<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/ / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended April 30, 1999
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____TO____
Commission File Number 0-22011
BIONUTRICS, INC.
(Exact name of registrant as specified in its charter)
NEVADA 86-0760991
(State or other jurisdiction of I.R.S. Employer
incorporation of organization) Identification Number
2425 E. CAMELBACK RD., SUITE 650 PHOENIX, ARIZONA 85016
(Address of principal executive offices) (Zip code)
602-508-0112
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, at the latest practical date.
<TABLE>
<CAPTION>
CLASS OUTSTANDING AS OF JUNE 10, 1999
- ----- -------------------------------
<S> <C>
COMMON 20,805,732
PAR VALUE $.001 PER SHARE
</TABLE>
<PAGE> 2
BIONUTRICS, INC.
INDEX TO QUARTERLY REPORT
ON FORM 10-Q
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
<S> <C>
ITEM I. Condensed Consolidated Financial Statements (Unaudited):
Consolidated Balance Sheets 3
Consolidated Statements of Operations 4
Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial
Statements 6
ITEM 2. Management's Discussion and Analysis 8
PART II. OTHER INFORMATION
ITEM 2(c) Changes in Securities 13
ITEM 4 Submission of Matters to a Vote of Security Holders 13
ITEM 5 Other Information 14
ITEM 6 Exhibits and Reports on Form 8-K 14
SIGNATURE 16
</TABLE>
2
<PAGE> 3
BIONUTRICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 387,519 $ 1,704,400
Trade receivables - net of allowance for bad debts of $75,808
and $72,086, respectively 2,047,900 1,992,060
Inventory 364,711 763,654
Prepaids and other current assets 191,328 169,822
------------ ------------
Total Current Assets 2,991,458 4,629,936
------------ ------------
PROPERTY - net of accumulated depreciation of $1,739,587
and $1,345,751, respectively 5,079,935 5,401,259
------------ ------------
OTHER ASSETS:
Goodwill - net of accumulated amortization of $42,300
and $28,200, respectively 521,578 535,678
Patent applications and other related costs - net of accumulated
amortization of $146,335 and $143,005, respectively 324,056 327,386
------------ ------------
Total Other Assets 845,634 863,064
------------ ------------
TOTAL $ 8,917,027 $ 10,894,259
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,057,996 $ 1,090,845
Accrued liabilities 1,222,027 1,102,070
Current portion of notes payable and capital leases 1,308,645 1,108,090
Other current liabilities 70,900 0
------------ ------------
Total Current Liabilities 3,659,568 3,301,005
------------ ------------
NOTES PAYABLE AND CAPITAL LEASES - Net of
current portion 9,740 17,525
------------ ------------
Total Liabilities 3,669,308 3,318,530
------------ ------------
STOCKHOLDERS' EQUITY
Common stock 20,802 20,352
Additional paid-in capital 31,924,413 31,483,706
Warrants 3,158,696 2,797,136
Accumulated deficit (29,854,989) (26,724,262)
Common stock in treasury, at cost (1,203) (1,203)
------------ ------------
Total Stockholders' Equity 5,247,719 7,575,729
------------ ------------
TOTAL $ 8,917,027 $ 10,894,259
============ ============
</TABLE>
See Notes to Condensed Consolidated Financial Statements
-3-
<PAGE> 4
BIONUTRICS, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Six Months
Ended April 30 Ended April 30
------------------------------------------------------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES:
REVENUE FROM SERVICES $ 1,102,914 $ 1,059,115 $ 1,794,633 $ 1,722,699
REVENUE FROM PRODUCT SALES 544,996 525,545 988,094 1,656,902
------------ ------------ ------------ ------------
TOTAL GROSS REVENUES 1,647,910 1,584,660 2,782,727 3,379,601
DISCOUNTS AND ALLOWANCES 228,529 73,310 404,339 165,331
------------ ------------ ------------ ------------
NET REVENUES 1,419,381 1,511,350 2,378,388 3,214,270
COST OF REVENUES 897,052 1,847,237 1,784,594 3,746,715
------------ ------------ ------------ ------------
GROSS PROFIT (LOSS) 522,329 (335,887) 593,794 (532,445)
------------ ------------ ------------ ------------
OPERATING EXPENSES:
SELLING, GENERAL AND ADMINISTRATIVE 1,839,659 3,341,082 3,473,559 6,292,502
RESEARCH AND DEVELOPMENT 125,693 69,939 187,618 266,562
------------ ------------ ------------ ------------
TOTAL OPERATING EXPENSES 1,965,352 3,411,021 3,661,177 6,559,064
------------ ------------ ------------ ------------
OPERATING LOSS (1,443,023) (3,746,908) (3,067,383) (7,091,509)
------------ ------------ ------------ ------------
OTHER (EXPENSE) INCOME: (52,716) (25,856) (63,344) (17,662)
------------ ------------ ------------ ------------
NET LOSS ($ 1,495,739) ($ 3,772,764) ($ 3,130,727) ($ 7,109,171)
============ ============ ============ ============
BASIC NET LOSS PER COMMON SHARE ($ 0.07) ($ 0.21) ($ 0.15) ($ 0.39)
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 20,805,732 18,322,714 20,622,398 18,098,920
============ ============ ============ ============
</TABLE>
See Notes to Condensed Consolidated Financial Statements
- 4 -
<PAGE> 5
BIONUTRICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six months
Ended April 30
-------------------------------
OPERATING ACTIVITIES: 1999 1998
----------- -----------
<S> <C> <C>
Net Loss ($3,130,727) ($7,109,171)
Adjustments to reconcile net loss to cash used in operations:
Depreciation and amortization 416,591 619,581
Expenses incurred in exchange for common stock 274,103 63,750
Stock-based compensation expense 28,614 70,152
Changes in operating assets and liabilities:
Trade receivables-net (55,840) (105,326)
Inventory 398,943 264,905
Prepaids and other current assets (21,506) 317,072
Accounts payable (32,849) (39,922)
Accrued and other current liabilities 190,857 (559,478)
----------- -----------
Net cash used in operating activities (1,931,814) (6,478,437)
----------- -----------
INVESTING ACTIVITIES:
Capital expenditures (81,838) (1,102,196)
Proceeds from disposal of assets 4,000 0
----------- -----------
Net cash used in investing activities (77,838) (1,102,196)
----------- -----------
FINANCING ACTIVITIES:
Proceeds from issuance of stock and warrants 500,000 3,611,920
Notes payable issuance 200,000 1,852,376
Repayments of notes payable and capital leases (7,229) (12,735)
----------- -----------
Net cash provided by financing activities 692,771 5,451,561
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,316,881) (2,129,072)
CASH AND CASH EQUIVALENTS, BEG OF PERIOD 1,704,400 2,181,121
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 387,519 $ 52,049
=========== ===========
Supplemental Disclosures of Noncash
Financing activities:
Property acquired under capital leases $ 173,808
===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
-5-
<PAGE> 6
BIONUTRICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - The accompanying unaudited Condensed Consolidated Financial
Statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and the
instructions to Form 10-Q. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting
principles for completed financial statements. In the opinion of
management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position,
results of operations and cash flows for all periods presented have
been made. The results of operations for the six-month period ended
April 30, 1999 are not necessarily indicative of the operating results
that may be expected for the entire year ending October 31, 1999. The
preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from these estimates. These financial statements should be read in
conjunction with the Company's financial statements and accompanying
notes thereto as of and for the year ended October 31, 1998. The
accompanying consolidated financial statements have been prepared on a
going concern basis, which contemplates the realization of assets and
the satisfaction of liabilities in the normal course of business. The
losses incurred to date, the uncertainty regarding the ability to raise
additional capital and the Company's inability to generate positive
cash flows from operations may indicate that the Company will be unable
to continue as a going concern for a reasonable period of time.
NOTE B - Basic net loss per share is computed by dividing net loss by the
weighted average number of common shares assumed outstanding during the
presented periods. Options and warrants are excluded from the basic net
loss per share calculation as they are anti-dilutive.
NOTE C - The Company raised $500,000 in capital through issuance of common
stock during the six-month period ended April 30, 1999. This capital
stock was issued at $2.00 per share. In conjunction with this issuance,
750,000 warrants were issued with an exercise price of $2.00 per share.
Of these warrants, 250,000 expire 6/30/99, 250,000 expire 12/30/99 and
250,000 expire 12/30/00.
6
<PAGE> 7
NOTE D - The Company borrowed $200,000 on a short-term basis from a
director. The loan is a demand loan and bears interest at the rate of
9.5% annually.
NOTE E - The Company is in negotiations with AC Humko Corp. to create a
joint venture with respect to the Company's toll processing
operations at InCon Technologies, Inc. The Company anticipates that
this transaction will include the transfer of certain assets to the
joint venture in exchange for cash. The goal of the venture is to
expand and grow the business with the Company and AC Humko sharing in
the future profits. The Company expects to reach an agreement
sometime during the third quarter.
NOTE F - In June 1998, the FASB issued SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities. SFAS No. 133 requires
that an enterprise recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those
instruments at fair value. The statement is effective for the Company's
fiscal year ending October 31, 2000. The Company has not yet completed
evaluating the impact of implementing the provisions of SFAS No. 133 as
there are many specifics to the statement that remain unclear at this
time.
7
<PAGE> 8
BIONUTRICS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
THE FOLLOWING DISCUSSION OF THE COMPANY'S FINANCIAL CONDITION AND RESULTS OF
OPERATIONS INCLUDES CERTAIN FORWARD LOOKING STATEMENTS. WHEN USED IN THIS
REPORT, THE WORDS "EXPECTS," "INTENDS," "PLANS" AND "ANTICIPATES" AND SIMILAR
TERMS ARE INTENDED TO IDENTIFY FORWARD LOOKING STATEMENTS THAT RELATE TO THE
COMPANY'S FUTURE PERFORMANCE. SUCH STATEMENTS INVOLVE RISKS AND UNCERTAINTIES.
THE COMPANY'S ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THE RESULTS DISCUSSED
HERE. FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED
TO, THOSE DISCUSSED UNDER "BUSINESS-SPECIAL CONSIDERATIONS" IN THE COMPANY'S
FORM 10-K.
Three months ended April 30, 1999 compared with three months ended April 30,
1998.
RESULTS OF OPERATIONS
The results of operations for the second quarter of fiscal 1999 as compared to
1998 continues to reflect Bionutrics, Inc. transitioning the Bionutrics Health
Products, Inc. subsidiary from production and distribution of a single brand,
evolvE, toward one of development and production of a variety of products for
third parties.
Consolidated gross revenues for the quarter ended April 30, 1999 were $1,648,000
versus $1,585,000 for the same quarter in 1998, summarized by subsidiary as
follows:
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED
SUBSIDIARY APRIL 30,
------------------------ ----------------------------
1999 1998
---------- ----------
<S> <C> <C>
InCon Technologies $1,312,000 $1,135,000
Bionutrics Health Products 276,000 415,000
Nutrition Technology 60,000 35,000
---------- ----------
TOTAL CONSOLIDATED GROSS REVENUES $1,648,000 $1,585,000
========== ==========
</TABLE>
8
<PAGE> 9
Bionutrics Health Products Inc. continues to experience a significant decline in
sales due to curtailment of advertising and support for the brand evolvE(R) as a
result of financial constraints. The Company recognizes that a substantial
advertising program is necessary to achieve growth in the evolvE(R) product
line, and that failure to show positive sales results will have a negative
impact on obtaining and maintaining distribution store accounts. In addition,
some accounts have returned the product due to low volume activity. EvolvE(R)
distribution is maintained by over 32,000 stores including many leading drug and
food chains throughout the United States.
Bionutrics Health Products is repositioning itself as a product development
company and as such is engaged in discussions with several potential marketing
partners involving evolvE(R) and future branded products including dietary
supplements and functional food products. New products will be based on new
technology extending beyond a tocotrienol platform.
InCon Technologies Inc.'s increase in sales reflects toll processing activity as
well as sales of equipment.
Nutrition Technology Corporation discontinued production in its West Monroe,
Louisiana facility in late 1997. The sales reflected for the quarter ended April
30, 1999 and 1998 reflect the sale of remaining by-products on hand from
production and testing. The Company's lease on the West Monroe, Louisiana
facility terminated on February 28, 1999 and no activity was conducted after
that time. After the sale of assets to AC Humko, Nutrition Technology
Corporation is substantially inactive.
Cost of revenues for the quarter ended April 30, 1999 was $897,000 versus
$1,847,000 for the same quarter in 1998. This reduction in cost of revenues is
due to lower sales volume in addition to reduced manufacturing costs from the
winding down of operations at the West Monroe, Louisiana production facility.
With the substantial reduction of production costs, the Company experienced its
second quarter of positive gross margin in the three months ended April 30,
1999.
Operating expenses for the quarter ended April 30, 1999 of $1,965,000 were
$1,446,000 less than that recognized for the same quarter in 1998 of $3,411,000.
This 42% reduction is due to significantly reduced advertising, salaries and
cost containment programs.
Other expense for the quarter ended April 30, 1999 was $53,000 versus $26,000
for the same quarter in 1998. This $27,000 increase is primarily due to interest
expense for notes payable outstanding.
Net loss decreased to $1,496,000 or $.07 per share for the quarter ended April
30, 1999 from $3,773,000, or $0.21 per share for the quarter ended April 30,
1998 due primarily to lower operating expenses.
9
<PAGE> 10
Six months ended April 30, 1999 compared with six months ended April 30, 1998.
RESULTS OF OPERATIONS
Trends and comments as noted for the second quarter apply also to the six month
year-to-date comparisons. The results of operations for the second quarter of
fiscal 1999 as compared to 1998 continue to reflect Bionutrics, Inc.
transitioning the Bionutrics Health Products, Inc. subsidiary from production
and distribution of a single brand, evolvE, toward one of development and
production of a variety of products for third parties.
Consolidated gross revenues for the six months ended April 30, 1999 were
$2,783,000 versus $3,380,000 for the same period in 1998 and are summarized by
subsidiary as follows:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
SUBSIDIARIES APRIL 30,
------------------------- ---------------------------
1999 1998
---------- ----------
<S> <C> <C>
InCon Technologies $2,028,000 $1,798,000
Bionutrics Health Products 650,000 1,336,000
Nutrition Technology 105,000 246,000
---------- ----------
TOTAL GROSS REVENUES $2,783,000 $3,380,000
========== ==========
</TABLE>
Bionutrics Health Products Inc. experienced a significant decline in sales due
to curtailment of advertising and support for the brand evolvE(R) as a result of
financial constraints.
InCon Technologies increase in sales reflects toll processing activity as well
as sales of equipment.
Nutrition Technology Corporation discontinued production in its West Monroe,
Louisiana facility in late 1997. The sales reflected for the six months ended
April 30, 1999 and 1998 reflect the sale of remaining by-products on hand from
production and testing.
Cost of revenues for the six months ended April 30, 1999 was $1,785,000 versus
$3,747,000 for the same period in 1998. This reduction in cost of revenues is
due to
10
<PAGE> 11
lower sales volume in addition to reduced manufacturing costs from the winding
down of operations at the West Monroe, Louisiana production facility.
Operating expenses for the six months ended April 30, 1999 of $3,661,000 were
$2,898,000 less than that recognized for the same period in 1998 of $6,559,000.
This 44% reduction is due to significantly reduced advertising, salaries and
cost containment programs.
Other expense for the six months ended April 30, 1999 was $63,000 versus $18,000
for the same period in 1998. This $45,000 increase is primarily due to interest
expense for notes payable outstanding.
Net loss decreased to $3,131,000 or $.15 per share for the six months ended
April 30, 1999 from $7,109,000, or $0.39 per share for the same period in 1998
due primarily to lower operating expenses.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities during the six-month period ended April
30, 1999 was $1,932,000 as compared to $6,573,000 during the same period in
1998. This decrease is due primarily to lower operating expenses.
Net cash used in investing activities during the six months ended April 30, 1999
was $78,000 as compared to $1,102,000 during the same period in 1998. These
investment activities were largely related to capital expenditures in the
manufacturing operations. In 1998, investing activities also reflected $125,000
invested in the acquisition of patents.
Net cash provided by financing activities totaled $693,000 for the six-month
period ended April 30, 1999 versus $5,546,000 from the same period in 1998. This
cash was provided primarily by the sale of common stock for both years and a
loan from a director during 1999.
As previously reported, in February 1998 the Company entered into a strategic
alliance with Novartis to enable it to evaluate the Company's technology and
rice bran-derived products for potential application as functional food
ingredients. Novartis and Bionutrics have agreed to extend the current option
agreement through the end of July 1999.
The Company's current cash resources and expected cash flow from operations will
not be sufficient to fund its operational needs for the balance of fiscal 1999.
Therefore, the Company continues to seek additional capital though private
equity and bank lines of credit. There can be no assurance that such additional
financing will be attainable, or attainable on terms acceptable to the Company.
Access by the Company to additional capital will depend substantially upon
prevailing market conditions, and the financial condition of and prospects for
the Company at the time.
11
<PAGE> 12
IMPACT OF THE YEAR 2000 ISSUE
The Company is presently assessing its exposure to year 2000 issues. Internally
it has been determined that systems are capable of handling the new millennium.
With regard to key suppliers and strategic partners a letter requesting the
status of year 2000 readiness has been distributed. Although not all recipients
have responded as yet, those that have stated they are prepared or have taken
steps to be prepared. As a complete assessment has not yet been achieved, the
Company's state of readiness, risks and contingency plans are not yet known.
Costs associated with year 2000 readiness have been minimal to date and are
anticipated to be so in the future.
12
<PAGE> 13
BIONUTRICS, INC.
PART II - OTHER INFORMATION
ITEM 2(c) Changes in Securities:
A director was issued 100,000 restricted shares of
Common Stock for services performed and to be
performed for the Company valued at $125,000.
HSBC Securities was issued 100,000 restricted shares
of Common Stock at $1.38 per share for investment
banking services.
Affiliates of the Shemano Group were issued warrants
exercisable at any time until April 9, 2001 for the
purchase of an aggregate of 100,000 shares of Common
Stock at $4.00 per share.
The Company borrowed $200,000 from a director
pursuant to a demand note bearing interest at 9.5%.
The above issuances were made pursuant to Section
4(2) of the Securities Act of 1933.
ITEM 4 Submission of Matters to a Vote of Security Holders
The Company's 1999 Annual Meeting of Stockholders was
held on March 30, 1999. The following nominee was
elected to the Company's Board of Directors to serve
as a Class I director for a two-year term or until
his successor is elected and qualified:
<TABLE>
<CAPTION>
Nominee Votes in Favor Withheld
- ------- -------------- --------
<S> <C> <C>
Richard M. Feldheim 10,939,715 437,819
</TABLE>
The following nominees were elected to the Company's Board of Directors to serve
as Class II directors for a three-year term or until their successors are
elected and qualified:
<TABLE>
<CAPTION>
Nominee Votes in Favor Withheld
- ------- -------------- --------
<S> <C> <C>
Y. Steve Henig, Ph.D 10,939,715 437,819
Winston A. Salser, Ph.D 10,939,715 437,819
Donald A. Winkler 10,939,715 437,819
Robert B. Goergen 10,939,715 437,819
</TABLE>
13
<PAGE> 14
The following directors' terms of office continued after the 1999 Annual Meeting
of Stockholders:
Ronald H. Lane, Ph.D.
Daniel S. Antonelli
C. Everett Koop, M.D., Sc.D.
William M. McCormick
Milton Okin
Frederick B. Rentschler
The following additional item was voted upon by the Company's stockholders:
Proposal to ratify the appointment of Deloitte & Touche LLP as the
independent auditors of the Company for the fiscal year ending October
31, 1999.
<TABLE>
<CAPTION>
Votes in Favor Opposed Abstained Broker Non-Vote
-------------- ------- --------- ---------------
<S> <C> <C> <C>
11,372,534 5,400 0 0
</TABLE>
ITEM 5 Other Information
Effective March 30, 1999, George E. Duck, Jr., the Vice
President of Finance, Secretary, and Treasurer of the Company,
resigned from the Company. Dr. Ronald H. Lane, the President,
was elected as Secretary and Treasurer of the Company
effective March 31, 1999. Karen Harwell, the Controller of the
Company, is the Company's Chief Accounting Officer. Ms.
Harwell, who is a CPA, has served as the Company's Controller
since January 1997. She served as Manager for Accounting
Solutions, Inc. from October 1995 to December 1996. She was
Executive Director for the Arizona Lions Eye and Tissue Bank,
Inc. from October 1993 to September 1995 and its Controller
from October 1990 to September 1993. Ms. Harwell began her
career as a Financial Auditor for the State of Arizona Office
of the Auditor General.
ITEM 6 Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10.22 Stock Purchase Agreement and Common Stock
Purchase Warrants dated January 28, 1999
between Ropart Investments, LLC and the
Company.
14
<PAGE> 15
Exhibit 10.23 Warrant Certificates dated April 27, 1999
issued to Gary J. Shemano, Mart Bailey and
Michael Jacks for an aggregate of 100,000
shares of Common Stock and Warrant Agreement
effective April 9, 1998 between The Shemano
Group and the Company
Exhibit 27
(b) Reports on Form 8-K - None
15
<PAGE> 16
BIONUTRICS, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Bionutrics, Inc.
(Registrant)
Dated: June 10, 1999 By:/s/Ronald H. Lane
-----------------
Its: Chairman of the Board,
Chief Executive Officer and President
By:/s/Karen J. Harwell
----------------------
Its: Controller and
Chief Accounting Officer
16
<PAGE> 17
Exhibit Index
Exhibit 10.22 Stock Purchase Agreement and Common Stock
Purchase Warrants dated January 28, 1999
between Ropart Investments, LLC and the
Company.
<PAGE> 18
Exhibit 10.23 Warrant Certificates dated April 27, 1999
issued to Gary J. Shemano, Mart Bailey and
Michael Jacks for an aggregate of 100,000
shares of Common Stock and Warrant Agreement
effective April 9, 1998 between The Shemano
Group and the Company
Exhibit 27
<PAGE> 1
Exhibit 10.22
THE SHARES BEING SUBSCRIBED FOR HEREIN HAVE NOT BEEN REGISTERED WITH THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION UNDER THE U.S. SECURITIES ACT OF 1933,
AS AMENDED, (THE "1933 ACT") OR THE SECURITIES COMMISSION OF ANY STATE UNDER ANY
STATE SECURITIES LAW. THEY ARE BEING OFFERED PURSUANT TO AN EXEMPTION FROM
REGISTRATION PURSUANT TO SECTION 4(2) OF THE 1933 ACT. THE SHARES MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS THE SHARES ARE REGISTERED UNDER
THE 1933 ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL IS
OBTAINED WHICH IS REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH OFFERS, SALES
AND TRANSFERS MAY BE MADE PURSUANT TO AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THOSE LAWS.
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made as of
the 28th day of January, 1999, by and between Bionutrics, Inc., a Nevada
corporation (the "Company"), and Ropart Investments LLC (the "Investor").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Stock.
1.1 Sale and Issuance of Stock. On the basis of the
representations, warranties and agreements contained herein and subject to the
terms and conditions herein set forth, the Company agrees to issue and sell
250,000 (two hundred fifty thousand) shares of its Common Stock, $.001 par
value, at $2.00 per share (the "Shares"), and the Investor hereby subscribes for
and agrees to purchase the Shares upon acceptance of this Agreement by the
Company.
1.2 Payment. Investor is delivering with this Agreement the
full amount of the purchase price of the Shares in the amount of $500,000 in
U.S. funds by wire transfer as directed by the Company to the Company's
designated escrow account. Such funds deposited into the escrow account on
behalf of the Investor shall be held until the conditions for the Closing of the
offering have been met.
1.3 Closing. The closing of the transaction contemplated by
this Agreement (the "Closing") shall be deemed to have occurred when this
Agreement has been executed by both the Investor and the Company and payment
shall have been made as set forth in 1.2 above in consideration for the
Company's delivery into the escrow account of certificates representing the
Shares subscribed for. If at the Closing any of the conditions specified in
Section 5 hereof shall not have been fulfilled to the reasonable satisfaction of
Investor, then Investor shall, at its election, be relieved of all of its
obligations under this Agreement, without thereby waiving any other rights it
may have by reason of such failure or unfulfillment. If at the Closing any of
the conditions specified in Section 4 hereof shall not have been fulfilled to
the reasonable satisfaction of the Company, the Company shall, at its election,
be relieved of all of its obligations under this Agreement, without thereby
waiving any other rights it may have by reason of such failure or unfulfillment.
<PAGE> 2
2. Representation and Warranties of the Company. The Company hereby
represents and warrants to the Investor as follows:
2.1 Organization, Good Standing and Qualification. The
Company is a corporation validly existing and in good standing under the laws of
the State of Nevada and has all requisite power and authority to own or lease
and operate its properties and assets and to carry on its business as now
conducted. The Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure to so qualify would have a
material adverse effect on its business, operations, prospects, condition
(financial or other), or properties.
2.2 Capitalization. The authorized capital of the Company
consists of:
(i) Common Stock. 45,000,000 shares of common stock
("Common Stock"), par value $.001, of which 20,355,732 shares are issued and
outstanding as of January 15, 1999.
(ii) Preferred Stock. 5,000,000 shares of preferred
stock ("Preferred Stock"), par value $.001, none of which is outstanding. The
Preferred Stock may be issued from time to time in one or more series and the
Board of Directors is authorized to fix the rights and terms relating to
dividends, conversion, voting, redemption, liquidation preferences and any other
rights, preferences, privileges and restrictions applicable to each such series.
(iii) Warrants, Options and Other Rights. There are no
preemptive rights or rights of first refusal for the purchase or acquisition
from the Company of any shares of its capital stock. As of October 31, 1998,
there were outstanding options and warrants to purchase up to 2,810,144 shares
of Common Stock not issued under the Company's Stock Option Plan. As of October
31, 1998, options in the amount of 2,152,756 shares were outstanding pursuant to
the Company's Stock Option Plan.
2.3 Valid Issuance of Shares. All of the outstanding shares
of the Company's stock have been duly and validly authorized and issued, are
fully paid and nonassessable, and no further approval or authority of the
stockholders or the directors of the Company will be required by the Company for
the issuance of the Shares. The Shares when issued and paid for in accordance
with the terms of this Agreement will be duly and validly issued, fully paid and
nonassessable and will be free of restrictions on transfer other than
restrictions on transfer under applicable state and federal securities laws.
2.4 Financial Statements. Except as otherwise stated in the
notes thereto, the audited financial statements contained in the Form 10-K for
the year ended October 31, 1998 consisting of an Independent Auditors' Report
dated January 8, 1999, Consolidated Balance Sheets as of October 31, 1998 and
1997, and the related Consolidated Statements of Operations, Stockholders'
Equity and Cash Flows for the years ended October 31, 1998, 1997 and 1996 have
been prepared in conformity with United States generally accepted accounting
principles applied, except as stated therein, on a consistent basis. The
financial statements fairly present the financial position and result of
operations and changes in financial position of the Company as of the dates and
for the periods indicated.
Except as reflected in such financial statements and the notes thereto,
the Company has no liabilities, absolute or contingent, material to the
operations, business, prospects, assets, properties or condition (financial or
other) of the Company, other than (i) ordinary course liabilities incurred since
the
2
<PAGE> 3
last date of such financial statements in connection with the conduct of the
business of the Company, and (ii) obligations under contracts and commitments
incurred in the ordinary course of business and not required under United States
generally accepted accounting principles to be reflected in the financial
statements, which, in both cases, individually or in the aggregate, are not
material to the financial condition or operating results of the Company.
2.5 No Conflict with Other Instruments. Neither the sale of
the Shares nor the consummation of the transactions herein contemplated, will:
(i) conflict with or constitute a breach of, permit the termination of,
constitute a default under, or violation of (A) the Articles of Incorporation,
as amended, or bylaws of the Company, (B) any material agreement, indenture,
mortgage, deed of trust or other material instrument or agreement or undertaking
by which the Company is bound or to which any of its properties is subject, or,
(C) to the knowledge of the Company, a violation of any law, administrative
regulation, or court decree to which the properties or assets of the Company is
subject; or (ii) result in the creation or imposition of any material lien,
charge or encumbrance upon the property or assets of the Company.
2.6 Authorization. The Company has the corporate power and
authority to enter into this Agreement and to perform all of its obligations
hereunder. The execution, delivery and performance of this Agreement by the
Company have been duly authorized by all necessary corporate actions, and this
Agreement constitutes a legal, valid, binding and enforceable obligation of the
Company. No consent, approval, authorization or order of any court or
governmental agency or board or any other third party, or registration,
qualification, designation or filing with any Federal, state or local authority
is required to consummate the transactions contemplated by this Agreement.
3. Representations and Warranties of Investor. By executing this
Agreement, Investor hereby represents and warrants to and covenants with the
Company as follows:
3.1 Authorization. Investor has the power and authority to
enter into this Agreement and to perform all of its obligations hereunder and
this Agreement constitutes a valid, binding and enforceable obligation of
Investor.
3.2 Legal Investment and Compliance with Laws. The purchase
of the Shares by Investor is legally permitted by all laws and regulations to
which Investor is subject and all consents, approvals, authorizations of or
designations, declarations, or filings in connection with the valid execution
and delivery of this Agreement by Investor or the purchase of the Shares by
Investor has been obtained, or will be obtained. Investor hereby represents that
it has satisfied itself as to the full observance of the laws of its
jurisdiction in connection with any invitation to subscribe for the Shares or
any use of this Agreement, including (i) any foreign exchange restrictions
applicable to such purchase, and (ii) the income tax and other tax consequences,
if any, which may be relevant to the purchase, holding, redemption, sale, or
transfer of the Shares. Such Investor's subscription and payment for, and its
continued beneficial ownership of the Shares, will not violate any applicable
securities or other laws of its jurisdiction.
3
<PAGE> 4
3.3 Access to Information. Investor acknowledges that it has
received the Company's Form 10-K/A for the period ended October 31, 1997, and
the Form 10-K for the period ended October 31, 1998 (the "Offering Documents"),
and is familiar with and understands the operations of the Company.
(a) Investor understands and acknowledges that the
Offering Documents provided in connection with this investment have been
prepared by the Company. Accordingly, Investor understands and acknowledges that
no independent investment banking firm or legal counsel have passed upon or
assumed any responsibility for the accuracy, completeness or fairness of the
information contained in the Offering Documents.
(b) Investor understands and acknowledges that any
financial projections provided in connection with this investment and have not
been prepared by independent accountants and are based on numerous assumptions
regarding sales, revenues and expenses and other factors which may not be
realized in the future.
(c) Investor acknowledges that it has been encouraged
to rely upon the advice of its legal counsel and accountants or other financial
advisers with respect to the financial, tax and other considerations relating to
the purchase of the Shares and has been offered, during the course of
discussions concerning the purchase of the Shares, the opportunity to ask such
questions and inspect such documents concerning the Company and its business and
affairs as Investor has requested so as to understand more fully the nature of
the investment and to verify the accuracy of the information supplied.
(d) Investor represents and warrants that, in
determining to purchase the Shares, it has relied solely upon the documents
provided and the advice of its advisors with respect to the tax, foreign and
U.S., and other consequences involved in purchasing the Shares.
3.4 Acquisition for Investment and Unregistered Nature of the
Shares.
(a) Investor represents and warrants that the Shares
being acquired are being acquired for its own account without a view to public
distribution or resale and that Investor has no contract, understanding,
agreement or arrangement to sell or otherwise transfer or dispose of the Shares
or any portion thereof to any other person.
(b) Investor represents and warrants that it (i) is
experienced in evaluating and investing in securities of companies in the
developmental stage and acknowledges that it can fend for itself, (ii) can bear
the economic risk of the purchase of the Shares including the total loss of its
investment, and (iii) has such knowledge and experience in business and
financial matters as to be capable of evaluating the merits and risks of an
investment in the Shares.
(c) Investor understands that the Shares have not been
registered under the 1933 Act, or the securities laws of any state and are
subject to substantial restrictions on resale or transfer.
4
<PAGE> 5
(d) Investor agrees that it will not sell or otherwise
transfer or dispose of the Shares or any portion thereof unless such Shares are
registered under the 1933 Act and any applicable state securities laws, or
unless Investor obtains an opinion of counsel which is reasonably satisfactory
to the Company that such Shares may be sold in reliance on an exemption from
such registration requirements.
(e) Investor understands that (i) the Company has no
obligation to register any Shares for resale or transfer under the 1933 Act or
any state securities laws and has made no representation that it will file the
necessary reports or publish the necessary information as required by Rule 144
under the 1933 Act that would make available an exemption from the registration
requirements of any such laws for the resale or transfer of the Shares; (ii) the
Company may place a legend on any certificates representing the Shares
indicating that the Shares may not be transferred except in accordance with an
exemption from the 1933 Act; (iii) the Company will not register a transfer not
made in accordance with an exemption from the 1933 Act; and (iv) Investor
therefore may be precluded from selling or otherwise transferring or disposing
of any of the Shares or any portion thereof for an indefinite period of time or
at any particular time.
3.5 Further Representations and Understandings.
(a) Investor understands that no federal or state
agency including the Securities and Exchange Commission, the Arizona Corporation
Commission or the securities commission or authorities of any other state has
approved or disapproved the Shares, passed upon or endorsed the merits of the
offering or the accuracy or adequacy of the documents, or made any finding or
determination as to the fairness of the Shares for public investment and any
representation to the contrary is a criminal offense.
(b) Investor understands that the Shares are being
offered and sold in reliance on specific exemptions or exclusions from the
registration requirements of federal and state laws and that the Company is
relying upon the truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings set forth herein in order to
determine the suitability of Investor to acquire the Shares.
(c) Investor represents and warrants that the
information set forth herein concerning Investor is true and correct.
4. Conditions to Obligations of the Company. The obligations of the
Company under this Agreement are subject to satisfaction of the following
conditions at or prior to the Closing, any of which may be waived by the
Company:
4.1 Representations and Warranties Correct. All of the
representations and warranties of Investor contained in this Agreement shall be
true and correct in all material respects as of the Closing with the same effect
as if made on the date of Closing.
4.2 Performance of Covenants and Agreements. All of the
covenants and agreements of Investor contained in this Agreement and required to
be performed on or before the date of Closing shall have been performed in all
material respects to the reasonable satisfaction of the Company.
5
<PAGE> 6
4.3 Legal Action.
(a) There shall not have been instituted any material
legal proceeding seeking to prohibit the consummation of the transactions
contemplated by this Agreement.
(b) None of the parties hereto shall be prohibited in
any order, writ, injunction or decree of any governmental body of competent
jurisdiction from consummating the transactions contemplated by this Agreement,
and no material action or proceeding shall then be pending which questions the
validity of this Agreement, any of the transactions contemplated hereby or any
action which has been taken by any of the parties in connection herewith or in
connection with any of the transactions contemplated hereby.
5. Conditions to Obligations of Investor. The obligations of Investor
under this Agreement are subject to satisfaction of the following conditions at
or prior to the Closing, any of which may be waived by Investor.
5.1 Representations and Warranties Correct. All of the
representations and warranties of the Company contained in this Agreement shall
be true and correct in all material respects as of the Closing with the same
effect as if made on the date of Closing.
5.2 Legal Action.
(a) There shall not have been instituted or threatened
any legal proceedings seeking to prohibit the consummation of the transactions
contemplated by this Agreement, or to obtain damages from Investor with respect
thereto.
(b) None of the parties hereto shall be prohibited by
any order, writ, injunction or decree of any governmental body of competent
jurisdiction from consummating the transactions contemplated by this Agreement,
and no action or proceeding shall then be pending which questions the validity
of this Agreement, any of the transactions contemplated hereby or any action
which has been taken by any of the parties in connection herewith or in
connection with any of the transactions contemplated hereby.
6. Legends. The certificates evidencing any of the Shares shall be
endorsed with the legend set forth below, and Investor covenants that Investor
shall not transfer the shares represented by any such certificate without
complying with the restrictions on transfer described in the legend endorsed on
such certificate:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION UNDER THE U.S. SECURITIES ACT
OF 1933, AS AMENDED, (THE "1933 ACT") OR THE SECURITIES COMMISSION OF
ANY STATE UNDER ANY STATE SECURITIES LAW. THEY WERE OFFERED PURSUANT TO
AN EXEMPTION FROM REGISTRATION PURSUANT TO SECTION 4(2) OF THE 1933
ACT. THE SHARES MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
UNLESS THE SHARES ARE REGISTERED UNDER THE 1933 ACT AND APPLICABLE
STATE
6
<PAGE> 7
SECURITIES LAWS, OR AN OPINION OF COUNSEL IS OBTAINED WHICH IS
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH OFFERS, SALES AND
TRANSFERS MAY BE MADE PURSUANT TO AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THOSE LAWS.
7. Miscellaneous.
7.1 Notices. All notices or other communications given or
made hereunder shall be in writing and shall be deemed delivered personally to
the party being given notice or by facsimile, overnight courier service or by
registered or certified mail, return receipt requested, postage prepaid if to
Investor at its address set forth herein or if to the Company at 2425 East
Camelback Road, Suite 650, Phoenix, Arizona 85016 or at such other address as
may have been furnished by the Company to Investor.
7.2 Construction. Notwithstanding the place where this
Agreement may be executed by any of the parties hereto, the parties expressly
agree that all terms and provisions hereof shall be construed in accordance with
and governed by the laws of the State of Arizona without giving effect to
principles of conflicts of law.
7.3 Entire Agreement; Amendments and Waiver. This Agreement
sets forth the entire understanding of the parties with respect to the
transactions contemplated hereby, and neither party shall be bound by nor deemed
to have made any representations and/or warranties except those contained herein
or incorporated herein by reference. The provisions of this Agreement may be
amended and the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, only if the Company has
obtained the written consent of Investor.
7.4 Successors and Assigns. Except as otherwise provided
herein, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective heirs, estate, successors and assigns of the
parties. Nothing in this Agreement, express or implied, is intended to confer
upon any party other than the parties hereto or their respective successors and
assigns any rights, remedies, obligations, or liabilities under or by reason of
this Agreement, except as expressly provided in this Agreement.
7.5 Headings. The terms used in this Agreement shall be
deemed to include the masculine and the feminine in the singular and the plural
as the context requires. The headings in this Agreement are for reference
purposes only and shall not be deemed to have any substantive effect.
7.6 Survival of Representations and Warranties. All
representations and warranties contained herein will survive the execution and
delivery of this Agreement and delivery of and payment for the Shares regardless
of any investigation made by or on behalf of the parties.
7.7 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7
<PAGE> 8
7.8 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
IN WITNESS WHEREOF, the parties hereby have executed this
Agreement as of the date indicated above.
INVESTOR
Ropart Investments LLC Robert B. Goergen, Managing Member
- -------------------------- -------------------------------------------
Exact Name in which Shares PRINT Name of Individual with authority to
are to be registered Purchase the Shares on behalf of Investor
and state capacity in which signing
/s/Robert B. Goergen
--------------------------------------------
SIGNATURE of Individual with Authority to
Purchase
DELIVERY INSTRUCTIONS
--------------------------------------------
BIONUTRICS, INC. Type or print address where certificates
are to be delivered
100 Field Point Road
--------------------------------------------
By: Ronald H. Lane
--------------------- --------------------------------------------
Its: President Street
Greenwich, CT 06830
--------------------------------------------
City, State or Province, Country
(203) 552-6622 or (203) 661-1988, Ext. 66
--------------------------------------------
Telephone Number
ATTN: Patricia Elliott
--------------------------------------------
8
<PAGE> 9
NEITHER THIS WARRANT, NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF, HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY APPLICABLE STATE SECURITIES LAW. SUCH SECURITIES MAY
NOT BE SOLD OR OTHERWISE TRANSFERRED UNLESS (i) A REGISTRATION STATEMENT UNDER
THE SECURITIES ACT AND SUCH APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME
EFFECTIVE WITH REGARD THERETO OR (ii) IN THE OPINION OF COUNSEL IN FORM AND
SUBSTANCE REASONABLY ACCEPTABLE TO THE COMPANY, REGISTRATION UNDER THE
SECURITIES ACT AND SUCH APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN
CONNECTION WITH A PROPOSED SALE OR TRANSFER.
COMMON STOCK
PURCHASE WARRANT
For the Purchase of Shares of
Common Stock of
BIONUTRICS, INC.
(Par Value $0.001 Per Share)
(Incorporated under the Laws of the State of Nevada)
VOID AFTER 5:00 P.M. PST ON JUNE 30, 1999
Date of Original Issuance: January 28, 1999
This is to certify that, for value received, Ropart Investments LLC, or
assigns (the "Warrantholder"), is entitled, subject to the terms and conditions
hereinafter set forth, to purchase 250,000 shares of common stock, par value
$0.001 per share (the "Common Stock"), of BIONUTRICS, INC., a Nevada corporation
(the "Company"), for the Warrant Price (as defined below), and to receive a
certificate or certificates for the shares of Common Stock so purchased. This
Warrant is being issued in connection with the terms of that certain Stock
Purchase Agreement dated January 28, 1999, by and between the Warrantholder and
the Company.
1. TERMS AND EXERCISE OF WARRANT.
(a) WARRANT SHARES. Warrant Shares (as defined below) may be acquired
in accordance with the terms of this Warrant until the Termination Date (as
defined below). The Warrantholder may exercise this Warrant with respect to all
Warrant Shares effective immediately.
(b) EXERCISE PERIOD. Subject to the terms of this Warrant, the
Warrantholder shall have the right, at any time during the Exercise Period (as
defined below), to exercise this Warrant for any or all Warrant Shares and to
purchase from the Company up to the number of fully paid and nonassessable
shares of Common Stock which the Warrantholder may at the time be entitled to
purchase pursuant to this Warrant. The 250,000 shares of Common Stock subject to
this Warrant and any other securities that the Company may be required by the
operation of Section 3 to issue upon the exercise
<PAGE> 10
hereof are referred to herein as the "Warrant Shares." The "Exercise Period"
shall mean the period commencing on the Date of Original Issuance for such
Warrant Shares and ending at 5:00 P.M., Mountain Standard Time, on June 30, 1999
(the "Termination Date"), or if such date is a day on which banking institutions
are authorized by law to close, then on the next succeeding day which shall not
be such a day. If this Warrant is not exercised on or prior to the Termination
Date, this Warrant shall become void and all rights of the Warrantholder
hereunder shall cease.
(c) METHOD OF EXERCISE. The Warrantholder may exercise this
Warrant by surrender of this Warrant to the Company at its principal office in
Phoenix, Arizona (or at such other address as the Company may designate by
notice in writing to the Warrantholder at the address of the Warrantholder
appearing on the books of the Company or such other address as the Warrantholder
may designate in writing), together with the form of Election to Purchase
included as Exhibit A hereto, duly completed and signed, and upon payment to the
Company of the Warrant Price (as defined in Section 2) multiplied by the number
of Warrant Shares being purchased upon such exercise (the "Aggregate Warrant
Price"), together with all taxes applicable upon such exercise. Payment of the
Aggregate Warrant Price shall be made in cash or by certified check or cashier's
check, payable to the order of the Company.
(d) PARTIAL EXERCISE. At the election of the Warrantholder,
this Warrant shall be exercisable in whole or in part at any time, and from time
to time, during the Exercise Period.
(e) SHARE ISSUANCE UPON EXERCISE. Upon the exercise and
surrender of this Warrant certificate and payment of the Aggregate Warrant
Price, the Company shall issue and cause to be delivered with all reasonable
dispatch to the Warrantholder, in such name or names as the Warrantholder may
designate in writing, a certificate or certificates for the number of full
Warrant Shares so purchased upon the exercise of the Warrant, together with
cash, as provided in Section 4 hereof, with respect to any fractional Warrant
Shares otherwise issuable upon such surrender and, if applicable, the Company
shall issue and deliver a new Warrant to the Warrantholder for the number of
Warrant Shares not so exercised. Such certificate or certificates shall be
deemed to have been issued and any person so designated to be named therein
shall be deemed to have become a holder of such Warrant Shares as of the close
of business on the date of the surrender of the Warrant and payment of the
Aggregate Warrant Price, notwithstanding that the certificates representing such
Warrant Shares shall not actually have been delivered or that the stock transfer
books of the Company shall then be closed.
2. WARRANT PRICE. The price per share at which Warrant Shares shall be
purchasable upon the exercise of this Warrant shall be $2.00 per share, subject
to adjustment pursuant to Section 3 hereof (originally and as adjusted, the
"Warrant Price").
3. ADJUSTMENT OF NUMBER OF WARRANT SHARES AND WARRANT PRICE. The
Company agrees to reserve and shall keep reserved for issuance the number of
shares of Common Stock issuable upon exercise of this Warrant. The number of
Warrant Shares purchasable upon the exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time upon the happening of
certain events, as follows:
(a) In case the Company shall (1) pay a dividend or make a
distribution in shares of its Common Stock, (2) subdivide its outstanding Common
Stock into a greater number of shares, (3) combine its outstanding Common Stock
into a smaller number of shares, or (4) issue by reclassification of its Common
Stock any shares of capital stock of the Company (other than a change in par
value, or from par value to no par value, or from no par value to par value),
the number of Warrant Shares issuable
<PAGE> 11
upon exercise of this Warrant and the Warrant Price in effect immediately prior
thereto shall be adjusted as follows:
(i) The number of Warrant Shares issuable upon
exercise of this Warrant shall be adjusted by multiplying the number of Warrant
Shares issuable upon exercise of this Warrant immediately prior to such
adjustment by a fraction, the numerator of which shall be the number of shares
of Common Stock outstanding immediately after such adjustment, and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately prior to such adjustment; and
(ii) The Warrant Price shall be adjusted by
multiplying the Warrant Price in effect immediately prior to such adjustment by
a fraction, the numerator of which shall be the number of Warrant Shares
issuable upon exercise of this Warrant immediately prior to such adjustment, and
the denominator of which shall be the number of Warrant Shares as so adjusted.
An adjustment made pursuant to this Section 3(a) shall become effective
immediately after the record date in the case of a dividend or distribution
(provided, however, that such adjustments shall be reversed if such dividends or
distributions are not actually paid) and shall become effective immediately
after the effective date in the case of a subdivision, combination or
reclassification. If, as a result of an adjustment made pursuant to this Section
3(a), the Warrantholder shall become entitled to receive shares of two or more
classes of capital stock of the Company, the Board of Directors (whose
determination shall be conclusive and shall be evidenced by a resolution) shall
determine the allocation of the adjusted Warrant Price between or among the
shares of such classes of capital stock.
(b) In case of any reclassification of the outstanding Common
Stock (other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of a subdivision, combination or
stock dividend), or in case of any consolidation of the Company with, or merger
of the Company into, another corporation wherein the Company is not the
surviving entity, or in case of any sale of all, or substantially all, of the
property, assets, business and goodwill of the Company, the Company, or such
successor or purchasing corporation, as the case may be, shall provide, by a
written instrument delivered to the Warrantholder, that the Warrantholder shall
thereafter be entitled, upon exercise of this Warrant, to the kind and amount of
shares of stock or other equity securities, or other property or assets which
would have been receivable by such Warrantholder upon such reclassification,
consolidation, merger or sale, if this Warrant had been exercised immediately
prior thereto. Such corporation, which thereafter shall be deemed to be the
"Company" for purposes of this Warrant, shall provide in such written instrument
for adjustments to the Warrant Price which shall be as nearly equivalent as may
be practicable to the adjustments provided for in this Section 3.
(c) No adjustment in the number of securities purchasable
hereunder shall be required unless such adjustment would require an increase or
decrease of at least five percent (5%) in the number of securities (calculated
to the nearest full share or unit thereof) then purchasable upon the exercise of
this Warrant; provided, however, that any adjustment which by reason of this
Section 3(c) is not required to be made immediately shall be carried forward and
taken into account in any subsequent adjustment.
(d) For the purpose of this Section 3, the term "Common Stock"
shall mean (i) the class of stock designated as Common Stock of the Company at
January 28, 1999, or (ii) any other class of stock resulting from successive
changes or reclassifications of such Common Stock consisting solely of changes
in par value, or from par value to no par value, or from no par value to par
value. In the event that at any time, as a result of an adjustment made pursuant
to this Section 3, the Warrantholder shall
<PAGE> 12
become entitled to purchase any shares of the Company's capital stock other than
Common Stock, thereafter the number of such other shares so purchasable upon the
exercise of this Warrant and the Warrant Price of such shares shall be subject
to adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the shares contained in this
Section 3.
(e) Whenever the number of shares of Common Stock and/or other
securities purchasable upon the exercise of this Warrant or the Warrant Price is
adjusted as herein provided, the Company shall cause to be promptly mailed to
the Warrantholder by first class mail, postage prepaid, notice of such
adjustment and a certificate of the Company's chief financial officer setting
forth the number of shares of Common Stock and/or other securities purchasable
upon the exercise of this Warrant, the Warrant Price after such adjustment, a
brief statement of the facts requiring such adjustment, and the computation by
which such adjustment was made.
(f) Irrespective of any adjustments in the Warrant Price or
the number or kind of securities purchasable upon the exercise of this Warrant,
the Warrant certificate or certificates theretofore or thereafter issued may
continue to express the same price or number or kind of securities stated in
this Warrant initially issuable hereunder.
4. FRACTIONAL INTEREST. The Company shall not be required to issue
fractional shares upon exercise of this Warrant, but shall pay an amount in cash
equal to the closing price of the Company's Common Stock on the Nasdaq SmallCap
Market or other trading market on the day preceding the date of the surrender of
this Warrant pursuant to Section 1(c) hereof, or if there is no public market,
cash equal to the then fair market value of the shares as reasonably determined
by the Board of Directors of the Company, in its sole discretion, multiplied by
such fraction.
5. TRANSFER PROHIBITION. Neither this Warrant nor any rights hereunder
may be sold, exchanged, conveyed, assigned, given, pledged, hypothecated or
otherwise transferred by the Warrantholder.
6. NO RIGHTS AS SHAREHOLDER; NOTICES TO WARRANTHOLDER. Prior to the
exercise of this Warrant pursuant to the terms hereof, nothing contained in this
Warrant shall be construed as conferring upon the Warrantholder any rights as a
shareholder of the Company, either at law or in equity, including the right to
vote, receive dividends, consent or receive notices as a shareholder with
respect to any meeting of shareholders for the election of directors of the
Company or for any other matter.
7. NOTICES. Any notice given pursuant to this Warrant by the Company or
by the Warrantholder shall be in writing and shall be deemed to have been duly
given upon (a) personal delivery, (b) transmitter's confirmation of the receipt
of a facsimile transmission, (c) confirmed delivery by a standard overnight
carrier, or (d) the expiration of three business days after the day when mailed
by United States Postal Service by certified or registered mail, return receipt
requested, postage prepaid at the following addresses:
If to the Company:
Bionutrics, Inc.
2425 E. Camelback Road, Suite 650
Phoenix, Arizona 85016
Attention: George E. Duck, Jr.
<PAGE> 13
with a copy to:
O'Connor, Cavanagh, Anderson, Killingsworth & Beshears, P.A.
One E. Camelback Road, Suite 1100
Phoenix, Arizona 85012
Attention: Jean E. Harris, Esq.
If to the Warrantholder:
Ropart Investments LLC
100 Field Point road
Greenwich, Connecticut 06830
Attention: Patricia Elliott
with a copy to:
Finn Dixon & Herling
1 Landmark Square
Suite 1404
Stamford, Connecticut 06901
Attention: Harold B. Finn III, Esq.
Each party hereto may, from time to time, change the address to which
notices to it are to be transmitted, delivered or mailed hereunder by notice in
accordance herewith to the other party.
8. INVESTMENT REPRESENTATION. The Warrantholder hereby represents to
the Company that it is acquiring this Warrant for its own account, as principal,
for investment and not with a view to or the intent to participate in, directly
or indirectly, the resale, assignment, distribution or fractionalization of all
or any part hereof. Further, the Warrantholder shall furnish the Company an
investment letter, in form and substance satisfactory to the Company, prior to
the issuance of any Warrant Shares or other securities issuable upon the
exercise hereof, to the effect that such securities, and any additional
securities of the Company for which such securities may be exercised or
exchanged or into which they may ultimately be converted, if not registered
pursuant to applicable state and federal securities laws, will be acquired for
investment and not with a view to the sale or distribution thereof. The
Warrantholder hereby further represents that it has been provided with, or given
reasonable access to, full and fair disclosure of all material information
regarding the Company, this Warrant, and the Common Stock.
9. GENERAL PROVISIONS.
(a) SUCCESSORS. All covenants and provisions of this Warrant
shall bind and inure to the benefit of the respective successors and assigns of
the parties hereto.
(b) CHOICE OF LAW. This Warrant and the rights of the parties
hereunder shall be governed by and construed in accordance with the laws of the
State of Arizona, including all matters of construction, validity, performance,
and enforcement, and without giving effect to the principles of any Arizona or
other conflict-of-law provisions to the contrary.
<PAGE> 14
(c) ENTIRE AGREEMENT. Except as provided herein, this Warrant,
including exhibits, contains the entire agreement of the parties, and supersedes
all existing negotiations, representations or agreements and all other oral,
written, or other communications between them concerning the subject matter of
this Warrant.
(d) SEVERABILITY. If any provision of this Warrant is
unenforceable, invalid, or violates applicable law, such provision shall be
deemed stricken and shall not affect the enforceability of any other provisions
of this Warrant.
(e) CAPTIONS. The captions in this Warrant are inserted only
as a matter of convenience and for reference and shall not be deemed to define,
limit, enlarge, or describe the scope of this Warrant or the relationship of the
parties, and shall not affect this Warrant or the construction of any provisions
herein.
IN WITNESS WHEREOF, the Company caused this Warrant to be duly executed
as of the date first above written.
BIONUTRICS, INC., a Nevada corporation
By: Ronald H. Lane
----------------------------------
Its: President
----------------------------------
The Warrantholder hereby agrees to and accepts the terms and conditions
of this Warrant this 28th day of January, 1999.
FOR ROPART INVESTMENTS LLC
/s/Robert B. Goergen
---------------------------------------
By: Robert B. Goergen
----------------------------------
Its: Managing Member
----------------------------------
<PAGE> 15
EXHIBIT A
ELECTION TO PURCHASE
Bionutrics, Inc.
2425 E. Camelback Road, Suite 650
Phoenix, Arizona 85016
The undersigned hereby irrevocably elects to exercise the
right of purchase set forth in the attached Warrant to purchase thereunder
____________________ shares of the Common Stock (the "Warrant Shares") provided
for therein and requests that the Warrant Shares be issued in the name of
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please Print Name, Address and SSN or EIN of Shareholder above)
Dated:
-----------------
Name of Warrantholder or Assignee:
--------------------------------------------
(Please Print)
Signature:
---------------------------------------------------------------------
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant.)
Address:
------------------------------------------------
------------------------------------------------
Aggregate Warrant Price Paid: $
------------------
Method of payment:
-----------------------------------------------------------
(Please Print)
- -------------------------------------------------------------
Medallion Signature Guarantee (required if an assignment of Warrant Shares
acquired on exercise is made upon exercise.)
<PAGE> 16
NEITHER THIS WARRANT, NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF, HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY APPLICABLE STATE SECURITIES LAW. SUCH SECURITIES MAY
NOT BE SOLD OR OTHERWISE TRANSFERRED UNLESS (i) A REGISTRATION STATEMENT UNDER
THE SECURITIES ACT AND SUCH APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME
EFFECTIVE WITH REGARD THERETO OR (ii) IN THE OPINION OF COUNSEL IN FORM AND
SUBSTANCE REASONABLY ACCEPTABLE TO THE COMPANY, REGISTRATION UNDER THE
SECURITIES ACT AND SUCH APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN
CONNECTION WITH A PROPOSED SALE OR TRANSFER.
COMMON STOCK
PURCHASE WARRANT
For the Purchase of Shares of
Common Stock of
BIONUTRICS, INC.
(Par Value $0.001 Per Share)
(Incorporated under the Laws of the State of Nevada)
VOID AFTER 5:00 P.M. PST ON DECEMBER 30, 1999
Date of Original Issuance: January 28, 1999
This is to certify that, for value received, Ropart Investments LLC, or
assigns (the "Warrantholder"), is entitled, subject to the terms and conditions
hereinafter set forth, to purchase 250,000 shares of common stock, par value
$0.001 per share (the "Common Stock"), of BIONUTRICS, INC., a Nevada corporation
(the "Company"), for the Warrant Price (as defined below), and to receive a
certificate or certificates for the shares of Common Stock so purchased. This
Warrant is being issued in connection with the terms of that certain Stock
Purchase Agreement dated January 28, 1999, by and between the Warrantholder and
the Company.
1. TERMS AND EXERCISE OF WARRANT.
(a) WARRANT SHARES. Warrant Shares (as defined below) may be
acquired in accordance with the terms of this Warrant until the Termination Date
(as defined below). The Warrantholder may exercise this Warrant with respect to
all Warrant Shares effective immediately.
(b) EXERCISE PERIOD. Subject to the terms of this Warrant, the
Warrantholder shall have the right, at any time during the Exercise Period (as
defined below), to exercise this Warrant for any or all Warrant Shares and to
purchase from the Company up to the number of fully paid and nonassessable
shares of Common Stock which the Warrantholder may at the time be entitled to
purchase pursuant to this Warrant. The 250,000 shares of Common Stock subject to
this Warrant and any other securities that the Company may be required by the
operation of Section 3 to issue upon the exercise
<PAGE> 17
hereof are referred to herein as the "Warrant Shares." The "Exercise Period"
shall mean the period commencing on the Date of Original Issuance for such
Warrant Shares and ending at 5:00 P.M., Mountain Standard Time, on December 30,
1999 (the "Termination Date"), or if such date is a day on which banking
institutions are authorized by law to close, then on the next succeeding day
which shall not be such a day. If this Warrant is not exercised on or prior to
the Termination Date, this Warrant shall become void and all rights of the
Warrantholder hereunder shall cease.
(c) METHOD OF EXERCISE. The Warrantholder may exercise this
Warrant by surrender of this Warrant to the Company at its principal office in
Phoenix, Arizona (or at such other address as the Company may designate by
notice in writing to the Warrantholder at the address of the Warrantholder
appearing on the books of the Company or such other address as the Warrantholder
may designate in writing), together with the form of Election to Purchase
included as Exhibit A hereto, duly completed and signed, and upon payment to the
Company of the Warrant Price (as defined in Section 2) multiplied by the number
of Warrant Shares being purchased upon such exercise (the "Aggregate Warrant
Price"), together with all taxes applicable upon such exercise. Payment of the
Aggregate Warrant Price shall be made in cash or by certified check or cashier's
check, payable to the order of the Company.
(d) PARTIAL EXERCISE. At the election of the Warrantholder,
this Warrant shall be exercisable in whole or in part at any time, and from time
to time, during the Exercise Period.
(e) SHARE ISSUANCE UPON EXERCISE. Upon the exercise and
surrender of this Warrant certificate and payment of the Aggregate Warrant
Price, the Company shall issue and cause to be delivered with all reasonable
dispatch to the Warrantholder, in such name or names as the Warrantholder may
designate in writing, a certificate or certificates for the number of full
Warrant Shares so purchased upon the exercise of the Warrant, together with
cash, as provided in Section 4 hereof, with respect to any fractional Warrant
Shares otherwise issuable upon such surrender and, if applicable, the Company
shall issue and deliver a new Warrant to the Warrantholder for the number of
Warrant Shares not so exercised. Such certificate or certificates shall be
deemed to have been issued and any person so designated to be named therein
shall be deemed to have become a holder of such Warrant Shares as of the close
of business on the date of the surrender of the Warrant and payment of the
Aggregate Warrant Price, notwithstanding that the certificates representing such
Warrant Shares shall not actually have been delivered or that the stock transfer
books of the Company shall then be closed.
2. WARRANT PRICE. The price per share at which Warrant Shares
shall be purchasable upon the exercise of this Warrant shall be $2.00 per share,
subject to adjustment pursuant to Section 3 hereof (originally and as adjusted,
the "Warrant Price").
3. ADJUSTMENT OF NUMBER OF WARRANT SHARES AND WARRANT PRICE. The
Company agrees to reserve and shall keep reserved for issuance the number of
shares of Common Stock issuable upon exercise of this Warrant. The number of
Warrant Shares purchasable upon the exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time upon the happening of
certain events, as follows:
(a) In case the Company shall (1) pay a dividend or make a
distribution in shares of its Common Stock, (2) subdivide its outstanding Common
Stock into a greater number of shares, (3) combine its outstanding Common Stock
into a smaller number of shares, or (4) issue by reclassification of its Common
Stock any shares of capital stock of the Company (other than a change in par
value, or from par value to no par value, or from no par value to par value),
the number of Warrant Shares issuable
<PAGE> 18
upon exercise of this Warrant and the Warrant Price in effect immediately prior
thereto shall be adjusted as follows:
(i) The number of Warrant Shares issuable upon
exercise of this Warrant shall be adjusted by multiplying the number of Warrant
Shares issuable upon exercise of this Warrant immediately prior to such
adjustment by a fraction, the numerator of which shall be the number of shares
of Common Stock outstanding immediately after such adjustment, and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately prior to such adjustment; and
(ii) The Warrant Price shall be adjusted by
multiplying the Warrant Price in effect immediately prior to such adjustment by
a fraction, the numerator of which shall be the number of Warrant Shares
issuable upon exercise of this Warrant immediately prior to such adjustment, and
the denominator of which shall be the number of Warrant Shares as so adjusted.
An adjustment made pursuant to this Section 3(a) shall become effective
immediately after the record date in the case of a dividend or distribution
(provided, however, that such adjustments shall be reversed if such dividends or
distributions are not actually paid) and shall become effective immediately
after the effective date in the case of a subdivision, combination or
reclassification. If, as a result of an adjustment made pursuant to this Section
3(a), the Warrantholder shall become entitled to receive shares of two or more
classes of capital stock of the Company, the Board of Directors (whose
determination shall be conclusive and shall be evidenced by a resolution) shall
determine the allocation of the adjusted Warrant Price between or among the
shares of such classes of capital stock.
(b) In case of any reclassification of the outstanding Common
Stock (other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of a subdivision, combination or
stock dividend), or in case of any consolidation of the Company with, or merger
of the Company into, another corporation wherein the Company is not the
surviving entity, or in case of any sale of all, or substantially all, of the
property, assets, business and goodwill of the Company, the Company, or such
successor or purchasing corporation, as the case may be, shall provide, by a
written instrument delivered to the Warrantholder, that the Warrantholder shall
thereafter be entitled, upon exercise of this Warrant, to the kind and amount of
shares of stock or other equity securities, or other property or assets which
would have been receivable by such Warrantholder upon such reclassification,
consolidation, merger or sale, if this Warrant had been exercised immediately
prior thereto. Such corporation, which thereafter shall be deemed to be the
"Company" for purposes of this Warrant, shall provide in such written instrument
for adjustments to the Warrant Price which shall be as nearly equivalent as may
be practicable to the adjustments provided for in this Section 3.
(c) No adjustment in the number of securities purchasable
hereunder shall be required unless such adjustment would require an increase or
decrease of at least five percent (5%) in the number of securities (calculated
to the nearest full share or unit thereof) then purchasable upon the exercise of
this Warrant; provided, however, that any adjustment which by reason of this
Section 3(c) is not required to be made immediately shall be carried forward and
taken into account in any subsequent adjustment.
(d) For the purpose of this Section 3, the term "Common Stock"
shall mean (i) the class of stock designated as Common Stock of the Company at
January 28, 1999, or (ii) any other class of stock resulting from successive
changes or reclassifications of such Common Stock consisting solely of changes
in par value, or from par value to no par value, or from no par value to par
value. In the event that at any time, as a result of an adjustment made pursuant
to this Section 3, the Warrantholder shall
<PAGE> 19
become entitled to purchase any shares of the Company's capital stock other than
Common Stock, thereafter the number of such other shares so purchasable upon the
exercise of this Warrant and the Warrant Price of such shares shall be subject
to adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the shares contained in this
Section 3.
(e) Whenever the number of shares of Common Stock and/or other
securities purchasable upon the exercise of this Warrant or the Warrant Price is
adjusted as herein provided, the Company shall cause to be promptly mailed to
the Warrantholder by first class mail, postage prepaid, notice of such
adjustment and a certificate of the Company's chief financial officer setting
forth the number of shares of Common Stock and/or other securities purchasable
upon the exercise of this Warrant, the Warrant Price after such adjustment, a
brief statement of the facts requiring such adjustment, and the computation by
which such adjustment was made.
(f) Irrespective of any adjustments in the Warrant Price or
the number or kind of securities purchasable upon the exercise of this Warrant,
the Warrant certificate or certificates theretofore or thereafter issued may
continue to express the same price or number or kind of securities stated in
this Warrant initially issuable hereunder.
4. FRACTIONAL INTEREST. The Company shall not be required to
issue fractional shares upon exercise of this Warrant, but shall pay an amount
in cash equal to the closing price of the Company's Common Stock on the Nasdaq
SmallCap Market or other trading market on the day preceding the date of the
surrender of this Warrant pursuant to Section 1(c) hereof, or if there is no
public market, cash equal to the then fair market value of the shares as
reasonably determined by the Board of Directors of the Company, in its sole
discretion, multiplied by such fraction.
5. TRANSFER PROHIBITION. Neither this Warrant nor any rights
hereunder may be sold, exchanged, conveyed, assigned, given, pledged,
hypothecated or otherwise transferred by the Warrantholder.
6. NO RIGHTS AS SHAREHOLDER; NOTICES TO WARRANTHOLDER. Prior to
the exercise of this Warrant pursuant to the terms hereof, nothing contained in
this Warrant shall be construed as conferring upon the Warrantholder any rights
as a shareholder of the Company, either at law or in equity, including the right
to vote, receive dividends, consent or receive notices as a shareholder with
respect to any meeting of shareholders for the election of directors of the
Company or for any other matter.
7. NOTICES. Any notice given pursuant to this Warrant by the
Company or by the Warrantholder shall be in writing and shall be deemed to have
been duly given upon (a) personal delivery, (b) transmitter's confirmation of
the receipt of a facsimile transmission, (c) confirmed delivery by a standard
overnight carrier, or (d) the expiration of three business days after the day
when mailed by United States Postal Service by certified or registered mail,
return receipt requested, postage prepaid at the following addresses:
If to the Company:
Bionutrics, Inc.
2425 E. Camelback Road, Suite 650
Phoenix, Arizona 85016
Attention: George E. Duck, Jr.
<PAGE> 20
with a copy to:
O'Connor, Cavanagh, Anderson, Killingsworth & Beshears, P.A.
One E. Camelback Road, Suite 1100
Phoenix, Arizona 85012
Attention: Jean E. Harris, Esq.
If to the Warrantholder:
Ropart Investments LLC
100 Field Point road
Greenwich, Connecticut 06830
Attention: Patricia Elliott
with a copy to:
Finn Dixon& Herling
1 Landmark Square
Suite 1404
Stamford, Connecticut 06901
Attention: Harold B. Finn III, Esq.
Each party hereto may, from time to time, change the address to which
notices to it are to be transmitted, delivered or mailed hereunder by notice in
accordance herewith to the other party.
8. INVESTMENT REPRESENTATION. The Warrantholder hereby represents
to the Company that it is acquiring this Warrant for its own account, as
principal, for investment and not with a view to or the intent to participate
in, directly or indirectly, the resale, assignment, distribution or
fractionalization of all or any part hereof. Further, the Warrantholder shall
furnish the Company an investment letter, in form and substance satisfactory to
the Company, prior to the issuance of any Warrant Shares or other securities
issuable upon the exercise hereof, to the effect that such securities, and any
additional securities of the Company for which such securities may be exercised
or exchanged or into which they may ultimately be converted, if not registered
pursuant to applicable state and federal securities laws, will be acquired for
investment and not with a view to the sale or distribution thereof. The
Warrantholder hereby further represents that it has been provided with, or given
reasonable access to, full and fair disclosure of all material information
regarding the Company, this Warrant, and the Common Stock.
9. GENERAL PROVISIONS.
(a) SUCCESSORS. All covenants and provisions of this Warrant
shall bind and inure to the benefit of the respective successors and assigns of
the parties hereto.
(b) CHOICE OF LAW. This Warrant and the rights of the parties
hereunder shall be governed by and construed in accordance with the laws of the
State of Arizona, including all matters of construction, validity, performance,
and enforcement, and without giving effect to the principles of any Arizona or
other conflict-of-law provisions to the contrary.
<PAGE> 21
(c) ENTIRE AGREEMENT. Except as provided herein, this Warrant,
including exhibits, contains the entire agreement of the parties, and supersedes
all existing negotiations, representations or agreements and all other oral,
written, or other communications between them concerning the subject matter of
this Warrant.
(d) SEVERABILITY. If any provision of this Warrant is
unenforceable, invalid, or violates applicable law, such provision shall be
deemed stricken and shall not affect the enforceability of any other provisions
of this Warrant.
(e) CAPTIONS. The captions in this Warrant are inserted only
as a matter of convenience and for reference and shall not be deemed to define,
limit, enlarge, or describe the scope of this Warrant or the relationship of the
parties, and shall not affect this Warrant or the construction of any provisions
herein.
IN WITNESS WHEREOF, the Company caused this Warrant to be duly executed
as of the date first above written.
BIONUTRICS, INC., a Nevada corporation
By: Ronald H. Lane
------------------------------------
Its: President
------------------------------------
The Warrantholder hereby agrees to and accepts the terms and conditions
of this Warrant this 28th day of January, 1999.
FOR ROPART INVESTMENTS LLC
/s/Robert B. Goergen
----------------------------------------
By: Robert B. Goergen
-----------------------------------
Its: Managing Member
-----------------------------------
<PAGE> 22
EXHIBIT A
ELECTION TO PURCHASE
Bionutrics, Inc.
2425 E. Camelback Road, Suite 650
Phoenix, Arizona 85016
The undersigned hereby irrevocably elects to exercise the
right of purchase set forth in the attached Warrant to purchase thereunder
shares of the Common Stock (the "Warrant Shares") provided
for therein and requests that the Warrant Shares be issued in the name of
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please Print Name, Address and SSN or EIN of Shareholder above)
Dated:
-------------------
Name of Warrantholder or Assignee:
---------------------------------------------
(Please Print)
Signature:
--------------------------------------------------------------------
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant.)
Address:
---------------------------------------------------------------------
---------------------------------------------------------------------
Aggregate Warrant Price Paid: $
--------------------
Method of payment:
-----------------------------------------------------------
(Please Print)
- -------------------------------------------------------------------------------
Medallion Signature Guarantee (required if an assignment of Warrant Shares
acquired on exercise is made upon exercise.)
<PAGE> 23
NEITHER THIS WARRANT, NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF, HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY APPLICABLE STATE SECURITIES LAW. SUCH SECURITIES MAY
NOT BE SOLD OR OTHERWISE TRANSFERRED UNLESS (i) A REGISTRATION STATEMENT UNDER
THE SECURITIES ACT AND SUCH APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME
EFFECTIVE WITH REGARD THERETO OR (ii) IN THE OPINION OF COUNSEL IN FORM AND
SUBSTANCE REASONABLY ACCEPTABLE TO THE COMPANY, REGISTRATION UNDER THE
SECURITIES ACT AND SUCH APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN
CONNECTION WITH A PROPOSED SALE OR TRANSFER.
COMMON STOCK
PURCHASE WARRANT
For the Purchase of Shares of
Common Stock of
BIONUTRICS, INC.
(Par Value $0.001 Per Share)
(Incorporated under the Laws of the State of Nevada)
VOID AFTER 5:00 P.M. PST ON DECEMBER 30, 2000
Date of Original Issuance: January 28, 1999
This is to certify that, for value received, Ropart Investments LLC, or
assigns (the "Warrantholder"), is entitled, subject to the terms and conditions
hereinafter set forth, to purchase 250,000 shares of common stock, par value
$0.001 per share (the "Common Stock"), of BIONUTRICS, INC., a Nevada corporation
(the "Company"), for the Warrant Price (as defined below), and to receive a
certificate or certificates for the shares of Common Stock so purchased. This
Warrant is being issued in connection with the terms of that certain Stock
Purchase Agreement dated January 28, 1999, by and between the Warrantholder and
the Company.
1. TERMS AND EXERCISE OF WARRANT.
(a) WARRANT SHARES. Warrant Shares (as defined below) may be
acquired in accordance with the terms of this Warrant until the Termination Date
(as defined below). The Warrantholder may exercise this Warrant with respect to
all Warrant Shares effective immediately.
(b) EXERCISE PERIOD. Subject to the terms of this Warrant, the
Warrantholder shall have the right, at any time during the Exercise Period (as
defined below), to exercise this Warrant for any or all Warrant Shares and to
purchase from the Company up to the number of fully paid and nonassessable
shares of Common Stock which the Warrantholder may at the time be entitled to
purchase pursuant to this Warrant. The 250,000 shares of Common Stock subject to
this Warrant and any other securities that the Company may be required by the
operation of Section 3 to issue upon the exercise
<PAGE> 24
hereof are referred to herein as the "Warrant Shares." The "Exercise Period"
shall mean the period commencing on the Date of Original Issuance for such
Warrant Shares and ending at 5:00 P.M., Mountain Standard Time, on December 30,
2000 (the "Termination Date"), or if such date is a day on which banking
institutions are authorized by law to close, then on the next succeeding day
which shall not be such a day. If this Warrant is not exercised on or prior to
the Termination Date, this Warrant shall become void and all rights of the
Warrantholder hereunder shall cease.
(c) METHOD OF EXERCISE. The Warrantholder may exercise this
Warrant by surrender of this Warrant to the Company at its principal office in
Phoenix, Arizona (or at such other address as the Company may designate by
notice in writing to the Warrantholder at the address of the Warrantholder
appearing on the books of the Company or such other address as the Warrantholder
may designate in writing), together with the form of Election to Purchase
included as Exhibit A hereto, duly completed and signed, and upon payment to the
Company of the Warrant Price (as defined in Section 2) multiplied by the number
of Warrant Shares being purchased upon such exercise (the "Aggregate Warrant
Price"), together with all taxes applicable upon such exercise. Payment of the
Aggregate Warrant Price shall be made in cash or by certified check or cashier's
check, payable to the order of the Company.
(d) PARTIAL EXERCISE. At the election of the Warrantholder,
this Warrant shall be exercisable in whole or in part at any time, and from time
to time, during the Exercise Period.
(e) SHARE ISSUANCE UPON EXERCISE. Upon the exercise and
surrender of this Warrant certificate and payment of the Aggregate Warrant
Price, the Company shall issue and cause to be delivered with all reasonable
dispatch to the Warrantholder, in such name or names as the Warrantholder may
designate in writing, a certificate or certificates for the number of full
Warrant Shares so purchased upon the exercise of the Warrant, together with
cash, as provided in Section 4 hereof, with respect to any fractional Warrant
Shares otherwise issuable upon such surrender and, if applicable, the Company
shall issue and deliver a new Warrant to the Warrantholder for the number of
Warrant Shares not so exercised. Such certificate or certificates shall be
deemed to have been issued and any person so designated to be named therein
shall be deemed to have become a holder of such Warrant Shares as of the close
of business on the date of the surrender of the Warrant and payment of the
Aggregate Warrant Price, notwithstanding that the certificates representing such
Warrant Shares shall not actually have been delivered or that the stock transfer
books of the Company shall then be closed.
2. WARRANT PRICE. The price per share at which Warrant Shares
shall be purchasable upon the exercise of this Warrant shall be $2.00 per share,
subject to adjustment pursuant to Section 3 hereof (originally and as adjusted,
the "Warrant Price").
3. ADJUSTMENT OF NUMBER OF WARRANT SHARES AND WARRANT PRICE. The
Company agrees to reserve and shall keep reserved for issuance the number of
shares of Common Stock issuable upon exercise of this Warrant. The number of
Warrant Shares purchasable upon the exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time upon the happening of
certain events, as follows:
(a) In case the Company shall (1) pay a dividend or make a
distribution in shares of its Common Stock, (2) subdivide its outstanding Common
Stock into a greater number of shares, (3) combine its outstanding Common Stock
into a smaller number of shares, or (4) issue by reclassification of its Common
Stock any shares of capital stock of the Company (other than a change in par
value, or from par value to no par value, or from no par value to par value),
the number of Warrant Shares issuable
<PAGE> 25
upon exercise of this Warrant and the Warrant Price in effect immediately prior
thereto shall be adjusted as follows:
(i) The number of Warrant Shares issuable upon
exercise of this Warrant shall be adjusted by multiplying the number of Warrant
Shares issuable upon exercise of this Warrant immediately prior to such
adjustment by a fraction, the numerator of which shall be the number of shares
of Common Stock outstanding immediately after such adjustment, and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately prior to such adjustment; and
(ii) The Warrant Price shall be adjusted by
multiplying the Warrant Price in effect immediately prior to such adjustment by
a fraction, the numerator of which shall be the number of Warrant Shares
issuable upon exercise of this Warrant immediately prior to such adjustment, and
the denominator of which shall be the number of Warrant Shares as so adjusted.
An adjustment made pursuant to this Section 3(a) shall become effective
immediately after the record date in the case of a dividend or distribution
(provided, however, that such adjustments shall be reversed if such dividends or
distributions are not actually paid) and shall become effective immediately
after the effective date in the case of a subdivision, combination or
reclassification. If, as a result of an adjustment made pursuant to this Section
3(a), the Warrantholder shall become entitled to receive shares of two or more
classes of capital stock of the Company, the Board of Directors (whose
determination shall be conclusive and shall be evidenced by a resolution) shall
determine the allocation of the adjusted Warrant Price between or among the
shares of such classes of capital stock.
(b) In case of any reclassification of the outstanding Common
Stock (other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of a subdivision, combination or
stock dividend), or in case of any consolidation of the Company with, or merger
of the Company into, another corporation wherein the Company is not the
surviving entity, or in case of any sale of all, or substantially all, of the
property, assets, business and goodwill of the Company, the Company, or such
successor or purchasing corporation, as the case may be, shall provide, by a
written instrument delivered to the Warrantholder, that the Warrantholder shall
thereafter be entitled, upon exercise of this Warrant, to the kind and amount of
shares of stock or other equity securities, or other property or assets which
would have been receivable by such Warrantholder upon such reclassification,
consolidation, merger or sale, if this Warrant had been exercised immediately
prior thereto. Such corporation, which thereafter shall be deemed to be the
"Company" for purposes of this Warrant, shall provide in such written instrument
for adjustments to the Warrant Price which shall be as nearly equivalent as may
be practicable to the adjustments provided for in this Section 3.
(c) No adjustment in the number of securities purchasable
hereunder shall be required unless such adjustment would require an increase or
decrease of at least five percent (5%) in the number of securities (calculated
to the nearest full share or unit thereof) then purchasable upon the exercise of
this Warrant; provided, however, that any adjustment which by reason of this
Section 3(c) is not required to be made immediately shall be carried forward and
taken into account in any subsequent adjustment.
(d) For the purpose of this Section 3, the term "Common Stock"
shall mean (i) the class of stock designated as Common Stock of the Company at
January 28, 1999, or (ii) any other class of stock resulting from successive
changes or reclassifications of such Common Stock consisting solely of changes
in par value, or from par value to no par value, or from no par value to par
value. In the event that at any time, as a result of an adjustment made pursuant
to this Section 3, the Warrantholder shall
<PAGE> 26
become entitled to purchase any shares of the Company's capital stock other than
Common Stock, thereafter the number of such other shares so purchasable upon the
exercise of this Warrant and the Warrant Price of such shares shall be subject
to adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the shares contained in this
Section 3.
(e) Whenever the number of shares of Common Stock and/or other
securities purchasable upon the exercise of this Warrant or the Warrant Price is
adjusted as herein provided, the Company shall cause to be promptly mailed to
the Warrantholder by first class mail, postage prepaid, notice of such
adjustment and a certificate of the Company's chief financial officer setting
forth the number of shares of Common Stock and/or other securities purchasable
upon the exercise of this Warrant, the Warrant Price after such adjustment, a
brief statement of the facts requiring such adjustment, and the computation by
which such adjustment was made.
(f) Irrespective of any adjustments in the Warrant Price or
the number or kind of securities purchasable upon the exercise of this Warrant,
the Warrant certificate or certificates theretofore or thereafter issued may
continue to express the same price or number or kind of securities stated in
this Warrant initially issuable hereunder.
4. FRACTIONAL INTEREST. The Company shall not be required to
issue fractional shares upon exercise of this Warrant, but shall pay an amount
in cash equal to the closing price of the Company's Common Stock on the Nasdaq
SmallCap Market or other trading market on the day preceding the date of the
surrender of this Warrant pursuant to Section 1(c) hereof, or if there is no
public market, cash equal to the then fair market value of the shares as
reasonably determined by the Board of Directors of the Company, in its sole
discretion, multiplied by such fraction.
5. TRANSFER PROHIBITION. Neither this Warrant nor any rights
hereunder may be sold, exchanged, conveyed, assigned, given, pledged,
hypothecated or otherwise transferred by the Warrantholder.
6. NO RIGHTS AS SHAREHOLDER; NOTICES TO WARRANTHOLDER. Prior to
the exercise of this Warrant pursuant to the terms hereof, nothing contained in
this Warrant shall be construed as conferring upon the Warrantholder any rights
as a shareholder of the Company, either at law or in equity, including the right
to vote, receive dividends, consent or receive notices as a shareholder with
respect to any meeting of shareholders for the election of directors of the
Company or for any other matter.
7. NOTICES. Any notice given pursuant to this Warrant by the
Company or by the Warrantholder shall be in writing and shall be deemed to have
been duly given upon (a) personal delivery, (b) transmitter's confirmation of
the receipt of a facsimile transmission, (c) confirmed delivery by a standard
overnight carrier, or (d) the expiration of three business days after the day
when mailed by United States Postal Service by certified or registered mail,
return receipt requested, postage prepaid at the following addresses:
If to the Company:
Bionutrics, Inc.
2425 E. Camelback Road, Suite 650
Phoenix, Arizona 85016
Attention: George E. Duck, Jr.
<PAGE> 27
with a copy to:
O'Connor, Cavanagh, Anderson, Killingsworth & Beshears, P.A.
One E. Camelback Road, Suite 1100
Phoenix, Arizona 85012
Attention: Jean E. Harris, Esq.
If to the Warrantholder:
Ropart Investments LLC
100 Field Point road
Greenwich, Connecticut 06830
Attention: Patricia Elliott
with a copy to:
Finn Dixon & Herling
1 Landmark Square
Suite 1404
Stamford, Connecticut 06901
Attention: Harold B. Finn III, Esq.
Each party hereto may, from time to time, change the address to which
notices to it are to be transmitted, delivered or mailed hereunder by notice in
accordance herewith to the other party.
8. INVESTMENT REPRESENTATION. The Warrantholder hereby represents
to the Company that it is acquiring this Warrant for its own account, as
principal, for investment and not with a view to or the intent to participate
in, directly or indirectly, the resale, assignment, distribution or
fractionalization of all or any part hereof. Further, the Warrantholder shall
furnish the Company an investment letter, in form and substance satisfactory to
the Company, prior to the issuance of any Warrant Shares or other securities
issuable upon the exercise hereof, to the effect that such securities, and any
additional securities of the Company for which such securities may be exercised
or exchanged or into which they may ultimately be converted, if not registered
pursuant to applicable state and federal securities laws, will be acquired for
investment and not with a view to the sale or distribution thereof. The
Warrantholder hereby further represents that it has been provided with, or given
reasonable access to, full and fair disclosure of all material information
regarding the Company, this Warrant, and the Common Stock.
9. GENERAL PROVISIONS.
(a) SUCCESSORS. All covenants and provisions of this Warrant
shall bind and inure to the benefit of the respective successors and assigns of
the parties hereto.
(b) CHOICE OF LAW. This Warrant and the rights of the parties
hereunder shall be governed by and construed in accordance with the laws of the
State of Arizona, including all matters of construction, validity, performance,
and enforcement, and without giving effect to the principles of any Arizona or
other conflict-of-law provisions to the contrary.
<PAGE> 28
(c) ENTIRE AGREEMENT. Except as provided herein, this Warrant,
including exhibits, contains the entire agreement of the parties, and supersedes
all existing negotiations, representations or agreements and all other oral,
written, or other communications between them concerning the subject matter of
this Warrant.
(d) SEVERABILITY. If any provision of this Warrant is
unenforceable, invalid, or violates applicable law, such provision shall be
deemed stricken and shall not affect the enforceability of any other provisions
of this Warrant.
(e) CAPTIONS. The captions in this Warrant are inserted only
as a matter of convenience and for reference and shall not be deemed to define,
limit, enlarge, or describe the scope of this Warrant or the relationship of the
parties, and shall not affect this Warrant or the construction of any provisions
herein.
IN WITNESS WHEREOF, the Company caused this Warrant to be duly executed
as of the date first above written.
BIONUTRICS, INC., a Nevada corporation
By: Ronald H. Lane
---------------------------------
Its: President
---------------------------------
The Warrantholder hereby agrees to and accepts the terms and conditions
of this Warrant this 28th day of January, 1999.
FOR ROPART INVESTMENTS LLC
/s/Robert B. Goergen
-------------------------------------
By: Robert B. Goergen
---------------------------------
Its: Managing Member
---------------------------------
<PAGE> 29
EXHIBIT A
ELECTION TO PURCHASE
Bionutrics, Inc.
2425 E. Camelback Road, Suite 650
Phoenix, Arizona 85016
The undersigned hereby irrevocably elects to exercise the
right of purchase set forth in the attached Warrant to purchase thereunder
shares of the Common Stock (the "Warrant Shares") provided
for therein and requests that the Warrant Shares be issued in the name of
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please Print Name, Address and SSN or EIN of Shareholder above)
Dated:
--------------------
Name of Warrantholder or Assignee:
--------------------------------------------
(Please Print)
Signature:
---------------------------------------------------------------------
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant.)
Address:
-----------------------------------------------------------
-----------------------------------------------------------
Aggregate Warrant Price Paid: $
--------------------
Method of payment:
----------------------------------------------------------
(Please Print)
- --------------------------------------------------------------------------------
Medallion Signature Guarantee (required if an assignment of Warrant Shares
acquired on exercise is made upon exercise.)
<PAGE> 1
Exhibit 10.23
WARRANT AGREEMENT effective as of April 9, 1998 between
Bionutrics, Inc., a Nevada corporation (the "Company"), and The Shemano Group,
Inc. (hereinafter referred to variously as "Holder").
W I T N E S S E T H:
WHEREAS, Holder and the Company are parties to a certain
investment banking agreement dated April 9, 1998 (the "Investment Agreement");
and
WHEREAS, pursuant to the terms of the Investment Agreement,
the Company has agreed to issue Holder certain warrants to purchase shares of
the Company's common stock, par value $.001 ("Common Stock") in consideration
for and as part of Holder's compensation in connection with Holder's financial
advisory services; and
NOW, THEREFORE, in consideration of the services to be
provided pursuant to the Investment Agreement and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agrees as follows:
1. Grant. Holder is hereby granted the right to purchase up to
an aggregate of 100,000 shares of Common Stock ("Warrants") at the Exercise
Price (as defined in Section 2), subject to adjustment as provided in Section 8,
during the exercise period which, for purposes of the first 50,000 shares, shall
be the period commencing on the date hereof and ending at 5:30 p.m. Eastern
Standard Time three years thereafter and, for purposes of the second 50,000
shares, shall be the period commencing 180 days from the date hereof and ending
at 5:30 p.m. Eastern Standard Time three years from the date hereof (the
"Exercise Period").
<PAGE> 2
2. Exercise Price.
The term "Exercise Price" shall mean $4 per share of Common
Stock as may be adjusted from time to time pursuant to Section 8.
3. Warrant Certificates. The warrant certificates delivered
pursuant to this Warrant Agreement shall be in the form set forth in Exhibit A
with such appropriate insertions, omissions, substitutions and other variations
as required or permitted by this Warrant Agreement (the "Warrant Certificates").
4. Exercise of Warrant.
The Warrants are exercisable at the Exercise Price and
payable to the Company at its executive offices located at 2425 East Camelback
Road, Ste. 650, Phoenix, AZ 85016, attn: Chief Financial Officer (or such other
officer as designated to Holder by the Company), by certified or official bank
check in New York Clearing House funds or wire transfer. Upon surrender of a
Warrant Certificate, submission of an executed Form of Election to Purchase in
the form set forth in Exhibit B and payment of the Exercise Price, Holder shall
be entitled to receive a certificate for the shares of Common Stock so
purchased. The purchase rights represented by each Warrant Certificate are
exercisable at the option of Holder in whole or in part, but not as to
fractional shares of the Common Stock underlying the Warrants or in increments
of less than 1,000 shares of Common Stock underlying the Warrants.
5. Issuance of Certificates. Upon the exercise of Warrants the
Company shall promptly issue to Holder a certificate for the shares of Common
Stock underlying such Warrant Certificate. If Holder purchases less than all the
shares of Common Stock purchasable under any Warrant Certificate, the Company
shall cancel said Warrant Certificate upon the surrender thereof
2
<PAGE> 3
and shall execute and deliver a new Warrant Certificate of like tenor for the
balance of the shares of Common Stock. Subject to the terms and conditions of
this Warrant Agreement, Holder shall be deemed the record holder of the shares
of Common Stock on the date of exercise of the Warrant, irrespective of the date
of delivery of the Common Stock certificate.
6. Restriction On Transfer of Warrants. Holder may not sell,
assign, pledge, hypothecate or otherwise transfer any rights under a Warrant,
except pursuant to the express written consent of the Company.
7.1 Registration Under the Securities Act of 1933. Neither the
Warrants nor the shares of Common Stock issuable upon exercise of the Warrants
have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), or any applicable state securities or blue sky laws. Upon
exercise of the Warrants, the Company may cause a legend in substantially the
form set forth below to be placed on each certificate representing the shares of
Common Stock issued.
The securities represented by this certificate have not been
registered for public resale under the Securities Act of 1933,
as amended ("Securities Act"), and may not be offered,
transferred or sold except pursuant to (i) an effective
registration statement under the Securities Act and any
applicable state securities or blue sky laws, (ii) to the
extent applicable, Rule 144 under the Securities Act (or any
similar rule under the Securities Act relating to the
disposition of securities) together with an opinion of
counsel, if such opinion shall be reasonably satisfactory to
issuer's counsel, that such transfer is permitted or (iii) an
opinion of counsel, if such opinion shall be reasonably
satisfactory to issuer's counsel, that an exemption from
registration under the Securities Act and any applicable state
securities or blue sky laws is available.
3
<PAGE> 4
7.2 Registration Rights. The Company shall file a registration
statement with respect to the shares of common stock underlying the Warrants' as
soon as practicable, but in no event later than 60 days after a request by
Holder, which request may only be made after such common stock closes on the
Nasdaq Small Cap or other national exchange at or above the Exercise Price for
five consecutive trading days or 12 such days within any consecutive 15-day
trading period provided that the Company shall not be required to so file unless
it is entitled to use of form S-3 or successor or like form authorizing
incorporation by reference to the information called for by items 401-403 of
Regulation S-K of the Securities Act. Following such filing, the Company shall
use its best efforts to have the registration statement underlying the Warrants
have been sold pursuant to the registration statement or pursuant to Rule 144 or
Section 4(2) of the Securities Act or (z) date on which the Company supplies to
Holder an opinion of counsel, or the Holder receives an opinion of counsel
reasonably satisfactory to the Company, that the shares underlying the Warrants
may be sold by non-affiliates under the provisions of Rule 144 under the
Securities Act (subject to volume and manner of sale restrictions).
Adjustments to Exercise and Number of Securities.
8.1 Recapitalization and Reclassifications. In case the
Company shall at any time effect a recapitalization or reclassification of such
character that the shares of Common Stock shall be changed into or become
exchangeable for a larger or smaller number of shares, then upon the effective
date thereof the number of shares of Common Stock which Holder shall be entitled
to purchase upon exercise of the Warrant shall be increased or decreased, as the
case may be, in direct proportion to the increase or decrease in the number of
shares of Common Stock by reason of such recapitalization or reclassification,
and the Exercise Price shall be, in the case of an increase in the
4
<PAGE> 5
number of shares, proportionately decreased and, in the case of a decrease in
the number of shares, proportionately increased.
8.2 Sale; Merger; Consolidation. In the case of a transfer or
sale of all or substantially all the capital stock or assets of the Company or
in the case of any consolidation or merger of the Company with another entity
(other than a consolidation or merger which does not result in any
reclassification or change of the outstanding Common Stock), the transferee,
purchaser or entity formed by or surviving a consolidation or merger, as the
case may be, shall execute and deliver to Holder a supplemental warrant
agreement providing Holder shall have the right during the Exercise Period to
receive, upon exercise of a Warrant, the kind and amount of shares of stock
and/or other securities receivable upon such transfer, sale, consolidation or
merger, as the case may be, by a holder of the number of shares of Common Stock
for which such Warrant might have been exercised immediately prior to such
transfer, sale, consolidation or merger, as the case may be. Such supplemental
warrant agreement shall provide for adjustments which shall be identical to the
adjustments provided in this Section 8.
8.3 No Adjustment of Exercise Price in Certain Cases. No
adjustment of the Exercise Price shall be made if the amount of an adjustment is
less than $.02 per share of Common Stock, provided that any adjustment that
would otherwise be required then to be made shall be carried forward and shall
be made at the time of and together with the next subsequent adjustment which,
together with any such adjustment, shall amount to at least $.02 per share of
Common Stock.
8.4 Dividends and Other Distributions. In the event the
Company declares a dividend payable in shares of Common Stock, Holder shall be
entitled to receive upon exercise of the Warrant, in addition to the number of
shares of Common Stock as to which the Warrant is
5
<PAGE> 6
exercised, such additional shares of Common Stock as Holder would have received
had the Warrant been exercised immediately prior to such record date for the
dividend. In the event the Company declares a dividend other than a dividend of
Common Stock, Holder shall thereafter be entitled to receive, in addition to the
shares of Common Stock receivable upon the exercise thereof, upon the exercise
of such Warrants, such non-Common Stock dividend as Holder would have received
had the Warrant been exercised immediately prior to such record date for the
dividend.
8.5 If, as a result of an adjustment made pursuant to this
Section 8, Holder shall upon exercise of the Warrants become entitled to receive
securities or assets other than Common Stock then, wherever appropriate, all
references herein to shares of Common Stock shall be deemed to refer to and
include such other securities or assets and thereafter the number of such other
securities or assets shall be subject to adjustment from time to time in a
manner and upon terms as nearly equivalent as practicable to the provisions of
this Section 8.
9. Issuance of New Warrant Certificate. Upon receipt by the
Company of evidence reasonably satisfactory to it of a loss, theft, destruction
or mutilation of a Warrant Certificate, reimbursement by Holder to the Company
of all incidental expenses and, in the case of loss, theft or destruction,
receipt of indemnity or security from Holder reasonably satisfactory to it, or,
in the case of mutilated, upon surrender and cancellation of the mutilated
Warrant Certificate by Holder, the Company will make and deliver a new Warrant
Certificate to Holder of like tenor in lieu thereof.
10. Elimination of Fractional Interests. The Company shall not
be required to issue certificates representing fractions of shares of Common
Stock upon the exercise of the
6
<PAGE> 7
Warrants. The Company shall have the option to make payment in cash in respect
of any fractional shares or to round any fraction up to the nearest whole number
of shares of Common Stock.
11. Reservation and Listing of Securities. The Company shall
at all times reserve and keep available out of its authorized shares of Common
Stock, solely for the purpose of issuance upon the exercise of the Warrants,
such number of shares of Common Stock as shall be issuable upon the exercise
thereof.
12. Representations and Warranties.
(a) Holder represents and warrants to the Company that the
Warrants are being acquired solely for Holder's own account, for investment, not
for the interest of any other and are not being acquired with a view to or for
resale, distribution, assignment, subdivision or fractionalization thereof, and
Holder has no present plans to enter into any contract, undertaking, agreement
or arrangement for such purpose.
(b) Holder represents and warrants to the Company that it
is a "sophisticated investor," i.e., an entity with such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of a prospective investment in the Warrants.
13. Notice to Warrant Holders. Nothing contained in this
Warrant Agreement shall be construed as conferring upon Holder the right to
vote, consent or receive notice as a stockholder in respect of any meetings of
stockholders for the election of directors or any other matter, or as having any
rights whatsoever as a stockholder of the Company.
14. Notices. Any notice or demand pursuant to this Warrant
Agreement shall be in writing and shall be deemed sufficiently given or made (i)
upon personal delivery; (ii) the day
7
<PAGE> 8
following delivery to a reputable overnight courier, or (iii) three days
following mailing by certified or registered mail, return receipt requested,
postage prepaid, and addressed, until the other party is notified of another
address, as follows:
If to the Company:
Bionutrics, Inc.
2425 East Camelback Road
Suite 650
Phoenix, AZ 85016
Attn: Ronald Lane, Chief Executive Officer
with a copy to:
Friedman Siegelbaum LLP
399 Park Avenue
20th Floor
New York, New York 10022
Attn: J. Robert Horton, Esq.
If to Holder:
The Shemano Group, Inc.
601 California Street
Suite 1850
San Francisco, California 94108
Attn: Gary J. Shemano
with a copy to:
Keesal, Young & Logan
Suite 1500
Four Embarcadero Center
San Francisco, California 94111
Attn: Kelly Moynihan
15. Supplements and Amendments. Except as otherwise expressly
provided herein, the provisions of this Warrant Agreement may be amended or
waived at any time only by the written agreement of the parties hereto. Any
waiver, permit, consent or approval of kind or
8
<PAGE> 9
character on the part of each Company or Holder of any provisions or conditions
of this Warrant Agreement must be made in writing and shall be effective only to
the extent specifically set forth in such writing.
16. Successors. All the covenants and provisions of this
Warrant Agreement shall be binding upon and inure to the benefit of the Company,
Holder and its respective successors and permitted assigns hereunder.
17. Governing Law; Submission to Jurisdiction. (a) This
Warrant Agreement and each Warrant Certificate issued hereunder shall be deemed
to be a contract made under the laws of the State of New York and for all the
purposes shall be construed in accordance with the laws of said State without
giving effect to the rules of said State governing the conflicts of laws.
(b) Arbitration. This Warrant Agreement and all
controversies that may arise between Holder and the Company hereunder shall be
determined by arbitration. The parties understand that
(i) arbitration is final and binding on the parties;
(ii) the parties waive their right to seek remedies in
court, including the right to a jury trial;
(iv) pre-arbitration discovery is generally more limited
than and different from court proceedings;
(v) the arbitrator's award is not required to include
factual findings or legal reasoning and each party's right to appeal or to seek
modifications or rulings by the arbitrators is strictly limited; and
9
<PAGE> 10
(vi) the panel of arbitrators typically includes a minority
or arbitrators who were or are affiliated with the securities industry.
18. Entire Agreement; Modification. This Warrant Agreement
contains the entire understanding between the parties with respect to the
subject matter hereof and may not be modified or amended except by both parties.
19. Severability. If any provision of this Warrant Agreement
shall be held to be invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provision hereof.
20. Captions. The caption headings of the Sections of this
Warrant Agreement are for convenience of reference only and are not intended,
nor should they be construed as, a part of this Warrant Agreement and shall be
given no substantive effect.
21. Benefits of this Warrant Agreement. Nothing in this
Warrant Agreement shall be construed to give to any person or entity other than
the Company and Holder any legal or equitable right, remedy or claim hereunder;
and this Warrant Agreement shall be for the sole and exclusive benefit of the
Company and Holder.
22. Counterparts. This Warrant Agreement may be executed in
any number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and such counterparts shall together constitute but
one and the same instrument.
10
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have caused this Warrant
Agreement to be duly executed, as of the day and year first above written.
BIONUTRICS, INC.
By: /s/Ronald H. Lane
------------------------------------
Name: Ronald H. Lane
Title: President
THE SHEMANO GROUP, INC.
By: /s/Gary J. Shemano
------------------------------------
Name: Gary J. Shemano
Title: President
11
<PAGE> 12
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF STOCK ISSUABLE
UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), FOR PUBLIC RESALE AND MAY NOT BE OFFERED,
TRANSFERRED OR SOLD EXCEPT PURSUANT TO (I) AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES OR BLUE SKY LAWS,
(ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER THE SECURITIES ACT (OR ANY SIMILAR
RULE UNDER THE SECURITIES ACT RELATING TO THE DISPOSITION OF SECURITIES)
TOGETHER WITH AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO ISSUER'S COUNSEL
THAT SUCH TRANSFER IS PERMITTED OR (iii) AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO ISSUER'S COUNSEL THAT AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES OR BLUE SKY LAWS IS
AVAILABLE.
THE EXERCISE, TRANSFER AND EXCHANGE OF THE WARRANTS REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO THE WARRANT AGREEMENT BETWEEN BIONUTRICS, INC. AND
THE SHEMANO GROUP, INC.
50,000 Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that Gary J. Shemano, c/o
The Shemano Group, 601 California Street, #1850, San Francisco, CA 94108, Social
Security # ###-##-####, is the registered holder of 50,000 Warrants to purchase,
at any time from the date hereof, until 5:30 p.m. Eastern Standard Time on April
9, 2001 ("Expiration Date"), up to 50,000 fully-paid and non-assessable shares
of common stock, par value $.001 per share ("Common Stock"), of Bionutrics, Inc.
(the "Company") at an exercise price of $4 per share of Common Stock ("Exercise
Price"), upon surrender of this Warrant Certificate and payment of the Exercise
Price to the Company and subject to the warrant agreement dated April 9, 1998
between the Company and The Shemano Group, Inc. (the "Warrant Agreement").
At 5:31 p.m. Eastern Standard Time on the Expiration Date all
Warrants evidenced hereby, unless exercised prior thereto, shall be void.
The Warrant Agreement is hereby incorporated by reference and
made a part of this Warrant Certificate and is hereby referred to for a
description of the rights, obligations, duties and restrictions of the Company
and holder of the Warrants.
<PAGE> 13
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed as of this 27th day of April, 1999.
Bionutrics, Inc.
By: /s/Ronald H. Lane
-------------------------------------
Ronald H. Lane
President
2
<PAGE> 14
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF STOCK ISSUABLE
UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), FOR PUBLIC RESALE AND MAY NOT BE OFFERED,
TRANSFERRED OR SOLD EXCEPT PURSUANT TO (I) AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES OR BLUE SKY LAWS,
(ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER THE SECURITIES ACT (OR ANY SIMILAR
RULE UNDER THE SECURITIES ACT RELATING TO THE DISPOSITION OF SECURITIES)
TOGETHER WITH AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO ISSUER'S COUNSEL
THAT SUCH TRANSFER IS PERMITTED OR (iii) AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO ISSUER'S COUNSEL THAT AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES OR BLUE SKY LAWS IS
AVAILABLE.
THE EXERCISE, TRANSFER AND EXCHANGE OF THE WARRANTS REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO THE WARRANT AGREEMENT BETWEEN BIONUTRICS, INC. AND
THE SHEMANO GROUP, INC.
25,000 Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that Mart Bailey, c/o The
Shemano Group, 601 California Street, #1850, San Francisco, CA 94108, Social
Security ####-##-#### is the registered holder of 25,000 Warrants to purchase,
at any time from the date hereof, until 5:30 p.m. Eastern Standard Time on April
9, 2001 ("Expiration Date"), up to 25,000 fully-paid and non-assessable shares
of common stock, par value $.001 per share ("Common Stock"), of Bionutrics, Inc.
(the "Company") at an exercise price of $4 per share of Common Stock ("Exercise
Price"), upon surrender of this Warrant Certificate and payment of the Exercise
Price to the Company and subject to the warrant agreement dated April 9, 1998
between the Company and The Shemano Group, Inc. (the "Warrant Agreement").
At 5:31 p.m. Eastern Standard Time on the Expiration Date all
Warrants evidenced hereby, unless exercised prior thereto, shall be void.
The Warrant Agreement is hereby incorporated by reference and
made a part of this Warrant Certificate and is hereby referred to for a
description of the rights, obligations, duties and restrictions of the Company
and holder of the Warrants.
<PAGE> 15
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed as of this 27th day of April, 1999.
BIONUTRICS, INC.
By: /s/Ronald H. Lane
-----------------------------------
Ronald H. Lane
President
2
<PAGE> 16
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF STOCK ISSUABLE
UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), FOR PUBLIC RESALE AND MAY NOT BE OFFERED,
TRANSFERRED OR SOLD EXCEPT PURSUANT TO (I) AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES OR BLUE SKY LAWS,
(ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER THE SECURITIES ACT (OR ANY SIMILAR
RULE UNDER THE SECURITIES ACT RELATING TO THE DISPOSITION OF SECURITIES)
TOGETHER WITH AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO ISSUER'S COUNSEL
THAT SUCH TRANSFER IS PERMITTED OR (iii) AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO ISSUER'S COUNSEL THAT AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES OR BLUE SKY LAWS IS
AVAILABLE.
THE EXERCISE, TRANSFER AND EXCHANGE OF THE WARRANTS REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO THE WARRANT AGREEMENT BETWEEN BIONUTRICS, INC. AND
THE SHEMANO GROUP, INC.
25,000 Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that Michael R. Jacks, c/o
The Shemano Group, 601 California Street, #1850, San Francisco, CA 94108, Social
Security ####-##-#### is the registered holder of 25,000 Warrants to purchase,
at any time from the date hereof, until 5:30 p.m. Eastern Standard Time on April
9, 2001 ("Expiration Date"), up to 25,000 fully-paid and non-assessable shares
of common stock, par value $.001 per share ("Common Stock"), of Bionutrics, Inc.
(the "Company") at an exercise price of $4 per share of Common Stock ("Exercise
Price"), upon surrender of this Warrant Certificate and payment of the Exercise
Price to the Company and subject to the warrant agreement dated April 9, 1998
between the Company and The Shemano Group, Inc. (the "Warrant Agreement").
At 5:31 p.m. Eastern Standard Time on the Expiration Date all
Warrants evidenced hereby, unless exercised prior thereto, shall be void.
The Warrant Agreement is hereby incorporated by reference and
made a part of this Warrant Certificate and is hereby referred to for a
description of the rights, obligations, duties and restrictions of the Company
and holder of the Warrants.
<PAGE> 17
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed as of this 27th day of April, 1999.
BIONUTRICS, INC.
By: /s/Ronald H. Lane
------------------------------
Ronald H. Lane
President
2
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> APR-30-1999
<CASH> 387,519
<SECURITIES> 0
<RECEIVABLES> 2,123,708
<ALLOWANCES> 75,808
<INVENTORY> 364,711
<CURRENT-ASSETS> 2,991,458
<PP&E> 5,079,935
<DEPRECIATION> 1,739,587
<TOTAL-ASSETS> 8,917,027
<CURRENT-LIABILITIES> 3,659,568
<BONDS> 0
0
0
<COMMON> 20,802
<OTHER-SE> 5,226,917
<TOTAL-LIABILITY-AND-EQUITY> 8,917,027
<SALES> 544,996
<TOTAL-REVENUES> 1,647,910
<CGS> 897,052
<TOTAL-COSTS> 2,862,404
<OTHER-EXPENSES> (52,716)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,495,739)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,495,739)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
