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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 25, 1999
BIONUTRICS, INC.
(Exact name of registrant as specified in its charter)
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NEVADA 0-22011 86-0760991
(State or other (Commission File No.) (IRS Employer ID No.)
jurisdiction of incorporation)
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2425 E. Camelback Road, Suite 650, Phoenix, Arizona 85016
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (602) 508-0112
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Item 2. Acquisition or Disposition of Assets / Item 5. Other Events
On June 25, 1999, Registrant and AC HUMKO CORP. entered into a new
50/50 joint venture wherein InCon Technologies, Inc., a wholly-owned subsidiary
of registrant ("InCon"), transferred substantially all of its assets to a newly
formed limited liability company, for which it received a payment of $3,000,000
and a 50% interest in the joint venture. InCon Processing, L.L.C. will take over
substantially all of the business currently engaged in by InCon relating to toll
processing, molecular separation, and the design and sale of molecular
separation facilities. AC HUMKO CORP. made a $3,000,000 capital contribution to
the new venture. Each party will make an initial capital contribution for
working capital of $200,000. The joint venture will be managed by
representatives from AC HUMKO CORP. and Bionutrics together with executive
officers from InCon. After a transition period, the joint venture will employ
certain personnel from InCon. InCon Processing, L.L.C. expects to utilize the
InCon expertise to expand its existing business and to expand its business into
processing micronutrients that would be available for food grade products.
Daniel Antonelli, the Chief Executive Officer of AC HUMKO CORP., is also a
director of Bionutrics.
In connection with the creation of the joint venture, registrant and
AC HUMKO CORP. have amended the terms of the perpetual profit-sharing interest
Bionutrics has in AC HUMKO CORP.'s U.S. rice bran business. The amendment to the
Asset Purchase Agreement entered into in August 1998 provides for a royalty
payment of a flat 15% of net earnings before all taxes (EBIT) and removes
previous earnings hurdles.
AC HUMKO CORP. is a national leader in vegetable oil manufacturing and
rice milling. It has extensive experience manufacturing private label brands and
oil -- based ingredient product lines. Today, AC HUMKO CORP. is a U.S.
subsidiary of the $8.5 billion Associated British Foods, Plc.
Exhibits:
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10.24 Master Formation Agreement for InCon Processing, L.L.C. among
AC HUMKO CORP., InCon Technologies, Inc., InCon International,
Inc., Nutrition Technology Corporation, and Bionutrics, Inc.,
dated June 25, 1999.*
10.25 Members Agreement for InCon Processing, L.L.C., between AC
HUMKO CORP. and InCon Technologies, Inc., dated June 25,
1999.*
10.26 First Amendment to Agreement for Purchase and Sale of Assets.
* A portion of the exhibits as noted therein has been redacted
pursuant to a request for confidential treatment filed with
the Commission. The omitted information has been filed
separately.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
July 12, 1999 BIONUTRICS, INC.
By:/s/ Ronald H. Lane
----------------------------------------
Ronald H. Lane
President and Chief Executive Officer
By:/s/Karen J. Harwell
----------------------------------------
Karen J. Harwell
Controller and Chief Accounting Officer
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Exhibit Index
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Exhibit No. Description
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10.24 Master Formation Agreement for InCon Processing, L.L.C. among
AC Humko Corp., InCon Technologies, Inc., InCon International,
Inc., Nutrition Technology Corporation, and Bionutrics, Inc.,
dated June 25, 1999.*
10.25 Members Agreement for InCon Processing, L.L.C., between AC
Humko Corp. and InCon Technologies, Inc., dated June 25,
1999.*
10.26 First Amendment to Agreement for Purchase and Sale of Assets.
* A portion of the exhibits as noted therein has been redacted
pursuant to a request for confidential treatment filed with
the Commission. The omitted information has been filed
separately.
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Exhibit 10.24
MASTER FORMATION AGREEMENT
FOR
INCON PROCESSING, L.L.C.
AMONG
AC HUMKO CORP.,
INCON TECHNOLOGIES, INC.,
INCON INTERNATIONAL, INC.,
NUTRITION TECHNOLOGY CORPORATION,
AND
BIONUTRICS, INC.,
JUNE 25, 1999
The notation [*] herein indicates information omitted pursuant to a
request for confidential treatment filed with the Commission. The confidential
information has been filed separately with the Commission.
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TABLE OF CONTENTS
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ARTICLE 1
Definitions ..................................................................................... 1
1.1 Definitions ............................................................................ 1
ARTICLE 2
The Company ..................................................................................... 7
2.1 New Business Structure ................................................................. 7
2.2 Contributions .......................................................................... 7
2.3 Contributions and Commitments to the Company ........................................... 7
2.4 Pre-Closing Actions to Create Company .................................................. 8
ARTICLE 3
Closing ......................................................................................... 9
3.1 Closing: Effective Date ............................................................... 9
3.2 Activation of the Company .............................................................. 9
3.3 Contributions and Commitments to the Company ........................................... 9
3.4 Transfer of Various Assets of InCon .................................................... 9
3.5 Execution of Transition Services Agreement. ............................................ 10
3.6 Execution of Amendment to Agreement for Purchase and Sale of Assets .................... 10
3.7 Execution of Related Agreements ........................................................ 10
3.8 Transfer of Construction Contract. ..................................................... 10
3.9 Notification of Assignment of Rights in Construction Contract. ......................... 10
3.10 Transfer of Representation Agreement. .................................................. 10
3.11 Notification of Assignment of Rights in Representation Agreement. ...................... 11
3.12 Transfer of Sales Representative Agreements. ........................................... 11
3.13 Notification of Assignment of Rights in Sales Representative Agreements. ............... 11
3.14 Escrow Agreement. ...................................................................... 11
3.15 Payment of Debts. ...................................................................... 11
3.16 Transfer of Golden Hope Instrument. .................................................... 11
3.17 Notification of Assignment of Rights in Golden Hope Instrument. ........................ 11
3.18 Guaranty. .............................................................................. 12
ARTICLE 4
Representations and Warranties by InCon ......................................................... 12
4.1 Organization and Authority ............................................................. 12
4.2 Validity: Enforceability. ............................................................. 12
4.3 No Violation. .......................................................................... 12
4.4 Litigation and Proceedings. ............................................................ 13
4.5 Third-Party Consents ................................................................... 13
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4.6 InCon Contracts. ....................................................................... 13
4.7 Environmental Matters .................................................................. 13
4.8 Intellectual Property Matters .......................................................... 14
4.9 Product Claims ......................................................................... 14
4.10 No Grant of Manufacturing Rights. ...................................................... 15
4.11 Title to Tangible Assets ............................................................... 15
4.12 Leased Real and Personal Property ...................................................... 15
4.13 Taxes .................................................................................. 15
4.14 Employee Matters ....................................................................... 16
4.15 Compliance with Laws ................................................................... 17
4.16 Ongoing Capital Expenditures ........................................................... 17
4.17 Ownership of Stock ..................................................................... 17
4.18 Identity of Subsidiaries ............................................................... 17
4.19 Employee Benefit Plans ................................................................. 17
4.20 Proprietary Information. ............................................................... 19
4.21 Brokers. ............................................................................... 20
4.22 Code. .................................................................................. 20
4.23 Insurance. ............................................................................. 20
4.24 Construction Contract. ................................................................. 20
4.25 Year 2000 Ready. ....................................................................... 20
4.26 Sales Representative Agreements. ....................................................... 20
4.27 State of Equipment ..................................................................... 20
4.28 Payments to Officials. ................................................................. 20
4.29 Accounts Payable. ...................................................................... 21
4.30 Accounts Receivable. ................................................................... 21
ARTICLE 4A
Representations and Warranties by Bionutrics .................................................... 21
4A.1 Organization and Authority. ............................................................ 21
4A.2 Validity: Enforceability. ............................................................. 21
4A.3 No Violation. .......................................................................... 21
4A.4 Litigation and Proceedings. ............................................................ 22
4A.5 Third-Party Consents. .................................................................. 22
4A.6 InCon Contracts. ....................................................................... 22
4A.7 Brokers. ............................................................................... 22
4A.8 Code. .................................................................................. 22
4A.9 Proprietary Information. ............................................................... 23
4A.10 Ownership of Stock. .................................................................... 23
4A.11 Matter Having Biological Activity. ..................................................... 23
ARTICLE 4B
Representations and Warranties by InCon International Inc. ...................................... 23
4B.1 Organization and Authority. ............................................................ 23
4B.2 Validity: Enforceability. ............................................................. 23
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4B.3 No Violation. .......................................................................... 24
4B.4 Representation Agreement ............................................................... 24
4B.5 Payments to Officials .................................................................. 24
4B.6 Sole Shareholder ....................................................................... 24
4B.7 Construction Contract. ................................................................. 24
ARTICLE 4C
Representations and Warranties by NTC ........................................................... 24
4C.1 Organization ............................................................................ 24
4C.2 Validity: Enforceability. .............................................................. 25
4C.3 No Violation. .......................................................................... 25
4C.4 Sole Shareholder. ...................................................................... 25
ARTICLE 5
Representations and Warranties by Humko ......................................................... 25
5.1 Organization and Authority ............................................................. 25
5.2 Validity: Enforceability. .............................................................. 26
5.3 No Violation. .......................................................................... 26
5.4 No Limitation. ......................................................................... 26
ARTICLE 6
Covenants Between Execution and Closing and Post-Closing ........................................ 26
6.1 Access to Records ...................................................................... 26
6.2 Conduct of Business Prior to Closing ................................................... 27
6.3 Filings with Governmental Authorities .................................................. 27
6.4 Statement of Finished Goods Inventory .................................................. 27
ARTICLE 7
Covenants of the Parties After the Closing ...................................................... 27
7.1 Indemnification Regarding Pre-existing Liabilities. .................................... 27
7.2 Confidentiality ........................................................................ 28
7.3 Budget ................................................................................. 30
7.4 Guaranteed Payment to Humko. ........................................................... 30
7.5 Restrictions Relating to Certain Products and Materials. ............................... 31
7.6 Adjustment Relating to Receivables and Payables Only. .................................. 31
ARTICLE 8
Conditions to Closing ........................................................................... 32
8.1 Conditions of Humko's Obligations to Close ............................................. 32
8.2 Conditions of InCon's and Bionutrics' Obligations to Close ............................. 33
8.3 Mutual Conditions ...................................................................... 33
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8.4 Waiver of Conditions to Closing ........................................................ 34
ARTICLE 9
Termination of Agreement ........................................................................ 34
9.1 Termination of this Agreement Prior to the Closing Date ................................ 34
ARTICLE 10
General Provisions .............................................................................. 35
10.1 Binding Nature and Restrictions on Assignment .......................................... 35
10.2 Notices ................................................................................ 35
10.3 Survival of Representations and Warranties ............................................. 36
10.4 Survival of Covenants .................................................................. 36
10.5 Governing Law: Severability ............................................................ 36
10.6 Public Announcement .................................................................... 36
10.7 Expenses ............................................................................... 37
10.8 Covenant of Good Faith ................................................................. 37
10.9 Further Assurances ..................................................................... 37
10.10 Calculation of Days .................................................................... 37
10.11 Headings ............................................................................... 37
10.12 Construction ........................................................................... 37
10.13 Counterparts ........................................................................... 37
10.14 Entire Agreement; Amendment ............................................................ 37
10.15 Submission to Jurisdiction ............................................................. 37
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EXHIBITS
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Exhibit 1.1 Members Agreement
Exhibit 3.4(a) General Assignment and Bill of Sale
Exhibit 3.4(b) Assignment of Lessee's Interest in Real Property Leases
Exhibit 3.4(c) Assignment of Lessee's Interest in Personal Property
Exhibit 3.4(d) Form of Opinions of InCon, International, NTC, and Bionutrics Counsel
Exhibit 3.4(e) FIRPTA Certificate
Exhibit 3.4(g) Technology Assignment Agreement from InCon to Company
Exhibit 3.5 Transition Services Agreement
Exhibit 3.6 First Amendment to Agreement for Purchase and Sale of Assets
Exhibit 3.8 Assignment and Assumption Agreement (International Construction Contract)
Exhibit 3.9 [*]
Exhibit 3.10 Assignment of Representation Agreement
Exhibit 3.11 [*]
Exhibit 3.12 Assignment of Sales Representative Agreements
Exhibit 3.13 Notification of Assignment of Rights in and to Sales Representative Agreements
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Exhibit 3.14 Escrow Agreement
Exhibit 3.16 [*]
Exhibit 3.17 [*]
Exhibit 3.18 Guaranty of Bionutrics
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SCHEDULES
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3.4 Schedule of InCon Assets to be Conveyed to the Company
3.15 List of Certain Loans of InCon and Its Affiliates
4.4 InCon's Litigation and Proceedings
4.5 InCon's Third-Party Consents
4.6 InCon Contracts
4.7 InCon's Environmental Disclosures
4.8 InCon's Intellectual Property Disclosures
4.9 InCon's Product Claims Disclosures
4.10 Manufacturing Licenses Granted by InCon and Affiliates
4.11(a) List of InCon's Assets to be Conveyed to Company
4.11(b) List of InCon's Assets that will be retained by InCon
4.12 InCon's Leased Real and Personal Property
4.13 InCon's Tax Disclosures
4.16 Capital Expenditures
4.19 Employee Plans
4.23 Insurance
4.29 List of Accounts Payable
4.30 List of Accounts Receivable
5.4 [*]
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MASTER FORMATION AGREEMENT
This MASTER FORMATION AGREEMENT is entered into as of June 25,
1999, by and among AC HUMKO CORP., a Delaware corporation ("Humko"), having
offices at 7171 Goodlett Farms Parkway, Memphis, Tennessee 38018-4909, INCON
TECHNOLOGIES, INC., a Delaware corporation ("InCon"), having offices at 970
Douglas Road, Batavia, Illinois 60510, INCON INTERNATIONAL INC., a British
Virgin Islands corporation ("International"), having offices at 970 Douglas
Road, Batavia, Illinois 60510, NUTRITION TECHNOLOGY CORPORATION, a Nevada
corporation ("NTC"), having offices at 2425 E. Camelback Road, Suite 650,
Phoenix, Arizona 85016, and BIONUTRICS, INC., a Nevada corporation
("Bionutrics"), having offices at 2425 E. Camelback Road, Suite 650, Phoenix,
Arizona 85016.
W I T N E S S E T H:
WHEREAS, InCon and Humko desire to enter into this Agreement in order
to form a Delaware limited liability company provisionally named InCon
Processing, L.L.C., (the "Company"); and
WHEREAS, NTC, as the sole shareholder of all of the outstanding capital
stock of InCon, and Bionutrics, as the sole shareholder of all the outstanding
capital stock of NTC, will benefit directly and indirectly from the transactions
referred to in this Agreement and, to evidence each of their approvals to this
Agreement and the transactions covered hereby, they joined in the execution of
this Agreement and additionally have made the respective warranties,
representations, indemnities and other agreements contained in this Agreement,
and Humko would not have executed this Agreement unless Bionutrics, NTC and
InCon all executed this Agreement; and
WHEREAS, the Company intends to engage in the business activities
included within the "Scope of Business", defined in Article I; and
WHEREAS, InCon and Humko desire to enter into the arrangements and
commitments described herein to create and effectuate the formation of the
Company, and Bionutrics joins in the execution of this Agreement for the
purposes set forth above.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements and covenants of the parties hereinafter set forth, the parties
hereby agree as follows:
ARTICLE 1
Definitions
1.1 Definitions. For purposes of this Agreement, the following
capitalized terms shall have the meanings ascribed thereto in this Section 1.1.
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"Affiliate(s)" means an entity controlling, controlled by or under
common control with another entity, with majority ownership being deemed
necessary for control.
"Agreement" means this Agreement, together with all Appendices,
Schedules and Exhibits hereto and any modification or amendment hereto or
thereto that is made in accordance with Section 10.14.
"Agreement for Purchase and Sale of Assets" means that certain
Agreement for Purchase and Sale of Assets dated as August 14, 1998, by and
between Bionutrics and Humko.
"Assets" has the meaning set forth in Section 3.4.
"Bionutrics" has the meaning set forth in the opening paragraph of this
Agreement.
"InCon" has the meaning set forth in the opening paragraph of this
Agreement.
"Claims and Expenses" has the meaning set forth in Section 7.1.
"Closing" has the meaning set forth in Section 3.1(a).
"Closing Date" has the meaning set forth in Section 3.1(a).
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the first recital of this
Agreement.
"Competitive Activity" has the meaning set forth in the Members
Agreement.
"Confidential Information" has the meaning set forth in Section 7.2(a).
[*]
"Covered Systems" shall mean all computer software, computer hardware,
firmware, process, production, or other control systems of every kind and
description, telecommunications and other information systems, and all other
equipment containing microchips or computer code, that are used by InCon in
connection with its business, the Facility or any of the Assets that will be
acquired by the Company pursuant to this Agreement. A Covered System includes
any third-party-manufactured products that have been included by InCon in a
Covered System that has been installed by InCon or any of its subcontractors in
connection with its business, the Facility or any of the Assets that will be
acquired by the Company pursuant to this Agreement.
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"EBITDA" means all Net Earnings before applicable state and federal
corporate income Taxes and interest expense.
"Effective Date" has the meaning set forth in Section 3.1(b).
"Employee Plans" has the meaning set forth in Section 4.19(a).
"Environmental Claims and Expenses" has the meaning set forth in
Section 7.1.
"Environmental Laws" means any and all laws, statutes, ordinances,
rules, regulations, orders, or determinations of any Governmental Authority at
the federal, state, and local level pertaining to pollution of the environment
and protection of health and the environment including without limitation, the
Clean Air Act, as amended, the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 ("CERCLA"), as amended, the Federal
Water Pollution Control Act, as amended, the Occupational Safety and Health Act
of 1970, as amended, the Resource and Conservation and Recovery Act of 1976,
("RCRA") as amended, the Safe Drinking Water Act, as amended, the Toxic
Substances Control Act, as amended, the Superfund Amendments and Reauthorization
Act of 1986, as amended, the Hazardous Materials Transportation Act, as amended,
all implementing rules and regulations, and any other environmental conservation
or protection laws at the federal, state, and local level regarding the Release,
Threatened Release, or Disposal of Petroleum Products, Hazardous Substances,
Solid Wastes or Materials of Environmental Concern.
"Environmental Permits" has the meaning set forth in Section 4.7(b).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Facility" means the facility of InCon located at 970 Douglas Road,
Batavia, Illinois 60510.
[*]
"Governmental Authority" means the United States, the state, county,
city, and political subdivisions in which the Facility is located or that
exercise jurisdiction over the Facility or InCon, and any agency, department,
commission, board, bureau, or instrumentality that exercises jurisdiction over
the Facility or InCon.
"Gross Revenues" means all revenues received from the business of the
Company during the period commencing one (1) calendar year after the date
hereof, and ending on the date that is two (2) calendar years after the date
hereof. All such items shall be determined in accordance with generally accepted
accounting principles applied consistently.
"Guaranty" means the Guaranty of Bionutrics guaranteeing all of the
warranties, representations, indemnities, and covenants of InCon, International
and NTC under this Agreement and the Related Agreements, in the form attached
hereto as Exhibit 3.18.
3
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"Hazardous Substance" means any material, waste, or substance, that is:
(A) included within the definitions of "hazardous substances," "hazardous
materials," or "toxic substances," in or pursuant to any Environmental Law, or
subject to regulation under any Environmental Law; (B) listed in the United
States Department of Transportation Hazardous Materials Table, 49 C.F.R.
Section 172.101, as amended, or in the United States Environmental Protection
Agency List of Hazardous Substances and Reportable Quantities, 40 C.F.R. Part
302, as amended; or (C) explosive, radioactive, asbestos, a polychlorinated
biphenyl, or a Petroleum Product.
"Humko" has the meaning set forth in the opening paragraph of this
Agreement.
"Indemnitor" has the meaning set forth in Section 7.1.
"InCon Contracts" has the meaning set forth in Section 4.6(a).
"Intellectual Property Rights" means any and all intangible rights
existing from time to time under state, federal and/or foreign Laws, including
patent Law, copyright Law, trade secret Law, unfair competition Law, trademark
Law or other similar Laws or principles. As used herein, the term "Intellectual
Property Rights" shall not include any and all proprietary compounds and
compositions of matter having biological activity and/or utility and products
incorporating such compositions of matter, but such term shall include (i) all
proprietary information with respect to methods and/or techniques involved in
the processing of natural source materials except for coconut oil and (ii) all
proprietary information relating to compounds and compositions of matter that
are biologically inactive and/or utility and products incorporating such
compositions of matter.
"International" has the meaning set forth in the opening paragraph of
this Agreement.
[*]
"Law" means any applicable constitutional provision, statute, act, code
(including the Code), law, regulation, rule, ordinance, order, injunction,
arbitral award, decree, ruling, proclamation, resolution, judgment, decision, or
declaration, of a Governmental Authority.
"Leased Real and Personal Property" has the meaning set forth in
Section 4.12(a).
"Materials of Environmental Concern" includes chemicals, pollutants,
contaminants, wastes, toxic substances, Hazardous Substances, hazardous wastes,
hazardous materials, hazardous chemical, petroleum and Petroleum Products,
regulated materials, radioactive materials, and pesticides.
"Members Agreement" means the Members Agreement for the Company, a copy
of which is attached hereto as Exhibit 1.1.
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"Net Earnings" means the difference between Gross Revenues minus all
costs (excluding depreciation and amortization) incurred by the Company in
connection with the operation of the business of the Company during the period
commencing one (1) calendar year after the date hereof, and ending on the date
that is two (2) calendar years after the date hereof.
"NTC" has the meaning set forth in the opening paragraph of this
Agreement.
"Petroleum Product" means any material, product, or substance that is
included within the definitions of "petroleum," "petroleum products," "petroleum
substances," or "crude oil" or any fraction thereof, in or pursuant to any
Environmental Law, or subject to regulation under any Environmental Law.
"Proprietary Information" means all commercial and technical
information, including, without limitation, licenses, know-how, trade secrets,
inventions, drawings (whether for engineering, production, or development
purposes), specifications (whether for products, processes, equipment, or
otherwise), and formulas, owned, licensed or developed by InCon or used in the
current business of InCon, including the exclusive, world-wide right to make use
of such information in the manufacture of products, the right to create
modifications and improvements thereof, and the right to defend its interests
therein with respect to third parties. As used herein, the term "Proprietary
Information" shall not include any and all commercial and technical information
relating to proprietary compounds and compositions of matter having biological
activity and/or utility and products incorporating such compositions of matter,
but such term shall include (i) all proprietary information with respect to
methods and/or techniques involved in the processing of natural source materials
except for coconut oil and (ii) all proprietary information relating to
compounds and compositions of matter that are biologically inactive and/or
utility and products incorporating such compositions of matter.
"Release", "Threatened Release" and "Disposal" shall have the meanings
provided within the definitions of "release," "threatened release," or
"disposal" in or pursuant to any Environmental Law, or subject to regulation
under any Environmental Law.
"Related Agreements" means all of the agreements set forth as Exhibits
hereto and any other agreements executed by any of the parties hereto in
connection with the matters covered by this Agreement.
[*]
"Sales Representative Agreements" means the following Sales
Representative Agreements:
[*]
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"Scope of Business" means the toll processing of various products, the
sale of certain equipment and services in connection with the design,
engineering and/or construction of molecular separation (including molecular
distillation, dry fractionation, chromatographic separation and membrane
filtration) facilities and various activities related thereto, including
research and development, technical support and marketing, and the operation of
certain facilities involving molecular separation procedures and other processes
and procedures currently engaged in by InCon [*]; and
"Solid Waste" means any material, waste, or substance included within
the definition of "solid waste" in or pursuant to any Environmental Law, or
subject to regulation under any Environmental Law.
"Taxes" has the meaning set forth in Section 4.13.
"Tax Return" has the meaning set forth in Section 4.13.
"Territory" has the meaning set forth in the Members Agreement.
"Technology" means all proprietary technology owned, licensed or
developed by InCon, which relates to the business of InCon or which is within
the Scope of the Business.
"Transition Services Agreement" means the Transition Services Agreement
between the Company and InCon of even date herewith and the form of which is
attached as Exhibit 3.5.
"Year 2000 Ready" shall mean capable at all times, without additional
human intervention or additional programming, of correctly processing (and, if
applicable, calculating, comparing, and/or sequencing), storing, retrieving,
displaying, printing, inputting and outputting calendar, date, and time data
before, on, and after January 1, 2000 (and correctly handling each leap year);
the dates shall be in a 4-digit year format (YYYY) except for windowing and
similar techniques that permit logical interpretation of two-digit year fields
in situations where use of the temporary logical technique is specifically
disclosed and agreed to by all parties.
ARTICLE 2
The Company
2.1 New Business Structure.
(a) The parties shall cause the Company to be formed as a
Delaware limited liability company. After the Closing, the Company will be owned
fifty percent (50%) by Humko and fifty percent (50%) by InCon, subject to the
terms of the Members Agreement.
(b) Each party is and shall remain liable for all pre-existing
liabilities relating to the conduct of its respective businesses and the
businesses of its Affiliates prior to the Closing.
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2.2 Contributions. InCon and Humko will make the contributions and
contractual commitments to the Company that are summarized in Sections 2.3 and
2.4. The parties have agreed that the aggregate value of the contributions to be
made by Humko is US $3,200,000 and the aggregate value of the contributions to
be made by InCon is US $3,200,000.
2.3 Contributions and Commitments to the Company.
(a) InCon shall convey to the Company all of the Assets, which InCon and Humko
have agreed have a value of US $6,000,000. InCon's contribution to the Company
shall be equal to $3,000,000 for the contribution of a one-half (1/2) undivided
interest in and to the Assets, and the Company shall immediately purchase the
other undivided one-half interest in and to the Assets for US $3,000,000. In
addition, InCon shall contribute US $200,000 in cash to the Company at Closing.
Accordingly, the aggregate contribution from InCon to the Company on the Closing
Date shall be equal to US $3,200,000.
(b) Humko shall make a cash contribution to the Company equal to US $3,200,000.
2.4 Pre-Closing Actions to Create Company. On or before the Closing
Date,
(a) Humko and InCon agree to execute, file and record such
certificates and other documents as may be required in order to form the Company
as a limited liability company under Delaware Law. The parties agree not to make
any election to treat the Company as other than a partnership for federal income
tax purposes. The parties will further qualify the Company to do business in
Illinois and any jurisdiction that they determine to be appropriate and will
open a bank account in the name of the Company at a bank agreed to by the
parties.
(b) InCon shall obtain the written consent and estoppel, in
form and substance reasonably satisfactory to Humko, of each lessor of equipment
and the Facility leased by InCon to the transfer by InCon of its interest under
each of the respective leases to the Company.
(c) InCon shall obtain such other written consents and
estoppels from other contract parties, in form and substance reasonably
satisfactory to Humko, as may be required by Humko including, without
limitation, those related to various toll processing agreements in connection
with the business of InCon and each of the following:
(i) [*]
(ii) [*]
(iii) Manufacturing Agreement with InCon Industries, Inc.
dated October 31, 1997;
(iv) Facility lease identified on Schedule 4.12; and
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(v) [*]
(d) Humko shall conduct its due diligence inspections of all
Facilities leased by InCon together with an inspection of all records and
documents of InCon.
ARTICLE 3
Closing
3.1 Closing: Effective Date.
(a) The closing (the "Closing") of the transactions
contemplated by this Agreement shall take place at 10:00 a.m. at the offices of
Vinson & Elkins L.L.P. at 1325 Avenue of the Americas, 17th Floor, New York
City, New York on or before (i) June 30, 1999, or (ii) at such other place, time
and date as InCon, Humko and Bionutrics may agree (the date of the Closing being
the "Closing Date"). All actions required to be taken at the Closing shall be
deemed to occur simultaneously and in the appropriate order in light of the
nature of the respective transactions. Final acceptance of this Agreement and
all Related Agreements shall be made by the parties in New York City, New York.
(b) All transactions consummated at the Closing will be given
financial effect as of 12.01 a.m. on the Closing Date (the "Effective Date").
3.2 Activation of the Company. At the Closing, InCon and Humko will
execute and deliver to each other the Members Agreement.
3.3 Contributions and Commitments to the Company. At the Closing, the
parties will make the contributions and commitments to the Company that are
described in Section 2.3.
3.4 Transfer of Various Assets of InCon. At the Closing, InCon shall
deliver the following instruments to the Company and transfer all of the assets
of InCon identified on Schedule 3.4 (the "Assets"):
(a) a General Assignment and Bill of Sale executed by InCon in
the form of Exhibit 3.4(a);
(b) Assignment of Lessee's Interest In Leases to each parcel
of real property leased by InCon, as required by applicable Law to transfer
leasehold title to all of such real property to the Company, in the form of
Exhibit 3.4(b);
(c) Assignment of Lessee's Interest In Leases to all equipment
leased by InCon in connection with the business of InCon, as required by
applicable Law to transfer leasehold title to all of such personal property to
the Company, in the form of Exhibit 3.4(c)
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(d) opinions of counsel to InCon, International, NTC, and
Bionutrics including Nevada counsel in the form of Exhibit 3.4(d);
(e) a Code Section 1445 certificate in the form of Exhibit
3.4(e);
(f) all books and records of InCon relating to the Assets
assigned by InCon to the Company and to InCon's business except those relating
to employees or the corporate minute books and capital stock ledger of InCon;
(g) Technology Assignment Agreement from InCon to the Company
granting perpetual ownership of the Technology to the Company in the form of
Exhibit 3.4(g); and
(h) written approval of the sole shareholder of InCon and
Nutrition Technology Corporation, approving the transactions covered by this
Agreement;
(i) written approval of the sole shareholder of NTC,
Bionutrics, approving the transactions covered by this Agreement; and
(j) such other instruments or documents as may be reasonably
necessary or appropriate to transfer all of the Assets of InCon and
International to the Company.
3.5 Execution of Transition Services Agreement. At the Closing, InCon
and the Company shall execute and deliver to each other the Transition Services
Agreement in the form of Exhibit 3.5.
3.6 Execution of Amendment to Agreement for Purchase and Sale of Assets
. At the Closing, Bionutrics and Humko shall execute and deliver to each other
the First Amendment to Agreement for Purchase and Sale of Assets in the form of
Exhibit 3.6.
3.7 Execution of Related Agreements. At the Closing, each of InCon,
Humko, and Bionutrics and the other parties hereto shall execute and deliver
each of the respective Related Agreements not already described in this Article
3 to which it is a party.
3.8 Transfer of Construction Contract. At the Closing, International
shall execute and deliver to the Company the Assignment and Assumption of
Agreement (Construction Contract) in the form of Exhibit 3.8, assigning to the
Company all of International's rights, titles and interests in and to the
Construction Contract.
3.9 [*]
3.10 Transfer of Representation Agreement. At the Closing,
International shall execute and deliver to the Company the Assignment of
Representation Agreement in the form of
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Exhibit 3.10, assigning to the Company all of International's rights, titles and
interests in and to the Representation Agreement.
3.11 [*]
3.12 Transfer of Sales Representative Agreements. At the Closing, InCon
shall execute and deliver to the Company the Assignments of Sales Representative
Agreements in the form of Exhibit 3.12, assigning to the Company all of InCon's
rights, titles and interests in and to each of the Sales Representative
Agreements.
3.13 Notification of Assignment of Rights in Sales Representative
Agreements. At the Closing, InCon shall execute and deliver to the Company the
Notification of Assignment of Rights in and to Sales Representative Agreements
in the form of Exhibit 3.13, notifying each of the Representatives defined in
each of the Sales Representative Agreements of the assignment to the Company of
all of InCon's rights, titles and interests in and to the respective Sales
Representative Agreements.
3.14 Escrow Agreement. At the Closing, InCon and Humko shall execute
and deliver to each other an Escrow Agreement in the form of Exhibit 3.14
appointing First American Title Insurance Company, National Division as escrow
agent to hold an amount of money equal to the amount required under the terms of
Section 7.7.
3.15 Payment of Debts. Schedule 3.15 contains a list of certain loans
of InCon or its Affiliates that must be paid by InCon from funds to be paid to
InCon by the Company as payment for an undivided fifty percent interest in the
Assets of InCon that will be contributed by InCon to the Company. The other
undivided fifty percent interest in such Assets shall constitute a capital
contribution by InCon to the Company.
3.16 [*]
3.17 [*]
3.18 Guaranty. At the Closing, Bionutrics shall execute and deliver the
Guaranty to Humko in the form of Exhibit 3.18.
ARTICLE 4
Representations and Warranties by InCon
InCon represents and warrants to Humko as follows:
4.1 Organization and Authority
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InCon (i) is a corporation duly formed, validly existing and
in good standing under the Laws of the State of Delaware, (ii) has the full
power and authority to carry on its business as now being conducted and to own
and lease its properties, and (iii) has full power and authority to execute and
deliver this Agreement, the Related Agreements to which it is a party, and the
other agreements and instruments executed or to be executed and delivered by it
in connection herewith and to consummate the transactions contemplated hereby
and thereby.
4.2 Validity: Enforceability.
InCon's execution, delivery and performance of this Agreement
and any Related Agreements to which it is or will be a party, and InCon's
consummation of the transactions contemplated hereby and thereby, have been duly
authorized by all necessary action of InCon's board of directors and have been
approved by all shareholders of InCon. This Agreement has been, and at the
Closing the Related Agreements to which InCon is a party will be, duly executed
and delivered by InCon, and when duly executed and delivered by InCon will
constitute the legal, valid and binding obligations of InCon, enforceable in
accordance with their respective terms, except to the extent provided by
bankruptcy, insolvency or similar Laws respecting creditors' rights generally or
to the extent that enforceability may be limited by the availability of specific
performance or other equitable remedies being in the discretion of the court.
4.3 No Violation.
The execution, delivery and performance by InCon of this
Agreement, the Related Agreements to which it is or will be a party, and the
other agreements and instruments executed or to be executed and delivered by it
in connection herewith, and the consummation of the transactions contemplated
hereby and thereby, does not and will not (i) violate or conflict with the
provisions of any Law or of any order, judgment or decree of any court or other
Governmental Authority applicable to InCon or the property or business of InCon
or its Affiliates, (ii) violate or conflict with the articles of incorporation
or by-laws of InCon, or (iii) result in a breach of or constitute a default (or
an event that with the giving of notice or lapse of time or both would become a
default) under, pursuant to, any agreement to which InCon is a party or by which
it is bound.
4.4 Litigation and Proceedings. Except as described in Schedule 4.4,
there are no actions, suits, or proceedings (whether or not purportedly on
behalf of or against InCon) pending, or to the knowledge of InCon threatened,
against InCon or its Affiliates or relating to the consummation of the
transactions contemplated hereby, at Law or in equity, before or by any
Governmental Authority, or before any arbitrator. Neither InCon nor any of its
Affiliates or the business of any such parties is subject to any judgment,
order, writ, injunction, decree or award that adversely affects the business of
InCon or any of its Affiliates.
4.5 Third-Party Consents. Except as described in Schedule 4.5, no
permit, consent, authorization or approval of, or waiver or exemption by, or
filing with, any person is required in connection with the execution, delivery
or performance by InCon of this Agreement or any of the Related Agreements or
the consummation by InCon of the transactions contemplated thereby.
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4.6 InCon Contracts.
(a) Schedule 4.6 lists, as of June 1, 1999, all
customer sales agreements, supply agreements, toll manufacturing agreements,
leases and other material agreements related to the business of InCon and
International (collectively, "InCon Contracts") in effect on the date hereof.
Except as described in Schedule 4.6, InCon is not aware of (i) the cancellation,
breach, expiration or lapse of any InCon Contract; or (ii) any default by any
party to any InCon Contract. Except as described in Schedule 4.6, neither InCon
nor any InCon Affiliate is a party to, or subject to, any agreement, contract or
commitment that substantially limits the freedom of InCon or any InCon Affiliate
to compete in any line of business within the Company Scope of Business, or that
would conflict with InCon's ability to become a member of the Company.
(b) Except as described in Schedule 4.6, the
execution, delivery and performance by InCon and International of this
Agreement, the Related Agreements, and the other agreements and instruments
executed or to be executed and delivered by it in connection herewith and the
consummation of the transactions contemplated hereby and thereby do not violate
or conflict with the provisions of any InCon Contract.
(c) Except as described in Schedule 4.6, each InCon
Contract is (or, in the case of InCon Contracts executed after the date hereof,
on the Closing Date will be) in full force and effect, and to the knowledge of
InCon, neither InCon nor any of its Affiliates is in default thereunder, and no
event has occurred which, with the passage of time or the giving of notice, or
both, would result in any default thereunder by InCon or any of its Affiliates.
4.7 Environmental Matters.
(a) Except as described in Schedule 4.7, neither InCon nor any
of its Affiliates is subject to any pending or threatened action, suit,
investigation, inquiry or proceeding by or before any court or Governmental
Authority (i) under any Environmental Laws or (ii) with respect to any claim by
any non-governmental third party in connection with any Release or Threatened
Release of any Hazardous Substances into the environment.
(b) InCon and its Affiliates have obtained with respect to the
Facility all permits, licenses, other authorizations, registrations and other
governmental consents ("Environmental Permits") required under Environmental
Laws.
(c) Except as described in Schedule 4.7, the Facility and the
business of InCon are each in compliance with all Environmental Laws and all
terms and conditions of such Environmental Permits.
(d) Except as described in Schedule 4.7, there has not been a
Release, Threatened Release, or Disposal of any Hazardous Substances or
Materials of Environmental Concerns at any Leased Real and Personal, or other
property owned or operated by InCon or International.
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(e) Neither InCon nor International has disposed of Hazardous
Substances or Materials of Environmental Concern at: (1) any facility that does
not have a permit to accept such substances or materials, or (2) any facility
that is on the National Priorities List.
4.8 Intellectual Property Matters. All of the Intellectual Property
Rights of InCon that are owned by InCon and/or used in InCon's business are
described on Schedule 4.8. Except as described in Schedule 4.8 and Schedule
4.10:
(a) There are no actions, suits, or proceedings pending
against InCon or any of its Affiliates that any of them is infringing upon (or
has infringed upon) the Intellectual Property Rights of any other party;
(b) To the knowledge of InCon, there are no such actions,
suits, or proceedings that have been threatened within the last three years; and
(c) To the knowledge of InCon, no party is infringing upon (or
has infringed upon) the Intellectual Property Rights related to the Technology.
4.9 Product Claims. Except as described in Schedule 4.9, there are no
actions, suits, or proceedings pending, or to the knowledge of InCon threatened,
against InCon or any of its Affiliates relating to any product liability claims
or product defect allegations relating to the business of InCon.
4.10 No Grant of Manufacturing Rights. Except as disclosed in Schedule
4.10, neither InCon nor any of its Affiliates has granted or transferred to any
person (including any Affiliate, Associate or third party) any rights or license
to use the Technology or to process or manufacture products using the
Technology. InCon knows of no basis on which any third party could claim to have
such rights. Neither InCon nor any of its Affiliates has disclosed any of its
technology relating to the Technology to any person, other than those parties
listed in Schedule 4.10, and then only pursuant to non-use and non-disclosure
restrictions described in such Schedule.
4.11 Title to Tangible Assets. (a) Schedule 4.11(a) lists all of the
material Assets of InCon that will be conveyed to the Company. Except as
specified in Schedule 4.11(a), InCon owns and has good and valid marketable
title to all such Assets and none of such Assets is subject to any security
agreement, pledge, mortgage, deed of trust, financing statement, lease financing
or any other financing arrangement whereby any other party has an interest in or
claim against any of such tangible Assets.
(b) Schedule 4.11(b) lists all of the material assets of InCon
that will not be conveyed or transferred to the Company.
4.12 Leased Real and Personal Property.
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(a) Schedule 4.12 lists all of the real and personal property
that InCon currently uses in connection with its business, all of which is held
by InCon pursuant to leases (the "Leased Real and Personal Property").
(b) Except as set forth in Schedule 4.12, InCon has a valid
leasehold interest in all of the Leased Real and Personal Property, free and
clear of all liens and security interests. All leases in respect of the Leased
Real and Personal Property are valid, binding and enforceable in accordance with
their respective terms, and there does not exist under any such lease any
default, or any event which with notice or lapse of time or both would
constitute such a default. No such lease has been modified or amended in writing
except as evidenced by instruments described in Schedule 4.12. InCon has not
received from any party to any such lease any written notice of, or written
claim with respect to, any breach or default thereof, and InCon has not granted
any sublease, license or any agreement granting to any person or entity any
right to use or occupy any part of the Leased Real and Personal Property or
portion thereof and has no knowledge of any grant by any such other person.
4.13 Taxes. Except as described in Schedule 4.13,
(a) InCon and each of its Affiliates have paid or will pay
when due or finally settled all Federal, state, local and provincial and other
foreign net or gross income Taxes together with any interest thereon, any
penalties, additions to Tax or additional amounts with respect thereto and any
interest in respect of such penalties, additions or additional amounts relating
to their businesses which are imposed on them or which are attributable to the
period of time prior to the Effective Time.
(b) InCon and each of its Affiliates have filed, or will file
when due, all Tax Returns of all Federal, state, local and provincial and other
foreign, receipts, sales, use, ad valorem, value added, franchise, withholding,
payroll, employment, excise, property or other Taxes, assessments or other
governmental charges, together with any penalties, additions to Tax or
additional amounts with respect thereto and any interest required to be filed
relating to the business or the Assets of InCon and each of its Affiliates for
the periods up to the Effective Time.
(c) There are no liens for any Taxes upon any of the Assets of
InCon or any of its Affiliates other than liens for Taxes not yet delinquent.
(d) All of the Assets of InCon were obtained by InCon for its
own use, and the Company's purchase of the Assets of InCon and its applicable
Affiliates is exempt from sales and use Tax.
(e) InCon will file within fifteen days after the Effective
Time a final sales and use Tax return from all applicable jurisdictions and will
request from each applicable tax commissioner for presentation to the Company
and Humko a receipt showing that all Taxes, interest and penalties have been
paid or a certificate indicating that no Taxes are due.
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(f) Neither InCon nor any of its Affiliates has requested or
received an extension of time within which to file any Tax Return that has not
yet been filed.
(g) Neither InCon nor any of its Affiliates is a party to any
allocation or sharing agreement with respect to Taxes.
As used in this Section 4.13,
"Taxes" means all taxes, fees, levies, imposts, assessments or other
charges including, but not limited to, foreign, federal, state, county or local
income, profits, gross receipts, payroll, excise, property, severance, sales,
use, employment, value added, unitary, capital, net worth, transfer, withholding
and franchise taxes and customs duties together with any penalties, interest and
additions to tax thereon or costs or expenses related thereto; and
"Tax Return" means all reports, estimates, declarations of estimated
tax, information statements and returns relating to, or required to be filed for
any period with any Governmental Authority in connection with, any Taxes.
4.14 Employee Matters. With respect to all of its employees, (i) InCon
has complied in all respects with all applicable Laws regarding labor,
employment and employment practices, terms and conditions of employment,
occupational safety and health and wages and hours, including, without
limitation, any bargaining or other obligations under the National Labor
Relations Act, (ii) InCon is not a party to or bound by, any collective
bargaining agreement or other written contract concerning employment, or any
affirmative action plan established pursuant to any local, state or federal Law
or order of any Governmental Body or court, (iii) there is no labor strike or
labor dispute, slowdown or stoppage actually pending or, to the best knowledge
and belief of InCon, threatened against or affecting InCon, and InCon has not
experienced any labor strikes or material labor disputes, slowdowns or stoppages
during last three years, and (iv) there is no dispute concerning representation
as to any collective bargaining representative concerning employees of InCon,
and no union claims to or is seeking to represent non-union employees of InCon.
4.15 Compliance with Laws. The business of InCon is being conducted,
and the Assets associated therewith are being maintained and operated, in
compliance with all applicable Laws and regulations. InCon knows of no pending
action by any Governmental Authority that, if taken, would prevent the present
conduct of such business or the present use of any of the Assets of InCon. InCon
has complied with all applicable statutes, codes, Laws, ordinances, rules and
regulations, in operating its business at the Facility and elsewhere. All
improvements and equipment situated on the Facility comply with all applicable
statutes, codes, Laws, ordinances, rules and regulations including specifically
(i) NFPA standards with regard to materials to be used in the area's class of
service including integral fire sprinklers or special protection devices for the
hazards in the area's class of service, (ii) the Occupational Safety and Hazards
Act health and safety standards with regard to materials to be used in the
area's class of service, and (iii) all pollution control regulations and
permitting requirements including but not limited to a spill prevention control
and countermeasure plan, storm water pollution control plan, and land use
documentation.
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4.16 Ongoing Capital Expenditures. Schedule 4.16 contains a complete
and correct list, as of April 1, 1999, of all ongoing capital expenditure
programs of InCon.
4.17 Ownership of Stock. All of the outstanding capital stock of InCon
is owned and held by Nutrition Technology Corporation, and none of such capital
stock is subject to any liens, security agreements or pledge that will exist
after the date hereof.
4.18 Identity of Subsidiaries. InCon has no subsidiaries.
4.19 Employee Benefit Plans.
(a) Schedule 4.19 lists all the following that are sponsored,
maintained or contributed to by Bionutrics or by InCon for the benefit of the
employees of InCon (collectively, the "Employee Plans"):
(i) each "employee benefit plan," as such term is defined in
Section 3(3) of ERISA; and
(ii)each personnel policy, stock option or purchase plan,
collective bargaining agreement, bonus plan or arrangement, incentive award plan
or arrangement, vacation policy, sick pay policy, severance pay plan, policy or
agreement, deferred compensation agreement or arrangement, annuity contract,
executive compensation or supplemental income arrangement, consulting agreement,
employment agreement, and each other employee benefit plans, agreement,
arrangements, program, practice or understanding that is not described in
Section 4.19(a)(i).
(b) InCon has performed in all material respects all
obligations, whether arising with respect to the Employee Plans, by operation of
Law or by contract, required to be performed by it in connection with the
Employee Plans, and there have been no material defaults or violations by any
other party to the Employee Plans. All contributions required to be made to the
Employee Plans pursuant to their terms and provisions and applicable Law have
been timely made.
(c) All reports and disclosures relating to the Employee Plans
required to be filed with or furnished to governmental agencies, Employee Plan
participants, or Employee Plan beneficiaries have been filed or furnished in
accordance with applicable Law in a timely manner, and each Employee Plan has
been administered in substantial compliance with its governing documents and
applicable Law.
(d) With respect to the Employee Plans, (1) there are no
actions, suits or claims pending (other than routine claims for benefits) or, to
the knowledge of InCon, threatened against, or with respect to, any of the
Employee Plans or their assets, (2) there is no matter pending (other than
routine qualification determination filings) with respect to any of the Employee
Plans before the Internal Revenue Service, the Department of Labor, or the
Pension Benefit Guaranty Corporation, (3) InCon has not received notification of
the commencement of
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an audit by any such agency of any of the Employee Plans, (4) there are no
expenses that are required to have been paid as of the date hereof by any of the
Employee Plans that have not been so paid, and (5) the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby will
not (i) require any larger contribution to, or the payment of greater benefits
under, any Employee Plan than otherwise would have been required or (ii) create
or give rise to any additional vested rights or service credits under any
Employee Plan.
(e) In connection with the consummation of the transactions
contemplated by this Agreement, no payments have or will be made under the
Employee Plans that, in the aggregate, would result in imposition of a penalty,
sanction, or Tax imposed under Section 280G and 4999 of the Code.
(f) None of the Employee Plans is a "multi employer plan" as
defined in Section 3(37) of ERISA.
(g) All the Employee Plans are in compliance in all material
respects with the requirements prescribed by applicable statutes, orders, or
governmental rules and regulations currently in effect with respect thereto.
(h) Each Employee Plan intended to be qualified under Section
401(a) of the Code has heretofore been determined by the Internal Revenue
Service to so qualify, and, such Employee Plan has not been amended or operated
in any manner that is reasonably likely to cause any such Employee Plan to fail
to qualify under Section 401(a) of the Code. As to any Employee Plan intended to
be qualified under Section 401 of the Code, there has been no termination of,
partial termination of, or, in the case of a plan to which Section 412 of the
Code does not apply, complete discontinuance of contributions under the Employee
Plan within the meaning of Section 411(d)(3) of the Code for which the rights of
all affected employees to benefits accrued to the date of such termination,
partial termination, or discontinuance, to the extent funded as of such date, or
the amounts credited to the employees' accounts, have not been vested 100% and
thereby rendered nonforfeitable.
(i) InCon has not incurred any liability to the Pension
Benefit Guaranty Corporation under Section 4001 et seq. of ERISA. All premiums
payable to the Pension Benefit Guaranty Corporation have been paid when due.
(j) InCon has delivered to Humko copies of all written
Employee Plans and, where applicable, amendments thereto, related trusts, the
most recent determination letter from the Internal Revenue Service, summary plan
descriptions and the most recent annual reports filed pursuant to ERISA or the
Internal Revenue Code with respect to the Employee Plans.
(k) No prohibited transaction, as defined in Section 4975 of
the Code or Section 406 of ERISA, has occurred with respect to any Employee
Plan. No breach of any fiduciary duty imposed with respect to an Employee Plan
pursuant to Title I of ERISA has occurred.
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4.20 Proprietary Information. With respect to the Proprietary
Information of InCon, (i) InCon is the owner or has the right to authorize the
use of or convey such Proprietary Information to third parties including,
without limitation, the Company; (ii) no action, suit or proceeding is pending
or, to InCon's knowledge, threatened with respect to the Proprietary
Information; (iii) to the knowledge of InCon, none of the Proprietary
Information infringes upon the rights of others or is subject to any outstanding
order, decree or judgment; and (iv) there are no royalty, commission or similar
arrangements, and no licenses, sublicenses or agreements, pertaining to any of
the Proprietary Information other than as set forth on Schedule 4.10. All rights
of InCon in and to the Proprietary Information are transferable to Company as
contemplated herein without any consent or other approval. It should be noted
that InCon is currently conducting certain research for Bionutrics in connection
with compounds and compositions of matter having biological activity and/or
utility and products incorporating such compositions of matter. Accordingly, the
representation and warranty contained in the second sentence of this Section
4.20 shall not be deemed to apply to any of such compounds and compositions of
matter having biological activity and/or utility and products incorporating such
compositions of matter with respect to which InCon is presently conducting
research for Bionutrics. Except for Bionutrics' interest in such compounds and
compositions of matter, none of the Affiliates of InCon including, without
limitation, Bionutrics or any other party has any rights in any propriety
information used in connection with the current business of InCon, and the
Proprietary Information is all of the proprietary information necessary to
continue the business of InCon in the manner that the business of InCon has been
conducted during 1998 and 1999.
4.21 Brokers. InCon has not retained any broker, finder or
agent or incurred any liability or obligation for any brokerage fees,
commissions or finders fees with respect to this Agreement or the transactions
contemplated hereby.
4.22 Code. InCon is not a "foreign person" within the meaning
of Code Section 1445 (26 U.S.C. Section 1445). InCon shall furnish Humko and the
Company on or before the Closing Date with a certificate of non-foreign status
signed by the appropriate party and sufficient in form and substance to relieve
Purchaser of all withholding obligations under Code Section 1445.
4.23 Insurance. Schedule 4.23 herein sets forth a list of all
policies of insurance maintained for the benefit of the business of InCon and
owned by InCon (other than employee benefit plans), setting forth the applicable
underwriter, type of coverage, policy number and policy periods.
4.24 Construction Contract. International is the sole owner of
all of the interest of the Contractor in the Construction Contract and none of
the rights of the Contractor thereunder are subject to any liens, security
agreements or pledges including, without limitation, the right to any payments
due thereunder.
4.25 Year 2000 Ready. All Covered Systems that have been
installed in the Facility, and all computer code and other computerized data, if
any, furnished by InCon or its subcontractors in connection with InCon's
business and any of the Assets that will be acquired by
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<PAGE> 25
the Company under the terms of this Agreement or the Members Agreement are Year
2000 Ready.
4.26 Sales Representative Agreements. InCon is the sole owner
of all rights, titles and interests of the Principal, as defined in the Sales
Representative Agreements.
4.27 State of Equipment. All of the equipment constituting
part of the Assets is located in the Facility and all of such equipment is
sufficient for, and is the only equipment needed for, conducting the business of
InCon after the Closing in the manner conducted before the Closing. All such
equipment is and will be fully operational on the Closing Date and will be in
working condition.
4.28 Payments to Officials. Prior to the date hereof, neither
InCon nor any of its Affiliates has paid or given or has authorized or committed
to the payment or gift of money or anything of value to any official or employee
of any government entity or instrumentality or any political party or candidate
for political office for the purpose of influencing any governmental action or
decision in order to obtain or retain business or to direct business to any
other party.
4.29 Accounts Payable. Schedule 4.29 contains a true and
correct list (with aging detail) of all existing accounts payable of InCon as of
the Closing Date.
4.30 Accounts Receivable. Schedule 4.30 contains a true and
correct list (with aging detail) of all existing accounts receivable of InCon as
of the Closing Date. None of the listed accounts receivable is subject to any
offset or counterclaim by any party owing any of such accounts receivable.
ARTICLE 4A
Representations and Warranties by Bionutrics
Bionutrics represents and warrants to Humko as follows:
4A.1 Organization and Authority.
Bionutrics (i) is a corporation duly formed, validly
existing and in good standing under the Laws of the State of Nevada, (ii) has
the full power and authority to carry on its business as now being conducted and
to own and lease its properties, and (iii) has full power and authority to
execute and deliver this Agreement, the Related Agreements to which it is a
party, and the other agreements and instruments executed or to be executed and
delivered by it in connection herewith and to consummate the transactions
contemplated hereby and thereby.
4A.2 Validity: Enforceability.
Bionutrics' execution, delivery and performance of
this Agreement and any Related Agreements to which it is or will be a party, and
Bionutrics' consummation of the transactions contemplated hereby and thereby,
have been duly authorized by all necessary action of Bionutrics' board of
directors. This Agreement has been, and at the Closing the Related
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Agreements to which Bionutrics is a party will be, duly executed and delivered
by Bionutrics, and when duly executed and delivered by Bionutrics will
constitute the legal, valid and binding obligations of Bionutrics, enforceable
in accordance with their respective terms, except to the extent provided by
bankruptcy, insolvency or similar Laws respecting creditors' rights generally or
to the extent that enforceability may be limited by the availability of specific
performance or other equitable remedies being in the discretion of the court.
4A.3 No Violation.
The execution, delivery and performance by Bionutrics
of this Agreement, the Related Agreements to which it is or will be a party, and
the other agreements and instruments executed or to be executed and delivered by
it in connection herewith, and the consummation of the transactions contemplated
hereby and thereby, does not and will not (i) violate or conflict with the
provisions of any Law or of any order, judgment or decree of any court or other
Governmental Authority applicable to Bionutrics or the property or business of
Bionutrics or its Affiliates, (ii) violate or conflict with the articles of
incorporation or by-laws of Bionutrics, or (iii) result in a breach of or
constitute a default (or an event that with the giving of notice or lapse of
time or both would become a default) under, pursuant to, any agreement to which
Bionutrics is a party or by which it is bound.
4A.4 Litigation and Proceedings. Except as described in
Schedule 4.4, there are no actions, suits, or proceedings (whether or not
purportedly on behalf of or against Bionutrics) pending, or to the knowledge of
Bionutrics threatened, against Bionutrics or its Affiliates or relating to the
consummation of the transactions contemplated hereby, at Law or in equity,
before or by any Governmental Authority, or before any arbitrator. Neither
Bionutrics nor any of its Affiliates or the business of any such parties is
subject to any judgment, order, writ, injunction, decree or award that adversely
affects the business of Bionutrics or any of its Affiliates.
4A.5 Third-Party Consents. Except as described in Schedule
4.5, no permit, consent, authorization or approval of, or waiver or exemption
by, or filing with, any person is required in connection with the execution,
delivery or performance by Bionutrics of this Agreement or any of the Related
Agreements or the consummation by Bionutrics of the transactions contemplated
thereby.
4A.6 InCon Contracts.
(a) Schedule 4.6 lists, as of June 1, 1999, all InCon
Contracts. Except as described in Schedule 4.6, Bionutrics is not aware of (i)
the cancellation, breach, expiration or lapse of any InCon Contract; or (ii) any
default by any party to any InCon Contract. Except as described in Schedule 4.6,
neither InCon nor any Affiliate of InCon is a party to, or subject to, any
agreement, contract or commitment that substantially limits the freedom of InCon
or any Affiliate by InCon to compete in any line of business within the Company
Scope of Business, or that would conflict with InCon's ability to become a
member of the Company.
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(b) Except as described in Schedule 4.6, to
Bionutric's knowledge, the execution, delivery and performance by InCon of this
Agreement, the Related Agreements, and the other agreements and instruments
executed or to be executed and delivered by it in connection herewith and the
consummation of the transactions contemplated hereby and thereby do not violate
or conflict with the provisions of any InCon Contract.
4A.7 Brokers. Bionutrics has not retained any broker, finder
or agent or incurred any liability or obligation for any brokerage fees,
commissions or finders fees with respect to this Agreement or the transactions
contemplated hereby.
4A.8 Code. Bionutrics is not a "foreign person" within the
meaning of Code Section 1445 (26 U.S.C. Section 1445). Bionutrics shall furnish
Humko and the Company on or before the Closing Date with a certificate of
non-foreign status signed by the appropriate party and sufficient in form and
substance to relieve Purchaser of all withholding obligations under Code Section
1445.
4A.9 Proprietary Information. Subject to Section 4A.11, InCon
does not use any Proprietary Information owned or licensed by Bionutrics or any
other Affiliate in connection with the current business of InCon as reflected in
the definition of "Scope of Business."
4A.10 Ownership of Stock. All of the outstanding capital stock
of NTC is owned and held by Bionutrics and none of such stock is subject to any
liens, security interests, or pledges that will exist after the date hereof.
4A.11 Matter Having Biological Activity. None of the compounds
and compositions of matter having biological activity and/or utility and
products incorporating such compositions of matter owned by Bionutrics is part
of, or is required in connection with, the operation of the business of InCon
after Closing in the manner that the business of InCon was operated during 1998
and 1999 except for the research that InCon is currently performing for
Bionutrics relating to such compounds and compositions of matter.
ARTICLE 4B
Representations and Warranties by InCon International Inc.
International represents and warrants to Humko as follows:
4B.1 Organization and Authority.
International (i) is a corporation duly formed,
validly existing and in good standing under the Laws of the British Virgin
Islands, all of the stock of which is owned by Bionutrics, (ii) has the full
power and authority to carry on its business as now being conducted and to own
and lease its properties, and International has full power and authority to
execute and deliver this Agreement, the Related Agreements to which it is a
party, and the other agreements and instruments executed or to be executed and
delivered by it in connection herewith and to consummate the transactions
contemplated hereby and thereby.
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4B.2 Validity: Enforceability.
International's execution, delivery and performance of this
Agreement and any Related Agreements to which it is or will be a party, and its
consummation of the transactions contemplated hereby and thereby, have been duly
authorized by all necessary action of its board of directors. This Agreement has
been, and at the Closing the Related Agreements to which International is a
party will be, duly executed and delivered by International, and when duly
executed and delivered by International will constitute the legal, valid and
binding obligations of International, enforceable in accordance with their
respective terms, except to the extent provided by bankruptcy, insolvency or
similar Laws respecting creditors' rights generally or to the extent that
enforceability may be limited by the availability of specific performance or
other equitable remedies being in the discretion of the court.
4B.3 No Violation.
The execution, delivery and performance by
International of this Agreement, the Related Agreements to which it is or will
be a party, and the other agreements and instruments executed or to be executed
and delivered by it in connection herewith, and the consummation of the
transactions contemplated hereby and thereby, does not and will not (i) violate
or conflict with the provisions of any Law or of any order, judgment or decree
of any court or other Governmental Authority applicable to it or the property or
business of International or its Affiliates, (ii) violate or conflict with the
articles of incorporation or by-laws of International, or result in a breach of
or constitute a default (or an event that with the giving of notice or lapse of
time or both would become a default) under, pursuant to, any agreement to which
International is a party or by which it is bound.
4B.4 Representation Agreement. International is the true and
correct owner of all of the rights, titles and interest of the Company, as
defined in the Representation Agreement.
4B.5 Payments to Officials. Prior to the date hereof, neither
International nor any of its Affiliates has paid or given or has authorized or
committed to the payment or gift of money or anything of value to any official
or employee of any government entity or instrumentality or any political party
or candidate for political party or candidate for political office for the
purpose of influencing any governmental action or decision in order to obtain or
retain business or to direct business to any other party.
4B.6 Sole Shareholder. Bionutrics is the sole shareholder of
all of the capital stock of International and has approved, and does hereby
approve, this Agreement and the transactions covered hereby.
4B.7 Construction Contract. International is the sole owner of
all of the interest of the Contractor in the Construction Contract and none of
the rights of the Contractor thereunder are subject to any liens, security
agreements or pledges including, without limitation, the right to any payments
due thereunder.
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ARTICLE 4C
Representations and Warranties by NTC
NTC represents and warrants to Humko as follows:
4C.1 Organization . NTC (i) is duly incorporated, validly
existing and in good standing under the Laws of Nevada, (ii) has the full power
and authority to carry on its business as now being conducted and to own and
lease its properties, and (iii) has full power and authority to execute and
deliver this Agreement, the Related Agreements to which it is a party, and the
other agreements and instruments executed or to be executed and delivered by it
in connection herewith and to consummate the transactions contemplated hereby
and thereby.
4C.2 Validity: Enforceability. NTC's execution, delivery and
performance of this Agreement and any Related Agreements to which it is or will
be a party, and NTC's consummation of the transactions contemplated hereby and
thereby, have been duly authorized by all required corporate action. This
Agreement has been, and at the Closing the Related Agreements to which NTC is a
party will be, duly executed and delivered by NTC, and when duly executed and
delivered by NTC will constitute the legal, valid and binding obligations of
NTC, enforceable in accordance with their respective terms, except to the extent
provided by bankruptcy, insolvency or similar Laws respecting creditors' rights
generally or to the extent that enforceability may be limited by the
availability of specific performance or other equitable remedies being in the
discretion of the court.
4C.3 No Violation. The execution, delivery and performance by
NTC of this Agreement, the Related Agreements to which it is to be a party, and
the other agreements and instruments executed or to be executed and delivered by
it in connection herewith, and the consummation of the transactions contemplated
hereby and thereby, does not and will not (i) violate or conflict with the
provisions of any Law or of any order, judgment or decree of any court or other
Governmental Authority applicable to NTC or the property or business of NTC,
(ii) violate the articles of incorporation or bylaws of NTC, or (iii) result in
a breach of or constitute a default (or an event that with the giving of notice
or lapse of time or both would become a default) under, pursuant to, any
agreement to which NTC is a party or by which it is bound.
4C.4 Sole Shareholder. NTC is the sole shareholder of all of
the capital stock of InCon and has approved, and does hereby approve, this
Agreement and the transactions covered hereby.
ARTICLE 5
Representations and Warranties by Humko
Humko represents and warrants to InCon and Bionutrics as
follows:
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5.1 Organization and Authority. Humko (i) is duly
incorporated, validly existing and in good standing under the Laws of Delaware,
(ii) has the full power and authority to carry on its business as now being
conducted and to own and lease its properties, and (iii) has full power and
authority to execute and deliver this Agreement, the Related Agreements to which
it is a party, and the other agreements and instruments executed or to be
executed and delivered by it in connection herewith and to consummate the
transactions contemplated hereby and thereby.
5.2 Validity: Enforceability. Humko's execution, delivery and
performance of this Agreement and any Related Agreements to which it is or will
be a party, and Humko's consummation of the transactions contemplated hereby and
thereby, have been duly authorized by all required corporate action. This
Agreement has been, and at the Closing the Related Agreements to which Humko is
a party will be, duly executed and delivered by Humko, and when duly executed
and delivered by Humko will constitute the legal, valid and binding obligations
of Humko, enforceable in accordance with their respective terms, except to the
extent provided by bankruptcy, insolvency or similar Laws respecting creditors'
rights generally or to the extent that enforceability may be limited by the
availability of specific performance or other equitable remedies being in the
discretion of the court.
5.3 No Violation. The execution, delivery and performance by
Humko of this Agreement, the Related Agreements to which it is to be a party,
and the other agreements and instruments executed or to be executed and
delivered by it in connection herewith, and the consummation of the transactions
contemplated hereby and thereby, does not and will not (i) violate or conflict
with the provisions of any Law or of any order, judgment or decree of any court
or other Governmental Authority applicable to Humko or the property or business
of Humko, (ii) violate the articles of incorporation or bylaws of Humko, or
(iii) result in a breach of or constitute a default (or an event that with the
giving of notice or lapse of time or both would become a default) under,
pursuant to, any agreement to which Humko is a party or by which it is bound.
5.4 No Limitation. Except as described in Schedule 5.4,
neither Humko nor any Humko Affiliate is aware of any agreement, contract or
commitment that substantially limits the freedom of Humko or any Humko Affiliate
to compete in any line of business within the Company Scope of Business, or that
would conflict with Humko's ability to become a member of the Company.
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ARTICLE 6
Covenants Between Execution and Closing and Post-Closing
6.1 Access to Records.
(a) From and after the date of this Agreement until the
Closing Date, upon reasonable advance notice, InCon will give Humko and its
counsel and representatives reasonable access during normal business hours to
the premises of InCon's business and the personnel of InCon related thereto;
furnish to Humko and its representatives such documents, financial information
and information with respect to InCon's business and the Technology as Humko may
from time to time reasonably request; subject, however, to any third party
limitations on confidentiality or disclosure that may restrict InCon from
providing such access.
(b) InCon and Humko recognize that each of them will need
access, from time to time, after the Closing, to certain accounting and Tax
records and information held by InCon to the extent such records and information
pertain to events occurring on or prior to the Closing; therefore, InCon agrees
(i) to properly retain and maintain such records for a period of seven (7) years
from the date the Tax Returns for the year in which the Closing occurs are filed
or until the expiration of the statute of limitations with respect to such year,
whichever is later, and (ii) allow Humko and its agents and representatives at
times and dates mutually acceptable to the InCon and Humko, to inspect, review
and make copies of such records as such other party may deem necessary or
appropriate from time to time, such activities to be conducted during normal
business hours and at the other party's expense.
6.2 Conduct of Business Prior to Closing. From the date
hereof to the Closing Date, InCon shall carry on its business in substantially
the same manner as heretofore conducted, and not introduce any materially
different method of management, operation or accounting with respect to its
business.
6.3 Filings with Governmental Authorities. Except as provided
in this Section 6.3, neither InCon nor Bionutrics is aware of any filings that
are required in any jurisdiction in connection with the transaction contemplated
by this Agreement. Without limiting the generality of the foregoing, InCon and
Bionutrics warrant and represent that none of the parties to this Agreement is
required to comply with any bulk sales act or other requirement relating to
notice to creditors in effecting the transactions contemplated by this
Agreement.
6.4 Statement of Finished Goods Inventory. The parties will
jointly prepare a statement of inventory showing the inventory to be contributed
to the Company by InCon. This joint statement will be used at the Closing, but
is subject to verification and correction within sixty (60) days after the
Closing through the parties' respective standard accounting practices, including
adjustments for inventory variances.
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ARTICLE 7
Covenants of the Parties After the Closing
7.1 Indemnification Regarding Pre-existing Liabilities. InCon
and Bionutrics (individually, an "Indemnitor" and collectively, the
"Indemnitors") each jointly and severally agrees to indemnify, hold harmless and
defend each of Humko and the Company and each of their officers, partners,
directors, owners, and Affiliates and their respective successors and assigns,
from and against any and all demands, claims, suits and causes of action and any
and all liability, costs, expenses, settlements, and judgments incurred in
connection therewith (including, without limitation, court costs and attorney's
fees, charges, disbursements and advances), whether arising in equity, at common
law, or by statute, or under the Law of contracts, torts (including, without
limitation, negligence and strict liability without regard to fault), of every
kind or character, arising in favor of or brought by any of InCon's employees,
agents, subcontractors, or representatives, or by any Governmental Authority or
any other third party, based upon, in connection with, relating to or arising
out of (i) any Indemnitor's actions or inactions under this Agreement, (ii)
violation of any Laws by any Indemnitor including, without limitation, any
Environmental Laws and any violation thereof by InCon in connection with its
business or its operation of the Facility, (iii) caused by any
misrepresentation, breach of warranty or failure to fulfill any covenant or
agreement of any Indemnitor contained herein, (iv) arising out of or resulting
from the failure to comply with any applicable bulk sales act, (v) any act or
failure to act by any Indemnitor or any of its Affiliates that occurred before
the Effective Date relating to or arising out of the operation of any
Indemnitor's business, the Intellectual Property Rights, the Proprietary
Information or the Technology, or the ownership or use prior to the Effective
Date of any of the Assets comprising InCon's business or which are otherwise
being transferred to the Company pursuant to the provisions of this Agreement,
or (vi) any obligation or liability (whether absolute, accrued, contingent or
otherwise) relating to any Indemnitor's business, the Intellectual Property
Rights, the Proprietary Information or the Technology which arose prior to the
Effective Date and which is not expressly assumed by the Company (herein all
matters referred to in clauses (i) through (vi) being collectively called
"Claims and Expenses"). Without limiting the generality of the foregoing, each
Indemnitor's indemnity under this Section 7.1 shall extend to any and all Claims
and Expenses arising out of or based upon the requirements of Environmental Laws
or Governmental Authorities in connection with the ownership or operation by
InCon or any of its Affiliates of any facilities associated with InCon's
business or the Technology prior to the Closing Date (herein collectively called
the "Environmental Claims and Expenses"). Notwithstanding anything to the
contrary contained in this Agreement, Bionutrics' liability for Claims and
Expenses under this Section 7.1 shall be limited to the sum of US $3,000,000,
and Bionutrics shall not be liable for any Claims and Expenses brought by Humko
at any time (i) in the case of Environmental Claims and Expenses, five (5) years
after the Closing Date, and (ii) in the case of all other Claims and Expenses,
three (3) years after the Closing Date. The obligations of InCon under this
Section 7.1 are secured by the security interest granted to Humko under the
terms of Section 4.4 of the Members Agreement. In addition, if InCon fails to
pay to the Company or Humko any Claims and Expenses that the Company is required
to pay, Humko is entitled to exercise its right to the Conversion, as defined in
Section 4.5(d) of the Members Agreement, in addition to all other rights under
this Agreement, the Members Agreement or at law or in equity. All past due
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amounts owed by InCon and Bionutrics with respect to any Environmental Claims
and Expenses that are required to be paid by Humko or the Company, shall bear
interest from the date due until paid at the annual rate equal to the lesser of
(i) the maximum lawful rate permitted by applicable law or (ii) the Agreed
Interest Rate, as defined in the Members Agreement, plus eight percent (8%).
However, in no event shall Humko or the Company be entitled to any interest on
any such amounts in excess of the maximum amount of interest that may be
charged, collected or received by Humko or the Company under applicable law.
7.2 Confidentiality.
(a) If either party or its Affiliates discloses to the
other party or its Affiliates or, if permitted, to the Company any information
that the disclosing entity considers to be confidential (referred to herein as
the "Confidential Information") relating to or within the Scope of Business, the
receiving party shall, and shall cause its Affiliates to, hold such Confidential
Information in confidence and shall not use such Confidential Information except
for the benefit of the Company in accordance with this Section.
(b) The Confidential Information may be disclosed in
documentary form or by physical sample or the Confidential Information may be
disclosed orally or visually. If in documentary form, the Confidential
Information shall be marked as "Confidential Information." If the disclosure is
by physical sample, oral communication or visual observation, the Confidential
Information shall be held in confidence if it is identified to the recipient in
writing as being confidential.
(c) Each party agrees to hold and to cause its Affiliates
to hold Confidential Information received from the other party or its Affiliates
in confidence and not to disclose it to third parties without the prior written
permission of the party from which the Confidential Information was received.
Further, each party agrees that neither it nor its Affiliates will copy or use
Confidential Information of the other party or its Affiliates for any purpose
except as otherwise permitted under the provisions of this Agreement or a
Related Agreement.
(d) Each party shall take, and shall cause its Affiliates
to take, such precautions as are reasonably necessary to prevent disclosure of
Confidential Information to third parties. Confidential Information may be
disclosed under the same or more restrictive terms of this Agreement as to
confidentiality and non-use to: Affiliates; third parties to the extent
reasonably necessary in order to perform activities contemplated herein; and
Governmental Authorities to the extent required by applicable Law.
(e) The parties and their Affiliates shall take all
reasonable measures to ensure that their employees and management who shall be
given access to Confidential Information shall abide by the obligations set
forth in this Section.
(f) Notwithstanding the other provisions of this Section,
Confidential Information shall not include, and no restrictions on use or
disclosure shall apply to, any information:
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(i) which was in the receiving party's possession
prior to its first receipt of the same, directly or indirectly, from the
disclosing party;
(ii) which is now, or hereafter becomes, through no
act or failure to act on the receiving party's part, generally known on a
non-confidential basis or as part of the public domain;
(iii) which corresponds in substance to information
heretofore or hereafter lawfully obtained by the receiving party from a third
party and the receiving party is without an existing restriction on the
disclosure thereof; or
(iv) which can be shown to be independently developed
by employees, agents or contractors of the receiving party who did not have
access to Confidential Information of the disclosing party;
provided, however, that the occurrence of (i), (ii), (iii) or
(iv) above shall not be construed to grant any rights, express or implied, under
any patents. Confidential Information shall not be deemed to be within one of
the foregoing exceptions if it is merely embraced by more general information
available on a non-confidential basis or in the receiving party's possession. In
addition, any combination of features shall not be deemed to be within the
foregoing exceptions unless the combination itself and its principle of
operation are embraced by corresponding information which is within one of the
exceptions.
(g) The secrecy and non-use obligations set forth in
this Section shall continue in force for a period of five (5) years from receipt
of such Confidential Information or such longer period as may be imposed under
third-party agreements with respect to information subject to such agreements,
irrespective of any termination or assignment of a party's or an Affiliate's
interest under this Agreement or any Related Agreement. If Confidential
Information is, under third-party agreements, subject to secrecy and non-use
obligations of duration greater than five (5) years from its receipt hereunder,
the disclosing party shall so inform the recipient party before making such
disclosure and, if the recipient party agrees to such longer term obligation of
secrecy and non-use, such disclosures shall be made. If the recipient party
refuses to assume such longer term obligation, the recipient party shall have no
right to obtain any Confidential Information that is subject to such longer term
obligation.
(h) The confidentiality provisions contained in any
Related Agreement shall supersede and replace the provisions of this Section 7.2
to the extent that the provisions in the Related Agreement are more specific or
impose obligations that are more stringent than the provisions in this Section
7.2.
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7.3 Budget. Within thirty (30) days after the Closing, Humko and InCon
shall agree on the annual budget for the Company. Until such budget has been
approved, the Company shall be operated in accordance with the Members Agreement
and the only amounts that may be utilized by the Company to satisfy its
obligations shall be the amounts contributed by InCon and Humko to the Company
as working capital, subject to the restrictions imposed by the Members
Agreement.
7.4 Guaranteed Payment to Humko. Humko has entered into this Agreement
and is making the cash investment covered by this Agreement, based in part on
the belief that the Company will achieve a certain level of profitability.
Although such profitability can never be assured, InCon and Bionutrics, in order
to induce Humko to enter into this Agreement and make the cash investment
covered by this Agreement hereby agree as follows:
(a) If EBITDA for the period commencing one (1) calendar year after the date
hereof and ending on the date that is two (2) calendar years after the date
hereof, is less than US $1,500,000, then InCon and Bionutrics shall jointly and
severally be liable to pay to Humko an amount equal to two hundred percent
(200%) of the difference between US $1,500,000 and the actual amount of EBITDA
for such period; provided, however, that the maximum amount payable by InCon and
Bionutrics under this Section 7.4(a) shall not exceed US $600,000. InCon and
Bionutrics will pay Humko all amounts which are required to be paid under this
Section 7.4(a) on or before November 30, 2001.
(b) The covenant to pay to Humko the amounts set forth in Section 7.4(a) above
is absolute and unconditional and is secured by the security interest granted to
Humko under the terms of Section 4.4 of the Members Agreement. In addition, if
InCon and Bionutrics fail to pay all of such amounts to Humko in a timely
manner, Humko is entitled to exercise its right to the Conversion, as defined in
Section 4.5(d) of the Members Agreement, in addition to all other rights under
this Agreement, the Members Agreement or at law or in equity.
(c) All past due amounts owed by InCon and Bionutrics with respect to such US
$600,000, shall bear interest from the date due until paid at the annual rate
equal to the lesser of (i) the maximum lawful rate permitted by applicable law
or (ii) the Agreed Interest Rate, as defined in the Members Agreement, plus
eight percent (8%). However, in no event shall Humko be entitled to any interest
on any such amounts in excess of the maximum amount of interest that may be
charged, collected or received by Humko under applicable law.
7.5 Restrictions Relating to Certain Products and Materials. Until
April 8, 2001, neither Bionutrics, InCon nor any Affiliate, assignee or agent of
Bionutrics or InCon shall (i) participate in any Competitive Activity within the
Territory, (ii) engage directly or indirectly in any Competitive Activity within
the Territory; or (iii) engage directly or indirectly in the business of
[*]within the Territory.
7.6 Adjustment Relating to Receivables and Payables Only. If the
aggregate amount of
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the accounts receivable listed on Schedule 4.30 do not exceed the aggregate
amount of the accounts payable listed on Schedule 4.29 by an amount equal to US
$275,000 on the Closing Date, then the following shall be applicable:
(a) InCon shall pay to the Company on the date hereof an
amount equal to the difference between US $275,000 and the difference between
such accounts receivable and such accounts payable. By example and not by way of
limitation, if such accounts payable equal US $400,000 and such accounts
receivable equal US $100,000, then the amount to be delivered to the Company
shall be equal to US $575,000.
(b) Such amount shall not constitute a capital contribution
but shall constitute payment to the Company for amounts to be paid on the
applicable accounts payable.
ARTICLE 8
Conditions to Closing
8.1 Conditions of Humko's Obligations to Close. The obligations of
Humko to consummate the transactions provided for by this Agreement are subject,
in the discretion of Humko, to the satisfaction at or prior to the Closing of
each of the following conditions, unless otherwise waived in writing by Humko:
(a) The representations and warranties of InCon and Bionutrics
contained in this Agreement shall be true in all material respects at and as of
the Closing Date as though such representations and warranties were made at and
as the Closing, except that such representations and warranties that were made
with specific reference to any date prior to the date hereof shall be updated as
of the Effective Date.
(b) InCon and Bionutrics shall have performed and complied in
all material respects with all agreements and covenants required by this
Agreement to be performed by InCon and Bionutrics prior to the Closing.
(c) Humko shall have received a certificate signed by a duly
authorized representative of InCon and Bionutrics certifying that the conditions
specified in Sections 8.1(a) and (b) have been satisfied.
(d) No action or proceeding shall be pending, or threatened to
be commenced, by or against InCon, Bionutrics or any of their Affiliates under
the United States Bankruptcy Code or under any other applicable insolvency,
reorganization, moratorium, or similar Law, and no receiver, liquidator or
trustee shall have been appointed in regard to InCon, Bionutrics or any of their
Affiliates, or as to all or any substantial portion of its property or the
business of InCon, Bionutrics or any of their Affiliates.
(e) There shall not have occurred any material adverse change
in the business, operations, properties, Assets, condition or prospects of the
business of InCon or Bionutrics.
30
<PAGE> 37
(f) All proceedings in connection with the transactions
contemplated hereby and all documents and instruments (including, without
limitation, all Related Agreements) incident to such transactions shall be
satisfactory in legal substance and form to Humko's counsel, and Humko and its
counsel shall have received all such executed counterpart originals or certified
or other copies of such documents as Humko or its counsel may reasonably
request.
(g) The present lease of the Facility shall have been amended
by written instrument, in form and substance reasonably satisfactory to Humko.
(h) All Financing Statements covering equipment purchased by
Humko from NTC in 1998 shall have been released or executed UCC 3 instruments
executed by each applicable secured party shall have been delivered to Humko
prior to the Closing.
8.2 Conditions of InCon's and Bionutrics' Obligations to Close. The
obligations of InCon and Bionutrics to consummate the transactions provided for
by this Agreement are subject, in the discretion of InCon and Bionutrics, to the
satisfaction at or prior to the Closing of each of the following conditions,
unless otherwise waived in writing by InCon or Bionutrics:
(a) The representations and warranties of Humko obtained in
this Agreement shall be true in all material respects at and as of the Closing
Date as though such representations and warranties were made at and as the
Closing.
(b) Humko shall have performed and complied in all material
respects with all agreements and covenants required by this Agreement to be
performed by Humko prior to the Closing.
(c) InCon shall have received a certificate signed by a duly
authorized representative of Humko certifying that the conditions specified in
Sections 8.2 (a) and (b) have been satisfied.
(d) No action or proceeding shall be pending, or threatened to
be commenced, by or against Humko under the United States Bankruptcy Code or
under any other applicable insolvency, reorganization, moratorium, or similar
Law, and no receiver, liquidator or trustee shall have been appointed in regard
to Humko or as to all or any substantial portion of its property.
(e) All proceedings in connection with the transactions
contemplated hereby and all documents and instruments (including, without
limitation, all Related Agreements) incident to such transactions shall be
satisfactory in legal substance and form to InCon's and Bionutrics' counsel, and
InCon, Bionutrics and their counsel shall have received all such executed
counterpart originals or certified or other copies of such documents as InCon,
Bionutrics or its counsel may reasonably request.
31
<PAGE> 38
8.3 Mutual Conditions. The respective obligations of Humko, InCon and
Bionutrics to consummate the transactions provided for by this Agreement are
subject, in the discretion of Humko, InCon and Bionutrics, respectively, to each
the following conditions, unless waived in writing by all parties:
(a) All consents and approvals of third parties (including,
without limitation, all Governmental Authorities) required to be received by or
on the part of the Company, InCon, Bionutrics, Humko or any of their respective
Affiliates for the consummation of the transactions contemplated by this
Agreement (other than any such consent or approval which is designated herein or
in a Related Agreement as not being required to be received on or prior to the
Closing Date) shall have been obtained.
(b) No suit, action or proceeding, or governmental
investigation or inquiry against or concerning, directly or indirectly, the
Company, InCon, Bionutrics or Humko, or any of their respective Affiliates or
any of the properties of any of them, or the transactions contemplated hereby,
shall have been instituted or threatened, nor shall any basis therefore have
arisen, that might result in any order or judgment of any court or other
Governmental Authority which in the opinion of InCon, Bionutrics or Humko, as
the case may be, is of such significance or materiality and of such a nature as
to render it inadvisable for such party to consummate the transactions
contemplated by this Agreement.
(c) The parties shall have agreed on a preliminary business
plan for the Company in such detail as may be reasonably requested by either
party covering the period of time from the Closing Date until one (1) year
thereafter.
8.4 Waiver of Conditions to Closing. If any condition precedent to
Humko's obligations hereunder is not satisfied in Humko's sole discretion by the
Closing Date or if any condition precedent to InCon's obligations hereunder is
not satisfied in InCon's or Bionutrics' sole discretion by the Closing Date,
then Humko, InCon or Bionutrics, as the case may be, may, nevertheless, at its
option, proceed with the Closing, in which event it shall be deemed to have
waived such condition precedent.
ARTICLE 9
Termination of Agreement
9.1 Termination of this Agreement Prior to the Closing Date.
(a) In the event of a material default by one party in the
performance of its obligations hereunder prior to the Closing, the other party
shall have the right to give notice of default, and if such default is not cured
within thirty (30) days after such notice, the other party may terminate this
Agreement by notice to the defaulting party. Whether or not this Agreement is so
terminated, each party shall have the right to pursue any and all remedies
available to it under Law or in equity against the other party for default of
any obligation of the other party hereunder.
32
<PAGE> 39
(b) In addition to the foregoing, this Agreement may, by
written notice, be terminated by mutual consent of InCon, Bionutrics and Humko.
(c) In the event this Agreement is terminated pursuant to
Section 9.1(a) or 9.1(b), the obligations of the parties hereunder shall
terminate on the date of such termination, except as may be expressly provided
herein, and each of the parties shall pay its own expenses and the fees and
expenses of its counsel and other experts.
ARTICLE 10
General Provisions
10.1 Binding Nature and Restrictions on Assignment. This Agreement
shall be binding on the parties hereto and their respective successors and
permitted assigns. Neither InCon, Bionutrics, International nor NTC shall have
the power to assign this Agreement or any of their rights and obligations
hereunder without the prior written consent of Humko.
10.2 Notices. Any and all notices to any of the parties hereto
provided for or permitted under this Agreement or by Law shall be given in
writing by personal delivery, telecopier, overnight delivery service, or by
certified or registered mail, return receipt requested, postage prepaid,
addressed to such party at the address set forth below, and shall be effective
upon actual receipt or, if given by certified or registered mail, as of three
(3) days after the date of mailing:
(a) If to InCon: c/o InCon Technologies, Inc.
970 Douglas Road
Batavia, Illinois 60510
Attention: John Palmer
Telecopy No.: 630-761-1190
With copies to: Wendy E. Rieder, Esq.
107 Barrett Hill Road
Mahopac, NY 10541
Telecopy No.: 914-628-2415
(b) If to Bionutrics, Bionutrics, Inc., International or NTC:
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
33
<PAGE> 40
(b) If to Humko: AC HUMKO CORP.
7171 Goodlett Farms Parkway
Memphis, Tennessee 38018
Telecopy No. 901-381-3066
Attention: President
-and-
AC HUMKO CORP.
7171 Goodlett Farms Parkway
Memphis, Tennessee 38018
Telecopy No. 901-381-3066
Attention: General Counsel
With copies to: Vinson & Elkins L.L.P.
2500 First City Tower
1001 Fannin
Houston, Texas 77002-6760
Telecopy No.: 713-615-5618
Attention: J. Brian Sokolik
Any party may change its address or add or change parties for receiving notice
by written notice given to the other names above in the manner required above.
10.3 Survival of Representations and Warranties. Any investigation
made by any party or such party's representatives shall not constitute a waiver
of any representation or warranty made by the parties under Articles 4 or 5,
respectively, and no such representation or warranty shall be merged into the
Closing and all representations and warranties contained in Articles 4 and 5 and
in any certificate delivered pursuant to this Agreement shall survive the
Closing.
10.4 Survival of Covenants and Indemnities. All covenants required to
be performed prior to or after the Closing and all indemnities shall survive the
Closing.
10.5 Governing Law: Severability. THIS AGREEMENT IS GOVERNED BY AND
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
(EXCLUDING ITS CONFLICT-OF-LAWS RULES), EXCEPT THAT WITH RESPECT TO THE
FORMATION OF THE COMPANY, THE LAWS OF THE STATE OF DELAWARE SHALL APPLY TO THE
EXTENT SUCH LAWS ARE MANDATORY UNDER DELAWARE LAW.
10.6 Public Announcement. The parties hereto will consult and agree
with each other prior to issuing any public announcement or statement with
respect to the transactions contemplated hereby.
34
<PAGE> 41
10.7 Expenses. Except as otherwise expressly provided by this
Agreement, each party shall pay all fees and expenses incurred by it in
connection with the negotiation and execution of, and performance under, this
Agreement.
10.8 Covenant of Good Faith. Each party agrees that, in its respective
dealings with the other party under or in connection with this Agreement, it
shall act in good faith.
10.9 Further Assurances. Each of the parties hereto agrees that, from
time to time, at the request of the other party and without further
consideration, it will execute and deliver such other documents and take such
other actions as such other party may reasonably request to consummate more
effectively the transactions contemplated under this Agreement.
10.10 Calculation of Days. Unless otherwise noted, "days" refers to
calendar days.
10.11 Headings. The Article and Section headings and the table of
contents used herein are for reference and convenience only and shall not enter
into the interpretation hereof.
10.12 Construction. In the event of any conflict between this
Agreement and any Exhibits or Attachments hereto, the provisions of this
Agreement shall control.
10.13 Counterparts. This Agreement may be executed in several
counterparts, all of which taken together shall constitute one single agreement
between the parties hereto.
10.14 Entire Agreement; Amendment. This Agreement, including any
Appendices, Schedules and Exhibits referred to herein and attached hereto, each
of which is incorporated herein for all purposes constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements, whether written or oral, with respect to the
subject matter contained in this Agreement. This Agreement may be amended only
by a written instrument signed by an authorized representative of each party. No
consent, agreement or approval of a party that is contemplated under this
Agreement shall be valid unless in writing and signed by such party.
10.15 Submission to Jurisdiction. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND
BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. ANY LEGAL ACTION OR PROCEEDING
AGAINST ANY PARTY WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT AND ENFORCED IN
A FEDERAL OR STATE COURT LOCATED IN THE SOUTHERN DISTRICT OR COUNTY OF NEW YORK,
AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE PARTIES HERETO
HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY,
IRREVOCABLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. THE
PARTIES HERETO AGREE THAT A JUDGMENT, AFTER EXHAUSTION OF ALL AVAILABLE APPEALS,
IN ANY SUCH ACTION OR
35
<PAGE> 42
PROCEEDINGS SHALL BE CONCLUSIVE AND BINDING UPON THE APPLICABLE PARTIES, AND MAY
BE ENFORCED IN ANY OTHER JURISDICTION BY A SUIT UPON SUCH JUDGMENT, A CERTIFIED
COPY OF WHICH SHALL BE CONCLUSIVE EVIDENCE OF THE JUDGMENT. HUMKO HEREBY
IRREVOCABLY DESIGNATES, APPOINTS AND EMPOWERS CORPORATION SERVICES COMPANY, WITH
OFFICES ON THE DATE HEREOF AT 1013 CENTRE ROAD, WILMINGTON, DELAWARE 19805 , AND
EACH OF THE OTHER PARTIES HERETO HEREBY IRREVOCABLY DESIGNATES, APPOINTS AND
EMPOWERS CORPORATION SERVICES COMPANY, WITH OFFICES ON THE DATE HEREOF AT 1013
CENTRE ROAD, WILMINGTON, DELAWARE 19805, SO LONG AS THIS AGREEMENT IS
OUTSTANDING, AS ITS RESPECTIVE DESIGNEE, APPOINTEE AND AGENT WITH RESPECT TO ANY
ACTION OR PROCEEDING TO RECEIVE, ACCEPT AND ACKNOWLEDGE FOR AND ON ITS
RESPECTIVE BEHALF, AND IN RESPECT OF ITS PROPERTY, SERVICE OF ANY AND ALL LEGAL
PROCESS, SUMMONS, NOTICES AND DOCUMENTS WHICH MAY BE SERVED IN ANY SUCH ACTION
OR PROCEEDING AND AGREE THAT THE FAILURE OF ANY SUCH AGENT TO GIVE ANY ADVICE OF
ANY SERVICE OF PROCESS TO THE RESPECTIVE PARTY SHALL NOT IMPAIR OR AFFECT THE
VALIDITY OF SUCH SERVICE OR OF ANY JUDGMENT BASED THEREON. IF FOR ANY REASON ANY
SUCH DESIGNEE, APPOINTEE AND AGENT SHALL CEASE TO BE AVAILABLE TO ACT AS SUCH,
THE RESPECTIVE PARTIES AGREE TO DESIGNATE A NEW DESIGNEE, APPOINTEE AND AGENT IN
THE STATE OF NEW YORK ON THE TERMS AND FOR THE PURPOSES OF THIS PROVISION
SATISFACTORY TO THE OTHER PARTIES. EACH OF THE PARTIES HERETO FURTHER
IRREVOCABLY CONSENT TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE RESPECTIVE PARTIES, AT
THEIR RESPECTIVE ADDRESSES SET FORTH IN SECTION 10.2 HEREOF, SUCH SERVICE TO
BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE
RIGHT OF ANY PARTY TO SERVE PROCESS OR TO COMMENCE LEGAL PROCEEDINGS OR
OTHERWISE PROCEED AGAINST ANY OTHER PARTY IN ANY OTHER MANNER PERMITTED BY LAW.
EACH PARTY HERETO HEREBY WAIVES IRREVOCABLY, TO THE FULLEST EXTENT PERMITTED BY
LAW, ANY OBJECTION TO THE LAYING OF VENUE IN THE AFOREMENTIONED NEW YORK COURTS
OR ANY CLAIM OF INCONVENIENT FORUM IN RESPECT OF ANY SUCH ACTION THEREIN TO
WHICH IT MIGHT OTHERWISE NOW OR HEREAFTER BE ENTITLED IN ANY ACTIONS ARISING OUT
OF OR BASED ON THIS AGREEMENT.
IN WITNESS WHEREOF, THE PARTIES BELOW HAVE EXECUTED THIS
AGREEMENT AS OF THE DATE FIRST SET FORTH ABOVE.
[SIGNATURES FOLLOW ON SUCCEEDING PAGES]
36
<PAGE> 43
MEMBERS:
AC HUMKO CORP., A DELAWARE CORPORATION
BY
DANIEL S. ANTONELLI
PRESIDENT & CEO
"HUMKO"
37
<PAGE> 44
INCON TECHNOLOGIES, INC., A DELAWARE
CORPORATION
BY
JOHN R. PALMER
PRESIDENT
"INCON"
[SIGNATURE PAGE 2 TO MASTER FORMATION AGREEMENT]
2
<PAGE> 45
BIONUTRICS, INC., A NEVADA CORPORATION
BY
RONALD H. LANE
PRESIDENT AND CHIEF EXECUTIVE OFFICER
"BIONUTRICS"
[SIGNATURE PAGE 3 TO MASTER FORMATION AGREEMENT]
<PAGE> 46
NUTRITION TECHNOLOGY
CORPORATION, A NEVADA CORPORATION
BY
NAME:
TITLE:
"NTC"
[SIGNATURE PAGE 4 TO MASTER FORMATION AGREEMENT]
<PAGE> 47
INCON INTERNATIONAL INC., A BRITISH
VIRGIN ISLANDS COMPANY
BY
NAME:
TITLE:
"INTERNATIONAL"
[SIGNATURE PAGE 5 TO MASTER FORMATION AGREEMENT]
<PAGE> 1
EXHIBIT 10.25
MEMBERS AGREEMENT
FOR
INCON PROCESSING, L.L.C.
BETWEEN
AC HUMKO CORP.
AND
INCON TECHNOLOGIES, INC.
JUNE 25, 1999
The notation [*] herein indicates information omitted pursuant to a
request for confidential treatment filed with the Commission. The confidential
information has been filed separately with the Commission.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I
DEFINED TERMS.......................................................................................1
1.1 Defined Terms..............................................................................1
1.2 Terminology................................................................................7
ARTICLE II
ORGANIZATION........................................................................................7
2.1 Formation..................................................................................7
2.2 Name.......................................................................................7
2.3 Registered Office; Registered Agent; Offices...............................................7
2.4 Purposes...................................................................................7
2.5 Foreign Qualification......................................................................7
2.6 Term.......................................................................................8
2.7 No State-Law Partnership...................................................................8
ARTICLE III
MEMBERS AND MEMBERSHIP..............................................................................8
3.1 Members; Membership Interests..............................................................8
3.2 Encumbrances of Membership Interests.......................................................8
3.3 Admission of New Members...................................................................8
3.4 Information................................................................................9
3.5 Liability to Third Parties.................................................................9
3.6 Expulsion..................................................................................9
3.7 Resignation................................................................................9
ARTICLE IV
CAPITAL AND OTHER CONTRIBUTIONS.....................................................................10
4.1 Initial Contributions......................................................................10
4.2 Subsequent Capital Contributions...........................................................11
4.3 Failure to Contribute......................................................................11
4.4 Security Agreement.........................................................................12
4.5 Special Cash Calls.........................................................................13
4.6 Return of Contributions....................................................................15
4.7 Special Humko Provisions...................................................................15
ARTICLE V
MANAGEMENT OF THE COMPANY...........................................................................16
5.1 Management by Members......................................................................16
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
5.2 Management Committee.......................................................................16
5.3 CEO, COO, CFO and CTO......................................................................21
5.4 Conflicts of Interest......................................................................23
5.5 Indemnification for Breach of Agreement....................................................23
ARTICLE VI
ALLOCATIONS; DISTRIBUTIONS..........................................................................24
6.1 Allocations................................................................................24
6.2 Distributions..............................................................................24
6.3 Liquidating Distributions..................................................................25
ARTICLE VII
FINANCIAL MATTERS...................................................................................25
7.1 Maintenance of Books and Records...........................................................25
7.2 Fiscal Year; Reports.......................................................................25
7.3 Bank Accounts and Investments..............................................................26
7.4 Loans by Members to the Company............................................................27
7.5 Insurance..................................................................................27
7.6 Tax Returns................................................................................27
7.7 Tax Elections..............................................................................27
ARTICLE VIII
PLANNING AND BUDGETS................................................................................28
8.1 Annual Business Plan.......................................................................28
8.2 Annual Budgets.............................................................................28
8.3 Completion Date; Failure to Agree..........................................................29
8.4 Proposals for Nonbudgeted Capital Expenditures.............................................29
8.5 Initial Business Plan, Operating Budget and Capital Expenditure Budget.....................29
ARTICLE IX
AGREEMENTS REGARDING CERTAIN OPERATIONS.............................................................29
9.1 Utilization of Production Capacity.........................................................29
9.2 Restrictions Relating to Certain Products and Materials....................................30
ARTICLE X
LIABILITIES AND INDEMNIFICATION.....................................................................30
10.1 Indemnity of Members by the Company........................................................30
10.2 Claims by InCon's Employees................................................................31
10.3 General Indemnity Provisions-Humko.........................................................31
10.4 General Indemnity Provisions-InCon.........................................................31
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C>
ARTICLE XI
DISPOSITIONS OF MEMBERSHIP INTERESTS................................................................32
11.1 Dispositions of Membership Interests.......................................................32
11.2 Change of Control of InCon.................................................................32
11.3 Preferential Right on Sales................................................................32
11.4 Buy-Sell Option............................................................................33
ARTICLE XII
DISSOLUTION OF THE COMPANY..........................................................................33
12.1 Dissolution................................................................................33
12.2 Deficit Capital Accounts...................................................................34
12.3 Winding-Up.................................................................................34
12.4 Effect of Dissolution on the Transition Services Agreement.................................35
12.5 Bankruptcy Remedies........................................................................35
12.6 No Consequential Damages...................................................................35
ARTICLE XIII
DEADLOCK RESOLUTION PROCEDURES......................................................................35
13.1 Notice of Deadlock Issue...................................................................35
13.2 Special Meeting of Members.................................................................35
13.3 Post-Meeting Time Period to Resolve Deadlock Issue.........................................35
13.4 Declaration of Deadlock Event..............................................................35
13.5 Failure to Declare Deadlock Event..........................................................36
13.6 Post-Declaration Time Period to Resolve Deadlock Event.....................................36
13.7 Election to Dissolve Company...............................................................36
13.8 Buy-Sell Option............................................................................36
ARTICLE XIV
BUY-SELL OPTION.....................................................................................36
14.1 Buy-Sell Notice............................................................................36
14.2 Actions by Receiving Member................................................................36
14.3 Closing....................................................................................37
14.4 Failure to Close...........................................................................37
ARTICLE XV
GENERAL PROVISIONS..................................................................................37
15.1 Notices....................................................................................37
15.2 Entire Agreement; Supersedure; Amendment; Written Consents and Agreements..................39
15.3 Effect of Waiver or Consent................................................................39
15.4 Amendments of Certificate and Regulations..................................................39
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
<S> <C>
15.5 Binding Effect.............................................................................39
15.6 Governing Law..............................................................................39
15.7 Severability...............................................................................39
15.8 Further Assurances.........................................................................39
15.9 Press Releases.............................................................................40
15.10 Trademarks.................................................................................40
15.11 Conflicts Between this Agreement and a Related Agreement...................................40
15.12 Counterparts...............................................................................40
</TABLE>
EXHIBITS
Exhibit 2.1 -- Certificate of Formation
<PAGE> 6
MEMBERS AGREEMENT
This MEMBERS AGREEMENT (this "Agreement") is entered into as of June
25, 1999, by and between AC HUMKO CORP., a Delaware corporation ("Humko"),
having offices at 7171 Goodlett Farms Parkway, Memphis, Tennessee 38018-4909,
and INCON TECHNOLOGIES, INC., a Delaware corporation ("InCon"), having offices
at 970 Douglas Road, Batavia, Illinois 60510.
W I T N E S S E T H:
WHEREAS, InCon and Humko (sometimes referred to herein as the
"Members") are the members of a newly-formed limited liability company named
INCON PROCESSING L.L.C. (the "Company"); and
WHEREAS, the Company will engage in toll processing of various
products, the sale of certain services in connection with the design,
engineering and/or construction of molecular separation (including molecular
distillation, dry fractionation, chromatographic separation and membrane
filtration) facilities and various activities related thereto, including
research and development, technical support and marketing and the operation of
certain facilities involving molecular separation procedures and other processes
and procedures currently engaged in by InCon, all as more fully described as the
"Scope of Business" defined in Article I; and
WHEREAS, Humko, InCon, Bionutrics, Inc., Nutrition Technology
Corporation, and InCon International, Inc. have entered into that certain Master
Formation Agreement dated of even date herewith (the "Master Formation
Agreement"), and this Agreement is being executed pursuant to the terms and
provisions of the Master Formation Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements and covenants hereinafter set forth, Humko and InCon hereby agree as
follows:
ARTICLE I
DEFINED TERMS
1.1 Defined Terms. For purposes of this Agreement, the following
capitalized terms shall have the meanings ascribed thereto in this Section 1.1.
"Act" has the meaning set forth in Section 2.1.
"Affiliate(s)" means an entity controlling, controlled by or under
common control with another entity, with majority ownership being deemed
necessary for control.
"Agreed Interest Rate" means the prime rate of interest established
from time to time by Citibank, N.A. or its successor.
1
<PAGE> 7
"Agreement" means this Members Agreement, together with its exhibits,
annexes, appendices and other documents referred to hereunder, as may from time
to time be supplemented or amended in accordance with the terms hereof. This
Agreement is an agreement referred to as a "limited liability company agreement"
under Section 18-101(7) of the Act.
"Alternate Representative" has the meaning set forth in Section 5.2(a).
"InCon" has the meaning set forth in the introductory paragraph of this
Agreement.
"Business Day" means any day other than a Saturday, Sunday or any other
day on which federal banking institutions in the United States are required or
authorized by Law to suspend operations.
"Buy-Sell Notice" has the meaning set forth in Section 14.1.
"Capital Contributions" means the contributions set forth in Sections
4.1, 4.2 and 4.3, together with any other contributions made by the Members
pursuant to this Agreement.
"Cash Call Loan" has the meaning set forth in Section 4.5(b)(i).
"Certificate" has the meaning set forth in Section 2.1.
"Claims and Expenses" means any and all demands, claims, suits and
causes of action and any and all liability, costs, expenses, settlements, and
judgments incurred in connection therewith (including, without limitation, court
costs and attorney's fees, charges, disbursements and advances), whether arising
in equity, at common law, or by statute, or under the Law of contracts, torts
(including, without limitation, negligence and strict liability without regard
to fault), of every kind or character, arising in favor of or brought by any
Members' employees, agents, subcontractors, or representatives, or by any
Governmental Authority or any other third party, based upon, in connection with,
relating to or arising out of (i) any Member's actions or inactions under this
Agreement, (ii) violation of any Laws by any Member including, without
limitation, any Environmental Laws, (iii) caused by any misrepresentation,
breach of warranty or failure to fulfill any covenant or agreement of any Member
contained herein, (iv) any act or failure to act by any Member or any of its
Affiliates that occurred before the date hereof relating to or arising out of
the operation of any Member's business, or the ownership or use prior to the
date hereof of any of the assets of any Member prior to the date hereof, or (v)
any obligation or liability (whether absolute, accrued, contingent or otherwise)
relating to any Member's business which arose prior to the date hereof and which
is not expressly assumed by the Company (herein clauses (i) through (v) being
collectively called "Claims and Expenses").
"Code" means the Internal Revenue Code of 1986, as amended. References
to specific sections of the Code shall be deemed to include references to
corresponding provisions of succeeding internal revenue Law.
"Company" has the meaning set forth in the first recital of this
Agreement.
2
<PAGE> 8
"Competitive Activity" means any action taken in furtherance of an
agreement, resolution, or other evidence of intent to [*].
"Confidential Information" means all secret, confidential or non-public
information or know-how owned by the Company, whether solely or jointly with
others, including, but not limited to, (i) 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, trade secrets, inventions, drawings (whether for engineering,
production, or development purposes), specifications (whether for products,
processes, equipment, or otherwise) and (ii) all of the foregoing matters that
were acquired by the Company from InCon or others pursuant to the Master
Formation Agreement or otherwise. As used herein, the term "Confidential
Information" shall not include any and all proprietary information relating to
compounds and compositions of matter having biological activity and/or utility
and products incorporating such compositions of matter, but such term shall
include (a) all proprietary information with respect to methods and/or
techniques involved in the processing of natural source materials except for
coconut oil and (b) all proprietary information relating to compounds and
compositions of matter that are biologically inactive and/or utility and
products incorporating such compositions of matter.
"Conversion" has the meaning set forth in Section 4.5(d).
"Cumulative Contributions" means, as to each Member, the value of all
contributions to the Company by the Members, and their respective Affiliates,
regardless of whether such contributions are reflected in their capital
accounts. The value of contributions other than cash shall be as agreed by the
Members for the purpose of any calculation involving Cumulative Contributions in
connection with any Conversion under Section 4.5(d). The value of the initial
contributions to the Company shall be deemed to be US $3,200,000 by each of
Humko and InCon, or US $6,400,000 in the aggregate.
"Deadlock Event" means an event declared by a Member pursuant to
Section 13.4(a), following a failure to resolve a Deadlock Issue within the time
permitted by Section 13.3.
"Deadlock Issue" means an issue of a profound nature involving the
conduct of the Company's business on which the Members are in disagreement,
including but not limited to any substantial aspect of (A) the business,
capital, research or financial plans of the Company, (B) the management of the
sales, research, Manufacturing, licensing or purchasing activities of the
Company, or (C) the development or implementation of the acquisition, joint
venture or business consolidation plans that directly affect and relate to the
Company, but does not include any issue relating to a breach or alleged breach
of this Agreement or any Related Agreement by a Member.
"Declining Member" has the meaning set forth in Section 4.5(b).
"Delinquent Member" has the meaning set forth in Section 4.3.
"Directly or indirectly" means taking an action or participating in an
activity, and shall be construed in the broadest possible sense and shall
include without limitation:
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(i) acting or participating as a proprietor, partner,
investor, joint venturer, shareholder, consultant, independent contractor, or
otherwise; and
(ii) acting or participating through directors,
officers, employees, subsidiaries, or agents.
"Dispose," "Disposing" or "Disposition" means with respect to any asset
(including a Membership Interest or any right forming a part thereof), a sale,
assignment, transfer, conveyance, foreclosure, gift, exchange, or other
disposition of such asset, whether such disposition be voluntary, involuntary or
by operation of Law.
[*]
"EBITDA" has the meaning set forth in the Master Formation Agreement.
"Facility" means the facility of InCon located at 970 Douglas Road,
Batavia, Illinois 60510.
"First Member" has the meaning set forth in Section 11.3.
"Governmental Authority" means the United States, the state, county,
city, and political subdivisions in which the Facility is located or that
exercise jurisdiction over the Facility or InCon, and any agency, department,
commission, board, bureau, or instrumentality that exercises jurisdiction over
the Facility or InCon.
"Humko" has the meaning set forth in the introductory paragraph of this
Agreement.
"Indemnified Acts" has the meaning set forth in Section 5.3(d).
[*]
"Law" means any applicable constitutional provision, statute, act, code
(including the Code), law, regulation, rule, ordinance, order, injunction,
arbitral award, decree, ruling, proclamation, resolution, judgment, decision, or
declaration, of a Governmental Authority.
"Lending Member" has the meaning set forth in Section 4.3.
"Majority Interest" has the meaning set forth in Section 5.2(f).
"Management Committee" has the meaning set forth in Section 5.2.
"Manufacture" or "Manufacturing" shall mean the processes commonly
referred to as refining, hydrogenating, co-hydrogenating, interesterifying,
co-interesterifying, [fractionating] fractioning, and deodorizing, but shall not
include the process commonly referred to as blending and packaging.
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"Master Formation Agreement" has the meaning set for in the recitals of
this Agreement.
"Members" means InCon, Humko and each other person that is hereafter
admitted to the Company as a member in accordance with this Agreement.
"Membership Interest" has the meaning set forth in Section 3.1.
"Monthly Financial Statements" has the meaning set forth in Section
7.2(b).
"Net Available Cash" has the meaning set forth in Section 6.2(d).
"Officer(s)" has the meaning set forth in Section 5.2(k).
"Ordinary Course of Business" means the ordinary course of business of
the Company consistent with past custom and practice (including with respect to
quantity and frequency). For purposes of the calendar year 1999 only, the term
"Ordinary Course of Business" means the ordinary course of business of InCon
consistent with past custom and practice (including with respect to quantity and
frequency) as reflected in the February 1999 profit and loss statement and the
February 1999 balance sheet of InCon for the period covered thereby, copies of
each of which have been delivered to Humko.
"Outside Activities" has the meaning set forth in Section 5.4.
"Preferential Notice" has the meaning set forth in Section 11.3.
"Purchase Price" has the meaning set forth in Section 14.1.
"Purchaser" has the meaning set forth in Section 14.3(i).
"Receiving Member" has the meaning set forth in Section 14.1.
"Related Agreement(s)" has the meaning set forth in the Master
Formation Agreement.
"Representative" has the meaning set forth in Section 5.2(a).
"Response Notice" has the meaning set forth in Section 14.2.
"Scope of Business" means the toll processing of various products, the
sale of certain equipment and services in connection with the design,
engineering and/or construction of molecular separation (including molecular
distillation, dry fractionation, chromatographic separation and membrane
filtration) facilities and various activities related thereto, including
research and development, technical support and marketing, and the operation of
certain facilities involving molecular separation procedures and other processes
and procedures currently engaged in by InCon [*].
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"Second Member" has the meaning set forth in Section 11.3.
"Seller" has the meaning set forth in Section 14.3(i).
"Sharing Ratio(s)" has the meaning set forth in Section 3.1.
"Special Cash Call" has the meaning set forth in Section 4.5.
"Territory" means the continents of North America, Central America and
South America.
"Transition Services Agreement" means that certain Transition Services
Agreement of even date herewith by and between InCon and the Company.
"Transition Period" means the period commencing on the date hereof and
ending on the date that the Transition Services Agreement terminates.
"Triggering Member" has the meaning set forth in Section 14.1.
"Unanimous Interest" has the meaning set forth in Section 5.2(f).
"Voting Ratio(s)" has the meaning set forth in Section 3.1.
"Yearly Financial Statements" has the meaning set forth in Section
7.2(a).
1.2 Terminology. Unless the context requires otherwise: (a) the gender
(or lack of gender) of all words used in this Agreement includes the masculine,
feminine, and neuter; (b) the word "including" means "including, without
limitation,"; (c) references to Articles and Sections refer to Articles and
Sections of this Agreement; and (d) references to Exhibits are to the Exhibits
attached to this Agreement, each of which is made a part hereof for all
purposes.
ARTICLE II
ORGANIZATION
2.1 Formation. The Company has been organized as a Delaware limited
liability company by the filing of a Certificate of Formation (the
"Certificate") in the form attached hereto as Exhibit 2.1 under and pursuant to
the Delaware Limited Liability Company Act (as amended from time to time, the
"Act").
2.2 Name. The name of the Company is "InCon Processing, L.L.C." and
all Company business must be conducted in that name or such other names that may
be selected by the Members and that comply with applicable Law.
2.3 Registered Office; Registered Agent; Offices. The registered
office and registered agent of the Company in the State of Delaware shall be as
specified in the Certificate or as designated by the Members from time to time
in the manner provided by applicable Law.
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2.4 Purposes. The purposes of the Company are to engage in operations
and activities within the Scope of Business, and to engage in any other business
or activity that now or hereafter may be determined by the Members to be
necessary, incidental, proper, advisable, or convenient to accomplish the
purposes of the Scope of Business (including obtaining financing therefor) and
that is not forbidden by the Law of the jurisdiction in which the Company
engages in that business.
2.5 Foreign Qualification. The Members shall cause the Company to
qualify as a foreign limited liability company (or otherwise qualify in the
method prescribed by the relevant jurisdiction) in all jurisdictions in which
the Company conducts business or is otherwise required by Law to register to do
business.
2.6 Term. The Company commenced on the effective date of the
Certificate and shall have a perpetual existence, unless and until it is
dissolved in accordance with Article XII.
2.7 No State-Law Partnership. The Members intend that the Company is
not and will not be a partnership (including a limited partnership) or joint
venture under state Law (even though the Company will be treated as a
partnership under U.S. federal income tax Law). Accordingly, pursuant to this
Agreement or otherwise in connection with the Company, no Member is or will be a
partner or joint venturer of any other Member for any purpose (other than
applicable tax Law), and this Agreement may not be construed to suggest
otherwise.
ARTICLE III
MEMBERS AND MEMBERSHIP
3.1 Members; Membership Interests. The initial Members of the Company
are InCon and Humko, each of which owns a limited liability company interest (as
that term is defined in the Act and herein referred to as a "Membership
Interest") in the Company. Each of Humko and InCon initially has a fifty percent
(50%) share of the profits and losses of the Company, and each is initially
entitled to receive fifty percent (50%) of any distributions of the Company's
assets (such percentages are herein referred to as "Sharing Ratios," as such
percentages may be changed from time to time by mutual agreement of the Members
or as may be required by the express terms of this Agreement). In addition, each
of Humko and InCon initially has a fifty percent (50%) vote with respect to
Company matters (such percentages are herein referred to as "Voting Ratios," as
such percentages may be changed from time to time by mutual agreement of the
Members or as may be required by the express terms of this Agreement). The
Voting Ratios shall be changed to correspond to the Sharing Ratios whenever the
Sharing Ratios are changed in accordance with the terms of this Agreement or as
may otherwise agreed by the Members.
3.2 Encumbrances of Membership Interests. Except as provided in
Section 4.4 of this Agreement, a Member may not pledge, mortgage, subject to a
security interest or lien, or otherwise encumber (voluntarily, involuntarily or
by operation of Law) all or any portion of its Membership Interest without the
prior written consent of the other Member.
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3.3 Admission of New Members.
(a) Each permitted transferee of a Membership Interest under
Article XI shall be admitted as a Member of the Company in the place of the
Member whose Membership Interest was transferred to such transferee.
(b) Additional Membership Interests may be created and issued
to existing Members or to other persons, and such other persons may be admitted
to the Company as Members, only with the unanimous written consent of the
existing Members, in which event the Members' Sharing Ratios and Voting Ratios
shall be adjusted as may be agreed by the Members.
3.4 Information. In addition to the other rights specifically set
forth in this Agreement, each Member has the right to have access to, or to
obtain copies of, all of the information described in Section 18-305(a) of the
Act, subject to the following:
(i) All requests to obtain such information shall be
submitted in writing to the Company and to the other Member.
(ii) If the requested information is in the
possession of the Company, the Company will make such information available to
the requesting Member during normal business hours at the location at which such
information is normally maintained.
(iii) If the requested information is not in the
possession of the Company, but rather in the possession of one of the Members,
then that Member will make such information available to the requesting Member
during normal business hours at the location at which such information is
normally maintained.
(iv) The requesting Member shall be responsible for
the expenses relating to copies of such information, but will not be obligated
to pay for the time of employees or contractors of the producing Member.
(v) All information that is provided to the
requesting Member pursuant to this Section 3.4 is subject to the confidentiality
provisions set forth in the Master Formation Agreement, unless expressly waived
by the producing Member.
3.5 Liability to Third Parties. No Member shall be liable for the
debts, obligations or liabilities of the Company solely by reason of being a
member or participating in the management of the Company as provided in Section
5.1.
3.6 Expulsion. A Member may not be expelled from the Company.
3.7 Resignation. A Member may not resign from the Company prior to the
dissolution and winding up of the Company. In the event that a Member attempts
to resign in violation of this Section 3.7, the non-resigning Member may, at its
sole option, (a) enforce the restriction set forth in this Section to the
maximum extent permitted under Law or in equity, or (b) may accept such
resignation subject to the following: (i) such resigning Member shall be
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<PAGE> 14
liable to the Company and the other Member for all monetary damages (including
all consequential damages) suffered by the non-resigning Member and the Company
as a result of such resignation; and (ii) such resigning Member shall not be
entitled to receive the fair market value of its Membership Interest; and (iii)
such resigning Member shall not have any rights under Section 18-604 of the Act.
ARTICLE IV
CAPITAL AND OTHER CONTRIBUTIONS
4.1 Initial Contributions.
(a) Contemporaneously with the execution of this Agreement,
each Member shall:
(i) make the contributions to the capital of the
Company described in the Master Formation Agreement; and
(ii) execute and deliver, and cause its Affiliates to
execute and deliver, those Related Agreements to which it or such Affiliates are
intended to be parties.
(b) The Members agree that the value of the initial
contributions made by each Member is equal and that, for the purpose of any
calculation involving Cumulative Contributions in connection with a Conversion
under Section 4.5(d), the value of each Member's initial contributions shall be
deemed to be US $3,200,000.
(c) The initial Capital Contribution of Humko will be made in
cash in the amount of US $3,200,000.
(d) The initial Capital Contribution of InCon will be made (i)
by the assignment to the Company of certain assets owned by InCon and others,
the value of which has been agreed upon by InCon and Humko to be US $6,000,000,
and (ii) by the payment by InCon to the Company of US $200,000 cash. On the date
hereof, the Company has paid to InCon US $3,000,000 in payment for a one-half
(1/2) undivided interest in the non-cash assets conveyed by InCon to the
Company. The other one-half (1/2) undivided interest in the non-cash assets
conveyed by InCon to the Company shall constitute a Capital Contribution by
InCon to the Company equal to US $3,000,000. InCon has additionally paid to the
Company a sum of money to cover payment of certain accounts payable that have
been assigned by InCon to the Company (which shall constitute a reimbursement to
the Company and not a contribution), but that were required to be paid by the
Company from funds provided by InCon to the Company under the terms of the
Master Formation Agreement.
(e) After the distribution of US $3,000,000 to InCon on the
date hereof, the remaining US $400,000 of cash of the Company shall be used as
directed by the Management Committee; provided, however, that none of such funds
may be expended by the Company (except for normal operations not exceeding in
the aggregate $300,000) until [*].
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4.2 Subsequent Capital Contributions
(a) Except as otherwise provided in this Agreement, no
subsequent contributions by the Members shall be made without the prior written
consent of both Members. Except as provided in Section 4.2(b) and Section 4.5,
neither Member is required to make any contributions to the Company other than
pursuant to Section 4.1.
(b) Without creating any rights in favor of any third party,
to the extent that the Members mutually agree to make any Capital Contributions
to the Company, each Member shall be obligated to contribute such amounts to the
Company in accordance with such agreement.
(c) Except as set forth above and as elsewhere expressly
provided in this Agreement, (i) in no event shall the payment of any amount by
any Member to the Company or the other Member pursuant to a requirement of
indemnification under this Agreement or any of the Related Agreements be
considered a contribution of capital to the Company, and (ii) no Member shall be
required to make any additional contributions to the Company.
4.3 Failure to Contribute. If a Member (the "Delinquent Member") does
not pay to the Company all or any portion of a Capital Contribution that is
required to be paid pursuant to Sections 4.1 or 4.2, the Company, upon written
request by the other Member, shall exercise one or more of the following
remedies, as specified by the other Member, and shall provide notice thereof to
the Delinquent Member:
(i) charging interest on the unpaid portion of such
required payment at an annual rate equal to the lesser of (i) the Agreed
Interest Rate plus three percent (3%) or (ii) the maximum rate permitted by
applicable Law, from the date that such payment was due until the date that it
is made;
(ii) taking such action as the other Member may deem
appropriate to obtain payment by the Delinquent Member of the required payment,
including withholding any distributions otherwise payable to the Delinquent
Member;
(iii) permitting (but not requiring) the other Member
(the "Lending Member") to deliver to the Company all or any portion of the
Delinquent Member's unpaid required payment, with the following results:
(A) the sum delivered shall constitute a
loan from the Lending Member to the Delinquent Member pursuant to the applicable
provisions of this Agreement;
(B) the principal balance of such loan and
all accrued unpaid interest thereon shall be due and payable in whole by the
Lending Member to the Delinquent Member on or before one (1) year from the date
of such loan;
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(C) the unpaid principal balance of such
loan shall bear interest at an annual rate equal to the lesser of (i) the Agreed
Interest Rate plus three percent (3%), or (ii) the maximum rate permitted by
applicable Law, from the date that such loan is made until the date that the
principal balance, together with all interest accrued thereon, is repaid to the
Lending Member;
(D) all distributions from the Company that
otherwise would be made to the Delinquent Member (whether before or after
dissolution of the Company) instead shall be paid to the Lending Member, for
credit against: first, all costs incurred by the Lending Member in enforcing
payment of its loan by the Delinquent Member (including, without limitation,
attorneys' fees and court costs); second, the unpaid and accrued interest on
such loan; and third, the unpaid principal balance of such loan, until all such
costs, such principal balance and all such interest shall have been paid in full
to the Lending Member, but all such payments to the Lending Member shall be
treated for all other purposes of this Agreement as a distribution to the
Delinquent Member;
(E) the repayment of the principal balance
and interest accrued thereon shall be secured by a security interest in the
Delinquent Member's Membership Interest, as more fully set forth in Section 4.4;
and
(F) the Lending Member shall have the right
(in addition to the other rights and remedies granted to it pursuant to this
Agreement or available to it at Law or in equity) to take, after five Business
Days' advance written notice to the Delinquent Member, such action (including
court proceedings) as the Lending Member may deem appropriate to obtain payment
by the Delinquent Member of the principal balance of such loan and all interest
accrued thereon, at the cost and expense of the Delinquent Member;
(iv) exercising the rights of a secured party under
the Uniform Commercial Code of the State of Delaware, as more fully set forth in
Section 4.4; or
(v) exercising any other rights and remedies
available at Law or in equity.
4.4 Security Agreement. Each Member (as a Delinquent Member) hereby
grants to the other Member (as a Lending Member) a security interest in, and a
first lien on, its Membership Interest and the proceeds thereof, under the
Uniform Commercial Code of the State of Delaware to secure any and all loans
made by the Lending Member to the Delinquent Member pursuant to Section
4.3(iii), together with interest thereon as provided in Section 4.3(iii)(C). In
addition, InCon hereby grants to Humko a security interest in, and a first lien
on, its Membership Interest and the proceeds thereof, under the Uniform
Commercial Code of the State of Delaware to secure its obligations under the
terms and provisions of Section 4.7 of this Agreement and under Section 7.6 of
the Master Formation Agreement, and upon failure by, or refusal of, InCon to pay
any of the amounts required to be paid under the terms of Section 4.7 of this
Agreement or to perform any of its obligations under Section 7.6 of the Master
Formation Agreement, Humko is entitled to all the rights and remedies of a
secured party under the Uniform Commercial Code of the State of Delaware with
respect to the security interest granted in this Section 4.4. On any
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default by a Member in making a required payment to the Lending Member pursuant
to Section 4.3(iii)(B), the Lending Member is entitled to all the rights and
remedies of a secured party under the Uniform Commercial Code of the State of
Delaware with respect to the security interest granted in this Section 4.4.
Contemporaneously with the execution and delivery of this Agreement and from
time- to-time thereafter, each Member shall execute and deliver to the other
Member (and hereby appoints the other Member as its attorney-in-fact for the
purpose of such execution and delivery) all financing statements and other
instruments as the Lending Member may reasonably request to effectuate and carry
out the preceding provisions of this Section 4.4.
4.5 Special Cash Calls. If the Company is unable to meet its
obligations as and when they come due and has exhausted all other sources of
funds reasonably available to it including, without limitation, additional
Member loans pursuant to Section 7.4 hereof, then either Member may make a
request (a "Special Cash Call") that both Members provide a specified amount of
additional funds to the Company in proportion to their respective Sharing Ratios
sufficient to meet the Company's immediate cash needs.
(a) If both Members agree to provide such additional funds
within 10 days of the date of a Special Cash Call, the Members shall make
additional Capital Contributions as provided in Section 4.2, or loans to the
Company as provided in Section 7.4, as they may agree. Any amounts contributed
or loaned pursuant to this Section 4.5(a) must be in proportion to the Members'
respective Sharing Ratios.
(b) If one Member (the "Declining Member") does not agree,
within 10 days of its receipt of a Special Cash Call, to provide its share of
funds requested pursuant to the Special Cash Call, then the other Member may, at
its option, advance to the Company the entire amount of both its share of the
Special Cash Call and the Declining Member's share of the Special Cash Call, on
the following basis:
(i) The sum advanced will constitute a loan (a "Cash
Call Loan") from the Lending Member to the Company.
(ii) The principal balance of a Cash Call Loan and
all accrued unpaid interest thereon will be due and payable in whole on or
before eighteen months from the date of such loan.
(iii) The amount of a Cash Call Loan will bear
interest at an annual rate equal to the lesser of (i) the Agreed Interest Rate
plus three percent (3%) or (ii) the maximum rate permitted by applicable Law,
such interest to be calculated from the date that a Cash Call Loan is made until
the date that such Cash Call Loan is repaid to the Lending Member.
(iv) The Company shall pay the interest on such Cash
Call Loan monthly, provided that it has funds available to do so.
(v) Notwithstanding the provisions of Article VI,
until such Cash Call Loan is repaid in full or converted into equity pursuant to
Section 4.5(d):
(A) No distributions shall be made to either
Member,
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(B) All Net Available Cash shall be paid to
the Lending Member to repay a Cash Call Loan (applied first to accrued and
unpaid interest, and second to principal),
(C) no payments shall be made by the Company
with respect to any other loan to the Company by either Member, and
(D) No further capital expenditures may be
made except for amounts required (i) by contract, (ii) to comply with
environmental, health or safety requirements, (iii) for routine maintenance,
(iv) for emergency repairs, (v) to preserve and protect partially completed
capital projects; or (vi) as otherwise approved by the Management Committee.
Notwithstanding the foregoing, while a Cash Call Loan is outstanding, the
Company shall pay all amounts due to Members and their Affiliates for goods or
services provided to the Company, to the extent that funds are available to make
such payments.
(c) At any time at which a Cash Call Loan is outstanding, the
Declining Member may pay to the Lending Member its share of the outstanding
balance of a Cash Call Loan (including any accrued and unpaid interest), in
exchange for a proportionate share of such Cash Call Loan.
(d) At any time after a Cash Call Loan is due and payable in
full, the Lending Member shall have the option, exercisable in its sole
discretion upon 180 days' prior written notice to the Declining Member, to
convert all or any portion of its Cash Call Loan (excluding any accrued and
unpaid interest thereon) to a Capital Contribution (the "Conversion"). If the
Declining Member does not pay its share of the outstanding balance of a Cash
Call Loan (including any accrued and unpaid interest) within 180 days after the
Lending Member's notice, the Conversion shall become effective, with the
following results:
(i) The Lending Member's Sharing Ratio shall be
adjusted to equal the percentage determined by a fraction, the numerator of
which is the sum of (A) the Lending Member's Cumulative Contributions
immediately preceding the Conversion plus (B) the outstanding principal and
accrued but unpaid interest of a Cash Call Loan converted hereunder, and the
denominator of which is the sum of (X) both Members' Cumulative Contributions
immediately preceding the Conversion plus (Y) the outstanding principal and
accrued but unpaid interest of a Cash Call Loan converted hereunder.
(ii) The Declining Member's Sharing Ratio shall be
adjusted to equal the percentage determined by a fraction, the numerator of
which is the Declining Member's Cumulative Contributions immediately preceding
the Conversion and the denominator of which is the sum of (X) both Members'
Cumulative Contributions immediately preceding the Conversion plus (Y) the
outstanding principal and accrued but unpaid interest of a Cash Call Loan
converted hereunder.
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4.6 Return of Contributions. A Member is not entitled to the return of
any part of its Capital Contributions or to be paid interest in respect of
either its capital account or its Capital Contributions. An unrepaid Capital
Contribution is not a liability of the Company or of any Member. A Member is not
required to contribute or to lend any cash or property to the Company to enable
the Company to return any Member's Capital Contributions. The foregoing
provisions of this Section 4.6 do not limit the Members from agreeing to
distribute capital of the Company or from receiving distributions of capital
upon the liquidation of the Company in accordance with Section 12.1. All of the
provisions of this Section are subject to the terms and provisions of Section
4.7.
4.7 Special Humko Provisions. Notwithstanding anything to the contrary
contained in this Agreement, if EBITDA is less than US $1,500,000 for the period
commencing one (1) calendar year after the date hereof and ending on the date
which is two (2) calendar years after the date hereof, InCon is obligated under
the terms and provisions of the Master Formation Agreement to pay to Humko two
hundred percent (200%) of the difference between US $1,500,000 and the actual
amount of EBITDA for such period, but in no event shall InCon be required to pay
Humko more than US $600,000 plus accrued and unpaid interest from the date due
until paid in accordance with the terms of the Master Formation Agreement. The
obligation to pay such amount to Humko shall be secured in the same manner as a
loan under the terms and provisions of Section 4.4, and Humko shall be deemed to
be a Lending Member and InCon a Delinquent Member under Sections 4.3 and 4.4 for
purposes of this Section 4.7 only, but such amount shall be payable upon demand
by Humko and shall not be subject to the term or interest rate applicable to a
loan under Section 4.3. In addition, if InCon fails to pay Humko such amount
when and if due in accordance with the provisions of the Master Formation
Agreement, then (i) all distributions to be made to InCon under the terms of
this Agreement shall be paid to Humko until the entire sum owed to Humko has
been paid in full, (ii) Humko shall be entitled to exercise any of the remedies
provided to the Lending Member under the terms and provisions of Section 4.5(b),
and (iii) the entire US $600,000 together with all accrued and unpaid interest
thereon or such portion thereof that InCon is obligated to pay to Humko but
fails to pay shall be deemed to be a Cash Call Loan for purposes of Conversion
only under Section 4.5(d) and shall be deemed to be due and payable upon failure
of InCon to pay all or any part of such amount when due under the Master
Formation Agreement. Without limiting the generality of the foregoing, (i) Humko
shall be entitled to the Conversion referred to in Section 4.5(d) immediately
upon failure of InCon to pay all or any portion of such amounts notwithstanding
anything to the contrary contained in Section 4.5(d), and (ii) all of the terms
and provisions of Section 4.5(b)(v) shall be applicable to the portion of the
foregoing amounts that remain unpaid in the same manner as if such amounts
constituted a Cash Call Loan.
ARTICLE V
MANAGEMENT OF THE COMPANY
5.1 Management by Members. The management of the Company is fully
vested in the Members, acting exclusively in their membership capacities. To
facilitate the orderly and efficient management of the Company, the Members
shall act (a) collectively as a "committee of the whole" pursuant to Section
5.2, and (b) through the delegation of certain responsibility and
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authority to the Chief Executive Officer pursuant to Section 5.3. The Company
will not have "managers," as that term is used in the Act, it being understood
that the Representatives, the Chief Executive Officer and the other Officers do
not constitute "managers."
5.2 Management Committee. The Members shall act collectively through
meetings as a "committee of the whole," which is hereby named the "Management
Committee". Decisions or actions taken by the Management Committee in accordance
with the provisions of this Agreement shall constitute decisions or actions by
the Company and shall be binding on each Member, Representative, Officer and
employee of the Company. The Management Committee shall conduct its affairs in
accordance with the following provisions and the other provisions of this
Agreement:
(a) Representatives.
(i) Designation. To facilitate the orderly and
efficient conduct of Management Committee meetings, each
Member shall notify the other Members, from time to time, of
the identity of (A) one of its Officers, employees or agents
who will represent it at such meetings (a "Representative"),
and (B) one of its Officers, employees or agents who will
represent it at any meeting that the Member's Representative
is unable to attend (an "Alternate Representative") (the term
"Representative" shall also refer to any Alternate
Representative that is actually performing the duties of the
applicable Representative.). The initial Representative of
Humko shall be Daniel S. Antonelli and the initial
Representative of InCon shall be Ronald H. Lane. A Member may
designate a different Representative or Alternate
Representative for any meeting of the Management Committee by
notifying each of the other Members at least three Business
Days prior to the scheduled date for such meeting; provided,
however, that if giving such advance notice is not feasible,
then such new Representative or Alternate Representative shall
present written evidence of his or her authority at the
commencement of such meeting.
(ii) Authority. Each Representative shall have the
full authority to act on behalf of the Member that designated
such Representative; the action of a Representative at a
meeting (or through a written consent) of the Management
Committee shall bind the Member that designated such
Representative; and the other Members shall be entitled to
rely upon such action without further inquiry or investigation
as to the actual authority (or lack thereof) of such
Representative. In addition, the act of an Alternate
Representative shall be deemed the act of the Representative
for which such Alternate Representative is acting, without the
need to produce evidence of the absence or unavailability of
such Representative.
(iii) Disclaimer of Duties; Indemnification. EACH
REPRESENTATIVE SHALL REPRESENT, AND OWE DUTIES TO, ONLY THE
MEMBER THAT DESIGNATED SUCH REPRESENTATIVE (THE NATURE AND
EXTENT OF SUCH DUTIES BEING AN INTERNAL CORPORATE AFFAIR OF
SUCH MEMBER), AND NOT TO THE
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COMPANY, ANY OTHER MEMBER OR REPRESENTATIVE, OR ANY OFFICER OR
EMPLOYEE OF THE COMPANY. THE PROVISIONS OF SECTION 5.2(f)(ii)
SHALL ALSO INURE TO THE BENEFIT OF EACH MEMBER'S
REPRESENTATIVE. THE COMPANY SHALL INDEMNIFY, PROTECT, DEFEND,
RELEASE AND HOLD HARMLESS EACH REPRESENTATIVE FROM AND AGAINST
ANY CLAIMS ASSERTED BY OR ON BEHALF OF ANY PERSON (INCLUDING
ANOTHER MEMBER), OTHER THAN THE MEMBER THAT DESIGNATED SUCH
REPRESENTATIVE, THAT ARISE OUT OF, RELATE TO OR ARE OTHERWISE
ATTRIBUTABLE TO, DIRECTLY OR INDIRECTLY, SUCH REPRESENTATIVE'S
SERVICE ON THE MANAGEMENT COMMITTEE.
(iv) Attendance. Each Member shall use all reasonable
efforts to cause its Representative or Alternate
Representative to attend each meeting of the Management
Committee, unless its Representative is unable to do so
because of a "force majeure" event or other event beyond his
or her reasonable control, in which event such Member shall
use all reasonable efforts to cause its Representative or
Alternate Representative to participate in the meeting by
telephone pursuant to Section 5.2(h).
(b) Chairman and Secretary. One of the Representatives will be
designated as Chairman of the Management Committee, in accordance with
this Section 5.2(b), to preside over meetings of the Management
Committee. The Chairman shall be the Representative of Humko in
odd-numbered calendar years and of InCon in even-numbered calendar
years. The Representative of Humko designated as Chairman initially
shall be Daniel S. Antonelli. The Management Committee shall also
designate a Secretary of the Management Committee, who need not be a
Representative.
(c) Procedures. The Secretary of the Management Committee
shall maintain written minutes of each of its meetings, which shall be
submitted for approval no later than the next regularly-scheduled
meeting. The Management Committee may adopt whatever rules and
procedures relating to its activities as it may deem appropriate,
provided that such rules and procedures shall not be inconsistent with
or violate the provisions of this Agreement.
(d) Time and Place of Meetings. The Management Committee shall
meet quarterly subject to more or less frequent meetings upon approval
of the Management Committee. Notice of, and an agenda for, all
Management Committee meetings shall be provided by the Chairman to all
Members at least ten days prior to the date of each meeting, together
with proposed minutes of the previous Management Committee meeting (if
such minutes have not been previously ratified). Special meetings of
the Management Committee may be called at such times, and in such
manner, as any Member deems necessary. Any Member calling for any such
special meeting shall notify the Chairman, who in turn shall notify all
Members of the date and agenda for such meeting at least ten days prior
to the date of such meeting. Such ten-day period may be shortened by
the Management Committee, acting through a Unanimous Interest. All
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meetings of the Management Committee shall be held at a location
designated by the Chairman. Attendance of a Member at a meeting of the
Management Committee shall constitute a waiver of notice of such
meeting, except where such Member attends the meeting for the express
purpose of objecting to the transaction of any business on the ground
that the meeting is not lawfully called or convened.
(e) Quorum. The presence of a Majority Interest shall
constitute a quorum for the transaction of business at any meeting of
the Management Committee.
(f) Voting.
(i) Voting by Voting Ratios; Voting Thresholds.
Except as provided otherwise in this Agreement, voting shall
be according to the Members' respective Voting Ratios. Set
forth below are definitions of the principal voting thresholds
that are required to approve certain actions:
(A) "Unanimous Interest" means all of the
Members; and
(B) "Majority Interest" means Members
holding among them at least a majority of the Voting
Ratios.
Except for matters that require the approval of a Unanimous
Interest, the vote of a Majority Interest shall constitute the
action of the Management Committee.
(ii) DISCLAIMER OF DUTIES. WITH RESPECT TO ANY VOTE,
CONSENT OR APPROVAL AT ANY MEETING OF THE MANAGEMENT COMMITTEE
OR OTHERWISE UNDER THIS AGREEMENT, EACH MEMBER MAY GRANT OR
WITHHOLD SUCH VOTE, CONSENT OR APPROVAL (A) IN ITS SOLE AND
ABSOLUTE DISCRETION, (B) WITH OR WITHOUT CAUSE, (C) SUBJECT TO
SUCH CONDITIONS AS IT SHALL DEEM APPROPRIATE, AND (D) WITHOUT
TAKING INTO ACCOUNT THE INTERESTS OF, AND WITHOUT INCURRING
LIABILITY TO, THE COMPANY, ANY OTHER MEMBER OR REPRESENTATIVE,
OR ANY OFFICER OR EMPLOYEE OF THE COMPANY (COLLECTIVELY, "SOLE
DISCRETION"). THE PROVISIONS OF THIS SECTION 5.2(f)(ii) SHALL
APPLY NOTWITHSTANDING THE NEGLIGENCE, GROSS NEGLIGENCE,
WILLFUL MISCONDUCT, STRICT LIABILITY OR OTHER FAULT OR
RESPONSIBILITY OF A MEMBER OR ITS REPRESENTATIVE.
(g) Action by Written Consent. Any action required or
permitted to be taken at a meeting of the Management Committee may be
taken without a meeting, without prior notice, and without a vote if a
consent or consents in writing, setting forth the action so taken, is
signed by Members that could have taken the action at a meeting of the
Management Committee at which all Members entitled to vote on the
action were represented and voted.
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(h) Meetings by Telephone. Members may participate in and hold
such meeting by means of conference telephone, video conference or
similar communications equipment by means of which all persons
participating in the meeting can hear each other. Participation in such
a meeting shall constitute presence in person at such meeting, except
where a Member participates in the meeting for the express purpose of
objecting to the transaction of any business on the ground that the
meeting is not lawfully called or convened.
(i) Matters Requiring Management Committee Approval.
Notwithstanding any other provision of this Agreement, no actions may
be taken by, or on behalf of, the Company (including by the Chief
Executive Officer or Chief Operating Officer) without first obtaining
the vote of a Majority Interest of the Management Committee. Included,
without limitation, in those actions that require the vote of a
Majority Interest of the Management Committee shall be each of the
following:
(i) causing or permitting the Company to Dispose of
or encumber (i) all or substantially all of its assets;
(ii) causing or permitting the Company to incur any
indebtedness for borrowed money, except a Cash Call Loan;
(iii) causing or permitting the Company to merge,
consolidate or convert into any other entity;
(iv) considering at a meeting of the Management
Committee a matter not on the agenda for that meeting;
(v) approving disclosures of Confidential
Information;
(vi) approving the annual Budget for the Company
(with it being understood that the last approved Budget shall
be used, and deemed approved, for any subsequent period until
the new Budget for that period is so approved), including the
parameters within which the Chief Executive Officer or Chief
Operating Officer is authorized to expend Company funds
without further Management Committee approval;
(vii) causing or permitting the Company to enter into
any contract or agreement (1) with a term in excess of one (1)
year, (2) involving payments by or to the Company in excess of
US $100,000 over the term of such contract or agreement
(taking into account any permitted renewals or extensions
thereof) or (3) which is not being entered into the Ordinary
Course of Business.
(viii) causing or permitting the Company to cancel,
amend or restate, or relinquish any material rights under, (i)
any Related Agreement or (ii) any other material contract or
agreement to which the Company is a party;
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(ix) causing or permitting the Company to enter into
or engage in any transaction, contract, agreement or
arrangement with a Member, Officer or employee of the Company,
an Affiliate of any of the foregoing, or a Person related by
blood or marriage to any of the foregoing;
(x) causing or permitting the Company to enter into
or engage in any transaction, contract, agreement or
arrangement that (i) is unrelated to the Company's purpose (as
set forth in Section 2.4), (ii) otherwise contravenes the
Certificate or this Agreement, (iii) would make it impossible
to carry on the Ordinary Course of Business of the Company, or
(iv) is not apparently for the carrying on of the business of
the Company in the usual way;
(xi) causing or permitting the Company (i) to fail to
comply with any provisions of applicable Law, (ii) to fail to
obtain, or comply with, all material permits and
authorizations from Governmental Authorities required for it
to conduct its business, or (iii) to agree to the
cancellation, amendment, restatement, or relinquish of any
material rights under, any such material permit or
authorization;
(xii) selecting a different name for the Company; and
(xiii) causing or permitting the Company to become
Bankrupt under the United States Bankruptcy Code (but this
provision shall not be construed to require any Member to
ensure the profitability or solvency of the Company).
(j) Subcommittees. The Management Committee may create such
subcommittees, delegate to such subcommittees such authority and
responsibility, and rescind any such delegations, as it may deem
appropriate.
(k) Officers. The Management Committee may designate one or
more persons to be Officers of the Company (the "Officers"). Any
Officers so designated shall have such titles and, subject to the other
provisions of this Agreement, have such authority and perform such
duties as the Management Committee may delegate to them and shall serve
at the pleasure of the Management Committee.
5.3 CEO, COO, CFO and CTO. The Members hereby delegate the authority
described in Section 5.3(b) to the Chief Executive Officer, Chief Operating
Officer, Chief Financial Officer and Chief Technology Officer in accordance with
this Section 5.3. The Chief Executive Officer, Chief Operating Officer, Chief
Financial Officer, Chief Technology Officer and such other Officers as may be
appointed by the Management Committee shall be Officers of the Company.
Decisions or actions taken by the Chief Executive Officer, Chief Operating
Officer, Chief Financial Officer and Chief Technology Officer in accordance with
the provisions of this Agreement shall constitute decisions or actions by the
Company and shall be binding on each Member, Representative, Officer and
employee of the Company. The Chief Executive Officer, Chief Operating Officer,
Chief Financial Officer and Chief Technology Officer shall be
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<PAGE> 25
designated, and shall exercise such delegated authority, in accordance with the
following provisions and the other provisions of this Agreement:
(a) Designation and Removal. The initial Chief Executive Officer is
John R. Palmer, the Chief Operating Officer is Stephen E. Bradshaw, and
the Chief Technology Officer is N.P. Shaikh. Each Officer shall serve
in such capacity for one (1) year unless reappointed by the Management
Committee. Each of them, and any successor Chief Executive Officer,
Chief Operating Officer, Chief Financial Officer or Chief Technology
Officer that is designated in accordance with this Section 5.3(a),
shall cease to be the Chief Executive Officer, Chief Operating Officer,
Chief Financial Officer and Chief Technology Officer upon the earliest
to occur of the following events: (i) if the Member with whom such
Officer is employed shall Dispose of all of its Membership Interest;
(ii) if the Member with whom such Officer is employed shall be in
default of any of its obligations under this Agreement; (iii) the
Management Committee removes any such Officers, (iv) any such Officer
shall resign as Chief Executive Officer, Chief Operating Officer, Chief
Financial Officer or Chief Technology Officer by giving notice thereof
to all Members (which resignation shall become effective 90 days after
delivery of such notice, unless an earlier or later effectiveness is
agreed to by such Officer and the Management Committee); (v) any such
Officer shall commit gross negligence or willful misconduct in the
management of the Company and, as a consequence, shall be removed as
Chief Executive Officer, Chief Operating Officer, Chief Financial
Officer or Chief Technology Officer by the Management Committee, acting
by a vote of a Majority Interest at a meeting called for such purpose
(which removal shall become effective 90 days after the vote of the
Management Committee, unless an earlier or later effectiveness is
agreed to by the Management Committee); or (vi) the respective
employment agreement of any such Officer with the Company has been
terminated. Upon the occurrence of any of the events described in the
immediately-preceding sentence, the Management Committee, by vote of a
Majority Interest, shall designate another person (that consents to
serve as such) as a successor to any such Officer so removed.
Notwithstanding anything to the contrary contained in this Agreement,
Humko shall have the exclusive right (i) until five (5) calendar years
after the date hereof, to appoint the Chief Financial Officer of the
Company, (ii) to appoint the independent accounting firm used by the
Company in the event that the Members are unable to agree on the firm
to be used, provided that for the first fiscal year of the Company, the
Company shall use the independent accounting firm of Delloite & Touche,
and (iii) to select the accounting procedures to be used by the
Company.
(b) Duties and Authority.
(i) Except for decisions and actions that are to be
made by the Management Committee pursuant to Section
5.2(i) or another express provision of this
Agreement, the Chief Executive Officer, Chief
Operating Officer, Chief Financial Officer and Chief
Technology Officer are hereby delegated duties and
authority that may be established, from time to time,
by the Management Committee. Without limiting the
generality of the foregoing, all such Officers shall
comply at all time with all Laws.
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(ii) Except for decisions and actions that are to be
made by the Management Committee pursuant to Section
5.2(i) or another express provision of this
Agreement, the Chief Operating Officer is hereby
delegated the duty and authority to manage the
day-to-day business of the Company, subject to any
policies that may be established, from time to time,
by the Management Committee.
(c) Compensation to Chief Executive Officer, Chief Operating
Officer, Chief Financial Officer and Chief Technology Officer. The
Company shall not make any payments to the Chief Executive Officer,
Chief Operating Officer, Chief Financial Officer and Chief Technology
Officer for any duties performed by them under the terms of this
Agreement. All such Officers shall be compensated for any duties
performed under this Agreement by the Member for whom they are employed
until such Officers have entered into employment contracts with the
Company.
(d) LIMITATIONS OF DUTIES; INDEMNIFICATION. THE CHIEF
EXECUTIVE OFFICER, CHIEF OPERATING OFFICER, CHIEF FINANCIAL OFFICER AND
CHIEF TECHNOLOGY OFFICER SHALL BE LIABLE TO THE COMPANY AND THE OTHER
MEMBERS FOR HIS OR HER GROSS NEGLIGENCE OR WILLFUL MISCONDUCT IN THE
MANAGEMENT OF THE COMPANY; BUT THE CHIEF EXECUTIVE OFFICER, CHIEF
OPERATING OFFICER, CHIEF FINANCIAL OFFICER AND CHIEF TECHNOLOGY OFFICER
SHALL NOT BE LIABLE TO THE COMPANY, ANY OTHER MEMBER OR REPRESENTATIVE,
OR ANY OFFICER OR EMPLOYEE OF THE COMPANY FOR ANY ACTS OR OMISSIONS
THAT DO NOT CONSTITUTE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT,
INCLUDING THE NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OR
RESPONSIBILITY (SHORT OF GROSS NEGLIGENCE OR WILLFUL MISCONDUCT) OF THE
CHIEF EXECUTIVE OFFICER, CHIEF OPERATING OFFICER, CHIEF FINANCIAL
OFFICER AND CHIEF TECHNOLOGY OFFICER (THE "INDEMNIFIED ACTS"); AND THE
COMPANY SHALL INDEMNIFY, PROTECT, DEFEND, RELEASE AND HOLD HARMLESS
FROM AND AGAINST ANY CLAIMS ASSERTED BY OR ON BEHALF OF ANY PERSON
(INCLUDING ANOTHER MEMBER) THAT ARISE OUT OF, RELATE TO OR ARE
OTHERWISE ATTRIBUTABLE TO, DIRECTLY OR INDIRECTLY, THE INDEMNIFIED
ACTS.
(e ) Limitation of Members' Authority. Except for the Chief
Executive Officer, Chief Operating Officer, Chief Financial Officer and
Chief Operating Officer, each Member agrees that it will not exercise
its authority under the Act to bind or commit the Company to
agreements, transactions or other arrangements, or to hold itself out
as an agent of the Company.
5.4 Conflicts of Interest. A Member or an Affiliate of a Member may
engage in and possess interests in other business ventures of any and every type
and description, independently or with others, including ones in competition
with the Company, with no obligation to offer to
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the Company, any other Member or any Affiliate of another Member the right to
participate therein. The Company may transact business with any Member or
Affiliate thereof, provided the terms of those transactions are approved by the
Management Committee. Without limiting the generality of the foregoing, the
Members recognize and agree that they and their respective Affiliates currently
engage in certain activities and that these and other activities by Members and
their Affiliates may be made possible or more profitable by reason of the
Company's activities (herein referred to as "Outside Activities"). No Member or
Affiliate of a Member shall be restricted in its right to conduct, individually
or jointly with others, for its own account any Outside Activities, and no
Member or its Affiliates shall have any duty or obligation, express or implied,
to account to, or to share the results or profits of such Outside Activities
with, the Company, any other Member or any Affiliate of any other Member, by
reason of such Outside Activities. Nothing contained herein shall limit or
modify any of the terms or provisions of Section 5.2(i)(v) relating to
disclosures of Confidential Information by the Company, and nothing contained
herein shall permit any Member to disclose any Confidential Information without
the prior written consent of all Members.
5.5 Indemnification for Breach of Agreement. Each Member shall
indemnify, protect, defend, release and hold harmless each other Member, its
Representative, its Affiliates, and its and their respective owners, directors,
Officers, trustees, employees and agents from and against any Claims and
Expenses asserted by or on behalf of any party (including another Member) that
arise out of, relate to or are otherwise attributable to, directly or
indirectly, a breach by the indemnifying Member of this Agreement; provided,
however, that this Section 5.5 shall not apply to any Claims and Expenses or
other matter for which a Member (or its Representative) has no liability or
duty, or is indemnified or released, pursuant to Section 5.2(a)(iii),
5.2(f)(ii), 5.3(d) (in the case of the Chief Executive Officer, Chief Operating
Officer, Chief Financial Officer and Chief Technology Officer) or 5.4.
ARTICLE VI
ALLOCATIONS; DISTRIBUTIONS
6.1 Allocations. All items of income, gain, loss, deduction and credit
of the Company shall be allocated to the Members in accordance with the
following:
(a) Except as otherwise provided in this Section 6.1, for
accounting and federal income tax purposes, each item of income, gain, loss,
deduction and credit shall be allocated to the Members in accordance with their
Sharing Ratios.
(b) Under Code Section 704(c) and Treasury Regulation Section
1.704-(3), income, gain, loss and deduction with respect to any asset
contributed to the capital of the Company, solely for federal income tax
purposes, shall be allocated among the Members so as to take into account any
variation between the adjusted tax basis of the asset for federal income tax
purposes and its fair market value at the date of contribution. The allocations
required by this Section 6.1 shall be made by the Management Committee using the
remedial allocation method permitted by Treasury Regulation Section 1.704-3(d).
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6.2 Distributions.
(a) The Company shall make distributions in accordance with
the procedure set out in this Section 6.2. Except as otherwise provided in this
Section 6.2, all distributions shall be made in accordance with the respective
Sharing Ratios of the Members or as otherwise expressly provided in this
Agreement.
(b) All Net Available Cash, if any, attributable to each
calendar year (or portion thereof) and distributable other than in connection
with the liquidation of the Company shall be applied and distributed as follows:
First, to Humko in payment of all accrued and
outstanding amounts referred to in Section 4.7 (including principal
even though not yet due and payable) to the extent Humko has not
elected to make a Conversion under Section 4.7, and such distribution
shall be deemed to be made entirely against the account of InCon;
Second, to the Lending Members in payment of any Cash
Call Loans, even though not yet due and payable, in proportion to the
outstanding balances of such Cash Call Loans (amounts so paid to be
applied first to interest accrued and unpaid, and then to outstanding
principal); and
Third, to the Members in accordance with their
respective Sharing Ratios.
(c) Unless the Management Committee requires otherwise, the
Company shall make distributions of Net Available Cash under this Section 6.2 as
soon as practicable after the end of each fiscal year but not later than
forty-five (45) days after the end of each fiscal year (if and to the extent of
Net Available Cash and not otherwise).
(d) As used in this Section 6.2, "Net Available Cash" means
the amount, if any (determined by the Management Committee as of December 31 of
the then just-ended year), by which the Company's funds, whether held in bank
accounts or in approved investments pursuant to Section 7.3(b), exceed the
Company's cash needs for ongoing operations, including, without limitation, (A)
meeting the Company's contractual obligations under the Related Agreements and
to third parties, (B) mandatory expenditures for health, safety or environmental
matters, (C) the continuance of capital projects approved in previous budgets,
but excluding any capital projects that have not been so approved, and (D)
payment of debt service and taxes.
6.3 Liquidating Distributions. Distributions in liquidation of the
Company shall be made in accordance with Section 12.3.
ARTICLE VII
FINANCIAL MATTERS
7.1 Maintenance of Books and Records. While the Transition Services
Agreement, as defined in the Master Formation Agreement, is in effect, InCon
shall, on behalf of the
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Company and the Members, maintain or cause to be maintained at the principal
office of the Company complete and accurate books and records of the Company,
and supporting and other documentation of the transactions with respect to the
conduct of the Company's business. After the Transition Services Agreement has
been terminated, the books and records of the Company, and supporting and other
documentation of the transactions with respect to the conduct of the Company's
business shall be maintained by the party designated by the Management
Committee. The books and records shall be maintained with respect to accounting
matters in accordance with sound accounting practices applied on a consistent
basis. All such books and records of the Company shall be available at the
Company's principal office for examination and audit by any Member or the
Member's duly authorized representatives at any and all reasonable times during
normal business hours with reasonable advance notice. Such books and records of
the Company will be maintained for a minimum of seven (7) years from the date of
each of the respective books and records and otherwise in accordance with the
Company's document retention policies that are in effect from time to time and
designated by the Management Committee.
7.2 Fiscal Year; Reports.
(a) The fiscal year of the Company shall be the fiscal year of Humko,
as the same may be modified from time to time. Within sixty (60) days after the
end of each fiscal year, the Company shall cause to be sent to each Member a
complete accounting of the financial affairs of the Company for the fiscal year
then ended, together with a balance sheet, statement of income and change in
financial position (collectively referred to as the "Yearly Financial
Statements"), all prepared in accordance with generally accepted accounting
principles, consistently applied by the Company and consistent with the
provisions of this Agreement and the Related Agreements.
(b) Within ten (10) days after the end of each month, the Company shall
cause to be sent to each Member a complete accounting of the financial affairs
of the Company for the month then ended, together with a balance sheet,
statement of income and change in financial position, all prepared in accordance
with generally accepted accounting principles, consistently applied by the
Company and consistent with the provisions of this Agreement and the Related
Agreements (collectively referred to as the "Monthly Financial Statements").
(c) As soon as practicable after such Yearly Financial Statements are
prepared, the Company will have such Yearly Financial Statements audited by the
independent accounting firm selected in accordance with the terms of Section
5.3(a). The costs and expenses associated with such audit will be borne by the
Company.
(d) Either Member may conduct a separate audit or accounting review of
the Yearly or Monthly Financial Statements or any aspect of the Company's
business or operations, at its own expense.
(e) On a weekly basis commencing on the first Monday following the date
hereof and then each Monday thereafter, the Chief Operating Officer of the
Company shall deliver or cause to be delivered to the Chief Financial Officer of
Humko a written statement listing each disbursement of funds made by the Company
during the immediately preceding week including, without limitation, all checks
of the Company written during the week in question.
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7.3 Bank Accounts and Investments.
(a) The Company shall establish one or more separate bank
accounts and arrangements in its name with financial institutions and such
signature authorizations as the Members agree upon. The accounts shall be
administered by the Company, and all funds of the Company will be held in such
accounts or in approved investments under Section 7.3(b).
(b) All funds of the Company held as reserves for the future
payment of Company expenses or pending distribution shall be invested as the
Members may agree.
(c) Each check or other payment to be made by the Company
which exceeds US $10,000 must be preapproved by the Chief Financial Officer of
Humko before it may be sent to the appropriate party. In addition, to the extent
that any payments are to be made to any party by the Company and the aggregate
of those payments will exceed US $10,000, such payments must be preapproved by
the Chief Financial Officer of Humko before they may be sent to the appropriate
party.
7.4 Loans by Members to the Company. In addition to loans made under
the terms and provisions of Article IV, from time to time, with the prior
written consent of the other Member, a Member may make a loan to the Company on
such terms as may be approved in such prior written consent.
7.5 Insurance. The Company shall obtain and maintain, either directly
or as an insured under worldwide insurance policies maintained by the Members or
their Affiliates, such insurance policies as may be determined from time to time
by the Members.
7.6 Tax Returns. (a) Unless otherwise agreed to by the Management
Committee, the accounting firm for the Company selected in accordance with
Section 5.3(a) shall prepare and timely file (on behalf of the Company) all
federal, state and local tax returns required to be filed by the Company. Each
Member shall furnish to such accounting firm all pertinent information in its
possession relating to the Company's operations that is necessary to enable the
Company's tax returns to be timely prepared and filed. The Company shall bear
the costs of the preparation and filing if its returns.
(b) On or before November 1 of each year, the accounting firm
for the Company selected in accordance with Section 5.3(a) shall furnish to each
Member such federal, state and local income tax returns and such other
accounting, tax information and schedules as shall be necessary for the
preparation by each Member of its income tax return with respect to the
immediately-preceding year.
7.7 Tax Elections. The Company shall make the following elections on
the appropriate tax returns:
(a) to adopt as the Company's fiscal year the fiscal year of
Humko then in effect;
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(b) to adopt the accrual method of accounting;
(c) to elect, pursuant to Code Section 754, to adjust the
basis of the Company's properties;
(d) to elect to amortize the organizational expenses of the
Company ratably over a period of 60 months as permitted by Section 709(b) of the
Code; and
(e) any other election the Management Committee may deem
appropriate.
ARTICLE VIII
PLANNING AND BUDGETS
8.1 Annual Business Plan. By May of each year but subject to Section
8.5, the Company (through the Chief Executive Officer, the Chief Operating
Officer, Chief Financial Officer and the Chief Technology Officer) will prepare
and submit to each Member for review and approval a business plan of the Company
that will address the topics specified below, as well as such other topics as
may be reasonably requested by a Member. Such business plan will cover a
three-year period with specific budget focus on the first year, or such other
periods as the Members may otherwise establish by mutual agreement. Such
business plan will be developed pursuant to the schedule and requirements
established by the Management Committee from time to time. The topics to be
covered by such business plan shall include:
(i) proposed business objectives and strategies of
the Company;
(ii) proposed financial objectives of the Company;
(iii) proposed sales objectives of the Company;
(iv) proposed licensing objectives of the Company, if
any;
(v) proposed capital expenditures of the Company
(including any capital expenditures required to be paid by the Company pursuant
to any Related Agreement) and proposed methods for the financing thereof;
(vi) a summary of proposed operating budgets
(research and development, technical services, Manufacturing, toll processing,
sales, general and administrative, and including all expenses and payment
obligations of the Company pursuant to any Related Agreement) of the Company for
the ensuing year with a projection of costs for the next 3 years; and
(vii) any other matters required by the Management
Committee.
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8.2 Annual Budgets. As part of the preparation of each business plan,
the Company (through the Chief Executive Officer, the Chief Operating Officer,
the Chief Financial Officer and the Chief Technology Officer) will prepare an
operating budget showing monthly detail and a capital expenditure budget that
will provide additional detail on the aggregate items submitted in such business
plan for the next ensuing year. Such operating budget (as approved by the
Members) will be used to monitor the Company's actual financial performance for
the fiscal year. Each budget shall separately identify the source of funds to
meet the requirements of the proposed budget. Each budget will contain such
information and details as any Member may reasonably request.
8.3 Completion Date; Failure to Agree.
(a) The Members shall seek to agree on a final business plan,
capital expenditure plan and operating budget on or before sixty (60) days
immediately precedes the beginning of each fiscal year.
(b) If the Members do not agree on an operating budget for the
next fiscal year by July 1, then the prior year's operating budget will be used
until a new operating budget has been established by the Members.
(c) Notwithstanding any failure to agree on a new operating
budget or a new capital budget, each Member shall be obligated to contribute any
Capital Contributions that the Members agreed to make when they approved any
previously approved budgets.
8.4 Proposals for Nonbudgeted Capital Expenditures. In addition to the
capital expenditure budget prepared in accordance with this Article VIII, any
Member may from time to time propose a capital expenditure program for the
Company for any purpose, including without limitation to increase the production
capacity of the Company. Each such proposal shall identify the source of
funding, and the cost, time and benefits associated with the proposed capital
improvement. No such proposal shall be adopted without the vote of a Majority
Interest.
8.5 Initial Business Plan, Operating Budget and Capital Expenditure
Budget. As of the date hereof, no business plan, operating budget or capital
expenditure budget has been approved by the Management Committee. Within thirty
(30) days after the date hereof, the Officers of the Company shall present a
written business plan, operating budget and capital expenditure budget for
approval by the Management Committee. Until the Management Committee has
approved the initial operating budget and capital expenditure budget submitted
by the Officers of the Company, the Company shall only make expenditures in the
Ordinary Course of Business (subject to the restrictions contained in Section
4.1[e]), and in no event will any capital expenditures be made without the
approval of the Management Committee.
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ARTICLE IX
AGREEMENTS REGARDING CERTAIN OPERATIONS
9.1 Utilization of Production Capacity.
(a) The Company leases the Facility. Unless the Members agree
otherwise, it is the intent of the Members that all of the capacity of the
Facility will be used as much as commercially practicable before any new
production facilities or significant improvements at existing sites are
constructed, purchased or leased by the Company and before the Company makes any
commitments for additional capacity through a contract or otherwise with a third
party.
(b) The scheduling of the Company's production and the
operation of the Facility and the business of the Company will be coordinated by
InCon during the term of the Transition Services Agreement. Thereafter, such
scheduling shall be done pursuant to the directives of the party or parties
designated by the Management Committee.
9.2 Restrictions Relating to Certain Products and Materials. Until
April 8, 2001, the Company shall not (i) participate in any Competitive Activity
within the Territory, (ii) engage directly or indirectly in any Competitive
Activity within the Territory; or (iii) engage directly or indirectly in the
business of manufacturing, marketing, selling, or distributing [*] or any
combination of the foregoing, within the Territory.
ARTICLE X
LIABILITIES AND INDEMNIFICATION
10.1 Indemnity of Members by the Company.
(a) To the fullest extent permitted by applicable Law
(including as permitted by Section 18-108 of the Act), the Company shall
indemnify, defend and hold harmless each Member from and against any Claims and
Expenses incurred by such Member (i) as a result of its status as a Member or
owner of the Company, or (ii) by reason of any acts, omissions or alleged acts
or omissions arising out of or purportedly arising out of its activities as a
Member on behalf of the Company or activities of the Company; provided, however,
that in the case of (ii), the acts, omissions or alleged acts and omissions upon
which such Claims and Expenses are based were undertaken by such Member in good
faith and consistent with any applicable standard of care set forth in any
Related Agreement, were not outside of the scope of authority conferred upon
such Member by this Agreement or a Related Agreement, and were not performed or
omitted fraudulently or in bad faith or as a result of gross negligence or
willful misconduct by such Member. The foregoing indemnification specifically
includes all Claims and Expenses caused or alleged to be caused by the sole,
joint or concurrent negligence, contractual comparative negligence, or other
fault of such Member, but excludes any Claims and Expenses that (1) do not meet
the requirements of the proviso to the immediately preceding sentence, (2) are
referred to in Section 10.1(d) or (3) are related to any of the warranties,
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representations or obligations of InCon or any Affiliate of InCon under the
Master Formation Agreement, the Guaranty (as defined in the Master Formation
Agreement) or any of the Related Agreements. Accordingly, if Humko or the
Company asserts a claim or brings an action against InCon for any matter covered
under either the Master Formation Agreement or any of the Related Agreements or
both, as the case may be, then none of such matters shall be deemed to be
covered by this Section 10.1(a).
(b) Expenses that are incurred by a Member prior to the final
disposition of such Claim or Expense in connection with the investigation or
defense of a Claim or Expense (including civil or criminal action, suit,
proceeding or claim) to which it is entitled to indemnification, shall be paid
by the Company no less frequently than quarterly, provided (i) such Claim or
Expense relates to the performance of duties or services by the Member on behalf
of the Company or asserts liability against the Member as a result of its status
as a member or owner of the Company, and (ii) the Company receives an
undertaking by or on behalf of such Member to repay such amount unless it shall
ultimately be determined that such Member is entitled to be indemnified by the
Company as authorized by this Section, together with the undertaking of the
ultimate corporate parent of such Member of its obligations under such
undertaking.
(c) Any amounts payable to a Member pursuant to this Section
10.1 are recoverable only out of the assets of the Company and not from the
Members.
(d) Notwithstanding the provisions of this Section 10.1, no
Member shall be indemnified for any liability imposed by judgment, or a cost
associated therewith, including attorneys' fees, arising from or out of a
violation of any applicable Law, including any state or federal securities Laws
or rules, to the extent such indemnification is prohibited thereby.
(e) For purposes of this Section 10.1, the term "Member" shall
be deemed to include any Affiliate or Associate of such Member, and any owner,
Officer, director, employee or agent of such Member or its Affiliates and
Associates.
10.2 Claims by InCon's Employees. DURING THE TRANSITION PERIOD, THE
COMPANY SHALL INDEMNIFY, DEFEND AND HOLD INCON HARMLESS FROM AND AGAINST ANY AND
ALL CLAIMS AND EXPENSES INCURRED OR SUFFERED BY INCON BY OR ON BEHALF OF ANY
INDIVIDUAL EMPLOYED BY OR PROVIDING PERSONAL SERVICES TO THE COMPANY FOR ANY
MATTER ARISING FROM OR RELATED TO SUCH EMPLOYEE'S EMPLOYMENT WITH INCON WHILE
PROVIDING SERVICES TO THE COMPANY DURING THE TRANSITION PERIOD ONLY, INCLUDING
WITHOUT LIMITATION ANY PERSONAL INJURY, DEATH, DISABILITY, DISCRIMINATION OR
OTHER SIMILAR EMPLOYEE RELATIONS MATTER OR ANY MATTER RELATED TO PAYROLL OR
BENEFITS, AND INCLUDING SPECIFICALLY ANY CLAIM OR EXPENSE CAUSED OR ALLEGED TO
BE CAUSED BY THE SOLE, JOINT OR CONCURRENT NEGLIGENCE, CONTRACTUAL COMPARATIVE
NEGLIGENCE OR OTHER FAULT OF INCON OTHER THAN GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT.
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10.3 General Indemnity Provisions-Humko. With respect to the
indemnities provided in this Agreement, references to "Humko" as an indemnified
person includes Humko, and all of its Affiliates, and their respective owners,
directors, officers, agents, partners and employees.
10.4 General Indemnity Provisions-InCon. With respect to the
indemnities provided in this Agreement, references to "InCon" as an indemnified
person includes InCon, and all of its Affiliates, and their respective owners,
directors, officers, agents, partners and employees, subject to the terms and
provisions of Section 5.3(d) relating to gross negligence or willful misconduct
of Officers.
ARTICLE XI
DISPOSITIONS OF MEMBERSHIP INTERESTS
11.1 Dispositions of Membership Interests.
(a) Except as expressly permitted under this Article and
elsewhere in this Agreement including, without limitation, Section 4.5(d), a
Member may not Dispose of all or any portion of its Membership Interest in the
Company, except with the prior written consent of the other Member, which
consent may be granted or withheld in the Member's sole and absolute discretion,
with or without cause, and subject to such conditions as it shall deem
appropriate. Any attempted Disposition of all or any portion of a Membership
Interest, other than in strict accordance with this Article, shall be null and
void ab initio.
(b) For purposes of this Article XI only and subject to
Section 11.2, the terms "Disposition" or "Dispose" shall not include any sale,
assignment, transfer, conveyance or other disposition of any Membership Interest
to any Affiliates of a Member or any corporate reorganization involving only an
Affiliate or Affiliates of a Member.
11.2 Change of Control of InCon. For purposes of this Article XI, a
Disposition of shares or other ownership interest in InCon or the sole
shareholder of the capital stock of InCon, which results in a change of control
of InCon shall be deemed to constitute an assignment of InCon's Membership
Interest in the Company.
11.3 Preferential Right on Sales of Membership Interests. Subject to
the other provisions of this Article XI, either Member may Dispose of all of its
Membership Interest in accordance with this Section 11.3. Should either Member
at any time desire to Dispose of all (but no Member may Dispose of part of its
Membership Interest) of its Membership Interest, such Member (the "First
Member") shall promptly give notice thereof (the "Preferential Notice") to the
other Member (the "Second Member"). The Preferential Notice shall set forth all
relevant information in respect of the proposed Disposition, including without
limitation the name and address of the prospective transferee, the purchase
price, the terms of payment, and the proposed closing date. The Second Member
shall have the following rights (which shall be exercised by written notice to
the First Member given no later than thirty (30) days after the Second Member's
receipt of the Preferential Notice): (i) the preferential right to acquire, at
the same purchase price and upon the same terms and conditions as set forth in
the Preferential Notice, the Membership
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Interest of the First Member, or (ii) the right to consent to the proposed
Disposition to the party identified in the Preferential Notice upon the exact
terms and conditions set out in the Preferential Notice. If the optional right
described in the immediately preceding clause (i) is not exercised within such
thirty (30) day period, then the First Member may Dispose of its Membership
Interest to the prospective transferee named in the Preferential Notice for the
same purchase price and upon the same terms and conditions as therein set forth,
provided such transaction is consummated within sixty (60) days after the Second
Member's receipt of the Preferential Notice. Thereafter the First Member may not
consummate such transaction without again complying with the provisions of this
Section 11.3. As a condition to the validity of any sale of an interest in the
Company to a third party pursuant to this Section 11.3, prior to or concurrently
with the closing of such sale such third party shall execute such documents as
the Second Member may reasonably require pursuant to which the third party
becomes bound by all terms and provisions of this Agreement. Following any such
sale, the First Member shall be relieved of future liability hereunder, but
shall not be relieved of any liabilities arising prior to such sale. Any closing
of a sale of an interest from one Member to another pursuant to this Section
11.3 shall be held in accordance with the terms and provisions relative thereto
set forth in the Preferential Notice.
11.4 Buy-Sell Options. All the terms and provisions of this Article XI
are subject to the rights of the Members under Article XIV. Without limiting the
generality of the foregoing, any Member may exercise the rights set forth in
Article XIV notwithstanding the existence of a Preferential Notice.
ARTICLE XII
DISSOLUTION OF THE COMPANY
12.1 Dissolution. The affairs of the Company shall be wound-up (and
the Company dissolved and liquidated upon completion of such winding up) on the
first to occur of the following events:
(a) the unanimous consent of the Members;
(b) entry of a decree of judicial dissolution of the Company
under Section 18-802 of the Act;
(c) subject to Article XIV (and to the extent permitted by
applicable Law), the bankruptcy (as defined in Section 18-304 of the Act) or
dissolution of either Member (upon the occurrence of such a bankruptcy and prior
to the winding-up of the Company, the non-bankrupt Member shall have the right
to exercise the option described in Section 12.5);
(d) subject to Article XIV, at the written election of either
Member delivered to the other Member in accordance with the provisions of
Article XIII, following the Members' failure to resolve a Deadlock Event; or
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(e) subject to Article XIV, at the written election of a
non-defaulting Member if the other Member defaults in the performance of any
material obligation under this Agreement or the Master Formation Agreement and
such defaulting Member has not cured such default within 30 days, with respect
to defaults under this Agreement, and 30 days, with respect to defaults under
the Master Formation Agreement, of its receipt of a notice specifying such
default.
12.2 Deficit Capital Accounts. No Member shall be required to pay to
the Company, to any other Member or to any third party, any deficit balance that
may exist from time to time in such Member's capital account.
12.3 Winding-Up.
(a) On the occurrence of an event described in Section 12.1,
the Management Committee shall appoint a liquidator by vote of Majority
Interest. The liquidator shall proceed diligently to wind up the affairs of the
Company and make final distributions as provided herein and in the Act. The
costs of winding up shall be borne as a Company expense. Until final
distribution, the liquidator shall continue to operate the Company properties
with all of the power and authority of the Members. The steps to be accomplished
by the liquidator are as follows:
(i) as promptly as possible after dissolution and again after
final winding up, the liquidator shall cause a proper accounting to be
made by a recognized firm of certified public accountants of the
Company's assets, liabilities, and operations through the last calendar
day of the month in which the dissolution occurs or the final winding
up is completed, as applicable;
(ii) the liquidator shall discharge from Company funds all of
the indebtedness and other debts, liabilities and obligations of the
Company (including all expenses incurred in winding up and any loans
described in Sections 4.3 and 4.5) or otherwise make adequate
provision for payment and discharge thereof (including the
establishment of a cash escrow fund for contingent liabilities in such
amount and for such term as the liquidator may reasonably determine);
and
(iii) all remaining assets of the Company shall be distributed
to the Members in accordance with their Sharing Ratios.
(b) All assets of the Company shall be sold by the liquidator
and may be sold to Members, and the net proceeds derived from any such sale
shall be applied and distributed in the following order of priority:
(i) First, to the payment of any debts and liabilities of the
Company; and
(ii) Second, in the order and in the proportions set forth in
Section 6.2.
(c) The distribution of cash or property to a Member in
accordance with the provisions of this Section 12.3 constitutes a complete
return to the Member of its Capital
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Contributions and a complete distribution to the Member of its Membership
Interest and all the Company's property and constitutes a compromise to which
all Members have consented pursuant to Section 18-502(b) of the Act. To the
extent that a Member returns funds to the Company, it has no claim against any
other Member for those funds.
(d) On completion of such final distribution, the Members
shall file a Certificate of Cancellation with the Secretary of State of
Delaware, cancel any other filings made pursuant to Section 2.5, and take such
other actions as may be necessary to terminate the existence of the Company.
12.4 Effect of Dissolution on the Transition Services Agreement. Upon
the occurrence of any dissolution of the Company pursuant to Section 12.1, the
Transition Services Agreement shall be terminated.
12.5 Bankruptcy Remedies. Upon the bankruptcy (as defined in Section
18-304 of the Act) or dissolution of a Member, prior to the winding up of the
Company, the other Member shall have the sole and exclusive authority to manage
the Company and shall, further, have the right to elect to have the Company
continue its business, rather than be dissolved and liquidated.
12.6 No Consequential Damages. Except as expressly set forth in this
Agreement or the Related Agreements, no Member shall be responsible for any lost
profits or other consequential damages arising as a result of the breach of this
Agreement or any of the Related Agreements. In addition, no termination of the
Company shall relieve any Member from its indemnification obligations under this
Agreement or the Related Agreements.
ARTICLE XIII
DEADLOCK RESOLUTION PROCEDURES
13.1 Notice of Deadlock Issue. If the Members are in disagreement over
an issue that falls within the definition of Deadlock Issue, either Member may
initiate the procedures provided in this Article XIII by giving written notice
to the other Member and calling a special meeting in accordance with Section
13.2.
13.2 Special Meeting of Members. A special meeting of the Members to
consider the Deadlock Issue shall be convened not less than 30 days, nor more
than 60 days, after the notice described in Section 13.1.
13.3 Post-Meeting Time Period to Resolve Deadlock Issue. If the
Deadlock Issue remains unresolved after the date established by the notifying
Member in its notice delivered pursuant to Section 13.1, the Members shall
attempt to resolve the Deadlock Issue to their mutual satisfaction during the
120-day period immediately following such date.
13.4 Declaration of Deadlock Event.
(a) Under the circumstances described in Section 13.4(b), if a
Deadlock Issue is not resolved during the 120-day period described in Section
13.3 either Member may, within
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30 days after the expiration of such 120-day period, give written notice to the
other Member declaring a Deadlock Event with respect to the Deadlock Issue.
(b) A Deadlock Event under Section 13.4(a) may be declared a
Deadlock Event only if the notice required by Section 13.4(a) is properly given.
Otherwise, no Deadlock Event may be declared, and the Members shall be subject
to Section 13.5.
13.5 Failure to Declare Deadlock Event. If no Deadlock Event is, or
can be, declared under Section 13.4(a), the Deadlock Issue shall lapse, and
neither Member may thereafter give notice under Section 13.1 with respect to the
same issue until thirty (30) days has elapsed from the end of the 120-day period
specified in Section 13.3.
13.6 Post-Declaration Time Period to Resolve Deadlock Event. The
Members shall attempt to resolve the Deadlock Event to their mutual satisfaction
during the 30-day period immediately following the declaration of the Deadlock
Event.
13.7 Election to Dissolve Company. If the Deadlock Issue is not
resolved during the 30-day period described in Section 13.6, either Member may,
within 30 days immediately following that 30-day period give written notice to
the other Member exercising its right under Section 12.1(d) to dissolve the
Company.
13.8 Buy-Sell Option. All of the terms and provisions of this Article
XIII are subject to the rights of the Members under Article XIV. Without
limiting the generality of the foregoing, any Member may exercise the rights set
forth in Article XIV notwithstanding the existence of a Deadlock Issue or a
Deadlock Event.
ARTICLE XIV
BUY-SELL OPTION
14.1 Buy-Sell Notice. At any time, either Member (the "Triggering
Member") may send a notice (the "Buy-Sell Notice") to the other Member (the
"Receiving Member"). The Buy-Sell Notice shall constitute a binding offer by the
Triggering Member to take either of the following actions, pursuant to this
Article XIV: (a) sell all of its Membership Interest to the Receiving Member, or
(b) purchase all of the Membership Interest of the Receiving Member, in either
case for the cash price per Sharing Ratio percentage (the "Purchase Price") set
forth in the Buy-Sell Notice.
14.2 Actions by Receiving Member. No later than 60 days after the
giving of the Buy-Sell Notice to the Receiving Member, the Receiving Member
shall notify (the "Response Notice") the Triggering Member whether the Receiving
Member elects (a) to sell or (b) to purchase, in either case at the Purchase
Price. Failure to give the Response Notice within such 60-day period shall be
deemed to be an election to sell by the Receiving Member.
14.3 Closing. The closing of the sale and purchase in accordance with
this Article XIV shall occur at the principal place of business of the Company
on the 60th day after (a) the
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giving of the Response Notice or (b) after the date that the Receiving Member is
deemed to make an election to sell as set forth in Section 14.2 above, as the
case may be (or, if later, the fifth day after the receipt of all applicable
regulatory and governmental approvals to the purchase), unless the parties to
such closing agree upon a different place or date. At the closing, the following
shall occur:
(i) The Member purchasing the applicable Membership Interest
(the "Purchaser") shall pay to the Member selling such Membership
Interest (the "Seller") the Purchase Price.
(ii) The Seller shall transfer its Membership Interest to the
Purchaser by instrument of assignment, bill of sale and such other
instruments as shall be reasonably requested by the Purchaser, shall
warrant to the Purchaser that the Membership Interest sold is free and
clear of all legal and equitable claims of third parties and, if
requested to do so by the Purchaser, shall provide an opinion of
Seller's regular counsel stating that, in the opinion of such counsel,
the instruments and agreements delivered to the Purchaser by Seller
with respect to such sale are binding on the Seller.
14.4 Failure to Close. If the Purchaser shall fail to complete its
acquisition of the Seller's Membership Interest pursuant to Section 14.3 for
reasons other than the breach by the Seller of any of its obligations imposed on
it thereunder, the Seller may elect (a) to purchase the Purchaser's Membership
Interest for a price equal to 90% of the Purchase Price that the Purchaser would
have received if, instead of being the Purchaser, it had been the Seller there
under, with the closing of the purchase and sale of such Membership Interest
pursuant to this Section 14.4 to take place within 90 days after notice is given
by the Seller to the Purchaser of its election to apply this Section 14.4, which
notice must be given within 60 days of such failure by Purchaser, or (b) to
cancel the Buy-Sell Notice or the Response Notice, as the case may be.
ARTICLE XV
GENERAL PROVISIONS
15.1 Notices. Any and all notices to any of the parties hereto
provided for or permitted under this Agreement or by Law shall be given in
writing by personal delivery, telecopier, overnight delivery service, or by
certified or registered mail, return receipt requested, postage prepaid,
addressed to such party at the address set forth below, and shall be effective
upon actual receipt or, if given by certified or registered mail, as of three
(3) days after the date of mailing:
(a) If to InCon: InCon Technologies, Inc.
970 Douglas Road
Batavia, Illinois 60510
Attention: President
Telecopy No.: 630-761-1190
With copies to: Wendy E. Rieder, Esq.
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107 Barrett Hill Road
Mahopac, NY 10541
Telecopy No.: 914-628-2415
(b) 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
(b) If to Humko: AC HUMKO CORP.
7171 Goodlett Farms Parkway
Memphis, Tennessee 38018
Telecopy No. 901-381-3066
Attention: President
- and-
AC HUMKO CORP.
7171 Goodlett Farms Parkway
Memphis, Tennessee 38018
Telecopy No. 901-381-3066
Attention: General Counsel
With copies to: Vinson & Elkins L.L.P.
2500 First City Tower
1001 Fannin
Houston, Texas 77002-6760
Telecopy No.: 713-615-5234
Attention: J. Brian Sokolik
Any party may change its address or add or change parties for receiving notice
by written notice given to the other names above in the manner required above.
15.2 Entire Agreement; Supersedure; Amendment; Written Consents and
Agreements. This Agreement and the Related Agreements constitute the entire
agreement of the Members relating to the Company and supersede all prior
contracts or agreements with respect to the Company, whether oral or written.
This Agreement and the Related Agreements may be amended only by a written
instrument signed by an authorized representative of each Member.
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<PAGE> 42
No consent, agreement or approval of a Member that is contemplated under this
Agreement shall be valid unless in writing and signed by such Member.
15.3 Effect of Waiver or Consent. A waiver or consent, express or
implied, to or of any breach or default by any person in the performance by that
person of its obligations with respect to the Company is not a consent or waiver
to or of any other breach or default in the performance by that person of the
same or any other obligations of that person with respect to the Company.
15.4 Amendments of Certificate and Regulations. The Certificate and
this Agreement may be amended or restated only with the unanimous approval of
the Members.
15.5 Binding Effect. Subject to the restrictions on Dispositions set
forth in this Agreement, this Agreement is binding on and inures to the benefit
of the Members and their respective heirs, legal representatives, successors,
and assigns.
15.6 Governing Law. THIS AGREEMENT IS GOVERNED BY AND SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF DELAWARE.
15.7 Severability. If any provision of this Agreement or the
application thereof to any person or circumstance is held invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of that provision to other persons or circumstances is not affected thereby and
that provision shall be enforced to the greatest extent permitted by applicable
Law.
15.8 Further Assurances. In connection with this Agreement and the
transactions contemplated hereby, each Member shall execute and deliver any
additional documents and instruments and perform any additional acts that may be
necessary or appropriate to effectuate and perform the provisions of this
Agreement and those transactions.
15.9 Press Releases. During the term of this Agreement, each Member
shall consult with the Company and each other regarding the development and
distribution of all news releases and other public disclosure regarding any
aspect of the Company or its business, and no such press release shall be issued
without the approval of both Members.
15.10 Trademarks. Unless expressly permitted by a Member or otherwise
covered in the Master Formation Agreement, neither Member nor the Company may
use the trademark or designs of the other Member or Company, as the case may be.
No Member shall have any obligation to license any of its trademarks to the
Company or the other Member.
15.11 Conflicts Between this Agreement and a Related Agreement. In the
event of a conflict between a provision contained in this Agreement and a
provision contained in the Master Formation Agreement, the provision contained
in the Master Formation Agreement shall prevail. In the event of a conflict
between a provision contained in the Agreement and a provision contained in
another Related Agreement, the provision contained in this Agreement shall
prevail.
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15.12 Counterparts. This Agreement may be executed in any number of
counterparts, all of which shall constitute the same instrument.
IN WITNESS WHEREOF, the parties below have executed this Agreement as
of the date first set forth above.
[SIGNATURES FOLLOW ON SUCCEEDING PAGES]
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MEMBERS:
AC HUMKO CORP., a Delaware corporation
By
Daniel S. Antonelli
President & CEO
"HUMKO"
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<PAGE> 45
INCON TECHNOLOGIES, INC., a Delaware
corporation
By
John R. Palmer
President
"INCON"
[SIGNATURE PAGE 2 TO MEMBERS AGREEMENT]
2
<PAGE> 1
Exhibit 10.26
FIRST AMENDMENT TO
AGREEMENT FOR PURCHASE AND SALE OF ASSETS
This FIRST AMENDMENT TO AGREEMENT FOR PURCHASE AND SALE OF ASSETS (this
"First Amendment") executed effective as of the 25 day of June, 1999 (the
"Effective Date") is by and between AC HUMKO CORP., a Delaware corporation
("Purchaser"), and BIONUTRICS, INC., a Nevada corporation, and NUTRITION
TECHNOLOGY CORPORATION, a Nevada corporation (collectively, "Seller").
W I T N E S S E T H:
WHEREAS, Purchaser and Seller are parties to that Agreement for
Purchase and Sale of Assets dated as of October 1, 1998 (the "Purchase
Agreement"), pursuant to which Seller sold, transferred, assigned and delivered
to Purchaser, and Purchaser purchased, accepted and received, the Purchased
Assets (as defined in the Purchase Agreement); and
WHEREAS, Purchaser, Seller, and other parties have entered into that
certain Master Formation Agreement of even date herewith (the "MFA"); and
WHEREAS, Seller will benefit directly from the transaction set forth in
the MFA; and
WHEREAS, Purchaser and Seller desire to amend the Purchase Agreement in
the manner hereinafter provided;
NOW, THEREFORE, in consideration of the premises, the execution of the
MFA and the matters set forth therein and the mutual covenants herein contained,
the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.01 Terms Defined Above. As used in this First Amendment, each
of the terms "Seller", "Purchaser", "Purchase Agreement", "Effective Date" and
"First Amendment" shall have the meaning assigned to such term hereinabove.
Section 1.02 Terms Defined in Purchase Agreement. Each term defined in
the Purchase Agreement and used herein without definition shall have the meaning
assigned to such term in the Purchase Agreement, unless expressly provided to
the contrary.
Section 1.03 Other Definitional Provisions.
(a) The words "hereby", "herein", "hereinafter", "hereof",
"hereto" and "hereunder" when used in this First Amendment shall refer
to this First Amendment as a whole and not to any particular Article,
Section, subsection or provision of this First Amendment.
<PAGE> 2
(b) Section, subsection and Exhibit references herein are to
such Sections, subsections and Exhibits to this First Amendment unless
otherwise specified.
ARTICLE II.
AMENDMENTS TO PURCHASE AGREEMENT
Purchaser and Seller agree that the Purchase Agreement is hereby
amended, effective as of the Effective Date, in the following particulars:
Section 2.01 Amendments. Schedule 3.2 of the Purchase Agreement is
hereby amended by deleting Schedule 3.2 in its entirety and substituting in lieu
thereof the following:
"SCHEDULE 3.2
ROYALTY PAYMENTS
A. ROYALTY PAYMENTS.
1. The Royalty Payments shall be fifteen percent (15%) of EBIT for the
period beginning on the date immediately following the last Saturday in August
of the immediately preceding calendar year, and ending on the last Saturday in
August of the immediately following calendar year. The first such period shall
commence on the Closing Date and end on August 28, 1999.
2. Royalty Payments shall be due and payable by Purchaser to Seller on
or before thirty (30) days immediately following the applicable period for which
an applicable Royalty Payment is due.
B. EBIT.
As used herein, "EBIT" shall mean all Net Earnings before applicable
state and federal corporate income taxes. "Net Earnings" shall mean the
difference between Gross Revenues minus all costs (including depreciation and
amortization) incurred by Purchaser in connection with the ownership and
operation of the Business. "Gross Revenues" shall mean all revenues received
from the Business for the applicable period for which the applicable Royalty
Payment is calculated. All such items shall be determined in accordance with
generally accepted accounting principles applied consistently.
<PAGE> 3
C. NON-DEFAULT.
Purchaser shall not be obligated to make any Royalty Payments to
Seller during any period in which Seller is in default in performance of any of
its obligations under this Agreement, or if a default by any party other than
Purchaser exists under (i) the Stock Purchase Agreement, (ii) the Technology
Agreement, (iii) the Supply Agreement, (iv) any other document executed in
connection with this Agreement (v) that certain Master Formation Agreement dated
June 25, 1999, by and among Purchaser, InCon Technologies, Inc., InCon
International, Inc., Nutrition Technology Corporation, and Bionutrics, Inc., or
(vi) the Members Agreement, as defined in the Master Formation Agreement
referred to in clause (v) above.
D. NO PARTNERSHIP
Nothing contained in this Agreement including, without limitation, the
provisions of this Schedule shall be deemed to constitute Seller and Purchaser
partners or joint venturers with respect to any matter, and neither party may
bind the other party for any obligation or liability.
E. NO OBLIGATION TO OPERATE AND MAINTAIN THE BUSINESS
Nothing contained in this Agreement including, without limitation, the
provisions of this Schedule shall be deemed to require Purchaser to continually
operate and maintain the Business. Without limiting the generality of the
foregoing, Purchaser, at any time and from time to time, may cease operating the
Business even though any such cessation may have an adverse effect on Net
Earnings or may result in there being no Net Earnings.
F. CONTINUATION ON SALE OR OTHER TRANSFER OF THE BUSINESS
If Purchaser shall sell or otherwise transfer the Business, then all of
the terms and provisions of this Schedule 3.2 shall continue in full force and
effect and the party to whom the Business is so sold or otherwise transferred
shall be bound by the terms and provisions of this Schedule 3.2. Upon any such
sale or transfer, Purchaser shall be relieved of all liability under this
Schedule 3.2, and Purchaser shall not have any further liability or obligations
under this Schedule 3.2 after any such sale or transfer. Promptly after the
consummation of any such sale or transfer, Purchaser shall notify Seller of the
identity and address of such new Purchaser."
ARTICLE III.
MISCELLANEOUS
Section 3.01 Adoption, Ratification and Confirmation of Purchase
Agreement. Each of the Purchaser and the Seller does hereby adopt, ratify and
confirm the Purchase Agreement, as amended hereby, and acknowledges and agrees
that the Purchase Agreement, as amended hereby, is and remains in full force and
effect.
<PAGE> 4
Section 3.02 Successors and Assigns. This First Amendment shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns permitted pursuant to the Purchase Agreement.
Section 3.03 Counterparts. This First Amendment may be executed by one
or more of the parties hereto in any number of separate counterparts, and all of
such counterparts taken together shall be deemed to constitute one and the same
instrument and shall be enforceable as of the Effective Date upon the execution
of one or more counterparts hereof by the Purchaser and the Seller. In this
regard, each of the parties hereto acknowledges that a counterpart of this First
Amendment containing a set of counterpart execution pages reflecting the
execution of each party hereto shall be sufficient to reflect the execution of
this First Amendment by each necessary party hereto and shall constitute one
instrument.
Section 3.04 Number and Gender. Whenever the context requires,
reference herein made to the single number shall be understood to include the
plural; and likewise, the plural shall be understood to include the singular.
Words denoting sex shall be construed to include the masculine, feminine and
neuter, when such construction is appropriate; and specific enumeration shall
not exclude the general but shall be construed as cumulative. Definitions of
terms defined in the singular or plural shall be equally applicable to the
plural or singular, as the case may be, unless otherwise indicated.
Section 3.05 Entire Agreement. This First Amendment constitutes the
entire agreement among the parties hereto with respect to the subject hereof.
All prior understandings, statements and agreements, whether written or oral,
relating to the subject hereof are superseded by this First Amendment.
Section 3.06 Invalidity. In the event that any one or more of the
provisions contained in this First Amendment shall for any reason be held
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this First Amendment.
Section 3.07 Titles of Articles, Sections and Subsections. All titles
or headings to Articles, Sections, subsections or other divisions of this First
Amendment or the exhibits hereto, if any, are only for the convenience of the
parties and shall not be construed to have any effect or meaning with respect to
the other content of such Articles, Sections, subsections, other divisions or
exhibits, such other content being controlling as the agreement among the
parties hereto.
Section 3.08 Governing Law. This First Amendment shall be deemed to be
a contract made under and shall be governed by and construed in accordance with
the internal laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment
to be duly executed and delivered by their proper and duly authorized officers
as of the Effective Date.
<PAGE> 5
PURCHASER: AC HUMKO CORP.
By:
Daniel S. Antonelli,
President and CEO
[SIGNATURE PAGE 1 TO FIRST AMENDMENT TO
AGREEMENT FOR PURCHASE AND SALE OF ASSETS]
<PAGE> 6
SELLER:
BIONUTRICS, INC., AND NUTRITION
TECHNOLOGY CORPORATION
By:
Ronald H. Lane,
President
[SIGNATURE PAGE 2 TO FIRST AMENDMENT TO
AGREEMENT FOR PURCHASE AND SALE OF ASSETS]
