[NAME] CONSOLIDATED GROWERS AND PROCESSORS, INCORPORATED
[STATE-OF-INCORPORATION] DELAWARE
[IRS-NUMBER] 77-0462311
[NEW-BUSINESS-ADDRESS]
[STREET1] 6350 LAUREL CANYON BLVD.
[STREET2] SUITE 406
[CITY] NORTH HOLLYWOOD
[STATE] CALIFORNIA
[ZIP] 91606
[PHONE] 818-752-9990
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM-10SB
GENERAL FORM FOR REGISTRATION OF
SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(g) of The Securities Exchange Act of 1934
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock
CONSOLIDATED GROWERS AND PROCESSORS, INCORPORATED
ITEM 1. DESCRIPTION OF BUSINESS
Consolidated Growers and Processors, Incorporated (hereinafter "CGP" or "the
Company"), OTC BB: CGPR, was formed and incorporated in Delaware on June 10,
1997 for the principal purpose of engaging in the large scale
commercialization of alternative industrial crop products, primarily
industrial hemp, through the development and / or acquisition of new and
advanced technologies. The Company was funded through a Reg 504D offering
and listed on the OTC market as of October 27, 1997. In October 1997, the
Company acquired a minority interest in a German company, Badische
Naturfaseraufbereitung ("BaFa"). In 1998, the Company furthered its
international operations through the formation of its wholly-owned Canadian
subsidiary, Consolidated Growers and Processors (CGP) Canada Limited
("CGP Canada"), NAWARO GmbH ("NAWARO") in Germany and CGP Europe AG ("CGP
Europe")in Switzerland. In June 1998, the Company also acquired a 100%
interest in a Swiss corporation, Werner Zoellig AG & Glulam Lumber Mfg.
("Zoellig"). The Company has subsequently restructured its European holdings:
it has increased its investment in BaFa from 15 percent to 75 percent
(effective July 1, 1999) and has sold Zoellig to focus on its core business,
the agriculture and processing of industrial hemp. At present, the Company
employs nine people.
CGP has created an integrated, global strategy to become the lowest cost
producer and preeminent supplier of industrial hemp raw material products, and
certain value-added products, in key market segments such as:
a) Nutraceuticals from hemp plant compounds (nutraceuticals are natural
compounds that provide health or medicinal benefits beyond basic nutritional
needs for disease prevention and / or health maintenance);
b) Pharmaceuticals produced from hemp plant compounds (pharmaceuticals are
medical drug products);
c) Hemp food products with nutritional advantages;
d) High quality hemp fibers for production of biocomposites (a biodegradable
composite of materials) and substitution of toxic petrochemical and synthetic
products such as certain rubbers, plastics and fiberglass; and
e) Other environmentally friendly products such as "tree-free" paper made
from hemp pulp. (Pulp is a material produced from the plant stem reduced to a
soft uniform mass for making paper).
Until recent decades, industrial hemp played a vital role in world commerce for
over 2,000 years, during which it had been relied upon to supply humanity
with a wide range of essential commodities. However, after World War II,
since petroleum was in abundant supply and relatively inexpensive, petroleum
technologies advanced with synthetic chemical processing to facilitate the
replacement of natural, industrial crop products in Western developed
countries. Sixty years later, the industrialized world is living with the two
major consequences of pollution, and economic dependence on sometimes
unreliable suppliers of oil. Furthermore, the world is now also facing a
potential major fiber crisis in the coming decade. There is an ever-increasing
need for fiber in paper and building materials. For these reasons and
consequences, producers, consumers and governments of major developed countries
are looking toward natural fibers, including industrial hemp, as alternative
sources of raw materials. Therefore, new crops will be important to both the
sustainability of our natural resources and certain raw material
requirements.
The French were the first Western country to begin redevelopment of hemp in
1969. Since 1994, Germany, The Netherlands and Austria have taken the lead
with France in starting the revitalization of industrial hemp. Some
manufacturers, particularly in the automotive and packaging sectors, have
increased demand for natural fibers to enhance the recyclable content of their
products. Total industrial hemp sales worldwide have increased exponentially
from approximately $5 million USD in 1993 to a projected $500 million for 1999.
In Europe, the move toward recycling has created an urgent need to replace
petrochemical products / materials with recyclable and / or biodegradable
alternatives, particularly in Germany, where the Government has mandated that
a minimum of 15 percent of an automobile be recyclable by the year 2002.
However, notwithstanding the impressive growth trends, the industrial hemp
industry in developed countries is fragmented and still in the early stages
of development.
CGP has undertaken the research and development of equipment to maximize
harvesting and processing capabilities for industrial hemp. Our German
subsidiary, BaFa, has made excellent progress in development of the process to
produce the highest quality fiber for application in certain market segments,
and the Company has commenced growing and harvesting larger quantities of hemp
for eventual processing into raw materials. At present however, total capacity
levels for processing hemp fiber and food products still remain too low to
create large user demand. The industry has begun to attract the interest of
large multinational companies seeking alternative, natural raw material
sources. Now, substantially higher planting acreage and more processing
facilities are required to develop potential large markets for major customers
of certain industrial hemp products.
UNIQUENESS OF BUSINESS
Industrial hemp is an invaluable bioresource (natural biological resource). In
1938, Popular Mechanics magazine stated "Over 25,000 products can be
manufactured from hemp." Unique features of the industrial hemp crop, which
are of particular importance to the Company's business development strategy,
are as follows: the hemp plant and nutraceutical compounds and foods that can
be derived therefrom have excellent healing and nutritional properties; hemp
fibers can be an environmentally-friendly alternative to large use toxic
materials and products such as plastics, fiberglass, etc.; the plant can
remediate certain contaminants in soil and water; the plant generates
significant agronomic benefits, such as weed control, soil enhancement and crop
rotation, increasing profitability to the farm economy; the plant has broad
versatility - it is more versatile than the soybean, cotton plant and the
Douglas fir combined in its applications and benefits; it provides superior
yield (e.g., yields 4X cotton) versus many crops and generates valuable seed
for (edible) oil production.
CGP has acquired and / or developed, and continues to develop advanced
technologies and processes to maximize the most advantageous attributes of the
hemp plant for commercial purposes. The Company is planning to build new,
state-of-the-art facilities to process hemp (plant) straw into pulp and various
grades of natural fibers for diverse commercial applications, and hemp
seed / grain into high nutritional food and nutraceutical products. The
Company has also commenced its research and development program, including
collaborative agreements with Rutgers University's Center for Agricultural
Molecular Biology and Phytomedics, Inc. for molecular biology research for seed
breeding, and nutraceutical / pharmaceutical opportunities, respectively; and,
with NTECH Corporation (formerly Minus 9, Inc., hereinafter referred to as
NTECH) for development of hemp based products that could become
environmentally-friendly substitutes for certain plastics and metals (see
Research section below).
Specific information and relevant timeline information about the Company's
research and development activities are presented in the Product Summary
Analysis.
PRODUCTS
All industrial hemp products originate from one of the four parts of the plant:
(1) seed (2) grain (3) stalk / straw (4) chaff and leaf (previously
considered harvest waste). CGP intends to process all parts of the industrial
hemp plant to produce and / or develop major raw material (and possibly
certain end use) products for commercial sale and applications as follows:
Novel nutraceuticals and pharmaceuticals from phytochemical industrial hemp
plant compounds;
New proprietary hemp seed varieties, particularly for traits that could
increase fiber content in crop biomass (biological mass of the crop), increase
oil yields and (possibly) completely eliminate existing minimal allowable
amounts of THC (tetrahydrocannabinol which is a psychoactive agent with no
affect at the minimal, allowable inclusive content in certifiable seed
varieties);
High quality nutraceuticals and nutritional human foods such as: edible oils,
nuts and protein powder;
High quality / purity fibers for biocomposites; for example, in automotive
parts, building insulation and matting materials;
Fibers for pulp to make "tree-free," regular and specialty (e.g., security)
paper products, building materials (e.g. particle board) and / or
"environmentally-friendly plastic and metal substitutes;"
Hurd for animal bedding, building materials, consumer products and industrial
absorbents;
Industrial hemp products offer many unique, beneficial features to the
marketplace that can be readily identifiable as follows:
1. Health and Nutritional Properties:
Cannabidiols and other phytochemical compounds of the plant have proven to be
neuroprotective (protect the brain from neurological disorders) antioxidants,
natural analgesics (pain relievers) and anti-inflammatory facilitators (assist
to reduce / prevent inflammation). The compounds unique to the Cannabis genus
are termed cannabinoids. Cannabidiol ("CBD") is just one of the cannabinoids
of the Cannabis genus plant. Cannabinoids are phenolic, lipophilic compounds,
which biosynthetically are derived from a phenol-carboxylic acid and a
monoterpen. Chemically, they are benzopyran derivatives;
Edible oil, nut, protein powder and cake contain the optimal, (best ratio)
natural profile of essential fatty acids for the human body;
Edible oil, nut and cake contain a high quality and concentration of protein
and a high protein efficiency ratio;
Hemp nut and protein powder contain all eight essential amino acids;
Hemp grain products are closest to "organic quality" - nearly free of
pesticides, herbicides and artificial fertilizers;
Hemp oil in cosmetics can penetrate skin three layers deep, improving effect.
2. Environmental Benefits:
Hemp fiber is natural and an environmentally-friendly alternative to various
petrochemical products in composites, plastics and synthetic fibers (e.g.,
fiberglass);
Hemp fiber is a substitute for wood products, such as pulp for paper,
positively impacting forest conservation;
The hemp plant has unusual characteristics that remediate the soil and water of
certain hazardous waste contaminants;
The hemp plant requires less herbicides / insecticides (than other crops with
comparable uses) avoiding groundwater and other contamination.
The Company currently grows and harvests hemp under long term contracts with
growers. Its hemp straw grown in Europe is being processed into hurd for
animal bedding and high quality natural fiber for use in automobile parts and
building materials. By mid-late 2000, the Company plans to commence processing
of hemp seed / grain into hemp oil, nut and protein powder and larger scale
processing of hemp straw into other grades of fiber for sale as raw materials
in different end use products, including security paper.
GENERAL DEVELOPMENTS
Hemp is more versatile than a combination of other alternative industrial crops
for product applications, and the fiber is stronger and more durable than other
industrial crops. The Company has been aggressive in its pursuit of
technological advancements that would benefit processing and uses of industrial
hemp. Management has concluded an Exclusive Agreement with NTECH, a company
involved in atomic and molecularly assembled substances, for the use of hemp
fiber in combination with other compounds to produce recyclable and / or
biodegradable products to compete with certain plastics and metal products.
The Company anticipates completion of formal product application tests to occur
during last quarter of the year 2000, after which the Company will pursue the
most profitable production and marketing strategies.
The Company has also acquired the exclusive license for a phytoremediation
process technology for all applications that would utilize industrial hemp as
the plant. Phytoremediation is a natural process utilized to remediate
polluted sites such as radioactive soil and water, as well as metals,
pesticides, hydrocarbons, etc., from weapons facilities or landfills. Plants
break down or degrade organic pollutants and stabilize metal contaminants by
acting as filters or traps. Industrial hemp is proving itself to be one of
the best plants available for this process. The license agreement provides CGP
with the worldwide rights for the use of phytoremediation applications that
utilize industrial hemp in the field of use, in exchange for a royalty of 2 and
1/2 percent of net service revenues. CGP can either directly utilize the
process to provide the remediation service, or sublicense the rights of use to
another party.
Although planting seed is the critical raw material for all of the Company's
products, it is also a saleable product to create another revenue stream. Of
significant importance to seed supply is the Company's relationship with
The Bast Institute, Glukhiv, Ukraine. There are several types of seed
varieties with different natural origins presently in use. The Bast
Institute, a respected agronomic research institute for industrial hemp and
flax, excels at breeding the lowest level THC cultivars available, which is a
critical factor for both planting certification (licensing), crop
processing and sale of human consumption products. The Company has the
exclusive rights to The Bast Institute Ukrainian seed for sales and development
(breeding) in North America, important growing countries in Europe and South
America, as well as Australia and Africa.
RESEARCH
Research efforts will continue to focus on agronomic studies in Africa and
Canada to learn the optimum growing conditions to maximize yields of industrial
hemp fiber and seed. In April 1999, the Company received a $60,000 (Canadian
Dollars, approximately $40,000 USD) Grant from A.R.D.I. (Agri-Food Research &
Development Initiative) of Canada to conduct such agronomic studies, and is in
the process of negotiations for other government grants and research programs
regarding the cultivation of industrial hemp. The Company intends to continue
research into the production of "hemp metals" and "hemp plastics," as naturally
produced materials to compete with existing products, through its collaborative
relationship with NTECH. The research commenced in June 1999, and progress to
date has exceeded expectations. Test products are anticipated to be available
in the fourth quarter of the calendar year 2000.
The Company's collaborative biotechnology research for the development of
nutraceutical and pharmaceutical hemp compounds with Phytomedics,Inc. has been
in process since April 1999 and, agricultural molecular biology research for
the enhancement of important hemp genetic traits (and possible elimination of
remaining negligible amounts of THC) in collaboration with the University of
Rutgers Center for Agricultural Molecular Biology since June 1999. The
agreement with Phytomedics is for five years with a committed cost to CGP of
$95,000 for the first year and a mutually agreed upon budget thereafter. Under
this agreement, CGP retains all ownership rights of any new product
developments, and Phytomedics receives a royalty in the amount of 5 percent of
gross revenues derived from any developed product sales. The Rutgers agreement
is for three years at a total cost to CGP of $1.2 million. Under this
agreement, CGP as the Research Sponsor has the right to license, patent and
market any new development with a license fee to Rutgers of a percent of
revenues "customary in the industry" therefrom. Typically, the amount would be
2-5 percent of gross revenues.
GOVERNMENT REGULATION
Growing, harvesting and processing of industrial hemp for commercial
(and other) purposes, activities critical to the Company's operations, are
presently subject to federal regulations in each respective country in which it
currently and / or plans to do business in. The allowable THC content level
for certified (for cultivation) seed varieties is up to 0.3 percent. The
regulations governing industrial hemp also typically stipulate that licenses
are required for the importation, exportation, possession,
production / processing, transportation, delivery and / or offering for sale of
hemp in any form. Growers of hemp must apply for a license for each crop year
in which they cultivate hemp and stipulate the purpose of the hemp crop (i.e.,
seed, grain, fiber) and seed varieties to be sown. In addition, some of the
products that the Company currently may produce, such as industrial hemp oil,
may be subject to regulation by the United States Food and Drug Administration
("FDA") or other similar governmental bodies in other countries. Regulations
require approval of certified seed varieties to be used, granting of licenses
to each grower, periodic testing of plants / seeds grown etc. in order to
control the THC levels of the crops and that reputable growers are involved in
the process. CGP has adhered to and satisfied all requirements.
Notwithstanding that hemp recognition and approval amongst developed
countries has accelerated (except in the United States where certain states
are more proactive than others and federal approvals are still not available),
CGP's research team has established a goal to develop THC-free hemp seed
varieties that have superior seed and fiber yields, without diminishing any
nutritional value or compromising the positive attributes of the hemp fiber,
that will no longer be subject to the administrative burden of the current
regulatory requirements. In the interim, CGP's scientific staff will
maintain the strictest internal controls to comply with all government
testing protocols.
The inability of CGP to develop a completely "THC free" seed variety does not
impact in any way the Company's business plans which are based entirely on the
continued development, cultivation, multiplication and processing of existing,
approved / certified seed varieties only. Failure to obtain FDA or Ministry of
Health approval in any country where it presently plans to sell hemp products
for human consumption (foods, nutraceuticals, cosmetics), could have a negative
impact on the Company's plans and forward looking revenue assumptions.
OPERATIONS
CGP Inc. is a Delaware corporation with domestic offices in Los Angeles,
California and New Brunswick, New Jersey. The Company maintains its main
office at: 6350 Laurel Canyon Blvd., Suite 406, North Hollywood, California
91606, in addition to offices in Winnipeg, Canada, Cologne, Germany and
Zug, Switzerland.
CGP Management has created a multi-continental, diversified strategy in
alignment and consistent with the Company's mission. The mission is to
establish a significant presence in the expansion of the industrial hemp
industry based upon a vertically integrated platform of:
1) Seed -- development and registration of new, better performing, higher
yielding and THC- free hemp seed varieties, and to utilize various FAO and
United Nations programs to introduce / expand hemp cultivation as a staple to
emerging economies based upon this proprietary seed.
2) Growing and Processing -- forming strategic partnerships in each country for
the value added uses of hemp fiber and seed products. These partnerships will
focus on the continual upgrading and modernization of hemp agriculture and
primary processing for the efficiency and economics of hemp use in down-
stream products such as paper, textiles and building materials and,
ultimately, in technical fiber applications in place of certain plastics,
metals and fiberglass products.
3) Research and Development -- continuing R&D in hemp Biotechnology and
pharmaceutical and nutraceutical compounds; continuing R&D into the material
sciences of using cellulose from hemp as the base for metals, plastics and
fiberglass type products that are recyclable and / or biodegradable.
The Company has commenced negotiations for a Joint Venture presence and seed
planting trials in Australia, Africa and South America, in addition to their
ongoing operations in Canada and Europe.
In general, the Company's planned manufacturing operations are not labor
intensive and neither labor availability nor wages present issues in any of the
planned areas of operations. The Company begins operations based upon
contractual relationships with farmers to grow industrial hemp for the Company
in the selected locations. CGP is entering into long-term contracts - three
years, with a three year option exercisable by CGP - with most of its farmers.
It is CGP's strategy to supply planting seed to the farmers for both commercial
production and seed multiplication purposes. The Company has established
quality standards and delivery terms that it considers essential for its
purchase obligations of the crop harvest under the contract. A summary of the
Company's planned operations, facilities, production and other relevant points
are presented below by region.
North America - United States and Canada
In order to establish a significant presence, continued research and
development is an important part of the Company's plans. The Company's
principal biotechnology and material science research and development
activities will be centered in New Jersey, USA. The Biotechnology operations
will be conducted on a collaborative basis with two organizations:
Rutgers University, Center for Agricultural Molecular Biology, Alternative
Crops Research and Development. Research will focus particularly on
industrial hemp through biotechnological approaches. CGP is the Research
Program Sponsor, and as such, shall retain all rights to license any
developments of interest; and
Phytomedics, Inc., formerly Photosynthetic Harvest, Inc., is a highly
reputable development stage biotechnology and biopharmaceutical company with a
comprehensive portfolio of novel, proprietary technologies which enable the
discovery and manufacturing of biologically active compounds from live plants
for uses such as nutraceuticals, pharmaceuticals, agro-chemicals, cosmetic and
health care products.
The material science research and development will be conducted through
NTECH, a company engaged in the science of nanotechnology and molecularly
assembled substances. The first products resulting from this research should be
available for industrial trials by June 2000.
The Rutgers agreement is for three years at a total cost to CGP of $1.2 million
USD. The agreement with Phytomedics is for five years with a first year cost
to CGP of $95,000 USD. The NTECH agreement is such that CGP (the licensee)
will pay a royalty of 5% of the net sales price for all products sold by CGP
and any / all sub-licensees, to NTECH. The term of the agreement is for 12
month periods, with automatic renewals, unless cancelled by either the
licensor or licensee with 12 months, written notice.
Management established CGP Canada in 1998 to grow and process industrial hemp
in Western Canada, an area with high quality soil and diverse climatic
conditions. 1998 was the first year of operations for CGP Canada. Eight
hundred acres of industrial hemp were planted in 1998. Most of the harvest met
or exceeded expectations for quality and quantity. The Company maintains 135 MT
of seed and 753 MT of straw as inventory from that harvest in a leased storage
facility. In the 1999 planting season, the Company has aggressively expanded
its Canadian operations. The Company has obtained its raw materials, Ukrainian
and French certified seed, as well as Ukrainian breeder / multiplication seed,
for this year's planting requirements. Planted acreage was 13,400 acres for
commercial production and 4,800 acres for seed multiplication. During the year
2000, the Company plans to press both the seed from inventory and the 1999
harvest to produce a nutraceutical oil, nut and protein powder for sale to
health food market customers. To accomplish this the Company intends to invest
$1.4 million USD for a temporary seed processing facility.
To execute the processing plans of its integrated strategy, Management intends
to commence construction of state-of-the-art, large capacity grain and straw /
fiber processing facilities as models for all future facilities. The
proprietary design of the fiber processing line is based upon the extensive
experience and technological advancements by Bernd Frank, Director of our
German facility (BaFa). Dugan & Associates of Los Angeles has been engaged for
construction management services.
Construction of both facilities should commence around April 2000 and be
completed and operable in mid-2001. Until these full scale facilities are
operable, and subject to additional financing, the Company intends to:
1) Subcontract early stages of straw processing to a Canadian company, and;
2) invest $2 million in a fiber cleaning facility that will produce the
highest quality "technical" fiber for sale into the North American automotive
parts market.
Availability of farmers to contract and labor to work at the planned facilities
are more than adequate to achieve objectives. Contracted prices to the farmer
are reasonable, and other labor wages should be modest. Although the site for
the first hemp fiber processing center in North America has not been identified
by Management, the Company anticipates receiving certain tax and other
incentives from local governments for revenue and job creation therein.
Notwithstanding that planting and harvesting are seasonal between April 1
through October 31, the processing facilities will operate year round.
Europe
NAWARO, a German Investment Company, was formed by CGP in early 1998 to invest
in hemp related businesses in German speaking countries and certain other
contiguous countries such as Poland and the Czech Republic. NAWARO increased
its ownership in BaFa from 15% to 75% as of July 1, 1999.
At present BaFa cultivates approximately 1,235 acres in Malsch, Germany. BaFa,
founded in 1994, was the first modern industrial hemp processing facility in
Germany. Management believes Germany will be a leader in developing mainstream
market products. The German government is considering a mandate that would
require German automotive companies to include the use of natural fibers in
their manufacturing process to achieve specified levels of recyclability by the
year 2002. BaFa has pioneered development of the technology to produce a very
fine, technical fiber that is useable in automobile composite parts and as a
fiberglass substitute for insulation. End users of BaFa products include
Mercedes S Class, BMW and Opel automobiles. BaFa presently operates a facility
with a capacity to produce 1,800 MT of fiber, which will soon be expanded to
2,600 MT.
MANAGEMENT AND OWNERSHIP
The strategic business affairs of the Company are managed by the Board of
Directors, which presently consists of four members. It is anticipated that
the current members will continue to serve until the next annual meeting of the
shareholders. At that meeting, new members will be elected for staggered
one to three year terms. Daily operations of the Company are the
responsibility of its executive officers. The officers are appointed by the
Board. It is anticipated that each of the officers will remain for the
foreseeable future, and one or more will be elected to the Board.
DEPENDENCE UPON KEY PERSONNEL
The Company relies greatly in its efforts on the services and expertise of its
current senior officers: Susan Brana, Chairman of the Board, CGP Inc.; Dr.
Werner Thelen, President, NAWARO; Hansjorg Spoerri, CEO, CGP Inc. and
President, CGP Europe; Dr. Slavik Dushenkov, Executive Vice President, Research
and Development; Mark Kaeller, Chief Operating Officer, CGP Inc. and; Darrell
McElroy, Senior Vice President, Agriculture, CGP Canada. The operation and
future success of the Company could be adversely affected in the event that
the above key personnel were incapacitated or the Company were to lose their
services.
PROFESSIONAL SERVICES / ADVISORS
The Company has retained the following firms as advisors of record:
Program & Construction
Management Dugan & Associates Construction Management
Auditor Kevin G. Breard, C.P.A.
These certified / licensed advisors will support management providing as needed
expertise in their respective areas of specialization-construction management,
accounting and taxation. During the next five years of planned processing
capacity ramp-up, Dugan & Associates will be heavily relied upon to
coordinate and manage all planned construction activities in North America,
Europe and Africa.
Alan Cade, Senior Vice President of Dugan & Associates, is also a member of the
Board of Directors of the Company.
MARKET RESEARCH AND ANALYSIS
GENERAL MARKET DATA
The demand for industrial hemp and industrial hemp products is rapidly
increasing. A story in the April 27, 1997 Wall Street Journal found that the
demand for industrial hemp products would increase by more than 300% from $75
million to greater than $250 million by 1999. A recent ABC TV news story
indicated that worldwide hemp sales would reach an estimated $500 million this
year.
Based upon discussions between CGP management and executives of major
multinational companies, demand for raw materials from hemp (e.g., fiber, pulp)
would be significantly greater if planned supply quantities were sufficiently
large for a major company to make a long term commitment to its use. Although
worldwide global market data by market segment is difficult to ascertain, the
University of Kentucky completed a study of the "Economic Impact of Industrial
Hemp in Kentucky" (July 1998) that includes estimates of market size by
category for the United States domestic markets only. In summary, the study
concludes that potential domestic markets exist for:
- - 300,000 tons of industrial hemp hurd for horse bedding;
- - 112,000 tons of industrial hemp fiber for other products as follows:
- - 80,000 tons: Paper
- - 18,500 tons: Auto parts
- - 7,000 tons: Fiberglass
- - 2,500 tons: Textiles
- - 3,500 tons: Carpeting
The study also found that the potential domestic markets exist for:
- - 36,000 tons of industrial hemp grain meal
- - 18,000 tons of industrial hemp oil (for edible and other uses)
The total estimate for the potential domestic market is approximately 466,000
tons / year based upon assumptions used that includes an assumption of a 10-20
percent level of market penetration, depending upon market segment, as
reasonable based upon competitive characteristics versus products currently
used in the respective market segments.
MARKET SEGMENTS
Nutraceuticals
The nutraceutical / herbal food supplements industry has worldwide sales of
more than $17 billion and a 15-20 percent annual growth rate. Nutraceuticals
are food substances with health / medical benefits, primarily derived from
plants. The industry is, to a large extent, self-regulated, although the
predominant trend and consumer demand is for proven efficacy, safety and
increased standardization of products. Consumers, particularly those of the
"baby boomer" generation, are showing dramatically increased interest in these
products as they search for new means to prolong health and well being.
Oil
The market for edible oil at present is approximately 6.9 million metric tons.
The food industry generally serves as an indicator of demand. For this reason,
food companies are stressing new product introductions. "Functional foods and
nutraceuticals" are two relatively new terms in the industry to describe foods
containing significant levels of biologically active components that impart
health benefits or desirable physiological effects beyond basic nutrition.
Consumers are showing continued strong interest in reduced calories and less
detrimental fats in food products.
Personal Care Products
Personal care products, encompassing personal soaps, skin care products, hair
care products, cosmetics and other toiletries, is a primary consumer end use
market for fats and oils and their derivatives. Demand for personal care
products is dependent upon demographic and consumer spending patterns, and
tends to be highly income elastic. Personal care product shipments are
projected to advance 4.3 percent annually to $28 billion in the year 2000,
based on new product introductions and an aging population. Consumer
preferences for value-priced, environmentally-responsible and better performing
products are increasing. Environmental regulations and narrower profit margins
have driven personal care products manufacturers' research and development
efforts. The economic downturn of the early 1990's sparked renewed consumer
interest in value-priced products, such as better performing multifunctional
hair care formulations incorporating shampoo, conditioner and other specialty
additives.
Another important trend in the personal care products market is growing
consumer preference for environmentally compatible products. In addition, the
aging population will also influence trends in the use of personal care product
consumption. As the baby-boomer population grows older, the group will
continue to demand new, better performing products based on advancing
technologies and materials to offset signs of aging. In addition, this
demographic trend will also provide opportunities for milder, more effective
formulations of many personal care products.
Nuts
The North American market for nuts is in excess of $10 billion annually of
which the non-peanut segment is approximately $1.3 billion. Nuts with a high
nutritional content profile are sold in "health stores" as a nutraceutical
food, as well as in mainstream markets, where consumers seek healthier
alternatives to peanuts.
Protein Powder
The health food market for high quality whey protein has been dramatically
increasing due to its benefits in building lean muscle mass, weight loss and
nutritional content. At present, soy based whey protein is the leading
product. The market in North America for whey protein was in excess of
150,000 MT in 1998.
Animal Feed
Flax meal, which used to serve this market in North America, has declined
significantly to 159,000 tons annually since customers have begun to switch to
"higher protein" soy meal, particularly due to noted health improvements in
horses.
Horse Bedding (Hurd)
The market for bedding in the US alone is approximately 3 million tons ($400+
million) annually. Most of this market is served presently by bedding made
from straw, wood chips, and to a lesser extent, composition mats.
Natural Fibers
Natural fibers have proven to be environmentally-friendly substitutes for
hydrocarbon (e.g. petrochemical products) and wood in diverse product
categories. Different qualities of fiber are better suited for different
product categories. The global markets for these products easily exceed $20
billion annually. The product categories include: paper, automotive parts,
building materials, non-wovens, plastics, etc.
Phytoremediation
This is an alternative natural process to remediate various types of polluted
sites from radioactive, chemical and hydrocarbon contaminants. The USA market
alone exceeds $230 billion according to the US Department of Energy.
In general, hemp raw materials and value-added products are presently available
and sold by some suppliers into each of the aforementioned market segments,
with the exception of protein powder (processing capability is currently in
development by CGP and should be available by the third quarter of 2000), and
phytoremediation, which is currently only done on a trial test basis by CGP.
CGP presently only produces hurd for bedding and high quality fiber for the
automotive parts and residential building materials (insulation) market
segments. Based upon Management's plans, the Company should have products
available for sale in all market segments before 2001, excluding
pharmaceuticals.
COMPETITION
The Company should face competition from numerous companies in each of its
targeted market segments. For example:
Hemp fibers (of different grades and qualities) - competition from other
agricultural, wood and synthetic fibers and petrochemical products.
Hemp oil - competition from other edible oils such as soy, canola, flax or
olive, and also from coconut, palm oils, sunflower etc. used in cosmetics.
Hemp nuts - competition from walnuts, cashews, almonds, peanuts, etc.
Most of the competitors in the above-named product market segments are more
established, benefit from market recognition and have greater financial,
production and marketing resources than the Company. Management believes that,
due to the large number of companies that operate in its diverse product
markets, it has no single or group of competitors. Notwithstanding the extent
of competition and available products that serve its target markets, the
Company's products should successfully achieve a reasonable level of market
penetration and compete in these markets based upon the following principal
factors:
Agronomic, environmental and economic advantages from growing hemp that should
continue to increase demand by the farmers, governments, manufacturers and
consumers to enable market development;
CGP's planned advanced, large-scale processing technology should result in the
efficient processing of all parts of the industrial hemp plant to facilitate
both supply and competitive pricing;
The potential to develop valuable nutraceuticals and pharmaceuticals from low-
cost, process waste / by-product that contains proven medicinal benefits;
High to optimum health and nutritional profiles of food products for the
nutraceutical and mainstream food markets;
Ability of hemp oil to penetrate three layers of skin, improving the
effects in cosmetic uses;
Biodegradability and higher absorbency of horse bedding product;
High quality fiber that is stronger, more flexible, safer, environmentally-
friendly and lower cost than existing petrochemical products or synthetic
fibers used in automobile parts, insulation, etc.;
Raw fiber to serve as a "tree-free" fiber for making paper;
Unusual capability of industrial hemp to remediate certain hazardous materials
in soil and water.
All of these qualities are competitive advantages that distinguish industrial
hemp from existing products currently serving large volume and revenue markets
and should facilitate reasonable market penetration for the Company's products.
OTHER BUSINESS RISKS
1. Need to Develop New Markets / Products
Although the industrial hemp product sales are experiencing rapid growth, the
industry is at the early stage of development. Major markets for key
industrial hemp raw material products have yet to be developed due to available
quantity limitations. Further development and product introduction in the
areas of nutraceuticals and biocomposites are important to the development of
the industrial hemp crop markets.
2. Evolving Marketing Strategy
The Company plans to develop markets through a dependence on resellers /
distributors and outside representatives. The Company intends to primarily
produce raw materials for value-added manufacturers that supply end user
markets. For most of its targeted market segments, it intends to rely on
distributors and / or commissioned representatives to sell its products. There
can be no assurance that these outside parties will provide the commitment for
success required by the Company.
3. Primary Raw Material Supply
Although the Company has an exclusive license to all Ukrainian seed varieties
for commercial planting and seed multiplication purposes, there are various
other varieties available with particular traits (e.g., THC content; days to
maturity). However, the Ukrainian varieties are among the lowest THC content
seed varieties in the world. The Company may purchase other varieties during
the next one to two years in order to meet its target growth objectives.
However, the Company's R & D strategy for seed breeding, together with success
in its seed multiplication planting program on a multiple locale, dual-
hemisphere basis are critical to control of its principal raw material and
overall success of its strategy. Therefore, the Company will be dependent upon
a non-controllable source of supply for a limited amount of its seed and there
cannot be any assurance the Company will secure its total needs for seed.
4. Crop Harvesting
The USDA states that 8-10 percent of all sown crops will not produce a viable
crop due to natural disasters, poor farming, etc. Under extreme adverse
natural occurrences, yield could be affected more severely.
5. Need for Future Funding; Uncertainty of Access to Capital
The Company plans to build twenty processing facilities over the next five
years at an estimated expenditure of $125 million. The development of global
marketing capabilities will also require a commitment of substantial funds.
The ability to achieve its plan is dependent upon both the successful
generation of cash flow from operations and access to public and / or private
capital. Additional equity financing could result in dilution to shareholders.
If sufficient capital is not available, the Company may be required to delay
the scope of its growth plans.
6. Technology
The business strategy of the Company includes expectations for technological
development and / or advancement in several areas that includes: seed breeding;
plant extraction systems for plant compounds; harvesting techniques; processing
capability; and biocomposite products. The inability of the Company to achieve
economic, viable results in one or more of the above will impact the projected
results from operations.
7. Dependence on Collaborative Development Arrangements
The Company has entered into collaborative agreements with Rutgers University
to conduct agricultural biotechnology research and development tasks, and
P.H.I. for research and development of commercially viable nutraceutical
compounds available in the industrial hemp plant. Although both organizations
have excellent track records, these partners, and personnel employed by them,
are not controlled by the Company, and each group has other commitments that
may limit their availability to the Company. The Company has limited control
over the activities of these partners, and can expect only specifically defined
resources to be dedicated to the Company's activities. There can only be
limited assurance that performance of obligations by the partners will be done
on a timely basis or that the Company will derive any commercially valuable
products from these arrangements. There can also be only limited assurance
that the partners will not pursue existing or alternative projects in
preference to those being developed in collaboration with the Company.
8. Risks Associated with International Sales
The Company expects that international sales will represent a substantial
portion of its Company's future business. International sales are subject to a
number of risks, including the following: fluctuation in exchange rates,
deteriorating general economic conditions, protection of intellectual property,
adoption of trade restrictions, etc. that could affect product demand and
others that could negatively impact results.
9. Potential Fluctuations in Operating Results
Fluctuations in the Company's results of operations may be caused by various
factors, including the inability to develop, introduce and deliver products on
a timely basis, to offer products at competitive prices, changes in
distribution channels, timely completion of production facilities, etc. and
risks of nature.
ITEM 2. DESCRIPTION OF PROPERTY
The Company has an office in Winnipeg, Manitoba, Canada under the name of its
Canadian subsidiary, Consolidated Growers and Processors (CGP) Canada Ltd.,
that is being leased. The lease term expires January 2001.
As of June 30, 1999 the Company did not own any real property.
The investment policies of the Company are left to the discretion of a quorum
of the Board of Directors. Resolutions can be passed by the Board of Directors
to allow input from security holders as required.
ITEM 3. LEGAL PROCEEDINGS
As of the date of this filing, the Company is not a party to any legal
proceeding.
ITEM 4. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
The registrant's securities are traded on the Over-The-Counter Bulletin Board
(OTC-BB) operated by the National Association of Securities Dealers, Inc. under
the symbol CGPR. The registrant's securities began trading on the OTC-BB on
October 27, 1997.
Holders
As of 6/30/99, there were 197 shareholders of Common Stock in the Company, and
32,173,802 shares of Common Stock outstanding.
Dividends
There have been no cash dividends declared on any shares of common equity in
the company since the inception of the Company to present.
ITEM 5. DESCRIPTION OF SECURITIES
Common Stock
Warrants - At present, there are no outstanding warrants to purchase common
equity in the Company.
Options - At present, there are no options outstanding that can be exercised to
purchase equity in the company.
Convertible Stock - At present, there is no convertible stock.
Selling Security Holders - There are no securities to be registered for the
account of any security holders.
Except as otherwise provided by the Company's Certificate of Incorporation or
By-Laws, at every meeting of the stockholders each stockholder shall be
entitled to one vote for each share of voting stock standing in his name on the
books of the corporation on the record date for the meeting.
A. IMPORTANT INFORMATION ON PENNY STOCKS
This statement is required by the U.S. Securities and Exchange Commission (SEC)
and contains important information on penny stocks. Your broker-dealer is
required to obtain your signature to show that you have received this statement
before your first trade in a penny stock. You are urged to read this statement
before signing and before making a purchase or sale of a penny stock.
PENNY STOCKS CAN BE VERY RISKY.
Penny stocks are low-priced shares of small companies not traded on an exchange
or quoted on NASDAQ. Prices often are not available. Investors in penny
stocks often are unable to sell stock back to the dealer that sold them the
stock. Thus, you may lose your investment. Be cautious of newly issued penny
stock.
Your salesperson is not an impartial advisor but is paid to sell you the stock.
Do not rely only on the salesperson, but seek outside advice before you buy any
stock. If you have problems with a salesperson, contact the firm's compliance
officer or the regulators listed below.
INFORMATION YOU SHOULD GET.
BEFORE YOU BUY PENNY STOCK, federal law requires your salesperson to tell you
the "offer" and the "bid" on the stock, and the "compensation" the salesperson
and the firm receive for the trade. The firm also must mail a confirmation of
these prices to you after the trade.
You will need this price information to determine what profit, if any, you will
have when you sell your stock. The offer price is the wholesale price at which
the dealer is willing to sell stock to other dealers. The bid price is the
wholesale price at which the dealer is willing to buy the stock from other
dealers. In its trade with you, the dealer may add a retail charge to these
wholesale prices as compensation (called a "markup" or "markdown").
The difference between the bid and the offer price is the dealer's "spread." A
spread that is large compared with the purchase price can make a resale of a
stock very costly. To be profitable when you sell, the bid price of your stock
must rise above the amount of this spread and the compensation charged by both
your selling and purchasing dealers. If the dealer has no bid price, you may
not be able to sell the stock after you buy it, and may lose your whole
investment.
Brokers' duties and customer's rights and remedies.
If you are a victim of fraud, you may have rights and remedies under state and
federal law. You can get the disciplinary history of a salesperson or firm
from the NASD at 1-800-289-9999, and additional information from your state
securities official, at the North American Securities Administrators
Association's central number: (202) 737-0900. You also may contact the SEC
with complaints at (202) 272-7440.
FURTHER INFORMATION
The securities being sold to you have not been approved or disapproved by the
Securities and Exchange Commission. Moreover, the Securities and Exchange
Commission has not passed upon the fairness or the merits of this transaction
nor upon the accuracy or adequacy of the information contained in any
prospectus or any other information provided by an issuer or a broker or
dealer.
Generally, penny stock is a security that:
Is priced under five dollars;
Is NOT traded on a national stock exchange or on NASDAQ (the NASD's automated
quotation system for actively traded stocks);
May be listed in the "pink sheets" or the NASD OTC Bulletin Board;
Is issued by a company that has less than $5 million in net tangible assets and
has been in business less than three years, by a company that has under $2
million in net tangible assets and has been in business for at least three
years, or by a company that has revenues of $6 million for 3 years.
Use Caution When Investing in Penny Stocks
DO NOT MAKE A HURRIED INVESTMENT DECISION. High-pressure sales techniques can
be a warning sign of fraud. The salesperson is not an impartial advisor, but
is paid for selling stock to you. The salesperson also does not have to watch
your investment for you. Thus, you should think over the offer and seek
outside advice. Check to see if the information given by the salesperson
differs from other information you may have. Also, it is illegal for
salespersons to promise that a stock will increase in value or is risk-free, or
to guarantee against loss. If you think there is a problem, ask to speak
with a compliance official at the firm, and, if necessary, any of the
regulators referred to in this statement.
STUDY THE COMPANY ISSUING THE STOCK. Be wary of companies that have no
operating history, few assets, or no defined business purpose. These may be
sham or "shell" corporations. Read the prospectus for the company carefully
before you invest. Some dealers fraudulently solicit investors' money to buy
stock in sham companies, artificially inflate the stock prices, then cash in
their profits before public investors can sell their stock.
UNDERSTAND THE RISKY NATURE OF THESE STOCKS. Understand the risky nature of
these stocks. You should be aware that you may lose part or all of your
investment. Because of large dealer spreads, you will not be able to sell the
stock immediately back to the dealer at the same price it sold the stock to
you. In some cases, the stock may fall quickly in value. New companies, whose
stock is sold in an "initial public offering," often are riskier investments.
Try to find out if the shares the salesperson wants to sell you are part of
such an offering. Your salesperson must give you a "prospectus" in an initial
public offering, but the financial condition shown in the prospectus of new
companies can change very quickly.
KNOW THE BROKERAGE FIRM AND THE SALESPERSON WITH WHOM YOU ARE DEALING. Because
of the nature of the market for penny stock, you may have to rely solely on the
original brokerage firm that sold you the stock for prices and to buy the stock
back from you. Ask the National Association of Securities Dealers, Inc. (NASD)
or your state securities regulator, which is a member of the North American
Securities Administrators Association, Inc. (NASAA), about the licensing and
disciplinary record of the brokerage firm and the salesperson contacting you.
The telephone numbers of the NASD and NASAA are listed on the first page of
this document.
BE CAUTIOUS IF YOUR SALESPERSON LEAVES THE FIRM. If the salesperson who sold
you the stock leaves his or her firm, the firm may reassign your account to a
new salesperson. If you have problems, ask to speak to the firm's branch
office manager or a compliance officer. Although the departing salesperson
may ask you to transfer your stock to his or her new firm, you do not have to
do so. Get information on the new firm. Be wary of requests to sell your
securities when the salesperson transfers to a new firm. Also, you have the
right to get your stock certificate from your selling firm. You do not have to
leave the certificate with that firm or any other firm.
Your Rights
DISCLOSURES TO YOU. Under penalty of federal law, your brokerage firm must
tell you the following information at two different times-before you agree
to buy or sell a penny stock, and after the trade, by written confirmation:
THE BID AND OFFER PRICE QUOTES FOR PENNY STOCK, AND THE NUMBER OF SHARES TO
WHICH THE QUOTED PRICES APPLY. The BID and OFFER quotes are the wholesale
prices at which dealers trade among themselves. These prices give you an idea
of the market value of the stock. The dealer must tell you these price quotes
if they appear on an automated quotation system approved by the SEC. If not,
the dealer must use its own quotes or trade prices. You should calculate the
spread, the difference between the bid and offer quotes, to help decide if
buying the stock is a good investment.
A lack of quotes may mean that the market among dealers is not active. It thus
may be difficult to resell the stock. You also should be aware that the actual
price charged to you for the stock may differ from the price quoted to you for
100 shares. You should therefore determine, before you agree to a purchase,
what the actual sales price (before the MARKUP) will be for the exact number of
shares you want to buy.
THE BROKERAGE FIRM'S COMPENSATION FOR THE TRADE. A markup is the amount a
dealer adds to the wholesale offer price of the stock and a markdown is the
amount it subtracts from the wholesale bid price of the stock as compensation.
A markup/markdown usually serves the same role as a broker's commission on a
trade. Most of the firms in the penny stock market will be dealers, not
brokers.
THE COMPENSATION RECEIVED BY THE BROKERAGE FIRM'S SALESPERSON FOR THE TRADE.
The brokerage firm must disclose to you, as a total sum, the cash compensation
of your salesperson for the trade that is known at the time of the trade. The
firm must describe in the written confirmation the nature of any other
compensation of your salesperson that is unknown at the time of the trade.
In addition to the items listed above, your brokerage firm must send to you:
MONTHLY ACCOUNT STATEMENTS. IN GENERAL, YOUR BROKERAGE FIRM MUST SEND YOU A
MONTHLY STATEMENT that gives an estimate of the value of each penny stock in
your account, if there is enough information to make an estimate. If the firm
has not bought or sold any penny stocks for your account for six months, it can
provide these statements every three months.
A WRITTEN STATEMENT OF YOUR FINANCIAL SITUATION AND INVESTMENT GOALS. In
general, unless you have had an account with your brokerage firm for more than
one year, or you have previously bought three different penny stocks from that
firm, your brokerage firm must send you a written statement for you to sign
that accurately describes your financial situation, your investment experience,
and your investment goals, and that contains a statement of why your firm
decided that penny stocks are a suitable investment for you. The firm also
must get your written consent to buy the penny stock.
LEGAL REMEDIES. If penny stocks are sold to you in violation of your rights
listed above, or other federal or state securities laws, you may be able to
cancel your purchase and get your money back. If the stocks are sold in a
fraudulent manner, you may be able to sue the persons and firms that caused the
fraud for damages. If you have signed an arbitration agreement, however, you
may have to pursue your claim through arbitration. You may wish to contact an
attorney. The SEC is not authorized to represent individuals in private
litigation.
However, to protect yourself and other investors, you should report any
violations of your brokerage firm's duties listed above and other securities
laws to the SEC, the NASD, or your state securities administrator at the
telephone numbers on the first page of this document. These bodies have the
power to stop fraudulent and abusive activity of salespersons and firms engaged
in the securities business. Or you can write to the SEC at 450 Fifth St., NW.,
Washington, DC 20549; the NASD at 1735 K Street, NW., Washington, DC 20006; or
NASAA at 555 New Jersey Avenue, NW., Suite 750, Washington, DC 20001. NASAA
will give you the telephone number of your state's securities agency. If there
is any disciplinary record of a person or a firm, the NASD, NASAA, or your
state securities regulator will send you this information if you ask for it.
Market Information
THE MARKET FOR PENNY STOCKS. Penny stocks usually are not listed on an
exchange or quoted on the NASDAQ system. Instead, they are traded between
dealers on the telephone in the "over-the-counter" market. The NASD's OTC
Bulletin Board also will contain information on some penny stocks. At times,
however, price information for these stocks is not publicly available.
MARKET DOMINATION. In some cases, only one or two dealers, acting as "market
makers," may be buying and selling a given stock. You should first ask if a
firm is acting as a BROKER (your agent) or as a dealer. A DEALER stock's
itself to fill your order or already owns the stock. A MARKET MAKER is a
dealer who holds itself out as ready to buy and sell stock on a regular
basis. If the firm is a market maker, ask how many other market makers are
dealing in the stock to see if the firm (or group of firms) dominates the
market. When there are only one or two market makers, there is a risk that
the dealer or group of dealers may control the market in that stock and set
prices that are not based on competitive forces. In recent years, some
market makers have created fraudulent markets in certain penny stocks, so
that stock prices rose suddenly, but collapsed just as quickly, at a loss to
investors.
MARK-UPS AND MARK-DOWNS. The actual price that the customer pays usually
includes the mark-up or mark-down. Markups and markdowns are direct profits
for the firm and its salespeople, so you should be aware of such amounts to
assess the overall value of the trade.
THE "SPREAD." The difference between the bid and offer price is the spread.
Like a mark-up or mark-down, the spread is another source of profit for the
brokerage firm and compensates the firm for the risk of owning the stock. A
large spread can make a trade very expensive to an investor. For some penny
stocks, the spread between the bid and offer may be a large part of the
purchase price of the stock. Where the bid price is much lower than the offer
price, the market value of the stock must rise substantially before the stock
can be sold at a profit. Moreover, an investor may experience substantial
losses if the stock must be sold immediately.
EXAMPLE: If the bid is $0.04 per share and the offer is $0.10 per share, the
spread (difference) is $0.06, which appears to be a small amount. But you would
lose $0.06 on every share that you bought for $0.10 if you had to sell that
stock immediately to the same firm. If you had invested $5,000 at the $0.10
offer price, the market maker's repurchase price, at $0.04 bid, would be only
$2,000; thus you would lose $3,000, or more than half of your investment, if
you decided to sell the stock. In addition, you would have to pay compensation
(a "mark-up," "mark-down," or commission) to buy and sell the stock. \1/4\
IN ADDITION TO THE AMOUNT OF THE SPREAD, the price of your stock must rise
enough to make up for the compensation that the dealer charged you when it
first sold you the stock. Then, when you want to resell the stock, a dealer
again will charge compensation, in the form of a markdown. The dealer
subtracts the markdown from the price of the stock when it buys the stock from
you. Thus, to make a profit, the bid price of your stock must rise above the
amount of the original spread, the markup, and the markdown.
PRIMARY OFFERINGS. Most penny stocks are sold to the public on an ongoing
basis. However, dealers sometimes sell these stocks in initial public
offerings. You should pay special attention to stocks of companies that have
never been offered to the public before, because the market for these stocks is
untested. Because the offering is on a first-time basis, there is generally no
market information about the stock to help determine its value. The federal
securities laws generally require broker-dealers to give investors a
"prospectus," which contains information about the objectives, management, and
financial condition of the issuer. In the absence of market information,
investors should read the company's prospectus with special care to find out if
the stocks are a good investment. However, the prospectus is only a
description of the current condition of the company. The outlook of the
start-up companies described in a prospectus often is very uncertain.
FOR MORE INFORMATION ABOUT PENNY STOCKS, contact the Office of Filings,
Information, and Consumer Services of the U.S. Securities and Exchange
Commission, 450 Fifth Street, NW., Washington, DC 20549, (202) 272-7440.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
OVERVIEW
Consolidated Growers and Processors, Incorporated (the "Company") is an
industrial hemp company with a growing multinational presence. The Company's
primary business objectives are to provide financing, technical, and marketing
expertise to the farming, processing, and marketing of products made from
industrial hemp and other industrial crops. From June 10, 1997 (inception) to
June 30, 1998, the Company's operations were in the development stage. On July
1, 1998 the Company began to receive revenue from hemp products. The Company's
activities primarily have been related to raising capital, establishing or
acquiring key subsidiaries, performing market analysis, sponsoring research,
developing technology, developing products, establishing a grower base, and
recruiting employees. The Company's operations primarily have been funded by
the sale of common stock and warrants.
In October 1997, the Company signed an agreement with the Ukrainian Academy of
Agricultural Sciences / Institute of Bast Crops (the "Institute"). The
Institute has granted the Company exclusive licensing rights for certain
registered industrial hemp seed varieties which were bred by the Institute. In
addition, the Company has exclusive rights for seed production / multiplication
of these varieties in North America, Central America, South America, Africa,
Australia, New Zealand, and Asia (excluding the countries of the former Soviet
Union). Management believes this agreement with the Institute is key to its
establishing a leadership position within industrial hemp as the Institute's
industrial hemp seed varieties have the lowest THC content of any industrial
hemp seed varieties available. The availability of low THC industrial hemp
seed varieties has opened up the commercial growing of industrial hemp in
both Europe and Canada. A comprehensive seed multiplication program has been
established by the Company to multiply seeds for planting in Canada, Europe,
Australia, and South Africa. Most governments, including the Canadian
Government, have imposed strict THC level requirements for the commercial
cultivation of industrial hemp. The Company's exclusive rights to these low
THC industrial hemp seed varieties gives it a strategic advantage to build
business, particularly in the key North American markets.
In November 1997, the Company entered into an agreement with NTECH Corporation
which has developed and also licensed coded microparticles known as StuffDust.
This agreement gives the Company the worldwide license for this product for use
in various paper products. The Company believes that use of this microparticle
should more easily facilitate introduction of industrial hemp fiber into the
specialty and security paper markets.
The Company increased its ownership in Badische Naturfaseraufbereitung
("BaFa") from 15 percent to 75 percent on July 1, 1999. BaFa was the first
modern grower and processor of industrial hemp in Germany. BaFa has the
ability to produce the highest purity and quality of fibers from industrial
hemp, which satisfy the most stringent technical specifications and
requirements, and are presently being used by automotive manufacturers such as
Mercedes, BMW and Opel in automotive panels and also for (residential) building
insulation.
The Company continued to expand operations of its strategic subsidiaries in
Canada (CGP Canada, Ltd.), Germany (NAWARO GmbH), and Switzerland
(CGP Europe AG), respectively, by significantly increasing planted acreage,
increasing the consumer base for its high quality fiber and preparing for new
operations in Canada to further facilitate the development of worldwide markets
for industrial hemp.
In December 1998, the Company sold a subsidiary (Werner Zoellig AG and Glulam
Lumber Manufacturing Corporation) to be able to focus on development of
industrial hemp products and increase its ownership and control of BaFa.
The Company has successfully planted, for the second consecutive year, several
hectares of industrial hemp in Chernobyl, Ukraine. While this project has not
generated revenue to the Company, the Company has received recognition of its
efforts, resulting in numerous, high profile speaking engagements at
international conferences within the agricultural and scientific communities
such as the Fourth International Symposium & Exhibition on Environmental
Contamination in Central and Eastern Europe, and also periodic seminars in 1999
in Eastern Europe in regards to similar topics.
The Company entered into collaborative research agreements with both
Phytomedics Inc. and Rutgers University Biotechnology Center for the
research and development of the nutraceutical and pharmaceutical compounds of
industrial hemp and the maximization of advantageous genetic traits of hemp
(see Research section above).
In December 1998, the Company was engaged as the official editor for industrial
hemp for the UN / FAO internet site, disseminating fundamental and scientific
information about industrial hemp throughout the world.
RESULTS OF OPERATIONS
Because the Company was in the developmental stage from inception through
June 30, 1998, and only began to receive income in July of 1998, only limited
revenues were recognized since inception. The amount of these revenues was
$-0- for the fiscal year ending on June 30, 1998 and $1,181,865 for the fiscal
year ending on June 30, 1999. Revenue from BaFa is not included in these
amounts since the increase in ownership in BaFa above the level at which CGP
may reflect BaFa's operations as other than an "investment" occurred on the
first day of the current fiscal year. Although BaFa has been in operation for
4 years, overall, the Company has a limited operating history, and its
prospects are subject to the risks, expenses and difficulties frequently
encountered by companies in an evolving market, in this case industrial crops.
To address these risks, the Company must, among other things, continue to
respond to competitive developments, attract, retain and motivate qualified
personnel, and successfully market the use of industrial hemp as an alternative
to timber and petroleum based products. There can be no assurance that the
Company will be successful in addressing these risks. As of June 30, 1999, the
Company had an accumulated deficit of $2,457,117. The Company had a negative
cash flow from operations of $2,270,298 and used $206,977 of cash for
investment activities, from the $2,422,787 of cash received from the sale of
additional shares.
As a result of the Company's limited operating history, the Company does not
have historical financial data for any significant period of time on which to
base planned operating expenses. The limited operating history of the Company
makes the prediction of future results of operations difficult. The Company's
expense levels are based in part on its expectations concerning future
revenue. The Company's operating expenses have increased significantly since
the Company's inception. This trend reflects the costs associated with
formation of the Company, development of infrastructure, and increased efforts
in the research and development and marketing of industrial hemp products. The
Company anticipates marketing expenses to increase in future periods as it
pursues an aggressive marketing campaign through a well-established public
relations firm and established distribution channels.
Product development costs consist primarily of the development costs of hemp
fiber, hemp oil products, "hemp plastics," a material the Company will market
to replace traditional plastics, and "hemp metals," a material the Company
will market to replace certain metal products (see discussion of hemp plastics
and hemp metals above).
General and Administrative expenses have consisted primarily of compensation
and fees for salaries and professional consulting services.
The Company's operating results may fluctuate significantly in the future as a
result of a variety of factors, many of which are outside the Company's
control. These factors include the acceptance by businesses and consumers of
industrial hemp, the availability of industrial hemp, the amount and timing of
capital expenditures and other costs relating to the expansion of the Company's
operations, the introduction of new products or services by the Company or
competitors, pricing changes in the industry, or general economic conditions
and economic conditions specific to industrial crops and / or non-wood fibers.
As a strategic response to changes in the competitive environment, the Company
may from time to time make certain pricing or marketing decisions or
acquisitions that could have a material adverse effect on the Company's
business, results of operations, and financial condition.
As part of the production process, the Company has established a network of
independent distributors in Canada and entered into multi-year contracts to
sell its seed to Canadian farmers. These exclusive contracts also provide for
the Company to purchase the crop at harvest time. The Company had
approximately 730 acres under contract in Canada in 1998. The 1998 Canadian
crop had a higher yield than predicted based on typical yields experienced in
Europe. The Company purchased the 1998 crop from the Growers in accordance
with the Grower contracts. The stalk portion of the 1998 crop, approximately
750MT is currently in storage awaiting construction of a fiber processing
facility. As of June 30, 1999, four MT of the 1998 seed crop had been sold for
approximately $5,600 USD under long term agreements. The remainder of the 1998
seed harvest (approximately 135 MT) also remains in storage pending completion
of a temporary seed processing facility which is scheduled to commence
operations in April 2000.
In 1999, 13,400 acres of industrial hemp were planted in Canada for commercial
production purposes. This crop achieved growth objectives and the (second)
Canadian harvest was successfully completed in October 1999. The Company is
preparing plans for a Spring 2000 planting. Additionally, 4,800 acres were
planted in Canada for seed multiplication, which also was successfully
harvested in October 1999 and will be used for the spring 2000 planting season.
During December 1999, the Company anticipates commencing growing trials in
Australia.
INFLATION AND CHANGING PRICES
To date, the impacts of inflation and changing prices on the Company's
operations have been minimal.
GOING CONCERN QUALIFICATIONS
The auditors of the consolidated financial statements of the Company have
stated that the financial statements have been prepared on a going-concern
basis for the year ended June 30, 1999. That basis of accounting contemplates
the realization of assets and the satisfaction of liabilities in the normal
course of conducting business operations. As shown in the consolidated
financial statements, operations for the year ended June 30, 1999 resulted in a
net loss of ($1,912,707). The Company's future is dependent on its ability to
continue to obtain additional capital and realize a level of sales adequate to
support its operations.
CAPITAL RESOURCES AND LIQUIDITY
The need for sustained funding of the current operations drives the Company's
efforts to raise additional capital from qualified investors. The Company
expects to privately place additional common stock and / or conduct an
additional public offering of equity securities. The proceeds used from any
offering are expected to fund the Company's general working capital needs and
provide for construction of physical processing facilities. The Company has no
significant commitments for equipment purchases, product manufacturing, or
marketing efforts at present.
INCOME TAXES
No provision for income taxes have been provided. The Company incurred a loss
for the fiscal year ending 6/30/99. The Company has elected to carry forward
the loss to offset future taxable income. The loss can be carried forward
twenty(20) years. There is no assurance that future taxable income will be
sufficient to realize the net asset or utilize the tax carryforwards.
Therefore, no valuation allowance has been recorded.
The Company's Canadian subsidiary, CGP Canada, Ltd., is leasing a facility
under a contract terminating in January 2001. The monthly expense is
approximately $1,375 US Dollars ($1,926 Canadian Dollars).
ITEM 7. FINANCIAL STATEMENTS
The selected financial data presented below has been derived from the financial
statements of the Company. The following table summarizes certain financial
information and should be read in conjunction with "Management's Discussion and
Analysis" and the Financial Statements and related notes included elsewhere in
this Registration Statement. The information below may not be indicative of
the Company's future results of operations.
JUNE 30, 1999 JUNE 30, 1998
Statement of Operations Data:
Revenue $ 1,181,865 $ -
Operating Expenses $ 2,843,988 $ 710,014
Net Loss $ (1,912,707) $ (544,410)
Net Loss per Share $ (.09) $ (.08)
Balance Sheet Data:
Current Assets $ 982,373 $ 231,692
Total Assets $ 1,527,508 $ 12,766,171
Total Stockholders Equity $ 1,166,101 $ 12,663,517
CASH CONTRIBUTIONS
Upon organization of the Company, there was an initial $200 paid in capital.
In exchange for these funds, the company issued 6,123,000 shares to the
founders, which were dispersed as follows:
GAIN, Inc.(1) 3,541,500 shares
Martin Moravcik 581,500 shares
Gero Leson (2) 2,000,000 shares
(1) Susan Brana is the owner of record.
(2) Terminated by the Board of Directors, June 1998.
The following is a list of cash contributions made by officers, directors,
promoters, and affiliated persons made subsequent to the organization of the
company, and made for the purpose of acquiring common equity in the company:
Shareholder Cash Contribution No. of Shares Issued
GAIN, Inc.(1) $1,364,967 9,257,333
Mark Kaeller $ 295,367 1,275,000
Aries Capital Management (2) $ 250,000 100,000
(1) Susan Brana is the owner of record.
(2) Aries Capital Management is affiliated with Sierra Brokerage, Inc.,
the Company's market maker.
ITEM 8. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Directors
Susan Brana; 46 years old; Chairman of the Board since July 1997
Susan Brana is an entrepreneur in technology companies. Ms. Brana also has
broad experience in securities compliance and commercial / investment banking.
She has been with CGP (founder) for the past four years, and was the owner /
operator of Alt Capital, a broker dealer in Los Angeles, for the three years
prior to founding CGP.
Hansjorg Spoerri; 53 years old; CEO, CGP and President, CGP Europe; Director
since December 1997
Hansjorg Spoerri has been the managing director of Papierfabrik, Netstal,
Switzerland for 12 years. He has more than 25 years experience in the
innovative development and production of paper in Europe, and consequently,
brings expertise and relationships in the pulp and paper industry.
Dr. Werner Thelen; 43 years old; President, NAWARO; Director since September
1998
Dr. Werner Thelen has been an independent attorney in Cologne, Germany, for the
past 15 years, specializing in banking, finance and corporate law. Dr. Thelen
has been instrumental in the investment in and development of BaFa.
Alan Cade; 43 years old; Director since July 1998
Alan Cade has been with Dugan & Associates, a highly regarded construction
management company in Los Angeles, CA, for over 10 years, and is currently the
Senior Vice President with them. Dugan & Associates will manage the
construction of all planned, state-of-the-art, integrated straw / fiber and
seed processing facilities.
Executive Officers
Susan M. Brana Chairman of the Board and Secretary, CGP Inc.
Hansjorg Spoerri CEO, CGP Inc. and President, CGP Europe AG
Dr. Werner Thelen President, NAWARO GmbH
Dr. Slavik Dushenkov Executive Vice President, Research and Development,
CGP Inc.
Mark Kaeller Senior Vice President, Chief Operating Officer,
CGP Inc.
Darrell McElroy Senior Vice President, Agriculture, CGP Canada Ltd.
Dr. Slavik Dushenkov joined CGP in April 1999 and had been a consultant to the
Company prior to becoming an employee. Prior to working with CGP, Dr.
Dushenkov was a senior research scientist at Phytotech, Inc. from 1995-1999.
Prior to that, he was a visiting scientist at the Center for Agricultural and
Molecular Biology at Rutgers University from 1992-1995. He has over 20 years
of innovative research experience that includes agricultural molecular
biology, plant physiology and bioremediation. He is co-inventor on three US
patents, and has authored / co-authored numerous books and articles. Dr.
Dushenkov will direct the Company's biotechnology and breeding research and
development programs.
Mark Kaeller has been with CGP for two years. He has ten years of commercial
banking management and operations experience. Prior to his work with CGP, Mr.
Kaeller was an A.V.P. at Sanwa Bank for one year and an A.V.P. at Wells Fargo
Bank for two and a half years.
Darrell McElroy joined CGP in January 1999. Prior to this, for the past 23
years, he has been an independent pedigree seed grower in cereals, canola and
flax. He was one of the first growers in 1998 to plant a commercial plot of
industrial hemp in Western Canada.
SIGNIFICANT EMPLOYEES
There are no other employees to mention that will make a significant
contribution to the Company at this time.
ITEM 9. EXECUTIVE COMPENSATION
Following is the amount of cash and stock compensation for executives of the
Company since inception to 6/30/99:
Dr. Slavik Dushenkov - $9,999.30; 13,000 shares of Common Stock
Dr. Werner Thelen - $22,000.00; 200,000 shares of Common Stock
Hansjorg Spoerri - 600,000 shares of Common Stock
Mark Kaeller - $40,500; 1,695,000 shares of Common Stock
Darrell McElroy - $15,333.33; 10,000 shares of Common Stock
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
</CAPTION>
Long Term Compensation
Annual Awards
Compensation
Name and
Principle Years Salary Restricted Stock
Position
<S> <C> <C> <C>
Hansjorg Spoerri 1997-9 - 600,000
CEO
Slavik Dushenkov 1999 9,999.30 13,000
EVP Research &
Development
Werner Thelen 1997-9 22,000.00 200,000
President, NAWARO
Mark Kaeller 1997-9 40,000.00 1,695,000
SVP, Chief
Operating Officer
Darrell McElroy 1999 15,333.33 10,000
SVP, Agriculture
ITEM 10. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the Common Stock ownership of each person known
by the Company to be the beneficial owner of five percent or more of the
Company's Common Stock, each director individually, and all officers and
directors of the Company as a group. Each person has sole voting and
investment power with respect to the shares of Common Stock shown, and all
ownership is of record and beneficial:
Title Name and address Amount and nature Percent
of class of beneficial owner of beneficial ownership of Class
Common GAIN, Inc (1) 12,953,183 36.82%
Stock 1015 Gayley Ave.
No. 387
Los Angeles, CA. 90024
Common Mark G. Kaeller 1,970,000 5.60%
Stock P.O. Box 572285
Tarzana, CA. 91357
Common Meekin Holdings Ltd. (2) 3,000,000 8.53%
Stock
Common Avoriaz Holdings Ltd. (2) 4,000,000 11.37%
Stock
All Officers 16,633,183 47.29%
Directors as
a Group
(1) Susan Brana is the owner of record.
(2) Sovereign Management Services, Suites 1601-1603, Kinwick Centre, 32
Hollywood Road,Central, HONG KONG, is the beneficial owner of these shares.
Note: Shareholder records with the Company's transfer agent as of June 30, 1999
show Werner Zoellig AG with 3,000,000 shares outstanding. These shares are
to be considered returned to the Company as part of its sale of Zoellig as of
June 30, 1999, but were not cancelled on record by the transfer agent until
after June 30, 1999.
PRINCIPAL SHAREHOLDERS AND DIRECTORS
A total of 32,174,802 shares of Common Stock were issued and 32,173,802 were
outstanding as of June 30, 1999. The authorized capital stock of the Company
constitutes 50 million shares of common stock at $0.0001 par value. The
holders of Common stock are entitled to one vote per share on all matters to be
voted by the shareholders.
ITEM 11. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Management has concluded an Exclusive Agreement with NTECH Corporation, a
company involved in atomic and molecularly assembled substances, for the use of
hemp fiber in combination with other compounds to produce recyclable /
biodegradable products to compete with certain plastics and metal products.
The Company anticipates completion of formal product application tests to occur
during last quarter of the calendar year 2000, after which the Company will
pursue the most profitable production and marketing strategies. Susan Brana,
Chairman of the Board of CGP, is also the Chairman of the Board of NTECH
Corporation. As of June 30, 1999, the Company had a note receivable of $24,200
due from NTECH Corporation that is unsecured, non-interest bearing and due on
demand.
Instruments defining the rights of Security-holders, including indentures.
Not applicable.
Voting trust agreements and amendments thereto.
Not applicable.
Company subsidiaries
All of the following companies are 100% wholly-owned subsidiaries of
Consolidated Growers and Processors, Inc.:
Consolidated Growers and Processors (CGP) Canada Limited
93 Lombard Ave., Suite 205
Winnipeg, Manitoba
R3B 3B1 Canada
CGP Canada Ltd. is incorporated in Winnipeg, Manitoba, Canada, and operates
under the name Consolidated Growers and Processors (CGP) Canada Limited.
CGP Europe AG
Industrie Strasse 1
CH 6304 Zug, Switzerland
CGP Europe AG is incorporated in Baar, Switzerland, and operates under the name
CGP Europe AG.
NAWARO GmbH
Kattenbug 18-24
50667
Cologne, Germany
NAWARO GmbH is incorporated in Cologne, Germany, and operates under the name
NAWARO GmbH.
The following company is owned 75%(as of July 1, 1999) by NAWARO GmbH:
Badische Naturfaseraufbereitung (BaFa)
Stephanstrasse 2
76316 Malsch Germany
Badische Naturfaseraufbereitung is incorporated in Malsch, Germany, and
operates under the name BaFa.
Contacts
Transfer Agent
Interwest Transfer Company, Inc.
Lorraine Brighton-Smith
P.O. Box 17136
1981 E. 4800 S.
Suite 100
Salt Lake City, CA. 84117-5126
(801) 272-9294 Tel.
(801) 277-3147 Fax
Market Maker
Sierra Brokerage
Merv Roland or Jeff Richardson
2000 Bethel Rd.
Columbus, OH. 43220
(614) 442-9400 Tel.
(614) 442-9486 Fax
Certified Public Accountant
Kevin G. Breard
9010 Corbin Ave.
Suite 7
Northridge, CA. 91324
(818) 886-0940 Tel.
(818) 886-1924 Fax
RECENT SALES OF UNREGISTERED SECURITIES
Upon organization, the management of the Company created incentive stock
options covering a total of 1,000,000 shares and exercisable at $.01 per
share. These options were granted to either new or existing officers or
directors at any time through the fiscal year ending June 30, 1998. In
November 1997, all 1,000,000 of these options were exercised at $.01 per share;
thus, the Company received $10,000 for the exercising of these options.
In July 1997 (pursuant to Reg. 504 of the Securities Act of 1933), the Company
sold 195,000 "units," whereby each unit consisted of one share of Common Stock
and two warrants. Each unit was sold at $.10 per unit. Each warrant was
exercisable by the holder thereof to purchase one common share of the Company
at an exercise price of $2.50 per share. The warrants were immediately
detachable from the common shares for separate transfer and were exercisable
from the date of the offering circular (July 1, 1997) for a period of twelve
months thereafter. At the discretion of the Board of Directors of the Company,
and on thirty days prior written notice to warrant holders, the exercise period
of the warrants could be extended, or the exercise price of the warrants could
be reduced. At any time during the exercise period of the warrants, or any
extension thereof, the Company could, on thirty days prior written notice, call
the warrants for redemption at a price of $.0001 per warrant. The warrants
would expire and become void on conclusion of their exercise period or any
extension thereof, if applicable. Of the original 390,000 warrants issued,
306,743 warrants were exercised (total $766,857.50).
Since inception to present, the Company has issued "restricted" shares of
Common Stock to various parties. The following is a list of the amount of
"restricted" shares issued for cash to 6/30/99, the price in which they were
issued at, and the consideration received:
Number of "restricted" shares sold Price per share Consideration received
600,000 $ .08 $ 50,000
4,605,000 $ .10 $ 95,000
1,300,000 $ .12 $161,831
819,000 $ .14 $114,660
1,725,000 $ .20 $345,000
3,500,000 $ .24 $850,000
1,000,000 $ .31 $310,000
275,000 $ .50 $137,500
55,000 $ 1.00 $ 55,000
62,700 $ 2.00 $125,400
With respect to these shares of Common Stock issued by the Company, the Company
believes that these transactions did not involve any public offering, in as
much as all these shares were issued to the Company's Officers, Directors and
others, who purchased the shares for investment purposes only and not with a
view to further public distribution. Further, no commissions were paid to any
persons in connection with such sales, no advertising of any nature was made in
connection with the sale of said shares, all Company information was made
available to said purchasers, and said purchasers were required to execute a
subscription agreement restating the aforementioned, among other things.
Accordingly, the Company believes that the aforementioned transactions were
exempt from registration pursuant to Section 4(2) of the Securities Act of
1933, as amended.
Since inception to 6/30/99, the Company has issued 12,466 "restricted" shares
of Common Stock to various parties for consideration of services rendered, at a
Fair Market Value of $2.50 per share (total consideration $31,165).
Since inception to 6/30/99, the Company has issued 10,000 "restricted" shares
of Common Stock to various parties for consideration of services rendered, at a
Fair Market Value of $2.00 per share (total consideration $20,000).
Since inception to 6/30/99, the Company has issued 1,100 "restricted" shares of
Common Stock to various parties for consideration of services rendered, at a
Fair Market Value of $1.00 per share (total consideration $1,100).
Since inception to 6/30/99, the Company has issued 2,556,500 "restricted"
shares of Common Stock to various parties for consideration of services
rendered, at a Fair Market Value of $.05 per share (total consideration
$127,825).
Since inception to 6/30/99, the Company has issued 121,600 "restricted" shares
of Common Stock to various parties for consideration of services rendered, at a
Fair Market Value of $.01 per share (total consideration $1,216).
Since inception to 6/30/99, the Company has issued 6,838,000 "restricted"
shares of Common Stock to various parties for consideration of services
rendered, at a Fair Market Value of $.0001 per share (total consideration
$683.80).
Since inception to 6/30/99, the Company has issued 41,293 "restricted" shares
of Common Stock to various growers for the purchase of their harvest, at a Fair
Market Value of $1.00 per share (total consideration $41,293).
In November 1997, the Company entered into an agreement with NTECH Corporation
(formerly Minus 9, Inc., a Nevada Corporation) which developed a coded
microparticle product known as StuffDust. This agreement gives the worldwide
license in regard to this product to the Company, which allows for the use of
the particle in the manufacture of various paper products. As payment for this
license, the Company issued 125,000 "restricted" shares of common stock.
These shares were issued at a Fair Market Value of $.05 per share (total
consideration $6,250). (See notes to Consolidated Financial Statements for
more specifics).
Warrants were sold to and exercised by investors only. Restricted Shares
of Common Stock were sold to investors as well as employees of the Company.
Restricted Shares of Common Stock were also issued for services rendered to
employees and consultants to the Company.
From July 1, 1999 through Sep. 30, 1999, the Company has issued an additional
11,298,055 Restricted Shares of Common Stock for cash as well as for services
rendered by employees and consultants to the Company.
In May 1998, the Company entered into an agreement to acquire 100% of the net
assets of Werner Zoellig AG and Glulam Lumber Mfg. For 3,000,000 shares of
Common Stock. The stock was valued at $4.00 per share. (See the notes to
Consolidated Financial Statements for more specifics.) The Company has since
sold this subsidiary to focus on their core business, i.e., industrial hemp
cultivation and processing.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation states the following:
"No director of the corporation shall have personal liability to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, provided that this provision shall not eliminate or limit
the liability of a director (a) for any breach of the director's duty or
loyalty to the corporation or its stockholders, (b) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (c) under Section 174 of the Delaware Corporation Law, or (d) for any
transaction from which the director derived an improper personal benefit."
The Company's BY-LAWS, Section 7.4, Indemnity, states the following:
"The corporation shall indemnify its directors, officers and employees to the
fullest extent allowed by law, provided, however, that it shall be within the
discretion of the Board of Directors whether to advance any funds in advance of
disposition of any action, suit or proceeding, and provided further that
nothing in this section 7.4 shall be deemed to obviate the necessity of the
Board of Directors to make any determination that indemnification of the
director, officer or employee is proper under the circumstances because he has
met the applicable standard of conduct set forth in subsections (a) and (b) of
Section 145 of the Delaware General Corporation Law."
At the present time, the Company is in the process of obtaining D & O
(Directors and Officers) insurance.
/s/ SUSAN BRANA
Susan Brana
Chairman of the Board of Directors
Consolidated Growers & Processors, Incorporated and Subsidiaries
Consolidated Financial Statements
June 30, 1999 and June 30, 1998
(Audited)
KEVIN G. BREARD, C.P.A.
AN ACCOUNTANCY CORPORATION
To the Board of Directors
Consolidated Growers & Processors, Incorporated
Monterey, California
Independent Auditor's Report
I have audited the accompanying consolidated balance sheets of Consolidated
Growers & Processors, Incorporated and Subsidiaries as of June 30, 1999 and
1998 and the related consolidated statements of operations and changes in
stockholders' equity, and changes in cash flows for the years then ended.
These financial statements are the responsibility of the Company's management.
My responsibility is to express an opinion on these financial statements based
on my audit.
I have conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatements. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. I believe that my audit provides a reasonable basis
for my opinion.
In my opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Consolidated Growers & Processors, Incorporated and Subsidiaries as of June 30,
1999 and 1998, and the consolidated results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company's operations to date have
resulted in substantial net losses of $1,912,707 and $544,410 during the years
ended June 30, 1999 and 1998 respectively. The Company plans a private
placement to generate sufficient cash to support operations. The Company has
actively discussed and is near finalizing this private placement with a
number of investment bankers, and foreign and domestic mutual funds. The
sole reason for the positive equity balance is the continuing effort of
company personnel to sell common stock. There is no certainty they will be
able to continue to do so, however management plans to rely on product sales
and this private placement to sustain operations. These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
/s/ KEVIN G. BREARD, CPA
Kevin G. Breard, CPA
Northridge, California
September 25, 1999
NORTHRIDGE OFFICE PLAZA,
9010 CORBIN AVENUE, SUITE 7
NORTHRIDGE, CALIFORNIA 91324
PH (818) 886-0940 FAX (818) 886-1924
Consolidated Growers & Processors, Incorporated and Subsidiaries
Consolidated Balance Sheet
Assets
For the year ended June 30,
1999 1998
Current Assets
Cash and cash equivalents $ 88,683 $ 143,171
Accounts receivable, net 731,351 -
Inventories 156,583 87,663
Prepaid expenses and other current assets 5,756 858
Total current assets 982,373 231,692
Other assets
Property, plant and equipment, net 167,414 175,468
Note receivable related party 24,200 -
Investments 353,521 195,089
Net assets of discontinued operations and
assets held for disposition - 12,163,922
Total other assets 545,135 12,534,479
Total assets $ 1,527,508 $ 12,766,171
Liabilities & Stockholders' Equity
Current liabilities
Accounts payable $ 259,504 $ 4,627
Current portion of long term debt 25,476 -
Total current liabilities 284,980 4,627
Long-term liabilities
Note payable, net of current portion 76,427 98,027
Total long-term liabilities 76,427 98,027
Total liabilities 361,407 102,654
Stockholders' equity
Common stock, $0.0001 par value, 50,000,000
shares authorized, 32,174,802 shares issued,
32,173,802 outstanding at June 30, 1999 and
11,379,100 shares issued and outstanding
at June 30, 1998 3,217 1,138
Common stock to be issued 35,778 12,370,378
Additional paid-in capital 3,632,349 845,885
Accumulated deficit during the development stage - (544,410)
Accumulated deficit (2,457,117) -
Accumulated other comprehensive income (44,926) (9,474)
Treasury stock, at cost, 1,000 shares in
1999, 0 shares in 1998 (3,200) -
Total stockholders' equity 1,166,101 12,663,517
Total liabilities & stockholders' equity $ 1,527,508 12,766,171
The accompanying notes are an integral part of these financial statements
Consolidated Growers & Processors, Incorporated and Subsidiaries
Consolidated Statement of Operations
For the Year Ended June 30,
1999 1998
Revenue
Hemp seeds, grains and by-products $ 1,181,865 -
Total revenue 1,181,865 -
Costs and expenses
Costs of hemp seeds, grains, and transportation 790,830 -
General and administrative expenses 1,894,168 705,166
Research and development 158,990 4,848
Total costs and expenses 2,843,988 710,014
Net ordinary income (1,662,123) (710,014)
Other income and expenses
Other income $ 14,277 1,682
Other expenses (55,944) -
Total other income and expenses (41,667) 1,682
Income (loss) from continuing operations
before provision for taxes (1,703,790) (708,332)
Provision for income taxes - -
Income (loss) from continuing operations (1,703,790) (708,332)
Discontinued operations:
Income from operations of Werner Zoellig
AG & Glulam Lumber Mfg., net of tax 205,457 163,922
Loss on disposal of Werner Zoellig AG
& Glulam Lumber Mfg., net of tax (414,374) -
Income loss from discontinued operations (208,917) 163,922
Net income (loss) $(1,912,707) $(544,410)
Income (loss) from continuing
operations per share $ (0.08) $ (0.10)
Net income (loss) per share $ (0.09) $ (0.08)
The accompanying notes are an integral part of these financial statements
Consolidated Growers & Processors, Incorporated and Subsidiaries
Consolidated Statement of Cash Flows
For the Year Ended June 30,
1999 1998
Cash flows from operating activities
Net income (loss) from continuing operations $ (1,703,790) $ (708,332)
Adjustments to reconcile net income (loss)
from continuing operations to net cash used
by operating activities:
Depreciation 36,200 456
Foreign currency translation (35,452) (9,474)
Issuance of common stock for
goods and services 922 337
Issuance of additional paid-in
capital for goods and services 104,737 118,838
Income from Zoellig operations 205,457 163,922
Loss on sale of investment in Zoellig (414,374) -
(Increase) decrease in:
Accounts receivable (731,351) -
Inventory (68,920) (87,663)
Prepaid expenses and other current assets (4,898) (858)
(Decrease) increase in:
Accounts payable 254,877 4,627
Total adjustments (652,802) 190,185
Net cash used by operating activities (2,356,592) (518,147)
Cash flow from investing activities
Purchase of investments (158,432) (359,011)
Purchase of property and equipment (28,146) (175,924)
Sale of investment in Zoellig 163,922 -
Net cash used in investing activities (22,656) (534,935)
Net cash flows from financing activities
Net (increase) loans to related parties (24,200) -
Proceeds from issuance of short term debt 25,476 -
Proceeds from issuance of long-term debt - 98,027
Repayment of long term debt (21,600) -
Proceeds from issuance of common stock 1,157 801
Proceeds from additional paid-in capital 2,681,727 727,047
Proceeds from common stock to be issued 35,778 370,378
Issuance of common stock to be issued (370,378) -
Purchase of treasury stock (3,200) -
Net cash provided by financing activities 2,324,760 1,196,253
Net increase (decrease) in cash and
cash equivalents (54,488) 143,171
Cash and cash equivalents
at the beginning of the year 143,171 -
Cash and cash equivalents at the end of the year $ 88,683 143,171
The accompanying notes are an integral part of these financial statements
Consolidated Growers & Processors, Incorporated and Subsidiaries
Consolidated Statement of Cash Flows
For the Year Ended June 30,
1999 1998
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $ -0- $ -0-
Income taxes $ -0- $ -0-
Noncash investing and financing transactions
Issuance of common stock in the year ended
June 30, 1998 for $112,925 in outside services
and $6,250 for a license
Common stock $337
Additional paid-in capital 118,838
Total $ 119,175
Issuance of common stock for net assets acquisition in the year ended June
30, 1998. In the acquisition the Company purchased the net assets of Werner
Zoellig AG & Glulam Lumber Mfg. The purchase was accomplished via issuing
3,000,000 shares of stock at $4.00 per share.
Issuance of common stock in the year ended June 30, 1999 for $105,659 in
goods and outside services
Common Stock $922
Additional paid-in capital 104,737
Total $ 105,659
On December 31, 1998 the Company sold back the acquired assets and liabilities
of Werner Zoellig AG and Glulam Lumber Mfg. ("Zoellig"). This was a noncash
transaction. The stock given in exchange for the net asset and liabilities was
returned to the Company and canceled. The stock given in the initial purchase
was worth $12,000,000, the value of Zoellig. When the Company disposed of
Zoellig on December 31, 1998, the book value of the Company was $12,414,374.
The book value of Zoellig appreciated $414,374, but when the Company disposed
of Zoellig, no consideration was received for the increased value.
Accordingly, a noncash loss of $414,374 was recorded in the Statement of
Operations.
The accompanying notes are an integral part of these financial statements
</TABLE>
<TABLE>
<CAPTION>
Consolidated Growers & Processors, Incorporated and Subsidiaries
Consolidated Statement of Changes in Stockholder's Equity
</CAPTION>
Accumulated Accumulated
Additional Other Stock Deficit During
Common Stock Paid-in Comprehensive To Be Development Treasury
Shares Amount Capital Income Issued Stage Stock Totals
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Common stock issued
for cash at $.000033
per share 4,123,000 $ 412 $ (277) $ - $ - $ - $ - $ 135
Common stock issued
for services at
.0001 per share 1,000,000 100 - - - - - 100
Common stock issued
for cash at $.10
per share 195,000 20 19,480 - - - - 19,500
Common stock issued
for cash at $2.50
per share 79,600 9 198,991 - - - - 199,000
Common stock issued
for cash at $.01 per
share to officers 1,000,000 100 9,900 - - - - 10,000
Common stock issued
for cash at $.20 per
share 1,000,000 100 199,900 - - - - 200,000
Common stock issued
for cash at $.20 per
share to officers 500,000 50 99,950 - - - - 100,000
Common stock issued
for cash at .10 per
share to officers 950,000 95 94,905 - - - - 95,000
Common stock issued
for services at $.05
per share 2,256,500 225 112,600 - - - - 112,825
Common stock issued
for cash at $.50 per
share 150,000 15 74,985 - - - - 75,000
Common stock issued
for license at $.05
per share 125,000 12 6,238 - - - - 6,250
Cash contributed by
officer - - 29,213 - - - - 29,213
Warrants exercised,
stock to be issued 148,151 - - - 370,378 - - 370,378
Stock subscribed,
stock to be issued
at $4.00 per share 3,000,000 - - - 12,000,000 - - 12,000,000
Foreign currency
translation
adjustment - - - (9,474) - - - (9,474)
Net income (loss) - - - - - (544,410) - (544,410)
BALANCES AS OF
JUNE 30, 1998 14,527,251 $ 1,138 $ 845,885 $ (9,474)$ 12,370,378 $ (544,410) $ - $12,663,517
Reclassification
of stock to be
issued at
June 30, 1998 - 315 12,370,063 - (12,370,378) - - -
Sale of subsidiary
(Zoellig) back to
stockholders (3,000,000) (300)(11,999,700) - - - - (12,000,000)
Issuance of stock
for services 9,224,459 922 104,737 - - - - 105,659
Issuance of stock 11,423,092 1,142 2,311,364 - - - - 2,312,506
Foreign currency
translation
adjustment - - - (35,452) - - - (35,452)
Stock subscribed,
stock to be issued - - - - 35,778 - - 35,778
Treasury Stock (1,000) - - - - - (3,200) (3,200)
Net income (loss) - - - - - (1,912,707) - (1,192,707)
BALANCES AS OF
JUNE 30, 1999 32,173,802 $ 3,217 $3,632,349 $ (44,926) $ 35,778 $ (2,457,117) $ (3,200) $ 1,166,101
The accompanying notes are an integral part of these financial statements
</TABLE>
Consolidated Growers & Processors, Incorporated and Subsidiaries
Notes to Consolidated Financial Statements
NOTE 1: ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
General
Consolidated Growers & Processors, Incorporated was incorporated under the laws
of the State of Delaware on June 10, 1997 for the primary purpose of providing
financing, technical and marketing expertise to the farming, processing and
marketing of products from industrial hemp and other industrial crops. The
Company was a development stage enterprise in the prior year: July 1, 1997 -
June 30, 1998. Most of the efforts were devoted to financial planning; raising
capital; recruiting and training personnel; developing markets; and starting up
production. For the year ended June 30, 1999, the Company planned principal
operations have commenced and significant revenue was recognized.
The accompanying consolidated financial statements include the accounts of
Consolidated Growers & Processors, Incorporated (the Parent) and its wholly
owned Subsidiaries Consolidated Growers & Processors, Canada Ltd. (CGP Canada),
NAWARO Beteiligungsgesellschaft mbH (NAWARO), and its 98% owned subsidiary
Consolidated Growers & Processors, Europe (CGP Europe) (collectively, the
Company). All significant intercompany accounts and transactions have been
eliminated in consolidation.
Summary of Significant Accounting Policies
The presentation 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 disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
The Parent and the Subsidiaries have allowed borrowing and lending on an
interest free basis.
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
Property and equipment are recorded at cost. Depreciation of property and
equipment is recorded on the straight-line method over the respective useful
lives of the assets.
Inventory is valued at the lower of cost or market. Inventory will be recorded
on a first-in first-out basis.
Revenue is recognized on the sale of hemp seed to farmers. The Company is a
purveyor of various hemp seeds and hemp byproducts. Hemp can be classified as
an annual crop, having a cycle of less than one year.
Licensing revenues will be recognized when earned. For the years ended June
30, 1999 and 1998 there was no revenue recognized from licensing.
Research and development expenditures are expensed as incurred.
The functional currency for the Company's foreign subsidiaries is the
applicable local currency. Assets and liabilities of the foreign subsidiaries
are translated into U.S. dollars at year-end exchange rates. Income and
expense items are translated at the average rates of exchange prevailing during
the year. The adjustments resulting from translating the financial statements
of the foreign subsidiary are reflected in stockholders' equity.
In February 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 128, "Earnings Per Share" ("EPS"). SFAS No. 128 requires dual presentation
of basic EPS and diluted EPS on the face of all statements of operations issued
after December 15, 1997 for all entities with complex capital structures.
Adoption of SFAS No. 128 had no effect on the Company's financial statements.
Basic EPS is computed as net income (loss) divided by the weighted averaged
number of common shares outstanding for the period. Diluted EPS reflects the
potential dilution that could occur from common shares that may be issued
through stock options, warrants, and other convertible securities.
Loss per share is computed using the weighted average number of common shares
outstanding. At June 30, 1999 and 1998 the weighted average number of shares
outstanding were 22,429,496 and 7,144,964 respectively. The computation of
loss per share does not include common stock equivalents because the Company
does not carry these instruments.
NOTE 2: ACCOUNTS RECEIVABLE, NET
The accounts receivable are trade contracts with growers for the production of
industrial hemp. The Company will receive the receivable balance over two
installment periods: November 30, 1999 and January 31, 2000. No material
amounts were provided for an allowance for doubtful accounts at June 30, 1999.
NOTE 3: INVENTORIES
1999 1998
Inventories consist of:
Grain $ 134,947 $ 53,467
Planting seed 11,061 34,196
Straw bales 10,575 -
Total $ 156,583 $87,663
NOTE 4: INVESTMENT
The Company purchased 15% ownership interest in Badische Naturfaseraufbereitung
GmbH (BaFa) for $169,689 for the year ended June 30, 1998. At June 30, 1999
the Company would estimate and accrue for an additional equity interest in
BaFa. The total BaFa investment including accruing $183,832 is $353,521.
The purchase was still in negotiations and the transaction would not be
consummated until after the year end. The financial statements carry the
investment on the cost basis for both years. The primary reason for the
investment in BaFa is that BaFa has represented to the Company that it
possesses the required skills to operate as a mechanical processing facility
for industrial hemp crops. BaFa then would provide industrial hemp fiber to
the Company, as ordered, at the prevailing fair market wholesale prices.
For the year ended June 30, 1998, the Company had made investments in hemp
fiber technology of $25,400. For the year ended June 30, 1999, these
capitalized costs were written off to research and development.
NOTE 5: PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
Depreciable
1999 1998 Lives
Machinery & equipment $ 198,557 $ 175,468 5 years
Furniture & fixtures 5,513 - 7 years
Total property, plant and equipment 204,070 175,924
Accumulated depreciation (36,656) (456)
Total property, plant and
equipment, net $ 167,414 $ 175,468
Depreciation expense for the years ended June 30, 1999 and June 30, 1998 was
$36,200 and $456 respectively.
NOTE 6: NOTE RECEIVABLE-RELATED PARTY
The note is unsecured, non-interest bearing, and due on demand. The related
party is NTECH Corporation. A majority shareholder in the Company is also a
majority shareholder in NTECH.
NOTE 7: COMMITMENTS AND CONTINGENCIES
Effective on October 1, 1997, the Company signed an agreement with the
Ukrainian Academy of Agricultural Sciences/Institute of Bast Crops (the
"Institute") whereby the Institute exclusively licensed to the Company
certain industrial hemp registered seed varieties, which were bred by the
Institute.
Under the terms of this agreement, the Institute will provide seed production
services for the Company on an exclusive basis for certain specified seed
varieties in the following geographic territories: North America, Central
America, South America, Africa, Australia, New Zealand and Asia (excluding the
countries of the former Soviet Union).
The Company is committed to pay a royalty of 5% of the gross sales price
(excluding the costs of packaging, insurance, taxes, duties, transportation or
other non-production expenses) of these seed varieties to the Institute. This
agreement will continue in effect until canceled by either party upon providing
three years notice to the other party.
On November 15, 1997, the Company entered into an agreement with NTECH
Corporation (formerly Minus 9 Inc.), a Nevada Corporation, which had
developed a coded micro particle product known as StuffDust. This agreement
gives the worldwide license in regard to this product to the Company, which
allows the use of the particle in the manufacture of various paper products.
As payment for this license, the Company issued 125,000 shares of common stock
in 1997, and is committed to pay Minus 9 Inc. royalties on net revenues derived
from the sales of this product. Royalties range from 4% of net revenues to
7.5%, depending upon such factors as user application and volume of sales.
Regardless of net revenues derived from the sale of particle products, the
Company is committed to pay the following annual minimum advance royalties:
Year Amount
1999 $ -0-
2000 100,000
2001 100,000
2002 and thereafter 100,000
Minimum advance royalty payments will be credited against royalties due based
upon actual sales.
This license agreement will terminate upon the expiration of the last-to-expire
patent relating to the licensed product.
NOTE 8: RELATED PARTY TRANSACTIONS
Related party transactions are summarized as follows:
1. 8,474,000 shares of common stock was issued to the Chairman of the Board
for $1,309,169. The value of the shares ranged from $0.10 to $0.249671.
2. 1,625,000 shares of common stock was issued to the chief financial officer
for $252,231. The value of the shares ranged from $0.0001 to $0.249671.
3. Additional stock as issued at par for services to parties who invested money
and resources into the Company (primarily the officers, directors and
employees). These parties were generally working without monetary
compensation. The Board of Directors voted these shares be issued at par
within the first three years of start up operations to parties who did not earn
compensation for their services.
NOTE 9: INCOME TAXES
No provision for income taxes have been provided. The Company incurred a loss
for the year. The Company has elected to carry forward the loss to offset
future taxable income. The loss can be carried forward twenty (20) years. The
Company believes it is more likely than not it will not generate future taxable
income prior to the expiration of the net operating loss carryforward, and thus
deferred tax assets would not be realized.
NOTE 10: DISPOSITION
On May 31, 1998, the Company purchased the net assets of Werner Zoellig AG. &
Glulam Lumber Mfg. The purchase was accomplished via issuing 3,000,000 shares
of stock at $4.00 per share.
On December 31, 1998, after seven (7) months, the Company decided to sell the
subsidiary back to its prior shareholder. The Company took back the issued
shares of stock, and the ownership reverted back to its prior ownership.
This transaction qualifies as a disposal of a business segment. This
subsidiary had a separate product line of glue laminated wooden beams.
NOTE 11: SEGMENT INFORMATION
Industry Segment Data
The Company will have one business segment: industrial hemp fiber, seeds, oil,
and by-products. No revenues have been received from imports. The Canadian
sales are exclusively within Canada.
Consolidated Growers & Processors, Incorporated (the Parent) employs two (2)
people, Consolidated Growers & Processors, Canada Ltd. employs five (5) people,
Consolidated Growers & Processors, Europe employs one (1) person and NAWARO
Beteiligungsgesellschaft mbH employs one (1) person.
Geographic Area Data
June 30, 1999
United Adjustments
States Canada Europe and Consolidated
Eliminations
Revenue from
continuing operations
Unaffiliated customers $ -0- $1,181,865 $ -0- $ - $ 1,181,865
Transfers between
geographic areas - - - - -
Total revenues from
continuing operations -0- 1,181,865 -0- - 1,181,865
Earnings from continuing
operations before
income taxes (1,656,960) 5,788 (52,618) - (1,703,790)
Identifiable assets
From continuing
operations 1,464,743 938,682 498,304 (1,374,221) 1,527,508
Net assets from
Continuing
Operations 1,342,905 (64,870) (66,863) (45,071) 1,166,101
June 30, 1998
United Adjustments
States Canada Europe and Consolidated
Eliminations
Revenue from
continuing operations
Unaffiliated customers $ -0- $ -0- $ -0- $ -0- -0-
Transfers between
geographic areas - - - - -
Total revenues from
continuing operations -0- -0- -0- -0- -0-
Earnings from continuing
operations before
income taxes (618,279) (65,853) (24,200) - (708,332)
Identifiable assets
from continuing
operations 789,211 96,061 380,254 (663,277) 602,249
Net assets from
continuing
operations 599,121 (71,377) 46,485 89,288 663,517
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001043839
<NAME> CONSOLIDATED GROWERS AND PROCESSORS, INC.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> JUN-30-1999
<CASH> 88,683
<SECURITIES> 0
<RECEIVABLES> 731,351
<ALLOWANCES> 0
<INVENTORY> 156,583
<CURRENT-ASSETS> 982,373
<PP&E> 204,070
<DEPRECIATION> (36,656)
<TOTAL-ASSETS> 1,527,508
<CURRENT-LIABILITIES> 284,980
<BONDS> 0
0
0
<COMMON> 3,217
<OTHER-SE> 1,162,884
<TOTAL-LIABILITY-AND-EQUITY> 1,527,508
<SALES> 1,181,865
<TOTAL-REVENUES> 1,181,865
<CGS> 790,830
<TOTAL-COSTS> 2,843,988
<OTHER-EXPENSES> (41,667)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,912,707)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,703,790)
<DISCONTINUED> (208,917)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,912,707)
<EPS-BASIC> (.09)
<EPS-DILUTED> (.09)
</TABLE>
EXHIBIT NAME
BY-LAWS
CERTIFICATE OF INCORPORATION
LICENSE AGREEMENT WITH NTECH CORPORATION (FORMERLY MINUS 9 INC.) FOR USE OF
MICROPARTICLE ("STUFFDUST") IN PAPER
LICENSE AGREEMENT WITH NTECH CORPORATION (FORMERLY MINUS 9 INC.) FOR SILICON
CARBIDE / HEMP PROCESS ("HEMP METALS") AND HYDROGEN BONDING / HEMP PROCESS
("HEMP PLASTICS")
RESEARCH AGREEMENT WITH RUTGERS UNIVERSITY
LICENSE AGREEMENT WITH BAST INSTITUTE
RESEARCH AGREEMENT WITH PHYTOMEDICS INC.
LICENSE AGREEMENT WITH PHYTOTECH INC.
BY-LAWS
OF
CONSOLIDATED GROWERS & PROCESSORS, INCORPORATED
ARTICLE I
OFFICES
1.1 Registered Office: The registered office shall be established and
maintained at and shall be the registered agent of the Corporation in
charge hereof.
1.2 Other Offices: The corporation may have other offices, either within or
without the State of Delaware, at such place or places as the Board of
Directors may from time to time appoint or the business of the
corporation may require, provided, however, that the corporation's books
and records shall be maintained at such place within the continental
United States as the Board of Directors shall from time to time
designate.
ARTICLE II
STOCKHOLDERS
2.1 Place of Stockholders' Meetings: All meetings of the stockholders of the
corporation shall be held at such place or places, within or outside the
State of Delaware as may be fixed by the Board of Directors from time to
time or as shall be specified in the respective notices thereof.
2.2 Date and Hour of annual Meetings of Stockholders: An annual meeting of
stockholders shall be held each year within five months after the close
of the fiscal year of the Corporation.
2.3 Purpose of Annual Meetings: At each annual meeting, the stockholders
shall elect the members of the Board of Directors for the succeeding
year. At any such annual meeting any further proper business may be
transacted.
2.4 Special Meetings of Stockholders: Special meetings of the stockholders
or of any class or series thereof entitled to vote may be called by the
President or by the Chairman of the Board of Directors, or at the request
in writing by stockholders of record owning at least fifty (50%) percent
of the issued and outstanding voting shares of common stock of the
corporation.
2.5 Notice of Meetings of Stockholders: Except as otherwise expressly
required or permitted by law, not less than ten days nor more than sixty
days before the date of every stockholders' meeting the Secretary shall
give to each stockholder of record entitled to date and hour of the
meeting and, in the case of a special meeting, the purpose or purposes
for which the meeting is called. Such notice, if mailed shall be deemed
to be given when deposited in the United States mail, postage prepaid,
directed to the stockholder at his address for notices to such
stockholder as it appears on the records of the corporation.
2.6 Quorum of Stockholders: (a) Unless otherwise provided by the
Certificate of Incorporation or by law, at any meeting of the
stockholders, the presence in person or by proxy of stockholders entitled
to cast a majority of the votes thereat shall constitute a quorum. The
withdrawal of any shareholder after the commencement of a meeting shall
have no effect on the existence of a quorum, after a quorum has been
established at such meeting.
(b) At any meeting of the stockholders at which a quorum shall be
present, a majority of voting stockholders, present in person or by
proxy, may adjourn the meeting from time to time without notice
other than announcement at the meeting. In the absence of a
quorum, the officer presiding thereat shall have power to adjourn
the meeting from time to time until a quorum shall be present.
Notice of any adjourned meeting, other than announcement at the
meeting, shall not be required to be given except as provided in
paragraph (d) below and except where expressly required by law.
(c) At any adjourned session at which a quorum shall be present, any
business may be transacted which might have been transacted at the
meeting originally called but only those stockholders entitled to
vote at the meeting as originally noticed shall be entitled to vote
at any adjournment or adjournments thereof, unless a new record
date is fixed by the Board of Directors.
(d) If an adjournment is for more than thirty days, or if after the
adjournment, a new record date is fixed for the adjourned meeting,
a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
2.7 Chairman and Secretary of Meeting: The President shall preside at
meetings of the stockholders. The Secretary shall act as secretary of
the meeting or if he is not present, then the presiding officer may
appoint a person to act as secretary of the meeting.
2.8 Voting by Stockholders: Except as may be otherwise provided by the
Certificate of Incorporation or these by-laws, at every meeting of the
stockholders each stockholder shall be entitled to one vote for each
share of voting stock standing in his name on the books of the
corporation on the record date for the meeting. Except as otherwise
provided by these by-laws, all elections and questions shall be decided
by the vote of a majority in interest of the stockholders present in
person or represented by proxy and entitled to vote at the meeting.
2.9 Proxies: Any stockholder entitled to vote at any meeting of stockholders
may vote either in person or by proxy. Every proxy shall be in writing,
subscribed by the stockholder or his duly authorized attorney-in-fact,
but need not be dated, sealed, witnessed or acknowledged.
2.10 Inspectors: The election of directors and any other vote by ballot at
any meeting of the stockholders shall be supervised by at least two
inspectors. Such inspectors may be appointed by the presiding officer
before or at the meeting; or if one or both inspectors so appointed shall
refuse to serve or shall not be present, such appointment shall be made
by the offer presiding at the meeting.
2.11 List of Stockholders: (a) At least ten days before every meeting of
stockholders, the Secretary shall prepare and make a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical
order, and showing the address of each stockholder and the number of
shares registered in the name of each stockholder.
(b) During ordinary business hours, for a period of at least ten days
prior to the meeting, such list shall be open to examination by any
stockholder for any purpose germane to the meeting, either at a place
within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or if not so specified, at the
place where the meeting is to be held.
(c) The list shall also be produced and kept at the time and place of
the meeting during the whole time of the meeting, and it may be
inspected by any stockholder who is present.
(d) The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required
by this Section 2.11 or the books of the corporation, or to vote in
person or by proxy at any meeting of stockholders.
2.12 Procedure at Stockholders' Meetings: Except as otherwise provided by
these by-laws or any resolutions adopted by the stockholders or Board of
Directors, the order of business and all other matters of procedure at
every meeting of stockholders shall be determined by the presiding
officer.
2.13 Action By Consent Without Meeting: Unless otherwise provided by the
Certificate of Incorporation, any action required to be taken at any
annual or special meeting of stockholders, or any action which may be
taken at any annual or special meeting, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting
forth the action so taken, shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all
shares entitled to vote thereon were present and voted. Prompt notice of
the taking of the corporate action without a meeting by less than
unanimous written consent shall be given to those stockholders who have
not consented in writing.
ARTICLE III
DIRECTORS
3.1 Powers of Directors: The property, business and affairs of the
corporation shall be managed by its Board of Directors which may exercise
all the powers of the corporation except such as are by the law of the
State of Delaware or the Certificate of Incorporation or these by-laws
required to be exercised or done by the stockholders.
3.2 Number, Method of Election, Terms of Office of Directors: The number of
directors which shall constitute the Board of Directors shall be five (5)
unless and until otherwise determined by a vote of a majority of the
entire Board of Directors. Each director shall hold office until the
next annual meeting of stockholders and until his successor is elected
and qualified, provided, however, that a director may resign at any time.
Directors need not be stockholders.
3.3 Vacancies on Board of Directors; Removal: (a) Any director may resign
his office at any time by delivering his resignation in writing to the
Chairman of the Board or to the President. It will take effect at the
time specified therein or, if no time is specified, it will be effective
at the time of its receipt by the corporation. The acceptance of a
resignation shall not be necessary to make it effective, unless expressly
so provided in the resignation.
(b) Any vacancy in the authorized number of directors may be filed by
majority vote of the stockholders and any director so chosen shall
hold office until the next annual election of directors by the
stockholders and until his successor is duly elected and qualified or
until his earlier resignation or removal.
(c) Any director may be removed with or without cause at any time by the
majority vote of the stockholders given at a special meeting of the
stockholders called for that purpose.
3.4 Meetings of the Board of Directors: (a) The Board of Directors may hold
their meetings, both regular and special, either within or outside the
State of Delaware.
(b) Regular meetings of the Board of Directors may be held at such time
and place as shall from time to time be determined by resolution of
the Board of Directors. No notice of such regular meetings shall be
required. If the date designated for any regular meeting be a legal
holiday, then the meeting shall be held on the next day which is not
a legal holiday.
(c) The first meeting of each newly elected Board of Directors shall be
held immediately following the annual meeting of the stockholders for
the election of officers and the transaction of such other business
as may come before it. If such meeting is held at the place of the
stockholders' meeting, no notice thereof shall be required.
(d) Special meetings of the Board of Directors shall be held whenever
called by direction of the Chairman of the Board or the President or
at the written request of any one director.
(e) The Secretary shall give notice to each director of any special meeting
of the Board of Directors by mailing the same at least three days before the
meeting or by telegraphing, telexing, or delivering the same no later than the
date before the meeting.
Unless required by law, such notice need not include a statement of the
business to be transacted at, or the purpose of, any such meeting. Any
and all business may be transacted at any meeting of the Board of
Directors. No notice of any adjourned meeting need be given. No notice
to or waiver by any director shall be required with respect to any
meeting at which the director is present.
3.5 Quorum and Action: Unless provided otherwise by law or by the
Certificate of Incorporation or these by-laws, a majority of the
directors shall constitute a quorum for the transaction of business; but
if there shall be less than a quorum at any meeting of the Board, a
majority of those present may adjourn the meeting from time to time. The
vote of a majority of the directors present at any meeting at which a
quorum is present shall be necessary to constitute the act of the Board
of Directors.
3.6 Presiding Officer and Secretary of the Meeting: The President, or, in
his absence a member of the Board of Directors selected by the members
present, shall preside at meetings of the Board. The Secretary shall act
as secretary of the meeting, but in his absence the presiding officer may
appoint a secretary of the meeting.
3.7 Action by Consent Without Meeting: Any action required or permitted to
be taken at any meeting of the Board of Directors or of any committee
thereof may be taken without a meeting if all members of the Board or
committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes or proceedings of the
Board or committee.
3.8 Action by Telephonic Conference: Members of the Board of Directors, or
any committee designated by such Board, may participate in a meeting of
such Board or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in
the meeting can hear each other, and participation in such a meeting
shall constitute presence in person at such meeting.
3.9 Committees: The Board of Directors shall, by resolution or resolutions
passed by a majority of directors designate one or more committees to
consist of one or more directors of the Corporation, for such purposes as
the Board shall determine. The Board may designate one or more directors
as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of such committee.
3.10 Compensation of Directors: Directors shall receive such reasonable
compensation for their service on the Board of Directors or any
committees thereof, whether in the form of salary or a fixed fee for
attendance at meetings, or both, with expenses, if any, as the Board of
Directors may from time to time determine. Nothing herein contained
shall be construed to preclude any director from serving in any other
capacity and receiving compensation therefor.
ARTICLE IV
OFFICERS
4.1 Officers, Title, Elections, Terms; (a) The elected officers of the
corporation shall be a President, a Treasurer and a Secretary, and such
other officers as the Board of Directors shall deem advisable. The
officers shall be elected by the Board of Directors at its annual meeting
following the annual meeting of the stockholders, to serve at the
pleasure of the Board or otherwise as shall be specified by the Board at
the time of such election and until their successors are elected and
qualified.
(b) The Board of Directors may elect or appoint at any time, and from
time to time, additional officers or agents with such duties as it may
deem necessary or desirable. Such additional officers shall serve at
the pleasure of the Board or otherwise as shall be specified by the
Board at the time of such election or appointment. Two or more
officers may be held by the same person.
(c) Any vacancy in any office may be filled for the unexpired portion
of the term by the Board of Directors.
(d) Any officer may resign his office at any time. Such resignation
shall be made in writing and shall take effect at the time specified
therein or, if no time has been specified, at the time of its receipt
by the corporation. The acceptance of a resignation shall not be
necessary to make it effective, unless expressly so provided in the
resignation.
(e) The salaries of all officers of the corporation shall be fixed by
the Board of Directors.
4.2 Removal of Elected Officers: Any elected officer may be removed at any
time, either with or without cause, by resolution adopted at any regular
or special meeting of the Board of Directors by a majority of the
directors then in office.
4.3 Duties: (a) President: The President shall be the principal executive
officer of the corporation and, subject to the control of the Board of
Directors, shall supervise and control all the business and affairs of
the corporation. He shall, when present, preside at all meetings of the
stockholders and of the Board of Directors. He shall see that all orders
and resolutions of the Board of Directors are carried into effect (unless
any such order or resolution shall provide otherwise), and in general
shall perform all duties incident to the office of president and such
other duties as may be prescribed by the Board of Directors from time to
time.
(b) Treasurer: The Treasurer shall (1) have charge and custody of and be
responsible for all funds and securities of the Corporation; (2)
receive and give receipts for moneys due and payable to the
corporation from any source whatsoever; (3) deposit all such moneys
in the name of the corporation in such banks, trust companies, or
other depositories as shall be selected by resolution of the Board of
Directors; and (4) in general perform all duties incident to the
office of treasurer and such other duties as from time to time may be
assigned to him by the President or by the Board of Directors. He
shall, if required by the Board of Directors, give a bond for the
faithful discharge of his duties in such sum and with such surety or
sureties as the Board of Directors shall determine.
(c) Secretary: The Secretary shall (1) keep the minutes of the meetings
of the stockholders, the Board of Directors, and all committees, if
any, of which a secretary shall not have been appointed, in one or
more books provided for that purpose; (2) see that all notices are
duly given in accordance with the provisions of these by-laws and as
required by law; (3) be custodian of the corporate records and of the
seal of the corporation and see that the seal of the corporation is
affixed to all documents, the execution of which on behalf of the
corporation under its seal, is duly authorized; (4) keep a register
of the post office address of each stockholder which shall be
furnished to the Secretary by such stockholder; (5) have general
charge of stock transfer books of the Corporation; and (6) in general
perform all duties incident to the office of secretary and such other
duties as from time to time any be assigned to him by the President
or by the Board of Directors.
ARTICLE V
CAPITAL STOCK
5.1 Stock Certificates: (a) Every holder of stock in the corporation shall
be entitled to have a certificate signed by, or in the name of, the
corporation by the President and by the Treasurer or the Secretary,
certifying the number of shares owned by him.
(b) If such certificate is countersigned by a transfer agent other than
the corporation or its employee, or by a registrar other than the
corporation or its employee, the signatures of the officers of the
corporation may be facsimiles, and, if permitted by law, any other
signature may be a facsimile.
(c) In case any officer who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer
before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer at the
date of issue.
(d) Certificates of stock shall be issued in such form not inconsistent
with the Certificate of Incorporation as shall be approved by the
Board of Directors, and shall be numbered and registered in the order
in which they were issued.
(e) All certificates surrendered to the corporation shall be canceled
with the date of cancellation, and shall be retained by the
Secretary, together with the powers of attorney to transfer and the
assignments of the shares represented by such certificates, for such
period of time as shall be prescribed from time to time by resolution
of the Board of Directors.
5.2 Record Ownership: A record of the name and address of the holder of such
certificate, the number of shares represented thereby and the date of
issue thereof shall be made on the corporation's books. The corporation
shall be entitled to treat the holder of any share of stock as the holder
in fact thereof, and accordingly shall not be bound to recognize any
equitable or other claim to or interest in any share on the part of any
other person, whether or not it shall have express or other notice
thereof, except as required by law.
5.3 Transfer of Record Ownership: Transfers of stock shall be made on the
books of the corporation only by direction of the person named in the
certificate or his attorney, lawfully constituted in writing, and only
upon the surrender of the certificate therefor and a written assignment
of the shares evidenced thereby. Whenever any transfer of stock shall be
made for collateral security, and not absolutely, it shall be so
expressed in the entry of the transfer if, when the certificates are
presented to the corporation for transfer, both the transferor and the
transferee request the corporation to do so.
5.4 Lost, Stolen or Destroyed Certificates: Certificates representing shares
of the stock of the corporation shall be issued in place of any
certificate alleged to have been lost, stolen or destroyed in such manner
and on such terms and conditions of the Board of Directors from time to
time may authorize.
5.5 Transfer Agent; Registrar; Rules Respecting Certificates: The
corporation may maintain one or more transfer offices or agencies where
stock of the corporation shall be transferable. The corporation may also
maintain one or more registry offices where such stock shall be
registered. The Board of Directors may make such rules and regulations
as it may deem expedient concerning the issue, transfer and registration
of stock certificates.
5.6 Fixing Record Date for Determination of Stockholders of Record: The
Board of Directors may fix, in advance, a date as the record date for the
purpose of determining stockholders entitled to notice of, or to vote at,
any meeting of the stockholders or any adjournment thereof, or the
stockholders entitled to receive payment of any dividend or other
distribution or the allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock, or to
express consent to corporate action in writing without a meeting, or in
order to make a determination of the stockholders for the purpose of any
other lawful action. Such record date in any case shall be not more than
sixty days nor less than ten days before the date of a meeting of the
stockholders, nor more than sixty days prior to any other action
requiring such determination of the stockholders. A determination of
stockholders of record entitled to notice or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the
adjourned meeting.
5.7 Dividends: Subject to the provisions of the Certificate of
Incorporation, the Board of Directors may, out of funds legally available
therefore at any regular or special meeting, declare dividends upon the
capital stock of the corporation as and when they deem expedient. Before
declaring any dividend there may be set apart out of any funds of the
corporation available for dividends, such sum or sums as the board of
Directors from time to time in their discretion deem proper for working
capital or as a reserve fund to meet contingencies or for equalizing
dividends or for such other purposes as the Board of Directors shall deem
conducive to the interest of the corporation.
ARTICLE VI
SECURITIES HELD BY THE CORPORATION
6.1 Voting: Unless the Board of Directors shall otherwise order, the
President, the Secretary or the Treasurer shall have full power and
authority, on behalf of the corporation, to attend, act and vote at any
meeting of the stockholders of any corporation in which the corporation
may hold stock, and at such meeting to exercise any or all rights and
powers incident to the ownership of such stock, and to execute on behalf
of the corporation a proxy or proxies empowering another or others to act
as aforesaid. The Board of Directors from time to time may confer like
powers upon any other person or persons.
6.2 General Authorization to Transfer Securities Held by the Corporation:
(a) Any of the following officers, to wit: the President and the
Treasurer shall be, and they hereby are, authorized and empowered to
transfer, convert, endorse, sell, assign, set over and deliver any and
all shares of stock, bonds, debentures, notes, subscription warrants,
stock purchase warrants, evidence of indebtedness, or other securities
now or hereafter standing in the name of or owned by the corporation, and
to make, execute and deliver, under the seal of the corporation, any and
all written instruments of assignment and transfer necessary or proper to
effectuate the authority hereby conferred.
(b) Whenever there shall be annexed to any instrument of assignment and
transfer executed pursuant to and in accordance with the foregoing
paragraph (a), a certificate of the Secretary of the corporation in
office at the date of such certificate setting forth the provision s
of this Section 6.2 and stating that they are in full force and
effect and setting forth the names of persons who are then officers
of the corporation, then all persons to whom such instrument and
annexed certificate shall thereafter come, shall be entitled, without
further inquiry or investigation and regardless of the date of such
certificate, to assume and to act in reliance upon the assumption
that the shares of stock or other securities named in such instrument
were theretofore duly and properly transferred, endorsed, sold,
assigned, set over and delivered by the corporation, and that with
respect to such securities the authority of these provisions of the
by-laws and of such officers is still in full force and effect.
ARTICLE VII
MISCELLANEOUS
7.1 Signatories: All checks, drafts or other orders for the payment of
money, note or other evidences of indebtedness issued in the name of the
corporation shall be signed by such officer or officers or such other person
or persons as the Board of Directors may from time to time designate.
7.2 Seal: The seal of the corporation shall be in such form and shall have
such content as the Board of Directors shall from time to time determine.
7.3 Notice and Waiver of Notice: Whenever any notice of the time, place or
purpose of any meeting of the stockholders, directors or a committee is
required to be given under the law of the State of Delaware, the Certificate
of Incorporation or these by-laws, a waiver thereof in writing, signed by
the person or persons entitled to such notice, whether before or after the
holding thereof, or actual attendance at the meeting in person or, in the
case of any stockholder, by his attorney-in-fact, shall be deemed equivalent to
the giving of such notice to such persons.
7.4 Indemnity: The corporation shall indemnify its directors, officers and
employees to the fullest extent allowed by law, provided, however, that it
shall be within the discretion of the Board of Directors whether to advance
any funds in advance of disposition of any action, suit or proceeding, and
provided further that nothing in this section 7.4 shall be deemed to obviate
the necessity of the Board of Directors to make any determination that
indemnification of the director, officer or employee is proper under the
circumstances because he has met the applicable standard of conduct set forth
in subsections (a) and (b) of Section 145 of the Delaware General Corporation
Law.
Fiscal year: Except as from time to time otherwise determined by the Board of
Directors, the fiscal year of the corporation shall end on June 30.
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 06/10/1997
971189665 - 2760477
CERTIFICATE OF INCORPORATION
OF
CONSOLIDATED GROWERS & PROCESSORS, INCORPORATED
FIRST: The name of the corporation is CONSOLIDATED GROWERS & PROCESSORS,
INCORPORATED
SECOND: The address of its registered office in the State of Delaware is Three
Mill Road, Suite 206, Wilmington, DE 19806 in the County of New Castle. Its
registered agent at such address is The Incorporators Ltd.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH: The corporation shall have the authority to issue fifty million
(50,000,000) shares of common stock at .0001 par value.
FIFTH: The Board of Directors is expressly authorized to adopt, amend, or
repeal the By-Laws of the corporation.
SIXTH: The stockholders and directors may hold their meetings and keep the
books and documents of the corporation outside the State of Delaware, at such
places from time to time designated by the By-Laws, except as otherwise
required by the Laws of Delaware.
SEVENTH: The corporation shall have perpetual existence.
EIGHTH: The name and mailing address of the incorporator is Marie Jorczak,
Three Mill Road, Suite 206, Wilmington, DE 19806-2146.
NINTH: The number of directors of the corporation shall be fixed from time to
time by its By-Laws and may be increased or decreased.
TENTH: The Board of Directors is expressly authorized and shall have such
authority as set forth in the By-Laws to the extent such authority would be
valid under Delaware Law.
ELEVENTH: No director of the corporation shall have personal liability to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, provided that this provision shall not eliminate or limit
the liability of a director (a) for any breach of the director's duty or
loyalty to the corporation or its stockholders, (b) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (c) under Section 174 of the Delaware Corporation Law, or (d) for any
transaction from which the director derived an improper personal benefit.
THE UNDERSIGNED Incorporator for the purpose of forming a corporation pursuant
to the laws of the State of Delaware, does make this Certificate, hereby
declaring and certifying that the facts herein stated are true.
June 10, 1997 BY: /s/ MARIE P JORCZAK
Marie P. Jorczak - Incorporator
STATEMENT OF INCORPORATOR
IN LIEU OF ORGANIZATIONAL
MEETING OF
CONSOLIDATED GROWERS & PROCESSORS, INCORPORATED
The Certificate of Incorporation of this corporation, having been filed in the
Office of the Secretary of State, the undersigned, being the sole incorporator
named in said certificate, does hereby state that the following actions were
taken on this day for the purpose of organizing this corporation.
1. A copy of the Certificate of Incorporation filed in the Office of the
Secretary of State on June 10, 1997 and recorded in the Office of Recorder of
Deeds of the County of New Castle, was appended to this statement.
2. The registered office of the corporation in the State of Delaware was fixed
as Three Mill Road, Suite 206, City of Wilmington. The Incorporators Ltd. at
that address is retained as registered agent.
3. By-Laws for the regulation of the affairs of the corporation were adopted by
the undersigned incorporator and were ordered inserted in the minute book
immediately before this instrument.
4. The Board of Directors is authorized, in its discretion, to issue the shares
of the capital stock of this corporation to the full amount or number of shares
authorized by the Certificate of Incorporation, in such amounts and for such
consideration as from time to time shall be determined by the Board of
Directors and as may be permitted by law.
5. The corporation is authorized and empowered to conduct any and all business
of the corporation without a seal of the corporation as permitted by Section 2
of the By-Laws and 8 Delaware Code Section 122 (3).
6. The following persons are elected as directors to hold office until the
first annual meeting of the stockholders or until a qualified successor is
elected and qualified.
Susan M. Brana
I hereby resign as incorporator after executing the foregoing statement.
Dated: June 10, 1997 /s/ MARIE P JORCZAK
Marie P. Jorczak
Incorporator
The following are appended to this statement:
Copy of Stamp Filed Certificate of Incorporation
By-Laws
CERTIFICATION
I, MARIE JORCZAK, Notary Public for the State of Delaware and County of
New Castle, do hereby certify that the above and foregoing is a true and
correct copy of the original Certificate of Incorporation of CONSOLIDATED
GROWERS & PROCESSORS, INCORPORATED as received and filed in the Office of the
Secretary of State, the 10th day of June in the year of our Lord, one thousand
nine hundred ninety-seven, at 9:00 A.M.
IN WITNESS WHEREOF, I have hereunto set my hand and seal of office this
10th day of June in the year of our Lord, one thousand nine hundred
ninety-seven.
/s/ MARIE P JORCZAK
Marie P. Jorczak
Notary Public
NOVEMBER 15, 1997
MINUS 9, INCORPORATED (1)
-AND-
CONSOLIDATED GROWERS & PROCESSORS, INCORPORATED (2)
PATENT (TECHNOLOGY) LICENSE
EXCLUSIVE / WORLDWIDE
MICRO-PARTICLE FOR USE IN PAPER
CONTENTS
Clause Heading Page
1. Definitions
2. Grant License
3. Warranties
4. Disclosure Of Know-How
5. Use Of Technology
6. Technical Assistance
7. Instruction In Know-How
8. The Patents
9. Improvements
10. Standard Of Quality
11. Marking
12. Appointment Of Sub-Licenses
13. Royalties
14. Promotion
15. Confidence
16. Term
17. Termination
18. Consequences Of Termination
19. Actions Of Infringements
20. Licensee Not To Take Action
21. No Assignment
22. Notices
23. Waiver
24. Amendments
25. Force Majeure
26. Severability
27. Cancellation Of Previous Agreements
28. Proper Law
29. Headings
Schedule
1. The Patent
2. Formal Patent License
AN AGREEMENT November 15, 1997
PARTIES:
(1) MINUS 9, INCORPORATED (MINUS 9), P.O. Box 1551, Monterey, California
93942 (the "Licensor"); and
(2) CONSOLIDATED GROWERS & PROCESSORS, INCORPORATED (CGP) P.O.
Box 2228, Monterey, California 93942 USA (the "Licensee")
RECITALS:
(A) The Licensor is the owner of certain technology relating to the process to
manufacture microparticle tags as defined below.
(B) The Licensor owns valuable intellectual property rights relating to the
said technology.
(C) The Licensee desires to obtain from the Licensor and the Licensor is
prepared to grant to the Licensee an exclusive, worldwide license to use such
technology for use in paper products only on the terms and for the
consideration set out below.
OPERATIVE TERMS:
1 Definitions
1.1 In this Agreement (unless the context otherwise requires):
"Associate" means in respect of either party hereto:
(a) any firm or body corporate in which such party directly or
indirectly:
(i) owns more than half the capital or business assets; or
(ii) has the power to exercise more than half the voting
rights; or
(iii) has the power to appoint more than half the members of
the supervisory board, Board of Directors or bodies
legally representing such firm or body corporate; or
(iv) has the right to manage the business of such firm or body
corporate;
(b) any person, firm or body corporate which directly or indirectly
has in or over such party the rights or powers listed above
("a controller"); and
(c) any firm or body corporate in which a controller directly or
indirectly has the rights or powers listed above;
CALENDAR QUARTER means each three monthly period commencing on the first day of
any of the months of January, April, July and October in any year;
"Effective Date" means November 15, 1997;
"Field of Use" means paper products;
"Force Majeure" means any cause of delay in the performance of any obligation
of either party hereto beyond the reasonable control of such party;
"Improvement" means any change in development of or improvement or modification
to the Technology or the Know-how or the method of manufacture, use or
application thereof (whether patentable or not) including (without limitation)
any change, improvement or modification which makes the Technology or Licensed
Products more efficient or adaptable or enables them to be manufactured more
cheaply or to a higher qualitative standard of performance;
"Intellectual Property" means the Patients and other intellectual property
rights subsisting in the Territory including, without limitation, copyright,
registered designs and design rights in the Inventions, and the Know-how owned
by the Licensor at the date hereof any time during the Life of this Agreement;
"Inventions" means the inventions more particularly described in the
specifications and claims of those Patents specified in schedule 1;
"Know-how" means all designs, plans, specifications and calculations and other
manufacturing, engineering and technical data and information relating to the
use of the Technology in the possession, custody or power of the licensor at
the date hereof and which it may lawfully communicate to the Licensee;
"Licensed Product" means any product in the field of use which falls within any
of the claims of any of the Patents or which is manufactured through use of any
of the Know-how;
"Licensee's Improvements" means improvements made or discovered by the Licensee
(whether before or after the commencement of this Agreement) or of which it is
at any time during the Life of this Agreement either the owner or entitled to
grant the rights specified in clause 9.3;
"Licensor's Improvements" means Improvements made or discovered by the Licensor
during the Life of this Agreement or of which it is at any time during the Life
of this agreement either the owner or entitled to grant the rights specified in
clause 9.3;
"Life of this Agreement" means the period during which this Agreement is in
full force and effect as provided by clauses 16 and 17;
"Net Sales Price" means the invoiced price on a sale by the Licensee or any
sub-Licensee (as the case may be) of Licensed Products to any person less:
(a) value added tax or other sales taxes payable thereon;
(b) bona fide packing, transport and insurance costs;
(c) reasonable trade discounts actually granted to the customer in
respect of such invoice.
If a Licensed Product is incorporated into or sold with another article (other
than another Licensed Product) at an overall price, then the "Net Sales Price"
shall be deemed to be the "Net Sales Price" which would have been invoiced if
the Licensed Product had been sold alone to a third party in the ordinary
course of business. For the avoidance of doubt royalties shall be payable on
Licensed Products sold to the Licensee by a Sub-Licensee unless such Licensed
Products are resold by the Licensee when royalties shall only be payable on the
Net Sales Price of the resale;
"Patents" means the patents and patent applications specified in schedule 1
subsisting from time to time during the Life of this Agreement together with
all patents granted pursuant to such applications so substituting;
"Quality Standards" means in respect of any Licensed Product, the quality
standards therefore notified by the Licensor to the Licensee from time to time
(if any);
"Sub-Licensee" means any person, firm or company sub-licensed (as the case may
be) by the Licensee to manufacture Licensed Products, or to exercise any of the
rights hereby licensed, and "sub-license" and "sub-licensing" shall be
construed accordingly;
"Technology" means the Intellectual Property and the Know-how;
"Territory" means the world.
2 Grant of License
2.1 With effect from the Effective Date the Licensor hereby grants to the
Licensee provided that the Licensee complies with the terms of this Agreement
an exclusive license to use the Technology to manufacture and sell Products in
the Territory in the field of Use.
2.2 The Licensee shall not be obliged to apply for any patent or other
intellectual property protection in the Territory for the Products or Licensed
Products.
2.3 The Licensee hereby undertakes with the Licensor that during the Life of
this Agreement it will not without the Licensor's written permission:
(a) manufacture, use or sell the Technology or Licensed Products outside or for
delivery, use or resale outside the Field of Use.
(b) Authorize or assist any person to manufacture or sell the Technology or
Licensed Products outside the Field of Use.
3 WARRANTIES
3.1 The Licensor warrants that at the date hereof it does not know of any
present or proposed litigation concerning the Technology in the Territory, and
it warrants that manufacture of or dealing in Licensed Products or the use of
the Technology or any Improvement is not or will not be an infringement of the
rights of third parties.
3.2 The License warrants that:
(a) neither it nor any of its Associates is involved in the manufacture,
marketing or sale in the Territory of any products which could compete with the
Licensed Products and undertakes that neither it nor any of its Associates will
be so involved at any time during the Life of this Agreement;
(b) it has full authority to execute and perform this Agreement;
(c) its execution and performance of this Agreement does not and will not cause
it to be in breach of any obligation whether contractual, statutory or
otherwise.
4 Disclosure of Know-how
4.1 As soon as reasonably practicable after the Effective Date (if and so far
as not already done) and subject to the payment of the sum specified in clause
13.1(a) the Licensor shall supply to the Licensee the Know-how in its
possession which relates to use of the technology in the Field of Use.
4.2 The Licensee hereby acknowledges that any information comprising the whole
or part of the Know-How which may have been obtained it from the Licensor or
any of its Associates prior to the date hereof shall be deemed to have been
furnished under the provisions of this Agreement.
5 USE OF TECHNOLOGY
5.1 The Licensee may use the Technology after the Effective Date solely for
the Production of products during the Life of this Agreement in the Field of
Use.
6 TECHNICAL ASSISTANCE
6.1 The Licensor agrees to make available to the Licensee after the Effective
Date such personnel of the Licensor as the Licensor shall consider reasonable
for a mutually agreed and defined period and location to assist in the
initiation of manufacturing facilities in the Territory for products.
6.2 The charges for such personnel shall be $100.00 per person per day for each
day spent performing the obligation under clause 6.1 plus all traveling,
accommodation, medical and subsistence expenses reasonably incurred by such
personnel in connection therewith. The daily charge may be increased
commensurably with increases in direct and indirect labor costs of the
Licensor.
7 INSTRUCTION IN KNOW-HOW
7.1 Upon the Licensee's written request after the Effective Date the Licensor
shall provide at the Licensee's expense during the Life of this Agreement and
at such times as are convenient to the Licensor personal instruction in the
Know-how by qualified persons in the Licensor's employment to a reasonable
number of the Licensee's employees at the Licensor's Premises.
7.2 The Licensee shall procure such persons to conform to the regulations laid
down by the Licensor for its own employees or especially for visitors so far as
applicable.
7.3 The employees of the Licensee to be instructed will be given adequate
opportunity to study the Know-how and (subject to examination thereof by the
Licensor) they may be permitted to make notes and sketches thereof.
7.4 The Licensor shall have the right to refuse training to those employees of
the Licensee sent to the Licensor's premises whom the Licensor regards as
unacceptable by reference to reasonable standards of character, behavior and
competence.
7.5 The Licensee shall procure all of its employees sent for instruction first
to enter into a written confidentiality agreement with the Licensor in such
form as the Licensor may reasonably require and the execution of such
agreements shall be a condition precedent to their acceptance by the Licensor
for instruction.
7.6 The Licensee shall be responsible for all traveling and subsistence
expenses of its employees and for their continuing salaries, emoluments and
other benefits connected with their employment during the period of instruction
and for insurance coverage in respect of all loss caused to themselves or third
parties by the acts or omissions of such employees.
7.7 The Licensor shall not be liable for any expenses incurred by the Licensee
in connection with this Agreement other than those for which the Licensor has
herein expressly agreed to be liable.
7.8 The Licensee shall indemnify the Licensor against all claims relating to
any loss, damage or injury (whether to person or property) which may be
suffered or caused by the Licensee's employees or representatives in or arising
out of any visit made to the Licensor's premises pursuant to this Agreement
PROVIDED THAT this indemnity shall not extend to any loss, damage or injury due
to the negligence of the Licensor or its employees in the course of their
employment with the Licensor.
8 The Patents
8.1 The Licensor or the Licensee (as the case may be) shall at the other's
written request and cost execute a license in such terms as may be required by
or permissible under the relevant Law (but substantially as far as possible in
the form set out in schedule 2) in respect of the Patents for registration by
the other (and at the other's costs) at the relevant Patent Offices in the
Territory so that this present Agreement shall not in any circumstances be
registered or recorded unless the parties are required by law so to do. If
there shall be any inconsistencies between the terms of any such formal license
and the provisions of this Agreement the latter shall prevail.
9 IMPROVEMENTS
9.1 The Licensor and the Licensee mutually covenant that:
(a) whether their respective Improvements are patentable or not they
will promptly communicate and explain the same to each other;
(b) they shall promptly inform each other in writing of all things
done by them to obtain patent protection therefore in the
Territory;
(c) they shall not abandon or cease to maintain any application or
patent relating to any of their Improvements without giving each
other at least one month's prior written notice of any intention
to do so, and if such notice be given, shall at the other's
written request assign any such application or patent to the
other upon terms to be agreed by the parties in writing. The
parties undertake to negotiate such terms without delay and on
a reasonable and fair commercial basis.
9.2 the Licensee shall have a license during the Life of this Agreement to use
the Licensor's Improvements on the same terms (mutatis mutandis) as the license
granted under clause 2 but for no other purpose.
9.3 The Licensee shall have a royalty-free, exclusive license together with
the right to sublicense during the Life of this Agreement to use the Licensor's
Improvements.
10 STANDARD OF QUALITY
10.1 The Licensee shall not sell or permit or authorize the sale of any
Licensed Product manufactured pursuant to this Agreement which fails to comply
in any respect with the Quality Standards. Prior to the commencement of the
sale of any Licensed Product, the Licensee shall submit two randomly selected
samples thereof to the Licensor for written approval as to the Quality
Standards. The Licensee shall in the same manner obtain the Licensor's prior
written approval before making any changes to such Licensed Product which may
affect its ability to comply with the Quality Standards.
10.2 If the Licensor at any time believes that any Licensed Product that comes
to its attention, does not comply with the Quality Standards, it shall notify
the Licensee of its objection setting out its reasons therefore. Without
prejudice to any other rights of the Licensor, the Licensee shall at the
Licensor's option either promptly take all such steps as the Licensor may
require to ensure that all further items of such Licensed Product conform to
the Quality Standards or discontinue the production of such Licensed Product.
In any event, the Licensee shall promptly dispose of any remaining stocks of
such Licensed Product which do not reach the Quality Standards in accordance
with the provisions of clause 10.3.
10.3 Without prejudice to any other rights of the Licensor, the Licensee shall
immediately cease manufacturing and selling any Licensed Products which fail to
comply with the Quality Standards and in such event all connection between such
defective Licensed Products and the Licensor shall be severed and removed.
10.4 The Licensee shall at its own expense upon request furnish to the Licensor
such number of randomly selected samples of each item of Licensed Products as
the Licensor may reasonably request from time to time for the purpose of
permitting the Licensor to determine that the Quality Standards and other
provisions of this Agreement are being complied with. The Licensee shall
provide to the Licensor and its representatives such access as the Licensor may
reasonably request from time to time to the factories, warehouses and other
establishments at which Licensed Products are manufactured, packed, stored or
offered for sale by or on behalf of the Licensee or by any Sub-Licensee in
order to determine compliance by the Licensee with the provisions of this
Agreement.
11 MARKING
11.1 The Licensee undertakes that all Licensed Products manufactured pursuant
to this Agreement are clearly and conspicuously marked "USED UNDER LICENSE FROM
MINUS 9 INCORPORATED." unless the parties hereto other wise agree in writing.
11.2 The marking shall comply with California law.
11.3 The Licensor shall have the final decision on the form of any marking on
Licensed Products.
11.4 The Licensee shall legibly mark or cause to be marked on some conspicuous
part of each Licensed Product which is the subject of the Patents (or if this
is not possible by reason of its nature on the packaging thereof) for disposal
in a country in respect of which a patent has been applied for words indicating
that a patent has been applied for in respect thereof, giving the patent
application number and the words "patent applied for", and upon a patent being
granted the words "patent number ( )" together with the number of the relevant
patent.
11.5 Notwithstanding the marking of Licensed Products as aforesaid, the
Licenses shall indemnify and keep indemnified the Licensor and its Associates
against all claims, actions, costs, charges, expenses and demands arising or
alleged to arise out of the manufacture, use, sale or marketing of any Licensed
Products made by the Licensee or any Sub-Licensee or by reason of instructions
or lack of instructions in regard to the use or application thereof to the
intent that the risks associated with the manufacture, use, sale and marketing
of such Licensed Products shall be assumed by the Licensee to the exclusion of
the Licensor but this indemnity shall not extend to any such claims, actions,
costs, charges, expenses or demands due to the negligent or willful acts or
omissions of the Licensor.
11.6 The Licensee shall not make, give or supply any guarantee, warranty or
other undertaking as to the quality or other attributes of Licensed Products
which binds or purports to bind the Licensor or its Associates except as may be
specifically authorized by the Licensor in writing.
11.7 The Licensee shall ensure that in any agreement entered into pursuant to
clause 12 the Sub-Licensee shall give an undertaking to the Licensor in the
form, mutatis mutandis, set out in this clause 11.
12 APPOINTMENT OF SUB-LICENSEES
12.1 the Licensee may appoint any sub-licensee PROVIDED THAT:
(a) the Licensee has first obtained the Licensor's written consent;
(b) such Sub-Licensee is party to a written agreement with the Licensee which
binds it to all the terms and conditions of this Agreement insofar as they
relate to contract, manufacture or Sub-Licensing, the use of the Technology and
any other provision which is relevant or necessary to enable the Licensee to
fulfill its obligations under this Agreement to the Licensor and the
Licensee shall not in any event enter into any such agreement unless and until
the final text thereof has been approved by the Licensor in writing;
(c) such agreement shall provide for automatic termination upon the
termination of this Agreement and where in this Agreement the consent,
permission or approval of the Licensor is required or any right of inspection
is given to the Licensor under any provision, there shall be required under
the corresponding provision in such Sub-License the consent, permission or
approval of the Licensor and the Licensee and there shall be given a right of
inspection to the Licensor and the Licensee;
(d) the Licensee shall take all necessary steps at its own expense (including
the bringing of legal proceedings) to secure the performance and observance
by the Sub-Licensee of the terms and undertakings contained in such sub-
license or sub-contract on its part to be observed and performed;
(e) the Licensee shall not charge or accept a lump sum, premium or similar
payment in connection with the appointment of any Sub-Licensee except on
payment of an agreed share thereof to the Licensor.
12.2 The Licensee shall be responsible to the Licensor for payments due in
respect of sales of Licensed Products by Sub-Licensees as though they were
sales by the Licensee.
12.3 At the Licensor's request the Licensee shall terminate its agreement with
any Sub-Licensee if such Sub-Licensee is in breach of its agreement with the
Licensee. The Licensee shall indemnify the Licensor against any loss or
damage which the Licensor may suffer as a result of any such breach whether
such loss or damage occurs before or after termination of this Agreement.
13 ROYALTIES
13.1 The Licensee shall pay to the Licensor the sums set out below in
consideration of the grant of the rights under this Agreement.
Amount Time of Payment
(a) 250,000 shares of Common Stock of CGPR on or near November 15, 1997.
13.2 In addition to the sums payable under clause 13.1 the Licensee shall pay
to the Licensor during the Life of this Agreement a royalty of 5% of the
Net Sales Price of Licensed Products sold by the Licensee and by all
Sub-Licensees.
13.3 In the event that the royalties paid in one calendar year under clause
13.2 does not exceed certain minimums, there is NO other no installment due
under this clause 13.1 then the Licensee shall only be obliged to pay the 5%
Royalty.
13.4 The Licensee shall pay all royalties due hereunder to the Licensor
quarterly within 30 days of the last day of each Calendar Quarter (and on
termination of this Agreement within 30 days of the date on which such
termination took effect) on the aggregated Net Sales Price of Licensed Products
sold by the Licensee and Sub-Licensees during the calendar Quarter ending on
such day or (in the case of termination) since the commencement of the Calendar
Quarter during which such termination takes effect.
13.5 All payments due to the Licensor under this Agreement shall be paid
without deduction of any taxes other than taxes which the Licensee is required
by law to deduct and the Licensee shall if so required by the Licensor furnish
to the Licensor such evidence as may be necessary to claim double taxation
relief.
13.6 All sums payable hereunder are exclusive of Value Added Tax and VAT is
NOT applicable.
13.7 Unless otherwise notified by the Licensor to the Licensee payments due
hereunder shall be credited to an account of the Licensor at such Bank as the
Licensor may notify the Licensee from time to time and shall be made in pounds
sterling. All costs of transmission shall be borne by the Licensee. If any
Licensed Products sold by the Licensee or any Sub-Licensee are invoiced in a
currency other than US Dollars then for the purposes of calculating royalties
payable hereunder such currency shall be converted to US Dollars at the middle
market spot rate ruling in London on the date of the actual payment to the
Licensor.
13.8 In the case of any sale of Licensed Products by the Licensee or a Sub-
Licensee at an invoice price less than that which would have been charged to
persons negotiating at arm's length, there shall be substituted for the purpose
of calculation of royalties due hereunder such invoice price as would have been
charged in an arm's length transaction.
13.9 The Licensee shall keep and retain for at least six years complete and
accurate records of matters relevant to the manufacture, sale and disposal of
Licensed Products. The Licensee shall when remitting royalties as herein
provided deliver written statements to the Licensor showing the number and type
of each item of Licensed Products manufactured and sold by the Licensee and
every Sub-Licensee during the Calendar Quarter (or other period) in question
and the royalties due thereon together with such other information as the
Licensor may reasonably request. The Licensee shall as and when so requested
by the Licensor at all reasonable times during the Life of this Agreement and
for a period of six years thereafter make the said records available for
inspection by the Licensor's authorized representatives who shall have the
right to take copies of or extracts from any records kept pursuant to this
Agreement and any books, accounts, receipts, papers or other documents in the
possession, custody or power of the Licensee relating in whole or in part to
the manufacture, promotion or sale of Licensed Products under this Agreement.
13.10 The Licensee shall have the right to appoint at its expense a firm of
auditors to audit and give a certificate with regard to all royalties payable
and reports and statements delivered to the Licensor pursuant to this clause 13
in respect of each year of the Life of this Agreement or such other period as
the Licensor may reasonably require. The Licensee shall provide such
assistance as may be necessary to enable such audit to be completed and such
certificate given not later than two months after the end of such year or other
period. In the event that any audit reveals an understatement or underpayment
exceeding two percent of the total sums payable to the Licensor during the year
or other period in question, the cost of such audit shall be borne by the
Licensee.
13.11 If any circumstances of Force Majeure prevents the transmission of moneys
by the Licensee to the United States, the Licensee shall not be absolved from
making payments for royalties hereunder but shall pay all moneys due from time
to time to the Licensor into a bank account to be opened in the name of the
Licensor at such branch of such bank as the Licensor may in writing direct, or
to such person or persons as the licensor shall in writing direct.
13.12 If there shall be any delay in the payment of any sums payable under this
Agreement to the Licensor for whatever reasons (including without limitation,
Force Majeure) the Licensee shall pay interest thereon at the rate of 1% above
the base rate of Prime Rate prevailing from time to time.
14 PROMOTION
14.1 The Licensee shall use its best endeavors to sell and to promote and
develop the sale of each and every type of the Products throughout the
Territory and in connection therewith the Licensee shall supply to the Licensor
such evidence of its performance as the Licensor may reasonably request from
time to time.
15 CONFIDENCE
15.1 Subject to clauses 15.2 and 15.3 and save as otherwise expressly provided
in this Agreement, neither party hereto (the "recipient party") shall during
the Life of this Agreement or thereafter disclose to any person or use for any
purpose any information obtained from the other (the "disclosing party") in
connection with this Agreement including (without limitation) the Know-how but
the recipient party may:
(a) Disclose any such information to:
(i) Sub-Licensees (where the recipient party is the Licensee) appointed
in accordance with the Provisions of clause 12; and
(ii) Its customers or prospective customers for Licensed Products who require
such disclosure where bona fide necessary for an evaluation or instruction
in the use thereof and who have first signed a confidentiality agreement in
such form as the disclosing party may reasonably require; and
(iii) Its responsible officers and employees who require such disclosure
where bona fide necessary for the proper performance of their duties and who
have first signed a confidentiality agreement in such form as the disclosing
party may reasonably require;
(b) use such information in the proper exercise of its rights and the
performance of its obligations under this Agreement.
15.2 The recipient party shall use its reasonable endeavors to minimize the
risk of unauthorized disclosure or use by its employees and officers of
information received from the disclosing party and to enforce the
confidentiality agreements referred to in clause 15.1(a) in case of need.
15.3 The restrictions on use and disclosure of information under clause 15.1
shall not apply to any information which the recipient party can prove;
(a) was already known to its receipt thereof from the disclosing party;
(b) was subsequently disclosed to it lawfully by a third party who did not
obtain the same (whether directly or indirectly) from the disclosing party;
(c) was in the public domain at the time of receipt by the recipient party or
has subsequently entered into the public domain other than by reason of the
breach of the provisions of this clause 15 or any obligation of confidence owed
by the recipient party or by any Sub-Licensee to the disclosing party.
15.4 Nothing in this Agreement shall prevent or restrict the supply by either
party (the "first party") (after prior notice to the other) of Licensed
Products or information relating to them to any official body or department
where so required.
16 TERM
16.1 This Agreement shall commence on the date hereof and (subject to prior
termination as herein provided) shall continue until terminated by either party
giving to the other not less than 12 month's notice expiring on the anniversary
or any subsequent anniversary of the effective date or at any time thereafter.
17 TERMINATION
17.1 This Agreement may be terminated forthwith by either party ("the first
party") by written notice to the other in the event of one or more of the
following:
(a) if the other goes into liquidation (other than voluntary liquidation for
the purpose of a bona fide reconstruction or amalgamation the terms of which
have been approved in advance by the first party in writing) or is dissolved or
struck off;
(b) if the other disposes of all or substantially all of its business or assets
to any person other than with the prior written approval of the first party;
(c) if the other is unable to pay its debts as they mature or suffers the
appointment of a receiver, administrative receiver or administrator (or any
similar official or process under the law of its domicile or place of
incorporation) of the whole or any part of its assets or is the subject of any
bankruptcy proceedings;
(d) if the other is in breach of any of the provisions of this Agreement and
fails to remedy such breach (where it is capable of being remedied) within 30
days notice from the first party specifying such breach;
(e) if the other is delayed in the performance of any of its obligations
hereunder by reason of Force Majeure for a continuous period exceeding 90 days
or for periods exceeding 90 days when aggregated in any period of 180 days.
17.2 Termination of this Agreement shall be without prejudice to any rights of
either party which may have accrued up to the date of such termination and the
rights to terminate this Agreement are not intended to be exclusive but shall
be in addition to every other remedy or right now or hereafter existing
including the right to recover damages and to a decree requiring any
appropriate performance required by this Agreement.
17.3 Subject to clause 18.1, in the event of termination of this Agreement for
whatever cause neither the Licensee nor any liquidator administrator,
administrative receiver or similar official thereof shall have any right
whatsoever to use, assign, license or otherwise deal in the Technology, the
Licensor's Improvements or any of the rights granted to the Licensee by this
Agreement.
18 CONSEQUENCES OF TERMINATION
18.1 Upon termination of this Agreement for whatsoever cause (other than
termination by the Licensor or the Licensee pursuant to clause 16 or by the
Licensor pursuant to clause 17.1) then subject to all the terms hereof the
Licensee shall have the right for a period of 3 months following such
termination to:
(a) advertise and sell Licensed Products already manufactured or in the course
of manufacture and remaining unsold at the time of the termination of this
Agreement; and
(b) complete binding contracts for the supply of Licensed Products then in
existence.
18.2 Upon termination of this Agreement for whatsoever cause:
(a) the Licensee hall return to the Licensor all the drawing and technical
documents supplied to it by the Licensor or by its Associates and all copies
thereof in its or any of the Licensee's Associates' possession power or
custody or in that of any Sub-Licensee;
(b) (other than termination by the Licensee pursuant to clause 17.1) the
Licensor shall have an irrevocable exclusive license to use the Licensee's
Improvements to manufacture and sell products throughout the world upon the
payment of such royalties as the parties may agree in writing. For such
purpose the parties shall negotiate with each other in good faith. If the
parties shall fail to reach agreement within 60 days of termination such
royalties shall be determined by such person as the parties may agree in
writing or (failing such agreement) at the request of either party by a person
nominated by the President for the time being of the Association of Chartered
Accountants. Such person shall act as an expert and his decision shall be
final and binding and his costs shall be borne by the parties equally.
19 ACTIONS FOR INFRINGEMENTS
19.1 Each party shall promptly notify the other of any suspected infringement
in the Territory of the Technology or the Licensor's Improvements by any third
party (an Infringer") which comes to its notice and shall consult with the
other about what to do to deal with such suspected infringement.
19.2 If the Licensor does not commence proceedings against an Infringer in the
Territory then the Licensee shall be entitled so to do at its own expense (and
if necessary in the Licensor's name subject to giving the Licensor such
indemnity as to costs as it may require).
19.3 The party which has the control of proceedings against an Infringer shall
bear all the costs thereof and shall be entitled to all damages and other
compensation recovered and at its request and cots, the other party shall
provide such assistance as it may reasonably require for the prosecution of the
action.
19.4 If the Licensee has the control of any proceedings against an Infringer,
it shall keep the Licensor regularly informed of the progress thereof in
writing and shall promptly provide the Licensor with such other information in
respect thereof as the Licensor may reasonably require from time to time.
20 LICENSEE NOT TO TAKE ACTION
20.1 Except as expressly permitted by clause 19, the Licensee shall not make
any demands or claims, bring suit, effect any settlements or compromise or take
any other action in respect of the Technology or any other proprietary or
intellectual property rights of the Licensor without the Licensor's prior
written consent.
21 NO ASSIGNMENT
21.1 Except as permitted by clause 12 the Licensee shall not assign, charge,
Sub-Contract, Sub-License or otherwise dispose of any of its rights or
obligations under this Agreement.
21.2 The Licensor may assign, charge, Sub-Contract or otherwise dispose of any
of its rights or obligations under this Agreement.
22 NOTICES
22.1 All notices to be given under this Agreement shall be in writing in
California and left at or sent by first class registered or recorded delivery
air mail or fax to the appropriate address shown at the head of this Agreement
or left at or sent to such other address as the party concerned may from time
to time designate by notice pursuant hereto. Any such notice shall be deemed
given:
(a) at the time when the same is left at the addressee's address; or
(b) on the second customary working day in the addressee's country after
the same shall have been property posted; or
(c) in the case of a fax, on the first such working day after the day of
transmission by the fax operator provided that the transmitting fax machine
generates upon completion of the transmission a transmission report stating
that the notice has been duly transmitted without error to the addressee's fax
number.
23 WAIVER
23.1 The rights of either party arising out of any provision of this Agreement
or any breach thereof shall not be waived except in writing. Any waiver by
either party of any of its rights under this Agreement of any breach of this
Agreement shall not be construed as a waiver of any other rights or of any
other or further breach.
24 AMENDMENTS
24.1 This Agreement constitutes the entire agreement of the parties on the
subject matter hereof and may not be amended except by an agreement in writing
signed by both parties.
25 FORCE MAJEURE
25.1 Without prejudice to clauses 13.11 or 17.1(e), neither the Licensor nor
the Licensee shall incur any liability to the other in the event that it is
delayed in the performance of its obligations hereunder solely by Force Majeure
but the party so delayed shall nevertheless use its reasonable endeavors to
resume full performance as soon as possible.
26 SEVERABILITY
26.1 All provisions of this Agreement are severable and in the event of any of
them being held to be invalid by any competent court this Agreement shall be
interpreted as if such invalid provisions were not contained herein.
27 CANCELLATION OF PREVIOUS AGREEMENTS
27.1 This Agreement shall cancel and supersede all previous agreements and
arrangements (if any) between the Licensor and the Licensee or their respective
predecessors relating to the subject matter hereof which in so far as they or
some of them may still be of effect are hereby declared to have been superseded
by this Agreement without claim for compensation or otherwise by either party
but without prejudice to any rights or liabilities accrued before the date
hereof.
28 PROPER LAW
28.1 This Agreement shall be governed by and interpreted in accordance with
California law. Each of the parties hereby submits to the non-exclusive
jurisdiction of the Courts of the State of California.
29 HEADINGS
29.1 The headings in this Agreement are for reference only and do not limit or
affect the interpretation thereof.
IN WITNESS whereof this Agreement has been duly executed by the parties the day
and year first above written.
(Schedule 1 The Patents)
(Schedule 2 Formal patent License)
MINUS 9 INCORPORATED (the "Licensor") HEREBY GRANTS to CONSOLIDATED GROWERS &
PROCESSORS, INCORPORATED of PO Box 2228, Monterey, California, 93942 USA (the
"Licensee") in respect of the patent specified in the schedule hereto of which
the Licensor is Proprietor (the "Patent") license and authority as from the
15th day of November, 1997 to manufacture, use and sell products embodying the
inventions within the claims of the Patent subject to the following terms:
1. Such License shall continue (unless sooner terminated by or pursuant to
agreement between the Licensor and the Licensee) for the Life of the Patent;
2. The Licensee shall notify the Licensor of any infringement of the Patent
which comes to its notice and render to the Licensor all such assistance as it
may reasonably require in relation thereto;
3. The Licensee shall notify the Licensor of all improvements relating to the
inventions within the scope of the Patent;
4. This License is made in California and the rights and liabilities of the
parties shall be determined according to the laws of California
5. This License shall not be assigned, mortgaged or charged nor shall sub-
licenses be granted hereunder without the Licensor's prior written consent.
IN WITNESS whereof this Agreement has been duly executed by the parties the day
and year first above written.
THE SCHEDULE
SIGNED by a duly authorized )Name: Thomas McCarthy
Signatory for and on behalf of )Signature: /s/ THOMAS MCCARTHY
MINUS 9 INCORPORATED )Status: President
In the presence of: )Name: Mark Kaeller
WITNESS )Signature: /s/ Mark Kaeller
)Occupation: Banking
)Address: 5317 Mecca Ave.
Tarzana, CA. 91356
SIGNED by a duly authorized )Name: Susan Brana
Signatory for and on behalf of )Signature: /s/ SUSAN BRANA
CONSOLIDATED GROWERS )Status: Corporate Secretary
& PROCESSORS, INC.
In the presence of: )Name: Diane Marciel
WITNESS )Signature: /s/ DIANE MARCIEL
)Occupation: Admin.
)Address: 1015 Gayley Ave. No. 387
Los Angeles, CA. 90024
January 1, 1999
NTECH CORPORATION(1)
-AND-
CONSOLIDATED GROWERS & PROCESSORS, INCORPORATED (2)
PATENT (TECHNOLOGY) LICENSE
EXCLUSIVE / WORLDWIDE
SILICON CARBIDE / HEMP PROCESS
HYDROGEN BONDING / HEMP PROCESS
CONTENTS
Clause Heading Page
1. Definitions
2. Grant License
3. Warranties
4. Disclosure Of Know-How
5. Use Of Technology
6. Technical Assistance
7. Instruction In Know-How
8. The Patents
9. Improvements
10. Standard Of Quality
11. Marking
12. Appointment Of Sub-Licenses
13. Royalties
14. Promotion
15. Confidence
16. Term
17. Termination
18. Consequences Of Termination
19. Actions Of Infringements
20. Licensee Not To Take Action
21. No Assignment
22. Notices
23. Waiver
24. Amendments
25. Force Majeure
26. Severability
27. Cancellation Of Previous Agreements
28. Proper Law
29. Headings
Schedule
1. The Patent
2. Formal Patent License
AN AGREEMENT January 1, 1999
PARTIES:
(1) NTECH CORPORATION, P.O. Box 1551, Monterey, California 93942 (the
"Licensor"); and
(2) CONSOLIDATED GROWERS & PROCESSORS, INCORPORATED (CGP) P.O.
Box 2228, Monterey, California 93942 USA (the "Licensee")
RECITALS:
(A) The Licensor is the owner of certain technology relating to certain
processes that harden cellulose through hydrogen bonding and mixed with Silicon
Carbide as defined below.
(B) The Licensor owns valuable intellectual property rights relating to the
said technology.
(C) The Licensee desires to obtain from the Licensor and the Licensor is
prepared to grant to the Licensee an exclusive, worldwide license to use such
technology for any and all uses and products only on the terms and for the
consideration set out below.
OPERATIVE TERMS:
1 Definitions
1.1 In this Agreement (unless the context otherwise requires):
"Associate" means in respect of either party hereto:
(a) any firm or body corporate in which such party directly or
indirectly:
(i) owns more than half the capital or business assets; or
(ii) has the power to exercise more than half the voting
rights; or
(iii) has the power to appoint more than half the members of
the supervisory board, board of directors or bodies
legally representing such firm or body corporate; or
(iv) has the right to manage the business of such firm or body
corporate;
(b) any person, firm or body corporate which directly or indirectly
has in or over such party the rights or powers listed above ("a
controller"); and
(c) any firm or body corporate in which a controller directly or
indirectly has the rights or powers listed above;
CALENDAR QUARTER means each three monthly period commencing on the first day of
any of the months of January, April, July and October in any year;
"Effective Date" means January 1, 1999
"Field of Use" means paper products
"Force Majeure" means any cause of delay in the performance of any obligation
of either party hereto beyond the reasonable control of such party;
"Improvement" means any change in development of or improvement or modification
to the Technology or the Know-how or the method of manufacture, use or
application thereof (whether patentable or not) including (without limitation)
any change, improvement or modification which makes the Technology or Licensed
Products more efficient or adaptable or enables them to be manufactured more
cheaply or to a higher qualitative standard of performance;
"Intellectual Property" means the Patients and other intellectual property
rights subsisting in the Territory including, without limitation, copyright,
registered designs and design rights in the Inventions, and the Know-how owned
by the Licensor at the date hereof any time during the Life of this Agreement;
"Inventions" means the inventions more particularly described in the
specifications and claims of those Patents specified in schedule 1;
"Know-how" means all designs, plans, specifications and calculations and other
manufacturing, engineering and technical data and information relating to the
use of the Technology in the possession, custody or power of the licensor at
the date hereof and which it may lawfully communicate to the Licensee;
"Licensed Product" means any product in the field of use which falls within any
of the claims of any of the Patents or which is manufactured through use of any
of the Know-how;
"Licensee's Improvements" means improvements made or discovered by the Licensee
(whether before or after the commencement of this Agreement) or of which it is
at any time during the Life of this Agreement either the owner or entitled to
grant the rights specified in clause 9.3;
"Licensor's Improvements" means Improvements made or discovered by the Licensor
during the Life of this Agreement or of which it is at any time during the Life
of this agreement either the owner or entitled to grant the rights specified in
clause 9.3;
"Life of this Agreement" means the period during which this Agreement is in
full force and effect as provided by clauses 16 and 17;
"Net Sales Price" means the invoiced price on a sale by the Licensee or any
sub-Licensee (as the case may be) of Licensed Products to any person less:
(a) value added tax or other sales taxes payable thereon;
(b) bona fide packing, transport and insurance costs;
(c) reasonable trade discounts actually granted to the customer in
respect of such invoice.
If a Licensed Product is incorporated into or sold with another article (other
than another Licensed Product) at an overall price, then the "Net Sales Price"
shall be deemed to be the "Net sales Price" which would have been invoiced if
the Licensed Product had been sold alone to a third party in the ordinary
course of business. For the avoidance of doubt royalties shall be payable on
Licensed Products sold to the Licensee by a Sub-Licensee unless such Licensed
Products are resold by the Licensee when royalties shall only be payable on the
Net Sales Price of the resale;
"Patents" means the patents and patent applications specified in schedule 1
subsisting from time to time during the Life of this Agreement together with
all patents granted pursuant to such applications so substituting;
"Quality Standards" means in respect of any Licensed Product, the quality
standards therefore notified by the Licensor to the Licensee from time to time
(if any);
"Sub-Licensee" means any person, firm or company sub-licensed (as the case may
be) by the Licensee to manufacture Licensed Products, or to exercise any of the
rights hereby licensed, and "sub-license" and "sub-licensing" shall be
construed accordingly;
"Technology" means the Intellectual Property and the Know-how;
"Territory" means the world.
2 Grant of License
2.1 With effect from the Effective Date the Licensor hereby grants to the
Licensee provided that the Licensee complies with the terms of this Agreement
an exclusive license to use the Technology to manufacture and sell Products in
the Territory in the field of Use.
2.2 The Licensee shall not be obliged to apply for any patent or other
intellectual property protection in the Territory for the Products or Licensed
Products.
2.3 The Licensee hereby undertakes with the Licensor that during the Life of
this Agreement it will not without the Licensor's written permission:
(a) manufacture, use or sell the Technology or Licensed Products outside or for
delivery, use or resale outside the Field of Use.
(b) Authorize or assist any person to manufacture or sell the Technology or
Licensed Products outside the Field of Use.
3 WARRANTIES
3.1 The Licensor warrants that at the date hereof it does not know of any
present or proposed litigation concerning the Technology in the Territory, and
it warrants that manufacture of or dealing in Licensed Products or the use of
the Technology or any Improvement is not or will not be an infringement of the
rights of third parties.
3.2 The License warrants that:
(a) neither it nor any of its Associates is involved in the manufacture,
marketing or sale in the Territory of any products which could compete with the
Licensed Products and undertakes that neither it nor any of its Associates will
be so involved at any time during the Life of this Agreement;
(b) it has full authority to execute and perform this Agreement;
(c) it's execution and performance of this Agreement does not and will not
cause it to be in breach of any obligation whether contractual, statutory or
otherwise.
4 Disclosure of Know-how
4.1 As soon as reasonably practicable after the Effective Date (if and so far
as not already done) and subject to the payment of the sum specified in clause
13.1(a) the Licensor shall supply to the Licensee the Know-how in its
possession which relates to use of the technology in the Field of Use.
4.2 The Licensee hereby acknowledges that any information comprising the whole
or part of the Know-how which may have been obtained it from the Licensor or
any of its Associates prior to the date hereof shall be deemed to have been
furnished under the provisions of this Agreement.
5 USE OF TECHNOLOGY
5.1 The Licensee may use the Technology after the Effective Date solely for
the Production of products during the Life of this Agreement in the Field of
Use.
6 TECHNICAL ASSISTANCE
6.1 The Licensor agrees to make available to the Licensee after the Effective
Date such personnel of the Licensor as the Licensor shall consider reasonable
for a mutually agreed and defined period and location to assist in the
initiation of manufacturing facilities in the Territory for products.
6.2 The charges for such personnel shall be $100.00 per person per day for each
day spent performing the obligation under clause 6.1 plus all travelling,
accommodation, medical and subsistence expenses reasonably incurred by such
personnel in connection therewith. The daily charge may be increased
commensurably with increases in direct and indirect labor costs of the
Licensor.
7 INSTRUCTION IN KNOW-HOW
7.1 Upon the Licensee's written request after the Effective Date the Licensor
shall provide at the Licensee's expense during the Life of this Agreement and
at such times as are convenient to the Licensor personal instruction in the
Know-How by qualified persons in the Licensor's employment to a reasonable
number of the Licensee's employees at the Licensor's Premises.
7.2 The Licensee shall procure such persons to conform to the regulations laid
down by the Licensor for its own employees or especially for visitors so far as
applicable.
7.3 The employees of the Licensee to be instructed will be given adequate
opportunity to study the Know-how and (subject to examination thereof by the
Licensor) they may be permitted to make notes and sketches thereof.
7.4 The Licensor shall have the right to refuse training to those employees of
the Licensee sent to the Licensor's premises whom the Licensor regards as
unacceptable by reference to reasonable standards of character, behavior and
competence.
7.5 The Licensee shall procure all of its employees sent for instruction first
to enter into a written confidentiality agreement with the Licensor in such
form as the Licensor may reasonably require and the execution of such
agreements shall be a condition precedent to their acceptance by the Licensor
for instruction.
7.6 The Licensee shall be responsible for all travelling and subsistence
expenses of its employees and for their continuing salaries, emoluments and
other benefits connected with their employment during the period of instruction
and for insurance coverage in respect of all loss caused to themselves or third
parties by the acts or omissions of such employees.
7.7 The Licensor shall not be liable for any expenses incurred by the Licensee
in connection with this Agreement other than those for which the Licensor has
herein expressly agreed to be liable.
7.8 The Licensee shall indemnify the Licensor against all claims relating to
any loss, damage or injury (whether to person or property) which may be
suffered or caused by the Licensee's employees or representatives in or arising
out of any visit made to the Licensor's premises pursuant to this Agreement
PROVIDED THAT this indemnity shall not extend to any loss, damage or injury due
to the negligence of the Licensor or its employees in the course of their
employment with the Licensor.
8 The Patents
8.1 The Licensor or the Licensee (as the case may be) shall at the other's
written request and cost execute a license in such terms as may be required by
or permissible under the relevant Law (but substantially as far as possible in
the form set out in schedule 2) in respect of the Patents for registration by
the other (and at the other's costs) at the relevant Patent Offices in the
Territory so that this present Agreement shall not in any circumstances be
registered or recorded unless the parties are required by law so to do. If
there shall be any inconsistencies between the terms of any such formal license
and the provisions of this Agreement the latter shall prevail.
9 IMPROVEMENTS
9.1 The Licensor and the Licensee mutually covenant that:
(a) whether their respective Improvements are patentable or not they
will promptly communicate and explain the same to each other;
(b) they shall promptly inform each other in writing of all things
done by them to obtain patent protection therefore in the
Territory;
(c) they shall not abandon or cease to maintain any application or
patent relating to any of their Improvements without giving each
other at least one month's prior written notice of any intention
to do so, and if such notice be given, shall at the other's
written request assign any such application or patent to the
other upon terms to be agreed by the parties in writing. The
parties undertake to negotiate such terms without delay and on a
reasonable and fair commercial basis.
9.2 the Licensee shall have a license during the Life of this Agreement to use
the Licensor's Improvements on the same terms (mutatis mutandis) as the license
granted under clause 2 but for no other purpose.
9.3 The Licensee shall have a royalty-free, exclusive license together with
the right to sublicense during the Life of this Agreement to use the Licensor's
Improvements.
10 STANDARD OF QUALITY
10.1 The Licensee shall not sell or permit or authorize the sale of any
Licensed Product manufactured pursuant to this Agreement which fails to comply
in any respect with the Quality Standards. Prior to the commencement of the
sale of any Licensed Product, the Licensee shall submit two randomly selected
samples thereof to the Licensor for written approval as to the Quality
Standards. The Licensee shall in the same manner obtain the Licensor's prior
written approval before making any changes to such Licensed Product which may
affect its ability to comply with the Quality Standards.
10.2 If the Licensor at any time believes that any Licensed Product that comes
to its attention, does not comply with the Quality Standards, it shall notify
the Licensee of its objection setting out its reasons therefore. Without
prejudice to any other rights of the Licensor, the Licensee shall at the
Licensor's option either promptly take all such steps as the Licensor may
require to ensure that all further items of such Licensed Product conform to
the Quality Standards or discontinue the production of such Licensed Product.
In any event, the Licensee shall promptly dispose of any remaining stocks of
such Licensed Product which do not reach the Quality Standards in accordance
with the provisions of clause 10.3.
10.3 Without prejudice to any other rights of the Licensor, the Licensee shall
immediately cease manufacturing and selling any Licensed Products which fail to
comply with the Quality Standards and in such event all connection between such
defective Licensed Products and the Licensor shall be severed and removed.
10.4 The Licensee shall at its own expense upon request furnish to the Licensor
such number of randomly selected samples of each item of Licensed Products as
the Licensor may reasonably request from time to time for the purpose of
permitting the Licensor to determine that the Quality Standards and other
provisions of this Agreement are being complied with. The Licensee shall
provide to the Licensor and its representatives such access as the Licensor may
reasonably request from time to time to the factories, warehouses and other
establishments at which Licensed Products are manufactured, packed, stored or
offered for sale by or on behalf of the Licensee or by any Sub-Licensee in
order to determine compliance by the Licensee with the provisions of this
Agreement.
11 MARKING
11.1 The Licensee undertakes that all Licensed Products manufactured pursuant
to this Agreement are clearly and conspicuously marked "USED UNDER LICENSE FROM
NTECH CORPORATION." unless the parties hereto other wise agree in writing.
11.2 The marking shall comply with California law.
11.3 The Licensor shall have the final decision on the form of any marking on
Licensed Products.
11.4 The Licensee shall legibly mark or cause to be marked on some conspicuous
part of each Licensed Product which is the subject of the Patents (or if this
is not possible by reason of its nature on the packaging thereof) for disposal
in a country in respect of which a patent has been applied for words indicating
that a patent has been applied for in respect thereof, giving the patent
application number and the words "patent applied for", and upon a patent being
granted the words "patent number ( )" together with the number of the relevant
patent.
11.5 Notwithstanding the marking of Licensed Products as aforesaid, the
Licenses shall indemnify and keep indemnified the Licensor and its Associates
against all claims, actions, costs, charges, expenses and demands arising or
alleged to arise out of the manufacture, use, sale or marketing of any Licensed
Products made by the Licensee or any Sub-Licensee or by reason of instructions
or lack of instructions in regard to the use or application thereof to the
intent that the risks associated with the manufacture, use, sale and marketing
of such Licensed Products shall be assumed by the Licensee to the exclusion of
the Licensor but this indemnity shall not extend to any such claims, actions,
costs, charges, expenses or demands due to the negligent or willful acts or
omissions of the Licensor.
11.6 The Licensee shall not make, give or supply any guarantee, warranty or
other undertaking as to the quality or other attributes of Licensed Products
which binds or purports to bind the Licensor or its Associates except as may be
specifically authorized by the Licensor in writing.
11.7 The Licensee shall ensure that in any agreement entered into pursuant to
clause 12 the Sub-Licensee shall give an undertaking to the Licensor in the
form, mutatis mutandis, set out in this clause 11.
12 APPOINTMENT OF SUB-LICENSEES
12.1 the Licensee may appoint any Sub-Licensee PROVIDED THAT:
(a) the Licensee has first obtained the Licensor's written consent;
(b) such sub-licensee is party to a written agreement with the Licensee which
binds it to all the terms and conditions of this Agreement insofar as they
relate to contract, manufacture or Sub-Licensing, the use of the Technology and
any other provision which is relevant or necessary to enable the Licensee to
fulfill its obligations under this Agreement to the Licensor and the Licensee
shall not in any event enter into any such agreement unless and until the final
text thereof has been approved by the Licensor in writing;
(c) such agreement shall provide for automatic termination upon the
termination of this Agreement and where in this Agreement the consent,
permission or approval of the Licensor is required or any right of inspection
is given to the Licensor under any provision, there shall be required under
the corresponding provision in such sub-license the consent, permission or
approval of the Licensor and the Licensee and there shall be given a right of
inspection to the Licensor and the Licensee;
(d) the Licensee shall take all necessary steps at its own expense (including
the bringing of legal proceedings) to secure the performance and observance
by the Sub-Licensee of the terms and undertakings contained in such sub-
license or sub-contract on its part to be observed and performed;
(e) the Licensee shall not charge or accept a lump sum, premium or similar
payment in connection with the appointment of any Sub-Licensee except on
payment of an agreed share thereof to the Licensor.
12.2 The Licensee shall be responsible to the Licensor for payments due in
respect of sales of Licensed Products by Sub-Licensees as though they were
sales by the Licensee.
12.3 At the Licensor's request the Licensee shall terminate its agreement with
any Sub-Licensee if such Sub-Licensee is in breach of its agreement with the
Licensee. The Licensee shall indemnify the Licensor against any loss or
damage which the Licensor may suffer as a result of any such breach whether
such loss or damage occurs before or after termination of this Agreement.
13 ROYALTIES
13.1 The Licensee shall pay to the Licensor the sums set out below in
consideration of the grant of the rights under this Agreement.
Amount Time of Payment
(a) royalty only See Below
13.2 In addition to the sums payable under clause 13.1 the Licensee shall pay
to the Licensor during the Life of this Agreement a royalty of 5% of the Net
Sales Price of Licensed Products sold by the Licensee and by all Sub-Licensees.
13.3 In the event that the royalties paid in one calendar year under clause
13.2 does not exceed certain minimums, there is NO other no installment due
under this clause 13.1 then the Licensee shall only be obliged to pay the 5%
Royalty.
13.4 The Licensee shall pay all royalties due hereunder to the Licensor
quarterly within 30 days of the last day of each Calendar Quarter (and on
termination of this Agreement within 30 days of the date on which such
termination took effect) on the aggregated Net Sales Price of Licensed Products
sold by the Licensee and Sub-Licensees during the calendar Quarter ending on
such day or (in the case of termination) since the commencement of the Calendar
Quarter during which such termination takes effect.
13.5 All payments due to the Licensor under this Agreement shall be paid
without deduction of any taxes other than taxes which the Licensee is
required by law to deduct and the Licensee shall if so required by the Licensor
furnish to the Licensor such evidence as may be necessary to claim double
taxation relief.
13.6 All sums payable hereunder are exclusive of Value Added Tax and VAT is
NOT applicable.
13.7 Unless otherwise notified by the Licensor to the Licensee payments due
hereunder shall be credited to an account of the Licensor at such Bank as the
Licensor may notify the Licensee from time to time and shall be made in pounds
sterling. All costs of transmission shall be borne by the Licensee. If any
Licensed Products sold by the Licensee or any Sub-Licensee are invoiced in a
currency other than US Dollars then for the purposes of calculating royalties
payable hereunder such currency shall be converted to US Dollars at the middle
market spot rate ruling in London on the date of the actual payment to the
Licensor.
13.8 In the case of any sale of Licensed Products by the Licensee or a Sub-
Licensee at an invoice price less than that which would have been charged to
persons negotiating at arm's length, there shall be substituted for the purpose
of calculation of royalties due hereunder such invoice price as would have been
charged in an arm's length transaction.
13.9 The Licensee shall keep and retain for at least six years complete and
accurate records of matters relevant to the manufacture, sale and disposal of
Licensed Products. The Licensee shall when remitting royalties as herein
provided deliver written statements to the Licensor showing the number and type
of each item of Licensed Products manufactured and sold by the Licensee and
every Sub-Licensee during the Calendar Quarter (or other period) in question
and the royalties due thereon together with such other information as the
Licensor may reasonably request. The Licensee shall as and when so requested
by the Licensor at all reasonable times during the Life of this Agreement and
for a period of six years thereafter make the said records available for
inspection by the Licensor's authorized representatives who shall have the
right to take copies of or extracts from any records kept pursuant to this
Agreement and any books, accounts, receipts, papers or other documents in the
possession, custody or power of the Licensee relating in whole or in part to
the manufacture, promotion or sale of Licensed Products under this Agreement.
13.10 The Licensee shall have the right to appoint at its expense a firm of
auditors to audit and give a certificate with regard to all royalties payable
and reports and statements delivered to the Licensor pursuant to this clause 13
in respect of each year of the Life of this Agreement or such other period as
the Licensor may reasonably require. The Licensee shall provide such
assistance as may be necessary to enable such audit to be completed and such
certificate given not later than two months after the end of such year or other
period. In the event that any audit reveals an understatement or underpayment
exceeding two percent of the total sums payable to the Licensor during the year
or other period in question, the cost of such audit shall be borne by the
Licensee.
13.11 If any circumstances of Force Majeure prevents the transmission of moneys
by the Licensee to the United States, the Licensee shall not be absolved from
making payments for royalties hereunder but shall pay all moneys due from time
to time to the Licensor into a bank account to be opened in the name of the
Licensor at such branch of such bank as the Licensor may in writing direct, or
to such person or persons as the Licensor shall in writing direct.
13.12 If there shall be any delay in the payment of any sums payable under this
Agreement to the Licensor for whatever reasons (including without limitation,
Force Majeure) the Licensee shall pay interest thereon at the rate of 1% above
the base rate of Prime Rate prevailing from time to time.
14 PROMOTION
14.1 The Licensee shall use its best endeavors to sell and to promote and
develop the sale of each and every type of the Products throughout the
Territory and in connection therewith the Licensee shall supply to the Licensor
such evidence of its performance as the Licensor may reasonably request from
time to time.
15 CONFIDENCE
15.1 Subject to clauses 15.2 and 15.3 and save as otherwise expressly provided
in
this Agreement, neither party hereto (the "recipient party") shall during the
Life of this Agreement or thereafter disclose to any person or use for any
purpose any information obtained from the other (the "disclosing party") in
connection with this Agreement including (without limitation) the Know-how but
the recipient party may:
(a) disclose any such information to:
(i) Sub-Licensees (where the recipient party is the Licensee) appointed
in accordance with the Provisions of clause 12; and
(ii) Its customers or prospective customers for Licensed Products who
require such disclosure where bona fide necessary for an evaluation or
instruction in the use thereof and who have first signed a confidentiality
agreement in such form as the disclosing party may reasonably require; and
(iii) Its responsible officers and employees who require such disclosure
where bona fide necessary for the proper performance of their duties and who
have first signed a confidentiality agreement in such form as the disclosing
party may reasonably require;
(b) use such information in the proper exercise of its rights and the
performance of its obligations under this Agreement.
15.2 The recipient party shall use its reasonable endeavors to minimize the
risk of unauthorized disclosure or use by its employees and officers of
information received from the disclosing party and to enforce the
confidentiality agreements referred to in clause 15.1(a) in case of need.
15.3 The restrictions on use and disclosure of information under clause 15.1
shall not apply to any information which the recipient party can prove;
(a) was already known to its receipt thereof from the disclosing party;
(b) was subsequently disclosed to it lawfully by a third party who did not
obtain the same (whether directly or indirectly) from the disclosing party;
(c) was in the public domain at the time of receipt by the recipient party or
has subsequently entered into the public domain other than by reason of the
breach of the provisions of this clause 15 or any obligation of confidence owed
by the recipient party or by any Sub-Licensee to the disclosing party.
15.4 Nothing in this Agreement shall prevent or restrict the supply by either
party (the "first party") (after prior notice to the other) of Licensed
Products or information relating to them to any official body or department
where so required.
16 TERM
16.1 This Agreement shall commence on the date hereof and (subject to prior
termination as herein provided) shall continue until terminated by either party
giving to the other not less than 12 month's notice expiring on the anniversary
or any subsequent anniversary of the effective date or at any time thereafter.
17 TERMINATION
17.1 This Agreement may be terminated forthwith by either party ("the first
party") by written notice to the other in the event of one or more of the
following:
(a) if the other goes into liquidation (other than voluntary liquidation for
the purpose of a bona fide reconstruction or amalgamation the terms of which
have been approved in advance by the first party in writing) or is dissolved or
struck off;
(b) if the other disposes of all or substantially all of its business or assets
to any person other than with the prior written approval of the first party;
(c) if the other is unable to pay its debts as they mature or suffers the
appointment of a receiver, administrative receiver or administrator (or any
similar official or process under the law of its domicile or place of
incorporation) of the whole or any part of its assets or is the subject of any
bankruptcy proceedings;
(d) if the other is in breach of any of the provisions of this Agreement and
fails to remedy such breach (where it is capable of being remedied) within 30
days notice from the first party specifying such breach;
(e) if the other is delayed in the performance of any of its obligations
hereunder by reason of Force Majeure for a continuous period exceeding 90 days
or for periods exceeding 90 days when aggregated in any period of 180 days.
17.2 Termination of this Agreement shall be without prejudice to any rights of
either party which may have accrued up to the date of such termination and the
rights to terminate this Agreement are not intended to be exclusive but shall
be in addition to every other remedy or right now or hereafter existing
including the right to recover damages and to a decree requiring any
appropriate performance required by this Agreement.
17.3 Subject to clause 18.1, in the event of termination of this Agreement for
whatever cause neither the Licensee nor any liquidator administrator,
administrative receiver or similar official thereof shall have any right
whatsoever to use, assign, license or otherwise deal in the Technology, the
Licensor's Improvements or any of the rights granted to the Licensee by this
Agreement.
18 CONSEQUENCES OF TERMINATION
18.1 Upon termination of this Agreement for whatsoever cause (other than
termination by the Licensor or the Licensee pursuant to clause 16 or by the
Licensor pursuant to clause 17.1) then subject to all the terms hereof the
Licensee shall have the right for a period of 3 months following such
termination to:
(a) advertise and sell Licensed Products already manufactured or in the course
of manufacture and remaining unsold at the time of the termination of this
Agreement; and
(b) complete binding contracts for the supply of Licensed Products then in
existence.
18.2 Upon termination of this Agreement for whatsoever cause:
(a) the Licensee shall return to the Licensor all the drawing and technical
documents supplied to it by the Licensor or by its Associates and all copies
thereof in its or any of the Licensee's Associates' possession power or
custody or in that of any Sub-Licensee;
(b) (other than termination by the Licensee pursuant to clause 17.1) the
Licensor shall have an irrevocable exclusive license to use the Licensee's
Improvements to manufacture and sell products throughout the world upon the
payment of such royalties as the parties may agree in writing. For such
purpose the parties shall negotiate with each other in good faith. If the
parties shall fail to reach agreement within 60 days of termination such
royalties shall be determined by such person as the parties may agree in
writing or (failing such agreement) at the request of either party by a person
nominated by the President for the time being of the Association of Chartered
Accountants. Such person shall act as an expert and his decision shall be
final and binding and his costs shall be borne by the parties equally.
19 ACTIONS FOR INFRINGEMENTS
19.1 Each party shall promptly notify the other of any suspected infringement
in the Territory of the Technology or the Licensor's Improvements by any third
party (an Infringer") which comes to its notice and shall consult with the
other about what to do to deal with such suspected infringement.
19.2 If the Licensor does not commence proceedings against an Infringer in the
Territory then the Licensee shall be entitled so to do at its own expense (and
if necessary in the Licensor's name subject to giving the Licensor such
indemnity as to costs as it may require).
19.3 The party which has the control of proceedings against an Infringer shall
bear all the costs thereof and shall be entitled to all damages and other
compensation recovered and at its request and cots, the other party shall
provide such assistance as it may reasonably require for the prosecution of the
action.
19.4 If the Licensee has the control of any proceedings against an Infringer,
it shall keep the Licensor regularly informed of the progress thereof in
writing and shall promptly provide the Licensor with such other information in
respect thereof as the Licensor may reasonably require from time to time.
20 LICENSEE NOT TO TAKE ACTION
20.1 Except as expressly permitted by clause 19, the Licensee shall not make
any demands or claims, bring suit, effect any settlements or compromise or take
any other action in respect of the Technology or any other proprietary or
intellectual property rights of the Licensor without the Licensor's prior
written consent.
21 NO ASSIGNMENT
21.1 Except as permitted by clause 12 the Licensee shall not assign, charge,
sub-contract, sub-license or otherwise dispose of any of its rights or
obligations under this Agreement.
21.2 The Licensor may assign, charge, Sub-Contract or otherwise dispose of any
of its rights or obligations under this Agreement.
22 NOTICES
22.1 All notices to be given under this Agreement shall be in writing in
California and left at or sent by first class registered or recorded delivery
air mail or fax to the appropriate address shown at the head of this Agreement
or left at or sent to such other address as the party concerned may from time
to time designate by notice pursuant hereto. Any such notice shall be deemed
given:
(a) at the time when the same is left at the addressee's address; or
(b) on the second customary working day in the addressee's country after the
same shall have been property posted; or
(c) in the case of a fax, on the first such working day after the day of
transmission by the fax operator provided that the transmitting fax machine
generates upon completion of the transmission a transmission report stating
that the notice has been duly transmitted without error to the addressee's fax
number.
23 WAIVER
23.1 The rights of either party arising out of any provision of this Agreement
or any breach thereof shall not be waived except in writing. Any waiver by
either party of any of its rights under this Agreement of any breach of this
Agreement shall not be construed as a waiver of any other rights or of any
other or further breach.
24 AMENDMENTS
24.1 This Agreement constitutes the entire agreement of the parties on the
subject matter hereof and may not be amended except by an agreement in writing
signed by both parties.
25 FORCE MAJEURE
25.1 Without prejudice to clauses 13.11 or 17.1(e), neither the Licensor nor
the Licensee shall incur any liability to the other in the event that it is
delayed in the performance of its obligations hereunder solely by Force Majeure
but the party so delayed shall nevertheless use its reasonable endeavors to
resume full performance as soon as possible.
26 SEVERABILITY
26.1 All provisions of this Agreement are severable and in the event of any of
them being held to be invalid by any competent court this Agreement shall be
interpreted as if such invalid provisions were not contained herein.
27 CANCELLATION OF PREVIOUS AGREEMENTS
27.1 This Agreement shall cancel and supersede all previous agreements and
arrangements (if any) between the Licensor and the Licensee or their respective
predecessors relating to the subject matter hereof which in so far as they or
some of them may still be of effect are hereby declared to have been superseded
by this Agreement without claim for compensation or otherwise by either party
but without prejudice to any rights or liabilities accrued before the date
hereof.
28 PROPER LAW
28.1 This Agreement shall be governed by and interpreted in accordance with
California law. Each of the parties hereby submits to the non-exclusive
jurisdiction of the Courts of the State of California.
29 HEADINGS
29.1 The headings in this Agreement are for reference only and do not limit or
affect the interpretation thereof.
IN WITNESS whereof this Agreement has been duly executed by the parties the day
and year first above written.
(Schedule 1
The Patents)
Schedule 2
Formal Patent License)
NTECH CORPORATION (the "Licensor") HEREBY GRANTS to CONSOLIDATED GROWERS &
PROCESSORS, INCORPORATED of PO Box 2228, Monterey, California , 93942 USA (the
"Licensee") in respect of the patent specified in the schedule hereto of which
the Licensor is Proprietor (the "Patent") license and authority as from the 1st
day of January, 1999 to manufacture, use and sell products embodying the
inventions within the claims of the Patent subject to the following terms:
1. Such License shall continue (unless sooner terminated by or pursuant to
agreement between the Licensor and the Licensee) for the Life of the Patent;
2. The Licensee shall notify the Licensor of any infringement of the Patent
which comes to its notice and render to the Licensor all such assistance as it
may reasonably require in relation thereto;
3. The Licensee shall notify the Licensor of all improvements relating to the
inventions within the scope of the Patent;
4. This License is made in California and the rights and liabilities of the
parties shall be determined according to the laws of California
5. This License shall not be assigned, mortgaged or charged nor shall sub-
licenses be granted hereunder without the Licensor's prior written consent.
IN WITNESS whereof this Agreement has been duly executed by the parties the day
and year first above written.
THE SCHEDULE
SIGNED by a duly authorized )Name: Thomas McCarthy
Signatory for and on behalf of )Signature: /s/ Thomas McCarthy
NTECH Corporation )Status: President
In the presence of: )Name: Mark Kaeller
WITNESS )Signature: /s/ Mark Kaeller
)Occupation: Finance
)Address: 5317 Mecca Ave.
Tarzana, CA. 91356
SIGNED by a duly authorized )Name: Susan Brana
Signatory for and on behalf of )Signature: /s/ SUSAN BRANA
CONSOLIDATED GROWERS )Status: Corporate Secretary
& PROCESSORS
In the presence of: )Name: Diane Marciel
WITNESS )Signature: /s/ Diane Marciel
)Occupation: Admin.
)Address: 1015 Gayley Ave. No. 387
Los Angeles, CA. 90024
RUTGERS, THE STATE UNIVERSITY OF NEW JERSEY
Office of Corporate Liaison and Technology Transfer
ALTERNATIVE CROPS RESEARCH AGREEMENT
This Alternative Crops Research Agreement ("Agreement") is entered into as of
May 15, 1999 by and between CGP, Inc., a corporation organized under the laws
of the State of California, having a business address at P.O. Box 2228,
Monterey, California 93942-2228 (hereafter "CGP") and RUTGERS, The State
University, a specially chartered New Jersey Educational Institution, having
its principal offices in New Brunswick, New Jersey 08903 (hereafter "RUTGERS").
WHEREAS, the program in the development of improved alternative crops,
particularly hemp (hereafter "Hemp") through biotechnological approaches
which are described in Exhibit 1 (hereafter "Research") to this
Agreement, is of mutual interest and benefit to RUTGERS and to CGP, will
further the instructional and research objectives of RUTGERS and the public
interest in a manner consistent with its status as a non-profit, tax-exempt,
public, educational institution, and will result in benefits for both CGP and
RUTGERS by advancing knowledge through discovery and by creating new Hemp
technologies through invention;
NOW, THEREFORE, the parties mutually agree as follows:
1. SCOPE OF WORK AND FUTURE COLLABORATIONS
CGP grants to RUTGERS and RUTGERS accepts support for the Research.
2. COMPENSATION
In consideration of RUTGERS' substantially conducting the Research, CGP will
pay RUTGERS $1,200,000 for Research during the time periods with ending dates
set forth in Article 3 hereof.
May 15, 1999 $350,000
May 15, 2000 $400,000
May 15, 2001 $450,000
CGP will pay RUTGERS one half of the amount due for the first year upon the
execution of this Agreement, and the remaining payments will be made
at three-month intervals in advance.
Checks should be made payable to Rutgers, The State University and should
identify CGP and the Principal Investigators and be sent to:
Rutgers, The State University
Division of Grant and Contract Accounting
65 Davidson Road
Piscataway, New Jersey 08854-5603
RUTGERS will not be obligated to expend funds in excess of those provided under
this Agreement to conduct the Research. Similarly, CGP shall not be required
to contribute funds in excess of this Agreement.
3. PERIOD OF PERFORMANCE
Research under this Agreement will be performed during the period May 15, 1999
through May 14, 2002.
4. PRINCIPAL INVESTIGATORS
Dr. Peter Day and Dr. Slavik Dushenkov will act together as Principal
Investigators under this Agreement. RUTGERS will appoint Dr. Slavik
Dushenkov, an employee of CGP, as a Visiting Research Professor at the
Biotechnology Center for Agriculture and the Environment, Cook College.
RUTGERS will conduct the Research under the oversight of Dr. Peter Day who will
also act as Faculty Mentor, advisor, and collaborator to Dr. Slavik Dushenkov
during his appointment. Dr. Slavik Dushenkov will act as CGP's Technical
Representative on the Research and will undertake to manage the Research.
1. During this Agreement, Dr. Slavik Dushenkov will remain an employee of
CGP, which shall be responsible for all compensation and employee benefits
before, during and after the term of this Agreement.
5. COMMUNICATION WITH CGP'S REPRESENTATIVES
During the period of this Agreement, CGP's Representatives may have reasonable
access personally or by telephone to discuss the Research informally with
RUTGERS' Principal Investigators. Access to work performed in RUTGERS
laboratories and at other RUTGERS' premises in the course of the Research will
be entirely under the control of RUTGERS personnel; CGP's representatives are
permitted to visit such laboratories and premises only during usual hours of
operation as is mutually agreeable.
6. TECHNICAL REPORTS
The Principal Investigators shall make up to four (4) oral reports each year if
requested by CGP and will provide written project reports twice each year.
Within sixty (60) days after the expiration of this Agreement, the Principal
Investigator shall submit a comprehensive final written report to CGP.
7. PUBLICITY
Neither party will use the name or trademarks of the other in any form of
advertising or promotion without the prior written approval of the other,
which consent shall not be unreasonably withheld. The parties may, however,
acknowledge CGP's support for, and the nature of, the investigations being
pursued under this Agreement. In any such statement, the relationship of the
parties will be accurately and appropriately described.
8. PUBLICATION
RUTGERS has the right to copyright and publish and otherwise publicly disclose,
and make technical presentations containing information and data it has gained
in the course of the Research. In order to permit CGP an opportunity to
determine if patentable inventions are disclosed, the Principal Investigators
will provide CGP with copies of articles written by project personnel reporting
on the Research prior to submission for publication. If CGP wishes to have
the article delayed so that a patent application may be filed on an invention
disclosed in such article, CGP shall so notify RUTGERS' Principal Investigator
in writing, and RUTGERS shall withhold publication for a reasonable time, not
to exceed ninety (90) days.
9. INTELLECTUAL PROPERTY
All rights in inventions, discoveries, biological material, and software
created during the term of this Agreement in the course of and within the scope
of the Research and associated intellectual property shall be the property of
RUTGERS, subject to the terms set forth in paragraphs 9(a) through 9(e).
RUTGERS shall promptly report any such inventions, discoveries, biological
material or software to CGP upon receipt by its Office of Corporate Liaison and
Technology Transfer of a completed written disclosure thereof from the
Principal Investigator. RUTGERS will assure that all such inventions,
discoveries, biological materials and software will be assigned to RUTGERS.
a) Patents and PVP Certificates
RUTGERS will promptly notify CGP once it has identified any inventions or
discoveries which it considers potentially valuable and patentable conceived
and reduced to practice during the term of this Agreement in the course of
and within the scope of the Research. If, within ninety (90) days of the
date such notice is given CGP directs that a patent or PVP application be
filed on such inventions or discoveries, RUTGERS agrees to cause patent or
PVP applications to be filed and prosecuted in its name at CGP's expense.
After filing, RUTGERS will promptly advise CGP and provide CGP a copy of any
such patent or PVP application. In consideration of the Research payments
made by CGP to RUTGERS and payment of expenses on patent or PVP applications,
from the date of such notice, CGP shall receive an exclusive option for a six
(6) month period to negotiate the terms of a license agreement and RUTGERS
agrees to negotiate these license terms in good faith. During this period
RUTGERS will not offer a commercial license to any other party. If the
parties do not execute a license agreement within this six (6) month period,
RUTGERS is free to offer a license to such inventions or discoveries to
others. In the event CGP does not agree, within ninety (90) days after
such notice, to support the filing of a patent or PVP application on such
invention or discovery, RUTGERS may file a patent or PVP application on such
invention or discovery at its own expense, and CGP shall have no further
rights in that invention or discovery, that patent or PVP application, or in
related unpatented technology.
b) Unpatented Technology
All rights in proprietary technology and materials (such as biological
materials) created during the term of this Agreement in the performance
of and within the scope of the Research for which RUTGERS does not seek
patent protection will also be owned by RUTGERS. After a written description
or sample of such technology or materials has been sent to CGP (promptly
after such technology or materials are developed), and subject to the
provisions of Article 9(a) above, CGP shall have six (6) months to negotiate
the terms of a license agreement and RUTGERS agrees to negotiate these
license terms in good faith. During this period RUTGERS will not offer a
commercial license to any other party.
c) Software
Copyright and all other rights in any software created during the term of
this Agreement in the course of and within the scope of the Research shall
be owned by RUTGERS. After a description or copy of such software have been
sent to CGP (promptly after such software has been developed), subject to the
provisions of Article 9(a) above, CGP shall have six (6) months to negotiate
the terms of a license agreement and RUTGERS agrees to negotiate these
license terms in good faith. During this period RUTGERS will not offer a
commercial license to any other party.
d) License Terms
Subject to the provisions of Article 9(a), 9(b) and 9(c), RUTGERS agrees to
grant to CGP an exclusive worldwide license, with a right of sublicense, for
all and any patent or PVP applications to be filed and prosecuted in its
name at CGP's expense under provision 9(a).
Any licenses granted to CGP are subject to RUTGERS policies and RUTGERS'
agreements with other sponsors and will provide (i) for CGP (and its sub-
licensees, if any) to diligently exert its best efforts to introduce
products utilizing the licensed technology into public use as rapidly as
practicable on terms acceptable to both RUTGERS and CGP; (ii) for a royalty
and other consideration that is usual and customary in the trade; (iii) for
termination in the event CGP has not introduced licensed products into
public use within a time period commensurate with industry standards that is
acceptable to RUTGERS; (iv) for indemnity and insurance terms acceptable to
RUTGERS' insurance carrier; (v) for RUTGERS to retain a non-exclusive
license, with the right to grant sub-licenses, for publication, research to
academic and nonprofit agencies, and internal use purposes only; (vi) that
the rights of the United States of America as set forth under Public Laws
96-517 and 98-620 are specifically reserved. (These rights include,
without limitation, a royalty free license to the U.S. Government of results
of research which it sponsors).
e) Confidential Information
All information given by CGP to RUTGERS or RUTGERS to CGP under this
Agreement shall be used only for the purposes given and shall be held in
confidence by the receiving party so long as such information (i) remains
unpublished by the giving party or does not otherwise comes into the public
domain, (ii) is not lawfully received by the receiving party from a third
party, or (iii) is independently developed by the receiving party without
the benefit of such information.
10. COLLABORATION
It is understood that the RUTGERS investigators will be free to discuss the
Research with other investigators at academic institutions and nonprofit
agencies and to collaborate with them. Notwithstanding RUTGERS' commitments
in Section 9 of this Agreement, in the event any inventions, discoveries,
biological material, or software result from such collaboration, RUTGERS will
grant to CGP the rights outlined above to the extent these are not in conflict
with obligations to another party as a result of the involvement of the other
investigator(s). In this latter case, RUTGERS shall exert its good faith
efforts to enable CGP to obtain rights from the other investigator similar to
those set forth in section 9 hereof.
11. INDEPENDENT CONTRACTOR
For the purposes of this Agreement and all services to be provided hereunder,
each party is, and will be deemed to be, an independent contractor and not an
agent or employee of the other party. Neither party shall have authority to
make any statements, representations or commitments of any kind, or to take any
action, which is binding on the other party, except as may be explicitly
provided for herein or authorized by the other party in writing.
12. WARRANTIES
RUTGERS MAKES NO WARRANTIES, EXPRESSED OR IMPLIED, AS TO ANY MATTER WHATSOEVER,
INCLUDING, WITHOUT LIMITATION, THE CONDITION, ORIGINALITY, OR ACCURACY OF THE
RESEARCH OR ANY INVENTION(S) OR PRODUCT(S), WHETHER TANGIBLE OR INTANGIBLE,
CONCEIVED, DISCOVERED, OR DEVELOPED UNDER THIS AGREEMENT; OR THE OWNERSHIP,
MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE OF THE RESEARCH OR ANY
SUCH INVENTION OR PRODUCT. RUTGERS WILL NOT BE LIABLE FOR ANY DIRECT,
CONSEQUENTIAL, OR OTHER DAMAGES SUFFERED BY CGP, ANY LICENSEE, OR ANY OTHERS
RESULTING FROM THE USE OF THE RESEARCH OR ANY SUCH INVENTION OR PRODUCT.
RUTGERS MAKES NO REPRESENTATION OR WARRANTY REGARDING ACTUAL OR POTENTIAL
INFRINGEMENT OF PATENTS, COPYRIGHTS OR OTHER INTELLECTUAL PROPERTY OF THIRD
PARTIES, AND CGP ACKNOWLEDGES THAT THE AVOIDANCE OF SUCH INFRINGEMENT IN THE
DESIGN, USE AND SALE OF PRODUCTS AND PROCESSES RELATED TO THIS RESEARCH WILL
REMAIN THE RESPONSIBILITY OF CGP.
13. INDEMNIFICATION
CGP hereby agrees to indemnify, defend, and hold harmless RUTGERS and its
present and former officers, directors, governing board members, employees,
agents, and students from any claim, loss, cost, expense, or liability of any
kind including reasonable attorney's fees and expenses arising out of or
connected with only this Agreement or the Research, except to the extent such
claim is due to the sole negligence or willful misconduct of RUTGERS.
Without limiting the foregoing, CGP agrees to hold harmless, indemnify and
defend RUTGERS from all liabilities, demands, damages, expenses and losses
(including reasonable attorney fees and expenses of litigation) arising out of
the use by CGP, or by any party acting on behalf of or under authorization from
CGP, of RUTGERS technical developments or out of any use, sale or other
disposition by CGP, or by any party acting on behalf of or under authorization
from CGP, of products made or developed as a result of information or materials
received from RUTGERS. The provisions of this paragraph shall survive
termination of this Agreement.
RUTGERS agrees to indemnify and hold harmless CGP, its employees and agents
against any liability, damages, loss or expenses (including reasonable
attorney fees and expenses of litigation) for damage to RUTGERS property or
bodily injury, death or property damage to employees of RUTGERS or to any
third party, acting on behalf of or under authorization from RUTGERS, arising
out of the performance of this Agreement at RUTGERS, except for the negligent
acts of CGP, its employees and agents.
14. GOVERNING LAW
The validity and interpretation of this Agreement and the legal relations of
the parties to it will be governed by the laws of the State of New Jersey
applicable to the agreements entered into, and to be fully performed in, the
State of New Jersey, without regard to its conflicts of laws provisions.
15. ASSIGNMENT
This Agreement is not assignable by either party without the prior written
consent of the other party. Any and all assignments not made in accordance
with this section are void.
16. TERM AND TERMINATION
This Agreement will expire on the date specified in Article 3, Period of
Performance, unless extended or sooner terminated in accordance with the
provisions of this section.
Either party may terminate this Agreement upon any anniversary date by giving
the other party one year prior written notice of its election to terminate.
In addition, RUTGERS may terminate this Agreement immediately if
circumstances beyond its control preclude continuation of the Research, and in
the event RUTGERS terminates this Agreement under this provision, RUTGERS shall
refund to CGP any research funds provided by CGP under this Agreement which
remain in excess of expenses and commitments incurred or committed to as of the
date of termination.
In the event RUTGERS' Principal Investigators are unavailable or unable to
continue direction of the Research for a period in excess of ninety (90) days,
RUTGERS shall notify CGP and may nominate a replacement; if RUTGERS does not
nominate a replacement or if that replacement is unsatisfactory to CGP, CGP may
terminate this Agreement upon thirty (30) days written notice and such right to
terminate shall be CGP's sole remedy at law or in equity, except that RUTGERS
shall refund to CGP any research funds provided by CGP under this Agreement
which remain in excess of expenses and commitments incurred or committed to as
of the date of termination.
If CGP fails to meet any of its obligations under this Agreement and fails to
remedy any such failure within sixty (60) days after receipt of written notice
thereof, RUTGERS shall have the option of terminating this Agreement upon
written notice thereof, and may terminate any licenses or options granted to
CGP. In the event RUTGERS fails to meet its obligations under this Agreement
and fails to remedy any such failure within sixty (60) days after receipt of
written notice thereof, CGP will have the option of terminating this Agreement
upon written notice thereof, and such right to terminate shall be CGP's sole
remedy at law or in equity, except that RUTGERS shall refund to CGP any
research funds provided by CGP under this Agreement which remain in excess of
expenses and commitments incurred or committed to as of the date of
termination.
Upon termination of this Agreement, CGP shall reimburse RUTGERS for all
reasonable expenses and uncancellable commitments incurred or committed as of
the date of termination and not paid for by CGP previously, provided that the
cumulative reimbursement responsibility of the CGP may not exceed the total
amount committed under this Agreement.
Termination or expiration of this Agreement, for reasons other than an
unremedied failure to meet the material obligations under this Agreement, will
not affect the rights and obligations of the parties accrued prior to
termination.
17. NO ORAL MODIFICATION
No change, modification, extension, termination, or waiver of this Agreement,
or any of the provisions herein contained, shall be valid unless made in
writing and signed by duly authorized representatives of the parties hereto.
18. TITLE TO EQUIPMENT
RUTGERS shall retain title to all equipment purchased and/or fabricated by it
with funds provided by CGP under this Agreement.
19. NOTICES
Any notice or report required or permitted to be given under this Agreement
shall be deemed to have been sufficiently given for all purposes if sent by
first class certified or registered mail to the following addresses of either
party:
Office of Corporate Liaison and Technology Transfer
Rutgers, The State University
ASB Annex II
58 Bevier Road
Piscataway, New Jersey 08854-8010
ATTN: Director
CGP, Inc.
P.O. Box 2228
Monterey, California 93942-2228
or to such other address as is hereafter furnished by written notice to the
other party.
20. PARAGRAPH HEADINGS
The section headings are provided for convenience and are not to be used in
construing this Agreement.
21. SURVIVORSHIP
The provisions of Sections 7, 9, 12, 13, 14, and 18 survive any expiration of
termination of this Agreement.
22. INSURANCE
Throughout the term of this Agreement, each party shall maintain, at its own
cost and expense, commercial insurance or a program of self-insurance with
funded reserves, covering worker's compensation benefits in accordance with the
law of the state of hire, employer's liability, automobile liability and
comprehensive or commercial general liability insurance to include its research
activities.
23. EXCUSABLE DELAYS
RUTGERS or CGP will be excused from performance of the Research if a delay is
caused by inclement weather, fire, flood, strike or other labor dispute, acts
of God, acts of governmental officials or agencies, or any other cause beyond
the control of RUTGERS or CGP. The excusable delay is allowed for the period
of time affected by the delay. If a delay occurs, the parties will revise the
performance period or other provisions, as appropriate.
24. ENTIRE AGREEMENT
This instrument contains the entire Agreement between the parties hereto. No
verbal agreement, conversation or representation between any officers, agents,
or employees of the parties hereto before or after the execution of this
Agreement or contemporaneous therewith, shall affect or modify any of the terms
or obligations herein contained.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives.
SIGNED ON BEHALF OF CGP, INC.
/s/ SUSAN BRANA
Susan Brana
Date 5/23/99
SIGNED ON BEHALF OF THE BIOTECHNOLOGY CENTER FOR
AGRICULTURE AND THE ENVIRONMENT
/s/ PETER R DAY
Peter R. Day, Ph.D.
Director
Date 5/12/99
SIGNED ON BEHALF OF RUTGERS, THE STATE UNIVERSITY OF NEW JERSEY
/s/ WILLIAM T ADAMS
William T. Adams
Director, OCLTT
Date 6/1/99
EXCLUSIVE AGENCY LICENSING AGREEMENT
Whereas The Ukrainian Academy of Agricultural Sciences / Institute of Bast
Crops aka Hemp Institute, collectively hereinafter referred to as "Institute"
is desirous of entering into a business relationship with Consolidated
Growers and Processors, Inc. hereinafter referred to as "CGP" wherein
Institute will be the Licensing Principal for the development and
distribution of industrial hemp seed and CGP is desirous of entering into a
business relationship with Institute wherein CGP will be the Licensing Agent
for the distribution of industrial hemp seed, the following Agreement
represents the formalization of these desires and understandings. This
Agreement shall by binding upon the Parties hereto when duly executed by the
Parties hereto.
1. The effective date of this Agreement shall be September 30, 1997. This
Agreement is made pursuant to that certain Memorandum of Understanding
between Institute and CGP dated August 24, 1997. Upon execution, this
Agreement will replace, supercede and nullify said Memorandum of
Understanding.
2. The term of this Agreement shall commence on October 1, 1997 and continue
until canceled by either Party hereto upon providing three (3) years notice
to the other Party, via the notice provisions contained herein.
3. The purpose of this Agreement shall be for Institute to exclusively
license to CGP certain Industrial Hemp registered seed varieties to which
Institute was the breeder and holds exclusive development rights. These
specific seed varieties are as identified within this Agreement. Institute
represents that it has not entered into similar arrangements with any other
entities relative to the exclusive license territories identified herein.
Institute represents that it has developed, holds breeders rights and has
full control of a industrial hemp seed bank which contains approximately 400
registered varieties of seeds. Under this Agreement, Institute will provide
professional seed production services for CGP on an exclusive basis for the
varieties of seed identified in Paragraph 4 of this Agreement in the
following geographic territories:
North America;
Central America;
South America;
Africa;
New Zealand and
Asia (excluding the countries of the former Soviet Union)
Institute shall manage and oversee any and all activities, whether by
Institute or its other Licensees or their Sub Licensees, in any and all
geographical areas in which CGP does not have an exclusive license, such that
any such activities do not interfere with activities of CGP in its areas of
exclusive license. Institute shall be responsible to CGP for any and all
damages to CGP resulting from Institutes' lack to so manage or oversee.
Determinations regarding shipment of product to exclusive territories of CGP
shall be defined as the ultimate location at which a product is utilized.
4. The varieties of seed covered by and under this Agreement consist of the
following:
Glukhovskaja 33;
Zolotonoshskaja odnodomnaja 11 (Zol. USO-11);
Zolotonoshskaja 13;
Zolotonoshskaja 15;
USO 14;
USO 16 and
USO 31
Varieties shall be defined as germ plasm presently developed and germ plasm
to be developed by Institute.
Institute represents and certifies that these varieties have been tested and
are suitable for planting on a commercial scale. Institute also represents
that it will assist CGP in identifying farmers who are interested in planting
and growing these seed varieties and is not aware of any superior product
developed by either Institute or third parties which would render these seed
varieties commercially, functionally or economically obsolete or non-
competitive.
5. Institute hereby authorizes CGP to further license or sub-license any and
all seed varieties licensed to CGP under this Agreement to third party sub-
licensees. All costs of such sub-licensing arrangements, including the cost
of pre-trials, registration trials and any related license or sub-license
fees, shall be born by CGP, except those administrative costs of Institute.
In the event that CGP does issue sub-licenses, Institute will not be
responsible for dealing directly with any such CGP sub-licensees. CGP hereby
agrees to bind its sub-licensees to all applicable provisions of this
Agreement. CGP further shall limit Institute supplied confidential data
available to sub-licensees to that which is required for the successful
performance of respective Sub-licensee. Sub-licenses may be awarded by CGP
in the country of seed development.
6. Institute hereby grants and conveys to CGP the plant breeder rights
(Plant Variety Protection) for the varieties stated in Paragraph 4 above in
the geographical areas indicated in Paragraph 3 above. Institute agrees to
fully cooperate in, and pay any and all costs pertaining to, the acquisition
and maintenance of said breeder rights in each political subdivision within
the geographical areas so indicated from any third party which may hold or
claim to hold any such rights, or attempt to challenge the holding of such
rights by CGP. Institute shall fully indemnify CGP, including any and all
legal fees or other costs, in perfecting or maintaining said breeder rights
conveyed under this Agreement.
7. Institute shall, at its sole cost and expense, make available to CGP
Breeder Seed on the terms contained in Paragraph 8 below, and will cooperate
with CGP for the seed production and "Maintenance of the Variety" in the
sequence as follows:
1) Breeder Seed;
2) Select Seed;
3) Foundation Seed;
4) Registered Seed and
5) Certified Seed
All production seed sold to CGP or CGP customers shall be pedigree seed.
Institute and CGP both agree to sell only pedigree seed and will work with
users of the seed to preserve the pedigree. CGP shall market Certified Seed
only.
8. Institute hereby agrees to sell to CGP and CGP agrees to purchase from
Institute, seed for testing. Such quantities shall be as determined by CGP.
The purchase price to CGP for any such seed for testing shall be One Thousand
Five Hundred United States Dollars (US$1,500.00) per metric ton, delivered
FOB a reasonable port nearest the seed point of origin which regularly
handles containerized cargo. Payment of the price per ton shall be made in
advance at the time the order for seed for testing is placed.
Institute agrees not to sell seeds to any other entity at a price less than
the price charged to CGP, except for sales of seed sold for testing purposes
to the countries of the former Soviet Union.
CGP shall not pay a royalty to Institute of seed that CGP purchases for
testing purposes.
CGP shall endeavor to place orders for testing seed with Institute by January
2 of the year in which respective is required. Institute shall be under no
obligation to produce or deliver testing seed for orders placed by CGP
subsequent to January 2 in which delivery is contemplated.
9. The breeding program is to be performed with breeding material from
Institute. Institute warrants that it has the full and unencumbered right to
use of the selected breeding material and that CGP will not be liable for any
royalties to any other entities pertaining to this breeding material.
10. Institute and CGP hereby agree that Institute will offer CGP the first
right of refusal to exclusively license any and all new varieties of
industrial hemp seed developed by Institute which have a lineage stemming
from one or more of the varieties exclusively licensed under this Agreement,
on the same terms, criteria and conditions provided in this Agreement.
Institute and CGP shall endeavor to jointly register the new varieties with
any and all jurisdictions and in any and all locations provided for in this
Agreement as CGP may designate.
Institute and CGP agree to jointly submit an application for registration of
the new varieties as soon as the varieties are sufficiently developed and
tested to allow a registration application to be submitted. It is
anticipated that this process will lead to the ability to market Certified
Seed of the newly developed varieties.
11. Institute agrees to supply seeds, for both testing and sales purposes to
CGP on a timely basis. Institute further represents that it has a sufficient
quality control program in place to ensure that all seed products shipped by
Institute shall be of good and consistent quality. The quality of all seeds
supplied by Institute shall be consistent with applicable EU standards,
unless a case by case deviation is required and approved by CGP for specific
shipments of seed destined to specific geographic areas. Institute shall
indemnify CGP for any costs or losses resulting from Institute providing
products of an inferior or inconsistent quality.
12. In the event that either Institute desires to sell or otherwise dispose
of their right to royalties and / or license fees for varieties which are
licensed to CGP under this Agreement, the Institute shall offer the right of
first refusal to acquire said rights to CGP.
13. Institute shall keep CGP advised on a periodic basis of planned and
actual work activities and accomplishments toward the maintenance of the seed
varieties covered under this Agreement and the development of new varieties
on which CGP would have the first right of refusal to license as provided for
in this Agreement. CGP shall at all standard business times have full rights
to review and copy all relevant material regarding the breeding maintenance
program as it pertains to varieties for which CGP has any exclusive license.
Representatives of CGP shall additionally have the right to visit the
Institute facilities and any other locations used for breeding processes
under this Agreement. CGP will endeavor inform Institute of anticipated
visits one week in advance.
14. Royalties shall be paid to Institute for all Registered or Certified
seed sold by CGP. The amount of such royalty shall be five percent (5.0%) of
the sales amount for bare seed sold by CGP. In the event that CGP treats or
otherwise modifies the seed prior to sale, the royalty payable to Institute
shall be calculated based solely on the value of the bare seed prior to the
treatment or modification. Additionally, the cost of any packaging,
insurance, taxes, duties, transportation or other non-production expenses
shall be excluded from the amount on which the royalty is calculated.
15. An accounting of royalties and any other amounts due to Institute by CGP
shall be made, in arrears, on an annual basis as of December 31 of each year.
The results of this accounting shall be submitted by CGP to Institute by
February 15 of the following year. Payment to Institute shall be remitted by
CGP prior to February 15 of the year following the year to which payment
pertains. Payment to Institute shall be made without setoff, except as
provided for or mandated by law. At their expense, Institute shall have a
reasonable opportunity to review the basis of the annual accounting in the
offices of CGP. Any dispute regarding the amount due to Institute shall be
settled by an accountant of CGP and an accountant of Institute mutually
agreeing upon and selecting an impartial third accountant to make a
determination of fact as to the amount due by CGP to Institute. The cost of
any such third accountant shall be evenly shared and paid for by CGP and
Institute.
CGP shall be fully responsible for obtaining any required authorizations or
permissions that may be required to export funds from a country from which
all or a portion of a payment to Institute may originate.
All taxes and other amounts which are due to a country into which products
are imported shall be collected by CGP and remitted to said country by CGP.
Institute will be responsible for the payment of any taxes which are lawfully
due and payable by Institute resulting from generation and / or earning of
its royalties in any specific country.
Payments shall be remitted by CGP as follows:
Account Number 070805
"Ukraina"
Glukhiv, Sumskoi District
MFO
337074
EKPO 00497845
16. In consideration of the royalties, payable to Institute by CGP,
Institute shall provide all required technical advice, knowledge and know-how
requested by CGP, or Sub-licensees of CGP, at no additional cost to CGP.
Such technical advice, knowledge and know-how may take many forms including
printed literature, video tapes and other media, in addition to
presentations, demonstrations and responding to specific questions from CGP.
In the event that an answer to a question is not immediately available or
Institute later determines that information supplied by Institute was not
fully correct, Institute shall respond with correct information on a priority
basis. In the event that in the opinion of CGP, such technical advice,
knowledge or know-how is best provided outside of the Institute offices, CGP
will pay all reasonable costs of technical equipment or material
transportation and personnel travel, lodging and per diem for Institute
experts while providing technical advice, knowledge or know-how to CGP away
from the Institute offices. Under these same terms, CGP may request and
Institute shall provide technical specialists or representatives to assist
CGP in marketing efforts. The quantity of Institute personnel, including,
when practical, the specific individuals, which participate in any technical
or marketing presentation shall be as mutually agreed between CGP and
Institute.
Institute may it its cost and expense, visit CGP facilities for the purposes
of gathering technical information or feedback or to evaluate CGP quality
control procedures. The frequency of any such visits shall be at the
discretion of Institute but shall not be so unreasonable frequent as to
impact CGP productivity. Institute shall also have the right, at its cost
and expense, to observe planted product in an effort to establish and maintain
Seed Production and Maintenance of Variety.
17. The scope of this Agreement provides for the development of new seed
vanities by Institute if mutually agreed by the Parties hereto. In the event
that new seed varieties are to be developed under this Agreement, the
specifics shall be identified in a document identified as Attachment "A". All
terms and conditions of this Agreement shall control any Exhibit "A"
attachments hereto. A blank Exhibit "A" format is attached hereto as Exhibit
"A".
18. Institute hereby guarantees all licensed product to CGP, sub-licensees
and ultimate user of product. If any product supplied by Institute is found
to be defective, Institute shall 1) replace produce, 2) pay all
transportation, shipping, insurance, taxes and duties on replacement product
to point of utilization by ultimate user, 3) pay the cost of removal of
defective product, 4) pay the cost or replanting if defective product was
planted prior to discovery of its' defects and 5) indemnify CGP for any
losses or legal fees. Institute also guarantees the accuracy, thoroughness
and quality of documentation supplied by Institute to CGP.
19. Institute hereby agrees to provide and supply any and all documentation,
certificates or certifications, at its sole cost and expense, required to
prove title to any product delivered under this Agreement and any other
documentation which may be required by any customs or other governmental
agency of a country to which product is ultimately being shipped. Institute
shall advise CGP regarding any illegality of shipping a product to or through
a country or territory during transportation to its stated ultimate point of
utilization or any illegality of introducing a product to the stated ultimate
point of utilization.
20. Institute hereby agrees to provide and supply all documentation,
certificates or certifications, at its sole cost and expense, as may be
required by any customs, agricultural or other jurisdictional authority
relative to the importation or utilization of licensed seed in any geographic
area for which its importation is provided for under this Agreement. Such
documents include, but are not limited to OECD tags.
21. CGP shall actively endeavor to create, develop and expand a market for
the commercial varieties which are exclusively licensed under this Agreement.
For those products, CGP will handle all customer inquires, coordinate
distribution activities and provide customer service functions in a
professional manner for the exclusive geographic areas. Institute shall
refer all potential marketing or sales leads for product to CGP from
potential customers or purchasers for shipment to the exclusive territories
of CGP. CGP shall not be required to maintain an active sales, marketing or
other organization or presence in any particular geographic area. If
warranted by the demand in any of the geographic areas covered by this
Agreement, CGP will be responsible for initiating, handling and financing
experimental tests and seed registration. CGP will report to Institute on a
regular basis on all current inquires and report on the status of previous
inquires on a monthly basis.
22. CGP shall forfeit its rights to the exclusive agency license provided
under this Agreement in the event that for a period of two (2) years CGP
fails to pay for seeds ordered for testing purposes or fails to place orders
with Institute for seed destined for production utilization by third parties.
23. Except as provided for in Paragraph 2 above, this agreement may be
terminated by either Institute or CGP only for cause, upon providing thirty
five (35) calendar days notice of default to the other party. The other
Party shall have thirty (30) calendar days to cure such default or advise the
Party claiming default that it is not in default. In the event that the
alleged default is not cured at the end of the thirty (30) calendar day
period, the Party claiming default shall advise the Party alleged to be in
default that the time to cure the default has expired and the Agreement shall
be terminated on the thirty fifth (35th ) day from the date of the original
notice.
24. Each Party hereto shall designate an authorized representative to
administer this Agreement on their behalf. This designated individual may be
changed from time to time upon advising the other Party in accordance with
the provisions of this Agreement.
The initial authorized representatives shall be as follows:
CGP Dr. Gero Leson, President
Institute Dr. Pavel A. Golobrod'ko, P. A., Director
For purposes of this Agreement, Institute of Bast Crops, through its
authorized representative, is fully authorized to act on behalf of Ukrainian
Academy of Agricultural Sciences.
25. Institute hereby agrees, that for a period of six (6) months following
termination of this Agreement, not to contact any Clients or potential
Clients of CGP.
26. Nothing contained within this Agreement shall be construed as
authorizing or giving either Party the authority to sign contracts,
agreements or purchase orders, or similar documents, or to obtain financing
or to acquire or dispose of assets, on behalf of the other Party.
27. Institute hereby grants CGP the right of first refusal to purchase any
seed for any purpose within its exclusive geographic territory. This right
shall include, but not be limited to, the right to purchase seed for pressing
for food oil and seed cake for food products. CGP and Institute shall
attempt to explore the possibility of working jointly toward the production
and processing of seeds for industrial applications and food.
28. Institute and CGP understand that in the performance of this Agreement,
they may have access to certain proprietary, trade secret or confidential
information, including but not limited to Seed Breeder data, agreements and
future plans of the other Party hereto, which is the property of the other
Party. Both Institute and CGP hereby agree not to divulge or disclose, or
assist in divulging or disclosing, any such proprietary, trade secret or
confidential information to any third party, or to utilize any such
information, without the prior written permission of the other Party. This
provision of this Agreement shall continue in full force and effect and
extend for a period of five (5) years after termination of this Agreement.
Both Parties further agree not to entice, or to assist in enticing, any
employee, consultant, Client, investor, vendor, supplier or joint venture
partner to leave or modify its relationship with the other Party during the
term of this Agreement and for a period of five (5) years thereafter, without
the prior written permission and authorization of the other Party.
29. Institute hereby warrants that it has and holds all required
authorizations, licenses and permits to conduct the business contemplated in
this Agreement. Institute further warrants that it is experienced in
conducting similar types of business. Institute additionally warrants that
it has the legal standing and capacity to enter into this binding Agreement
and that execution or fulfillment of this Agreement will not conflict with or
violate any other to which Institute is a Party.
30. CGP shall have the right to develop marketing, advertising and related
content, formats and campaigns, which may include the use of any trademarks
or other proprietary property of Institute. Such efforts shall be at the sole
expense of CGP and shall not be subject to review or approval by Institute.
31. The parties hereto shall be released from the performance of their
responsibilities in a timely manner and fulfilling the conditions of this
Agreement in case of force majeure, which could not be foreseen at the time
of signing this Agreement. Examples of force majeure include, but are not
limited to, decisions of governmental authorities which make the fulfillment
of an obligation either impossible or illegal, military actions, acts of God,
extremely abnormal climatic conditions, strikes, transportation calamities
and natural disasters.
32. Institute warrants and guarantees that it has the legal capacity to
negotiate and execute this Agreement to appoint CGP as their exclusive agent
as defined in this Agreement and that Institute is the true and legal owner
of the varieties which are the subject matter hereof.
33. Time is of the essence for this Agreement.
34. Any claims or controversy arising out of or relating to this Agreement,
or the breach thereof, shall be settled by arbitration and judgement upon the
award may be entered in any court having jurisdiction. Prior to either Party
submitting a dispute to Arbitration, both Parties shall attempt to resolve
such dispute by non-binding mediation.
35. This Agreement may not be assigned by either Party hereto without the
written authorization of the other Party hereto.
36. This Agreement contains the entire agreement and understanding between
Institute and CGP pertaining to the subject matter hereof.
37. Any notices required to be given under this Agreement shall be mailed by
certified or registered mail, postage prepaid, via the national postal system
in the country of origin or sent by Federal Express. Any such notices shall
be deemed to have been received upon receipt. The addresses for such notices
shall be as follows. Either of these addresses may be changed by notifying
the other Party in accordance with the provisions of this Agreement.
CGP Institute
Consolidated Growers Institute of Bast Crops
and Processors 45 Lenina Street
P. O. Box 2228 245130 Glukhiv
Monterey, CA Sumy Region
93942 Ukraine
USA
38. The failure of any Party hereto to insist upon the performance of any
term or provision contained herein or to enforce any right provided
hereunder, in any one or more instances, shall not be construed as a waiver
or relinquishment of the right to require the future performance of any such
item, term, right or provision.
39. The invalidity or unenforceability of any particular provision of this
Agreement shall not affect or impair the other provisions hereof and this
Agreement shall be construed in all respects as if such invalid or
unenforceable provision were omitted, except in cases where such
unenforceable provision is a basic prerequisite for either Party or both
Parties hereto to perform under this Agreement. In such cases, the Parties
shall negotiate in good faith to agree upon a new enforceable provision as a
substitute for the provision found enforceable.
40. Any modification to this Agreement must be in writing, signed by the
Parties hereto.
41. The use or reference to the singular and the masculine genders shall be
read and construed as plural or the feminine or neuter genders wherever this
Agreement so requires.
42. This Agreement may be executed in one or more counterparts, by facsimile
transition or otherwise, each of which copies, when executed, shall be deemed
an original, and it shall not be necessary to produce or account for more
than one such counterpart to prove this Agreement.
43. This Agreement shall be governed by the laws of the State of California,
United States of America and any dispute shall be arbitrated as identified in
Paragraph 34 above under the laws of Switzerland pursuant to the regulations
of the FIS International Seed Organization.
44. Each of the Parties hereto shall execute or cause to be executed, all
such further documents as may be necessary or reasonably required to carry
out the intent and purpose of this Agreement.
45. In witness hereof, Institute and CGP have executed this Agreement on the
dates indicated below:
/s/ GERO LESON
Date 2/14/98
Consolidated Growers and Converters, Inc., a Delaware Corporation
By Gero Leson, President
/s/ PAVEL A. GOLOBORODKO
Date 1/14/98
Institute of Bast Crops
By Pavel A. Golobrod'ko
Validated, Endorsed, Cosigned, Concurred and Guaranteed By:
/s/ VICTOR SITNIK
Date 1/14/98
The Ukrainian Academy of Agricultural Sciences
By Victor Sitnik
EXHIBIT A
AMENDMENT TO AGREEMENT FOR DEVELOPMENT OF NEW SEED VARIETIES
Item #3 in the Exclusive Agency Licensing Agreement dated effectively September
30, 1997 shall
Include AUSTRALIA in the "geographic territories" that CONSOLIDATED GROWERS &
PROCESSORS INCORPORATED shall represent THE UKRAINIAN ACADEMY OF AGRICULTURAL
SCIENCES / INSTITUTE OF BAST CROPS.
All other terms and conditions outlined in the Exclusive Agency Licensing
Agreement shall remain the same. A copy of this Exclusive Agency Licensing
Agreement is attached hereto and made a part hereof as "Exhibit A."
/s/ SUSAN M. BRANA
Date 11/5/98
Susan M. Brana, Chairman and Corporate Secretary
CONSOLIDATED GROWERS & PROCESSORS, INCORPORATED
/s/ PAVEL A. GOLOBORODKO
Date 11/16/98
Pavel A. Goloborodko
Institute of Bast Crops
/s/ VICTOR SITNIK
Date 11/16/98
Victor Sitnik
The Ukrainian Academy of Agricultural Sciences
EXCLUSIVE and CONFIDENTIAL RESEARCH AGREEMENT
METABOLIC PROFILING AND DEVELOPMENT OF NOVEL NUTRACEUTICALS AND
PHARMACEUTICALS FROM HEMP SEED / GRAIN PRODUCTS AND THE HEMP PLANT
This Agreement is entered into as of April 1, 1999 by and between Consolidated
Growers and Processors Inc. (hereinafter "CGP" or "the Company"), a corporation
organized under the laws of the state of Delaware, having a business office in
Monterey, California, and Photosynthetic Harvest Inc., (hereinafter "PHI"), a
corporation organized under the laws of the state of Delaware and having a
business office in Willingboro, New Jersey.
Whereas, CGP desires TO IDENTIFY, CHARACTERIZE AND DOCUMENT-PATENT, ETC.-ALL OF
THE BENEFICIAL PROPERTIES OF HEMP SEED OR GRAIN PRODUCTS, i.e. OIL, NUT AND
CAKE/MEAL/POWDER-AND PUBLISH THIS INFORMATION, AT ITS DIRECTION, TO FACILITATE
ITS MARKETING STRATEGY FOR TRADEMARK AND/OR OTHER HEMP SEED OR GRAIN PRODUCTS;
and, Whereas, PHI has the scientific capability and other required resources to
perform these services for CGP;
NOW, THEREFORE, the aforementioned parties herein agree to the following:
1. Scope of Work and Future Collaboration.
PHI will utilize all of its proprietary technical and scientific expertise, as
well as other existing technology and processes to perform the following
general objectives:
(a) A comprehensive biochemical analysis of chemical components of oil from
various hemp varieties / cultivars provided by CGP, including the quantifying
of their content in order to provide a comprehensive biochemical
fingerprinting-metabolic profiling-of hemp oil; thereafter, the same for hemp
nut and cake / meal and /or powder;
(b) Activity profiling of various components of hemp oil;
(c) A metabolic profiling of the entire hemp plant, which includes activity
profiling of phytochemicals from vegetative and reproductive hemp tissues;
(d) To develop a new generation of scientifically designed and tested
nutraceutical products that would include and require the development of
proprietary technologies for the effective extraction and preservation of the
beneficial ingredients in their most pharmacologically active forms, and to
utilize proprietary technology to increase the content of valuable
nutraceuticals in the hemp plant before harvest. Hemp oil will be the first
priority of this activity;
(e) Utilize its proprietary elicitation technology to attempt to discover
novel
anti-microbial and anti-cancer compounds;
(f) PHI shall assist CGP with the "self-affirmation" process for the Federal
Food and Drug Administration approval process for Hemp Seed Grain Products as a
food or food additive;
(g) PHI and CGP will participate in all public relations activities and
requirements with regard to all findings and discoveries including, but not
limited to, those stipulated below.
2. Milestones.
Certain general health / nutritional benefits of Omega 3 and other unsaturated
oils to humans are scientifically known and documented. Based upon the above
scope and general objectives, PHI shall specifically perform and document the
following:
During months one through four from the effective date of this agreement, PHI
shall obtain and share with CGP documentation and literature for all identified
components of hemp oil, nut and cake / meal with health and nutritional
benefits for human and animal consumption. PHI will also perform the metabolic
and activity profiling of hemp oil using analytical and screening approaches it
had already established for other plant species.
During the subsequent eight months therefrom, PHI shall perform, in its best
efforts, metabolic and activity profiling of the entire hemp plant, with
particular emphasize on anti-bacterial, anti-fungal, anti-cancer and, then
possible, cardiovascular, analgesic, weight loss, skin-care and anti-aging
effects of natural products from hemp. The goal of this work will be to
identify commercially viable nutraceutical and pharmaceutical leads from hemp.
CGP shall utilize all of its available resources to develop commercial
markets - distribution and sales strategies and implementation - for all
potential nutraceutical and / or pharmaceutical product opportunities generated
through the research and development accomplishments of PHI.
3.Term.
Subject to early termination, as set forth in "13" below, research and all
other services under this Agreement shall be performed for the lesser of: 1.
five (5) years from the date of this Agreement; or 2. such date when the
probative information from hemp is deemed to be exhausted. The term may be
extended at anytime by mutual agreement of both parties.
4. Exclusive Agreement.
During the term of this agreement, PHI agrees that it shall perform all
research and development work on any and all parts of the hemp plant, including
but not limited to the general and specific stipulations above, solely for CGP
and / or its affiliates assignees and / or successors; and, CGP shall perform
all marketing, sales and distribution services solely for, or on behalf of, the
mutual benefit of both parties. Furthermore, notwithstanding the terms of this
Agreement, PHI and CGP shall be bound by the NON-DISCLOSURE / CONFIDENTIALITY
AGREEMENT ATTACHED. This attached agreement shall be in effect and binding for
a term of five years, and may be extended by mutual agreement of the parties.
5. Intellectual Property and All Information.
All rights in inventions, discoveries, biological material, software and any
and all information and relative intellectual property created from the
research and development during the term of and within the scope of this
Agreement (the "Hemp Research") shall be the property of CGP and /or/ its
assignees, affiliates or successors (collectively, "Affiliates"). All such
information is CONFIDENTIAL FOR AND BETWEEN THE PARTIES, except as otherwise
directed by CGP.
6. Compensation / Payments.
(a) CGP shall make the following payments, as the total sum required to perform
the entire scope of the services for the first twelve months:
$30,000 upon execution of this Agreement
$25,000 three months after date of execution
$20,000 six months after execution
$20,000 nine months after execution
(b) All cost and expenses for writing and filing of intellectual property
applications and maintenance documentation relative to Hemp Research shall be
borne by CGP.
(c) At the completion of the first year under this Agreement, or at the
earliest practical date, the parties shall jointly develop a budget to perform
any and all agreed upon future research and development work, including agree
on additional progress payments to PHI, and to achieve identified objectives.
(d) All gross revenues received by CGP or any of its Affiliates from the sale
or other commercialization of any and all products developed under and as the
result of the Hemp Research or this Agreement (the "Products"), including
royalties as a result of licensing the commercial rights to any such Products,
shall be shared by the parties as follows: CGP-95% and PHI-5%. CGP shall pay
PHI's share hereunder quarterly, within 30 days after the end of each calendar
quarter. Together with such payment, CGP shall provide PHI with a report,
signed by its chief financial officer or other executive officer, setting forth
in reasonable detail the calculation of the payments due to PHI hereunder. PHI,
solely through Price Waterhouse Coopers or another reputable CPA firm agreed to
by CGP, shall have the right to audit the revenue attributable to the sale or
other commercialization of the Products in order to verify the calculation of
the payment due PHI hereunder.
7. Written Modification.
Any change, amendment, modification, extension etc. to this Agreement must be
in writing and signed by both parties hereto.
8. Arbitration.
Unless otherwise agreed upon by partners, any dispute arising from the terms of
this agreement shall be adjudicated by a single arbitrator pursuant to the
rules of the American Arbitration Association. The arbitration shall take place
within the State of California if PHI is the plaintiff, or within the State of
New Jersey if CGP is the plaintiff.
9. Jurisdiction.
The terms of this agreement shall be governed by the laws of the state of
California or New Jersey without regard to conflicts of laws provisions, as
follows:
(a) if CGP is the plaintiff (in any legal action), New Jersey shall be the
state of jurisdiction
(b) if PHI is the plaintiff (in any legal action), California shall be the
state of jurisdiction
10. Assignment.
This Agreement is not assignable by either party without the prior written
consent of the other party. Any and all assignments not made in accordance
with this provision are null and void.
11.Survivorship.
Articles 4., 5. And 6.(d) herein survive any termination and expiration of this
Agreement.
12. Excusable Delays.
Any delays or suspension of performance by either party in the event of
government intervention, Acts of God, extreme natural events or any other event
beyond the control of the affected party(ies) shall require the parties to
communicate such and to negotiate in good faith a modification to be included
in writing herein.
13. Termination.
PHI may terminate this agreement if CGP defaults on its payment obligations and
payment is not received within thirty(30) days from the scheduled due date or
if the parties in good faith fail to agree on a budget for work to be performed
after first year of this Agreement as set forth in Article 6(c). CGP may
terminate this agreement if PHI fails to perform the research and development
services referred to in 1. and 2. above in a professional and timely manner.
14. Notice.
Any notice or report required in accordance with the articles herein shall be
deemed to have been legally provided for all purposes if sent by first class
certified, registered or courier overnight express delivery to the respective
addresses of the parties:
PHI, One Levitt Parkway, Willingboro, NJ 08046,
With a copy to: David Gitlin, Esq. Wolf, Block, Schorr and Solis-Cohen LLP
Before July 1, 1999, Twelfth Floor Packard Building. 111 South 15th Street,
Philadelphia, PA 19102-2678
After July 1, 1999, 1950 Arch Street, Philadelphia, PA 19103-2085
CGP, PO Box 2228, Monterey, CA. 93942
15. Entire Agreement.
The terms and conditions herein is the entire agreement between the parties and
any previous verbal representations, discussions or agreements made between any
officers, agents or employees of the parties prior to the date of this
Agreement shall be deemed contemporaneous with and included herein.
IN WITNESS WHEREOF, the parties have read understood and executed this
Agreement through duly authorized representatives.
Signed on behalf of Photosynthetic Harvest, Inc. by:
Signature: /s/ ILYA RASKIN
Name: Ilya Raskin
Date: 4-7-1999
Signed on behalf of CGP, Inc.
Signature: /s/ SUSAN BRANA
Name: Susan Brana
Date: 4-7-99
PHOTOSYNTHETIC HARVEST, INC.
MUTUAL NONDISCLOSURE AGREEMENT
Either or both of the undersigned parties (the "Receiving Party")
understands that the other party (the "Disclosing Party") has disclosed or may
disclose trade secrets or other confidential and proprietary information
relating to the Disclosing Party's business information, technical information
and/or ideas or inventions (whether or not patentable) which to the extent
previously, presently or subsequently disclosed to the Receiving Party is
hereinafter referred to as "Confidential and Proprietary Information" of the
Disclosing Party.
In consideration of the parties' discussions and any access of the
Receiving Party to Confidential and Proprietary Information of the Disclosing
Party, the Receiving Party hereby agrees as follows:
1. The Receiving Party agrees (i) to hold the Disclosing Party's
Confidential and Proprietary Information in strict confidence and to take
reasonable precautions to protect such Confidential and Proprietary Information
(including without limitation, all precautions the Receiving Party employs with
respect to its confidential materials), (ii) not to divulge any such
Confidential and Proprietary Information or any information derived therefrom
to any third person (except consultants, subject to the conditions stated
below), (iii) not to make any use whatsoever at any time of such Confidential
and Proprietary Information except to evaluate internally its relationship with
the Disclosing Party, (iv) not to remove or export from the United States or
reexport any such Confidential and Proprietary Information or any direct
product thereof except in compliance with and with all licenses and approvals
required under applicable export laws and regulations, including without
limitation, those of the U.S. Department of Commerce, and (v) not to copy or
reverse engineer any such Confidential and Proprietary Information. Any
employee or consultant given access to any such Confidential and Proprietary
Information must have a legitimate "need to know" and shall be similarly bound
in writing. Without granting any right or license, the Disclosing Party agrees
that the foregoing clauses 1 (i), (ii), (iii) and (v) shall not apply with
respect to any information that the Receiving Party can document (i) is or
becomes (through no improper action or inaction by the Receiving Party or any
affiliate, agent, consultant or employee) generally available to the public,
(ii) was in its possession or known by it prior to receipt from the Disclosing
Party, (iii) was disclosed to it by a third party without restriction or (iv)
is independently developed by the Receiving Party without use of the Disclosing
Party's Confidential and Proprietary Information. For purposes of the
immediately preceding sentence, "availability," "possession," "disclosure,"
"development" or "knowledge" of information combined, synthesized or used by
the Disclosing Party in a particular manner does not include availability,
possession, disclosure development or knowledge of various pieces of
information that are not so combined, synthesized or used. The Receiving Party
may make disclosures required by law or court order provided the Receiving
Party uses diligent, reasonable efforts to limit disclosure and to obtain
confidential treatment or a protective order and has allowed the Disclosing
Party to participate in the proceeding.
2. Immediately upon (i) the decision by either party not to enter into
the agreement contemplated by paragraph 1, or (ii) a request by the Disclosing
Party at any time (which request will be effective on the earlier of receipt or
three days after mailed first class postage prepaid to the Receiving Party's
address set forth below), the Receiving Party will turn over to the Disclosing
Party all Confidential and Proprietary Information of the Disclosing Party and
all documents or media containing any such Confidential and Proprietary
Information and any and all copies or extracts thereof. The Receiving Party
understands that nothing herein (i) requires the disclosure of any Confidential
and Proprietary Information of the Disclosing Party, which shall be disclosed
if at all solely at the option of the Disclosing Party (in particular, but
without limitation, any disclosure is subject to compliance with export control
laws and regulations), (iii) required the Disclosing Party to proceed with any
proposed transaction or relationship.
3. Except to the extent required by law, neither party shall disclose
the existence or subject matter of the negotiations or business relationship
contemplated by this Agreement.
4. The Receiving Party acknowledges and agrees that, due to the unique
nature of the Disclosing Party's Confidential and Proprietary Information,
there can be no adequate remedy at law for any breach of its obligations
hereunder, that any such breach may allow the Receiving Party or third parties
to unfairly compete with the Disclosing Party resulting in irreparable harm to
the Disclosing Party, and therefore, that upon any such breach or any threat
thereof, the Disclosing Party shall be entitled to appropriate equitable relief
in addition to whatever remedies it might have at law and to be indemnified by
the Receiving Party from any loss or harm, including without limitation,
attorney's fees, in connection with any breach or enforcement of the Receiving
Party's obligations hereunder or the unauthorized use or release of any such
Confidential and Proprietary Information. The Receiving Party will notify the
Disclosing Party in writing immediately upon the occurrence of any such
unauthorized release or other breach of which it is aware. In the event that
any of the provisions of this Agreement shall be held by a court or other
tribunal of competent jurisdiction to be illegal, invalid or unenforceable,
such provisions shall be limited or eliminated to the minimum extent necessary
so that this Agreement shall otherwise remain in full force and effect. This
Agreement shall be governed by the law of the State of New Jersey without
regard to the conflicts of law provision thereof. This Agreement supercedes
all prior discussions and writings and constitutes the entire agreement between
the parties with respect to the subject matter hereof. The prevailing party in
any action to enforce this Agreement shall be entitled to costs and attorney's
fees. No waiver or modification of this Agreement will be binding upon
either party unless made in writing and signed by a duly authorized
representative of such party, and no failure or delay in enforcing any right
will be deemed a waiver. This Agreement may be signed 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.
IN WITNESS WHEREOF, the parties have read, understood, and executed this Mutual
Nondisclosure Agreement through duly authorized representatives as of the day
and year set forth below.
Photosynthetic Harvest Inc. Consolidated Growers and Processors, Inc.
By: Ilya Raskin, Chairman By: Susan Brana
Signature: /s/ ILYA RASKIN Signature: /s/ SUSAN BRANA
Date: 4-8-99 Date: 4-11-99
March 16, 1999
PHYTOTECH, INC. (1)
-and-
CONSOLIDATED GROWERS & PROCESSORS, INCORPORATED (2)
Patent (TECHNOLOGY) License
EXCLUSIVE / WORLDWIDE
PHYTOREMEDIATION TECHNOLOGY USED WITH INDUSTRIAL HEMP
CONTENTS
Clause Heading Page
1. Definitions
2. Grant License
3. Warranties
4. Disclosure Of Know-How
5. Use Of Technology
6. Technical Assistance
7. Instruction In Know-How
8. The Patents
9. Improvements
10. Standard Of Quality
11. Marking
12. Appointment Of Sub-Licenses
13. Royalties
14. Promotion
15. Confidence
16. Term
17. Termination
18. Consequences Of Termination
19. Actions Of Infringements
20. Licensee Not To take Action
21. No Assignment
22. Notices
23. Waiver
24. Amendments
25. Force Majeure
26. Severability
27. Cancellation Of Previous Agreements
28. Proper Law
29. Headings
Schedule
1. The Patent
2. Formal Patent License
AN AGREEMENT March 16, 1999
PARTIES:
(1) PHYTOTECH, INC., 1 Deer Park Drive, Suite I, Monmouth Junction, New
Jersey, 08852 (the "Licensor"); and
(2) CONSOLIDATED GROWERS & PROCESSORS, INCORPORATED (CGP) P.O. Box 2228,
Monterey, California 93942-2228 USA (the "Licensee")
RECITALS:
(A) The Licensor is the owner of certain technology relating to
phytoremediation and reclamation of soils.
(B) The Licensor owns valuable intellectual property rights relating to the
said technology.
(C) The Licensee desires to obtain from the Licensor and the Licensor is
prepared to grant to the Licensee an exclusive, worldwide license to use
such technology for use with industrial hemp on the terms and for the
consideration set out below.
OPERATIVE TERMS:
1. DEFINITIONS
1.1 In this Agreement (unless the context otherwise requires):
"Associate" means in respect of either party hereto:
(a) any firm or body corporate in which such party directly or indirectly:
(i) owns more than half the capital or business assets; or
(ii) has the power to exercise more than half the voting rights; or
(iii) has the power to appoint more than half the members of the supervisory
board, board of directors or bodies legally representing such firm or body
corporate; or
(iv) has the right to manage the business of such firm or body corporate;
(a) any person, firm or body corporate which directly or indirectly has in or
over such party the rights or powers listed above ("a controller"); and
(b) any firm or body corporate in which a controller directly or indirectly
has the rights or powers listed above;
"CALENDAR QUARTER" means each three monthly period commencing on the first
day of any of the months of January, April, July and October in any year;
"Effective Date" means March 16, 1999;
"Field of Use" means PHYTOREMEDIATION;
"Force Majeure" means any cause of delay in the performance of any
obligation of either party hereto beyond the reasonable control of such party;
"Improvement" means any change in development of or improvement or
modification to the Technology or the Know-how or the method of manufacture,
use or application thereof (whether patentable or not) including (without
limitation) any change, improvement or modification which makes the
Technology or Licensed Products more efficient or adaptable or enables them
to be manufactured more cheaply or to a higher qualitative standard of
performance;
"Intellectual Property" means the Patients and other intellectual property
rights subsisting in the Territory including, without limitation, copyright,
registered designs and design rights in the Inventions, and the Know-how
owned by the Licensor at the date hereof any time during the Life of this
Agreement;
"Inventions" means the inventions more particularly described in the
specifications and claims of those Patents specified in schedule 1;
"Know-how" means all designs, plans, specifications and calculations and
other manufacturing, engineering and technical data and information relating
to the use of the Technology in the possession, custody or power of the
licensor at the date hereof and which it may lawfully communicate to the
Licensee;
"Licensed Product" means any product in the field of use which falls within
any of the claims of any of the Patents or which is manufactured through use
of any of the Know-how;
"Licensee's Improvements" means improvements made or discovered by the
Licensee (whether before or after the commencement of this Agreement) or of
which it is at any time during the Life of this Agreement either the owner or
entitled to grant the rights specified in clause 9.3;
"Licensor's Improvements" means Improvements made or discovered by the
Licensor during the Life of this Agreement or of which it is at any time
during the Life of this agreement either the owner or entitled to grant the
rights specified in clause 9.3;
"Life of this Agreement" means the period during which this Agreement is in
full force and effect as provided by clauses 16 and 17;
"Net Sales Price" means the invoiced price on a sale by the Licensee or any
sub-Licensee (as the case may be) of Licensed Products to any person less:
(a) value added tax or other sales taxes payable thereon;
(b) bona fide packing, transport and insurance costs;
(c) reasonable trade discounts actually granted to the customer in respect of
such invoice.
If a Licensed Product is incorporated into or sold with another article
(other than another Licensed Product) at an overall price, then the "Net
Sales Price" shall be deemed to be the "Net sales Price" which would have
been invoiced if the Licensed Product had been sold alone to a third party in
the ordinary course of business. For the avoidance of doubt royalties shall
be payable on Licensed Products sold to the Licensee by a Sub-Licensee unless
such Licensed Products are resold by the Licensee when royalties shall only
be payable on the Net sales Price of the resale;
"Patents" means the patents and patent applications specified in schedule 1
subsisting from time to time during the Life of this Agreement together with
all patents granted pursuant to such applications so substituting;
"Quality Standards" means in respect of any Licensed Product, the quality
standards therefore notified by the Licensor to the Licensee from time to
time (if any);
"Sub-Licensee" means any person, firm or company sub-licensed (as the case
may be) by the Licensee to manufacture Licensed Products, or to exercise any
of the rights hereby licensed, and "sub-license" and "sub-licensing" shall
be construed accordingly;
"Technology" means the Intellectual Property and the Know-how;
"Territory" means the world.
2. GRANT OF LICENSE
2.1 With effect from the Effective Date the Licensor hereby grants to the
Licensee provided that the Licensee complies with the terms of this Agreement
an exclusive license to use all the Technology in phytoremediation
applications that utilizes industrial hemp in the Field of Use.
2.2 The Licensee shall not be obliged to apply for any patent or other
intellectual property protection in the Territory for the Products or
Licensed Products.
2.3 The Licensee hereby undertakes with the Licensor that during the Life of
this Agreement it will not without the Licensor's written permission:
(a) manufacture, use or sell the Technology or Licensed Products outside or
for delivery, use or resale outside the Field of Use.
(b) Authorize or assist any person to manufacture or sell the Technology or
Licensed Products outside the Field of Use.
3. WARRANTIES
3.1 The Licensor warrants that at the date hereof it does not know of any
present or proposed litigation concerning the Technology in the Territory,
and it warrants that manufacture of or dealing in Licensed Products or the
use of the Technology or any Improvement is not or will not be an
infringement of the rights of third parties.
3.2 The License warrants that:
(a) neither it nor any of its Associates is involved in the manufacture,
marketing or sale in the Territory of any products which could compete with
the Licensed Products and undertakes that neither it nor any of its Associates
will be so involved at any time during the Life of this Agreement;
(b) it has full authority to execute and perform this Agreement;
(c) it's execution and performance of this Agreement does not and will not
cause it to be in breach of any obligation whether contractual, statutory or
otherwise.
4. DISCLOSURE OF KNOW-HOW
4.1 As soon as reasonably practicable after the Effective Date (if and so far
as not already done) and subject to the payment of the sum specified in
clause 13.1(a) the Licensor shall supply to the Licensee the Know-how in its
possession which relates to use of the technology in the Field of Use.
4.2 The Licensee hereby acknowledges that any information comprising the whole
or part of the Know-how which may have been obtained it from the Licensor or
any of its Associates prior to the date hereof shall be deemed to have been
furnished under the provisions of this Agreement.
5. USE OF TECHNOLOGY
5.1 The Licensee may use the Technology after the Effective Date solely for
the Production of products during the Life of this Agreement in the Field of
Use.
6. TECHNICAL ASSISTANCE
6.1 The Licensor agrees to make available to the Licensee after the Effective
Date such personnel of the Licensor as the Licensor shall consider reasonable
for a mutually agreed and defined period and location to assist in the
initiation of manufacturing facilities in the Territory for products.
6.2 The charges for such personnel shall be born by Licensor for each day
spent performing the obligation under clause 6.1 plus all traveling,
accommodation, medical and subsistence expenses reasonably incurred by such
personnel in connection therewith. The daily charge may be commensurably
increased in direct and indirect labor costs of the Licensor and paid by them.
7. INSTRUCTION IN KNOW-HOW
7.1 Upon the Licensee's written request after the Effective Date the Licensor
shall provide at the Licensee's expense during the Life of this Agreement
and at such times as are convenient to the Licensor personal instruction in
the Know-How by qualified persons in the Licensor's employment to a
reasonable number of the Licensee's employees at the Licensor's Premises.
7.2 The Licensee shall procure such persons to conform to the regulations laid
down by the Licensor for its own employees or especially for visitors so far
as applicable.
7.3 The employees of the Licensee to be instructed will be given adequate
opportunity to study the Know-how and (subject to examination thereof by the
Licensor) they may be permitted to make notes and sketches thereof.
7.4 The Licensor shall have the right to refuse training to those employees of
the Licensee sent to the Licensor's premises whom the Licensor regards as
unacceptable by reference to reasonable standards of character, behavior and
competence.
7.5 The Licensee shall procure all of its employees sent for instruction first
to enter into a written confidentiality agreement with the Licensor in such
form as the Licensor may reasonably require and the execution of such
agreements shall be a condition precedent to their acceptance by the Licensor
for instruction.
7.6 The Licensee shall be responsible for all traveling and subsistence
expenses of its employees and for their continuing salaries, emoluments and
other benefits connected with their employment during the period of
instruction and for insurance coverage in respect of all loss caused to
themselves or third parties by the acts or omissions of such employees.
7.7 The Licensor shall not be liable for any expenses incurred by the Licensee
in connection with this Agreement other than those for which the Licensor has
herein expressly agreed to be liable.
7.8 The Licensee shall indemnify the Licensor against all claims relating to
any loss, damage or injury (whether to person or property) which may be
suffered or caused by the Licensee's employees or representatives in or
arising out of any visit made to the Licensor's premises pursuant to this
Agreement PROVIDED THAT this indemnity shall not extend to any loss, damage
or injury due to the negligence of the Licensor or its employees in the
course of their employment with the Licensor.
8. THE PATENTS
8.1 The Licensor or the Licensee (as the case may be) shall at the other's
written request and cost execute a license in such terms as may be required
by or permissible under the relevant Law (but substantially as far as
possible in the form set out in schedule 2) in respect of the Patents for
registration by the other (and at the other's costs) at the relevant Patent
Offices in the Territory so that this present Agreement shall not in any
circumstances be registered or recorded unless the parties are required by
law so to do. If there shall be any inconsistencies between the terms of any
such formal license and the provisions of this Agreement the latter shall
prevail.
9. IMPROVEMENTS
9.1 The Licensor and the Licensee mutually covenant that:
(a) whether their respective Improvements are patentable or not they will
promptly communicate and explain the same to each other;
(b) they shall promptly inform each other in writing of all things done by
them to obtain patent protection therefore in the Territory;
(c) they shall not abandon or cease to maintain any application or patent
relating to any of their Improvements without giving each other at least one
month's prior written notice of any intention to do so, and if such notice be
given, shall at the other's written request assign any such application or
patent to the other upon terms to be agreed by the parties in writing. The
parties undertake to negotiate such terms without delay and on a reasonable and
fair commercial basis.
9.2 the Licensee shall have a license during the Life of this Agreement to use
the Licensor's Improvements on the same terms (mutatis mutandis) as the
license granted under clause 2 but for no other purpose.
9.3 The Licensee shall have a royalty-free, exclusive license together with
the right to sublicense during the Life of this Agreement to use the
Licensor's Improvements.
10. STANDARD OF QUALITY
10.1 The Licensee shall not sell or permit or authorize the sale of any
Licensed Product manufactured pursuant to this Agreement which fails to
comply in any respect with the Quality Standards. Prior to the commencement
of the sale of any Licensed Product, the Licensee shall submit two randomly
selected samples thereof to the Licensor for written approval as to the
Quality Standards. The Licensee shall in the same manner obtain the
Licensor's prior written approval before making any changes to such Licensed
Product which may affect its ability to comply with the Quality Standards.
10.2 If the Licensor at any time believes that any Licensed Product that comes
to its attention, does not comply with the Quality Standards, it shall notify
the Licensee of its objection setting out its reasons therefore. Without
prejudice to any other rights of the Licensor, the Licensee shall at the
Licensor's option either promptly take all such steps as the Licensor may
require to ensure that all further items of such Licensed Product conform to
the Quality Standards or discontinue the production of such Licensed Product.
In any event, the Licensee shall promptly dispose of any remaining stocks of
such Licensed Product which do not reach the Quality Standards in accordance
with the provisions of clause 10.3.
10.3 Without prejudice to any other rights of the Licensor, the Licensee shall
immediately cease manufacturing and selling any Licensed Products which fail
to comply with the Quality Standards and in such event all connection
between such defective Licensed Products and the Licensor shall be severed
and removed.
10.4 The Licensee shall at its own expense upon request furnish to the Licensor
such number of randomly selected samples of each item of Licensed Products as
the Licensor may reasonably request from time to time for the purpose of
permitting the Licensor to determine that the Quality Standards and other
provisions of this Agreement are being complied with. The Licensee shall
provide to the Licensor and its representatives such access as the Licensor
may reasonably request from time to time to the factories, warehouses and
other establishments at which Licensed Products are manufactured, packed,
stored or offered for sale by or on behalf of the Licensee or by any
Sub-Licensee in order to determine compliance by the Licensee with the
provisions of this Agreement.
11. MARKING
11.1 The Licensee undertakes that all Licensed Products manufactured pursuant
to this Agreement are clearly and conspicuously marked "USED UNDER LICENSE
FROM PHYTOTECH, INC." unless the parties hereto other wise agree in
writing.
11.2 The marking shall comply with California law.
11.3 The Licensor shall have the final decision on the form of any marking on
Licensed Products.
11.4 The Licensee shall legibly mark or cause to be marked on some conspicuous
part of each Licensed Product which is the subject of the Patents (or if this
is not possible by reason of its nature on the packaging thereof) for
disposal in a country in respect of which a patent has been applied for words
indicating that a patent has been applied for in respect thereof, giving the
patent application number and the words "patent applied for", and upon a
patent being granted the words "patent number ( )" together with the number
of the relevant patent.
11.5 Notwithstanding the marking of Licensed Products as aforesaid, the
Licenses shall indemnify and keep indemnified the Licensor and its Associates
against all claims, actions, costs, charges, expenses and demands arising or
alleged to arise out of the manufacture, use, sale or marketing of any
Licensed Products made by the Licensee or any Sub-Licensee or by reason of
instructions or lack of instructions in regard to the use or application
thereof to the intent that the risks associated with the manufacture, use,
sale and marketing of such Licensed Products shall be assumed by the Licensee
to the exclusion of the Licensor but this indemnity shall not extend to any
such claims, actions, costs, charges, expenses or demands due to the
negligent or willful acts or omissions of the Licensor.
11.6 The Licensee shall not make, give or supply any guarantee, warranty or
other undertaking as to the quality or other attributes of Licensed Products
which binds or purports to bind the Licensor or its Associates except as may
be specifically authorized by the Licensor in writing.
11.7 The Licensee shall ensure that in any agreement entered into pursuant to
clause 12 the Sub-Licensee shall give an undertaking to the Licensor in the
form, mutatis mutandis, set out in this clause 11.
12. APPOINTMENT OF SUB-LICENSEES
12.1 the Licensee may appoint any Sub-Licensee PROVIDED THAT:
(a) the Licensee has first obtained the Licensor's written consent;
(b) such Sub-Licensee is party to a written agreement with the Licensee which
binds it to all the terms and conditions of this Agreement insofar as they
relate to contract, manufacture or sub-licensing, the use of the Technology
and any other provision which is relevant or necessary to enable the Licensee
to fulfill its obligations under this Agreement to the Licensor and the
Licensee shall not in any event enter into any such agreement unless and
until the final text thereof has been approved by the Licensor in writing;
(c) such agreement shall provide for automatic termination upon the
termination of this Agreement and where in this Agreement the consent,
permission or approval of the Licensor is required or any right of inspection
is given to the Licensor under any provision, there shall be required under
the corresponding provision in such sub-license the consent, permission or
approval of the Licensor and the Licensee and there shall be given a right of
inspection to the Licensor and the Licensee;
(d) the Licensee shall take all necessary steps at its own expense (including
the bringing of legal proceedings) to secure the performance and observance
by the Sub-Licensee of the terms and undertakings contained in such
sub-license or sub-contract on its part to be observed and performed;
(e) the Licensee shall not charge or accept a lump sum, premium or similar
payment in connection with the appointment of any Sub-Licensee except on
payment of an agreed share thereof to the Licensor.
12.2 The Licensee shall be responsible to the Licensor for payments due in
respect of sales of Licensed Products by Sub-Licensees as though they were
sales by the Licensee.
12.3 At the Licensor's request the Licensee shall terminate its agreement
with any Sub-Licensee if such Sub-Licensee is in breach of its agreement with
the Licensee. The Licensee shall indemnify the Licensor against any loss or
damage which the Licensor may suffer as a result of any such breach whether
such loss or damage occurs before or after termination of this Agreement.
13. ROYALTIES
13.1 The Licensee shall pay to the Licensor the sums set out below in
consideration of the grant of the rights under this Agreement.
Amount Time of Payment
(a) $15,000 Paid in full upon execution of this agreement
13.2 In addition to the sums payable under clause 13.1 the Licensee shall pay
to the Licensor during the Life of this Agreement a royalty of 2% of the Net
Sales Price of Licensed Products sold by the Licensee and by all Sub-Licensees.
13.3 In the event that the royalties paid in one calendar year under clause
13.2 does not exceed certain minimums, there is NO other no installment due.
Licensee shall only be obliged to pay the 2% Royalty only upon registered
sales.
13.4 The Licensee shall pay all royalties due hereunder to the Licensor
quarterly within 30 days of the last day of each Calendar Quarter (and on
termination of this Agreement within 30 days of the date on which such
termination took effect) on the aggregated Net Sales Price of Licensed
Products sold by the Licensee and Sub-Licensees during the calendar Quarter
ending on such day or (in the case of termination) since the commencement of
the Calendar Quarter during which such termination takes effect.
13.5 All payments due to the Licensor under this Agreement shall be paid
without deduction of any taxes other than taxes which the Licensee is
required by law to deduct and the Licensee shall if so required by the
Licensor furnish to the Licensor such evidence as may be necessary to claim
double taxation relief.
13.6 All sums payable hereunder are exclusive of Value Added Tax and VAT is
NOT applicable.
13.7 Unless otherwise notified by the Licensor to the Licensee payments due
hereunder shall be credited to an account of the Licensor at such Bank as the
Licensor may notify the Licensee from time to time and shall be made in
pounds sterling. All costs of transmission shall be borne by the Licensee.
If any Licensed Products sold by the Licensee or any Sub-Licensee are
invoiced in a currency other than US Dollars then for the purposes of
calculating royalties payable hereunder such currency shall be converted to
US Dollars at the middle market spot rate ruling in London on the date of the
actual payment to the Licensor.
13.8 In the case of any sale of Licensed Products by the Licensee or a Sub-
Licensee at an invoice price less than that which would have been charged to
persons negotiating at arm's length, there shall be substituted for the
purpose of calculation of royalties due hereunder such invoice price as
would have been charged in an arm's length transaction.
13.9 The Licensee shall keep and retain for at least six years complete and
accurate records of matters relevant to the manufacture, sale and disposal of
Licensed Products. The Licensee shall when remitting royalties as herein
provided deliver written statements to the Licensor showing the number and
type of each item of Licensed Products manufactured and sold by the Licensee
and every Sub-Licensee during the Calendar Quarter (or other period) in
question and the royalties due thereon together with such other information
as the Licensor may reasonably request. The Licensee shall as and when so
requested by the Licensor at all reasonable times during the Life of this
Agreement and for a period of six years thereafter make the said records
available for inspection by the Licensor's authorized representatives who
shall have the right to take copies of or extracts from any records kept
pursuant to this Agreement and any books, accounts, receipts, papers or other
documents in the possession, custody or power of the Licensee relating in
whole or in part to the manufacture, promotion or sale of Licensed Products
under this Agreement.
13.10 The Licensee shall have the right to appoint at its expense a firm of
auditors to audit and give a certificate with regard to all royalties payable
and reports and statements delivered to the Licensor pursuant to this clause
13 in respect of each year of the Life of this Agreement or such other period
as the Licensor may reasonably require. The Licensee shall provide such
assistance as may be necessary to enable such audit to be completed and such
certificate given not later than two months after the end of such year or
other period. In the event that any audit reveals an understatement or
underpayment exceeding two percent of the total sums payable to the Licensor
during the year or other period in question, the cost of such audit shall be
borne by the Licensee.
13.11 If any circumstances of Force Majeure prevents the transmission of moneys
by the Licensee to the United States, the Licensee shall not be absolved from
making payments for royalties hereunder but shall pay all moneys due from
time to time to the Licensor into a bank account to be opened in the name of
the Licensor at such branch of such bank as the Licensor may in writing
direct, or to such person or persons as the Licensor shall in writing direct.
13.12 If there shall be any delay in the payment of any sums payable under this
Agreement to the Licensor for whatever reasons (including without limitation,
Force Majeure) the Licensee shall pay interest thereon at the rate of 1%
above the base rate of Prime Rate prevailing from time to time.
14. PROMOTION
14.1 The Licensee shall use its best endeavors to sell and to promote and
develop the sale of each and every type of the Products throughout the
Territory and in connection therewith the Licensee shall supply to the
Licensor such evidence of its performance as the Licensor may reasonably
request from time to time.
15. CONFIDENCE
15.1 Subject to clauses 15.2 and 15.3 and save as otherwise expressly provided
in this Agreement, neither party hereto (the "recipient party") shall during
the Life of this Agreement or thereafter disclose to any person or use for
any purpose any information obtained from the other (the "disclosing party")
in connection with this Agreement including (without limitation) the Know-how
but the recipient party may:
(a) disclose any such information to:
(i) Sub-Licensees (where the recipient party is the Licensee) appointed in
accordance with the Provisions of clause 12; and
(ii) Its customers or prospective customers for Licensed Products who require
such disclosure where bona fide necessary for an evaluation or instruction in
the use thereof and who have first signed a confidentiality agreement in such
form as the disclosing party may reasonably require; and
(iii) Its responsible officers and employees who require such disclosure
where bona fide necessary for the proper performance of their duties and who
have first signed a confidentiality agreement in such form as the disclosing
party may reasonably require;
(a) use such information in the proper exercise of its rights and the
performance of its obligations under this Agreement.
15.2 The recipient party shall use its reasonable endeavors to minimize the
risk of unauthorized disclosure or use by its employees and officers of
information received from the disclosing party and to enforce the
confidentiality agreements referred to in clause 15.1(a) in case of need.
15.3 The restrictions on use and disclosure of information under clause 15.1
shall not apply to any information which the recipient party can prove;
(a) was already known to its receipt thereof from the disclosing party;
(b) was subsequently disclosed to it lawfully by a third party who did not
obtain the same (whether directly or indirectly) from the disclosing party;
(c) was in the public domain at the time of receipt by the recipient party or
has subsequently entered into the public domain other than by reason of the
breach of the provisions of this clause 15 or any obligation of confidence
owed by the recipient party or by any Sub-Licensee to the disclosing party.
15.4 Nothing in this Agreement shall prevent or restrict the supply by either
party (the "first party") (after prior notice to the other) of Licensed
Products or information relating to them to any official body or department
where so required.
16. TERM
16.1 This Agreement shall commence on the date hereof and (subject to prior
termination as herein provided) shall continue until terminated by either
party giving to the other not less than 12 month's notice expiring on the
anniversary or any subsequent anniversary of the effective date or at any
time thereafter.
17. TERMINATION
17.1 This Agreement may be terminated forthwith by either party ("the first
party") by written notice to the other in the event of one or more of the
following:
(a) if the other goes into liquidation (other than voluntary liquidation for
the purpose of a bona fide reconstruction or amalgamation the terms of which
have been approved in advance by the first party in writing) or is dissolved
or struck off;
(b) if the other disposes of all or substantially all of its business or
assets to any person other than with the prior written approval of the first
party;
(c) if the other is unable to pay its debts as they mature or suffers the
appointment of a receiver, administrative receiver or administrator (or any
similar official or process under the law of its domicile or place of
incorporation) of the whole or any part of its assets or is the subject of
any bankruptcy proceedings;
(d) if the other is in breach of any of the provisions of this Agreement and
fails to remedy such breach (where it is capable of being remedied) within
30 days notice from the first party specifying such breach;
(e) if the other is delayed in the performance of any of its obligations
hereunder by reason of Force Majeure for a continuous period exceeding 90
days or for periods exceeding 90 days when aggregated in any period of 180
days.
17.2 Termination of this Agreement shall be without prejudice to any rights of
either party which may have accrued up to the date of such termination and
the rights to terminate this Agreement are not intended to be exclusive but
shall be in addition to every other remedy or right now or hereafter existing
including the right to recover damages and to a decree requiring any
appropriate performance required by this Agreement.
17.3 Subject to clause 18.1, in the event of termination of this Agreement for
whatever cause neither the Licensee nor any liquidator administrator,
administrative receiver or similar official thereof shall have any right
whatsoever to use, assign, license or otherwise deal in the Technology, the
Licensor's Improvements or any of the rights granted to the Licensee by this
Agreement.
18. CONSEQUENCES OF TERMINATION
18.1 Upon termination of this Agreement for whatsoever cause (other than
termination by the Licensor or the Licensee pursuant to clause 16 or by the
Licensor pursuant to clause 17.1) then subject to all the terms hereof the
Licensee shall have the right for a period of 3 months following such
termination to:
(a) advertise and sell Licensed Products already manufactured or in the
course of manufacture and remaining unsold at the time of the termination of
this Agreement; and
(b) complete binding contracts for the supply of Licensed Products then in
existence.
18.2 Upon termination of this Agreement for whatsoever cause:
(a) the Licensee shall return to the Licensor all the drawing and technical
documents supplied to it by the Licensor or by its Associates and all copies
thereof in its or any of the Licensee's Associates' possession power or
custody or in that of any Sub-Licensee;
(b) (other than termination by the Licensee pursuant to clause 17.1) the
Licensor shall have an irrevocable exclusive license to use the Licensee's
Improvements to manufacture and sell products throughout the world upon the
payment of such royalties as the parties may agree in writing. For such
purpose the parties shall negotiate with each other in good faith. If the
parties shall fail to reach agreement within 60 days of termination such
royalties shall be determined by such person as the parties may agree in
writing or (failing such agreement) at the request of either party by a
person nominated by the President for the time being of the Association of
Chartered Accountants. Such person shall act as an expert and his decision
shall be final and binding and his costs shall be borne by the parties equally.
19. ACTIONS FOR INFRINGEMENTS
19.1 Each party shall promptly notify the other of any suspected infringement
in the Territory of the Technology or the Licensor's Improvements by any
third party (an Infringer") which comes to its notice and shall consult with
the other about what to do to deal with such suspected infringement.
19.2 If the Licensor does not commence proceedings against an Infringer in the
Territory then the Licensee shall be entitled so to do at its own expense
(and if necessary in the Licensor's name subject to giving the Licensor such
indemnity as to costs as it may require).
19.3 The party which has the control of proceedings against an Infringer shall
bear all the costs thereof and shall be entitled to all damages and other
compensation recovered and at its request and cots, the other party shall
provide such assistance as it may reasonably require for the prosecution of
the action.
19.4 If the Licensee has the control of any proceedings against an Infringer,
it shall keep the Licensor regularly informed of the progress thereof in
writing and shall promptly provide the Licensor with such other
information in respect thereof as the Licensor may reasonably require from
time to time.
20. LICENSEE NOT TO TAKE ACTION
20.1 Except as expressly permitted by clause 19, the Licensee shall not make
any demands or claims, bring suit, effect any settlements or compromise or
take any other action in respect of the Technology or any other proprietary
or intellectual property rights of the Licensor without the
Licensor's prior written consent.
21 NO ASSIGNMENT
21.1 Except as permitted by clause 12 the Licensee shall not assign, charge,
sub-contract, sub-license or otherwise dispose of any of its rights or
obligations under this Agreement.
21.2 The Licensor may assign, charge, Sub-Contract or otherwise dispose of any
of its rights or obligations under this Agreement.
22 NOTICES
22.1 All notices to be given under this Agreement shall be in writing in
California and left at or sent by first class registered or recorded delivery
air mail or fax to the appropriate address shown at the head of this Agreement
or left at or sent to such other address as the party concerned may from time
to time designate by notice pursuant hereto. Any such notice shall be deemed
given:
(a) at the time when the same is left at the addressee's address; or
(b) on the second customary working day in the addressee's country after the
same shall have been property posted; or
(c) in the case of a fax, on the first such working day after the day of
transmission by the fax operator provided that the transmitting fax machine
generates upon completion of the transmission a transmission report stating
that the notice has been duly transmitted without error to the addressee's
fax number.
23 WAIVER
23.1 The rights of either party arising out of any provision of this Agreement
or any breach thereof shall not be waived except in writing. Any waiver by
either party of any of its rights under this Agreement of any breach of this
Agreement shall not be construed as a waiver of any other rights or of any
other or further breach.
24 AMENDMENTS
24.1 This Agreement constitutes the entire agreement of the parties on the
subject matter hereof and may not be amended except by an agreement in
writing signed by both parties.
25 FORCE MAJEURE
25.1 Without prejudice to clauses 13.11 or 17.1(e), neither the Licensor nor
the Licensee shall incur any liability to the other in the event that it is
delayed in the performance of its obligations hereunder solely by Force
Majeure but the party so delayed shall nevertheless use its reasonable
endeavors to resume full performance as soon as possible.
26 SEVERABILITY
26.1 All provisions of this Agreement are severable and in the event of any of
them being held to be invalid by any competent court this Agreement shall be
interpreted as if such invalid provisions were not contained herein.
27 CANCELLATION OF PREVIOUS AGREEMENTS
27.1 This Agreement shall cancel and supersede all previous agreements and
arrangements (if any) between the Licensor and the Licensee or their
respective predecessors relating to the subject matter hereof which in so far
as they or some of them may still be of effect are hereby declared to have
been superseded by this Agreement without claim for compensation or otherwise
by either party but without prejudice to any rights or liabilities accrued
before the date hereof.
28. PROPER LAW
28.1 This Agreement shall be governed by and interpreted in accordance with
California law. Each of the parties hereby submits to the non-exclusive
jurisdiction of the Courts of the State of California.
28 HEADINGS
29.1 The headings in this Agreement are for reference only and do not limit or
affect the interpretation thereof.
IN WITNESS whereof this Agreement has been duly executed by the parties the day
and year first above written.
(Schedule 1
The Patents)
Schedule 2
Formal Patent License)
PHYTOTECH, INC. (the "Licensor") HEREBY GRANTS to CONSOLIDATED GROWERS &
PROCESSORS, INCORPORATED of PO Box 2228, Monterey, California , 93942-1551 USA
(the "Licensee") in respect of the patent specified in the schedule hereto of
which the Licensor is Proprietor (the "Patent") license and authority as from
the 7th day of March, 1999 to manufacture, use and sell products embodying the
inventions within the claims of the Patent subject to the following terms:
1. Such License shall continue (unless sooner terminated by or pursuant to
agreement between the Licensor and the Licensee) for the Life of the Patent;
2. The Licensee shall notify the Licensor of any infringement of the Patent
which comes to its notice and render to the Licensor all such assistance as
it may reasonably require in relation thereto;
3. The Licensee shall notify the Licensor of all improvements relating to the
inventions within the scope of the Patent;
4. This License is made in California and the rights and liabilities of the
parties shall be determined according to the laws of California
5. This License shall not be assigned, mortgaged or charged nor shall sub-
licenses be granted hereunder without the Licensor's prior written consent.
IN WITNESS whereof this Agreement has been duly executed by the parties
the day and year first above written.
The Schedule
SIGNED by a duly authorized )Name: Burt Ensley
Signatory for and on behalf of )Signature: /s/ Burt Ensley
Phytotech, Inc.
In the presence of: )Name: Kathy Makowki
WITNESS )Signature: /s/ Kathy Makowki
SIGNED by a duly authorized )Name: Susan Brana
Signatory for and on behalf of )Signature: /s/ Susan Brana
CONSOLIDATED GROWERS
& PROCESSORS
In the presence of: )Name: Diane Marciel
WITNESS )Signature: /s/ Diane Marciel
