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EXHIBIT 10.41
THE PREFERRED STOCK AND THE COMMON STOCK ISSUABLE UPON CONVERSION (THE
"SECURITIES") 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.
SERIES A CONVERTIBLE PREFERRED STOCK ACQUISITION AGREEMENT
THIS SERIES A CONVERTIBLE PREFERRED STOCK ACQUISITION
AGREEMENT (the "Agreement") is made as of the 27th day of October, 2000, by and
between Bionutrics, Inc., a Nevada corporation (the "Company"), and Milton Okin
("Acquiror").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Acquisition of Preferred Stock.
1.1 Issuance of Preferred 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 to Acquiror
591,850 shares of its Series A Convertible Preferred Stock, $.001 par value (the
"Shares") as described in Exhibit A. The Shares and the Common Stock issuable
upon conversion are hereinafter referred to as the "Securities."
1.2 Consideration. The consideration for the issuance of the
Shares is the cancellation by the Company of debt owed by the Company to
Acquiror in the aggregate amount of $798,998 as evidenced by that certain
promissory notes dated December 22, 1999 and June 19, 2000, made by the Company
in favor of Acquiror (the "Note").
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 Acquiror and the Company. If at the Closing
any of the conditions specified in Section 5 hereof shall not have been
fulfilled to the reasonable satisfaction of Acquiror, then Acquiror shall, at
his election, be relieved of all of his obligations under this Agreement,
without thereby waiving any other rights he may have by reason of such failure
or fulfillment. 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
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reason of such failure or unfulfillment. At the Closing, the Company shall
deliver the certificates evidencing the Shares and Acquiror shall deliver the
Note to be marked cancelled.
2. Representation and Warranties of the Company. The Company
hereby represents and warrants to Acquiror 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:
(a) Common Stock. 45,000,000 shares of common stock ("Common
Stock"), par value $.001, of which 21,471,252 shares are issued and outstanding
as of the date hereof and the Company has entered into a stock purchase
agreement for 500,000 shares of Common Stock as of October 25, 2000.
(b) 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.
The terms of the Series A Convertible Preferred Stock shall be in substantially
the form set forth on Exhibit A.
(c) Warrants and Options. As of the date hereof, there were
outstanding warrants to purchase up to 1,480,000 shares of Common Stock. As of
the date hereof, options in the amount of 1,825,144 shares were outstanding and
held by current employees, officers, and directors pursuant to the Company's
Stock Option Plan and 686,667 were outstanding and held by former directors and
employees and others.
2.3 Valid Issuance of Securities. 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 Securities. The Securities when issued 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, 1999 and the unaudited financial statements contained
in the Forms 10-Q filed subsequent thereto 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
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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 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 issuance
of the Securities 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 Restated 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 Acquiror. By executing this
Agreement, Acquiror hereby represents and warrants to and covenants with the
Company as follows:
3.1 Authorization. Acquiror has the power and authority to
enter into this Agreement and to perform all of his obligations hereunder and
this Agreement constitutes a valid, binding and enforceable obligation of
Acquiror.
3.2 Legal Investment and Compliance with Laws. The acquisition
of the Securities by Acquiror is legally permitted by all laws and regulations
to which Acquiror 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 Acquiror or the acquisition of the Securities
by Acquiror has been obtained, or will be obtained. Acquiror hereby represents
that he has satisfied himself as to the full observance of the laws in
connection with his acquisition of the Securities or any use of this Agreement,
including the income tax and
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other tax consequences, if any, which may be relevant to the acquisition,
holding, redemption, sale, or transfer of the Securities. Such Acquiror's
acquisition, and his continued beneficial ownership of the Securities, will not
violate any applicable securities or other laws.
3.3 Access to Information. Acquiror acknowledges that he has
received the Company's Form 10-K for the period ended October 31, 1999 and the
Forms 10-Q filed subsequent thereto (the "Offering Documents"), and is familiar
with and understands the operations of the Company.
(a) Acquiror understands and acknowledges that the Offering
Documents provided in connection with this investment have been prepared by the
Company. Accordingly, Acquiror 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) Acquiror 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) Acquiror acknowledges that he has been encouraged to rely
upon the advice of his legal counsel and accountants or other financial advisers
with respect to the financial, tax, and other considerations relating to the
acquisition of the Securities and has been offered, during the course of
discussions concerning the acquisition of the Securities, the opportunity to ask
such questions and inspect such documents concerning the Company and its
business and affairs as Acquiror has requested so as to understand more fully
the nature of the investment and to verify the accuracy of the information
supplied.
(d) Acquiror represents and warrants that, in determining to
acquire the Securities, he has relied solely upon the documents provided and the
advice of his advisors with respect to the tax, foreign and U.S., and other
consequences involved in acquiring the Securities.
3.4 Acquisition for Investment and Unregistered Nature of the
Securities.
(a) Acquiror represents and warrants that the Securities being
acquired are being acquired for his own account without a view to public
distribution or resale and that Acquiror has no contract, understanding,
agreement, or arrangement to sell or otherwise transfer or dispose of the
Securities or any portion thereof to any other person.
(b) Acquiror represents and warrants that he (i) is
experienced in evaluating and investing in securities of companies in the
developmental stage and acknowledges that he can fend for himself, (ii) can bear
the economic risk of the acquisition of the Securities including the total loss
of his 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 Securities.
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(c) Acquiror understands that the Securities 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.
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(d) Acquiror agrees that he will not sell or otherwise
transfer or dispose of the Securities or any portion thereof unless such
Securities are registered under the 1933 Act and any applicable state securities
laws, or unless Acquiror obtains an opinion of counsel which is reasonably
satisfactory to the Company that such Securities may be sold in reliance on an
exemption from such registration requirements.
(e) Acquiror understands that (i) the Company may place a
legend on any certificates representing the Securities indicating that the
Securities may not be transferred except in accordance with an exemption from
the 1933 Act, (ii) the Company will not register a transfer not made in
accordance with an exemption from the 1933 Act, and (iii) Acquiror therefore may
be precluded from selling or otherwise transferring or disposing of any of the
Securities or any portion thereof for an indefinite period of time or at any
particular time.
3.5 Further Representations and Understandings.
(a) Acquiror 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 Securities, 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 Securities for public investment and
any representation to the contrary is a criminal offense.
(b) Acquiror understands that the Securities are being offered
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 Acquiror to acquire the Shares.
(c) Acquiror represents and warrants that the information set
forth herein concerning Acquiror 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 Acquiror 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 Acquiror 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.
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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 Acquiror. The obligations of
Acquiror under this Agreement are subject to satisfaction of the following
conditions at or prior to the Closing, any of which may be waived by Acquiror.
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 or any like Agreement, or to obtain damages from Acquiror.
(b) None of the parties hereto or to other like agreements in
connection with this offering shall be prohibited by any order, writ, injunction
or decree of any governmental body of competent jurisdiction from consummating
the transactions contemplated by this or any like Agreement, and no action or
proceeding shall then be pending which questions the validity of this or any
like 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 Securities
shall be endorsed with the legend set forth below, and Acquiror covenants that
Acquiror 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
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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.
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
Acquiror at his address set forth herein or if to the Company at the address set
forth herein or at such other address as may have been furnished by the Company
to Acquiror.
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
and Exhibit A hereto set 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, including Exhibit A hereto, 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
Acquiror.
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 Securities
regardless of any investigation made by or on behalf of the parties.
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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.
7.8 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.
ACQUIROR: DELIVERY INSTRUCTIONS:
Type or print address where certificates
/s/ Milton Okin be delivered
----------------------------------
Milton Okin
306 Brevoort Lane
----------------------------------------
----------------------------------------
Street
BIONUTRICS, INC.
Rye, New York
----------------------------------------
City, State or Province, Country
By: /s/ Ronald H. Lane
-----------------------------
Name: Ronald H. Lane 914-698-4325
--------------------------- ----------------------------------------
Its: President Telephone Number
-----------------------------
Attention: Milton Okin
-----------------------------
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EXHIBIT 10.41
EXHIBIT A
CERTIFICATE OF DESIGNATION
Bionutrics, Inc. (the "Corporation"), a Nevada corporation, pursuant to
NRS 78.1955, hereby certifies that:
The Board of Directors of the Corporation, pursuant to authority
expressly vested in it by the provisions of the Corporation's Restated Articles
of Incorporation, as amended, duly adopted the following resolution creating
Series A Convertible Preferred Stock of the Corporation to consist initially of
600,000 shares, and fixing the designations, preferences, rights,
qualifications, limitations and restrictions thereof, of the shares of such
series, pursuant to a Unanimous Written Consent, dated October 25, 2000:
RESOLVED, that pursuant to authority expressly granted to the
Board of Directors by the provisions of this Corporation's
Restated Articles of Incorporation, as amended, the Board of
Directors hereby creates this series of Series A Convertible
Preferred Stock of the Corporation to consist initially of
600,000 shares (the "Series") and hereby fixes the
designations, preferences and rights, and qualifications,
limitations and restrictions thereof, as follows:
1. DESIGNATION OF SERIES AND NUMBER OF SHARES. This Series
shall have a par value of $.001 per share and shall be designated as "Series A
Convertible Preferred Stock." The number of authorized shares of Series A
Convertible Preferred Stock shall be 600,000, which number from time to time may
be increased or decreased (but not below the number of shares of the series then
outstanding) by resolution of the Board of Directors of the Corporation.
2. DIVIDENDS. Subject to provisions of law, the holders of
record of shares of the Series A Convertible Preferred Stock shall be entitled
to receive cash dividends, which shall be payable when, as and if declared by
the Board of Directors, out of assets which are legally available for the
payment of such dividends, including any special dividends declared by the Board
of Directors as well as ordinary dividends, at an annual rate equal to $0.108
per share of Series A Convertible Preferred Stock (which amount shall be subject
to equitable adjustment whenever there shall occur a stock dividend, stock
split, combination, reorganization, recapitalization, reclassification or other
similar event involving the Series A Convertible Preferred Stock), provided that
such dividends shall not be currently payable and shall only be payable when and
if specifically provided herein. Dividends shall be cumulative, without
compounding, and shall accrue daily on each share of Series A Convertible
Preferred Stock from the date of issue thereof. Dividends payable on the Series
A Convertible Preferred Stock for any period less than a full year shall be
computed on the basis of the actual number of days elapsed and a 365-day year.
No dividends shall be paid or declared, and no other distribution shall be made,
other than distributions or dividends to effect a stock split, on or with
respect to the Common Stock of the Corporation as long as there are shares of
Series A Convertible Preferred
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Stock issued and outstanding. Upon the conversion of shares of the Series A
Preferred Stock into Common Stock of the Corporation, all cumulative dividends
with respect to such converted shares shall be cancelled.
3. LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) TREATMENT AT SALE, LIQUIDATION, DISSOLUTION OR WINDING UP.
In the event of any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, before any distribution or payment is made to
any holders of any shares of Common Stock or any other class or series of
capital stock of the Corporation designated to be junior to the Series A
Convertible Preferred Stock, and subject to the liquidation rights and
preferences of any class or series of Preferred Stock designated to be senior
to, or on a parity with, the Series A Convertible Preferred Stock, the holders
of shares of Series A Convertible Preferred Stock shall be entitled to be paid
first out of the assets of the Corporation available for distribution to holders
of the Corporation's capital stock whether such assets are capital, surplus or
earnings, an amount equal to $1.35 per share of Series A Convertible Preferred
Stock (which amount shall be subject to equitable adjustment whenever there
shall occur a stock dividend, stock split, combination, reorganization,
recapitalization, reclassification or other similar event involving the Series A
Convertible Preferred Stock), plus any dividends accrued or declared but unpaid
on such shares (such amount, as so determined, is referred to herein as the
"Series A Liquidation Value" with respect to such shares). After payment has
been made to the holders of the Series A Convertible Preferred Stock and any
series of Preferred Stock designated to be senior to, or on a parity with, the
Series A Convertible Preferred Stock, of the full liquidation preference to
which such holders shall be entitled as aforesaid, the remaining assets shall be
distributed among the holders of Common Stock on a pro-rata basis.
(b) INSUFFICIENT FUNDS. If upon such liquidation, dissolution
or winding up the assets or surplus funds of the Corporation to be distributed
to the holders of shares of Series A Convertible Preferred Stock and any other
then-outstanding shares of the Corporation's capital stock ranking on a parity
with respect to payment on liquidation with the Series A Convertible Preferred
Stock (such shares being referred to herein as the "Series A Parity Stock")
shall be insufficient to permit payment to such respective holders of the full
Series A Liquidation Value and all other preferential amounts payable with
respect to the Series A Convertible Preferred Stock and such Series A Parity
Stock, then the assets available for payment or distribution to such holders
shall be allocated among the holders of the Series A Convertible Preferred Stock
and such Series A Parity Stock, pro rata, in proportion to the full respective
preferential amounts to which the Series A Convertible Preferred Stock and such
Series A Parity Stock are each entitled.
(c) CERTAIN TRANSACTIONS TREATED AS LIQUIDATION. For purposes
of this Section 3, (A) any acquisition of the Corporation by means of merger or
other form of corporate reorganization or consolidation with or into another
corporation in which outstanding shares of this Corporation, including shares of
Series A Convertible Preferred Stock, are exchanged for securities or other
consideration issued, or caused to be issued, by the other corporation or its
subsidiary and, as a result of which transaction, the shareholders of this
Corporation own 50% or less of the voting power of the surviving entity, or (B)
a sale, transfer or lease (other than a pledge or grant of a security interest
to a bona fide lender) of all or substantially all of the assets
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of the Corporation (other than to or by a wholly-owned subsidiary or parent of
the Corporation) (a "Change of Control Transaction"), shall be treated as a
liquidation, dissolution or winding up of the Corporation and shall entitle the
holders of Series A Convertible Preferred Stock to receive the amount that would
be received in a liquidation, dissolution or winding up pursuant to Section 3(a)
hereof, if the holders of at least 50% of the then outstanding shares of Series
A Convertible Preferred Stock so elect by giving written notice thereof to the
Corporation at least three days before the effective date of such event. The
Company will provide the holders of Preferred Stock with notice of all
transactions which are to be treated as a liquidation, dissolution or winding up
pursuant to this Section 3(c) twenty (20) days prior to the earlier of the vote
relating to such transaction or the closing of such transaction.
(d) DISTRIBUTIONS OF PROPERTY. Whenever the distribution
provided for in this Section 3 shall be payable in property other than cash, the
value of such distribution shall be the fair market value of such property as
determined in good faith by the Board of Directors, unless the holders of 50% or
more of the then outstanding shares of Series A Convertible Preferred Stock
request, in writing, that an independent appraiser perform such valuation, then
by an independent appraiser selected by the Board of Directors and reasonably
acceptable to 50% or more of the holders of such series of Preferred Stock.
4. VOTING POWER.
(a) GENERAL. Except as otherwise required by law, each holder
of Series A Convertible Preferred Stock shall be entitled to vote on all matters
and shall be entitled to that number of votes equal to the number of whole
shares of Common Stock into which such holder's shares of Series A Convertible
Preferred Stock could then be converted, pursuant to the provisions of Section 5
hereof, at the record date for the determination of shareholders entitled to
vote on such matter or, if no such record date is established, at the date such
vote is taken or any written consent of shareholders is solicited. Except as
otherwise required by law, the holders of shares of Preferred Stock and Common
Stock shall vote together as a single class on all matters.
5. CONVERSION RIGHTS. The holders of the Series A Convertible
Preferred Stock shall have the following rights with respect to the conversion
of such shares into shares of Common Stock:
(a) GENERAL. Subject to and in compliance with the provisions
of this Section 5, any or all shares of the Series A Convertible Preferred Stock
may, at the option of the holder thereof, be converted at any time on or after
October 27, 2001 into fully-paid and non-assessable shares of Common Stock. The
number of shares of Common Stock to which a holder of Series A Convertible
Preferred Stock shall be entitled to receive upon conversion shall be the
product obtained by multiplying the Series A Applicable Conversion Rate
(determined as provided in Section 5(b)) by the number of shares of Series A
Convertible Preferred Stock being converted at any time.
(b) APPLICABLE CONVERSION RATE. The conversion rate in effect
at any time for the Series A Convertible Preferred Stock (the "Series A
Applicable Conversion Rate") shall be the quotient obtained by dividing $1.35 by
the Series A Applicable Conversion Value, as defined in Section 5(c). Initially,
the Series A Applicable Conversion Rate shall be one (1), and
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each share of Series A Convertible Preferred Stock shall initially be
convertible into one (1) share of Common Stock.
(c) APPLICABLE CONVERSION VALUE. The Series A Applicable
Conversion Value in effect from time to time shall be $1.35 with respect to the
Series A Convertible Preferred Stock (the "Series A Applicable Conversion
Value").
(d) DIVIDENDS. In the event the Corporation shall make or
issue, or shall fix a record date for the determination of holders of Common
Stock entitled to receive a dividend or other distribution (other than a
distribution in liquidation or other distribution otherwise provided for herein)
with respect to the Common Stock payable in (i) securities of the Corporation
other than shares of Common Stock, or (ii) other assets (excluding cash
dividends or distributions), then and in each such event provision shall be made
so that the holders of the Series A Convertible Preferred Stock shall receive
upon conversion thereof in addition to the number of shares of Common Stock
receivable thereupon, the number of securities or such other assets of the
Corporation which they would have received had their Series A Convertible
Preferred Stock been converted into Common Stock on the date of such event and
had they thereafter, during the period from the date of such event to and
including the Conversion Date (as that term is hereafter defined in Section
5(h)), retained such securities or such other assets receivable by them during
such period, giving application to all other adjustments called for during such
period under this Section 5 with respect to the rights of the holders of the
Series A Convertible Preferred Stock.
(e) CAPITAL REORGANIZATION OR RECLASSIFICATION. If the Common
Stock issuable upon the conversion of the Series A Convertible Preferred Stock
shall be changed into the same or different number of shares of any class or
classes of capital stock, whether by capital reorganization, recapitalization,
reclassification or otherwise (other than a subdivision or combination of shares
or stock dividend provided for elsewhere in this Section 5, or a merger,
consolidation or sale of all or substantially all of the Corporation's capital
stock or assets to any other person), then and in each such event the holder of
each share of Series A Convertible Preferred Stock shall have the right
thereafter to convert such share into the kind and amount of shares of capital
stock and other securities and property receivable upon such reorganization,
recapitalization, reclassification or other change by the holders of the number
of shares of Common Stock into which such shares of Series A Convertible
Preferred Stock might have been converted immediately prior to such
reorganization, recapitalization, reclassification or change, all subject to
further adjustment as provided herein.
(f) MERGER, CONSOLIDATION OR SALE OF ASSETS. If at any time or
from time to time there shall be a merger or consolidation of the Corporation
with or into another corporation (other than a merger or reorganization
involving only a change in the state of incorporation of the Corporation), or
the sale of all or substantially all of the Corporation's capital stock or
assets to any other person, then, unless such a transaction is treated as a
liquidation under Section 3(c), as a part of such reorganization, merger, or
consolidation or sale, provision shall be made so that the holders of the Series
A Convertible Preferred Stock shall thereafter be entitled to receive upon
conversion of the Series A Convertible Preferred Stock the number of shares of
stock or other securities or property of the Corporation, or of the successor
corporation resulting from such merger or consolidation, to which such holder
would have been
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entitled if such holder had converted its shares of Series A Convertible
Preferred Stock immediately prior to such capital reorganization, merger,
consolidation or sale. In any such case, unless such a transaction is treated as
a liquidation under Section 3(c), appropriate adjustment shall be made in the
application of the provisions of this Section 5 to the end that the provisions
of this Section 5 (including adjustment of the Series A Applicable Conversion
Value then in effect and the number of shares of Common Stock or other
securities issuable upon conversion of such shares of Series A Convertible
Preferred Stock) shall be applicable after that event in as nearly equivalent a
manner as may be practicable.
(g) CERTIFICATE AS TO ADJUSTMENTS; NOTICE BY CORPORATION. In
each case of an adjustment or readjustment of the Series A Applicable Conversion
Rate, the Corporation at its expense will furnish each holder of Series A
Convertible Preferred Stock with a certificate prepared by the Treasurer or
Chief Financial Officer of the Corporation, showing such adjustment or
readjustment, and stating in detail the facts upon which such adjustment or
readjustment is based.
(h) EXERCISE OF CONVERSION PRIVILEGE. To exercise its
conversion privilege, a holder of Series A Convertible Preferred Stock shall
surrender the certificate or certificates representing the shares being
converted to the Corporation at its principal office, and shall give written
notice to the Corporation at that office that such holder elects to convert such
shares. Such notice shall also state the name or names (with address or
addresses) in which the certificate or certificates for shares of Common Stock
issuable upon such conversion shall be issued. The certificate or certificates
for shares of Series A Convertible Preferred Stock surrendered for conversion
shall be accompanied by proper assignment thereof to the Corporation or in
blank. The date when such written notice is received by the Corporation,
together with the certificate or certificates representing the shares of Series
A Convertible Preferred Stock being converted, shall be the "Conversion Date."
As promptly as practicable after the Conversion Date, the Corporation shall
issue and shall deliver to the holder of the shares of Series A Convertible
Preferred Stock being converted, or on its written order, such certificate or
certificates as it may request for the number of whole shares of Common Stock
issuable upon the conversion of such shares of Series A Convertible Preferred
Stock in accordance with the provisions of this Section 5, rounded up to the
nearest whole share as provided in Section 5(i), in respect of any fraction of a
share of Common Stock issuable upon such conversion. Such conversion shall be
deemed to have been effected immediately prior to the close of business on the
Conversion Date, and at such time the rights of the holder as holder of the
converted shares of Series A Convertible Preferred Stock shall cease and the
person(s) in whose name(s) any certificate(s) for shares of Common Stock shall
be issuable upon such conversion shall be deemed to have become the holder or
holders of record of the shares of Common Stock represented thereby.
(i) NO ISSUANCE OF FRACTIONAL SHARES. No fractional shares of
Common Stock or scrip representing fractional shares shall be issued upon the
conversion of shares of Series A Convertible Preferred Stock. Instead of any
fractional shares of Common Stock which would otherwise be issuable upon
conversion of Series A Convertible Preferred Stock, the Corporation shall round
up to the next whole share of Common Stock issuable upon the conversion of
shares of Series A Convertible Preferred Stock. The determination as to whether
any fractional shares of Common Stock shall be rounded up shall be made with
respect to the
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<PAGE> 15
aggregate number of shares of Series A Convertible Preferred Stock being
converted at any one time by any holder thereof, not with respect to each share
of Series A Convertible Preferred Stock being converted.
(j) PARTIAL CONVERSION. In the event some but not all of the
shares of Series A Convertible Preferred Stock represented by a certificate(s)
surrendered by a holder are converted, the Corporation shall execute and deliver
to or on the order of the holder, at the expense of the Corporation, a new
certificate representing the number of shares of Series A Convertible Preferred
Stock which were not converted.
(k) RESERVATION OF COMMON STOCK. The Corporation shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the conversion of the shares
of the Series A Convertible Preferred Stock, such number of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series A Convertible Preferred Stock (including any
shares of Series A Convertible Preferred Stock represented by any warrants,
options, subscription or purchase rights for Series A Convertible Preferred
Stock), and if at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the conversion of all then
outstanding shares of the Series A Convertible Preferred Stock (including any
shares of Series A Convertible Preferred Stock represented by any warrants,
options, subscriptions or purchase rights for such Preferred Stock), the
Corporation shall take such action as may be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purpose.
(l) NO REISSUANCE OF PREFERRED STOCK. No share or shares of
Series A Convertible Preferred Stock acquired by the Corporation by reason of
redemption, purchase, conversion or otherwise shall be reissued, and all such
shares shall be cancelled, retired and eliminated from the shares which the
Corporation shall be authorized to issue. The Corporation shall from time to
time take such appropriate corporate action as may be necessary to reduce the
authorized number of shares of the Series A Convertible Preferred Stock.
6. REDEMPTION.
(a) OPTIONAL REDEMPTION. The Corporation may, at any time and
from time to time, redeem, on such date (the "Redemption Date"), all of the then
outstanding shares of Series A Convertible Preferred Stock. The redemption price
for each share of Preferred Stock redeemed pursuant to this Section 6(a) shall
initially be $1.35 per share in cash plus all accrued and/or declared but unpaid
dividends on such shares up to and including the date fixed for redemption (the
"Redemption Price"). The Redemption Price set forth in this Section 6 shall be
subject to equitable adjustment with respect to each series of Preferred Stock
whenever there shall occur a stock split, stock dividend, combination,
recapitalization, reclassification or other similar event involving a change in
the Series A Convertible Preferred Stock. The Redemption Price shall be payable
on the Redemption Date. To the extent that the Company may not legally redeem
such shares of Preferred Stock, such redemption shall take place as soon as
legally permitted.
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<PAGE> 16
(b) INSUFFICIENT FUNDS FOR REDEMPTION.
(i) If the funds of the Corporation legally available
for redemption of the Series A Convertible Preferred Stock on the Redemption
Date are insufficient to redeem the number of shares of Series A Convertible
Preferred Stock to be so redeemed on such Redemption Date, the holders of shares
of Series A Convertible Preferred Stock shall share ratably in any funds legally
available for redemption of such shares according to the respective amounts
which would be payable with respect to the number of shares owned by them if the
shares to be so redeemed on such Redemption Date were redeemed in full. The
shares of Series A Convertible Preferred Stock not redeemed shall remain
outstanding and entitled to all rights and preferences provided herein.
(ii) At any time thereafter when additional funds of
the Corporation are legally available for the redemption of such shares of
Series A Convertible Preferred Stock, such funds will be used, as soon as
practicable but no later than the end of the next succeeding fiscal quarter, to
redeem the balance of such shares, or such portion thereof for which funds are
then legally available, on the basis set forth above.
(c) REDEMPTION PROPORTIONATE. Each redemption of Series A
Convertible Preferred Stock pursuant to this Section 6 shall be made so that the
number of shares of Series A Convertible Preferred Stock to be redeemed from
each registered owner shall be on a pro rata basis according to the respective
liquidation preferences of shares of Series A Convertible Preferred Stock which
each such holder of Series A Convertible Preferred Stock owns of record as of
the applicable Redemption Date.
(d) REDEMPTION NOTICE. At least 15 days prior to the
Redemption Date, written notice (hereinafter referred to as the "Redemption
Notice") shall be mailed, first class or certified mail, postage prepaid, by the
Corporation to each holder of record of Series A Convertible Preferred Stock
which are to be redeemed, as its address shown on the records of the
Corporation; provided, however, that the Corporation's failure to give such
Redemption Notice as to any holder shall not affect its obligation to redeem the
Series A Convertible Preferred Stock as provided in this Section 6 hereof as to
such holder. The Redemption Notice shall contain the following information:
(i) the number of shares of Series A Convertible
Preferred Stock held by the holder which are to be redeemed by the Corporation;
(ii) the Redemption Date and the Redemption Price;
and
(iii) that the holder is to surrender to the
Corporation, at the place designated therein, its certificate or certificates
representing the Series A Convertible Preferred Stock to be redeemed.
(e) SURRENDER OF CERTIFICATES. Each holder of Series A
Convertible Preferred Stock shall surrender the certificate(s) representing such
shares to the Corporation at the place designated in the Redemption Notice, and
thereupon the Redemption Price for such shares as set forth in this Section 6
shall be paid to the order of the person whose name appears on such
certificate(s) and each surrendered certificate shall be canceled and retired.
In the event
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<PAGE> 17
some but not all of the Series A Convertible Preferred Stock represented by a
certificate(s) surrendered by a holder are being redeemed, the Corporation shall
execute and deliver to or on the order of the holder, at the expense of the
Corporation, a new certificate representing the number of shares of Series A
Convertible Preferred Stock which were not redeemed.
The rights of redemption of the holders of Series A
Convertible Series A Convertible Preferred Stock are subject to the rights and
preferences of any class or series of preferred stock that may be designated to
be senior to, or on parity with, the Series A Convertible Series A Convertible
Preferred Stock with respect to rights of redemption.
(f) DIVIDENDS AND CONVERSION AFTER REDEMPTION. After
redemption, no shares of Series A Convertible Preferred Stock shall be entitled
to any further rights hereunder (other than the right to receive the Redemption
Price); provided, however, that in all events such redemption is consummated.
7. REGISTRATION OF TRANSFER. The Corporation will keep at its principal
office a register for the registration of shares of Series A Convertible
Preferred Stock. Upon the surrender of any certificate representing shares of
Series A Convertible Preferred Stock at such place, the Corporation will, at the
request of the record holders of such certificate, execute and deliver (at the
Corporation's expense) a new certificate or certificates in exchange therefore
representing the aggregate number of shares of Series A Convertible Preferred
Stock represented by the surrendered certificate. Each such new certificate will
be registered in such name and will represent such number of shares of Series A
Convertible Preferred Stock as is required by the holder of the surrendered
certificate and will be substantially identical in form to the surrendered
certificate.
8. REPLACEMENT. Upon receipt of evidence reasonably satisfactory to the
Corporation (an affidavit of the registered holder will be satisfactory) of the
ownership and the loss, theft, destruction or mutilation of any certificate
evidencing shares of Series A Convertible Preferred Stock, and in the case of
any such loss, theft or destruction, upon receipt of an unsecured indemnity from
the holder reasonably satisfactory to the Corporation or, in the case of such
mutilation upon surrender of such certificate, the Corporation will (at its
expense) execute and deliver in lieu of such certificate a new certificate of
like kind representing the number of shares of Series A Convertible Preferred
Stock represented by such lost, stolen, destroyed or mutilated certificate and
dated the date of such lost, stolen, destroyed or mutilated certificate.
9. NOTICES OF RECORD DATE. In the event of:
(a) any taking by the Corporation of a record of the holders
of any class of securities for the purpose of determining the holders thereof
who are entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of capital stock of any
class or any other securities or property, or to receive any other right, or
(b) any capital reorganization of the Corporation, any
reclassification or recapitalization of the capital stock of the Corporation,
any merger or consolidation of the Corporation, or any transfer of all or
substantially all of the assets of the Corporation to any other corporation, or
any other entity or person, or
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<PAGE> 18
(c) any voluntary or involuntary dissolution, liquidation or
winding up of the Corporation, then and in each such event the Corporation shall
mail or cause to be mailed to each holder of Series A Convertible Preferred
Stock a notice specifying (i) the date on which any such record is to be taken
for the purpose of such dividend, distribution or right and a description of
such dividend, distribution or right, (ii) the date on which any such
reorganization, reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or winding up is expected to become effective,
and (iii) the time, if any, that is to be fixed, as to when the holders of
record of Common Stock (or other securities) shall be entitled to exchange their
shares of Common Stock (or other securities) for securities or other property
deliverable upon such reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation or winding up. Such
notice shall be mailed by first class mail, postage prepaid, at least ten (10)
days prior to the earlier of (1) the date specified in such notice on which such
record is to be taken and (2) the date on which such action is to be taken.
10. NOTICES. Except as otherwise expressly provided, all notices
referred to herein will be in writing and will be delivered by registered or
certified mail, return receipt requested, postage prepaid and will be deemed to
have been given when so mailed (i) to the Corporation, at its principal
executive offices and (ii) to any shareholder, at such holder's address as it
appears in the stock records of the Corporation (unless otherwise indicated in
writing by any such holder).
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IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designation of Series A Convertible Preferred Stock to be executed by its
President and Secretary this 28th day of November, 2000.
BIONUTRICS, INC.
By: /s/ Ronald H. Lane
-----------------------------------------
Name: Ronald H. Lane
Its: President
BIONUTRICS, INC.
By: /s/ Ronald H. Lane
-------------------------------------
Name: Ronald H. Lane
Its: Secretary
STATE OF ARIZONA )
) ss:
County of Maricopa )
The foregoing instrument was acknowledged before me this 28th day of
November, 2000, by Ronald H. Lane, the President and Secretary of Bionutrics,
Inc., a Nevada corporation, on behalf of such corporation.
Wendi S. Hicks
-------------------------------------
Notary Public
My commission expires:
04-30-04
----------------------
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