the date of any such notice given in accordance with Section 11.5 hereof, the
Company will use its best efforts to effect the registration under the
Securities Act of all Registrable Securities which the Company has been so
requested to register by the holders thereof, to the extent requisite to permit
the disposition of the Registrable Securities so to be registered, provided
that if, at any time after giving written notice of its intention to register
any securities and prior to the effective date of the registration statement
filed in connection with such registration, the Company shall determine for any
reason not to register or to delay registration of such securities, the Company
may, at its election, give written notice of such determination to each holder
of Registrable Securities and, thereupon, (i) in the case of a determination
not to register, shall be relieved of its obligation to register any
Registrable Securities in connection with such registration (but not from its
obligation to pay the Registration Expenses in connection therewith), without
prejudice, however, to the rights of any holder or holders of Registrable
Securities entitled to do so to request that such registration be effected as a
registration under Section 9.2, and (ii) in the case of a determination to
delay registering, shall be permitted to delay registering any Registrable
Securities, for the same period as the delay in registering such other
securities. No registration effected under this Section 9.2 shall relieve the
Company of its obligation to effect any registration upon request under Section
9.1. The Company will pay all Registration Expenses in connection with each
registration of
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Registrable Securities requested pursuant to this Section 9.2. No holder shall
have the right to cause the Company to employ any expert or professional to act
on behalf of the Company other than any expert or professional, such as an
independent engineer or accountant, whose report or consent is required to be
included in a registration statement for the Registrable Securities.
(b) Apportionment in Incidental Registrations. If (i) a
registration pursuant to this Section 9.2 involves an underwritten offering of
the securities being registered, whether or not for sale for the account of the
Company, to be distributed (on a firm commitment basis) by or through one or
more underwriters of recognized national or regional standing under
underwriting terms appropriate for such a transaction, and (ii) the managing
underwriter of such underwritten offering shall inform the Company and the
holders of the Registrable Securities requesting such registration by letter of
its belief that the number of securities requested to be included in such
registration exceeds the number which can be sold in (or during the time of)
such offering or that the inclusion would adversely affect the marketing of the
securities to be sold by the Company therein, then the Company may include all
securities proposed by the Company to be sold for its own account and may
decrease the number of Registrable Securities and other securities of the
Company so proposed to be sold and so requested to be included in such
registration (pro rata on the basis of the percentage of the securities of the
Company sought to be registered by the holders of such Registrable Securities
and such other securities) to the extent necessary to reduce the number of
securities to be included in the registration to the level recommended by the
managing underwriter. Notwithstanding the foregoing, if the registration
referred to herein involves an underwritten offering of securities being
registered for sale by holders of securities other than registrable Securities,
the Company will include in such registration the securities proposed by such
holders to be sold and may decrease the number of Registrable Securities and
such other securities exercising incidental registration rights proposed to be
sold in such registration (pro rata on the basis of the percentage of the
securities sought to be registered held by such holders of Registrable
Securities and such other securities exercising incidental registration rights)
to the extent necessary to reduce the number of securities to be included in
the registration to the level recommended by the managing underwriter. In such
case, no securities shall be offered for sale by the Company.
(c) The Registrable Securities proposed to be registered under any
registration statement under Section 9.2 hereof will be offered for sale at the
same public offering price as the shares of Common Stock offered for sale by
the Company or any other selling shareholder covered thereby.
9.3 Registration Procedures. If and whenever the Company is
required to use its best efforts to effect the registration of any Registrable
Securities under the Securities Act as provided in Sections 9.1 and 9.2, the
Company will as expeditiously as possible:
(i) prepare and (as soon thereafter as possible or in any
event no later than 90 days after the end of the period within which
requests for registration may be given to the Company) file with the
Commission the requisite registration statement to effect such
registration and thereafter use its best efforts to cause such
registration statement to become effective, provided that the Company
may discontinue any registration of its securities which are not
Registrable Securities (and, under the circumstances specified in
Section 9.2(a), its securities which are Registrable Securities) at
any time prior to the effective date of the registration statement
relating thereto; and provided, further, that the Company may defer
its obligations under Section 9.1 for a period of no more than ninety
(90) days if the Company's Board of Directors adopts a resolution that
filing such a registration statement would require a public disclosure
by the Company which disclosure would have material adverse
consequences for the Company, such as a disclosure regarding a pending
material acquisition by the Company or a material discovery of oil and
gas reserves; provided,
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further, that once such information has been publicly disclosed, then
the Company shall promptly proceed to fulfill its obligations under
Section 9.1;
(ii) prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used
in connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the
Securities Act with respect to the disposition of all securities
covered by such registration statement until such time as all of such
securities have ben disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof set forth in
such registration statement;
(iii) furnish to each seller of Registrable Securities
covered by such registration statement such number of conformed copies
of such registration statement and of each such amendment and
supplement thereto, such number of copies of the prospectus contained
in such registration statement (including each preliminary prospectus
and any summary prospectus) and any other prospectus filed under Rule
424 or Rule 430A under the Securities Act, in conformity with the
requirements of the Securities Act, and such other documents, as such
seller may reasonably request;
(iv) use its best efforts to register or qualify all
Registrable Securities and other securities covered by such
registration statement under such other securities or blue sky laws of
such jurisdictions as each seller thereof shall reasonably request, to
keep such registration or qualification in effect for so long as such
registration statement remains in effect, and take any other action
which may be reasonably necessary to enable such seller to consummate
the disposition in such jurisdictions of the securities owned by such
seller, except that the Company shall not for any such purpose be
required to qualify generally to do business as a foreign corporation
in any jurisdiction wherein it would not but for the requirements of
this subdivision (iv) be obligated to be so qualified or to consent to
general service of process in any such jurisdiction or subject itself
to be required to pay any franchise or income taxes in any such
jurisdiction;
(v) use its best efforts to cause all Registrable
Securities covered by such registration statement to be registered
with or approved by such other governmental agencies or authorities as
may be necessary to enable the seller or sellers thereof to consummate
the disposition of such Registrable Securities;
(vi) furnish to each seller of Registrable Securities a
signed counterpart, addressed to such seller, except as provided in
(y) below (and the underwriters, if any), of
(x) an opinion of counsel for the Company, dated
the effective date of such registration statement (and, if
such registration includes an underwritten public offering,
dated the date of the closing under the underwriting
agreement), reasonably satisfactory in form and substance to
such seller or, if such registration includes an underwritten
public offering, to such underwriter, and
(y) a "comfort" letter, dated the effective date
of such registration statement (and, if such registration
includes an underwritten public offering, dated the date of
the closing under the underwriting agreement), signed by the
independent public accountants who have certified the
Company's financial statements included in such registration
statement, addressed to each seller, to the extent the same
can be reasonably obtained, and addressed to the underwriters,
if any, covering substantially the same matters with respect
to such registration
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<PAGE> 30
statement (and the prospectus included therein) and, in the
case of the accountants' letter, with respect to events
subsequent to the date of such financial statements, as are
customarily covered in accountants' letters delivered to the
underwriters in underwritten public offerings of securities
and such other financial matters as such seller or such holder
(or the underwriters, if any) may reasonably request;
(vii) notify each seller of Registrable Securities covered
by such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, upon
discovery that, or upon the happening of any event as a result of
which, the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the
circumstances under which they were made, and at the request of any
such seller or holder promptly prepare to furnish to such seller or
holder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such securities, such
prospectus shall not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light
of the circumstances under which they were made;
(viii) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available
to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months, but
not more than eighteen months, beginning with the first fiscal quarter
beginning after the effective date of such registration statement,
which earnings statement shall satisfy the provisions of Section 11(a)
of the Securities Act, and, in the case of a registration requested
pursuant to Section 9.1 hereof, will furnish to each such seller at
least two business days prior to the filing thereof a copy of any
amendment or supplement to such registration statement or prospectus
and shall not file any thereof to which any such seller shall have
reasonably objected on the grounds that such amendment or supplement
does not comply in all material respects with the requirements of the
Securities Act or of the rules or regulations thereunder;
(ix) provide and cause to be maintained a transfer agent
and registrar for all Registrable Securities covered by such
registration statement from and after a date not later than the
effective date of such registration statement; and
(x) use its best efforts to list all Registrable
Securities covered by such registration statement on any securities
exchange on which any of the Registrable Securities is then listed.
The Company may require each proposed seller of Registrable Securities as to
which any registration is being effected to promptly furnish the Company, as a
condition precedent to including such holder's Registrable Securities in any
registration, such information regarding such seller and the distribution of
such securities as the Company may from time to time reasonably request in
writing.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that upon receipt of any notice from the Company of the
happening of any event of the kind described in subdivision (vii) of this
Section 9.3, such holder will forthwith discontinue such holder's disposition
of Registrable Securities pursuant to the registration statement relating to
such Registrable Securities until such holder's receipt of the copies of the
supplemented or amended prospectus contemplated by subdivision (vii) of this
Section 9.3 and, if so directed by the
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<PAGE> 31
Company, will deliver to the Company (at the Company's expense) all copies,
other than permanent file copies, then in such holder's possession of the
prospectus relating to such Registrable Securities current at the time of
receipt of such notice.
9.4 Underwritten Offerings. (a) Requested Underwritten Offerings.
If requested by the underwriters for any offering by holders of Registrable
Securities pursuant to a registration requested under Section 9.1, the Company
will enter into an underwriting agreement with such underwriters for such
offering, such agreement to be satisfactory in substance and form to the
Company, to holders of more than 50% of the Registrable Securities included in
such registration and the underwriters and to contain such representations and
warranties by the Company and such other terms as are generally prevailing in
agreements of this type, including, without limitation, indemnities to the
effect and to the extent provided in Section 9.6. The holders of the
Registrable Securities will cooperate with the Company in the negotiation of
the underwriting agreement and will give consideration to the reasonable
requests of the Company regarding the form thereof, provided that nothing
herein contained shall diminish the foregoing obligations of the Company. The
holders of Registrable Securities to be distributed by such underwriters shall
be parties to such underwriting agreement and may, at their option, require
that any or all of the representations and warranties by, and the other
agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of such holders of
Registrable Securities and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be
conditions precedent to the obligations of such holders of Registrable
Securities. Other than as required under Section 9.3 hereof, any such holder
of Registrable Securities shall not be required to make any representations or
warranties to or agreements with the Company or the underwriters other than
representations, warranties or agreements regarding such holder, such holder's
Registrable Securities, and such holder's intended method of distribution, any
other information supplied by such holder to the Company for use of the
Registration Statement and any other representation required by law.
(b) Incidental Underwritten Offerings. If the Company at any time
proposes to register any of its securities under the Securities Act as
contemplated by Section 9.2 and such securities are to be distributed by or
through one or more underwriters, the Company will, if requested by any holder
of Registrable Securities as provided in Section 9.2 and subject to the
provisions of Sections 9.2(a), 9.2(b) and 9.3, arrange for such underwriters to
include all the Registrable Securities to be offered and sold by such holder
among the securities to be distributed by such underwriters. The holders of
Registrable Securities to be distributed by such underwriters shall be parties
to the underwriting agreement between the Company and such underwriters and
may, at their option, require that any or all of the representations and
warranties by, and the other agreements on the part of, the Company to and for
the benefit of such underwriters shall also be made to and for the benefit of
such holders of Registrable Securities and that any or all of the conditions
percent to the obligations of such underwriters under such underwriting
agreement be conditions precedent to the obligations of such holders of
Registrable Securities. Other than as required under Section 9.3 hereof, any
such holder of Registrable Securities shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties, or agreements regarding
such holder, such holder's Registrable Securities and such holder's intended
method of distribution, any other information supplied by such holder to the
Company for use in the Registration Statement and any other representation
required by law.
9.5 Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Company will give the holders of Registrable
Securities registered under such registration statement, their underwriters, if
any, and their respective counsel and firm of accountants (such holders'
counsel and firm of accountants to be appointed by the holders of a majority of
such Registrable Securities), the opportunity to participate in the preparation
of such registration statement, each prospectus included therein or filed with
the Commission, and each amendment thereof or supplement thereto,
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and will give each of them such access to its books and records and such
opportunities to discuss the business of the Company with its officers and the
independent public accountants who have certified its financial statements as
shall be necessary, in the opinion of such holders' and such underwriters'
respective counsel, to conduct a reasonable investigation within the meaning of
the Securities Act.
9.6 Indemnification. (a) Indemnification by the Company. In the
event of any registration of any Registrable Securities of the Company under
the Securities Act pursuant to this Agreement, the Company will, and hereby
does, indemnify and hold harmless the seller of any Registrable Securities
covered by such registration statement, its directors and officers, each other
Person who participates as an underwriter in the offering or sale of such
securities and such other Person, if any, who controls such seller or any such
underwriter within the meaning of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which such seller or any
such director or officer or underwriter or controlling person may become
subject under the Securities Act or any other statute or at common law, insofar
as such losses, claims, damages or liabilities (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained, on the effective date thereof, in any registration statement under
which such Registrable Securities were registered under the Securities Act, or
in any preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and the Company will
reimburse such seller and each such director, officer, underwriter and
controlling person for any legal or any other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided that the Company shall not be liable
in any such case to the extent that any such loss, claim, damage, liability (or
action or proceeding in respect thereof) or expense arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement, any such preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement in reliance upon
and in conformity with written information furnished to the Company through an
instrument duly executed by such seller for use in the preparation thereof.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such seller or any such director,
officer, underwriter or controlling person and shall survive the transfer of
such securities by such seller.
(b) Indemnification by the Purchasers. The Purchasers will, and
hereby do, indemnify and hold harmless (in the same manner and to the same
extent as set forth in subdivision (a) of this Section 9.6) the Company, each
director of the Company, each officer of the Company and each other Person, if
any, who controls the Company within the meaning of the Securities Act with
respect to any statement or alleged statement in or omission or alleged
omission from such registration statement, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, if such statement or alleged statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by such Purchaser for use in the
preparation of such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement. Such indemnity shall
remain in full force and effect, regardless of any investigation made by or on
behalf of the Company or any such director, officer or controlling Person and
shall survive the transfer of such securities by such Purchaser.
(c) Notices of Claims, etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subdivisions of this Section
9.6, such indemnified party will, if a claim in respect thereof is to be made
against an indemnifying party, give written notice to the latter of the
commencement of such action, provided that the failure of any indemnified party
to give notice as provided herein shall not relieve the indemnifying party of
its obligations under the preceding subdivisions of this Section 9.6, except to
the extent that the indemnifying party is prejudiced by such failure to give
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notice. In case any such action is brought against an indemnified party,
unless in such indemnified party's reasonable judgment a conflict of interest
between such indemnified party and indemnifying parties may exist in respect of
such claim, the indemnifying party shall be entitled to participate in and to
assume the defense thereof, jointly with any other indemnifying party similarly
notified to the extent that it may wish, with counsel reasonably satisfactory
to such indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party shall, without the consent of the indemnified party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation.
(d) Other Indemnification. Indemnification similar to that
specified in the preceding subdivisions of this Section 9.6 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration or other qualification of
securities under any Federal or state law or regulation of any governmental
authority other than the Securities Act.
(e) Indemnification Payments. The indemnification required by
this Section 9.6 shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred.
9.7 Rule 144. If the Company shall have filed a registration
statement pursuant to the requirements of Section 12 of the Exchange Act or a
registration statement pursuant to the requirements of the Securities Act, the
Company will file the reports required to be filed by it, and in the manner
required to be filed by it, under the Securities Act and the Exchange Act (or,
if the Company is not required to file such reports, will, upon the request of
any holder of Registrable Securities, make publicly available other
information) and will take such further action as any holder of Registrable
Securities may reasonably request, all to the extent required from time to time
to enable such holder to sell Registrable Securities without registration under
the Securities Act within the limitation of the exemptions provided by (a) Rule
144 under the Securities Act, as such Rule may be amended from time to time or
(b) any similar rule or regulation hereafter adopted by the Commission ("Rule
144"). Upon the request of any holder of Registrable Securities, the Company
will deliver to such holder a written statement as to whether it has complied
with such requirements.
Section 10
Indemnification
10.1 Obligation of the Company to Indemnify. Subject to section
11.2, the Company shall indemnify, defend and hold harmless Purchaser (and its
respective partners, directors, officers, employees, affiliates and assigns)
from and against all losses, liabilities, damages, deficiencies, diminution in
value, costs or expenses (including interest and penalties imposed or assessed
by any judicial or administrative body and reasonable attorneys' fees)
(collectively, "Losses") based upon, arising out of or relating to any
inaccuracy or in any breach of any representation, warranty, covenant or
agreement of the Company contained in this agreement or in the Disclosure
Schedule or any exhibit, schedule certificate or any of the other Transaction
Documents delivered by the Company at the Closing.
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<PAGE> 34
10.2 Obligation of Purchaser to Indemnify. Subject to section
11.2, Purchaser shall indemnify, defend and hold harmless the Company from and
against any Losses based upon, arising out of or relating to any breach of any
representation, warranty, covenant or agreement of Purchaser contained in this
agreement or in any exhibit, schedule or certificate delivered by Purchaser at
the Closing.
10.3 Notice and Opportunity to Defend. (a) Within 30 days after
receipt by any party hereto (the "Indemnitee") of notice of any demand, claim
or circumstance that, with the lapse of time, would give rise to a claim or the
commencement (or threatened commencement) of any action, proceeding or
investigation or within 30 days of an Indemnitee learning that a representation
or warranty is materially inaccurate, in each case that may result in a Loss
(an "Asserted Liability"), the Indemnitee shall give notice thereof (the
"Claims Notice") to the party required to provide indemnification pursuant to
section 10.1 or 10.2 hereof (the "Indemnitor"). The Claims Notice shall
describe the Asserted Liability in reasonable detail, and shall indicate the
amount (estimated, if necessary) of the Loss that has been or may be suffered
by the Indemnitee.
(b) Opportunity to Defend. The Indemnitor may elect to
compromise or defend, and control the defense of, at its own expense and by
counsel reasonably satisfactory to the Indemnitee, any Asserted Liability
provided that the Indemnitee shall have no liability under any compromise or
settlement agreed to by the Indemnitor that it has not approved in writing. If
the Indemnitor elects to compromise or defend such Asserted Liability, it shall
within 30 days (or sooner, if the nature of the Asserted Liability so requires)
notify the Indemnitee of its intent to do so, and the Indemnitee shall
cooperate upon the request and at the expense of the Indemnitor in the
compromise of, or defense against, such Asserted Liability. If the Indemnitor
elects not to compromise or defend against the Asserted Liability, or fails to
notify the Indemnitee of its election as herein provided, the Indemnitee may
pay, compromise or defend such Asserted Liability and receive full
indemnification for its Losses as provided in sections 10.1 and 10.2. In any
event, the Indemnitee and the Indemnitor may participate, at their own expense,
in the defense of such Asserted Liability by the Indemnitor or the Indemnitee,
respectively. If the Indemnitor chooses to defend any claim, the Indemnitee
shall make available to the Indemnitor any books, records or other documents
within its control that are reasonably requested for such defense and shall
otherwise cooperate with the Indemnitor, in which event the Indemnitee shall be
reimbursed for its out-of-pocket expense.
Section 11
Miscellaneous
11.1 Governing Law. This Agreement shall be governed in all
respects by the law of the State of New York without regard to its choice of
law rules.
11.2 Survival. The representations, warranties, covenants and
agreements made herein subject to indemnification pursuant to section 10 shall
survive (a) any investigation made by Purchaser and (b) the earlier of two
years after Closing and the applicable statute of limitations.
11.3 Successors and Assigns. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto provided the Company may not assign its rights hereunder.
11.4 Entire Agreement; Amendment. This agreement (including the
Disclosure Schedule and exhibits hereto) and the other documents delivered
pursuant hereto at the Closing constitute the entire understanding and
agreement between the parties with regard to the subjects hereof and thereof.
Except as otherwise expressly provided
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herein, neither this Agreement nor any term hereof may be amended, waived,
discharged or terminated orally, except by a written agreement signed by the
Company and Purchaser.
11.5 Notices, etc. All notices and other communications required
or permitted hereunder shall be in writing and shall be mailed by first-class
mail, postage prepaid, or delivered either by hand or by messenger, addressed
if to Purchaser or the Company at its address set forth in the preamble of this
agreement, or at such other address as Purchaser or the Company furnishes to
the other party in writing.
11.6 Delays or Omissions. No delay in exercising or omission to
exercise any right, power or remedy accruing to Purchaser or the Company upon
any breach or default of the Company or Purchaser under this agreement shall
impair any such party's right, power or remedy nor construed to be a waiver of
any such breach or default, or an acquiescence therein, or of any similar
breach or default thereafter occurring, nor shall any waiver of any single
breach or default be deemed a waiver of any other breach or default theretofore
or thereafter occurring. Any waiver, permit, consent or approval of any kind
or character on the part of any party of any breach or default under this
agreement, or any waiver by either party of any provisions of this agreement
shall to be effective be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
agreement or by law or otherwise, shall be cumulative and not alternative.
11.7 Separability. In case any provision of the agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not be affected thereby.
11.8 No Broker. Each party represents and warrants to the other
that it has retained no finder or broker or other like person in connection
with the transactions contemplated by this agreement. The Company shall
indemnify and hold Purchaser harmless, and Purchaser shall indemnify and hold
the Company harmless, from any liability for any commission or compensation in
the nature of an agent's fee to any broker, finder or other person (and the
costs and expenses of defending against such liability or asserted liability)
arising from any act by the Company or Purchaser as the case may be or any of
its employees or representatives.
11.9 Titles and Subtitles. The titles of the sections of this
agreement are for convenience of reference only and are not to be considered in
construing this agreement.
11.10 Counterparts. This agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
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In witness whereof the parties have caused this agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the date and year first written above.
Key Management Bionutrics, Inc.
Employee/Directors:
by
----------------------------------------
Ronald H. Lane, Chief Executive Officer
- -------------------------
Ronald H. Lane AC Humko Corp.
- -------------------------
D. Michael Wells by
----------------------------------------
Wayne Briesemeister
Vice President
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EXHIBIT A
Warrant Agreement dated August 14, 1998 between Bionutrics,
Inc., a Nevada corporation (the "Company"), and AC Humko Corp., a Delaware
corporation and its permitted transferees (hereinafter referred to as
"Holder").
Whereas Holder is purchasing certain securities of the Company
pursuant to that certain stock purchase agreement dated August 14, 1998 (the
"Purchase Agreement"); and
Whereas pursuant to the terms of the Purchase Agreement the
Company has agreed to issue Holder certain warrants to purchase shares of the
Company's Common Stock (as defined in section 8.8); and
Now therefore for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agrees as
follows:
1. Grant. The Company hereby grants to Holder warrants to
purchase up to an aggregate of two million shares of Common Stock ("Warrants")
at the Exercise Price (as defined in section 2), subject to adjustment as
provided in section 8, during the period commencing on the date hereof and
ending at 5:30 p.m. Eastern Standard Time two years thereafter ("Exercise
Period").
2. Exercise Price. The term "Exercise Price" for 2 million
shares of Common Stock shall be $2.00 per share as may be adjusted from time to
time pursuant to Section 8.
3. Warrant Certificate. The warrant certificate delivered
pursuant to this Warrant Agreement shall be in the form set forth in exhibit A
with such appropriate insertions, omissions, substitutions and other variations
as required or permitted by this Warrant Agreement (the "Warrant Certificate").
4. Exercise of Warrants. The Warrants are exercisable at the
Exercise Price and payable to the Company at its executive offices located at
2425 East Camelback Road, Ste. 650, Phoenix, AZ 85016, attn: Chief Financial
Officer (or such other officer as designated to Holder by the Company) by
certified or official bank check in New York Clearing House funds or wire
transfer. Upon surrender of a Warrant Certificate, submission of an
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executed Form of Election to Purchase in the form set forth in Exhibit B and
payment of the Exercise Price, Holder shall be entitled to receive a certificate
for the shares of Common Stock so purchased. The purchase rights represented by
the Warrant Certificate are exercisable at the option of Holder in whole or in
part, but not as to fractional shares of the Common Stock underlying the
Warrants provided the Company shall pay cash in respect of any fraction of a
share that would otherwise be issuable in an amount equal to the same fraction
of the market price per share of the shares of Common Stock underlying the
Warrants on the date of the exercise, as reasonably determined by the Company.
5. Issuance of Certificates. Upon the exercise of Warrants the
Company shall promptly issue to Holder a certificate for the shares of Common
Stock underlying the Warrant Certificate. If Holder purchases less than all
the shares of Common Stock purchasable under the Warrant Certificate, the
Company shall cancel the Warrant Certificate upon the surrender thereof and
shall execute and deliver a new Warrant Certificate of like tenor for the
balance of the shares of Common Stock. Holder shall be deemed the record
holder of the shares of Common Stock on the date of exercise of the Warrant
pursuant to section 4, irrespective of the date of delivery of the Common Stock
certificate.
6. Restriction On Transfer of Warrants. Holder may not sell,
assign, pledge, hypothecate or otherwise transfer any rights under the Warrants
except in compliance with all securities laws. Subject to the above, this
Warrant Agreement and the Warrants are transferable in the same manner and with
the same effect as in the case of a negotiable instrument payable to a
specified person. The Company, however, may treat the registered holder
thereof as the owner hereof for all purposes until the Warrant Certificate is
surrendered for transfer as hereinafter provided. Upon surrender of the
Warrant Certificate at the principal office of the Company, together with a
written assignment thereof duly executed by the holder hereof or his agent or
attorney, the Company shall execute and deliver a new Warrant Certificate in
the name of the assignee or assignees and in the denominations specified in
such instrument of assignment. The Company shall pay all expenses, taxes and
other charges payable in connection with the preparation, execution and
delivery of Warrant Certificate under this section, except that in case such
new Warrant
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is registered in a name or names other than the name of the holder of this
Warrant Agreement all stock transfer taxes payable upon the execution and
delivery of such Warrant Certificate shall be paid by the holder hereof at the
time of the presentation thereof. In such case the holder hereof shall deliver
at the time of such presentation evidence, satisfactory to the Company, that
such taxes have been paid.
7. Registration Under the Securities Act of 1933. Neither the
Warrants nor the shares of Common Stock issuable upon exercise of the Warrants
have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), or any applicable state securities or blue sky laws. Upon
exercise of the Warrants, the Company may cause a legend in substantially the
form set forth below to be placed on each certificate representing the shares
of Common Stock issued.
The shares of stock represented by this certificate have not
been registered under the Securities Act of 1993, as amended
(the "Securities Act"), for public resale and may not be
offered, transferred or sold except pursuant to (i) an
effective registration statement under the Securities Act and
any applicable state securities or blue sky laws, (ii) to the
extent applicable, Rule 144 under the securities act (or any
similar rule under the securities act relating to the
disposition of securities) together with an opinion of counsel
reasonably satisfactory to issuer's counsel that such transfer
is permitted or (iii) an opinion of counsel reasonably
satisfactory to issuer's counsel that an exemption from
registration under the securities act and any applicable state
securities or blue sky laws is available.
8. Adjustments to Exercise and Number of Securities.
8.1 Recapitalization and Reclassifications. If upon a
recapitalization or reclassification the shares of Common Stock are changed
into or become exchangeable for a larger or smaller number of shares, then upon
the effective date thereof the number of shares of Common Stock that Holder
shall be entitled to purchase upon exercise of the Warrants shall be increased
or decreased, as the case may be, in direct proportion to the increase or
decrease in the number of shares of Common Stock by reason of such
recapitalization or reclassification, and the Exercise Price shall be, in the
case of an increase in the number of shares, proportionately decreased and, in
the case of a decrease in the number of shares, proportionately increased.
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8.2 Sale; Merger; Consolidation. Subject to the notice
provisions set forth in section 13, upon a transfer or sale of all or
substantially all the capital stock or assets of the Company or in the case of
any consolidation or merger of the Company with another entity (other than a
consolidation or merger that does not result in any reclassification or change
of the outstanding Common Stock), the transferee, purchaser or entity formed by
or surviving the consolidation or merger, as the case may be, shall execute and
deliver to Holder a supplemental warrant agreement giving Holder the right
during the Exercise Period to receive, upon exercise of the Warrants, the kind
and amount of shares of stock and/or other securities receivable upon such
transfer, sale, consolidation or merger, as the case may be, by a holder of the
number of shares of Common Stock for which such Warrants could have been
exercised immediately prior to such transfer, sale, consolidation or merger. If
such transfer, sale, consolidation or merger results in the shareholders of the
Company receiving cash or publicly traded securities having a value in excess
of the Exercise Price, this Warrant Agreement shall terminate if not exercised
prior to the closing date of such transaction. Such supplemental warrant
agreement shall provide for adjustments identical to the adjustments provided
in this section 8.
8.3 No Adjustment of Exercise Price in Certain Cases. No
adjustment of the Exercise Price shall be made if the amount of an adjustment
is less than $.02 per share of Common Stock provided that any adjustment that
would otherwise be required then to be made shall be carried forward and shall
be made at the time of and together with the next subsequent adjustment that,
together with any such adjustment, amounts to at least $.02 per share of Common
Stock.
8.4 Dividends and Other Distributions. If the Company
declares a dividend payable in shares of Common Stock, Holder shall be entitled
to receive upon exercise of the Warrant, in addition to the number of shares of
Common Stock as to which the Warrant is exercised, such additional shares of
Common Stock as Holder would have received had the Warrant been exercised
immediately prior to such record date for the dividend. If the Company
declares a dividend of securities other than a dividend of Common Stock, Holder
shall thereafter be entitled to receive upon the exercise of such Warrants in
addition to the shares of Common Stock receivable upon the exercise
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of such Warrants, such non-Common Stock dividend as Holder would have received
had the Warrant been exercised immediately prior to such record date for the
dividend. At the time of any such dividend or distribution, the Company shall
make appropriate reserves to ensure the timely performance of this section 8.
Holder shall not be entitled to receive any cash dividend declared by the
Company.
8.5 If the Company issues in a public offering any shares
of Common Stock for a consideration per share less than the prevailing Exercise
Price, then (a) the Exercise Price in effect immediately prior to each such
instance shall be adjusted to a price equal to the quotient obtained by
dividing (i) an amount equal to the sum of the total number of shares of Common
Stock outstanding on a fully diluted basis immediately prior to such issuance
multiplied by the Exercise Price in effect immediately prior to such issuance
(the "Old Common Stock Number"), plus the consideration received by the
Company upon such issuance, by (ii) the total number of shares of Common Stock
outstanding on a fully diluted basis immediately after such issuance (the "New
Common Stock Number"), and (b) the number of shares of Common Stock then
issuable upon the exercise of the Warrants outstanding immediately prior to
each such issuance shall forthwith be adjusted by multiplying such number so
issuable by the quotient obtained by dividing (i) the New Common Stock Number
by (ii) the Old Common Stock Number.
8.6 Except as provided in section 8.5, if the Company
issues shares of Common Stock, or convertible preferred stock, warrants,
options, rights, or other securities only to the extent the aforementioned
securities are convertible into or exchangeable or exercisable for shares of
Common Stock, or rights to subscribe for or to purchase Common Stock or any
stock or securities convertible into or exchangeable or exercisable for Common
Stock, without consideration or for a consideration per share less than the
prevailing Exercise Price then, the Exercise Price in effect immediately prior
to each such issuance shall be decreased and the number of shares of Common
Stock issuable upon the exercise of the Warrants shall be increased pursuant to
the formula set forth in section 8.5 counting as consideration received by the
Company the consideration actually received plus that deemed to be received
upon such conversion or exchange as provided in section 8.7(c).
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8.7 For the purposes of any adjustment of the Exercise
Price and the number of shares of Common Stock issuable upon exercise of the
Warrants pursuant to sections 8.5 and 8.6, the following provisions shall be
applicable:
(a) In the case of the issuance of Common Stock
for cash, the consideration shall be deemed to be the amount
of cash received by the Company therefor.
(b) In the case of the issuance of Common Stock
for a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the "fair
value" of such consideration as determined in the good faith
judgment of the board of directors of the Company.
(c) In the case of the issuance of (x) options to
purchase or rights to subscribe for Common Stock, (y)
securities by their terms convertible into or exchangeable for
Common Stock or (z) options to purchase or rights to subscribe
for such convertible or exchangeable securities:
(i) the aggregate maximum number of
shares of Common Stock deliverable upon exercise of
such options to purchase or rights to subscribe for
Common Stock shall be deemed to have been issued at
the time such options or rights were issued and for a
consideration equal to the consideration (determined
in the manner provided in subsections (a) and (b)
above), if any, received by the Company upon the
issuance of such options or rights plus the minimum
purchase price provided in such options or rights for
the Common Stock covered thereby;
(ii) the aggregate maximum number of
shares of Common Stock deliverable upon conversion of
or in exchange for any such convertible or
exchangeable securities or upon the exercise of
options to purchase or rights to subscribe for such
convertible or exchangeable securities and subsequent
conversion or exchange thereof shall be deemed to
have been issued at the time such securities were
issued or such options or rights were issued and for
a consideration equal to the consideration received
by the Company for any
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such securities and related options or rights
(excluding any cash received on account of accrued
interest or accrued dividends), plus the additional
consideration, if any, to be received by the Company
upon the conversion or exchange of such securities or
the exercise of any related options or rights (the
consideration in each case to be determined in the
manner provided in subsections (a) and (b) above);
(iii) on any change in the number of
shares or exercise price of Common Stock deliverable
upon exercise of any such options or rights or
conversions of or exchange for such convertible or
exchangeable securities, other than a change
resulting from the antidilution provisions thereof,
the Exercise Price and the number of shares of Common
Stock issuable upon exercise of the Warrants shall
forthwith be readjusted to such Exercise Price and to
such number of shares as would have obtained had the
adjustment made at the time of the issuance of such
options, rights or securities not converted prior to
such change been made upon the basis of such change;
and
(iv) on the expiration of any such option
or rights, the termination of any such rights to
convert or exchange or the expiration of any options
or rights related to such convertible or exchangeable
securities, the Exercise Price and the number of
shares of Common Stock issuable upon exercise of the
Warrants shall forthwith be readjusted to such
Exercise Price and to such number of shares as would
have obtained had such options, rights, securities or
options or rights related to such securities not been
issued.
8.8 Definition of Common Stock. The term "Common Stock"
shall mean:
(a) the class of stock designated as Common
Stock in the Company's Articles of Incorporation, as may be amended,
or any other class of stock resulting from successive changes or
reclassifications of such Common Stock; and
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(b) if, as a result of an adjustment made
pursuant to this section 8, Holder shall upon exercise of the Warrants
become entitled to receive securities or assets other than Common Stock
then, wherever appropriate, all references herein to shares of Common
Stock shall be deemed to refer to and include such other securities or
assets and thereafter the number of such other securities or assets
shall be subject to adjustment from time to time in a manner and upon
terms as nearly equivalent as practicable to the provisions of this
section
9. Issuance of New Warrant Certificate. Upon receipt by the
Company of evidence reasonably satisfactory to it of a loss, theft, destruction
or mutilation of a Warrant Certificate, reimbursement by Holder to the Company
of all incidental expenses and, in the case of loss, theft or destruction,
receipt of indemnity or security from Holder reasonably satisfactory to it or,
in the case of a mutilated Warrant Certificate, upon surrender and cancellation
thereof, the Company shall make and deliver a new Warrant Certificate to
Holder.
10. Elimination of Fractional Interests. The Company shall not be
required to issue certificates representing fractions of shares of Common Stock
upon the exercise of the Warrants. The Company shall have the option to make
payment in cash in respect of any fractional shares or to round any fraction up
to the nearest whole number of shares of Common Stock.
11. Reservation and Listing of Securities. The Company shall at
all times reserve and keep available out of its authorized shares of Common
Stock, solely for the purpose of issuance upon the exercise of the Warrants,
such number of shares of Common Stock as shall be issuable upon the exercise
thereof. The Company covenant and agrees that, upon exercise of the Warrants
and payment of the Exercise Price by Holder, all shares of Common Stock
issuable upon such exercise shall be duly and validly issued, fully paid and
non-assessable.
12. Representations and Warranties.
12.1 Holder represents and warrants to the Company that
the Warrants are being acquired solely for Holder's own account, for
investment, not for the interest of any other and are not being acquired with a
view to
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or for resale, distribution, assignment, subdivision or fractionalization
thereof, and Holder has no present plan to enter into any contract,
undertaking, agreement or arrangement for such purpose.
12.2 Holder represents and warrants to the Company that it
is an "Accredited investor" and a "sophisticated investor," each as defined in
the Regulation D promulgated under the Securities Act.
13. Advance Notice to Warrant Holder re: Dividend, Exchange,
Merger, etc. Nothing contained in this Warrant Agreement shall be construed as
conferring upon Holder the right to vote, consent or receive notice as a
stockholder in respect of any meeting of stockholders for the election of
directors or any other matter, or as having any right as a stockholder of the
Company. If, however, at any time prior to the expiration of the Warrants and
their exercise, any of the following events shall occur:
(a) the Company takes a record of the holders of its
shares of Common Stock for the purpose of entitling them to receive a
dividend or distribution payable other than in cash, or a cash
dividend or distribution payable otherwise than out of current or
retained earnings, as indicated by the accounting treatment (which
treatment shall be in accordance with generally accepted accounting
principles) of such dividend or distribution on the books of the
Company; or
(b) the Company offers to all the holders of its
Common Stock any additional shares of capital stock of the Company or
securities convertible into or exchange for shares of capital stock of
the Company, or any option, right or warrant to subscribe therefor; or
(c) a dissolution, liquidation, winding up,
transfer, consolidation, merger or a sale of all or substantially all
its property, assets and business as an entirety is proposed; the
Company shall give notice of such event at least 15 days prior to the
date fixed as a record date or the date of the closing the transfer
books for the determination of the stockholders entitled to such
dividend, distribution, convertible or exchangeable securities or
subscription rights, or entitled to vote on such proposed dissolution,
liquidation, winding up or sale. Such notice shall specify such
record date or the date of closing the transfer books, as the case may
be. Failure to give such notice or any defect therein shall not
affect the validity of any action
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<PAGE> 46
taken in connection with the declaration or payment of any such
dividend, or the issuance of any convertible or exchangeable
securities, or subscription rights, options or warrants, or any
proposed dissolution, liquidation, winding up or sale.
14. Notices. Any notice or demand pursuant to this Warrant
Agreement shall be in writing and shall be deemed sufficiently given or made
(a) upon personal delivery (b) the next business day following delivery to a
reputable overnight courier or (c) three days following mailing by certified or
registered mail, return receipt requested, postage prepaid, and addressed,
until the other party is notified of another address, as follows:
If to the Company:
Bionutrics, Inc.
2425 East Camelback Road
Suite 650
Phoenix, AZ 85016
Attn: Ronald H. Lane, Chief Executive Officer
with a copy to:
Friedman Siegelbaum LLP
399 Park Avenue
20th Floor
New York, New York 10022
Attn: J. Robert Horton, Esq.
If to Holder:
AC Humko Corp.
P.O. Box 343
Memphis, Tennessee 38101
Attn: Daniel S. Antonelli
with a copy to:
Vinson & Elkins LLP
1001 Fannin Street (Suite 2900)
Houston, TX 77002
Attn: Brian Sokolik, Esq.
15. Successors. All the covenants and provisions of this Warrant
Agreement shall be binding upon and inure to the benefit of the Company, Holder
and their respective successors and permitted assigns hereunder.
16. Governing Law; Submission to Jurisdiction. (a) This Warrant
Agreement and each Warrant Certificate issued hereunder shall be deemed to be a
contract made under the laws of the State of New York and for
A-10
<PAGE> 47
all the purposes shall be construed in accordance with the laws of said State
without giving effect to the rules thereof governing conflicts of laws.
(b) Any action, proceeding or claim against either party hereto
arising out of, or relating in any way to, this Warrant Agreement shall be
brought and enforced in the courts of the State of New York or of the United
States of America for the Southern District of New York, and the parties
hereto irrevocably submit to such jurisdiction, which jurisdiction shall be
exclusive. The parties irrevocably waive any objection to such exclusive
jurisdiction including on the ground of inconvenient forum. Any such process
or summons to be served upon either party hereto may (at the option of any
party bringing such action, proceeding or claim) be served in accordance with
section 14. The prevailing party in any such action or proceeding shall be
entitled to recover from the other party its reasonable legal costs and expense
incurred in connection with such action or proceeding.
17. Entire Agreement; Modification. This Warrant Agreement
contains the entire understanding between the parties with respect to the
subject matter hereof and may not be modified or amended except in writing by
both parties.
18. Severability. If any provision of this Warrant Agreement
shall be held to be invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provision hereof.
19. Captions. The caption headings of the sections of this
Warrant Agreement are for convenience of reference only and are not intended,
nor should they be construed as, a part of this Warrant Agreement and shall be
given no substantive effect.
20. Benefits of this Warrant Agreement. Nothing in this Warrant
Agreement shall be construed to give to any person or entity other than the
Company and Holder any legal or equitable right, remedy or claim hereunder and
this Warrant Agreement shall be for the sole and exclusive benefit of the
Company and Holder.
[INTENTIONALLY LEFT BLANK]
[CONTINUES ON FOLLOWING PAGE]
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<PAGE> 48
22. Counterparts. This Warrant Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and such counterparts shall together constitute but
one and the same instrument.
In Witness Whereof the parties hereto have caused this Warrant
Agreement to be duly executed, as of the day date in the preamble hereof.
Bionutrics, Inc.
by:
---------------------------------------
Ronald H. Lane, Chief Executive Officer
AC Humko Corp.
by:
---------------------------------------
Wayne Briesemeister, Vice President
A-12
<PAGE> 49
Exhibit A-1
Form of Warrant Certificate
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF STOCK ISSUABLE
UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), FOR PUBLIC RESALE AND MAY NOT BE OFFERED,
TRANSFERRED OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES OR BLUE SKY LAWS,
(ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER THE SECURITIES ACT (OR ANY
SIMILAR RULE UNDER THE SECURITIES ACT RELATING TO THE DISPOSITION OF
SECURITIES) TOGETHER WITH AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
ISSUER'S COUNSEL THAT SUCH TRANSFER IS PERMITTED OR (iii) AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO ISSUER'S COUNSEL THAT AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES OR BLUE SKY LAWS
IS AVAILABLE.
THE EXERCISE, TRANSFER AND EXCHANGE OF THE WARRANTS REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO THE WARRANT AGREEMENT BETWEEN BIONUTRICS, INC. AND
AC HUMKO CORP.
2,000,000 Warrants
Warrant Certificate
This Warrant Certificate certifies that AC Humko Corp., a Delaware
corporation, is the registered holder of 2,000,000 warrants to purchase, at any
time from August 14, 1998, until 5:30 p.m. Eastern Standard Time on August 14,
2000 ("Expiration Date"), up to 2,000,000 fully-paid and non-assessable shares
of common stock, par value $.001 per share ("Common Stock"), of Bionutrics,
Inc. (the "Company") at an exercise price determined pursuant to section 2 of
the Warrant Agreement dated August 14, 1998 between the Company and AC Humko
Corp. (the "Warrant Agreement"), upon surrender of this Warrant Certificate and
payment of such exercise price to the Company and subject to the Warrant
Agreement.
At 5:31 p.m. Eastern Standard Time on the Expiration Date all Warrants
evidenced hereby, unless exercised prior thereto, shall be void.
<PAGE> 50
INTENTIONALLY LEFT BLANK]
[CONTINUES ON FOLLOWING PAGE]
<PAGE> 51
The Warrant Agreement is hereby incorporated by reference and made a
part of this Warrant Certificate and is hereby referred to for a description of
the rights, obligations, duties and restrictions of the Company and holder of
the Warrants.
In Witness Whereof, the Company has caused this Warrant Certificate to
be duly executed on this 14 day of August 1998.
Bionutrics, Inc.
by:
---------------------------------------
Ronald H. Lane, Chief Executive Officer
<PAGE> 52
Exhibit B
Form of Election to Purchase
The undersigned hereby irrevocably elects to exercise the right
represented by the attached Warrant Certificate to purchase ______ shares of
common stock, par value $.001, of Bionutrics, Inc. at an exercise price of
$____ per share and herewith tenders in payment for such stock a certified or
official bank check payable in New York Clearing House Funds to the order of
Bionutrics, Inc. or if so indicated below had arranged for wire transfer to
Bionutrics's account as set forth on the attached wire transfer information in
the amount of $___________.
AC Humko Corp.
by:
---------------------------------------
Daniel S. Antonelli,
Chief Executive Officer
<PAGE> 53
EXHIBIT D
TECHNOLOGY AGREEMENT
This TECHNOLOGY AGREEMENT (this "Agreement") is made and entered into
effective as of August 14th, 1998, (the "Effective Date"), by and between
Bionutrics, Inc., a Nevada corporation, with a place of business at 2425 E.
Camelback Road, Suite 650, Phoenix, Arizona 85016 ("Bionutrics"); Bionutrics
Health Products, Inc., a Delaware corporation, with a place of business at 2425
E. Camelback Road, Suite 650, Phoenix, Arizona 85016 ("BHP"); Nutrition
Technology Corporation, a Nevada corporation with a place of business at 2425
E. Camelback Road, Suite 650, Phoenix, Arizona 85016 ("NTC"); InCon
Technologies, Inc., a Delaware corporation with a place of business at 2425 E.
Camelback Road, Suite 650, Phoenix, Arizona 85016 ("InCon"); LipoGenics, Inc.,
a Delaware corporation, with a place of business at 2425 E. Camelback Road,
Suite 650, Phoenix, Arizona 85016 ("LipoGenics"); and Bionutrics International,
Ltd., a British Virgin Islands corporation, with a place of business at 2425 E.
Camelback Road, Suite 650, Phoenix, Arizona 85016 ("Bionutrics International");
(collectively the "Bionutrics Entities"); and AC Humko Corp., a Delaware
corporation, with a place of business at 7171 Goodlett Farms Parkway, Memphis,
Tennessee 38018 ("ACH").
W I T N E S S E T H:
WHEREAS, Bionutrics and ACH are entering into a Stock Purchase
Agreement, certain Bionutrics Entities will enter into a Supply Agreement with
ACH, and certain Bionutrics Entities will enter into an Agreement for Purchase
and Sale of Assets in connection with this Technology Agreement with ACH;
In consideration of the payment hereunder, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the Bionutrics Entities, the Bionutrics Entities, jointly and
severally, and ACH agree as follows.
1. DEFINITIONS.
(a) "Intellectual Property" shall refer to all intellectual
property rights, including but not limited to, all Patents, Trade Secrets,
Copyrights, and Trademarks, owned by the Bionutrics Entities, whether solely or
jointly, that are used or can be used within the ACH Field of Use.
(b) "Patents" shall refer to (i) all patents, together with any
foreign counterpart patents or foreign counterpart patent applications, as well
as any reissued and reexamined patents and extensions corresponding to the
patents that are used or can be used within the ACH Field of Use, (ii) all
patent applications, as well as any related continuation, continuation in part,
and divisional applications and patents issuing therefrom and any respective
foreign counterpart foreign patent applications or foreign
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patents issuing therefrom that are used or can be used within the ACH Field of
Use; provided, however, the foreign counterpart patents and foreign counterpart
patent applications shall be limited to North America. The Patents include,
but are not limited to, the patents and patent applications listed on Exhibit 1
(which include the Joint Subject Matter Patents).
(c) "Joint Subject Matter Patents" shall refer to those Patents
that include claims directed to both (i) the ACH Field of Use; and (ii) the
Bionutrics Field of Use. As to all present patents and patent applications
listed on Exhibit 1, the parties hereby agree that the patents and patent
applications that are not listed under the heading "Joint Subject Matter
Patents" are not Joint Subject Matter Patents and are therefore within the
scope of the assignment in Section 2(a).
(d) "Trade Secrets" shall refer to all secret, confidential or
non-public information or know-how owned by the Bionutrics Entities, whether
solely or jointly, including but not limited to, information, ideas, concepts,
improvements, discoveries, inventions, applications of products and services,
results of investigations, studies or experiments products, processes,
compositions, samples, formulas, computer programs, computer hardware designs,
computer firmware designs, and servicing, marketing or manufacturing methods
and techniques that are used or can be used within the ACH Field of Use. The
Trade Secrets include, but are not limited to, the Trade Secrets listed on
Exhibit 2.
(e) "Copyrights" shall refer to all works of authorship owned by
the Bionutrics Entities, whether solely or jointly, or authored by the
Bionutrics Entities, whether solely or jointly that are used or can be used
within the ACH Field of Use. The Copyrights include, but are not limited to,
the Copyrights listed on Exhibit 3.
(f) "North America" shall refer to United States of America,
Canada, and Mexico.
(g) "Trademarks" shall refer to the trademarks, service marks, and
trade names, and the goodwill associated with such trademarks, service marks,
and trade names, listed on Exhibit 4.
(h) The "ACH Field of Use" shall refer to the processing in North
America of rice, rice bran, rice bran protein, rice bran oil, and other
rice-derived products (including but not limited to such processes as crushing,
stabilization, extraction, dewaxing, degumming, caustic refining and
deodorization), but excluding any processing steps following deodorization.
The ACH Field of Use expressly excludes processing steps involving Tocols that
occur downstream of deodorization such as the isolation, crystallization,
chromatography or molecular distillation of Tocols.
(i) The "Bionutrics Field of Use" shall refer to all technology
not included within the ACH Field of Use, including all compositions of matter
(including formulations, compounds, foodstuffs and dietary supplements),
methods for treating/preventing diseases and processes not included in the ACH
Field of Use.
(j) "Tocols" shall refer to tocotrienols, tocopherols and mixtures
thereof.
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<PAGE> 55
(k) "Rice Bran Oil Distillate" shall refer to all rice bran oil
distillate that is not a Bionutrics Distillate.
(l) "Bionutrics Distillate" shall refer to rice bran oil
distillate that is produced using either (i) the tocotrienol enhancing
processes that are claimed in claims 31, 32, 34, 35 and 39 of United States
Patent No. 5,591,772 or (ii) the tocotrienol enhancing processes that are
described and claimed in any U.S. patent that issues from the pending U.S.
patent applications 07/952,615 or 08/583,232 as a second stabilization process.
(m) "Clearesterol" shall refer to any tocotrienol rich fraction
actually obtained from a Bionutrics Distillate.
(n) "Affiliate" shall mean any Person directly or indirectly
controlling, controlled by, or under direct or indirect common control with,
any other Person. A Person shall be deemed to control a corporation or similar
legal entity if such Person possesses, directly or indirectly, the power to
direct or cause the direction of the management and policies of such
corporation or similar legal entity, whether through the ownership of voting
securities, by contract or otherwise.
(o) "Person" shall mean any natural person, firm, partnership,
association, corporation, limited liability company, company, trust, entity,
public body or government.
2. ASSIGNMENT OF RIGHTS TO ACH.
(a) The Bionutrics Entities, individually and jointly, agree to
assign and transfer and hereby assign and transfer to ACH all of the right,
title and interest in and to all of the Intellectual Property, including but
not limited to, the Patents (excluding the Joint Subject Matter Patents), the
Trade Secrets, the Copyrights, and the Trademarks, including the right to sue
for all past, present, and future infringements and misappropriation, including
damages, of such Intellectual Property, in North America.
(b) The Bionutrics Entities, individually and jointly, agree to
assign and transfer and hereby assign and transfer to ACH an undivided joint
and equal interest in and to all of the Joint Subject Matter Patents. The
Bionutrics Entities and ACH hereby agree as follows with respect to their
respective rights and duties as to the Joint Subject Matter Patents:
(i) ACH shall have the exclusive rights as to all claims
that cover the ACH Field of Use. The Bionutrics Entities shall have
no right to grant any license, release, or immunity from suit as to
the ACH Field of Use, and the Bionutrics Entities shall have no right
to make, use, offer to sell, sell the patented invention within the
ACH Field of Use or import the patented invention within the ACH Field
of Use. As to United States Patent No. 5,591,772, ACH and the
Bionutrics Entities agree that the ACH Field of Use specifically
includes claims 31, 32, 34, 35 and 39.
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<PAGE> 56
(ii) ACH shall have the exclusive right to sue in the name
of ACH (or if so required by the law of the forum, to bring suit in
the name of one or all of the Bionutrics Entities or join one or all
of the Bionutrics Entities as a party plaintiff with ACH) for all
past, present, and future infringement, including damages, of such
Joint Subject Matter Patents within the ACH Field of Use. Whenever
such suit is brought by ACH as provided above, ACH shall notify the
Bionutrics Entities in writing of such suit. The Bionutrics Entities
shall have the right, in any such suit brought by ACH, to be
represented at their own expense by counsel of their own selection;
provided, however, that ACH shall have control over such suit and any
settlement of such suit, except that ACH shall not enter into or agree
to an order, consent judgment, or the like that invalidates any of the
claims of the Joint Subject Matter Patents. The Bionutrics Entities
shall fully cooperate with ACH in the bringing of such suit, including
making their employees available as needed for such suit.
(iii) The Bionutrics Entities shall have the exclusive
rights as to all claims that cover the Bionutrics Field of Use. ACH
shall have no right to grant any license, release, or immunity from
suit as to the Bionutrics Field of Use, and ACH shall have no right to
make, use, offer to sell, sell the patented invention within the
Bionutrics Field of Use, or import the patented invention within the
Bionutrics Field of Use. As to the United States Patent No.
5,591,772, ACH and the Bionutrics Entities agree that the Bionutrics
Field of Use specifically includes claims 1 - 30, 33, and 36-38.
(iv) The Bionutrics Entities shall have the exclusive
right to sue in the name of the Bionutrics Entities (or if so required
by the law of the forum, to bring suit in the name of ACH or join ACH
as a party plaintiff with the Bionutrics Entities) for all past,
present, and future infringement, including damages, of such Joint
Subject Matter Patents within the Bionutrics Field of Use. Whenever
such suit is brought by the Bionutrics Entities as provided above, the
Bionutrics Entities shall notify ACH in writing of such suit. ACH
shall have the right, in any such suit brought by the Bionutrics
Entities, to be represented at its own expense by counsel of its own
selection; provided, however, that the Bionutrics Entities shall have
control over such suit and any settlement of such suit, except that
the Bionutrics Entities shall not enter into or agree to an order,
consent judgment, or the like which invalidates any of the claims of
the Joint Subject Matter Patents. ACH shall fully cooperate with the
Bionutrics Entities in the bringing of such suit, including making
employees available as needed for such suit.
(v) In the event that a suit involves issues as to both
the ACH Field of Use and the Bionutrics Field of Use, both parties
shall have the right to control the litigation as to their specific
Fields of Use. In the event that a suit is filed under Section
2(b)(i) - (iv), the party not controlling the suit shall have no
financial responsibility for the suit beyond the expense of its own
counsel.
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<PAGE> 57
(c) Subject to the terms of Section 2(f), the Bionutrics Entities
hereby agree to assign and transfer, and do hereby assign and transfer to ACH,
all right, title and interest in and to all Intellectual Property, including
but not limited to, the Patents (excluding the Joint Subject Matter Patents),
the Trade Secrets, and the Copyrights, developed, conceived, reduced to
practice, or acquired, whether by purchase or license, by any of or all of the
Bionutrics Entities for ten (10) years after the Effective Date of this
Agreement, including the right to sue for all past, present, and future
infringements and misappropriation, including damages, of such Intellectual
Property, in North America.
(d) Subject to the terms of Section 2(f), the Bionutrics Entities
hereby assign and transfer and do hereby assign and transfer unto ACH an
undivided joint and equal interest in and to all of the Joint Subject Matter
Patents developed, conceived, reduced to practice, or acquired, whether by
purchase or license, by any of or all of the Bionutrics Entities for ten (10)
years after the Effective Date of this Agreement. The Bionutrics Entities and
ACH hereby agree that Section 2(b)(i) - (v) shall also govern with respect to
their respective rights and duties as to the Joint Subject Matter Patents under
this Section 2(d).
(e) The division of rights as to the Joint Subject Matter Patents
in this Section 2:
(i) shall not be construed to provide any of the
Bionutrics Entities with any right, claim, or cause of action against
ACH or its Affiliates arising out of the sale of products resulting
from the processing of rice, rice bran, rice bran oil, lecithin,
waxes, rice bran protein, Rice Bran Oil Distillates or any other
rice-derived products using any processing steps up through and
including deodorization such as crushing, stabilization, extraction,
dewaxing, degumming, caustic refining and deodorization.
(ii) shall be construed as absolutely and unconditionally
allowing the use and sale by ACH and its Affiliates of rice bran oil,
lecithin, waxes, rice bran protein, Rice Bran Oil Distillates or any
other rice-derived products produced by ACH or its Affiliates using
the Joint Subject Matter Patents or Intellectual Property,
(iii) shall be construed as allowing third parties
acquiring such rice bran oil, lecithin, waxes, rice bran protein, Rice
Bran Oil Distillates or any other rice-derived products produced by
ACH or its Affiliates using the Joint Subject Matter Patents or
Intellectual Property to use and sell such rice bran oil, lecithin,
waxes, rice bran protein, Rice Bran Oil Distillates or any other
rice-derived products without claims and causes of action asserted by
the Bionutrics Entities.
(iv) If a third party acquires such rice bran oil,
lecithin, waxes, rice bran protein, Rice Bran Oil Distillates or any
other rice-derived products produced by ACH or its Affiliates and such
third party either modifies or uses such rice bran oil, lecithin,
waxes, rice bran protein, Rice Bran Oil Distillates or any other
rice-derived products in such a way that it infringes the Bionutrics
Entities Field of Use, then the Bionutrics Entities shall have no
claim, cause of action, or remedy against ACH or its Affiliates for
inducing such alleged infringement or for ACH's sale of such rice bran
oil, lecithin, waxes, rice bran protein, Rice Bran Oil
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<PAGE> 58
Distillates or any other rice-derived products; provided, however, the
Bionutrics Entities shall retain all rights and remedies against any
third parties for such third party's allegedly infringing acts.
(f) As to Intellectual Property within the scope of Sections 2(c)
and (d) involving stabilization processes within the ACH Field of Use, the
Bionutrics Entities agree that all such Intellectual Property is hereby
assigned and transferred to ACH as set forth in Sections 2(a) and 2(b). As to
such Intellectual Property regarding stabilization processes, the Bionutrics
Entities shall disclose such Intellectual Property as set forth in Section 7
herein. As to such Intellectual Property regarding stabilization for which
there are rights outside the ACH Field of Use, neither ACH nor the Bionutrics
Entities shall file a patent application anywhere in the world without the
agreement of the other party. As to any other Intellectual Property within the
scope of Sections 2(c) and (d) involving processing steps in the ACH Field of
Use after stabilization up to and through deodorization, the assignments
contemplated under Sections 2(c) and (d) shall be subject to the following
terms: All right, title and interest in and to such Intellectual Property will
remain in the Bionutrics Entities. The Bionutrics Entities shall disclose such
Intellectual Property as set forth in Section 7 herein and provide ACH with the
opportunity to acquire the exclusive rights to such Intellectual Property
within the ACH Field of Use. The parties shall negotiate confidentially in
good faith the price or consideration for the transfer of such Intellectual
Property. If ACH and the Bionutrics Entities are unable to agree as to the
consideration, then the Bionutrics Entities shall not use or disclose such
Intellectual Property to any third party.
(g) This Agreement is being entered in connection with and
ancillary to the Supply Agreement entered into by the parties on the Effective
Date.
3. PAYMENT. In consideration of the assignment and
representations and warranties herein, the Company agrees to pay the Bionutrics
Entities Two Million Dollars ($2,000,000.00) by wire transfer at the time of
the Closing. Such amount shall be wire transferred to the following account in
accordance with the following wire transfer transactions:
WELLS FARGO BANK
ABA # 121000248
Credit Account # 4068001460
REF: Bionutrics, Inc.
0902307400
Attn: Wire Room Calabasas
Malibu Canyon, CA
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<PAGE> 59
Payment to such account in accordance with the foregoing instructions shall
constitute payment to all Bionutrics Entities and ACH shall not be responsible
for the application of such amount among the Bionutrics Entities.
4. REPRESENTATIONS AND WARRANTIES. The Bionutrics Entities
represent and warrant that:
(a) the Bionutrics Entities are legally free to make and perform
this Agreement, that the Bionutrics Entities have no obligation to any other
person or entity that would affect or conflict with any of their obligations
hereunder, and that the complete performance of the Bionutrics Entities'
obligations hereunder will not violate any law, regulation, order or decree of
any governmental or judicial body or contract by which any of the Bionutrics
Entities is bound;
(b) the patents and patent applications listed on Exhibit 1 are
the only patents or patent applications for which the Bionutrics Entities own
or have filed, jointly or solely, that relate to the ACH Field of Use;
(c) the Bionutrics Entities have not transferred to any third
party, by assignment, mortgage, security interest, license, or otherwise, any
of the rights or title in and to any of the Intellectual Property; and
(d) the Bionutrics Entities have full legal and equitable title to
the Intellectual Property.
5. THE BIONUTRICS ENTITIES' COVENANT.
(a) The Bionutrics Entities, in order to induce ACH to enter into
this Agreement, expressly covenant and agree that during the Excluded Period,
the Bionutrics Entities will not, and the Bionutrics Entities will cause their
Affiliates not to, directly or indirectly, own, manage, operate, join, control
or participate in with any business, individual, partnership, firm or
corporation, which engages in any business that provides services within the
ACH Field of Use in North America. As used in this Section 5, "Excluded
Period" shall mean the term of this Technology Agreement, but commencing only
upon the Closing Date of the transfer of assets pursuant to the Agreement for
Purchase and Sale of Assets.
(b) Notwithstanding the restrictions contained in Section 5(a),
the Bionutrics Entities or any of their Affiliates may own an aggregate of not
more than 2.5% of the outstanding stock of any class of any corporation engaged
in a business within the ACH Field of Use, if such stock is listed on a
national securities exchange or regularly traded in the over-the-counter market
by a member of a national securities exchange, without violating the provisions
of Section 5(a), provided that none of Sellers or their Affiliates have the
power, directly or indirectly, to control or direct the management or affairs
of any such corporation and are not involved in the management of such
corporation.
(c) The Bionutrics Entities further expressly covenant and agree
that for a period of two years from and after the Closing Date, the Bionutrics
Entities will not, and the Bionutrics Entities will cause their Affiliates not
to (1) engage or employ, or solicit or contact with a view to the engagement
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<PAGE> 60
or employment by any person who is (or in the twelve months prior to the
Closing Date has been) an officer or employee of NTC; or (2) canvass, solicit,
approach or entice away or cause to be canvassed, solicited, approached or
enticed away from ACH any person who or which is (or in the twelve months prior
to the Closing Date has been) a customer or client of NTC.
(d) To the extent that any part of this Section 5 may be invalid,
illegal or unenforceable for any reason, it is intended that such part shall be
enforceable to the extent that a court of competent jurisdiction shall
determine that such part, if more limited in scope, would have been
enforceable, and such part shall be deemed to have been so written and the
remaining parts shall as written be effective and enforceable in all events.
(e) The Bionutrics Entities and ACH agree and acknowledge that the
limitations as to time, geographical area and scope of activity to be
restrained as set forth in this Section 5 do not impose any greater restraint
than is necessary to protect the legitimate business interests of ACH. The
Bionutrics Entities and ACH further agree and acknowledge that, in the event of
a breach or threatened breach of any of the provisions of this Section 5, ACH
shall be entitled to immediate injunctive relief, as any such breach would
cause ACH irreparable injury for which it would have no adequate remedy at law.
Nothing herein shall be construed so as to prohibit ACH from pursuing any other
remedies available to it hereunder, at law or in equity for any such breach or
threatened breach.
(f) The Bionutrics Entities hereby represent to ACH that they have
read and understand, and agree to be bound by, the terms of this Section. The
Bionutrics Entities acknowledge that the geographic scope and duration of the
covenants contained in this Section are the result of arm's-length bargaining
and are fair and reasonable in light of (i) the nature and wide geographic
scope of the operations of NTC, (ii) the Bionutrics Entities' level of control
over and contact with NTC business and operations in all jurisdictions where
same are conducted, (iii) the fact that the NTC business is conducted
throughout the geographic area where competition is restricted by this
Agreement, and (iv) the amount of consideration that the Bionutrics Entities
are receiving in connection with the Agreement and the amount of the goodwill
for which ACH is paying. It is the desire and intent of the parties that the
provisions of this Agreement be enforced to the fullest extent permitted under
applicable law, whether now or hereafter in effect and therefore, to the extent
permitted by applicable law, the parties hereto waive any provision of
applicable law that would render any provision of this Section 5 invalid or
unenforceable.
(g) From and after the Effective Date of this Agreement, none of
the Bionutrics Entities will directly or indirectly use in any manner any trade
name, trademark, service mark or logo listed on Exhibit 4 or any word or logo
that is similar in sound or appearance.
6. ACH'S COVENANT.
(a) ACH, in order to induce The Bionutrics Entities to enter into
this Agreement, expressly covenants and agrees with Bionutrics that during
Excluded Period, ACH will not, and ACH will cause their Affiliates not to,
directly or indirectly, own, manage, operate, join, control or participate in
with
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<PAGE> 61
any business, individual, partnership, firm or corporation, other than the
Bionutrics Entities, which engages in any business that markets or sells
Clearesterol in North America. As used in this Section, "Excluded Period"
shall mean the time period during which the claims of the United States Patent
No. 5,591,772 covering the marketing and sale of Clearesterol (and not methods
for its use) remain valid and enforceable but in no event shall the Excluded
Period extend beyond the term of this Technology Agreement. In addition, the
Excluded Period shall commence upon the Closing Date of the transfer of assets
pursuant to the Agreement for Purchase and Sale of Assets. The covenant is
this Section 6 shall only run in favor of Bionutrics and shall not be
assignable or transferable to a third party.
(b) Notwithstanding the restrictions contained in Section 6(a),
ACH or any of its Affiliates may own an aggregate of not more than 2.5% of the
outstanding stock of any class of any corporation (other than the Bionutrics
Entities) engaged in a business that markets or sells Clearesterol in North
America, if such stock is listed on a national securities exchange or regularly
traded in the over-the-counter market by a member of a national securities
exchange, without violating the provisions of Section 6(a) provided that none
of ACH or its Affiliates have the power, directly or indirectly, to control or
direct the management or affairs of any such corporation and are not involved
in the management of such corporation.
(c) To the extent that any part of this Section may be invalid,
illegal or unenforceable for any reason, it is intended that such part shall be
enforceable to the extent that a court of competent jurisdiction shall
determine that such part, if more limited in scope, would have been
enforceable, and such part shall be deemed to have been so written and the
remaining parts shall as written be effective and enforceable in all events.
(d) ACH agrees and acknowledge that the limitations as to time,
geographical area and scope of activity to be restrained as set forth in this
Section 6 do not impose any greater restraint than is necessary to protect the
legitimate business interests of the Bionutrics Entities. ACH further agrees
and acknowledges that, in the event of a breach or threatened breach of any of
the provisions of this Section 6, the Bionutrics Entities shall be entitled to
immediate injunctive relief, as any such breach would cause the Bionutrics
Entities irreparable injury for which it would have no adequate remedy at law.
Nothing herein shall be construed so as to prohibit the Bionutrics Entities
from pursuing any other remedies available to it hereunder, at law or in equity
for any such breach or threatened breach.
(e) ACH hereby represents to the Bionutrics Entities that it has
read and understands, and agrees to be bound by, the terms of this Section 6.
ACH acknowledges that the geographic scope and duration of the covenants
contained in this Section 6 are the result of arm's-length bargaining and are
fair and reasonable in light of the nature and wide geographic scope of the
operations of ACH, (ii) ACH's level of contact with the business and operations
of Bionutrics Entities in all jurisdictions where same are conducted, (iii) the
fact that the ACH business is conducted throughout the geographic area where
competition is restricted by this Agreement, and (iv) ACH's access to
Bionutrics Intellectual Property, including Trade Secrets, granted in this
Agreement. It is the desire and intent of the parties that the provisions of
this Agreement be enforced to the fullest extent permitted under applicable
law, whether now or hereafter in effect and therefore, to the extent permitted
by applicable law, the parties hereto waive any provision of applicable law
that would render any provision of this Section 6 invalid or unenforceable.
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<PAGE> 62
7. FURTHER ACTS AND COOPERATION. At the request of ACH, the
Bionutrics Entities, individually or jointly as may be requested by ACH, shall
execute any and all papers and perform all lawful acts that ACH may deem
necessary or appropriate to further evidence or carry out the transactions
contemplated in this Agreement including, without limitation, such acts as may
be necessary for the preparation, filing, prosecution, and maintenance of
applications for United States letters patent and foreign letters patent, the
assignment of United States letters patent and foreign letters patent
(including but not limited to those patents identified on Exhibit 1 and
assigned under Section 2(a)), or for United States and foreign copyright, on
the Intellectual Property. The Bionutrics Entities shall also assist and fully
cooperate in every way, at ACH's expense, in securing, maintaining, and
enforcing, for the benefit of ACH or its designee, patents, copyrights or other
types of proprietary or intellectual property protection for the Intellectual
Property in any and all countries. In addition, the Bionutrics Entities shall
disclose and provide to ACH all documents bearing, embodying or disclosing the
Intellectual Property so as to allow ACH to practice and protect such
Intellectual Property. With respect to Intellectual Property within the scope
of Sections 2(c) and (d), the Bionutrics Entities shall make disclosures of the
current status and details of any such Intellectual Property, including any
projects, developments, or research within the ACH Field of Use, every six
months. These disclosures shall take place in status meetings to be scheduled
by ACH. ACH shall notify the Bionutrics Entities of such status meetings. If
no status meeting takes place for six months or longer because ACH fails to
schedule such meetings, the Bionutrics Entities will not be in default of this
provision. Once ACH notifies that no status meeting has taken place for six
months, the next status meeting shall take place promptly but no later than
thirty (30) days after such notice.
8. RESTRICTIONS ON TRADE SECRETS AND CONFIDENTIAL INFORMATION.
(a) During the term of this Agreement and thereafter, each of the
Bionutrics Entities agrees not to disclose to others, use, copy or permit to be
copied, except with the express written approval of ACH, its successors,
assigns or nominees, any of the Trade Secrets assigned hereunder without the
prior written consent of ACH.
(b) As to disclosures by the Bionutrics Entities of Intellectual
Property involving processing steps in the ACH Field of Use after stabilization
up to and through deodorization described in Section 2(f) and as to any
disclosures by ACH of confidential information or trade secrets regarding the
ACH Field of Use other than the Trade Secrets or developed, conceived, reduced
to practice, or acquired, whether by purchase or license, by ACH or its
Affiliates during the term of this Agreement, (collectively referred to in this
Section 8 as "Confidential Information"):
(i) ACH and the Bionutrics Entities agree to hold such
Confidential Information owned by the other party in the strictest confidence
and shall exercise due care to prevent the unauthorized disclosure of such
information or its use for any unauthorized purpose.
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<PAGE> 63
(ii) ACH and the Bionutrics Entities shall only disclose the
Confidential Information of the other party to their employees and officers
(and consultants, attorneys, and accountants) who have a need to have access to
such for the purposes of this Agreement, but shall not disclose the same to any
employee or officer who may use such for any other purpose. ACH and the
Bionutrics Entities shall require each employee and officer who is granted
access to such information to agree to abide by the terms of this Section 8.
(iii) ACH and the Bionutrics Entities agree that such Confidential
Information and any developments materially derived therefrom are and shall
remain the sole property of the party disclosing such Intellectual Property
(the "Disclosing Party") or the party owning such Intellectual Property in the
case of Intellectual Property acquired by ACH pursuant to Section 2(f)) .
(iv) Confidential Information shall exclude information that:
(1) is disclosed in a printed or online publication
available to the public, is described in an issued patent anywhere in
the world, is otherwise in the public domain at the time of
disclosure, or becomes publicly known through no wrongful act on the
part of the party (or its Affiliates) receiving the Confidential
Information (the "Receiving Party");
(2) is already known to the Receiving Party at the time
of the disclosure or becomes known to or lawfully available to the
Receiving Party through disclosure by a third party who has not
received the Confidential Information, directly or indirectly, from
the Disclosing Party under an obligation of secrecy;
(3) is disclosed to third parties by the Disclosing Party
without an obligation of confidence being imposed on such third
parties;
(4) is subsequently developed by or for the Receiving
Party without use of the Confidential Information by the Disclosing
Party; and
(5) the Disclosing Party expressly authorizes in writing
shall not be considered Confidential Information.
(v) If a Disclosing Party discloses information it believes is
Confidential Information, the Disclosing Party shall specifically designate
materials bearing the confidential information "CONFIDENTIAL." If a Disclosing
Party discloses orally to the Receiving Party information the Disclosing Party
believes is confidential, the Disclosing Party shall within thirty days of such
disclosure reduce such information to writing and provide such writing to the
Receiving Party marked CONFIDENTIAL.
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<PAGE> 64
(f) If any portion of Confidential Information is required to be
disclosed to a governmental regulatory agency or commission, or is otherwise
required to be disclosed by law or regulation, subpoena, civil investigative
demand or similar process, the Receiving Party will inform the Disclosing Party
of such disclosure requirement as soon as practicable after notice of such
requirement is received and will further inform the Disclosing Party which
Confidential Information is required to be disclosed. The Disclosing Party
shall then be completely responsible for seeking any protective order to
protect the confidentiality of the Confidential Information. In the event that
the Disclosing Party is unable to obtain a protective order satisfactory to the
Disclosing Party, after the exhaustion of all applications for writs of
mandamus and all interlocutory appeals from the denial of such a protective
order, the Receiving Party shall have the right to disclose the specific
Confidential Information that is required to be disclosed in the particular
proceeding.
9. ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement and understanding between the parties as to the subject matter of
this Agreement and supersedes all prior discussions between them, and neither
of the parties shall be bound by any modification of this Agreement, other than
as expressly provided in this Agreement or as duly set forth on or subsequent
to the date hereof in writing and signed by a duly authorized representative of
the party to be bound thereby. No oral explanation or oral information by
either party hereto shall alter the meaning or interpretation of this
Agreement. This Agreement incorporates the entire agreement of the parties with
respect to the subject matter hereof and supersedes all prior agreements,
documents, or other instruments with respect to the matters covered hereby.
The failure of either party to enforce at any time any provision of this
Agreement shall not be construed as a waiver of such provision. Neither shall
the waiver by either party of a breach by the other party of any provision of
this Agreement constitute a continuing waiver of other breaches of the same
provision or a waiver of any breach of any other provision of this Agreement.
10. ASSIGNMENT. The obligations of this Agreement shall be binding
upon the parties hereto, their successors, assigns, and legal representatives.
This Agreement shall only be assignable or transferable by either ACH or the
Bionutrics Entities in connection with a merger or a sale of all or
substantially all of the assets of a party to which this Agreement relates;
provided, however, ACH may assign this Agreement any or all to its Affiliates;
and provided further, the sale or transfer of substantially all of the business
of ACH related to the Intellectual Property shall be deemed to constitute a sale
of all or substantially all of the assets of ACH for purposes of satisfying the
provisions of this Section 10. In the event of such an assignment or transfer,
the assignor or transferor shall advise the assignee or transferee of the
existence of this Agreement and the obligations hereunder, and such assignee or
transferee to whom such assignment or transfer has been made shall
unconditionally and without restriction expressly assume and succeed in writing
to all obligations and rights of the assigning party or parties under this
Agreement from and after the date thereof or from and after the date thereof by
executing an agreement memorializing such assumption and succession to such
obligations and rights and shall provide a copy of such agreement to the other
party or parties to this Agreement. Except as set forth in this Agreement, this
Agreement shall not be assignable by any party hereto without the express
written consent of the other parties hereto. Nothing in this Agreement shall be
construed as prohibiting ACH from transferring, assigning, licensing or
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<PAGE> 65
sublicensing any or all of its rights in and to the Intellectual Property that
is being assigned to ACH under Section 2 of this Agreement.
11. SEVERABILITY. Should any clause, sentence, term or
paragraph of this Agreement be declared by a court of competent jurisdiction to
be invalid, unenforceable, or void, such decision shall not have the effect of
invalidating or voiding the remainder of this Agreement, and the parties hereto
hereby agree that the part or parts of this Agreement so held to be invalid,
unenforceable, or void shall be deemed to have been stricken, and the remainder
of this Agreement shall have the same force and effect as if such part or parts
had never been included herein.
12. TERM. This term of this Agreement shall become effective on
the Effective Date and shall remain in effect throughout the life of the
Patents and such Patents as may be granted from any applications assigned under
this Agreement, and throughout the life of any other patents now or hereafter
covered by this Agreement.
13. GOVERNING LAW AND FORUM.
(A) CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
CONSTRUED, AND INTERPRETED IN ACCORDANCE WITH THE PROVISIONS OF, THE LAW OF THE
STATE OF NEW YORK, WITHOUT REFERENCE TO PROVISIONS THAT REFER A MATTER TO THE
LAW OF ANY OTHER JURISDICTION.
(B) FORUM SELECTION CLAUSE. THE BIONUTRICS ENTITIES (FOR
THEMSELVES, THEIR SUCCESSORS, AND ASSIGNS) AND ACH HEREBY IRREVOCABLY AGREE
THAT ANY AND ALL CLAIMS FOR RELIEF ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR ANY OTHER AGREEMENT EXECUTED IN CONNECTION WITH THIS AGREEMENT(ALL OF WHICH
ARE REFERRED TO AS THE "CLAIMS"), WHETHER SUCH CLAIMS SOUND IN CONTRACT, TORT
OR OTHERWISE, AT LAW OR IN EQUITY, UNDER STATE OR FEDERAL LAW, WHETHER BY
STATUTE OR COMMON LAW, SHALL BE BROUGHT EXCLUSIVELY IN THE STATE OR FEDERAL
COURTS LOCATED IN THE JURISDICTION IN WHICH THE HEADQUARTERS OF THE DEFENDANT
IN SUCH SUIT IS THEN LOCATED. FOR EXAMPLE, AS OF THE EFFECTIVE DATE, ANY
CLAIMS BROUGHT AGAINST ACH SHALL BE BROUGHT EXCLUSIVELY IN MEMPHIS, TENNESSEE,
AND ANY CLAIM BROUGHT AGAINST BIONUTRICS SHALL BE BROUGHT EXCLUSIVELY IN
PHOENIX, ARIZONA.
14. LIMITATIONS OF LIABILITY.
(a) IN NO EVENT SHALL ACH BE LIABLE TO ANY OR ALL OF THE BIONUTRICS
ENTITIES FOR ANY CONSEQUENTIAL, SPECIAL, OR PUNITIVE DAMAGES BASED UPON BREACH
OF WARRANTY, BREACH OF CONTRACT,
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<PAGE> 66
NEGLIGENCE, STRICT LIABILITY, TORT OR ANY OTHER LEGAL THEORY. SUCH EXCLUDED
DAMAGES INCLUDE, BUT ARE NOT LIMITED TO, LOST PROFITS, EVEN IF ACH HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
(b) IN NO EVENT SHALL THE BIONUTRICS ENTITIES BE LIABLE TO ACH FOR
ANY CONSEQUENTIAL, SPECIAL, OR PUNITIVE DAMAGES BASED UPON BREACH OF WARRANTY,
BREACH OF CONTRACT, NEGLIGENCE, STRICT LIABILITY, TORT OR ANY OTHER LEGAL
THEORY. SUCH EXCLUDED DAMAGES INCLUDE, BUT ARE NOT LIMITED TO, LOST PROFITS,
EVEN IF THE BIONUTRICS ENTITIES HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES.
15. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same Agreement.
16. NOTICES. Wherever under this Agreement one party is required
or permitted to give notice to the other party, such notice shall be in writing
and shall be delivered personally, sent by facsimile transmission, sent by
nationally recognized express courier or sent by certified, registered, first
class mail. Any such notice shall be deemed given when actually received when
so delivered personally, by facsimile transmission or by express courier, or if
mailed, on the fifth day after its mailing, postage prepaid to the recipient
party addressed as follows:
If to AC HUMKO:
AC HUMKO Corporation
7171 Goodlett Farms Parkway
Memphis, Tennessee 38018-4909
901-381-3066 (FAX)
Attention: Dennis W. Koerner
with a copy to: Vinson & Elkins, L.L.P.
1001 Fannin
2300 First City Tower
Houston, Texas 77002
713-615-5234 (FAX)
Attention: James B. Rylander
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<PAGE> 67
If to BIONUTRICS ENTITIES:
Bionutrics, Inc.
2425 E. Camelback Road
Suite 650
Phoenix, Arizona 85016
602-508-0115 (FAX)
Attention: Ronald H. Lane
with a copy to:
Friedman Siegelbaum L.L.P.
399 Park Avenue
2th Floor
New York, New York 10022
212-980-6991 (FAX)
Attention: J. Robert Horton
Either party may change its address by a notice given to the other
party in the manner set forth above.
EXECUTED as of the date first written above.
BIONUTRICS, INC.
By:
-------------------------------------
Name: Ronald H. Lane
Title: President and Chief Executive
Officer
BIONUTRICS HEALTH PRODUCTS, INC.
By:
-------------------------------------
Name: Ronald H. Lane
Title: President
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<PAGE> 68
NUTRITION TECHNOLOGY
CORPORATION
By:
Name: Michael Wells
Title: President
LIPOGENICS, INC.
By:
Name: Ronald H. Lane
Title: Vice President
INCON TECHNOLOGIES, INC.
By:
Name: John Palmer
Title: Chairman and CEO
AC HUMKO CORP.
By:
-----------------------------------
Name: Wayne Briesemeister
Title: Vice President
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<PAGE> 69
Exhibit 1
PATENTS
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------
COUNTRY # STATUS
- ------------------------------------------------------------------------------------------
United States LEE Appln. No. 07/841,009
Issued
(Pat No. 5,047,254)
- ------------------------------------------------------------------------------------------
Joint Subject Matter Patents
- ------------------------------------------------------------------------------------------
COUNTRY # STATUS
- ------------------------------------------------------------------------------------------
United States PD-1 Appln. No. 07/796,486
Abandoned
- ------------------------------------------------------------------------------------------
Canada PD-1 CIP Appln. No. 2083512
Pending
- ------------------------------------------------------------------------------------------
United States PD-1 CIP Appln. No. 07/952,615
CIP of 07/796,486
Pending
- ------------------------------------------------------------------------------------------
United States PD-1 CIP2 Appln. No. 08/583,232
CIP of 07/952,615
Pending
- ------------------------------------------------------------------------------------------
United States PD-2 Appln. No. 07/796,486
Abandoned
- ------------------------------------------------------------------------------------------
Canada PD-2 CIP Appln. No. 2124086
Pending
- ------------------------------------------------------------------------------------------
Mexico PD-2 CIP Appln. No. 926735
Pending
- ------------------------------------------------------------------------------------------
United States PD-2 CIP Appln. No. 08/244,215
Issued
(Pat. No. 5,591,772)
- ------------------------------------------------------------------------------------------
United States PD-2 CIP Appln. No. 08/719,284
CON 1 Allowed
- ------------------------------------------------------------------------------------------
United States PD-4 Appln. No. 60/057,395
PROV 1 Pending
- ------------------------------------------------------------------------------------------
United States PD-4 Appln. No. 60/067,438
PROV 2 Pending
- ------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 70
Exhibit 2
TRADE SECRETS
Proprietary information and know-how associated with:
o the design and operation of the Monroe, Louisiana processing plant
o rice bran oil extraction, degumming and dewaxing processes
o the manufacture of Bionutrics Distillate Products including
Clearesterol, P25 etc. (including the deodorization process)
o protein extraction and concentration from rice bran
o rice bran procurement, handling and stabilization
o the production of Rice Bran Oil Distillate and Derivative Products
<PAGE> 71
Exhibit 3
COPYRIGHTS
Federal copyright rights in any reports, tables, drawings,
compilations, data and other writings owned by any of the Bionutrics Entities
within the ACH Field of Use.
<PAGE> 72
Exhibit 4
TRADEMARKS
Common law rights in the name "Nutrition Technology Corporation", "Nutrition
Technology Corporation, Inc." and other like designations used by NTC in
identifying itself in business dealings with third parties.
<PAGE> 73
EXHIBIT E
EXCLUSIVE SUPPLY AGREEMENT
THIS EXCLUSIVE SUPPLY AGREEMENT ("Agreement"), entered into as of the
14th_day of August, 1998 ("Effective Date"), is by and among BIONUTRICS, INC.,
a Nevada corporation, with a place of business at 2425 E. Camelback Road,
Suite 650, Phoenix, Arizona 85016 ("Bionutrics, Inc.") (together with any and
all of its Affiliates, "Bionutrics") ; BIONUTRICS HEALTH PRODUCTS, INC., a
Delaware corporation, with a place of business at 2425 E. Camelback Road, Suite
650, Phoenix, Arizona 85016 ("BHP"); INCON TECHNOLOGIES, INC., a Delaware
corporation with a place of business at 2425 E. Camelback Road, Suite 650,
Phoenix, Arizona 85016 ("InCon"); (collectively the "Bionutrics Entities");
and AC HUMKO CORP., a Delaware corporation, with a place of business at 7171
Goodlett Farms Parkway, Memphis, Tennessee 38018 ("Humko").
INTRODUCTION
WHEREAS, as of the Effective Date, Humko has purchased certain common
stock and warrants of Bionutrics in a Stock Purchase Agreement and certain
technology from Affiliates and/or subsidiaries of Bionutrics, Inc., in a
Technology Agreement, and in consideration for the purchase of such stock,
warrants and such technology, the respective Bionutrics Entities agreed to
enter into this Agreement; and
WHEREAS, Humko, Bionutrics and various subsidiaries of Bionutrics,
intend to enter into an Agreement for Purchase and Sale of Assets after the
date hereof (upon terms agreeable to the parties thereto), which will provide
(in addition to other matters) for the purchase of substantially all or part of
(at the option of Humko) the assets of Nutrition Technology Corporation used in
connection with its business, and, as a condition to Humko's entering into any
such Agreement for Purchase and Sale of Assets, Humko has required Bionutrics
to enter into this Agreement, and Humko will not enter into such Agreement for
Purchase and Sale of Assets unless Bionutrics has entered into this Agreement;
and
WHEREAS, as a condition to Bionutrics' entering into such Technology
Agreement and Agreement for Purchase and Sale of Assets, Bionutrics has
required Humko to enter into this Agreement to supply Bionutrics and its
Affiliates and subsidiaries with Bionutrics Products, Bionutrics Distillate
Products, Rice Bran Oil Distillate, Derivative Products and Rice Bran Products,
as defined herein; and
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<PAGE> 74
WHEREAS, Bionutrics and its Affiliates and subsidiaries, including but
not limited to BHP and InCon, desire to purchase from Humko Bionutrics Products,
Bionutrics Distillate Products, Rice Bran Oil Distillate, Derivative Products
and Rice Bran Products, as defined herein, for use by or for Bionutrics or any
of its subsidiaries or Affiliates;
NOW, THEREFORE, in consideration of the premises and covenants set out
below, the sufficiency of which is acknowledged by the parties, Humko and
Bionutrics agree as follows:
1. DEFINITIONS.
A. As used in this Agreement, the terms "Humko," "Agreement,"
"Effective Date," and "Bionutrics" shall have the meanings indicated above.
B. As used in this Agreement, all other capitalized terms shall
have the meanings assigned such terms below:
"Affiliate" will have the meaning assigned to such term in the
Technology Agreement.
"Bionutrics Distillate" shall refer to rice bran oil Distillate that
is produced using either (i) the tocotrienol enhancing processes that are
claimed in claims 31, 32, 34, 35 and 39 of United States Patent 5,591,772 or
(ii) the tocotrienol enhancing processes that are described and claimed in any
U.S. patent that issues from the pending U.S. patent applications 07/952,615 or
08/583,232 as a second stabilization process.
"Bionutrics Distillate Products" will mean all products produced,
marketed or sold by the Bionutrics Entities, or marketed by or sold by others
for the Bionutrics Entities, wherein each such product is produced, in whole or
in part, from Bionutrics Distillate including, without limitation, evolvE(R),
Clearesterol(TM), P25(TM), P18(TM), all tocotrienols and all tocopherols.
"Bionutrics Plants" will mean the manufacturing plants of Bionutrics
wherever located.
"Bionutrics Products" will mean all products produced, marketed, or
sold by the Bionutrics Entities, or produced, marketed or sold for the
Bionutrics Entities, or produced, marketed or sold by others for the Bionutrics
Entities, wherein each such product is produced, in whole or in part, from
Bionutrics Distillate, Rice Bran Oil Distillate, or Rice Bran Products.
The "Commissioning Date" shall mean the date determined solely by
Humko that (i) the Equipment is fully operational and producing the Bionutrics
Distillate Products, Rice Bran Oil Distillate, and Rice Bran Products described
in the Specifications, and (ii) all Bionutrics Products produced by the
Equipment conforms in all respects to the Specifications, but in no event shall
the Commissioning Date occur, subject to the terms of Section 10, later than
six (6) months following
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<PAGE> 75
the date that the assets purchased in connection with the Agreement for
Purchase and Sale of Assets are acquired by Humko.
"Confidential Information" shall have the meaning assigned to such
term in Section 13 hereof.
"Derivative Products" will mean products produced from the further
processing of Rice Bran Oil Distillate, including (but not limited to)
concentrated Tocol-containing fractions thereof.
"Distillate" will mean the resulting chemical fatty stream produced by
the high temperature, low pressure, steam stripping of edible oils in the
process of edible rice oil refining that is isolated and collected.
"Equipment" will mean all equipment used in the production of the
Bionutrics Distillate Products, Rice Bran Oil Distillate, Derivative Products
and Rice Bran Products by Humko.
"Humko Plants" will mean the facilities of Humko where Rice Bran Oil
Distillate, Bionutrics Distillate Products, and/or Rice Bran Products are
produced wherever located.
"Intellectual Property" shall have the same meaning ascribed to that
term in the Technology Agreement.
"Price" will mean the price set forth in Exhibit A for Bionutrics
Distillate Products ordered and delivered in accordance with this Agreement.
"Rice Bran Oil Distillate" shall refer to all rice bran oil Distillate
that is not a Bionutrics Distillate.
"Rice Bran Products" shall refer to any products derived from the
processing of rice bran other than Rice Bran Oil Distillate and Bionutrics
Distillate, including but not limited to, carbohydrates, proteins, fibers, and
oils.
"Specifications" will mean the specifications and requirements for the
Bionutrics Distillate Products and the Rice Bran Oil Distillate set forth on
Exhibit B or as may otherwise be agreed by the parties during the Term of this
Agreement. The specifications and requirements for Rice Bran Products and
Derivative Products will be agreed to by the parties during the Term of this
Agreement, as appropriate.
"Technology Agreement" shall mean the Technology Agreement of even
date herewith by and among Humko, Bionutrics, Inc., and various Affiliates and
subsidiaries of Bionutrics, Inc.
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"Term" will have the meaning assigned to such term in Section 2
hereof.
"Tocols" shall refer to tocotrienols, tocopherols and mixtures
thereof.
2. TERM. The term of this Agreement (the "Term") shall be for twenty
years from the Effective Date, unless terminated earlier by either
party pursuant to the terms of this Agreement.
3. SUPPLY, PRODUCTION AND SHIPPING.
A. During the Term, but only after the Commissioning Date and subject to
Section 10:
(i) BIONUTRICS DISTILLATE PRODUCTS. Humko will sell and deliver
to Bionutrics, and Bionutrics will purchase and take from
Humko, all of Bionutrics' requirements for the Bionutrics
Distillate Products for use in the Bionutrics Products. The
Price for Bionutrics Distillate Products shall be set
according to Exhibit A.
(ii) RICE BRAN PRODUCTS. In the event that Bionutrics desires to
obtain any Rice Bran Product for any Bionutrics Product during
the Term of this Agreement, Bionutrics shall first offer to
Humko the right to supply all of Bionutrics' requirements for
such Rice Bran Product for any such Bionutrics Product. This
right of first refusal shall operate as set forth in this
Section 3.A.(ii):
(a) If, after Humko and Bionutrics discuss Humko's
supplying of requirements of such Rice Bran Product to
Bionutrics for such Bionutrics Products, Humko is willing and
able to supply such Rice Bran Product to Bionutrics at Humko's
market price and terms established by Humko from time to time,
then Bionutrics shall be obligated to take its requirements
from Humko for such Rice Bran Product unless Bionutrics is
able to obtain such Rice Bran Product requirements from a
third party at a better price and terms than the market price
and terms offered by Humko provided that there is no
pre-existing contract between Humko and Bionutrics with
respect to such Rice Bran Product. If a third party offers a
better price and terms, Humko shall have thirty (30) days to
match such price and terms. If Humko fails to do so within
such thirty (30) day period, then Bionutrics shall be free to
contract with such third party for its requirements of such
Rice Bran Product; provided, however, the terms and provisions
of Section 3.A.(ii)(c) shall be applicable to such Rice Bran
Product. If Humko notifies Bionutrics that it will match such
price and terms within such period, then Humko will sell and
deliver to Bionutrics, and Bionutrics will purchase and take
from Humko, all of Bionutrics' requirements for the Rice Bran
Product for such Bionutrics Product upon such price and terms.
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(b) If, after Humko and Bionutrics discuss Humko's
supplying of requirements of such Rice Bran Product to
Bionutrics, Humko is unwilling or unable to supply such Rice
Bran Product to Bionutrics at Humko's established market price
and terms, then Bionutrics shall be free to contract with such
third party for its requirements of such Rice Bran Product and
Bionutrics shall no longer owe Humko any obligation with
respect to Bionutrics' requirements for such Rice Bran
Product.
(c) In contracting with such third party for its
requirements of such Rice Bran Product, this Agreement shall
not be construed to grant to Bionutrics or any such third
party, and Humko expressly negates and reserves, any rights to
use any of the Intellectual Property in North America with
respect to the processing of, or providing of, any Rice Bran
Product to Bionutrics. Bionutrics expressly covenants not to
use in North America the Intellectual Property with respect to
any Rice Bran Product.
(iii) RICE BRAN OIL DISTILLATE THROUGH AUGUST 31, 2000. For the
period from the Commissioning Date through August 31, 2000,
Humko will sell and deliver to Bionutrics, and Bionutrics will
purchase and take from Humko, all of Humko's entire output of
Rice Bran Oil Distillate, provided that the Rice Bran Oil
Distillate has a total Tocol content of at least 3%. The
price for the Rice Bran Oil Distillate referred to in this
Section 3.A(iii) shall be as shown on Exhibit D.
(iv) RICE BRAN OIL DISTILLATE AFTER AUGUST 31, 2000. If Humko and
Bionutrics have not voluntarily reached an agreement in
writing signed by both parties by August 31, 1999 regarding
the price and conditions for the supply of Rice Bran Oil
Distillate to Bionutrics after August 31, 2000, then Humko
shall be free to supply such Rice Bran Oil Distillate to third
parties on any terms and conditions that are more favorable to
Humko than those offered by Bionutrics. If a third party or
third parties offer more favorable terms and conditions for
any or all of Humko's supply of the Rice Bran Oil Distillate,
Bionutrics shall have fourteen (14) days to match any such
terms and conditions by written notice to Humko. If
Bionutrics fails to do so within such fourteen (14) day
period, then Humko shall be free to contract with such third
party or third parties for the supply of Rice Bran Oil
Distillate and Humko shall no longer owe Bionutrics any
obligation with respect to the supply of Rice Bran Oil
Distillate. If Bionutrics matches the more favorable terms
and conditions offered by such third party, as set forth
above, then Humko will sell and deliver to Bionutrics, and
Bionutrics will purchase and take from Humko, all of Humko's
supply of the Rice Bran Oil Distillate to the extent and on
the terms and conditions set forth in such third-party offer.
To the extent that Bionutrics cannot obtain its requirements
of Rice Bran Oil Distillate after August 31, 2000 from Humko,
Humko grants to Bionutrics a limited, nonexclusive,
nontransferable
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license to use the Intellectual Property to import Rice Bran
Oil Distillate from outside North America but only to produce
Derivative Products in Bionutrics' own facilities (or the
facilities of its subsidiaries and Affiliates). This
Agreement shall not be construed to grant to Bionutrics or any
other party, and Humko expressly negates and reserves, any
rights to use any of the Intellectual Property with respect to
the production of Rice Bran Oil Distillate. Bionutrics
expressly covenants not to use the Intellectual Property to
produce the Rice Bran Oil Distillate in North America.
(v) DERIVATIVE PRODUCTS AFTER AUGUST 31, 2000. In the event that
Humko is no longer willing or able to supply all of its
production of Rice Bran Oil Distillate to Bionutrics, and
Humko is processing any or all of such Rice Bran Oil
Distillate into Derivative Products, Humko shall have the
option to supply Bionutrics with Bionutrics' needs for
Derivative Products. Price to Bionutrics for Derivative
Products will be the market price for Rice Bran Oil Distillate
plus a toll processing fee. Such toll processing fee will be
determined by two experts, one each selected by Humko and
Bionutrics, but in the event that the two experts so chosen
cannot agree, the toll processing fee shall be determined by a
third expert chosen jointly by the former two experts. Humko
reserves the right to market any or all of its Rice Bran Oil
Distillate and Derivative Products to third parties.
(vi) It is understood that prior to the date hereof, Bionutrics may
have been purchasing or acquiring the Bionutrics Distillate
Products, Rice Bran Oil Distillate and Rice Bran Products from
other parties, but from and after the date hereof, Humko shall
be the exclusive supplier to Bionutrics of all Bionutrics
Distillate Products, Rice Bran Oil Distillate and Rice Bran
Products used by Bionutrics in the Bionutrics Products
(subject to any exclusions specified under Section 3.A.(i)-(v)
above); provided, however, until the Commissioning Date,
Bionutrics may continue to purchase or acquire the Bionutrics
Distillate Products, Rice Bran Oil Distillate, and Rice Bran
Products from other parties to fulfill its production
requirements in accordance with its normal course of business.
Notwithstanding the foregoing, Bionutrics may not enter into
any long term contracts for the supply of Bionutrics
Distillate Products, Rice Bran Oil Distillate, or Rice Bran
Products if the end of the term of any such contracts occurs
after January 1, 1999, except as provided in Section 10.
B. REQUIREMENTS PRIOR TO COMMISSIONING DATE. Unless agreed
otherwise in writing, until the Commissioning Date, Humko shall have no
obligation to deliver the Bionutrics Distillate Products, Rice Bran Oil
Distillate, and Rice Bran Products. Upon the occurrence of the Commissioning
Date, Humko will notify Bionutrics and begin supplying Bionutrics with its
requirements of Bionutrics Distillate Products, Rice Bran Oil Distillate and
Rice Bran Products
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used by Bionutrics in the Bionutrics Products. On or before the Commissioning
Date, Bionutrics will provide to Humko an initial order of its requirements of
Bionutrics Distillate Products, Rice Bran Oil Distillate and Rice Bran Products
used by Bionutrics in the Bionutrics Products for the time period prior to the
Commissioning Date (the "Initial Period"). This order shall contain all of the
terms set forth below in Section 3.D.
C. REQUIREMENTS AFTER COMMISSIONING DATE.
(i) (1) REQUIREMENTS OF BIONUTRICS DISTILLATE PRODUCTS. By
January 15 of each calendar year during the Term of this Agreement, Bionutrics
shall notify Humko in writing with a good faith projection of its requirements
of Bionutrics Distillate Products for use in Bionutrics Products for the one
year period commencing on April 1 of the same calendar year (the "Applicable
One Year Period"). Such notification of requirements shall contain all of the
terms set forth below in Section 3.D. By February 15 of the same calendar
year, Humko shall notify Bionutrics if Humko's capacity is insufficient to meet
such requirements. In the event Humko so notifies Bionutrics, Bionutrics shall
be obligated to purchase Humko's capacity but as to Bionutrics' requirements in
excess of such capacity for that Applicable One Year Period, Humko grants to
Bionutrics a limited, nonexclusive, nontransferable license to use the
Intellectual Property in its own facilities solely to produce Bionutrics
Distillate Products but only using Bionutrics Distillate imported from outside
North America, which Bionutrics shall be permitted to import for this limited
purpose only. This Agreement shall not be construed to grant to Bionutrics,
and Humko expressly negates and reserves, any rights to use any of the
Intellectual Property with respect to the production of Bionutrics Distillate
in North America. Bionutrics expressly covenants not to use the Intellectual
Property with respect to the production of such Bionutrics Distillate in North
America. If Humko notifies Bionutrics by March 15 of the same calendar year
that Humko can deliver all such requirements for the Applicable One Year
Period, then, unless otherwise agreed to in writing by Bionutrics, Humko shall
be obligated to, subject to Section 10, and will sell such requirements to
Bionutrics. In addition, unless otherwise agreed to in writing by Humko,
Bionutrics shall be obligated to purchase its good faith projection of its
requirements of Bionutrics Distillate Products for the following calendar year
as set forth in the projection to the extent that Humko has obligated itself to
produce any of same in accordance with the foregoing provisions. During the
Applicable One Year Period for which such requirements have been agreed upon by
Humko and Bionutrics pursuant to this Section 3.C.(i)(1) above, the parties
will work in good faith in the event that Bionutrics desires to modify the
original shipping and delivery dates for the quantities of the Bionutrics
Distillate Products ordered and required to be produced by Humko.
(2) REQUIREMENTS OF RICE BRAN PRODUCTS (PURSUANT TO SECTION
3.A. (ii)(a)). By January 15 of each calendar year during the Term of this
Agreement, Bionutrics shall notify Humko in writing with a good faith projection
of its requirements of Rice Bran Products, if any, for use in Bionutrics
Products for the Applicable One Year Period. Such notification of
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requirements shall contain all of the terms set forth below in Section 3.D. By
February 15 of the same calendar year, Humko shall notify Bionutrics if Humko's
capacity is insufficient to meet such requirements. In the event Humko so
notifies Bionutrics, Bionutrics shall be obligated to purchase Humko's capacity
but as to Bionutrics' requirements in excess of such capacity for that
Applicable One Year Period, Bionutrics shall be free to contract with third
parties for its additional requirements of such Rice Bran Products that Humko is
unable to supply for that Applicable One Year Period, subject to the following
provisions of this Section 3.C.(i)(2). This Agreement shall not be construed to
grant to Bionutrics, and Humko expressly negates and reserves, any rights to use
any of the Intellectual Property with respect to the production of Rice Bran Oil
Distillate in North America. Similarly, this Agreement shall not be construed
to grant to Bionutrics or any third party supplying Bionutrics with such Rice
Bran Products, and Humko expressly negates and reserves, any rights to use any
of the Intellectual Property with respect to the processing of such Rice Bran
Products for Bionutrics. Bionutrics expressly covenants not to use the
Intellectual Property with respect to such Rice Bran Products in North America.
If Humko notifies Bionutrics by March 15 of the same calendar year that Humko
can deliver all such requirements for the Applicable One Year Period, then,
unless otherwise agreed to in writing by Bionutrics, Humko shall be obligated
to, subject to Section 10, and will sell such requirements to Bionutrics;
however, as to any additional capacity that Humko may have to produce any such
Rice Bran Products, Humko may freely contract to sell such additional capacity
to third parties for the Applicable One Year Period. In addition, unless
otherwise agreed to in writing by Humko, Bionutrics shall be obligated to
purchase its good faith projection of its requirements of Rice Bran Products for
the following calendar year as set forth in the projection to the extent that
Humko has obligated itself to produce any of same in accordance with the
foregoing provisions. During the Applicable One Year Period for which such
requirements have been agreed upon by Humko and Bionutrics pursuant to this
Section 3.C.(i)(2) above, the parties will work in good faith in the event that
Bionutrics desires to modify the original shipping and delivery dates for the
quantities of any such Rice Bran Products ordered and required to be produced by
Humko.
(ii) If during any Applicable One Year Period, Bionutrics desires
to purchase additional amounts of the Bionutrics Distillate Products or Rice
Bran Products, Bionutrics shall notify Humko during the Applicable One Year
Period as set forth herein. First, Bionutrics will notify Humko of Bionutrics'
anticipated needs for the Bionutrics Distillate Products and Rice Bran Products
in addition to its requirements previously set forth from time to time.
Without limiting the generality of the foregoing, Bionutrics will provide to
Humko, on a quarterly basis, and not later than the 15th day of the month
beginning each quarter during each Applicable One Year Period during the Term,
a good faith estimate of Bionutrics' anticipated additional needs (if any) of
the Bionutrics Distillate Products and Rice Bran Products for use in Bionutrics
Products during the remaining time in the Applicable One Year Period. Although
Bionutrics' failure to provide such a quarterly estimate shall not be deemed a
breach of this Agreement, Humko shall have the right to offer any excess
capacity of Rice Bran Products for sale to third parties based on the last
estimate provided to Humko of Bionutrics' anticipated needs of Rice Bran
Products. To the extent
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Humko notifies Bionutrics that Humko can meet such additional annual or
quarterly requirements, then such orders shall become firm commitments as if
such orders had been originally included in the applicable order made pursuant
to Section 3.C.(i).
D. Each order for the Initial Period and the Applicable One Year
Periods shall specify the following minimum information: (i) the Bionutrics
Distillate Products, Rice Bran Oil Distillate, Derivative Products and Rice
Bran Products ordered, (ii) the quantities of the Bionutrics Distillate
Products, Rice Bran Oil Distillate, Derivative Products and Rice Bran Products
ordered, (iii) the delivery destination of each of the Bionutrics Distillate
Products, Rice Bran Oil Distillate, Derivative Products and Rice Bran Products
ordered if other than FOB the applicable Humko Plant, (iv) the shipment date
for the quantities of the Bionutrics Distillate Products, Rice Bran Oil
Distillate, Derivative Products and Rice Bran Products ordered (which shall not
be less than thirty (30) working days from the applicable date of the purchase
order subject to Section 10), (v) the desired delivery date of each of the
Bionutrics Distillate Products, Rice Bran Oil Distillate, Derivative Products
and Rice Bran Products ordered, and (vi) special freight arrangements, if any,
which shall be at the sole cost and expense of Bionutrics.
E. Humko will deliver the Bionutrics Distillate Products, Rice
Bran Oil Distillate, Derivative Products and Rice Bran Products in amounts
necessary to fill all of Bionutrics' orders (subject to this Section 3 and
Section 10). Unless specified otherwise on Bionutrics' orders, all deliveries
will be FOB the Humko Plants specified in Bionutrics' order. Humko will
specify delivery of the Bionutrics Distillate Products, Rice Bran Oil
Distillate, Derivative Products and Rice Bran Products to designated Bionutrics
Plants via common carriers mutually acceptable to Bionutrics and Humko.
Bionutrics shall be responsible for all outbound freight costs. Bionutrics
will instruct all agreed upon trucking companies to submit freight charges
directly to Bionutrics for payment. Except with respect to the delivery
procedures for products covered in Exhibit E, Humko will arrange for all
transportation required to transport products shipped by Humko under this
Agreement to the applicable destination in accordance with the instructions
given by Bionutrics. Humko will inform Bionutrics if Humko is unable to
arrange transportation with agreed upon trucking companies for any purchase
order and offer alternatives to Bionutrics if available. Humko will provide
Bionutrics with adequate, timely shipping information. Bionutrics shall be
responsible for tracking and managing freight from time of shipment to delivery
to the applicable destination. Title to and risk of loss of all products
shipped by Humko under this Agreement shall transfer from Humko to Bionutrics
(or the applicable subsidiary and/or Affiliate of Bionutrics) at the time of
delivery at the applicable Humko Plant to the freight carrier designated in the
applicable purchase order. If Bionutrics notifies Humko of discrepancies
between shipping and receiving weights or volume, the parties will negotiate in
good faith to determine appropriate corrective action and any adjustments
necessary to compensate Bionutrics for any shortages confirmed by such
discrepancies.
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F. Nothing contained in this Agreement will be deemed to
constitute Bionutrics as a guarantor of any minimum level of purchases
Bionutrics Distillate Products, Derivative Products or Rice Bran Products.
G. In the event that Bionutrics elects to discontinue producing
Bionutrics Products during the term of this Agreement, Humko shall have the
option, exercisable in its sole discretion, to provide any or all of the other
ingredients used in Bionutrics' production of other products produced by
Bionutrics. If such other ingredients meet the specifications provided by
Bionutrics, such other ingredients shall be sold and delivered by Humko, and
purchased by Bionutrics, in accordance with the applicable terms of this
Agreement. The price for such other ingredients shall be negotiated and agreed
to by Bionutrics and Humko prior to the sale of such ingredients by Humko to
Bionutrics. Notwithstanding the foregoing, Bionutrics shall not be entitled to
purchase from any other supplier any products similar to the Bionutrics
Distillate Products, Rice Bran Oil Distillate, Derivative Products and Rice
Bran Products in order to fulfill the needs of Bionutrics except according to
the terms of Section 3.A.(ii) (Rice Bran Products), 3.A(iv) (Derivative
Products), 3.C(i) (Bionutrics Distillate Products and Rice Bran Products), or
Section 10.
H. Bionutrics acknowledges that Humko is not granting to
Bionutrics any express or implied license to use any trademark or tradename
owned by Humko, and Humko acknowledges that Bionutrics is not granting to Humko
any express or implied license to use any trademark or tradename owned by any
of the Bionutrics Entities except those listed in Exhibit 4 of the Technology
Agreement.
4. EQUIPMENT AND MATERIALS.
A. Subject to and in accordance with the other terms of this
Agreement, Humko will supply all production capacity (inclusive of all
equipment and facilities) and all raw materials, and will maintain an inventory
of the Bionutrics Distillate Products, Rice Bran Oil Distillate, Derivative
Products and Rice Bran Products, each in quantities deemed necessary or
appropriate by Humko to ensure uninterrupted production and delivery of the
Bionutrics Distillate Products, Rice Bran Oil Distillate, Derivative Products
and Rice Bran Products.
B. Humko will pay all taxes on all equipment, facilities,
materials, and inventory (prior to its sale to Bionutrics) required for the
performance of Humko's obligations under this Agreement.
5. PRODUCT SPECIFICATIONS. All the Bionutrics Distillate Products, Rice
Bran Oil Distillate, Derivative Products and Rice Bran Products will be
produced and delivered in conformance with the Specifications and the terms and
conditions of this Agreement.
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6. WARRANTIES, REMEDIES, AND LIMITATIONS OF LIABILITY.
A. Humko will perform all of its obligations under this Agreement
in such a manner and consistent with its other activities so that the
Bionutrics Distillate Products, Rice Bran Oil Distillate, Derivative Products
and Rice Bran Products meet the Specifications as required under this
Agreement.
B. Humko represents and warrants that:
(1) The Bionutrics Distillate Products, Rice Bran Oil
Distillate, Derivative Products and Rice Bran Products will conform to
the Specifications.
(2) All the Bionutrics Distillate, Rice Bran Oil
Distillate, Derivative Products and Rice Bran Products will be
produced in compliance with all applicable Federal, state, and local
laws and regulations and industry standards, including, by way of
example only and not limitation, the Food, Drug, and Cosmetic Act and
as required by all applicable Federal, state, and local laws and
regulations pertaining to the manufacture, storage, or distribution of
the Bionutrics Distillate Products, Rice Bran Oil Distillate,
Derivative Products and Rice Bran Products.
C. THE FOLLOWING STATES HUMKO'S ENTIRE LIABILITY, AND BIONUTRICS'
SOLE AND EXCLUSIVE REMEDY, WITH RESPECT TO BREACH OF ANY WARRANTY BY HUMKO.
WITH RESPECT TO ANY CLAIMS THAT THE BIONUTRICS DISTILLATE PRODUCTS, RICE BRAN
OIL DISTILLATE, DERIVATIVE PRODUCTS AND RICE BRAN PRODUCTS DO NOT CONFORM TO
THE SPECIFICATIONS AND WARRANTIES HEREIN. BIONUTRICS' SOLE AND EXCLUSIVE
REMEDY SHALL BE TO REQUIRE HUMKO EITHER (I) TO PROMPTLY REPLACE SUCH BIONUTRICS
DISTILLATE PRODUCTS, RICE BRAN OIL DISTILLATE, DERIVATIVE PRODUCTS AND RICE
BRAN PRODUCTS WITHOUT ANY ADDITIONAL CHARGE OR (II) TO REFUND THE PRICE PAID BY
BIONUTRICS FOR SUCH BIONUTRICS DISTILLATE PRODUCTS, RICE BRAN OIL DISTILLATE,
DERIVATIVE PRODUCTS AND RICE BRAN PRODUCTS. HUMKO, AT ITS COST, WILL SHIP ANY
SUCH REPLACEMENT OF BIONUTRICS DISTILLATE PRODUCTS, RICE BRAN OIL DISTILLATE,
DERIVATIVE PRODUCTS AND RICE BRAN PRODUCTS PURSUANT TO BIONUTRICS' SHIPMENT
INSTRUCTIONS.
EXCEPT FOR THE WARRANTIES MADE IN THIS SECTION 6, HUMKO MAKES NO
WARRANTIES, WHETHER EXPRESS OR IMPLIED, WITH RESPECT TO BIONUTRICS PURCHASING
ANY BIONUTRICS PRODUCT OR WITH RESPECT TO THE BIONUTRICS DISTILLATE PRODUCTS,
THE RICE BRAN OIL DISTILLATE, DERIVATIVE PRODUCTS OR THE RICE BRAN PRODUCTS
PROVIDED HEREUNDER, AND HUMKO HEREBY DISCLAIMS ALL IMPLIED WARRANTIES,
INCLUDING WITHOUT LIMITATION
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WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND
NON-INFRINGEMENT. IN ADDITION, HUMKO EXPRESSLY DISCLAIMS ALL WARRANTIES,
EXPRESS OR IMPLIED, TO ANY THIRD PARTIES, INCLUDING WITHOUT LIMITATION
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND
NON-INFRINGEMENT.
D. AS A CONDITION PRECEDENT TO ANY WARRANTY CLAIMS HEREUNDER,
BIONUTRICS WILL AFFORD HUMKO PROMPT AND REASONABLE OPPORTUNITY TO INSPECT ALL
BIONUTRICS DISTILLATE PRODUCTS, RICE BRAN OIL DISTILLATE, DERIVATIVE PRODUCTS
AND RICE BRAN PRODUCTS AS TO WHICH ANY CLAIM IS MADE THAT SUCH BIONUTRICS
DISTILLATE PRODUCTS, RICE BRAN OIL DISTILLATE, DERIVATIVE PRODUCTS AND RICE
BRAN PRODUCTS DO NOT CONFORM TO THE SPECIFICATIONS AS FOLLOWS: AT HUMKO'S
OPTION, AND AS A CONDITION TO ANY WARRANTY CLAIMS HEREUNDER, BIONUTRICS WILL
ALLOW HUMKO TO TAKE CONTROL OF SUCH BIONUTRICS DISTILLATE PRODUCTS, RICE BRAN
OIL DISTILLATE, DERIVATIVE PRODUCTS AND RICE BRAN PRODUCTS AND DIRECT THEIR
DISPOSAL. UPON RECEIPT OF SHIPPING INSTRUCTIONS FROM HUMKO, BIONUTRICS WILL
RETURN TO HUMKO, AT HUMKO'S COST, ALL THE BIONUTRICS DISTILLATE PRODUCTS, RICE
BRAN OIL DISTILLATE, DERIVATIVE PRODUCTS AND RICE BRAN PRODUCTS ALLEGEDLY NOT
CONFORMING TO THE SPECIFICATIONS; PROVIDED, HOWEVER, IN THE EVENT THAT IT IS
SUBSEQUENTLY DETERMINED THAT SUCH BIONUTRICS DISTILLATE PRODUCTS, RICE BRAN OIL
DISTILLATE, DERIVATIVE PRODUCTS AND RICE BRAN PRODUCTS DO IN FACT CONFORM TO
THE SPECIFICATIONS, BIONUTRICS SHALL REIMBURSE HUMKO FOR ALL SUCH SHIPPING
COSTS INCURRED BY HUMKO.
7. INVOICE AND PAYMENT.
A. As soon as reasonably practicable after shipment or pick-up of
the Bionutrics Distillate Products, Rice Bran Oil Distillate, Derivative
Products and Rice Bran Products ordered by Bionutrics pursuant to this
Agreement, Humko will send an invoice on Humko's usual form to Bionutrics for
such Bionutrics Distillate Products, Rice Bran Oil Distillate, Derivative
Products and Rice Bran Products. The invoice will set forth the quantities of
the Bionutrics Distillate Products, Rice Bran Oil Distillate, Derivative
Products and Rice Bran Products delivered in accordance with this Agreement and
the applicable price for such Bionutrics Distillate Products, Rice Bran Oil
Distillate, Derivative Products and Rice Bran Products (determined in
accordance with Exhibits A and D hereto and elsewhere herein).
B. Bionutrics will pay all correct invoices for the Bionutrics
Distillate Products, Rice Bran Oil Distillate, Derivative Products and Rice
Bran Products ordered by and delivered to Bionutrics in accordance with this
Agreement. The terms of payment are net 15 days. For any
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invoices containing invoicing errors, such dates, with respect to the incorrect
portions of the invoice only, are extended until the invoicing errors are
corrected and a new invoice, with respect to the incorrect portions on the
original invoice, is sent.
C. All payments required to be made under this Agreement shall
bear interest from the due date until paid at the rate per annum equal to the
lesser of (i) the maximum rate permitted by applicable law and (ii) (a) the
prime rate of interest published by the banking institution in which Humko has
deposited the most significant portion of its deposited funds plus five percent
(5%), or (b) fifteen percent (15%) per annum.
8. QUALITY CONTROL.
A. As reasonably requested by Bionutrics, Humko will submit
samples of the Bionutrics Distillate Products, Rice Bran Oil Distillate,
Derivative Products and Rice Bran Products to Bionutrics at no cost to
Bionutrics.
B. In the event there is any actual or threatened recall or
withdrawal of any the Bionutrics Distillate Products, Rice Bran Oil Distillate,
Derivative Products and Rice Bran Products or any actual or threatened
litigation, claim, or governmental proceeding involving the quality or safety
of any the Bionutrics Distillate Products, Rice Bran Oil Distillate, Derivative
Products and Rice Bran Products, the parties will cooperate in good faith with
one another to address such matters.
9. RISK OF LOSS. Humko assumes all risk of loss or damage to all the
Bionutrics Distillate Products, Rice Bran Oil Distillate, Derivative Products
and Rice Bran Products prior to delivery to Bionutrics in accordance with
orders placed by Bionutrics pursuant to Sections 3.D and 3.E and other
applicable terms of this Agreement.
10. FORCE MAJEURE, HUMKO'S OPTION AND DEFAULT.
A. Notwithstanding anything to the contrary contained in this
Agreement, delays by Humko in the performance or non-performance of its
obligations under this Agreement will be excused if due to any cause beyond
Humko's reasonable control, including, by way of example only and not
limitation, acts of God, governmental laws, rules, or regulations, wars, fires,
the elements, labor troubles , interruption or shortage of transport
facilities, or inability to obtain raw material or packaging supplies.
B. At any time and from time to time, Humko may, at its sole
option, upon nine (9) months written notice to Bionutrics and for reasons other
than as set forth in Section 10.A: (i) choose not to supply the requirements,
or any portion thereof, of Bionutrics Distillate Products or Rice Bran Products
as required by this Agreement to Bionutrics under this Agreement for any
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period of time or (ii) choose not to supply its output, or any portion thereof,
of the Rice Bran Oil Distillate (subject to the terms of Sections 3.A(iii) and
(iv)) or Derivative Products, or any portions of such requirements or output,
to Bionutrics under this Agreement for any period of time. The exercise of
such option by Humko shall, at Bionutrics sole option, excuse Bionutrics'
obligation to purchase the supply or requirements, as the case may be, of the
applicable Bionutrics Distillate Products or the Rice Bran Products or the
output, as the case may be, of the Rice Bran Oil Distillate or Derivative
Products to the extent the exercise of such option by Humko impacts the supply
or requirements. To the extent that Humko has exercised its option to no
longer supply Bionutrics' requirements of Bionutrics Distillate Products, Humko
grants to Bionutrics a limited, nonexclusive, nontransferable license to use
the Intellectual Property to import Bionutrics Distillate from outside North
America to produce Bionutrics Distillate Products in its own facilities (and
the facilities of its subsidiaries and Affiliates). To the extent that Humko
has exercised its option to no longer supply Bionutrics with its requirements
of any Rice Bran Product, Bionutrics shall be free to contract with third
parties for its additional requirements of such Rice Bran Product. This
Agreement shall not be construed to grant to Bionutrics, and Humko expressly
negates and reserves, any rights to use any of the Intellectual Property with
respect to the production of Rice Bran Oil Distillate in North America.
Similarly, this Agreement shall not be construed to grant to Bionutrics or any
third party supplying Bionutrics with such Rice Bran Product, and Humko
expressly negates and reserves, any rights to use any of the Intellectual
Property with respect to the processing of such Rice Bran Products or such
Bionutrics Products in North America to Bionutrics. Bionutrics expressly
covenants not to use in North America the Intellectual Property with respect to
the production of any Rice Bran Products or such Bionutrics Products.
C. If either party defaults in the performance of its obligations
under this Agreement, the non-defaulting party immediately will notify the
defaulting party of such default and the time to cure such default, which time
will be five days in the case of a failure to pay amounts due for the
Bionutrics Distillate Products, Rice Bran Oil Distillate, Derivative Products
and Rice Bran Products (but only given twice per calendar year), and 30 days
for all other defaults, after the defaulting party receives such notice of the
default; provided, however, if such non-monetary default is curable but
requires work to be performed, acts to be done or conditions to be remedied
which, by their nature, cannot be performed, done or remedied, as the case may
be, within such 30-day period, then no default shall be deemed to have occurred
if the defaulting party commences same within such 30-day period and thereafter
diligently and continuously prosecutes the same until completion. Subject to
the foregoing provisions of this Section 10.C., any default by either party
under this Agreement shall entitle the other party to all remedies available at
law or in equity including, without limitation, the right to terminate this
Agreement upon notice to the defaulting party. The termination of this
Agreement in whole or in part pursuant to this Section 10.C. will not relieve
either party from the obligations in this Agreement which survive termination.
Each of the following shall also constitute a default under this Agreement:
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(1) the entry of an "Order for Relief" naming a party as a
"Debtor" under Title 11 of the United States Code or upon the entry of
a decree or order by a court having competent jurisdiction in respect
to any petition filed or action respecting a party directly involved
in a reorganization, arrangement, creditors' composition,
readjustment, liquidation, dissolution, bankruptcy, or similar relief
under any other present or future United States or other statute, law
or regulation, whether or not resulting in the appointment of a
receiver, liquidator, assignee, trustee, custodian, sequestrator or
other similar official, and any such decree or order is in effect for
a period of thirty (30) consecutive days;
(2) the making by a party of an assignment for the benefit of
creditors, or the admission by such party in writing of its inability
to pay its debts generally as they become due, or the taking of action
by a party in furtherance of any such action; or
(3) as expressly provided elsewhere in this Agreement.
D. During any force majeure event under Section 10.A., or default
by Humko, Bionutrics, as its sole and exclusive remedy, may remove any or all
of the impacted part of the Bionutrics Distillate Products, Rice Bran Oil
Distillate, Derivative Products and Rice Bran Products business from Humko and
obtain such Bionutrics Distillate Products, Rice Bran Oil Distillate,
Derivative Products and Rice Bran Products from any other supplier during the
applicable period of such force majeure event or the period of such default;
provided, however, when the period covered by such force majeure events or
Humko's exercise of the option contained in Section 10.B., or when such default
is cured by Humko, Bionutrics shall, upon ninety (90) days written notice,
cease purchasing the Bionutrics Distillate Products, Rice Bran Oil Distillate,
Derivative Products and Rice Bran Products or any products similar thereto from
other suppliers and shall continue purchasing the Bionutrics Distillate
Products, Rice Bran Oil Distillate, Derivative Products and Rice Bran Products
solely from Humko under this Agreement. This Agreement shall not be construed
to grant to Bionutrics, and Humko expressly negates and reserves, any rights to
use any of the Intellectual Property with respect to the production of
Bionutrics Distillate, Rice Bran Oil Distillate and Rice Bran Products in North
America. Similarly, this Agreement shall not be construed to grant to
Bionutrics or any third party supplying Bionutrics with such Bionutrics
Distillate Products, Rice Bran Oil Distillate or Rice Bran Products, and Humko
expressly negates and reserves, any rights to use any of the Intellectual
Property with respect to the processing of, such Bionutrics Distillate
Products, Rice Bran Oil Distillate or Rice Bran Products or such Bionutrics
Products in North America to Bionutrics.
E. No failure by any party to exercise any right given in this
Agreement or to insist on strict compliance by the other party of any
obligation under this Agreement will constitute a waiver of the party's right
to later demand exact compliance with the terms of this Agreement.
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11. INDEMNIFICATION. Bionutrics will defend, indemnify, and hold harmless
Humko and its parents, subsidiaries, Affiliates, successors, and assigns, and
their respective officers, directors, employees, agents, and contractors from
and against (i) any and all claims, demands, liabilities, losses, damages,
cost, or expenses (including reasonable attorneys' fees), including by way of
example only and not limitation for death, personal injury, property damage, or
otherwise to the extent based on, arising out of, or in any way related to
Bionutrics' or its parents', subsidiaries', Affiliates', successors', or
assigns', or their respective officers', directors', employees', agents', or
contractors' failure to perform its obligations under this Agreement, or any
negligent act, misfeasance, malfeasance, non-feasance or strict liability by
Bionutrics or its parents, subsidiaries, Affiliates, successors, or assigns, or
their respective officers, directors, employees, agents, or contractors, and
(ii) any and all fees (including reasonable attorney's fees), costs, and
expenses incurred by Humko or its parents, subsidiaries, Affiliates,
successors, or assigns, or their respective officers, directors, employees,
agents, or contractors in the investigation, correction, or defense against any
and all such losses, claims, or threatened claims; except to the extent any
such claim for loss, cost, expense, damage, or liability is the direct result
of the acts or negligence of Humko or its parents, subsidiaries, Affiliates,
successors, or assigns, or their respective officers, directors, employees,
agents, or contractors. If Humko receives notice of any claim for which it
considers Bionutrics responsible under this Section 11, Humko promptly will
inform Bionutrics in writing.
12. NOTICES. Any notice or other communication required or permitted in
this Agreement will be in writing and sent by overnight delivery or registered
or certified mail, return receipt requested, with postage and all other charges
prepaid. All notices will be addressed to the respective party at the address
below or to such other address as the party may designate in writing. Notices
will be deemed effective upon delivery or the first good faith reasonable
attempt to deliver during regular business hours.
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If to Bionutrics: Bionutrics, Inc.
2425 E. Camelback Road, Suite 650
Phoenix, Arizona 85016
Attention: Ronald H. Lane
Telecopy No.: 602-508-0115
With copies to: Friedman Siegelbaum LLP
399 Park Avenue, 20th Floor
New York, New York 10022-4689
Attention: J. Robert Horton
Telecopy No.: 212-980-6991
If to Humko: AC Humko Corp.
7171 Goodlett Farms Parkway
Memphis, Tennessee 38018
Telecopy No. 901-381-3066
Attention: Dennis W. Koerner
With copies to: Vinson & Elkins L.L.P.
2500 First City Tower
1001 Fannin
Houston, Texas 77002-6760
Telecopy No.: 713-615-5234
Attention: James B. Rylander
13. CONFIDENTIALITY.
A. Except for the proper exercise of any rights granted or
reserved under other provisions of this Agreement, and except for any other
confidentiality provisions set forth in any other agreement or instrument
involving Bionutrics (or any of its Affiliates or subsidiaries) and Humko,
Bionutrics (and its Affiliates and subsidiaries) will take such precautions as
it normally takes with its own confidential or proprietary information to keep
confidential and not to publish or otherwise disclose to a third party without
the prior written consent of Humko, except as permitted or anticipated in this
Agreement, any information of a proprietary nature furnished by Humko in
connection with this Agreement, including by way of example only and not
limitation technology, marketing strategy, specifications, product information,
data, inventions, processes, know-how, sales force information, sales data,
plans, trade secrets, call lists, customer lists, business information, adverse
reaction reports, and this Agreement (collectively called "Confidential
Information") without the prior written consent of Humko except, subject to
Section
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13.C below, to the extent that such Confidential Information is required to be
disclosed for purposes of complying with governmental laws and regulations.
B. Bionutrics will disclose Confidential Information of Humko
only to those of its employees that have a need for access to it in order to
enable Bionutrics to perform under this Agreement; provided, however, that
Bionutrics has first advised all persons who receive any of the Confidential
Information of its confidential nature, and provided, further, that Bionutrics
has first obtained assurances from all such persons that they will abide by the
terms and conditions of this Confidentiality Agreement as if such persons were
parties hereto.
C. Nothing in this Section 13 will prevent disclosure or use of
Confidential Information that is required to be disclosed by applicable law or
regulation or by order of a court or regulatory body having competent
jurisdiction, and (a) Bionutrics, in writing and in advance of any disclosure,
makes the requesting entity aware of Bionutrics' obligations of confidentiality
in this Agreement, and (b) Bionutrics provides timely written notice to Humko
in advance of any disclosure to the court, regulatory body, or other entity so
as to permit Humko to address with the requesting party any concerns of Humko
regarding such requested disclosure.
D. After the effective date of the termination or expiration of
this Agreement, and within 30 days following receipt of a written request from
Humko, Bionutrics will return to Humko its tangible Confidential Information.
E. The provisions of this Section 13 will apply during the Term
of this Agreement and for five years following the Term.
14. SALE, TRANSFER, ASSIGNMENT, AND CHANGES IN MANAGEMENT.
A. This Agreement will bind and inure to the benefit of the
parties and their successors and assigns except that none of the Bionutrics
Entities will have any right whatsoever to make any assignment of any of its
respective rights or obligations without the written approval of Humko. No
sale, assignment, transfer, conveyance, or encumbrance, whether by law or
otherwise, will be of any force or effect unless such written approval will
have been first obtained.
B. No person, firm, or corporation will succeed to any of the
rights of a party under this Agreement by virtue of any voluntary or
involuntary proceeding in bankruptcy, receivership, attachment, execution, or
assignment for the benefit of creditors, or other legal process.
15. SEVERABLE CONDITIONS. If any provision of this Agreement is held to
be void, invalid, or unenforceable, such provision will be construed as
severable and will not in any way affect or render void, invalid, or
unenforceable any other provision of this Agreement, and this
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Agreement will be carried out as if such void, invalid, or unenforceable
provision was not a part of this Agreement.
16. WAIVER AND MODIFICATION. The terms of this Agreement may not be
altered, waived, modified, or discharged except by an express declaration in
writing on behalf of the parties by duly authorized officers and referring
specifically to this Agreement, and no separate oral or other written agreement
which may be made between any of the parties' employees will in any way modify
this Agreement. Furthermore, any waiver of the requirements of this Section 16
likewise must be explicit and in a writing signed by a duly authorized
representative of each party.
17. SURVIVAL. All of party's rights and privileges provided under this
Agreement, to the extent they are fairly attributable to events or conditions
occurring or existing on or prior to the expiration or termination of this
Agreement, will survive the expiration or termination and be enforceable by the
party and its successors and assigns.
18. GOVERNING LAW AND FORUM.
(A) CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
CONSTRUED, AND INTERPRETED IN ACCORDANCE WITH THE PROVISIONS OF, THE LAW OF THE
STATE OF NEW YORK, WITHOUT REFERENCE TO PROVISIONS THAT REFER A MATTER TO THE
LAW OF ANY OTHER JURISDICTION.
(B) FORUM SELECTION CLAUSE. THE BIONUTRICS ENTITIES (FOR
THEMSELVES, THEIR SUCCESSORS, AND ASSIGNS) AND HUMKO HEREBY IRREVOCABLY AGREE
THAT ANY AND ALL CLAIMS FOR RELIEF ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR ANY OTHER AGREEMENT EXECUTED IN CONNECTION WITH THIS AGREEMENT(ALL OF WHICH
ARE REFERRED TO AS THE "CLAIMS"), WHETHER SUCH CLAIMS SOUND IN CONTRACT, TORT
OR OTHERWISE, AT LAW OR IN EQUITY, UNDER STATE OR FEDERAL LAW, WHETHER BY
STATUTE OR COMMON LAW, SHALL BE BROUGHT EXCLUSIVELY IN THE STATE OR FEDERAL
COURTS LOCATED IN THE JURISDICTION IN WHICH THE HEADQUARTERS OF THE DEFENDANT
IN SUCH SUIT IS THEN LOCATED. FOR EXAMPLE, AS OF THE EFFECTIVE DATE, ANY
CLAIMS BROUGHT AGAINST HUMKO SHALL BE BROUGHT EXCLUSIVELY IN MEMPHIS,
TENNESSEE, AND ANY CLAIM BROUGHT AGAINST THE BIONUTRICS ENTITIES SHALL BE
BROUGHT EXCLUSIVELY IN PHOENIX, ARIZONA.
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<PAGE> 92
19. LIMITATIONS OF LIABILITY.
(a) IN NO EVENT SHALL HUMKO BE LIABLE TO ANY OR ALL OF THE BIONUTRICS
ENTITIES FOR ANY CONSEQUENTIAL, SPECIAL, OR PUNITIVE DAMAGES BASED UPON BREACH
OF WARRANTY, BREACH OF CONTRACT, NEGLIGENCE, STRICT LIABILITY, TORT OR ANY OTHER
LEGAL THEORY. SUCH EXCLUDED DAMAGES INCLUDE, BUT ARE NOT LIMITED TO, LOST
PROFITS, EVEN IF HUMKO HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
(b) IN NO EVENT SHALL THE BIONUTRICS ENTITIES BE LIABLE TO HUMKO
FOR ANY CONSEQUENTIAL, SPECIAL, OR PUNITIVE DAMAGES BASED UPON BREACH OF
WARRANTY, BREACH OF CONTRACT, NEGLIGENCE, STRICT LIABILITY, TORT OR ANY OTHER
LEGAL THEORY. SUCH EXCLUDED DAMAGES INCLUDE, BUT ARE NOT LIMITED TO, LOST
PROFITS, EVEN IF THE BIONUTRICS ENTITIES HAVE BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES.
20. DESCRIPTIVE HEADINGS. The descriptive headings of the Sections in
this Agreement are inserted for convenience only and do not constitute a part
of this Agreement.
21. COUNTERPARTS. This Agreement may be executed in two original
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument representing the agreement
of the parties.
22. RIGHT TO ENTER INTO AGREEMENT. The parties warrant and represent that
they have the capacity and right to enter into this Agreement. Each party is
an independent contractor in the performance of its respective obligations
under this Agreement.
23. ENTIRE AGREEMENT AND EXHIBITS. The conditions set forth in Humko's
standard Purchase Order, a current copy of which is attached as Exhibit C,
constitute additional terms and conditions of this Agreement. In the event that
any of the terms of Exhibit C are deemed to be conflicting or inconsistent with
the terms of this Agreement, the terms of this Agreement will prevail. This
Agreement supersedes all former agreements, understandings, communications, and
negotiations between the parties relating to any and all of the matters for
which provision is made under this Agreement. The following Exhibits are
incorporated by reference: Exhibit A - Price; Exhibit B - Specifications;
Exhibit C - Humko's Standard Purchase Order; Exhibit D - Pricing for Distillate
Products; and Exhibit E - Delivery and Invoice Procedures.
[Signature Page follows]
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<PAGE> 93
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties by their duly authorized respective officers as of the date noted
above.
BIONUTRICS, INC.
By:
----------------------------------
Ronald H. Lane
President and Chief
Executive Officer
BIONUTRICS HEALTH PRODUCTS, INC.
By:
----------------------------------
Ronald H. Lane
President
INCON TECHNOLOGIES, INC.
By:
----------------------------------
John Palmer
Chairman and Chief
Executive Officer
AC HUMKO CORP.
By:
----------------------------------
Wayne Briesemeister,
Vice President
[Signature Page]
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<PAGE> 94
EXHIBIT A
Price for Bionutrics Distillate Products
The Price for Bionutrics Distillate Products shall be as follows:
For the evolvE(R) products, the price to be paid by Bionutrics or other
Bionutrics Entities to Humko shall be two times the cost incurred by Humko in
producing the evolvE(R) products. Humko agrees to be responsible for
encapsulation and packaging (including placing the capsules in cartons and
cases) of the evolvE(R) products. For all other products derived from
Bionutrics Distillate, the price to be paid by Bionutrics or other Bionutrics
Entities to Humko shall be three times the direct costs incurred by Humko in
producing these products.
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<PAGE> 95
EXHIBIT B
SPECIFICATIONS
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<PAGE> 96
EXHIBIT C
HUMKO'S STANDARD PURCHASE ORDER
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<PAGE> 97
EXHIBIT D
PRICING FOR RICE BRAN OIL DISTILLATE PRODUCTS
The price is $10.00 per pound of contained tocopherol, basis 10%, FOB
applicable Humko Plants. The following discount scale shall apply to
distillate that contains less than 10% Tocol:
<TABLE>
<CAPTION>
% TOCOL DISCOUNT
------- --------
<S> <C>
9 - 9.9% 2.5%
8 - 8.9% 5.0%
7 - 7.9% 7.5%
6 - 6.9% 12.5%
5 - 5.9% 17.5%
4 - 4.9% 20.0%
3 - 3.9% 22.5%
</TABLE>
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EXHIBIT E
DELIVERY AND INVOICE PROCEDURES
(DISTILLATE PRODUCTS)
DELIVERY
Humko shall notify Bionutrics when distillate is available for pick up
at one of the Humko Plants. Bionutrics shall arrange to pick up distillate at
the specified location within 2 working days of said notification.
INVOICING
Invoices shall be calculated on the basis of pricing in Exhibit D.
The percentage of Tocol content shall be determined by procedures mutually
agreed to by the parties.
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<PAGE> 1
EXHIBIT 2
JOINT FILING AGREEMENT
The undersigned, and each of them, do hereby agree and consent to the
filing of a single statement on behalf of all of them on Schedule 13D and
amendments thereto, in accordance with the provisions of Rule 13d-1(f)(1) of
the Securities Exchange Act of 1934, as amended.
Dated: August 21, 1998
AC HUMKO CORP.
By: /s/ Wayne Briesemeister
--------------------------------------
Wayne Briesemeister,
Vice President
THE GARFIELD WESTON
CHARITABLE FOUNDATION
By: /s/ Garfield Howard Weston
--------------------------------------
Garfield Howard Weston,
Director
