REGISTRATION NO. 333-34597
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-1
AMENDMENT NO. 3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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AGRITOPE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 8731 93-0820945
(STATE OF INCORPORATION) (PRIMARY STANDARD INDUSTRIAL IRS EMPLOYER IDENTIFICA-
CLASSIFICATION CODE NUMBER) TION NUMBER)
8505 S.W. Creekside Place, Beaverton, Oregon 97008
(503) 641-6115
(ADDRESS, INCLUDING ZIP CODE, AND
TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE
OFFICES)
Adolph J. Ferro, Ph.D., Chairman, President and Chief Executive Officer
Agritope, Inc.
8505 S.W. Creekside Place, Beaverton, Oregon 97008
(503) 641-6115
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
Copies to:
Erich W. Merrill, Jr. Brian G. Booth
Miller, Nash, Wiener, Hager Tonkon Torp LLP
& Carlsen LLP Suite 1600
111 S.W. Fifth Avenue 888 S.W. Fifth Avenue
Portland, Oregon 97204-3699 Portland, Oregon 97204
(503) 224-5858 (503) 221-1440
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED
DISTRIBUTION TO THE PUBLIC: As soon as practicable
after the effective date of this Registration
Statement.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |_|
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_| ________
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_| __________________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
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[Epitope letterhead]
[Date]
Dear Shareholder:
We are pleased to inform you that the Board of Directors has authorized
a spin-off of the Company's wholly owned subsidiary, Agritope, Inc. To effect
the spin-off, Epitope, Inc. is distributing the Agritope Common Stock it now
holds to Epitope shareholders as a dividend. After the distribution, Agritope
will operate as an independent public company.
In connection with the spin-off, Agritope is raising working capital by
selling newly issued Agritope common and preferred stock to certain investors
and strategic partners. Agritope could not operate as an independent company
without this additional financing. The shares being distributed to Epitope
shareholders as a dividend are expected to represent between 53 percent and 63
percent of the Agritope voting stock outstanding after the distribution and
sales of common and preferred stock are completed, depending on the extent to
which an option to purchase additional shares of preferred stock is exercised,
as more fully described in the attached Information Statement/Prospectus.
You will receive one share of Agritope Common Stock for every five
shares of Epitope Common Stock that you owned on the record date of December
___, 1997. You will receive cash for any fractional share of Agritope Common
Stock that you would have received. The Company has received an opinion of
counsel that the distribution will be tax-free to most shareholders, except for
cash received for any fractional shares. You should consult your own tax advisor
about the tax consequences of the distribution to you.
You do not need to take any action for the spin-off to occur. You do
not have to pay for the shares of Agritope Common Stock that you will receive,
nor do you have to surrender or exchange shares of Epitope Common Stock in order
to receive shares of Agritope Common Stock. The number of shares of Epitope
Common Stock you own will not change as a result of the spin-off.
The attached Information Statement/Prospectus gives detailed
information about Agritope and the spin-off. We encourage you to read it
carefully.
Very truly yours,
Roger L. Pringle
Chairman
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Information Statement/Prospectus shall not constitute an offer
to sell or the solicitation of an offer to buy nor shall there be any sale of
these securities in any state in which such offer, solicitation, or sale would
be unlawful prior to registration or qualification under the securities laws of
any such state.
SUBJECT TO COMPLETION, DATED DECEMBER 5, 1997.
INFORMATION STATEMENT/PROSPECTUS
AGRITOPE, INC.
DISTRIBUTION OF UP TO ________ SHARES OF COMMON STOCK
OF AGRITOPE, INC. TO SHAREHOLDERS OF EPITOPE, INC.
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This Information Statement/Prospectus is being furnished to the
shareholders of Epitope, Inc. ("Epitope"), in connection with the spin-off of
Epitope's wholly owned subsidiary, Agritope, Inc. ("Agritope" or the "Company").
The spin-off will be accomplished through a dividend distribution (the
"Distribution") to Epitope shareholders of all the Agritope common stock, par
value $.01 per share, including associated preferred stock purchase rights
("Agritope Common"), held by Epitope. As a result of the Distribution, Agritope
will cease to be a subsidiary of Epitope and will operate as an independent
public company. Neither Epitope nor Agritope will receive any cash or other
proceeds from the Distribution.
Epitope will make a distribution to holders of record of Epitope common
stock, no par value ("Epitope Stock"), on December ___, 1997 (the "Record Date")
of one share of Agritope Common for every five shares of Epitope Stock
outstanding. On the Record Date, Epitope had outstanding ____________ shares of
Epitope Stock, its only outstanding class of stock. Therefore, an aggregate of
approximately 2.7 million shares of Agritope Common will be issued in the
Distribution.
In order to finance the operations of Agritope after the Distribution,
Agritope will sell 1,343,704 shares of Agritope Common at a price of $7 per
share in a private placement to certain foreign investors (the "Private
Placement") pursuant to the Regulation S exemption ("Regulation S") under the
Securities Act of 1933, as amended (the "Securities Act"), for an aggregate
price of $9.4 million, immediately following the Distribution.
In connection with a research and development collaboration, Agritope
and Vilmorin & Cie ("Vilmorin"), an affiliate of Groupe Limagrain, have entered
into an agreement for the sale under Regulation S of 214,285 shares of Agritope
Series A Preferred Stock ("Series A Convertible Preferred") at a price of $7 per
share for an aggregate purchase price of $1.5 million (the "Preferred Stock
Sale"). In addition, Agritope has agreed to grant Vilmorin an option (the
"Series A Option"), exercisable by Vilmorin or its designees and expiring
January 15, 1998, to purchase up to 785,715 additional shares of Series A
Convertible Preferred at a price of $7 per share. Series A Convertible Preferred
has preemptive rights and the right to elect a director, but otherwise has
rights substantially equivalent to Agritope Common and is convertible at any
time into shares of Agritope Common, initially on a share-for-share basis.
The Epitope board of directors (the "Epitope Board") believes that the
funds raised in the Private Placement are sufficient to finance the operations
of Agritope as a separate business for a period of not less than two years
following the Distribution, although no assurance to that effect can be given.
Agritope could not operate as an independent entity without such financing.
Following the Private Placement and the Preferred Stock Sale, the Agritope
Common to be issued in the Distribution will represent between 53 percent and 63
percent of outstanding Agritope voting stock, depending on the extent to which
the Series A Option is exercised.
Fractional shares of Agritope Common will not be issued in the
Distribution. If the aggregate number of shares due an Epitope shareholder of
record includes a fraction of a share, Epitope will pay the cash value of the
fractional share to the holder, based on a price of $7 per share of Agritope
Common. Shareholders who own their stock in "street name" through a broker or
other nominee listed as the holder of record will have their fractional shares
handled according to the practices of the broker or nominee.
Currently, no public market for Agritope Common exists. Agritope has
applied to have Agritope Common approved for quotation on The Nasdaq SmallCap
Market under the symbol "AGTO." Agritope Common received in the Distribution
will be freely tradeable by nonaffiliates of Agritope.
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PERSONS RECEIVING THIS INFORMATION STATEMENT/PROSPECTUS SHOULD
CAREFULLY CONSIDER THE FACTORS SPECIFIED UNDER THE CAPTION "RISK FACTORS" ON
PAGE 11.
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NO VOTE OF SHAREHOLDERS IS REQUIRED IN CONNECTION WITH THE DISTRIBUTION.
NO PROXIES ARE BEING SOLICITED AND YOU ARE REQUESTED NOT TO SEND A PROXY.
----------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION,
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS INFORMATION STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
--------------------------
The date of this Information Statement/Prospectus is December ___, 1997.
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TABLE OF CONTENTS
PAGE
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AVAILABLE INFORMATION......................................................................................... 1
NOTE REGARDING FORWARD-LOOKING STATEMENTS..................................................................... 1
SUMMARY ..................................................................................................... 2
The Distribution..................................................................................... 2
Agritope ............................................................................................ 6
Summary of Risk Factors.............................................................................. 6
Summary Financial Data............................................................................... 9
RISK FACTORS.................................................................................................. 11
INTRODUCTION.................................................................................................. 16
THE DISTRIBUTION.............................................................................................. 17
Reasons for the Distribution......................................................................... 17
Manner of Effecting the Distribution................................................................. 18
Trading of Agritope Common........................................................................... 18
Certain Federal Income Tax Consequences.............................................................. 19
PRIVATE PLACEMENT............................................................................................. 22
SALE OF SERIES A CONVERTIBLE PREFERRED........................................................................ 22
RELATIONSHIP BETWEEN AGRITOPE AND EPITOPE AFTER THE DISTRIBUTION.............................................. 22
Separation Agreement................................................................................. 23
Employee Benefits Agreement.......................................................................... 23
Tax Allocation Agreement............................................................................. 25
Transition Services Agreement........................................................................ 26
SELECTED FINANCIAL DATA....................................................................................... 27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS............................... 29
Overview ............................................................................................ 29
Results of Operations................................................................................ 30
Liquidity and Capital Resources...................................................................... 31
DESCRIPTION OF BUSINESS....................................................................................... 33
General ............................................................................................ 33
Agritope Biotechnology Program....................................................................... 33
Commercialization Strategy........................................................................... 39
Grants and Contracts................................................................................. 39
Vinifera ............................................................................................ 40
Competition.......................................................................................... 40
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Government Regulation................................................................................ 40
Patents and Proprietary Information.................................................................. 42
Personnel............................................................................................ 42
Scientific Advisory Board............................................................................ 43
Properties........................................................................................... 43
Legal Proceedings.................................................................................... 43
DIVIDEND POLICY............................................................................................... 43
TRANSFER AGENT................................................................................................ 44
MANAGEMENT.................................................................................................... 45
Directors and Executive Officers..................................................................... 45
Committees of the Board.............................................................................. 47
Compensation of Directors............................................................................ 48
Executive Compensation............................................................................... 48
Grants of Options to Purchase Agritope Common........................................................ 49
Aggregated Option Exercises in Last Fiscal Year and Outstanding Options for Agritope
Common...................................................................................... 50
Employment; Change in Control Agreements............................................................. 50
1997 STOCK AWARD PLAN......................................................................................... 51
General ............................................................................................ 51
Purpose ............................................................................................ 51
Awards and Eligibility............................................................................... 51
New Options.......................................................................................... 51
Description of Terms of Awards....................................................................... 52
Federal Income Tax Consequences...................................................................... 53
1997 EMPLOYEE STOCK PURCHASE PLAN............................................................................. 55
General ............................................................................................ 55
Purpose ............................................................................................ 55
Subscriptions........................................................................................ 55
Federal Income Tax Consequences...................................................................... 56
EMPLOYEE STOCK OWNERSHIP PLAN................................................................................. 56
401(K) PROFIT SHARING PLAN.................................................................................... 57
CERTAIN TRANSACTIONS.......................................................................................... 58
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT................................................ 58
SHARES ELIGIBLE FOR FUTURE SALE............................................................................... 60
DESCRIPTION OF AGRITOPE CAPITAL STOCK......................................................................... 61
Agritope Preferred................................................................................... 61
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Agritope Series A Convertible Preferred.............................................................. 61
Agritope Warrants.................................................................................... 62
Preemptive Rights.................................................................................... 63
Stockholder Rights Plan.............................................................................. 63
Other Anti-takeover Measures......................................................................... 63
Delaware Business Combinations Statute............................................................... 65
Indemnification of Directors and Officers; Limitation of Liability; Insurance........................ 65
LEGAL MATTERS................................................................................................. 66
EXPERTS ..................................................................................................... 66
FINANCIAL STATEMENTS ........................................................................................ F-1
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AVAILABLE INFORMATION
After the Distribution of Agritope Common, Agritope will be subject to
the informational requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Accordingly, Agritope will file annual, quarterly
and special reports, proxy statements and other information with the Securities
and Exchange Commission (the "Commission"). You may read and copy the
information Agritope files without charge at the Commission's public reference
rooms at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, at Suite 1400, Citicorp Center, 500 West Madison Street, Chicago,
Illinois 60661 and at Seven World Trade Center, 13th Floor, New York, New York
10048. You may also obtain the information from commercial document retrieval
services and at the Internet web site maintained by the Commission at
"http://www.sec.gov."
Agritope filed a Registration Statement on Form S-1 (together with all
amendments, the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), to register Agritope Common with the Commission.
This Information Statement/Prospectus is part of the Registration Statement. As
allowed by Commission rules, this Information Statement/Prospectus omits some
information included in the Registration Statement. Statements contained in this
Information Statement/Prospectus about contracts or other exhibits to the
Registration Statement are not necessarily complete and are qualified by the
full text of the exhibits. You may read and copy the Registration Statement,
including the exhibits, as described above.
Agritope intends to distribute to shareholders annual reports
containing audited financial statements, but does not plan to furnish
shareholders with quarterly reports containing unaudited interim financial
information for the first three fiscal quarters of each fiscal year.
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Statements in this Information Statement/Prospectus about future events
or performance are "forward-looking statements." The forward-looking statements
involve known and unknown risks, uncertainties and other factors that may cause
actual results to be materially different from those expressed or implied by the
forward-looking statements. Certain of these factors are discussed in more
detail under the caption "Risk Factors" and elsewhere in this Information
Statement/Prospectus. Given these uncertainties, shareholders are cautioned not
to place undue reliance on the forward-looking statements. Agritope does not
intend to update any forward-looking statements.
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SUMMARY
This summary highlights certain information contained elsewhere in this
Information Statement/Prospectus. To better understand the Distribution and
Agritope, you should read this entire document, including the section "Risk
Factors" beginning on page 9. Capitalized terms used but not defined in this
summary have the meanings given elsewhere in this Information
Statement/Prospectus.
THE DISTRIBUTION
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DISTRIBUTING CORPORATION AND BUSINESS ....................... Epitope, Inc., an Oregon corporation. Epitope uses biotech-
nology to develop and market medical diagnostic products.
DISTRIBUTED CORPORATION AND
BUSINESS..................................................... Agritope, Inc., a Delaware corporation, currently a wholly
owned subsidiary of Epitope. Agritope is a biotechnology
company specializing in the development of new fruit and
vegetable plant varieties for sale to the fresh produce industry.
Agritope is also the majority owner of Vinifera, which
management believes offers one of the most technically
advanced grapevine plant propagation and disease screening
and elimination programs available to the wine and table grape
production industry. See "Summary--Agritope" and
"Description of Business."
FINANCING OF AGRITOPE ....................................... In order to finance the operations of Agritope after the
Distribution, Agritope will sell 1,343,704 shares of Agritope
Common at a price of $7 per share in the Private Placement for
an aggregate price of $9.4 million, immediately following the
Distribution. The Epitope Board believes that the funds raised
in the Private Placement are sufficient to finance the
operations of Agritope as a separate business for a period of
not less than two years following the Distribution, although no
assurance to that effect can be given. See "Risk Factors--Need
for Additional Funds." In connection with a research and
development collaboration, Agritope and Vilmorin, an affiliate
of Groupe Limagrain, have entered into an agreement for the
sale under Regulation S of 214,285 shares of Series A
Convertible Preferred at a price of $7 per share for an
aggregate purchase price of $1.5 million. Agritope could not
operate as an independent entity without the financing to be
raised in the Private Placement. See "Private Placement" and
"Sale of Series A Convertible Preferred."
DISTRIBUTION RATIO........................................... Each Epitope shareholder will receive one share of Agritope
Common for every five shares of Epitope Stock held as of the
Record Date.
RECORD DATE.................................................. Close of business on December ___, 1997.
DISTRIBUTION DATE............................................ Five business days following the Record Date.
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DISTRIBUTION AGENT........................................... ChaseMellon Shareholder Services, L.L.C.
MAILING OF STOCK CERTIFICATES ............................... Certificates representing shares of Agritope Common issued in
the Distribution will be mailed as soon as practicable after the
Distribution Date.
SHARES TO BE DISTRIBUTED..................................... An aggregate of approximately 2.7 million shares of Agritope
Common will be issued in the Distribution. Following the
Distribution, the Private Placement and the Preferred Stock
Sale, approximately 4.2 million shares of Agritope voting
stock will be outstanding, and shares distributed to Epitope
shareholders in the Distribution will represent between 53 and
63 percent of Agritope voting stock outstanding, depending on
the extent to which the Series A Option is exercised.
FRACTIONAL SHARE INTERESTS................................... Fractional shares of Agritope Common will not be issued in
the Distribution. If the number of shares of Agritope Common
to be issued to any record holder of Epitope Stock includes a
fraction of a share, Epitope will pay an amount in cash for the
fractional share. See "The Distribution--Manner of Effecting
the Distribution."
TRADING MARKET............................................... Agritope has applied to include Agritope Common for
quotation on The Nasdaq SmallCap Market under the symbol
"AGTO." There is currently no public market for Agritope
Common. There can be no assurance that an active trading
market in shares of Agritope Common will develop after the
Distribution. See "The Distribution--Trading of Agritope
Common" and "Risk Factors--No Assurance as to Market
Performance of Agritope Common."
PRIMARY PURPOSES OF THE DISTRIBUTION......................... The primary purpose of the Distribution is to enable Agritope
to raise immediately needed working capital through the sale
of its own equity securities. The Distribution also is intended
to permit Epitope and Agritope each to (i) adopt strategies and
pursue objectives appropriate to its specific business;
(ii) enable management to concentrate attention and financial
resources on its core business; (iii) make acquisitions and enter
into transactions with strategic partners by issuing its own
equity securities; (iv) implement incentive compensation
arrangements that are more directly based on results of
operations of its separate business; and (v) be recognized and
evaluated by the financial community as a separate and distinct
business. See "The Distribution--Reasons for the
Distribution."
TAX CONSEQUENCES............................................. Epitope has received an opinion of counsel that the
Distribution will be treated as a tax free transaction to
Epitope's shareholders, with the exception of shareholders who
received their shares of Epitope Stock as compensation, who
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are not U.S. citizens or residents, or who are otherwise subject
to special tax treatment. Epitope has not applied, and does not
intend to apply, for a ruling from the Internal Revenue Service
to that effect. See "The Distribution--Certain Federal Income
Tax Consequences."
RELATIONSHIP WITH EPITOPE
AFTER THE DISTRIBUTION ...................................... Following the Distribution, Epitope will not own any shares of
Agritope's capital stock, and Epitope and Agritope will be
operated as independent public companies. Epitope will not
make financing of any kind available to Agritope after the
Distribution. Epitope and Agritope will, however, continue to
have a relationship as a result of agreements they have entered
into in connection with the Distribution, which include a
Separation Agreement, an Employee Benefits Agreement, a
Tax Allocation Agreement and a Transition Services and
Facilities Agreement (the "Transition Services Agreement").
In addition, two individuals will continue to serve as directors
of both Agritope and Epitope after the Distribution. Except as
set forth in the agreements listed above or as otherwise
described in this Information Statement/Prospectus, Epitope
and Agritope will cease to have any material relationship with
each other following the Distribution. See "Relationship
Between Agritope and Epitope After the Distribution" and
"Management--Directors and Executive Officers."
CERTAIN ANTI-TAKEOVER
CONSIDERATIONS............................................... Certain provisions of Agritope's Certificate of Incorporation
and Bylaws and of Delaware law could make it more difficult
for a party to acquire, or discourage a party from attempting
to acquire, control of Agritope without approval of the
Agritope board of directors (the "Agritope Board"). Agritope
has adopted a Stockholder Rights Plan (the "Rights
Agreement") designed to protect Agritope and its stockholders
from inequitable offers to acquire Agritope. In addition,
Agritope's Certificate of Incorporation and Bylaws contain
certain provisions designed to deter changes in the composition
of the Agritope Board, and to allow the Agritope Board to
issue Agritope Preferred and Agritope Common without
stockholder approval. Each of these provisions may
discourage tender offers or other bids for Agritope Common.
See "Risk Factors--Anti-takeover Considerations" and
"Description of Agritope Capital Stock."
DIVIDEND POLICY ............................................. Agritope does not anticipate paying dividends in the
foreseeable future.
PRIVATE PLACEMENT ........................................... Agritope will sell 1,343,704 shares of Agritope Common in
the Private Placement at a price of $7 per share for an
aggregate price of $9.4 million, immediately following the
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Distribution. Subscribers in the Private Placement have
deposited the purchase price for their shares of Agritope
Common in an escrow account pending the completion of the
Distribution and the closing of the Private Placement. See
"Private Placement."
SALE OF SERIES A CONVERTIBLE PREFERRED....................... Agritope has designated 1 million shares of Agritope Preferred
as Series A Convertible Preferred. In connection with a
research and development collaboration, Agritope and Vilmorin
have entered into an agreement for the sale under Regulation S
of 214,285 shares of Series A Convertible Preferred at a price
of $7 per share for an aggregate purchase price of $1.5
million. See "Risk Factors--Dependence on Strategic Partners,"
"Sale of Series A Convertible Preferred," and "Description of
Business--Agritope Biotechnology Program--Vegetable and Flower
Crops." In addition, Agritope has agreed to grant Vilmorin the
Series A Option, exercisable by Vilmorin or its designees
(which may or may not be related to Vilmorin) and expiring
January 15, 1998, to purchase up to 785,715 additional shares
of Series A Convertible Preferred at a price of $7 per share.
Series A Convertible Preferred has preemptive rights and the
right to elect a director, but otherwise has rights
substantially equivalent to Agritope Common and is convertible
at any time into shares of Agritope Common, initially on a
share-for-share basis. See "Description of Agritope Capital
Stock--Agritope Series A Convertible Preferred."
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AGRITOPE
Agritope is a biotechnology company specializing in the development of
new fruit and vegetable plant varieties for sale to the fresh produce industry.
The Company is utilizing its patented ethylene control technology to develop a
wide variety of fruits and vegetables that are resistant to the decaying effects
of ethylene. The Company also recently acquired certain rights to certain
proprietary genes from the Salk Institute for Biological Studies (the "Salk
Genes"). Agritope believes that the Salk Genes may have the potential to confer
disease resistance, enhance crop yield, control flowering and enhance gene
expression in plants. Agritope has an option to obtain a worldwide license to
use the Salk Genes in a wide range of fruit and vegetable species.
The Company consists of two units: Agritope Research and Development
and Vinifera. Agritope Research and Development provides biotechnology and
product development capabilities to strategic partners and provides disease
screening and elimination programs to its Vinifera subsidiary. Through Vinifera,
Agritope offers what management believes to be one of the most technically
advanced grapevine plant propagation and disease screening and elimination
programs available to the wine and table grape production industry. Because
Agritope has not achieved commercialization of any of its products, the majority
of its revenues, to date, have resulted from operations of Vinifera.
Agritope was formed under Oregon law in 1987. On December 3, 1997,
Agritope was reincorporated under Delaware law by means of a merger of the
Oregon corporation into Agritope, Inc., a newly formed Delaware corporation,
with the Delaware corporation as the surviving entity.
Agritope has had a history of significant operating losses. Its
accumulated deficit was $41.2 million as of September 30, 1997.
Agritope's principal offices are located at 8505 S.W. Creekside Place,
Beaverton, Oregon 97008. Its telephone number is (503) 641-6115.
SUMMARY OF RISK FACTORS
The following is a summary of certain of the risk factors that Epitope
shareholders who will receive Agritope Common in the Distribution should
carefully consider, together with other information presented elsewhere in this
Information Statement/Prospectus. See "Risk Factors."
No Operating History as an Independent Company. Since 1987, Agritope
has operated as a wholly owned subsidiary of Epitope. Therefore, it does not
have a recent operating history as an independent company. After December 1,
1997, Epitope will not provide any additional operating capital to Agritope,
other than advances to be repaid by Agritope when the Distribution is completed,
and will provide only the limited administrative and other support provided for
in the Transition Services Agreement. Agritope is required to repay any amounts
advanced by Epitope to Agritope between December 1, 1997, and the Distribution.
History of Losses; Uncertainty of Future Profitability. Agritope has
experienced significant operating losses since inception and, as of September
30, 1997, had an accumulated deficit of approximately $41.2 million. Agritope
may continue to experience significant operating losses as it continues its
research and development programs. Agritope's ability to increase revenues and
achieve profitability and positive cash flows from operations will depend in
part on successful completion of the development and commercialization of its
genetically engineered products, as to which there can be no assurance. Agritope
has not at this time achieved commercialization of any of its products.
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Need for Additional Funds. The Distribution was conditioned upon a
determination by the Epitope Board that funds from the Private Placement to be
completed immediately following the Distribution will be sufficient to finance
the operations of Agritope as a separate business for at least two years. There
can be no assurance that the determination of Agritope's anticipated cash
requirements will prove to be accurate. The Company's actual capital
requirements will depend on numerous factors, many of which are difficult to
predict. The majority of Agritope's financial requirements to date have been met
by Epitope. Agritope has an accumulated intercompany balance due to Epitope of
approximately $47.5 million as of September 30, 1997, substantially all of which
will be canceled as part of the Distribution. Epitope will not provide
additional financial support following the Distribution, other than advances to
be reimbursed by Agritope when the Distribution is completed. Agritope is
required to repay any amounts advanced by Epitope to Agritope between December
1, 1997, and the Distribution. Agritope may seek or be required to raise
substantial additional funds through public or private financings, collaborative
relationships or other arrangements. There can be no assurance that financing
will be available on satisfactory terms, if at all. Additional equity financing
may be dilutive to stockholders, and debt financing, if available, may involve
significant interest expense and restrictive covenants.
Dependence on Strategic Partners. Agritope relies on strategic partners
for access to proprietary plant varieties. In addition, Agritope does not have
or plan to have the capability to grow and distribute genetically engineered
products in commercial quantities. Agritope expects some or all of the
development, manufacturing and marketing of certain of its products to be
performed or paid for by other parties, primarily agricultural companies,
through license agreements, joint ventures or other arrangements. There can be
no assurance that Agritope will be able to maintain its current strategic
relationships or establish additional relationships or that such relationships
will be successful.
Uncertainties Relating to Patents and Proprietary Information. Agritope
has obtained certain patents, has licensed rights under other patents, and has
filed a number of patent applications. Agritope anticipates filing patent
applications for protection of future products and technology. There can be no
assurance that patents applied for will be obtained, that existing patents to
which Agritope has rights will not be challenged, or that the issuance of a
patent will give Agritope any material advantage over its competitors in
connection with any of its products. Competitors may be able to produce products
competing with a patented Agritope product without infringing on Agritope's
patent rights.
Dependence on Key Personnel. Agritope depends to a large extent on the
abilities and continued participation of its principal executive officers and
scientific personnel. The loss of key personnel could have a material adverse
effect on Agritope's business and results of operations.
Technological Change and Competition. A number of companies are engaged
in research related to plant biotechnology, including other companies that rely
on the use of recombinant DNA as a principal scientific strategy. Technological
advances by others could render Agritope's technologies less competitive or
obsolete. Competition in the fresh produce market is intense and is expected to
increase as additional companies introduce products with longer shelf life and
improved quality. There can be no assurance that such competition will not have
an adverse effect on Agritope's business and results of operations.
Limited Marketability of Agritope Common. Agritope has applied to have
Agritope Common approved for quotation on The Nasdaq SmallCap Market, beginning
after the Record Date. Prior to the Distribution, there has been no public
market for Agritope Common. There can be no assurance that an active trading
market will develop upon completion of the Distribution or, if it does develop,
that the market will be sustained. The relatively small number of publicly
traded shares of Agritope Common may result in a market in such shares that
lacks liquidity. Also, the market price of Agritope Common could be vulnerable
to significant fluctuations in response to variations in actual and anticipated
operating results, lack of liquidity, failure by the Company to achieve its
growth plans and other events affecting the Company, its competitors or its
industry sector. The market for securities of small market
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<PAGE>
capitalization companies has been highly volatile in recent years, often as a
result of factors unrelated to their operations.
- 8 -
<PAGE>
SUMMARY FINANCIAL DATA
(In thousands, except per share data)
The following table presents summary financial data of Agritope and its
subsidiaries. The balance sheet data at September 30, 1997, and 1996 and the
operating results data for the years ended September 30, 1997, 1996, and 1995
have been derived from audited consolidated financial statements and notes
thereto included in this Information Statement/Prospectus. This information
should be read in conjunction with Agritope's consolidated financial statements
and notes thereto and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30
1997 1996 1995(1)
<S> <C> <C> <C>
CONSOLIDATED OPERATING RESULTS
Revenues......................................... $ 1,551 $ 585 $2,110
Operating costs and expenses..................... 6,089 2,821 9,920
Other expense, net............................... (4,153)(2) (265) (235)
Net loss......................................... (8,691) (2,501) (8,045)
Pro forma net loss per share (3)................. (3.23) ( .93) (2.99)
Pro forma shares used in
per share calculations (3)..................... 2,691 2,691 2,691
SEPTEMBER 30
1997 1996
As Adjusted(4) Actual
pro forma
(unaudited)
CONSOLIDATED BALANCE SHEET
Working capital (deficiency)..................... $11,740 $ 1,659 $(3,163)
Total assets..................................... 17,366 7,285 5,670
Long-term debt................................... 15 15 -
Convertible notes, due 1997...................... - - 3,620
Accumulated deficit.............................. (41,168) (41,168) (32,478)
Shareholder's equity............................. 14,844 4,763 1,008
</TABLE>
(1) Data for 1995 includes revenues of $2.0 million and operating losses of
$3.8 million, attributable to business units which were divested. See
Note 3 to consolidated financial statements.
(2) Includes non-cash charges of $2.3 million, reflecting the permanent
impairment in the value of Agritope's investment in affiliated
companies, and $1.2 million for the conversion of Agritope convertible
notes into Epitope Stock at a reduced price. See Notes 3 and 5 to
consolidated financial statements.
(3) Net loss per share is presented on a pro forma basis assuming that the
Distribution of Agritope Common pursuant to the Agritope spin-off had
occurred on October 1, 1994. Pro forma calculations exclude shares to
be issued in the Private Placement, the Preferred Stock Sale, and upon
the exercise of the Series A Option. See Note 11 to Consolidated
Financial Statements.
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<PAGE>
(4) The capitalization of Agritope as adjusted reflects the effects of the
Private Placement of 1,343,704 shares of Agritope Common and the sale
of 214,285 shares of Series A Convertible Preferred for aggregate
proceeds of $10.9 million, less issuance costs of $825,000.
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<PAGE>
RISK FACTORS
Epitope shareholders who will receive Agritope Common in the
Distribution should carefully consider the following risk factors, as well as
the other information provided elsewhere in this Information
Statement/Prospectus.
No Operating History as an Independent Company. Since 1987, Agritope
has operated as a wholly owned subsidiary of Epitope. Therefore, it does not
have a recent operating history as an independent company. After December 1,
1997, Epitope will not provide any additional operating capital to Agritope,
other than advances to be repaid by Agritope when the Distribution is completed,
and will provide only the limited administrative and other support provided for
in the Transition Services Agreement. Agritope is required to repay any amounts
advanced by Epitope to Agritope between December 1, 1997, and the Distribution.
History of Losses; Uncertainty of Future Profitability. Agritope has
experienced significant operating losses since inception and, as of September
30, 1997, had an accumulated deficit of $41.2 million. Agritope may continue to
experience significant operating losses as it continues its research and
development programs. Agritope's ability to increase revenues and achieve
profitability and positive cash flows from operations will depend in part on
successful completion of the development and commercialization of its
genetically engineered products. See "Risk Factors--Dependence on Strategic
Partners." Agritope has not at this time achieved commercialization of any of
its products. There can be no assurance that Agritope's development efforts will
result in commercially viable genetically engineered products, that Agritope's
products will obtain required regulatory clearances or approvals or that any
such products will achieve a significant level of market acceptance. As such,
there can be no assurance that Agritope will ever achieve profitability.
Need for Additional Funds. The Distribution was conditioned upon a
determination by the Epitope Board that funds from the Private Placement to be
completed immediately following the Distribution will be sufficient to finance
the operations of Agritope as a separate business for at least two years.
Subscribers in the Private Placement have agreed to purchase a total of $9.4
million of Agritope Common and have deposited the purchase price in an escrow
account, pending the closing of the Private Placement. The Preferred Stock Sale
will generate an additional $1.5 million in proceeds. There can be no assurance
that the determination of Agritope's anticipated cash requirements will prove to
be accurate. Historically, the majority of Agritope's financial requirements
have been met by Epitope. Agritope has also received funding from $5.4 million
principal amount of convertible notes, $1.6 million in investments in Vinifera
by minority shareholders, and $1.0 million of funding from strategic partners
and other research grants. Agritope had an accumulated intercompany balance due
to Epitope of approximately $47.5 million as of September 30, 1997,
substantially all of which will be canceled as part of the Distribution. After
December 1, 1997, Epitope will not provide any financial support to Agritope,
except advances to be repaid by Agritope when the Distribution is completed. The
actual future liquidity and capital requirements of Agritope will depend on
numerous factors, including: the costs and success of development efforts; the
costs and timing of establishment of sales and marketing activities; the success
of its current strategic collaborations; the success of Agritope in securing
additional strategic partners; the extent to which existing and new products
gain market acceptance; competing technological and market developments; product
sales and royalties; the costs involved in preparing, filing, prosecuting,
maintaining, enforcing and defending patent claims and other intellectual
property rights; and the availability of third party funding for research
projects. In any event, Agritope may seek or be required to raise substantial
additional funds through public or private financings, collaborative
relationships or other arrangements. There can be no assurance that financing
will be available on satisfactory terms, if at all. Any additional equity
financing may be dilutive to stockholders, and debt financing, if available, may
involve significant interest expense and restrictive covenants. In addition,
subsequent changes in ownership due to future equity sales could adversely
affect Agritope's ability to utilize existing net operating losses. See Note 7
to consolidated financial statements. Collaborative arrangements, if necessary
to raise additional funds, may require that Agritope relinquish its rights to
certain of its technologies, products or marketing territories. The failure of
Agritope to raise capital could require it to scale back, delay or eliminate
certain of its programs and would have a material adverse effect on its
business, financial condition and results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
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<PAGE>
Dependence on Strategic Partners. Agritope relies on strategic partners
for access to proprietary plant varieties. In addition, Agritope does not have
or plan to have the capability to grow and distribute genetically engineered
products in commercial quantities. Agritope expects some or all of the
development, manufacturing and marketing of certain of its products to be
performed or paid for by other parties, primarily agricultural companies,
through license agreements, joint ventures or other arrangements. Agritope has
entered into several such arrangements. Agritope and Vilmorin have entered into
a collaborative research and development arrangement. See "Sale of Series A
Preferred Stock" and "Description of Business-Agritope Biotechnology
Program--Vegetable and Flowers Crops." The Company has also entered agreements
with Sweetbriar Development, Inc.; Harris Moran Seed Company, an affiliate
company of Groupe Limagrain; and Sunseeds Company. Commercialization of
Agritope's products will require the assistance of Agritope's current strategic
partners and may require that Agritope enter additional strategic partnerships
with businesses experienced in the breeding, developing, producing, marketing
and distributing of produce varieties. Agritope's future revenues will be
dependent on the success of products developed pursuant to such collaborative
relationships. There can be no assurance that Agritope will be able to establish
additional strategic relationships or maintain its current strategic
relationships or that such relationships will be on terms sufficiently favorable
to permit Agritope to operate profitably. Furthermore, conflicts may arise
between the Company and its partners or among these third parties that could
discourage them from working cooperatively with the Company. Agritope's
commercial success will be dependent in part upon the performance of its
strategic partners. See "Description of Business."
Uncertainties Relating to Patents and Proprietary Information. Agritope
has obtained certain patents, has license rights under other patents, and has
filed a number of patent applications. Agritope anticipates filing patent
applications for protection of future products and technology. There can be no
assurance that patents applied for will be obtained, that existing patents to
which Agritope has rights will not be challenged, or that the issuance of a
patent will give Agritope any material advantage over its competitors in
connection with any of its products. Competitors may be able to produce products
competing with a patented Agritope product without infringing on Agritope's
patent rights. The issuance of a patent to Agritope or to a licensor is not
conclusive as to validity or as to the enforceable scope of claims therein. The
validity and enforceability of a patent can be challenged by litigation after
its issuance and, if the outcome of the litigation is adverse to the owner of
the patent, the owner's rights could be diminished or withdrawn.
The patent laws of other countries may differ from those of the U.S. as
to the patentability of Agritope's products and processes. Moreover, the degree
of protection afforded by foreign patents may be different from that of U.S.
patents.
The technologies used by Agritope may infringe the patents or
proprietary technology of others. The cost of enforcing Agritope's patent rights
in lawsuits that Agritope may bring against infringers or of defending itself
against infringement charges by other patent holders may be high and could
interfere with Agritope's operations.
Trade secrets and confidential know-how are important to Agritope's
scientific and commercial success. Although Agritope seeks to protect its
proprietary information through confidentiality agreements and appropriate
contractual provisions, there can be no assurance that others will not develop
independently the same or similar information or gain access to proprietary
information of Agritope. See "Description of Business--Patents and Proprietary
Information."
Dependence on Key Personnel. Agritope depends to a large extent on the
abilities and continued participation of its principal executive officers and
scientific personnel. The loss of key personnel could have a material adverse
effect on Agritope's business and results of operations. Agritope's key
personnel include, among others, the individuals identified under "Management."
Competition for management and scientific staff in the agricultural
biotechnology field is intense. No assurance can be given that Agritope will be
able to continue to attract and retain personnel with sufficient experience and
expertise to satisfy its needs.
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<PAGE>
Limited Marketability of Agritope Common. Agritope has applied to have
Agritope Common approved for quotation on The Nasdaq SmallCap Market, beginning
after the Record Date. Prior to the Distribution, there has been no public
market for Agritope Common. There can be no assurance that an active trading
market will develop upon completion of the Distribution or, if it does develop,
that the market will be sustained. The relatively small number of publicly
traded shares may result in a market in shares of Agritope Common that lacks
liquidity. Also, the market price of Agritope Common could be vulnerable to
significant fluctuations in response to variations in actual and anticipated
operating results, lack of liquidity, failure by the Company to achieve its
growth plans and other events affecting the Company, its competitors, or its
industry sector. The market for securities of small market capitalization
companies has been highly volatile in recent years, often as a result of factors
unrelated to their operations.
Uncertainty of Product Development. Agritope's genetically engineered
products are at various stages of development. There are difficult scientific
objectives to be achieved in certain product development programs before the
technological or commercial feasibility of the products can be demonstrated.
Even the more advanced programs could encounter technological problems that may
significantly delay or prevent product development or product introduction. See
"Description of Business." There can be no assurance that any of Agritope's
products under development, if and when fully developed and tested, will perform
in accordance with Agritope's expectations, that necessary regulatory approvals
will be obtained in a timely manner, if at all, or that these products can be
successfully and profitably produced, distributed and sold.
Terms for Commercialization of Certain Vegetable and Flower Crops.
Under the proposed terms of the research and development agreement between
Agritope and Vilmorin (the "Vilmorin Research Agreement"), the terms of
agreements for commercializing any covered vegetable and flower crops resulting
from Agritope research funded by Vilmorin are to be determined by "baseball"
style arbitration if the parties are unable to reach agreement. In this style of
arbitration, the arbitrator must choose all terms proposed by one party or the
other, without modification or compromise. Although "baseball" style arbitration
is intended to encourage the parties to make reasonable offers and to compromise
their differences, there can be no assurance that it will do so. Accordingly,
Agritope may not control the terms on which some of its research will be
commercialized, and there can be no assurance that the terms selected by an
arbitrator will be favorable to Agritope or allow it to operate profitably.
Technological Change and Competition. A number of companies are engaged
in research related to plant biotechnology, including other companies that rely
on the use of recombinant DNA as a principal scientific strategy. Technological
advances by others could render Agritope's technologies less competitive or
obsolete. Agritope believes that, despite barriers to new competitors such as
patent positions and substantial research and development lead time, competition
will intensify, particularly from agricultural biotechnology firms and major
agrichemical, seed and food companies with biotechnology laboratories.
Competition in the fresh produce market is intense and is expected to increase
as additional companies introduce products with longer shelf life and improved
quality. Many of Agritope's competitors have substantially greater
financial, technical and marketing resources than Agritope. There can be no
assurance that such competition will not have an adverse effect on
Agritope's business, financial condition and results of operations. See
"Description of Business--Competition."
Need for Public Acceptance of Genetically Engineered Products. The
commercial success of Agritope's genetically engineered products will depend in
part on public acceptance of the cultivation and consumption of genetically
engineered plants and plant products. Public attitudes may be influenced by
claims that genetically engineered plant products are unsafe for consumption or
pose a danger to the environment. There can be no assurance that Agritope's
genetically engineered products will gain public acceptance.
Product Liability and Recall Risk. Agritope could be subject to claims
for personal injury or other damages resulting from its products or services or
product recalls. Agritope carries liability insurance against the negligent acts
of certain of its employees and a general liability insurance policy that
includes coverage for product liability, but not for product recall. In
addition, Agritope may require increased product liability coverage as its
products are commercially developed. Such insurance is expensive and in the
future may not be available on acceptable
- 13 -
<PAGE>
terms, if at all. Also, no assurance can be given that any product liability
claim or product recall will not have a material adverse effect on Agritope's
business, financial condition and results of operations.
Government Regulation. Many of Agritope's products and activities are
subject to regulation by various local, state, and federal regulatory
authorities in the U.S. and by governmental authorities in foreign countries
where its products may be marketed. Agritope is devoting substantial effort to
the development of genetically engineered plants, using recombinant DNA methods.
Many of Agritope's proposed agricultural products are subject to regulation by
both the U.S. Department of Agriculture ("USDA") and the Food and Drug
Administration ("FDA") and may be subject to regulation by the Environmental
Protection Agency ("EPA") and other federal, state, local and foreign
authorities. The extent of regulation depends on the intended uses of the
products, how they are derived, and how applicable statutes and regulations are
interpreted to apply to new genetic technologies and products thereof. The
regulatory approaches of the USDA, FDA, EPA and other agencies are still
evolving with respect to products of modern biotechnology, such as those derived
from the use of recombinant DNA methods. No assurance can be given that any
regulatory approvals, exemptions, permits or other clearances, if required, can
be obtained in a timely manner, if at all, either for research or commercial
activities. See "Description of Business--Government Regulation."
No Assurance as to Market Performance of Agritope Common. There can be
no assurance that the combined market values of the Epitope Stock and the
Agritope Common held by a shareholder after the Distribution will equal or
exceed the market value of the Epitope Stock held by the shareholder prior to
the Distribution Date. The trading price of Agritope Common may also be subject
to significant fluctuations. The market prices for securities of agricultural
biotechnology companies historically have been volatile. Many factors such as
announcements of technological innovations or new commercial products by
Agritope or its competitors, governmental regulation, patent or proprietary
rights developments, industry alliances, public concern as to the safety or
other implications of products, and market conditions in general may have a
significant impact on the market price of Agritope Common. In addition, broad
market fluctuations and general economic conditions may adversely affect the
market price of Agritope Common.
Agritope has applied to include Agritope Common for quotation on The
Nasdaq SmallCap Market. In order to maintain its listing on The Nasdaq SmallCap
Market, Agritope will be required to comply with certain Nasdaq listing
maintenance standards including minimum tangible asset value amounts, public
float requirements and minimum stock price amounts. There can be no assurance
that Agritope will be able to comply with the listing maintenance standards of
The Nasdaq SmallCap Market as in effect from time to time.
Possibility of Substantial Sales of Agritope Common. Any sales of
substantial amounts of Agritope Common in the public market, or the perception
that such sales might occur, whether as a result of the Distribution or
otherwise, could materially adversely affect the market price of Agritope
Common. See "The Distribution-- Trading of Agritope Common" and "Shares Eligible
for Future Sale."
Agreements with Epitope; Lack of Arm's-length Negotiations. In
contemplation of the Distribution, Agritope has entered into a number of
agreements with Epitope, including a Separation Agreement, an Employee Benefits
Agreement, and a Transition Services Agreement, for the purpose of defining its
ongoing relationship with Epitope. Although these agreements were not the result
of arm's-length negotiations between independent parties, Agritope believes such
agreements contain terms comparable to those that would have resulted from
negotiations between unaffiliated parties. There can be no assurance, however,
that the terms of the agreements are in fact comparable to those that would have
been negotiated on an arm's-length basis. See "Relationship Between Agritope and
Epitope After the Distribution."
Anti-takeover Considerations. Agritope's Certificate of Incorporation
and Bylaws may have the effect of making an acquisition of control of Agritope
in a transaction not approved by the Agritope Board more difficult. For example,
the Certificate of Incorporation and Bylaws provide for a classified board,
prohibit the removal of directors except for "cause," limit the ability of the
stockholders and directors to change the size of the board, and
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<PAGE>
require advance notice before stockholders are permitted to nominate directors
or submit other proposals at stockholder meetings. The Agritope Board has also
adopted the Rights Agreement. In addition, subject to limitations prescribed by
Delaware law, the Agritope Board has the authority to issue up to 10 million
shares of Agritope Preferred and to fix the rights, preferences, privileges and
restrictions of those shares, and to issue up to a total of 30 million shares of
Agritope Common, all without any vote or action by Agritope's stockholders,
except as may be required by law or any stock exchange or automated securities
interdealer quotation system on which Agritope Common may be listed or quoted.
Agritope is also subject to Delaware statutory provisions governing business
combinations with persons deemed to be "interested stockholders." See
"Description of Agritope Capital Stock." Finally, awards made under the 1997
Stock Award Plan may vest in full immediately in the event of a change in
control of Agritope or similar event. See "1997 Stock Award Plan." The potential
issuance of additional shares of Agritope capital stock and other considerations
referenced above may have the effect of delaying or preventing a change in
control of Agritope, may discourage offers for Agritope Common, and may
adversely affect the market price of, and the voting and other rights of the
holders of, Agritope Common.
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<PAGE>
INTRODUCTION
On ____________________, 1997, the Epitope Board authorized management
to proceed with the distribution to Epitope shareholders of all the Agritope
Common held by Epitope. The Distribution will be made to holders of record of
Epitope Stock at the close of business on the Record Date, in the ratio of one
share of Agritope Common for every five shares of Epitope Stock held.
Shareholders will receive cash in lieu of any fractional shares. Epitope
shareholders participating in the Distribution will not be required to surrender
or exchange shares or pay any consideration for the Agritope Common. After the
Distribution, Agritope will cease to be a subsidiary of Epitope and will operate
as an independent public company.
Agritope will sell 1,343,704 shares of Agritope Common in the Private
Placement and 214,285 shares of the Series A Convertible Preferred in the
Preferred Stock Sale, for an aggregate price of $10.9 million, immediately
following the Distribution. The Epitope Board believes that the proceeds of the
Private Placement are sufficient to finance the operations of Agritope as a
separate business for a period of not less than two years, although no assurance
to that effect can be given. Agritope could not operate as an independent entity
without the financing to be raised in the Private Placement. See "Risk
Factors--Need for Additional Financing."
Agritope has designated 1 million shares of Agritope Preferred as
Series A Convertible Preferred. See "Description of Agritope Capital
Stock--Series A Convertible Preferred Stock." In connection with a research and
development collaboration between Agritope and Vilmorin, Agritope has entered
into an agreement for the sale of 214,285 shares of the Series A Convertible
Preferred to Vilmorin, an affiliate of Groupe Limagrain in the Preferred Stock
Sale, for an aggregate purchase price of $1.5 million. See "Sale of Series A
Convertible Preferred," "Description of Business--Agritope Biotechnology
Program--Vegetable and Flower Crops." In addition, Agritope has agreed to grant
Vilmorin the Series A Option, exercisable by Vilmorin or its designees and
expiring January 15, 1998, to purchase up to 785,715 additional shares of Series
A Convertible Preferred at a price of $7 per share. Series A Convertible
Preferred has preemptive rights and the right to elect a director, but otherwise
has rights substantially equivalent to Agritope Common and is convertible at any
time into shares of Agritope Common, initially on a share-for-share basis.
After giving effect to the Private Placement, the Preferred Stock Sale
and the Distribution, the shares of Agritope Common distributed to Epitope
shareholders in the Distribution will represent between 53 and 63 percent of all
Agritope voting stock outstanding immediately following the Distribution,
depending on the extent to which the Series A Option is exercised.
Agritope will operate separately from Epitope after the Distribution,
but has entered into various agreements with Epitope, including a Separation
Agreement, an Employee Benefits Agreement, a Tax Allocation Agreement, and a
Transition Services Agreement, to facilitate Agritope's transition to
independent operation. In connection with the Transition Services Agreement,
Epitope has agreed to provide office and laboratory facilities and accounting
and human resources services to Agritope for a 3-to-6 month period following the
Distribution. Agritope has leased new office and laboratory facilities under a
lease commencing March 1, 1998. See "Description of Business--Properties."
Epitope's and Agritope's executive offices are at 8505 S.W. Creekside
Place, Beaverton, Oregon 97008, telephone (503) 641-6115. Epitope shareholders
with questions about the Distribution should contact Mary W. Hagen, Investor
Relations Department, at the address or telephone number above. After the
Distribution Date, Agritope shareholders with questions about Agritope or
Agritope Common should contact Gilbert N. Miller, Secretary, at Agritope's
executive offices.
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<PAGE>
THE DISTRIBUTION
REASONS FOR THE DISTRIBUTION
In July 1997, the Epitope Board approved a management proposal to spin
off Agritope, subject to obtaining financing for Agritope and satisfaction of
certain other considerations. The proposal resulted from the Epitope Board's
1996 decision to make changes in corporate structure to enable investors and
management to focus separately on the agricultural and medical products business
units of Epitope.
In November 1996, the Epitope Board proposed creating two separate
classes of Epitope common stock, one to reflect the business and operations of
Epitope and the other to reflect the business and operations of Agritope (the
"Targeted Stock Proposal"). In addition, in December 1996, Epitope acquired
Andrew and Williamson Sales, Co. ("A&W"), a producer and distributor of fruits
and vegetables, as a direct wholly owned subsidiary of Epitope. In May 1997,
prior to a shareholder vote on the Targeted Stock Proposal, the Epitope Board
rescinded its acquisition of A&W and withdrew the Targeted Stock Proposal in
light of events surrounding a Hepatitis A outbreak allegedly associated with
strawberries shipped by A&W prior to its acquisition by Epitope. The potential
liabilities arising out of the outbreak convinced the Epitope Board that a
targeted stock structure presented too great a risk that liabilities of one
business unit could affect the other. In addition, the rescission and events
related to the Hepatitis A outbreak increased pressure on Epitope's available
capital and decreased the funds available for Agritope's operations. The Epitope
Board believed that in light of uncertainties surrounding the outbreak and
subsequent rescission of the purchase of A&W, raising the funds necessary to
fund the operations of both Epitope and Agritope on terms acceptable to Epitope
was unlikely. The Epitope Board ultimately concluded that, in light of the
different risks, operating environments, stages of development and respective
financing requirements of the medical products and agricultural biotechnology
businesses and the current need to raise substantial capital for Agritope, a
complete separation of the two businesses was in the best interests of Epitope
and its shareholders.
The primary purpose of the Distribution is to allow Agritope to raise
immediately needed working capital through the sale of its own equity
securities. See "Private Placement" and "Sale of Series A Preferred." Agritope's
history of operating losses is expected to continue, giving rise to a need for
additional capital that cannot be satisfied in Epitope's current corporate
structure. The Private Placement and the sale of Series A Preferred can only be
accomplished if Agritope becomes an independent public company. The Epitope
Board considered certain disadvantages of a spin-off as compared to a targeted
stock structure, such as a loss of efficiencies gained by sharing a common
administrative framework and management team and a loss of synergies in the two
companies' research and development programs but determined that such
disadvantages were outweighed by the risks that the liability of one business
would affect the value of the other.
The Distribution will separate the businesses of Epitope and Agritope,
each having its own distinct operating, financial, and investment
characteristics, so that each company can adopt strategies and pursue objectives
more appropriate to its specific business than is possible with Agritope
operating as a wholly owned subsidiary of Epitope. The Epitope Board believes
that the Distribution will better enable management of each company to
concentrate attention and financial resources on research and development and
management of growth in each of its respective core businesses, without regard
to the corporate objectives, policies, challenges and investment criteria of the
other. The Distribution is also intended to afford Agritope increased
flexibility to make acquisitions and enter into strategic partnering
transactions, by issuing its own equity securities. Finally, as a separate
company, Agritope will be able to develop incentive-based compensation programs
that are keyed directly to its earnings and performance, enhancing Agritope's
ability to attract, motivate and retain key employees.
The Epitope Board has also been concerned that the investment community
has historically focused principally on the products and business of Epitope and
has not given sufficient recognition to the value of Agritope's business.
Agritope's status as a separate public company after the Distribution will allow
investors to better evaluate the performance and investment characteristics and
the future prospects of its business. There can be no assurance that the
combined market values of Epitope Stock and Agritope Common held by a
shareholder
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after the Distribution Date will equal or exceed the market value of the
existing Epitope Stock held by the shareholder prior to the Distribution Date.
See "Risk Factors--Limited Marketability of Agritope Common" and "--No Assurance
as to Market Performance of Agritope Common."
MANNER OF EFFECTING THE DISTRIBUTION
The general terms and conditions relating to the Distribution are set
forth in a Separation Agreement between Agritope and Epitope dated December 1,
1997. See "Relationship Between Agritope and Epitope After the
Distribution--Separation Agreement."
Holders of Epitope Stock on the Record Date will not be required to pay
cash or other consideration for the Agritope Common received in the Distribution
or to surrender or exchange certificates representing shares of Epitope Stock in
order to receive Agritope Common in the Distribution.
Under the Separation Agreement, on or before the Record Date, Epitope
will deliver to the Distribution Agent a certificate or certificates
representing all of the then outstanding shares of Agritope Common held by
Epitope. Epitope will then instruct the Distribution Agent to distribute to each
holder of record of Epitope Stock on the Record Date a certificate or
certificates representing one share of Agritope Common for every five shares of
Epitope Stock outstanding. Any shares not distributed on account of the
arrangements made for paying cash in lieu of fractional shares as described
below, will be returned to Agritope for cancellation. A total of approximately
2.7 million shares of Agritope Common will be issued in the Distribution.
Fractional shares of Agritope Common will not be issued in the
Distribution. If the aggregate number of shares due an Epitope shareholder of
record includes a fraction of a share, Epitope will pay the cash value of the
fractional share to the holder, based on a price of $7 per share of Agritope
Common. Shareholders who own their stock in "street name" through a broker or
other nominee listed as the holder of record will have their fractional shares
handled according to the practices of the broker or nominee, which may result in
those shareholders receiving a price for their fractional share interests that
is higher or lower than the price paid by Agritope to shareholders of record.
Certificates representing shares of Agritope Common will be mailed by
the Distribution Agent as soon as practicable following the Distribution Date.
The distributed shares of Agritope Common will be fully paid and nonassessable
and will not be entitled to preemptive rights. Initially, the preferred stock
purchase rights associated with each share of Agritope Common will be
represented by the certificate for such share of Agritope Common.
See "Description of Agritope Capital Stock--Stockholder Rights Plan."
TRADING OF AGRITOPE COMMON
After the Distribution, Epitope and Agritope will operate as
independent public companies. Immediately after the Distribution and the
consummation of the Private Placement, Agritope expects to have approximately
1,030 holders of record of Agritope Common and 4 million shares of Agritope
Common outstanding, based on the number of holders of record of outstanding
Epitope Stock, the distribution ratio, and the number of investors and amount of
shares involved in the Private Placement. The actual number of shares of
Agritope Common to be distributed will be determined as of the Record Date.
Following the Preferred Stock Sale, Agritope expects to have
outstanding 214,285 shares of Series A Convertible Preferred, and up to 785,715
additional shares of Series A Convertible Preferred that may be issued upon
exercise of the Series A Option. Series A Convertible Preferred is convertible
at any time into shares of Agritope Common, initially on a share-for-share
basis.
Agritope has applied to include Agritope Common for quotation on The
Nasdaq SmallCap Market under the symbol "AGTO." There can be no assurance,
however, that, if accepted, Agritope will meet the requirements
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for continued inclusion on The Nasdaq SmallCap Market, or that an active trading
market for shares of Agritope Common will develop after the Distribution.
A "when-issued" market in Agritope Common is expected to develop on or
after the Record Date. Prices at which Agritope Common may trade prior to the
Distribution on a "when-issued" basis or after the Distribution cannot be
predicted. The prices at which trading in Agritope Common occurs may be subject
to significant fluctuations, particularly in the period immediately preceding
and immediately after the Distribution and until an orderly trading market
develops, if at all. See "Risk Factors--No Assurance as to Market Performance of
Agritope Common."
The transfer agent and registrar for the Agritope Common will be
ChaseMellon Shareholder Services, L.L.C.
Shares of Agritope Common distributed to Epitope shareholders in the
Distribution will be freely transferable, except for shares received by persons
who may be deemed to be "affiliates" of Agritope under the Securities Act.
Persons who may be deemed to be affiliates of Agritope after the Distribution
generally include individuals or entities that control, are controlled by, or
are under common control with, Agritope, and may include certain officers and
directors of Agritope as well as principal stockholders of Agritope, if any.
Persons who are affiliates of Agritope will be permitted to sell their shares of
Agritope Common only pursuant to an effective registration statement under the
Securities Act or an exemption from the registration requirements of the
Securities Act, such as the exemption afforded by Rule 144 under the Securities
Act.
In general, under Rule 144, any affiliate of Agritope or any person
owning unregistered Agritope Common (Agritope Common held by any such affiliate
or person referred to as "Restricted Securities") who has beneficially owned
Restricted Securities for at least one year (including the holding period of any
prior owner who is not an affiliate of Agritope) would be entitled to sell
within any three-month period a number of shares that does not exceed the
greater of (i) one percent of the then outstanding shares of Agritope Common
(approximately 40,000 shares immediately after the Distribution and Private
Placement), or (ii) the average weekly trading volume of Agritope Common during
the four calendar weeks preceding the filing of a Form 144 with respect to such
sale. Sales under Rule 144 are also subject to certain manner of sale and notice
requirements and to the availability of current public information about
Agritope.
The shares of Agritope Common being sold in the Private Placement and
the shares of Agritope Common issuable upon the conversion of the Series A
Convertible Preferred have not been registered under the Securities Act.
Pursuant to Regulation S of the Securities Act, shares of Agritope Common
purchased in the Private Placement and the shares of Agritope Common issuable
upon the conversion of the Series A Convertible Preferred may not be sold in the
U.S. without registration under the Securities Act until 40 days following the
closing of the Private Placement and the Preferred Stock Sale respectively. Sale
of a significant number of shares by these holders could adversely affect the
market price of Agritope Common. See "Shares Eligible for Future Sale."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Epitope has received an opinion of Miller, Nash, Wiener, Hager &
Carlsen LLP ("Miller Nash") that (i) the Distribution will be treated as a
tax-free transaction to Epitope shareholders qualifying under Section 355 of the
Internal Revenue Code of 1986, as amended (the "Code"), and (ii) the following
discussion concerning the material tax consequences of the transaction, insofar
as it relates to statements of tax law or conclusions thereunder, is correct and
complete in all material respects. For a more complete description of the
limitations, analysis and assumptions underlying the opinion of Miller Nash,
refer to the complete opinion filed with the Registration Statement of which
this Information Statement/Prospectus is a part. The opinion of Miller Nash
received by Epitope represents only the best judgment of Miller Nash, and is not
binding on the Internal Revenue Service (the "IRS"). There can be no guarantee
that the IRS will agree with the opinion or that upon challenge by the IRS, a
court will not reach a conclusion contrary to the opinion. Epitope has not
requested, and does not anticipate requesting, a
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ruling from the IRS with respect to the federal income tax consequences of the
Distribution. Under the provisions of a revenue procedure issued by the IRS in
1996, the IRS has announced that it will not issue advance private letter
rulings for any spin-off transaction if there have been negotiations related to
the sale of stock of the distributed corporation. Accordingly, due to the
Private Placement and Preferred Stock Sale, the IRS would not issue a ruling
with respect to the Distribution. The IRS's refusal to issue rulings with
respect to certain spin-off transactions does not mean that the Distribution
does not qualify as a tax-free transaction. However, because no ruling will be
received, there can be no assurance that the Distribution will qualify as a
tax-free transaction.
Consequences of Qualification as a Tax-Free Distribution. The discussion set
forth below may not be applicable to certain Epitope shareholders who, among
other limitations, received their shares of Epitope Stock as compensation, who
are not citizens or residents of the U.S. or who are otherwise subject to
special treatment under the Code. Subject to such special circumstances that may
apply to certain Epitope shareholders, in the opinion of Miller Nash, the
Distribution will have the following federal income tax consequences:
(1) An Epitope shareholder will not recognize any income, gain or loss
upon the receipt of Agritope Common which is received by the shareholder as a
result of the Distribution, although income and gain or loss will be recognized
in connection with any cash received in lieu of fractional shares, as described
below.
(2) An Epitope shareholder's tax basis in the Epitope Stock with
respect to which Agritope Common is received will be apportioned between the
shareholder's Epitope shares and the shares of Agritope Common received by the
shareholder (including any fractional shares of Agritope Common deemed received)
in proportion to the relative aggregate fair market values of Epitope Stock and
Agritope Common on the Distribution Date.
(3) An Epitope shareholder's holding period for Agritope Common
received in the Distribution will include the period during which the
shareholder held the Epitope Stock with respect to which the Agritope Common is
distributed, provided such Epitope shareholder held the Epitope Stock as a
capital asset at the time of the Distribution.
(4) An Epitope shareholder who receives cash in lieu of a fractional
share of Agritope Common in the Distribution will be treated as if the
fractional share of Agritope Common had been received by the shareholder as part
of the Distribution and then sold by the shareholder for cash. Accordingly, the
shareholder will recognize gain or loss equal to the difference between the cash
so received and the amount of tax basis allocable (as described above) to the
fractional share of Agritope Common. The gain or loss will be capital gain or
loss if the fractional share of Agritope Common would have been held by the
shareholder as a capital asset.
(5) Agritope will not recognize any income, gain or loss as a result of
the Distribution.
Miller Nash has not expressed any opinion concerning the tax
consequences to Epitope of the Distribution. Depending on the number of shares
of Agritope Common issued in the Private Placement and the Preferred Stock Sale
(see "Private Placement" and "Sale of Series A Convertible Preferred"), the
Distribution might result in recognition of taxable gain by Epitope. Epitope
believes that its tax basis in Agritope is greater than the fair market value of
Agritope. Thus, while the Distribution might be deemed to be a taxable
transaction for Epitope, Epitope believes it is more likely than not that the
Distribution will result in the realization of a loss rather than the
recognition of any taxable gain. Epitope will not be allowed to recognize for
income tax purposes any taxable loss realized as a result of the Distribution.
If any taxable gain is recognized, Epitope believes that it has sufficient net
operating loss carryforwards to offset any such gain for regular tax purposes.
However, if any gain is recognized, Epitope would incur an alternative minimum
tax, which amount management believes would be immaterial.
Current U.S. Treasury regulations require that each Epitope shareholder
who receives shares of Agritope Common pursuant to the Distribution attach a
statement to the shareholder's federal income tax return for the taxable year in
which the Distribution occurs, providing certain information with respect to the
applicability of Section 355 of the Code to the Distribution. In a Tax
Allocation Agreement between the parties (discussed below),
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Epitope has represented that it will provide to each Epitope shareholder of
record as of the Record Date information necessary to comply with this
requirement.
Consequences of Failure to Qualify as a Tax-Free Distribution. If the
Distribution ultimately were determined not to qualify as a tax-free transaction
to Epitope shareholders pursuant to Section 355 of the Code, the following
federal income tax consequences would result:
(1) Each Epitope shareholder would be considered to have received a
distribution in an amount equal to the fair market value, when distributed, of
the shares of Agritope Common received by the shareholder plus the amount of any
cash received in lieu of fractional shares of Agritope Common. Such a
distribution would be taxed as a dividend to the shareholder to the extent of
the shareholder's share of (i) Epitope's current earnings and profits for
federal income tax purposes for the fiscal year ending September 30, 1998 (which
current earnings and profits, if any, will be increased by any gain recognized
by Epitope as a result of the Distribution (which would equal the excess, if
any, of the fair market value of Agritope over Epitope's tax basis in Agritope))
or (ii) Epitope's accumulated earnings and profits through September 30, 1998
(including any gain recognized as a result of the Distribution). To the extent
that the aggregate fair market value of the shares of Agritope Common
distributed exceeds Epitope's earnings and profits, the excess would be treated
first as a non-taxable reduction in the tax basis of a shareholder's Epitope
Stock to the extent of the tax basis, and thereafter as short-term or long-term
capital gain, provided the Epitope Stock is held by the shareholder as a capital
asset. Under Epitope's best current estimates, Epitope will not have sufficient
earnings and profits by September 30, 1998, to treat any part of the
Distribution as a dividend. This estimate is, however, subject to change as
current assumptions may change and future events could materially impact
Epitope's earnings and profits.
(2) An Epitope shareholder's tax basis in the shares of Agritope Common
received in the Distribution would equal the fair market value of the Agritope
Common on the Distribution Date, and the shareholder's holding period for the
shares of Agritope Common would begin the day after that date. An Epitope
shareholder's tax basis in the Epitope Stock would not be affected by the
Distribution, unless, as described above, the amount of the Distribution
exceeded the current and accumulated earnings and profits of Epitope
attributable to the shareholder and was treated as a non-taxable reduction in
tax basis. Upon a subsequent sale of the shares of Agritope Common, a
shareholder would recognize gain or loss measured by the difference between the
amount realized on the sale and the shareholder's tax basis in the shares of
Agritope Common sold.
(3) In general, any amount received by a corporate shareholder that is
taxable as a dividend would be eligible for a 70 percent dividends-received
deduction. However, the 70 percent dividends-received deduction would not be
available with respect to stock unless, among other requirements, certain
holding period requirements were satisfied. In this regard, under Section 246(c)
of the Code, the length of time that a taxpayer is deemed to have held stock is
reduced for periods during which the taxpayer's risk of loss with respect to
such stock is diminished by reason of the existence of certain options to sell,
contracts to sell or other similar arrangements.
In addition, under Section 1059 of the Code, a corporate shareholder
whose holding period, as determined using rules similar to those contained in
Section 246(c) of the Code, is two years or less (as of the Distribution
announcement date) would be required to reduce the tax basis of such Epitope
Stock (but not below zero) by that portion of any "extraordinary dividend," as
defined in the Code, that is not taxed because of the dividends-received
deduction. If the portion exceeded the corporate shareholder's tax basis for its
Epitope Stock, any such excess would be treated as gain on the subsequent sale
or disposition of the stock for the taxable year in which the extraordinary
dividend is received.
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The summary of federal income tax consequences set forth above is for
general information only and may not be applicable to shareholders who received
their shares of Epitope Stock through the exercise of an option or otherwise as
compensation, who are not citizens or residents of the U.S. or who are otherwise
subject to special treatment under the Code. All shareholders should consult
their own tax advisors as to the particular tax consequences of the Distribution
to them, including the applicability and effect of state, local and foreign tax
laws.
PRIVATE PLACEMENT
Immediately following the Distribution, Agritope will sell 1,343,704
shares of Agritope Common at a price of $7 per share, for an aggregate price of
$9.4 million in the Private Placement. Subscribers in the Private Placement have
entered into stock purchase agreements and have deposited the purchase price for
the shares in an escrow account, pending completion of the Distribution and
closing of the Private Placement. Immediately following the Distribution, the
funds held in escrow will be released to Agritope and shares of Agritope Common
will be issued to investors in the Private Placement. Shares sold in the Private
Placement will not be registered under the Securities Act in reliance upon the
exemption from registration provided by Regulation S.
The Epitope Board believes that the proceeds of the Private Placement
are sufficient to finance the operations of Agritope as a separate business for
a period of not less than two years. There can be no assurance that the
determination of Agritope's anticipated cash requirements will prove to be
accurate. See "Risk Factors-- Need for Additional Funds."
SALE OF SERIES A CONVERTIBLE PREFERRED
Agritope has designated 1 million shares of Agritope Preferred as
Series A Convertible Preferred. In connection with the proposed Vilmorin
Research Agreement, Agritope and Vilmorin have agreed to the Preferred Stock
Sale providing for the sale under Regulation S of 214,285 shares of Series A
Convertible Preferred at a price of $7 per share for an aggregate purchase price
of $1.5 million. See "Description of Business--Agritope Biotechnology
Program--Vegetable and Flower Crops." In addition, Agritope has agreed to grant
Vilmorin the Series A Option, exercisable by Vilmorin or its designees and
expiring January 15, 1998, to purchase up to 785,715 additional shares of Series
A Convertible Preferred at a price of $7 per share. Series A Convertible
Preferred has preemptive rights and the right to elect a director, but otherwise
has rights substantially equivalent to Agritope Common and is convertible at any
time into shares of Agritope Common, initially on a share-for-share basis. For a
description of the Series A Convertible Preferred, see "Description of Agritope
Capital Stock--Agritope Series A Convertible Preferred."
RELATIONSHIP BETWEEN AGRITOPE AND EPITOPE AFTER THE DISTRIBUTION
For purposes of setting forth the conditions to and procedures for the
Distribution, governing the ongoing relationship between Epitope and Agritope
after the Distribution and providing for a more orderly transition of Agritope
to operation as an independent public company, Epitope and Agritope have entered
into various agreements. The agreements summarized in this section are included
as exhibits to the Registration Statement of which this Information
Statement/Prospectus forms a part. The following summary is qualified in its
entirety by reference to the agreements as filed.
Management believes that the administrative costs for Agritope as a
stand-alone company will not be materially different from the administrative
costs incurred and the shared services costs allocated in the historical
financial statements. Additionally, the amounts to be charged to Agritope under
the Transition Services Agreement described below are not expected to differ
materially from what Agritope would incur on a stand-alone basis.
SEPARATION AGREEMENT
Epitope and Agritope have entered into a Separation Agreement, which
provides for, among other things, certain pre-Distribution actions of the
parties, the manner of effecting the Distribution, indemnification rights and
procedures, allocation of expenses prior to and in connection with the
Distribution, insurance matters, access to books and records, and
confidentiality. The Separation Agreement also provides for the cancellation of
approximately $47.5 million of Agritope's intercompany balances due to Epitope,
which has been treated as a capital
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contribution in the consolidated financial statements included herein. Because
Epitope and Agritope have separately conducted their respective businesses, the
Separation Agreement does not otherwise contemplate either entity transferring
any significant assets or property to the other.
The Separation Agreement sets forth all of the material conditions
precedent to the Distribution, which are: (i) receipt by Agritope of binding
commitments for financing in an amount the Epitope Board deems sufficient to
finance Agritope's operation as an independent public company for a period of
not less than two years; (ii) receipt by Epitope of an opinion of its tax
advisors as to certain tax considerations in connection with the Distribution;
(iii) receipt of all material approvals and consents necessary to consummate the
Distribution and absence of any pending or threatened action with respect to the
Distribution; (iv) effectiveness of the Registration Statement; and (v)
occurrence of no other event or development that, in the judgment of the Epitope
Board, would have a material adverse effect on Epitope or its shareholders. The
Distribution is subject to satisfaction or waiver of each of these material
conditions and certain other conditions set forth in the Separation Agreement.
The Separation Agreement may be terminated, and the Distribution abandoned, at
any time prior to the Record Date by, and in the sole discretion of, the Epitope
Board.
In addition, the Separation Agreement provides for the allocation of
benefits under existing insurance policies between Epitope and Agritope, grants
each of Epitope and Agritope access to certain records and information in the
possession of the other, imposes certain confidentiality obligations on each,
and provides that, except as otherwise set forth therein or in any related
agreement, Epitope and Agritope will each pay its own costs and expenses in
connection with the Distribution.
Pursuant to the Separation Agreement, Agritope has increased its
authorized capital stock to 30 million shares of Agritope Common and 10 million
shares of Agritope Preferred, and taken other corporate actions in anticipation
of its transition to an independent public company.
Each of the parties has agreed to indemnify the other against claims
relating to or arising out of their respective businesses prior to the
Distribution and arising out of the Distribution. Agritope has agreed to assume
responsibility for certain expenses incurred prior to and in connection with the
Distribution.
EMPLOYEE BENEFITS AGREEMENT
It is anticipated that each person who is an Epitope employee or an
Agritope employee immediately prior to the Distribution Date will continue to be
such immediately after the Distribution Date. To address certain employee and
employee benefits matters in connection with the Distribution, Epitope and
Agritope have entered into an Employee Benefits Agreement. Pursuant to the
Employee Benefits Agreement, Agritope will retain or assume, as the case may be,
sole responsibility as employer for all employees of Agritope as of the
Distribution Date, and will cause any Agritope employee who is then a party to
any employment-related agreement with Epitope to terminate such agreement
effective as of the Distribution Date, except as described below.
Epitope currently provides benefits to its employees and employees of
Agritope under the Epitope, Inc. 401-K Profit Sharing Plan (the "Epitope 401(k)
Plan"), the Incentive Stock Option Plan (the "Incentive Plan"), the 1991 Stock
Award Plan (the "1991 Epitope Award Plan"), and the 1993 Employee Stock Purchase
Plan (the "Epitope Purchase Plan"). Pursuant to the Employee Benefits Agreement,
Agritope has amended the Agritope, Inc. 1992 Stock Award Plan (the "1992
Agritope Award Plan") and outstanding options issued thereunder and adopted
other benefit plans to replace the employee benefits provided by Epitope.
Agritope employees will be eligible for the new Agritope plans following the
Distribution. To facilitate the transition, Epitope and Agritope have agreed to
adjust each existing Epitope employee benefit or award in the following manner:
401(k) Plan. The Employee Benefits Agreement provides that Agritope
will establish and administer a new plan named the Agritope 401(k)
Retirement Plan and Trust (the "Agritope 401(k) Plan"), under which
benefits will be provided to all Agritope employees including those who
were
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eligible for the Epitope 401(k) Plan immediately prior to the
Distribution Date. All Agritope employees who wish to participate in
the Agritope 401(k) Plan will be required to enroll in the Agritope
401(k) Plan in accordance with its terms. Under the Employee Benefits
Agreement, Agritope employees will become fully vested (if not already
fully vested) in their matching accounts under the Epitope 401(k) Plan
as of the Distribution Date, and will be entitled to a distribution
from the Epitope 401(k) Plan of all of their accounts within a
reasonable time after the Distribution Date. The Employee Benefits
Agreement requires the Agritope 401(k) Plan to accept a rollover
contribution from any Agritope employee who elects to have his or her
distribution from the Epitope 401(k) Plan rolled over to the Agritope
401(k) Plan.
Existing Epitope Options. Pursuant to the Employee Benefits Agreement,
Epitope and Agritope have agreed that each unexercised option to
purchase Epitope Stock outstanding as of the Distribution Date
("Existing Epitope Options") will be adjusted as follows as of the
Distribution Date.
The exercise price of Existing Epitope Options will be adjusted
according to a formula provided in the Employee Benefits Agreement that
subtracts the value of Agritope Common from the exercise price. The
value of Agritope Common will be based on the average of the reported
closing prices of Agritope Common on The Nasdaq SmallCap Market during
the five consecutive trading days beginning on the Distribution Date.
Epitope and Agritope believe that the exercise price adjustments to
Existing Epitope Options should not result in the recognition of
taxable income by Epitope or Agritope or their respective optionees.
However, there can be no assurance that such recognition will not
occur. Each holder of an outstanding Existing Epitope Option is urged
to consult with his or her own tax advisor.
Also, for purposes of determining the period that Existing Epitope
Options remain exercisable, employment by Agritope shall be deemed
employment by Epitope. Employment by Agritope or any of its majority
owned subsidiaries after the Distribution will not be deemed employment
by Epitope for vesting and all other purposes relating to Existing
Epitope Options. Accordingly, Existing Epitope Options held by Agritope
employees will continue to vest after the Distribution in accordance
with existing award agreements which provide for continued vesting for
periods ranging from 90 days to one year after the Distribution Date.
Certain Existing Epitope Options are currently intended to qualify as
"incentive stock options" ("ISOs") under the Code. However, continued
ISO status requires that the optionee be employed by the grantor (or a
parent or subsidiary of the grantor) and that the option generally be
exercised within three months after an optionee's termination. Because
the Distribution will terminate the affiliation between Epitope and
Agritope, employees of Agritope holding Existing Epitope Options will
lose any claim to ISO status for such options three months after the
Distribution Date. Such options will thereafter be treated as
nonqualified options.
Agritope has adopted the Agritope, Inc. 1997 Stock Award Plan (the
"Agritope 1997 Award Plan") pursuant to which awards will be made to
Agritope employees as of and following the Distribution. See "1997
Stock Award Plan."
Agritope Options Held by Epitope and Agritope Employees. Agritope has
granted options to certain employees of Epitope and Agritope under the
1992 Agritope Award Plan. The options are denominated in shares of
Agritope Common, but provide for issuance of Epitope Stock upon
exercise so long as Agritope is a wholly owned subsidiary of Epitope.
Agritope has amended the options outstanding under the 1992 Agritope
Award Plan to provide that Epitope Stock will be received upon the
exercise of the options and to provide that such options will be
subject to
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substantially the restrictions and adjustments provided above for
Existing Epitope Options. No further options will be granted under the
plan.
Purchase Plan. The Epitope Purchase Plan enables participating Epitope
employees to purchase Epitope Stock during offering periods selected by
the Epitope Board. The purchase price per share is the lesser of (i) 85
percent of the fair market value of Epitope Stock on the last trading
day prior to the related Offering Date (as defined in the Epitope
Purchase Plan) or (ii) 100 percent of the fair market value of Epitope
Stock on the last day of the purchase period or on any earlier date of
purchase provided for in the Epitope Purchase Plan. The purchase price
is collected by means of payroll deductions. An employee whose
employment is terminated for any reason other than retirement,
disability, or death may, at his or her election, (i) be refunded the
full amount withheld to date, plus interest at the rate of 6 percent
per year, or (ii) receive the whole number of shares that could be
purchased at the purchase price with that amount together with a cash
refund of any balance.
Pursuant to the Employee Benefits Agreement, the Epitope Purchase Plan
will continue in full force and effect in accordance with its terms.
The Employee Benefits Agreement provides that participants under the
Epitope Purchase Plan will be eligible to participate in the
Distribution and receive shares of Agritope Common only to the extent
that, by operation of the Epitope Purchase Plan or otherwise, they are
shareholders of record on the Record Date, except that participants who
are entitled to receive shares of Epitope Stock under the Epitope
Purchase Plan as of the Record Date but who have not yet been
mechanically recorded as shareholders of record as of the Record Date
will be treated as shareholders of record for purposes of the
Distribution. The Employee Benefits Agreement also provides for certain
adjustments to the Maximum Purchase Price (as defined in the Epitope
Purchase Plan) during the purchase period in which the Distribution
Date occurs in order to reflect the effect of the Distribution.
Agritope has established an Employee Stock Purchase Plan for Agritope
employees. See "1997 Employee Stock Purchase Plan."
The Employee Benefits Agreement also provides for the continuation of
medical, dental and other welfare plans by Epitope and Agritope for the benefit
of their respective employees following the Distribution, and for the allocation
of liability for, and indemnity obligations related to, any employment-related
claims brought against Epitope or Agritope, or both companies jointly.
TAX ALLOCATION AGREEMENT
Epitope and Agritope have entered into a Tax Allocation Agreement
providing for their respective obligations concerning various tax liabilities
and related matters. The Tax Allocation Agreement provides that Epitope will
pay, and will indemnify Agritope with respect to, all federal, state, local and
foreign income, franchise and similar taxes relating to Epitope for all taxable
periods. Epitope has also generally agreed to pay all other taxes (other than
those which are imposed solely on Agritope) that are payable in connection with
the Distribution and transactions related to the Distribution, the liability for
which arises on or before the Distribution Date. The Tax Allocation Agreement
provides that Agritope will pay, and will indemnify Epitope with respect to, all
federal, state, local and foreign income, franchise and similar taxes relating
to Agritope for all taxable periods. Further, the Separation Agreement provides
for cooperation with respect to certain tax matters, including the preparation
of income tax returns, the exchange of information, the handling of tax
controversies, and the retention of records which may affect the income tax
liability of either party.
- 25 -
<PAGE>
TRANSITION SERVICES AGREEMENT
Epitope and Agritope have entered into a Transition Services Agreement
pursuant to which Epitope has agreed to provide office and laboratory facilities
and accounting and human resources services to Agritope for a 3-to-6 month
period following the Distribution.
- 26 -
<PAGE>
SELECTED FINANCIAL DATA
(In thousands, except per share data)
The following table sets forth selected historical consolidated income
and balance sheet data of Agritope and its subsidiaries. The balance sheet data
at September 30, 1997 and 1996 and the operating results data for the years
ended September 30, 1997, 1996, and 1995 have been derived from audited
consolidated financial statements and notes thereto included in this Information
Statement/Prospectus. The balance sheet data at September 30, 1995, and
operating results data for the year ended September 30, 1994 are derived from
audited consolidated financial statements and notes thereto not included in this
Information Statement/Prospectus. The balance sheet data at September 30, 1994
and 1993 and operating results data for the year ended September 30, 1993 are
derived from unaudited consolidated financial statements, and notes thereto not
included in this Information Statement/Prospectus and, in the opinion of
management, include all adjustments necessary for fair presentation. This
information should be read in conjunction with the consolidated financial
statements and notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30
1997 1996 1995(1) 1994(1) 1993(1)
CONSOLIDATED OPERATING RESULTS
<S> <C> <C> <C> <C> <C>
Revenues............................................ $ 1,551 $ 585 $ 2,110 $ 2,213 $ 524
Operating costs and expenses........................ 6,089 2,821 9,920 11,703 7,331
Other income (expense), net ........................ (4,153)(2) (265) (235) (314) (151)
Net loss............................................ (8,691) (2,501) (8,045) (9,804) (6,958)
Pro forma net loss per share (3).................... (3.23) ( .93) (2.99) (3.64) (2.59)
Pro forma shares used in per
share calculations (3)............................ 2,691 2,691 2,691 2,691 2,691
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET SEPTEMBER 30
1997 1996 1995 1994 1993
As Adjusted(4) ACTUAL
Pro Forma
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Working capital (deficiency)................. $11,740 $ 1,659 $(3,163) $ 846 $ 418 $ 0
Total assets................................. 17,366 7,285 5,670 4,067 4,081 2,091
Long-term debt............................... 15 15 - 22 38 57
Convertible notes, due 1997.................. - - 3,620 3,620 4,070 4,630
Accumulated deficit.......................... (41,168) (41,168) (32,478) (29,976) (21,931) (12,127)
Shareholder's equity (deficit)............... 14,844 4,763 1,008 75 (482) (2,983)
</TABLE>
(1) Data for 1995, 1994, and 1993 include revenues of $2.0 million, $2.1
million, and $482,000, and operating losses of $3.8 million, $5.6
million, and $2.2 million, respectively, attributable to business units
which were divested. See Note 3 to 1997 consolidated financial
statements.
(2) Includes non-cash charges of $2.3 million, reflecting the permanent
impairment in the value of Agritope's investment in affiliated
companies, and $1.2 million for the conversion of Agritope convertible
notes into Epitope Stock at a reduced price. See Notes 3 and 5 to 1997
consolidated financial statements.
(3) Net loss per share is presented on a pro forma basis assuming that the
Distribution of Agritope Common pursuant to the Agritope spin-off had
occurred on October 1, 1994. Pro forma calculations exclude shares to
be issued in the Private Placement, the Preferred Stock Sale, and upon
the exercise of the Series A Option. See Note 11 to Consolidated
Financial Statements.
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<PAGE>
(4) The capitalization of Agritope as adjusted reflects the effects of the
Private Placement of 1,343,704 shares of Agritope Common and the sale
of 214,285 shares of the Series A Convertible Preferred for aggregate
proceeds of $10.9 million, less issuance costs of $825,000.
- 28 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of operations and financial condition should be read in
conjunction with the consolidated financial statements and notes thereto
included elsewhere in this Information Statement/Prospectus. Special Note:
Certain statements set forth below constitute "forward-looking statements." See
"Note Regarding Forward-Looking Statements."
OVERVIEW
Agritope, Inc. (the "Company" or "Agritope"), consists of two units:
Agritope Research and Development and Vinifera, Inc. ("Vinifera"). Agritope
Research and Development uses biotechnology in the development of new fruit and
vegetable plant varieties for sale to the fresh produce industry. To date,
Agritope has not completed commercialization of this technology. A portion of
the research and development efforts conducted by Agritope has been performed
under various research grants and contracts. Vinifera is engaged in the
grapevine propagation and distribution business. During 1995, Vinifera was in
the development stage and generated minimal product sales. Vinifera commenced
commercial stage operations in 1996.
The results of operations for the first three quarters of 1995 include
the activity of Vinifera, then a wholly owned subsidiary of Agritope. Vinifera
was sold in the third quarter of 1995. A majority interest in Vinifera was
reacquired in the fourth quarter of 1996. No gain was recognized upon the sale
of Vinifera in 1995. The 1996 purchase price of $916,000 was allocated to
tangible net assets. As a result of subsequent equity sales to private
investors, Agritope now holds a 61 percent equity interest in Vinifera.
Vinifera's operations are included in results of operations for the fourth
quarter of 1996, and for all of 1997.
Agritope's results of operations for the first three quarters of 1995
also include the activity of Agrimax Floral Products, Inc. ("Agrimax"), a wholly
owned subsidiary, which was engaged in the fresh flower packaging and
distribution business. Agrimax's business was discontinued in 1995. In 1995, a
portion of the operating assets of Agrimax were contributed to UAF Limited
Partnership ("UAF"), an unrelated company, in exchange for a minority equity
interest in UAF. A loss of $500,000 was recognized in 1995 on the discontinuance
of operations at Agrimax and the transaction with UAF. In 1996, the remainder of
the operating assets of Agrimax were contributed to Petals USA, Inc. ("Petals"),
an unrelated company, in exchange for a minority equity interest in Petals. No
gain or loss was recognized on the transaction with Petals and the investment in
Petals was recorded at the net book value of the contributed assets. There are
no operations of Agrimax included in 1996 or 1997 operating results.
The accompanying consolidated financial statements have been prepared
to reflect the operating results and financial condition of Agritope and its
subsidiaries. The operating statements include the cost of certain corporate
overhead services which are provided on a centralized basis for the benefit of
the medical products business conducted by Epitope and the agricultural
biotechnology business conducted by Agritope and its subsidiaries ("Shared
Services"). Such expenses have historically been allocated using activity
indicators which, in the opinion of management, represent a reasonable measure
of the respective business' utilization of or benefit from such Shared Services.
In July 1997, Epitope's board of directors approved a management
proposal to spin off Agritope, subject to obtaining financing for Agritope and
the satisfaction of certain other conditions. Agritope has agreed to sell
1,343,704 shares of Agritope common stock at a price of $7 per share in a
private placement to certain investors, for an aggregate price of $9.4 million,
immediately after the spin-off. In connection with a research and development
collaboration, Agritope has entered into an agreement with Vilmorin & Cie, an
affiliate of Groupe Limagrain, to sell 214,285 shares of the Series A
Convertible Preferred at a price of $7 per share for an aggregate price of $1.5
million. The spin-off will be accomplished by a distribution of Agritope common
- 29 -
<PAGE>
stock to Epitope's shareholders. Epitope will not own or control any shares of
Agritope stock following the spin-off, which is expected to occur in December
1997.
In November 1996, the Epitope Board proposed creating two separate
classes of Epitope common stock, one to reflect the medical products business
and operations of Epitope and the other to reflect the business and operations
of Agritope (the "Targeted Stock Proposal"). In addition, in December 1996,
Epitope acquired Andrew and Williamson Sales, Co. ("A&W"), a producer and
distributor of fruits and vegetables, as a direct wholly owned subsidiary of
Epitope. Agritope and A&W thereby became sister companies, each a wholly owned
subsidiary of Epitope. Agritope had no relationship with A&W other than as a
sister corporation. In May 1997, prior to a shareholder vote on the Targeted
Stock Proposal, the Epitope Board rescinded its acquisition of A&W and withdrew
the Targeted Stock Proposal in light of events surrounding a Hepatitis A
outbreak allegedly associated with strawberries shipped by A&W prior to its
acquisition by Epitope. The accompanying consolidated financial statements do
not include the operations of A&W. The effects of Epitope's ownership of A&W are
reflected solely in Epitope's financial statements and have no impact on
Agritope's financial statements.
RESULTS OF OPERATIONS
Years ended September 30, 1997, 1996 and 1995
Revenues. Total revenues increased by $966,000 or 65 percent from 1996 to 1997,
and decreased by $1.5 million or 72 percent from 1995 to 1996. Revenues by
component are shown below:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30 (IN THOUSANDS) 1997 1996 1995
Product sales
<S> <C> <C> <C>
Grapevine plant sales.................................... $ 1,436 $ - $ 84
Wholesale fresh flower sales............................. - - 1,931
---------- ---------- --------
1,436 - 2,015
Grants and contracts
Government research grants.............................. 30 145 16
Research projects with strategic partners............... 53 326 40
Other................................................... 32 114 38
--------- -------- ---------
115 585 94
$ 1,551 $ 585 $ 2,110
</TABLE>
Grapevine plant sales pertain to Agritope's majority owned subsidiary,
Vinifera. Vinifera was sold in the third quarter of 1995, and a majority
interest was reacquired at the end of August 1996. Vinifera had no product sales
in September 1996. Vinifera was in the development stage in 1995, commenced
commercial stage operations in 1996 and continued its marketing efforts and
expansion of its customer base during 1997. Vinifera currently has confirmed
orders exceeding $1.4 million for delivery in the spring and summer of 1998.
Product sales in 1995 included $1.9 million of sales in Agrimax's
unprofitable wholesale fresh flower packaging and distribution operations, which
were discontinued in the third quarter of 1995.
Grant and contract revenues pertain to research projects directed at
developing superior new plants through genetic engineering. Revenue from such
projects can vary significantly from year to year as new projects are started
while other projects may be extended, completed, or terminated. In addition, not
all research projects conducted by Agritope receive grant or contract funding.
Grant and contract revenues in 1996 included three significant contracts with
strategic partners for joint research projects. Grant and contract revenue in
1996 also included SBIR government grants totaling $145,000 which declined to
only $30,000 in 1997. In October 1997, the
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<PAGE>
Company was awarded a three-year grant totaling $1.0 million from the U.S.
Department of Commerce to study the application of Agritope's ripening
technology to certain tree fruits and bananas.
Gross margin. Gross margin on product sales was 7.7 percent of sales for 1997.
Gross margin in 1997 was adversely affected by production start-up costs
incurred during the expansion of production capacity at Vinifera. There were no
comparable product sales in 1996. The Company's unprofitable wholesale fresh
flower packaging and distribution operations were primarily responsible for the
negative gross margin in 1995.
Research and development expenses. Research and development expenses in 1997,
1996 and 1995 totaled $1.7 million, $1.3 million and $2.2 million, respectively.
The increase of $343,000 or 26 percent from 1996 to 1997 reflects increased
efforts to develop and propagate crops containing Agritope's patented ethylene
control technology as well as research and development efforts to improve
grapevine plant propagation conducted by Vinifera. The decrease of $866,000 or
39 percent from 1995 to 1996 resulted from the divestitures of the Agrimax and
Vinifera businesses in the third quarter of 1995.
Selling, general and administrative expenses. Selling, general and
administrative expenses in 1997, 1996 and 1995 were $3.1 million, $1.5 million
and $4.5 million, respectively. Expenses in 1997 included $913,000 of costs
incurred by Vinifera, which was not part of Agritope during the first eleven
months of 1996. The increase in 1997 is also attributable to expenses of
$424,000 related to the withdrawn Targeted Stock Proposal to create two classes
of common stock of Epitope. During 1997, Vinifera expanded greenhouse capacity
and continued to establish marketing and administrative functions at its new
headquarters location in Petaluma, California. Such activities contributed to
relatively high selling, general and administrative expenses in comparison to
product sales levels. Expenses in 1995 included $2.8 million of costs incurred
by Agrimax and Vinifera before these businesses were divested.
Selling, general and administrative expenses include $1.4 million, $1.1
million and $1.9 million for the allocation of Shared Services in 1997, 1996 and
1995, respectively. The amount of allocated Shared Services increased by
$334,000 or 31 percent from 1996 to 1997 as a result of the reacquisition of
Vinifera in August 1996, as well as increased corporate costs at Epitope due to
increased administrative personnel. The amount of allocated Shared Services
decreased by $823,000 or 43 percent from 1995 to 1996 largely as a result of the
dispositions of the Agrimax and Vinifera businesses.
Other income (expense), net. Other income (expense), net was affected by three
significant non-recurring charges totaling $4.2 million in 1997. During 1997,
Agritope recorded a non-cash charge to results of operations of $2.3 million,
reflecting the permanent impairment in the value of its investment in affiliated
companies (UAF and Petals). Additionally, conversion of $3.4 million principal
amount of Agritope convertible notes into Epitope common stock at a reduced
conversion price resulted in a charge to results of operations of $1.2 million.
Also in 1997, a charge of $744,000 in recognition of the Company's contingent
liability as primary lessee on two leases pertaining to Agritope's discontinued
wholesale fresh flower packaging and distribution business was recognized.
Interest expense decreased by $240,000 or 90 percent from 1996 to 1997
due to the conversion of $3.4 million principal amount of Agritope notes into
Epitope common stock in the first quarter of 1997, and payment of the remaining
principal amount of $240,000 on June 30, 1997.
<TABLE>
<CAPTION>
LIQUIDITY AND CAPITAL RESOURCES SEPTEMBER 30
1997 1996
(in thousands)
<S> <C> <C>
Cash and cash equivalents.............................................. $ 4 $ 477
Working capital (deficiency)........................................... 1,659 (3,163)
</TABLE>
- 31 -
<PAGE>
At September 30, 1997, Agritope had working capital of $1.7 million as
compared to a working capital deficiency of $3.2 million at September 30, 1996.
The increase in working capital was principally attributable to the conversion
of $3.4 million of convertible notes into 250,367 shares of Epitope common stock
in the first quarter of 1997. Concurrent with the note conversion, Epitope made
a $4.4 million capital contribution to Agritope. Working capital also increased
due to a $1.6 million buildup in Vinifera's inventory of growing grapevine
plants. The grapevine plants are grafted and then kept in greenhouses for
approximately 10 weeks before they are ready for sale. The plants can be
maintained in greenhouses or stored outside for several years during which time
they continue to grow. Inventory on hand at September 30, 1997 represents
grapevine plants expected to be sold in the spring of 1998.
Expenditures for property and equipment were $1.9 million during 1997,
largely as a result of expansion of greenhouse capacity at Vinifera.
Expenditures for patents and proprietary technology in 1997 included a one-time
cash payment of $590,000 to a co-inventor of Agritope's ethylene control
technology who is an officer of Agritope. Agritope has also acquired certain
rights to certain proprietary genes for which it made payments of $171,000 in
1997. Such amounts are included in "Patents and proprietary technology, net."
Agritope's investment in affiliated companies, obtained in connection with the
divestiture of its fresh flower packaging and distribution business, was reduced
by a non-cash charge of $2.3 million in 1997 reflecting the permanent impairment
in the value of these investments.
Cash flows from operating activities improved significantly from 1995
to 1996 largely due to the divestiture of Agrimax and Vinifera. Year-end
inventories increased by $510,000 from 1995 to 1996 due to the reacquisition of
Vinifera in August 1996. Additions to property and equipment increased in 1996
as a result of expansion of greenhouse capacity at Vinifera, which was
reacquired in August 1996. Expenditures for patents and proprietary technology
increased in 1996 primarily due to a one-time cash payment of $365,000 to the
other co-inventor of Agritope's ethylene control technology.
Historically through September 30, 1997, the primary sources of funds
for meeting Agritope's requirements for operations, working capital and business
expansion have been $45.4 million in cash from Epitope, $5.4 million principal
amount of convertible notes, $1.6 million of investments in Vinifera by minority
shareholders, and $1.0 million in funding from strategic partners and other
research grants. Agritope expects to continue to require funds to support its
operations and research activities. Agritope intends to utilize cash reserves,
cash generated from sales of products, and research funding from strategic
partners and other research grants to provide the necessary funds. Agritope may
also rely on the sale of equity securities to generate additional funds.
Agritope has agreed to reimburse Epitope for amounts advanced by Epitope on or
after December 1, 1997.
Immediately following the spin-off and related financing, Agritope is
expected to have $___ million in cash and cash equivalents on hand to finance
its continued operations. Agritope presently anticipates that these funds will
be sufficient to finance operations as a separate business for at least two
years after the spin-off, based on currently estimated revenues and expenses.
Because this estimate is based on a number of factors, many of which are beyond
its control, Agritope cannot be certain that this estimate will prove to be
accurate, and to the extent that Agritope's operations do not progress as
anticipated, additional capital may be required. Agritope currently utilizes a
portion of Epitope's office and research and development facilities and is
allocated a charge representing the cost of such facilities. As soon as
practicable after the spin-off, Agritope intends to relocate its administrative
and research and development activities to separate leased facilities.
Management estimates that the cost to relocate, including leasehold
improvements, will not exceed $2.0 million and that the cash on hand following
the spin-off will be adequate to meet this need. Additional capital may not be
available on acceptable terms, if at all, and the failure to raise such capital
would have a material adverse effect on Agritope's business, financial
condition, and results of operations. See "Risk Factors--Need for Additional
Funds."
Agritope has completed a Year 2000 review of its systems and procedures
to determine the scope of costs or risks Agritope may face in connection with
potential computer problems associated with the Year 2000. The
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<PAGE>
Company believes that it will not incur material Year 2000 remedial costs and
that its operations will not be materially affected by any Year 2000 problems.
DESCRIPTION OF BUSINESS
GENERAL
Agritope is a biotechnology company specializing in the development of
new fruit and vegetable plant varieties for sale to the fresh produce industry.
The Company is utilizing its patented ethylene control technology to produce a
wide variety of fruits and vegetables that are resistant to the decaying effects
of ethylene. The Company also recently acquired certain rights to certain
proprietary genes from the Salk Institute for Biological Studies. Agritope
believes that the Salk Genes may have the potential to confer disease
resistance, enhance crop yield, control flowering, and enhance gene expression
in plants. Agritope has an option to obtain a worldwide license to use the Salk
Genes in a wide range of fruit and vegetable species.
The Company consists of two units: Agritope Research and Development
and Vinifera. Agritope Research and Development contributes biotechnology and
product development to strategic partners and provides disease screening and
elimination programs to Vinifera. Through Vinifera, Agritope believes that it
offers one of the most technically advanced grapevine plant propagation and
disease screening and elimination programs available to the wine and table grape
production industry.
AGRITOPE BIOTECHNOLOGY PROGRAM
Historically, Agritope's biotechnology program focused on using the
tools and techniques of plant genetic engineering to regulate the synthesis of
ethylene in ripening fruits and vegetables. Recently, the Company has begun
research into genetically regulating other physiological processes in plants.
Ethylene is a gaseous plant hormone which in higher plant species is responsible
for fruit ripening and vegetable senescence as well as numerous other
physiological effects. The Company has identified and patented a single gene
that can be inserted into plants and expressed to regulate the plant's ability
to produce ethylene. In addition, Agritope is conducting research in the area of
disease control, including screening plants for the presence of disease and
creating genetically engineered plants with resistance to pathogens.
Ripening Control. The fresh produce industry is based largely upon rapid
harvesting, processing and distribution of fruits and vegetables in order to
prevent spoilage and ensure the arrival of product at retail outlets in
acceptable condition for consumer purchase and use. The post-harvest period for
most fruits and vegetables is one of continuous ripening and senescence, as
evidenced by rapid changes in color, texture, flavor, nutrient content, and
other quality attributes. Product losses due to perishability during harvesting,
processing, packing, shipping and distribution can reach substantial portions of
overall crop yield. Growers frequently incur losses resulting from the
abandonment of crops in the field or having shipments refused by receivers
because the produce is overripe. In addition, wholesalers and retailers may be
forced either to discard or sell overripe produce at reduced prices and
consumers often must use produce shortly after purchase to avoid spoilage.
Studies published in the USDA Marketing Research Report have estimated
post-harvest losses of 30 percent and 40 percent, respectively, for strawberries
shipped from Florida to the Chicago and New York markets. In the U.S. fruit and
vegetable markets, post-harvest losses are estimated to amount to several
billion dollars annually.
Post-harvest losses are largely attributable to the effects of
ethylene. Because ethylene is a gas, it not only affects the plant producing it,
but also surrounding plants as well. The physiological effects of ethylene
include initiation and enhancement of ripening, senescence, leaf abscission and
drooping, and flower fading and wilting. Common examples include the ripening
and subsequent rotting of tomatoes and apples, discoloration in lettuce and
broccoli, and the short bloom life of cut flowers.
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<PAGE>
The importance of controlling ethylene production in plants has been
recognized for decades, and has been addressed primarily through the use of
controlled atmosphere storage, chemical treatment, and special packaging.
Conventional techniques for controlling ethylene production have serious
disadvantages that include high cost, time-critical handling requirements and
lack of consistent ripening. For example, the majority of product sold in the
fresh tomato market today is composed of "gas-green" tomatoes. These tomatoes
are picked and packed while still green and firm. Prior to shipping to wholesale
customers, green tomatoes are exposed to ethylene gas in order to initiate
ripening of the product. In general, gas-green tomatoes are perceived by
consumers to have less desirable taste and texture than vine ripened tomatoes.
Agritope believes the ability to regulate ethylene and control ripening
through genetic engineering represents an opportunity to provide a superior
product to consumers while also improving profitability for growers and
distributors. Growers may achieve higher marketable yields due to fewer losses
to overripe product in the field and may lower labor costs by decreasing
frequency of harvest. For packer/shippers, better control of product
perishability may result in improved inventory flexibility and control, and more
uniform product quality.
Ethylene Control Technology. Agritope's ethylene control technology is focused
on the use of a patented gene known as SAMase. The expression of SAMase in
plants produces an enzyme that acts to degrade one of the important precursor
compounds (S-adenosylmethionine or "SAM") necessary for the production of
ethylene. Agritope has genetically engineered plants to express the SAMase gene
only when certain levels of rising ethylene concentrations are reached in the
tissues of the fruit or plant. This feature causes the production of greater
levels of the enzyme that degrades SAM in response to a correspondingly higher
level of ethylene. Agritope believes that this technology thus offers a major
advantage over other approaches to ripening control in that the production of
ethylene may be specifically reduced to levels that allow for the initiation of
ripening but that delay the spoiling effects of excess ethylene. Therefore, the
fruit can be maintained at an optimal level of ripeness for an extended period
of time. An additional benefit of Agritope's technology is that the reaction
catalyzed by the SAMase gene results in compounds normally found in plants.
Agritope believes its SAMase technology can be utilized for the control of
ethylene in any plant species where ethylene affects ripening or senescence.
Agritope's application of ethylene control technology to various fruit
and vegetable crops is at different stages, as described below. There are
difficult scientific objectives to be achieved with respect to application of
the technology to certain crops before the technical or commercial feasibility
of the modified crops can be demonstrated. There can be no assurance that the
technology can be successfully applied to particular crops or that the modified
crops can be successfully and profitably produced, distributed, and sold. See
"Risk Factors--Uncertainty of Product Development."
Agritope's ripening control technology is protected by a U.S. patent
covering the use of any gene that encodes S-adenosylmethionine hydrolase (the
enzyme expressed by the SAMase gene) in any plant species. In addition to the
patent on the SAMase gene, utility claims have been allowed on the promoter/gene
combination used by Agritope in applications currently under development as well
as potential applications in all other fruit-bearing plants. In the area of
regulated ripening control, Agritope has four additional U.S. and foreign
patents pending. In addition, Agritope has three U.S. and foreign patent
applications pending in related areas.
The Salk Genes. In addition to its ethylene control technology, Agritope also
recently acquired certain rights to certain proprietary genes discovered by
scientists at the Salk Institute for Biological Studies ("Salk"). The Company
believes that the Salk Genes may have the potential to confer disease
resistance, enhance yield, control flowering and enhance gene expression in
plants. Agritope believes these new technologies will allow Agritope to leverage
its ability to genetically engineer fruits and vegetables and enhance its
ability to broaden its pipeline of new genetically engineered products. U.S. and
international patent filings have been made with respect to each of these genes.
A patent covering one gene, LEAFY, recently issued in the U.S.
Under the terms of the Salk agreement, Agritope has an option to obtain
an exclusive or nonexclusive worldwide license to use the Salk Genes in a wide
range of fruit and vegetable crops. The agreement permits
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<PAGE>
Agritope to use each Salk Gene for research and evaluation purposes, for which
Agritope will pay an annual access fee until it elects to license the gene for
commercial purposes. Agritope will pay a license issue fee and royalty for each
Salk Gene it elects to license. Agritope has also agreed to reimburse a
percentage of applicable Salk patent costs. Salk retains ownership of the Salk
Genes, subject to applicable U.S. government rights. Agritope will own any
modified plant species and fruit and vegetable crops it develops using the Salk
Genes, and will therefore have control of the marketing and distribution rights
to such products.
Agritope's work with the Salk Genes to produce desirable fruit and
vegetable crops is at an early stage. There are difficult scientific objectives
to be achieved before the technological or commercial feasibility of the
products can be demonstrated. There can be no assurance that any of Agritope's
products under development using the Salk Genes, if and when fully developed and
tested, will perform in accordance with Agritope's expectations, that necessary
regulatory approvals will be obtained in a timely manner, if at all, or that
these products can be successfully and profitably produced, distributed and
sold.
SAR-1 is a gene that confers systemic acquired resistance ("SAR"). SAR
is the ability of plants to develop a powerful disease resistance state. After
exposure to a non-lethal inoculum of a bacterial, viral or fungal pathogen, a
plant will possess a heightened ability to defend itself against a broad range
of new pathogenic challenges. The phenomenon of SAR has been studied for years
but only recently at the molecular level. Scientists at the Salk Institute for
Biological Studies, in collaboration with those at the Samuel Roberts Nobel
Foundation, have discovered a gene, SAR-1, that appears to play a key role in
the maintenance of SAR. Agritope intends to utilize SAR-1 in the development of
plant varieties that have increased disease resistance to a broad range of plant
pathogens.
DET2 is a gene that controls brassinosteroid synthesis in plants.
Brassinosteroids are compounds that are naturally produced in minute quantities
in plants and play a key role in plant growth and development. In addition to
being difficult to extract (due to their small quantity within the plant),
brassinosteroids are also exceedingly difficult to synthesize using organic
synthesis methods. Nevertheless, research has demonstrated that application of
purified brassinosteroids to crop plants can result in enhanced yields.
Scientists at the Salk Institute have identified the key enzymatic step that
limits brassinosteroid synthesis in plants and cloned the gene, DET2, that
encodes the enzyme. Expression of the gene in transgenic plants has produced
plants with enhanced growth properties due to increased synthesis of
brassinosteroid by the transgenic plant.
BIN1 is a gene that encodes the plant receptor for brassinosteroids.
The BIN1 gene encodes a receptor-like protein kinase involved in brassinosteroid
signaling and provides further opportunities for biotechnological applications
related to yield increase in transgenic plants. In principle, it is possible to
manipulate both hormone biosynthesis with DET2, as described above, as well as
the level of brassinosteroid receptor through BIN1. In addition, it is possible
to generate BIN1 derivatives that have been activated as if brassinosteroid were
bound. Both approaches, either separately or together, have the potential to
greatly stimulate plant growth and yield.
Cyclin is a gene that is involved in regulating cell division. Salk
Institute scientists have expressed the cyclin gene in transgenic plants and
believe it may play a role in accelerating root growth. Furthermore, transgenic
crop plants containing the cyclin gene are also expected to have enhanced
vegetative growth properties. Agritope intends to test the cyclin gene initially
in commercial tomato and carrot varieties.
LEAFY is a gene that is responsible for flower initiation in plants.
Scientists at the Salk Institute have demonstrated that transgenic aspen trees
expressing LEAFY develop flowers within months rather than the 8 to 10 years
that a non-transgenic aspen requires. Agritope intends to investigate uses of
the LEAFY gene for use in tree fruits and grapevines. Alternatively, inhibiting
LEAFY expression in plants may prevent plants from flowering, which could be of
value in some vegetable crops such as lettuce and celery.
Booster Element ("BE") is a genetic element (a small piece of DNA) that
can be added to plant gene promoters to enhance gene expression. The BE
technology is applicable to a range of plant genetic engineering strategies,
including the Company's SAMase ripening control technology, and to other Salk
genes. For example,
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certain crops may need a higher level of SAMase expression to produce a specific
level of ripening control. BE may facilitate manipulation of the promoters
controlling SAMase expression and thus improve the utility of the SAMase
technology.
Additional Technologies. Agritope is also conducting research on several
additional early-stage technologies. For example, Agritope scientists have
devised a genetic engineering strategy to confer seedlessness to fruit crops. In
addition, Agritope has recently been awarded a Phase I Small Business Innovation
Research ("SBIR") grant to develop a novel geminivirus resistance strategy and
to incorporate the approach into commercial tomato varieties. Geminiviruses are
a class of plant viruses that cause widespread damage in several crops including
tomato, pepper, melon and squash.
Existing Development Programs. Agritope's research and development programs are
directed toward several highly perishable fruit and vegetable crops described
below. The development program comprises five stages, including gene isolation,
transformation, product evaluation, seed/plant production and product launch,
defined below.
The following chart shows the approximate progress Agritope has made to
date with various crops, which are described in more detail below.
[Chart titled "Agritope Product Development Program" listing the stages
of development (gene isolation, transformation, product evaluation,
seed/plant production, and product launch). The chart shows that the
following products are in the stages indicated:
Melon Product Evaluation
Tomato Product Evaluation
Raspberry Product Evaluation
Additional Crops Gene Isolation]
Gene Isolation: The initial stage of genetic engineering. Gene
isolation involves the identification and characterization of genes and
gene promoters for use in Agritope's development programs. These
genetic elements are then combined for use in genetically engineered
plants.
Transformation: The stage at which the new genetic material is
introduced into the plant. The transgenic plants which result are then
available for product evaluation.
Product Evaluation: The analysis of transgenic plants in both
laboratory and field settings to determine commercial utility. This
stage also involves the plant breeding and selection process to develop
commercially competitive new varieties that incorporate the Agritope
technology. Regulatory data are also collected and submitted at this
stage.
Seed/Plant Production: Propagation of selected plant material (either
seed or plants) in quantities needed for commercial production.
Product Launch: Commercial production and sale, following regulatory
clearance.
Melon. The U.S. wholesale fresh melon market is estimated to exceed $350 million
annually. Perishability in melons results in substantial product losses during
the processes of production, harvesting, and distribution. Agritope believes
that melons represent a substantial market opportunity for implementation of its
ripening control technology. Recent scientific reports have demonstrated a
dramatic increase in shelf life for specialty type melons in which the ability
to produce ethylene has been impaired. Using proprietary seed varieties supplied
by two units of the French seed company Groupe Limagrain: Clause Semences and
its U.S. affiliate Harris Moran Seed Company ("Harris Moran"), Agritope is
developing commercial melon varieties with controlled ripening and
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increased post-harvest product life. Transgenic melons containing Agritope's
ethylene control gene are currently being evaluated jointly by Harris Moran and
Agritope technicians.
Tomato. The annual U.S. wholesale fresh market tomato business is estimated at
$1.7 billion. In order to facilitate the commercialization of its ethylene
control technology for this market, Agritope formed Superior Tomato Associates,
L.L.C. ("STA"), a joint venture with Sunseeds Company, the developer and
producer of several leading fresh market tomato varieties.
Agritope provides genetic engineering technology and regulatory
expertise, has responsibility for managing the joint venture, and owns a
two-thirds equity ownership interest in STA. Sunseeds provides elite tomato
germplasm and breeding expertise in the development of transgenic varieties. STA
owns rights to any fresh market cherry, roma and vine-ripened large fruited
tomato varieties developed for the joint venture using Agritope ethylene control
technology and Sunseeds germplasm. STA also owns any technology jointly
developed by Agritope and Sunseeds. The parties otherwise retain all rights to
their respective technologies.
STA is currently in the process of developing and testing transgenic
cherry, roma, and large fruited vine ripe tomato varieties. Agritope has
developed lines of elite tomato germplasm provided by Sunseeds. Recent field
trials have successfully demonstrated the transfer of Agritope's SAMase ripening
control technology to a number of Sunseeds' elite breeding lines. Sunseeds is
conducting further breeding and field trials of these transgenic lines. These
trials will be followed by production scale trials that, if successful, will
lead to regulatory submissions and, if regulatory clearances are received,
commercial-scale seed production. Seeds will then be sold to approved growers,
who will pay STA a royalty on net sales of tomatoes grown from the seed.
Prior to the formation of STA, Agritope submitted safety, nutritional,
and environmental information on a prototype transgenic tomato line to both the
USDA and the FDA. In March 1996, the USDA issued its finding that this line has
no significant environmental impact and would no longer be considered a
regulated article. During the same month the FDA determined that the variety did
not raise issues that would require pre-market review or approval by that
agency. In addition to receiving these U.S. regulatory clearances, Agritope also
conducted field evaluations of SAMase tomato lines in Mexico under permits
granted by the Mexican Ministry of Agriculture. In order to commence sale of
selected varieties, Agritope will be required to make supplemental submissions
to the USDA and FDA that establish that such varieties are comparable to the
previously cleared lines.
Raspberry. The wholesale raspberry market, estimated at $48 million annually in
the U.S., has experienced limited growth because of the extreme perishability of
the fruit. Agritope believes that the successful development of raspberries
containing its ethylene control technology could permit a significant expansion
of the fresh raspberry market.
In a collaboration with Sweetbriar Development, Inc. ("Sweetbriar"),
the largest fresh raspberry producer in the U.S., Agritope has engineered
several of Sweetbriar's proprietary commercial raspberry varieties to contain
the SAMase gene. Initial field trials of transgenic raspberries are currently
underway at Sweetbriar facilities in California and Agritope facilities in
Woodburn, Oregon. Agritope has already demonstrated the ability to reduce
ethylene synthesis in the fruit. Successful development of a commercial
transgenic raspberry, which would be owned by Sweetbriar, will require further
demonstration of improved shelf life as well as additional field trials to
obtain the appropriate regulatory clearances. If these conditions are met,
Sweetbriar would produce the new raspberries for distribution and marketing by
Driscoll Strawberry Associates ("Driscoll"), the largest distributor of fresh
raspberries and strawberries in the U.S. Agritope would receive royalties on
wholesale product sales. Separately, Agritope has integrated its ripening
control technology into several public domain varieties.
Vegetable and Flower Crops. Agritope and Vilmorin have entered into the Vilmorin
Research Agreement covering certain vegetable and flower crops. See "Risk
Factors--Terms for Commercialization of Certain Vegetable and Flower Crops."
Under the terms of the Vilmorin Research Agreement, Vilmorin will provide
certain proprietary seed varieties and germplasm for use by Agritope in research
and development projects to be
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funded by Vilmorin, in which Agritope technology, and possibly Vilmorin
technology, may be applied to the various covered crops. The specific research
projects to be conducted will be determined by agreement of the parties, taking
into account recommendations of Agritope's Project Advisory Committee, two of
the four members of which are to be designated by Vilmorin. Unless otherwise
agreed, Vilmorin will pay, on a quarterly basis, all Agritope's out-of-pocket
expenses, including employee salaries and overhead, for each selected research
project. See "Risk Factors--Dependence on Strategic Partners."
Agritope and Vilmorin have agreed to negotiate in good faith the terms
of future commercialization agreements applicable to any commercial-stage
products that arise out of such research and development projects. It is the
intent of the parties that Agritope will receive royalties on revenues generated
through sales of modified crops or modified seeds resulting from the research
projects, or that Agritope will receive revenues through participation in
programs providing royalties to Agritope and Vilmorin based on savings realized
by farmers utilizing the modified products. If the parties are unable to agree
on the terms on which a modified crop or seed is to be commercialized, the terms
of commercialization will be determined by "baseball" style arbitration, in
which the arbitrator chooses all of the terms proposed by one party or the other
without modification or compromise. See "Risk Factors--Terms for
Commercialization of Certain Vegetable and Flower Crops."
Each of Agritope and Vilmorin will continue to own its existing
proprietary technology. Any new technology developed in the course of the
research, other than modified crops or seeds, will be jointly owned by the
parties. See "Description of Business--Patents and Proprietary Information."
Each will have a right to commercialize the new technology in designated fields
of use, subject to an obligation to pay royalties for such use to the other
party. See "Risk Factors--Dependence on Strategic Partners."
During the term of the agreement, Vilmorin will have a right of first
refusal to fund and participate in research projects proposed by Agritope
involving the genetic alteration of a covered crop. The agreement provides that
Agritope will deal with Vilmorin as a most favored customer in connection with
research and commercialization agreements. Unless terminated for default, the
agreement will remain in effect until the earlier of (i) expiration of all
patents (and absence of trade secrets) for technology used in modified crops and
seeds for which the parties have entered into commercialization agreements, and
(ii) the date on which Vilmorin ceases to own at least 214,285 shares of
Agritope capital stock.
In connection with the Vilmorin Research Agreement, Vilmorin has agreed
to purchase $1.5 million shares of Series A Convertible Preferred at a price of
$7 per share. See "Sale of Series A Convertible Preferred" and "Description of
Agritope Capital Stock--Agritope Series A Convertible Preferred." Vilmorin also
has an option, expiring on January 15, 1998, to acquire all or any portion of
the remaining 785,715 additional shares of Series A Convertible Preferred at $7
per share. Vilmorin has agreed to provide additional funding totaling $1 million
either by exercising its option to purchase Series A Convertible Preferred or
through the financing of research and development projects.
Vilmorin is majority owned by Groupe Limagrain Holding S.A.
("Limagrain"). Limagrain is in turn owned by Societe Cooperative Agricole de
Semences de Limague, a societe organized under the laws of France
("Cooperative"). Cooperative is a French agricultural cooperative and the third
largest seed company in the world. Its principal business is the production of
seeds for grains, corn, garden vegetables, and oil-producing plants.
Other Crops. Agritope is also pursuing research and development programs to
incorporate its SAMase technology into other crops where perishability causes
significant losses in the production and distribution process. These include
strawberries, bananas, peaches, pears, and apples. The estimated U.S. wholesale
markets for these crops range from $325 million for pears to $2.4 billion for
bananas.
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COMMERCIALIZATION STRATEGY
Agritope is currently evaluating a number of commercialization
strategies in order to realize the value of its technology. The Company intends
to generate revenues by licensing rights to its technology in exchange for
license fees, royalties and other payments. Agritope intends to focus its
development and licensing efforts primarily toward growers and distributors of
fruits and vegetables who are likely to derive the most benefit from the reduced
costs and spoilage losses that could potentially result from using the Company's
technologies.
As part of the Vilmorin Research Agreement, Agritope and Vilmorin have
agreed to negotiate in good faith the terms of future commercialization
agreements covering any products that reach commercial-stage development.
Agritope anticipates that it will receive royalties on the sale of any products,
including modified crops or seeds, that arise out of research and development
projects conducted by Agritope and funded by Vilmorin.
GRANTS AND CONTRACTS
U.S. Department of Commerce. In October 1997, Agritope was awarded a U.S.
Department of Commerce, National Institutes of Technology ("NIST"), Advanced
Technology Program ("ATP") grant. The award covers a three-year project and
totals $990,000. Agritope was awarded the grant for use in the application of
its proprietary ripening control technology to certain tree fruits and bananas.
The NIST/ATP grant provides cost shared funding for research and
development projects with potential for important broad based economic benefits
to the United States. Agritope will bear $1.8 million of the total costs of the
program, which are estimated at $2.8 million. The awards are made on the basis
of a rigorous competitive review which considers both scientific and technical
merit.
SBIR Programs. Agritope actively participates in the SBIR programs sponsored by
the USDA. The SBIR programs have two phases. Phase I covers a six-month project
period and a total award not to exceed $100,000. Phase II covers a two-year
project period and a total award not to exceed $750,000. Agritope was awarded a
Phase I grant of $50,000 in 1994 plus a Phase II grant of $198,000 in 1995 for
development of diagnostic tests for the detection of grapevine leafroll virus.
In 1997, Agritope received a $55,000 Phase I grant for work on geminivirus
resistance strategies in tomato.
Cooperative Research and Development Agreements. Agritope has entered into two
Cooperative Research and Development Agreements ("CRADAs") with the U.S.
Department of Agriculture /Agricultural Research Services ("USDA/ARS"). Under
the CRADAs, Agritope will collaborate with USDA/ARS laboratories by providing
research services or partial funding for research projects. In return, Agritope
has been granted a right of first refusal to obtain a license for any resulting
inventions. The first CRADA is to evaluate and confer raspberry bushy dwarf
virus resistance ("RBDVr") in raspberry. This research is a collaborative effort
with the Northwest Center for Small Fruit Research, located in Corvallis,
Oregon. The purpose of the second CRADA is for the evaluation of the ripening
physiology of SAMase transformed melon. This research will be carried out
through the USDA/ARS research station in Weslaco, Texas.
Other Grants and Contracts. Agritope has also been awarded grant support in the
past from the Oregon Strawberry Commission and Oregon Raspberry and Blueberry
Commission for antifungal biocontrol research. Agritope also receives funds for
research and development programs from its strategic partners. Agritope intends
to continue to participate in the SBIR program, similar grant programs and
projects with strategic partners, as it deems appropriate. Agritope regularly
makes application for new grants, but there is no assurance that grant support
will be continued.
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VINIFERA
Vinifera, Inc. was incorporated in 1993 to participate in the grapevine
nursery business. Through proprietary processes, Vinifera propagates and grafts
grapevine plants for sale to vineyards and to growers of table grapes. All of
Agritope's current product sales are attributable to Vinifera. Industry
sources have estimated that 44 million grafted wine grapevine plants were
produced in California in 1996. This number is expected to increase to between
70 and 90 million by the year 2000.
Traditionally, grapevine plants for sale to vineyards are produced
seasonally using field grown, dormant cuttings that are grafted. In contrast,
Vinifera uses year-round greenhouse propagation and a herbaceous grafting method
that employs very young, actively growing cuttings. As a result of greenhouse
propagation, Vinifera is able to develop in two years a quantity of new plants
that is approximately ten times larger than can be produced with traditional
techniques. In addition, herbaceous grafting with green cuttings could allow a
vineyard to begin commercial production of grapes from a newly planted vineyard
a year sooner than would otherwise be possible. This grafting process also
produces sturdier unions than dormant grafting, resulting in significantly
higher yields of successful grafts, both at the propagation stage and in the
survival of actual plantings in the field. Agritope Research and Development
provides disease testing services for Vinifera.
Vinifera is headquartered in Petaluma, California, with propagation and
production facilities there and in Woodburn, Oregon. Its library of grapevine
plants includes 32 different phylloxera-resistant types of rootstock, 88
different wine varietal clones, and ten different table grape varietal clones.
In addition, several French and Italian varietals are currently passing through
quarantine and, when released, will be available to the U.S. market exclusively
through Vinifera. Vinifera believes that this collection of different grapevine
clones is one of the largest in the world. Vinifera's U.S. customer base
consists of over 80 vineyards in California, Washington and Oregon. In 1995,
Vinifera established a joint venture in Argentina (Vinifera Sudamericana S.A.)
to begin the propagation of plant material in that country. Vinifera is
currently in the process of establishing similar ventures in other countries
with large grape and wine production industries.
COMPETITION
The plant biotechnology industry is highly competitive. Competitors
include independent companies that specialize in biotechnology; chemical,
pharmaceutical and food companies that have biotechnology laboratories;
universities; and public and private research organizations. Agritope believes
that many companies including companies with significantly greater financial
resources, such as Monsanto Company, DNAP Holding and Zeneca Plant Sciences, are
engaged in the development of mechanisms to control the ripening and senescence
of fruit and vegetable products. Technological advances by others could render
Agritope's products less competitive. The Company believes that, despite
barriers to new competitors such as patent positions and substantial research
and development lead time, competition will intensify, particularly from
agricultural biotechnology firms and major agrichemical, seed and food companies
with biotechnology laboratories.
GOVERNMENT REGULATION
Regulation by federal, state and local government authorities in the
U.S. and by foreign governmental authorities will be a significant factor in the
future production and marketing of Agritope's genetically engineered fruit and
vegetable products.
The federal government has implemented a coordinated policy for the
regulation of biotechnology research and products. The USDA has primary federal
authority for the regulation of specific research, product development and
commercial applications of certain genetically engineered plants and plant
products. The FDA has principal jurisdiction over plant products that are used
for human or animal food. The EPA has jurisdiction over the field testing and
commercial application of plants genetically engineered to contain pesticides.
Other federal agencies have jurisdiction over certain other classes of products
or laboratory research.
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The USDA regulates the growing and transportation of most genetically
engineered plants and plant products. In March 1996 following a request from
Agritope, the USDA issued a determination that permits the growing and shipping
of Agritope's prototype variety of ripening-controlled cherry tomato anywhere in
the U.S. in the same manner as conventionally developed tomatoes.
In May 1992, the FDA announced its policy on foods developed through
genetic engineering (the "FDA Policy"). The FDA Policy provides that the FDA
will apply the same regulatory standards to foods developed through genetic
engineering as applied to foods developed through traditional plant breeding.
Under the FDA Policy, the FDA will not ordinarily require premarket review of
genetically engineered plant varieties of traditional foods unless their
characteristics raise significant safety questions, such as elevated levels of
toxicants, the presence of allergens, or they are deemed to contain a food
additive.
In March 1996, the FDA announced its determination, based on its review
of food safety data submitted by Agritope, that Agritope's prototype variety of
ripening controlled cherry tomato expressing the SAMase gene has not been
significantly altered with respect to food safety or nutritive value when
compared to conventional tomatoes.
Currently, the FDA Policy does not require that genetically engineered
products be labeled as such, provided that such products are as safe and have
the same nutritional characteristics as conventionally developed products.
However, there can be no assurance that the FDA will not reconsider its
position, or that local, state or international authorities will not enact
labeling requirements, any of which could have a material adverse effect on the
marketing of products derived using the tools and techniques of genetic
engineering.
The FDA is considering modifying its policy on foods developed through
genetic engineering to include a Premarket Notification ("PMN") procedure. This
policy modification could require a company that develops genetically engineered
foods to inform the FDA that its safety evaluation is complete and that the
company intends to commercialize the product. The objective of the PMN is to
make the FDA and the public aware of all new genetically engineered food
products entering the market. Agritope believes that any future requirement for
a PMN should not delay plans to commercialize its genetically engineered fruit
and vegetable products.
Agritope's complete range of agribusiness and plant biotechnology
activities are subject to general FDA food regulations and are, or may be,
subject to regulation under various other laws and regulations. These include
but are not limited to the Occupational Safety and Health Act, the Toxic
Substances Control Act, the National Environmental Policy Act, other federal
water, air and environmental quality statutes, import/export control
legislation, and other laws. At the present time most states are generally
deferring to federal agencies (USDA or EPA) for the approval of genetically
engineered plant field trials, although states are provided a review period
prior to the issuance of a field trial permit. Failure to comply with applicable
regulatory requirements could result in enforcement action, including withdrawal
of marketing approval, seizure or recall of products, injunction or criminal
prosecution.
International regulatory policies for genetically engineered plants and
plant products are not complete. Consequently, it is possible that additional
data, labeling or other requirements will be required in countries where
Agritope intends to grow and/or commercialize its genetically engineered
products. Foreign regulatory agencies could require Agritope to conduct further
safety assessments and potentially delay product development programs or
commercialization of resulting products.
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To date, to the best of its knowledge, Agritope has successfully
functioned within the scope of applicable laws and regulations, including rules
administered by the USDA, the FDA, the Mexican Ministry of Agriculture, and the
Chilean Ministry of Agriculture (Servicio Agricola y Ganadero Departemento
Proteccion Agricola de Chile). Agritope believes it is in substantial compliance
with all applicable laws and regulations pertaining to the development and
commercialization of its products.
PATENTS AND PROPRIETARY INFORMATION
In 1995, Agritope received a U.S. patent relating to its ethylene
control gene. Agritope has also applied for additional U.S. and foreign patent
protection for its ethylene control technology. Agritope's ability to
commercialize products depends in part on the ownership or right to use relevant
enabling technology as well as the ownership or right to use genes of interest.
Agritope anticipates filing patent applications for protection on future
products and technology. U.S. patents generally have a maximum term of 20 years
from the date an application is filed or 17 years from issuance, whichever is
longer.
Much of the technology developed by Agritope is subject to trade secret
protection. To reduce the risk of loss of trade secret protection through
disclosure, Agritope requires its employees and consultants to enter into
confidentiality agreements. Agritope believes that patent and trade secret
protection is important to its business. However, the issuance of a patent or
existence of trade secret protection does not in itself ensure Agritope's
success. Competitors may be able to produce products competing with a patented
Agritope product without infringing on Agritope's patent rights. Issuance of a
patent in one country generally does not prevent others from manufacturing or
selling the patented product in other countries. The issuance of a patent to
Agritope or to a licensor is not conclusive as to validity or as to the
enforceable scope of the patent. The validity or enforceability of a patent can
be challenged by litigation after its issuance, and, if the outcome of such
litigation is adverse to the owner of the patent, the owner's rights could be
diminished or withdrawn. Trade secret protection does not prevent independent
discovery and exploitation of the secret product or technique.
Agritope recently acquired certain rights to five new proprietary genes
discovered by scientists at the Salk Institute for Biological Studies. Agritope
believes the Salk Genes may have the potential to confer disease resistance,
enhanced yield, controlled flowering, and enhanced gene expression in plants.
All of the Salk Gene technologies are covered by pending patent applications.
Agritope has an option to obtain an exclusive worldwide license to the Salk
Genes for a field of use that includes a variety of plant species and nearly all
fruit and vegetable crops.
Agritope and Vilmorin have entered into the Vilmorin Research
Agreement. Under the terms of the agreement, Agritope and Vilmorin will each
continue to own its existing proprietary technology. Any new technologies will
be owned jointly by the parties, with each party having a royalty-bearing right
to commercialize the new technology in the party's field of use.
PERSONNEL
At September 30, 1997, Agritope and its subsidiaries had 46 full-time
employees, including 19 in research and development and 23 at the Vinifera grape
plant nursery operation, which also employs seasonal part-time employees as
needed. Agritope considers its relations with its employees to be excellent.
None of its employees are represented by labor unions.
Agritope employs five persons holding Ph.D. degrees with specialties in
the following disciplines: applied botany, bacteriology and public health,
biochemistry and biophysics, biological sciences, molecular biology, and plant
pathology and molecular virology. From time to time, Agritope also engages the
services of scientists as consultants to augment the skills of its scientific
staff.
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SCIENTIFIC ADVISORY BOARD
Agritope utilizes the services of a Scientific Advisory Board. The
Scientific Advisory Board meets periodically to review Agritope's research and
development efforts and to apprise Agritope of scientific developments pertinent
to Agritope's business. The Agritope Scientific Advisory Board consists of
Richard K. Bestwick, Agritope Senior Vice President--Research and Development;
Eugene W. Nester, Ph.D., Professor and Chair Department of Microbiology,
University of Washington; Peter R. Bristow, Ph.D., Associate Professor of Plant
Pathology, Washington State University; Roger Beachy, Ph.D., Scripps Family
Chair, Department of Cell Biology, Scripps Research Institute; and Christopher
J. Lamb, Ph.D., Professor, Director, Plant Biology Lab, Salk Institute for
Biological Studies. Drs. Nester and Beachy are members of the National Academy
of Sciences.
After the closing of the Vilmorin Research Agreement, Vilmorin will
have the right to designate a scientist to sit on the Scientific Advisory board.
PROPERTIES
Agritope currently uses a portion of Epitope's office space and
research and development facilities in Beaverton, Oregon, consisting of
approximately 35,600 square feet of office, manufacturing, and laboratory space.
Agritope is charged a monthly fee of $16,000 by Epitope for use of the
facilities.
Agritope has entered into a lease agreement for approximately 11,000
square feet of office and laboratory space in Portland, Oregon. The agreement
requires monthly rental payments on a triple net basis of $10,285 from
commencement of the lease term on March 1, 1998 through May 1, 2001, and
thereafter of $11,210 until expiration of the lease on February 28, 2003.
Agritope intends to relocate its office and research and development operations
to the leased facilities on March 1, 1998, or as soon thereafter as practicable.
Agritope owns a 15-acre farm in Woodburn, Oregon, which it leases to
Vinifera for use in connection with Vinifera's grapevine propagation operations.
Greenhouse capacity at the farm currently totals 60,000 square feet.
In addition to leasing Agritope's Oregon farm and greenhouse, Vinifera
leases 250,000 square feet of greenhouse space in Petaluma, California under a
lease that expires January 31, 2001. The lease provides an option to purchase
the leased premises, exercisable through January 31, 1999, for a price of $1.3
million. The California greenhouse is currently in the final stages of being
upgraded to provide the capacity necessary to meet anticipated 1998 production
requirements.
Agritope believes that its present and new leased facilities are
adequate to meet current requirements.
LEGAL PROCEEDINGS
There are no material legal proceedings pending against Agritope.
DIVIDEND POLICY
Agritope has never declared or paid cash dividends on its common stock.
Agritope currently anticipates that it will retain all future earnings for use
in the operation and growth of its business and does not anticipate paying any
cash dividends in the foreseeable future. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
- 43 -
<PAGE>
TRANSFER AGENT
The transfer agent and registrar for the Agritope Common is ChaseMellon
Shareholder Services, L.L.C.
- 44 -
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The Agritope Board consists of seven directors. Under the terms of the
Series A Convertible Preferred, the holders of such shares will be entitled to
elect one director on an annual basis so long as at least 214,285 shares of
Series A Convertible Preferred are outstanding. That director was appointed to
the Agritope Board in December 1997. Because the Agritope Board is a staggered
board, the other six directors have been designated as Class 1, Class 2 and
Class 3 directors. Directors of each class will serve for a term expiring at the
annual meeting of Agritope stockholders in 1998, 1999 and 2000, respectively.
The table below presents the names, ages and positions of Agritope's
executive officers and directors as of the Distribution Date.
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C>
Adolph J. Ferro, Ph.D. 55 Chairman of the Board, President,
Chief Executive Officer and
Class 1 Director.
Gilbert N. Miller 56 Executive Vice President,
Chief Financial Officer,
Secretary and Class 1 Director
Richard K. Bestwick, Ph.D. 43 Senior Vice President--Research
and Development
Matthew G. Kramer 40 Vice President--Product Development
Joseph A. Bouckaert 56 President and Chief Executive
Officer--Vinifera, Inc.
W. Charles Armstrong 52 Class 2 Director
Roger L. Pringle 56 Class 2 Director
Michel de Beaumont 55 Class 3 Director
Nancy L. Buc 53 Class 3 Director
Pierre Lefebvre (1) 46 Director
</TABLE>
(1) Mr. Lefebvre has been elected at the request of the holders of the Series A
Convertible Preferred Stock to be issued in connection with the Vilmorin
Research Agreement entered into between Agritope and Vilmorin.
Adolph J. Ferro, Ph.D., has been President and Chief Executive Officer
of Agritope since 1989, and a director since 1990. He is Chairman of the Board
of Agritope. He was President and Chief Executive Officer of Epitope from 1990
through May 1997, and has been a director of Epitope since 1990. Dr. Ferro was
Senior Vice President of Epitope from 1988 until 1990. From 1987 until 1988, he
was Vice President of Research and Development. He was a cofounder of
Agricultural Genetic Systems, Inc., which Epitope acquired and renamed Agritope
in 1987. Prior to joining Agritope, he was a Professor in the Department of
Microbiology at Oregon State University ("OSU"). From 1981 to 1986, he was an
Associate Professor at OSU, and from 1978 to 1981, he was
- 45 -
<PAGE>
an Assistant Professor at OSU. From 1975 to 1978, he was Assistant Professor at
the University of Illinois at Chicago in the Department of Biological Sciences.
Dr. Ferro received a B.A. degree from the University of Washington in 1965, an
M.S. degree in biology from Western Washington University in 1970, and a Ph.D.
in bacteriology and public health from Washington State University in 1973.
Gilbert N. Miller has been Chief Financial Officer of Agritope since
1991. He was also Senior Vice President of Agritope from 1992 until February
1996, when he became Executive Vice President. He has been a director of
Agritope since August 1997. He joined Epitope in 1989 as Executive Vice
President and Chief Financial Officer and has served as Epitope's Treasurer
since 1991. He will not serve as Executive Vice President and Chief Financial
Officer of Epitope after the Distribution. From 1987 to 1989, he was Executive
Vice President, Finance and Administration, of Northwest Marine Iron Works, a
privately held ship repair contractor located in Portland, Oregon. From 1986 to
1987, he was Vice President/Controller of the Manufacturing Group of Morgan
Products, Ltd., a manufacturer and distributor of specialty building products
based in Oshkosh, Wisconsin. He also held the position of Senior Vice
President/Finance of Nicolai Company, a Portland wood door manufacturing concern
which became a wholly owned subsidiary of Morgan Products, Ltd., in 1986. Mr.
Miller received a B.S. degree from Oregon State University and a Master of
Business Administration degree from University of Oregon. He is a certified
public accountant.
Richard K. Bestwick, Ph.D., has been a Senior Vice President of
Agritope since 1992. He became Chief Operating Officer--Research and Development
in October 1996 and was named Senior Vice President - Research and Development
in October 1997. He was employed by Epitope from 1987 to 1992. Prior to joining
Epitope, he was a Research Assistant Professor in the Department of Biochemistry
at the Oregon Health Sciences University, where he also completed his
postdoctoral training. Dr. Bestwick received a Ph.D. in Biochemistry and
Biophysics from Oregon State University and a B.S. degree from Evergreen State
College.
Matthew G. Kramer joined Agritope in 1994 as Vice President--Product
Development. From 1987 to 1994, he was Director of Production and Product
Development for Calgene Fresh, Inc., where he was involved in development and
commercialization of the FLAVR SAVR(TM) tomato. Mr. Kramer received an M.S.
degree in Agronomy and a B.S. degree at Montana State University.
Joseph A. Bouckaert joined Vinifera as its President and Chief
Executive Officer when Vinifera began operations in 1993. From 1988 to 1991, he
was Vice Chairman of DNA Plant Technology Corporation, a publicly held
agricultural biotechnology company with offices in Cinnaminson, New Jersey, and
Oakland, California. He also was a co-founder and member of the board of
directors of Florigene, B.V., an agricultural biotechnology company focused on
the flower business and located in the Netherlands. From 1985 to 1988, he served
as President and Chief Executive Officer of Advanced Genetic Sciences Inc. a
publicly held biotechnology company located in Oakland, California. In 1982, Mr.
Bouckaert co-founded Plant Genetic Systems, N.V., a privately held agricultural
biotechnology company located in Brussels, Belgium, and served as its first
Managing Director from 1982 through 1986. Mr. Bouckaert received a Juris Doctor
degree from the University of Leuven in Belgium and postgraduate degrees in
Business Administration from the University of Ghent in Belgium, and the
University of Kentucky in Lexington, Kentucky.
W. Charles Armstrong has been a director of Agritope since August 1997.
He has also been a director of Epitope since 1989 and a director of Pacificorp,
a public utility holding company, since 1996. He served as President and Chief
Executive Officer of Epitope from May 1997 to October 1997. He was Chairman and
Chief Executive Officer of Bank of America Oregon from September 1992 until
September 1996. From April to September 1992, he was Chairman and Chief
Executive Officer of Bank of America Idaho. Mr. Armstrong served as President
and Chief Operating Officer of Honolulu Federal Savings Bank from February 1989
to April 1992. Prior to February 1989, he was President and Chief Executive
Officer of West One Bank, Oregon.
- 46 -
<PAGE>
Roger L. Pringle has been a director of Agritope since 1990. He has
been a director of Epitope since 1989, and Chairman of the Board of Epitope
since 1990. He is President of The Pringle Company, a management consulting firm
in Portland, Oregon, which he founded in 1975.
Michel de Beaumont was elected a director of the Company in September
1997. Since 1981, Mr. de Beaumont has served as a co-founder and director of
American Equities Overseas (UK) Ltd. of London, England, a wholly owned
subsidiary of American Equities Overseas, Inc. ("American Equities"), a private
securities brokerage and corporate finance firm. Mr. de Beaumont was Vice
President in the London office of American Securities Corp. from 1978 to 1981.
He also served as Vice President, Institutional Sales in the London office of
Smith Barney Harris Upham, Inc. from 1975 to 1978 and as a Vice President at
Oppenheimer & Co. Mr. de Beaumont graduated from the University of Poitiers and
Paris with degrees in Advanced Math, Physics and Chemistry and has earned a
degree in business administration from the University of Paris.
Nancy L. Buc was elected a director of the Company in September 1997.
She has been a partner in the law firm of Buc & Beardsley in Washington, D.C.
since 1994. Prior to 1994, Ms. Buc was a partner at Weil, Gotshal & Manges from
1981 to 1994 and from 1977 to 1980. Ms. Buc served as General Counsel for the
FDA from 1980 to 1981. During an earlier period of government service
(1969-1972), she served successively as Attorney-Advisor to the Chairman of the
Federal Trade Commission and Assistant Director of that agency's Bureau of
Consumer Protection. She is a Director of the Virginia Law School Foundation and
the Women's Legal Defense Fund. Ms. Buc is a graduate of Brown University and
the University of Virginia School of Law. Ms. Buc holds an honorary Doctor of
Laws from Brown and is a fellow emerita of the Brown Corporation, that
university's governing board.
Pierre Lefebvre was elected a director of the Company in December 1997.
He has served as Deputy Chief Executive Officer of Groupe Limagrain Holding and
as chief executive officer of Vilmorin, a subsidiary of Groupe Limagrain
Holding, since 1990. He presently leads both Vilmorin and the Groupe Limagrain
Bio-Health Division. Prior to 1990, Mr. Lefebvre served as chief executive
officer at Harris Moran Seed Company (formerly Ferry-Morse Seed Company), a
California-based subsidiary of Limagrain, specializing in vegetable and flower
seeds, and as controller at Tezier, another subsidiary of Limagrain. Mr.
Lefebvre is a 1975 graduate of Groupe ESSEC School of Management, a French
business school.
COMMITTEES OF THE BOARD
The Agritope Board has established the following standing committees:
Executive Committee, Audit Committee, Compensation Committee and Nominating
Committee. Pursuant to the Bylaws, the Agritope Board may also establish other
committees from time to time in its discretion.
The Executive Committee consists of at least two directors and may
exercise all the authority and powers of the Agritope Board in the management of
the business and affairs of Agritope, except those reserved to the Agritope
Board by the Delaware General Corporation Law. Mr. Pringle (chair), Dr. Ferro
and Mr. Miller are the initial members of the Executive Committee.
The Audit Committee consists of at least two outside directors and,
among other things, recommends the appointment of independent public
accountants, reviews the scope of the annual audit and the engagement letter,
reviews the independence of the independent accountants and reviews the findings
and recommendations of the independent accountants and management's response.
The Audit Committee also reviews the internal audit and control functions of
Agritope and makes recommendations for changes in accounting systems, if
warranted. Mr. Armstrong (chair), Ms. Buc and Mr. Pringle are the initial
members of the Audit Committee.
The Compensation Committee also consists of at least two outside
directors and determines compensation for the officers of Agritope, administers
stock-based compensation plans and other performance-based compensation
- 47 -
<PAGE>
plans adopted by Agritope, and considers matters of director compensation and
benefits. Ms. Buc (chair) and Mr. Armstrong are the initial members of the
Compensation Committee.
The Nominating Committee which consists of at least two directors will
select and recommend candidates to serve on the Agritope Board, whose names will
be submitted for election at annual meetings of Agritope shareholders. The
Nominating Committee will also review and make recommendations to the Agritope
Board concerning the composition and size of the Agritope Board and its
committees. Mr. de Beaumont (chair), Ms. Buc, Dr. Ferro and Mr. Miller are the
initial members of the Nominating Committee.
COMPENSATION OF DIRECTORS
Nonemployee directors of Agritope will be reimbursed for out-of-pocket
expenses in connection with attending board and committee meetings. Each
nonemployee director is granted an option for 25,000 shares of Agritope Common
upon his or her initial election or appointment to the Agritope Board, plus an
additional option for 5,000 shares of Agritope Common for his or her initial
year of service. On December 1 of each subsequent year on which the director
serves on the Agritope Board, the director will receive an additional option for
5,000 shares of Agritope Common. The options will be nonqualified stock options
with an exercise price equal to 25 percent of the price of Agritope Common on
the date of grant, with the discount being no more than $2 per share. The
options will vest ratably over four years and have an indefinite term. Directors
are also eligible to receive options under Agritope's 1997 Stock Award Plan. See
"1997 Stock Award Plan."
EXECUTIVE COMPENSATION
The following table summarizes the compensation for the last three
fiscal years of the Chief Executive Officer and the three other executive
officers of Agritope whose salary and bonus exceeded $100,000 during the 1997
fiscal year. Information set forth in the table reflects compensation paid for
services rendered for Epitope and/or Agritope.
- 48 -
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Awards
Annual Compensation Securities All Other
Underlying Compen-
Name and Principal Position Year Salary Bonus Options (1) sation(2)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Adolph J. Ferro, Ph.D. 1997 $ 240,000 $ - $ 7,354
Chairman of the Board, 1996 214,183 50,000 - 4,237
President and Chief Executive 1995 200,769 113,245 5,390
Officer (3)
Gilbert N. Miller 1997 165,000 - - $ 7,125
Executive Vice President 1996 128,510 33,075 - 3,206
and Chief Financial Officer 1995 130,962 - 5,021
Richard K. Bestwick, Ph.D. 1997 150,000 - - -
Senior Vice President-- 1996 91,385 20,160 - 2,280
Research and Development (4)
Joseph A. Bouckaert 1997 160,000 - - -
President and Chief Executive 1996 160,000 33,600 - -
Officer--Vinifera, Inc. (5) 1995 115,592 40,000 - -
</TABLE>
(1) Represents the number of shares of Agritope Common for which options
were awarded. Excludes options for Epitope Stock received under the
Epitope Award Plan as follows: Dr. Ferro--74,000 options in 1995; Mr.
Miller--34,000 options in 1995; Mr. Bouckaert--50,000 options in 1996.
(2) Represents amounts contributed to Epitope's 401(k) Plan as employer
matching contributions in the form of Epitope Stock.
(3) The information in the above table does not include approximately
$440,000 payable by Epitope to Dr. Ferro, pursuant to his employment
agreement with Epitope, in connection with the termination of Dr.
Ferro's position as President and Chief Executive Officer of Epitope in
May 1997.
(4) Dr. Bestwick was not an executive officer of Agritope during fiscal
1995.
(5) Information for Mr. Bouckaert for 1996 and 1995 includes compensation
paid for periods during which Vinifera was not a subsidiary of
Agritope.
GRANTS OF OPTIONS TO PURCHASE AGRITOPE COMMON
No options to purchase Agritope Common were granted to officers named
in the "Summary Compensation Table" during the fiscal year ended September 30,
1997.
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<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND OUTSTANDING OPTIONS FOR
AGRITOPE COMMON
None of the officers named in the "Summary Compensation Table"
exercised options to purchase Agritope Common during the fiscal year ended
September 30, 1997, and none of such officers held any options exercisable for
Agritope Common at September 30, 1997.
EMPLOYMENT; CHANGE IN CONTROL AGREEMENTS
Pursuant to written employment agreements with Agritope, each of the
executive officers named in the Summary Compensation Table above is entitled to
receive one year of salary in the event of termination without cause (two years
in the case of Dr. Ferro and Mr. Miller) or two years of salary (three years in
the case of Dr. Ferro and Mr. Miller) if terminated without cause within 12
months following a change in control (within the meaning of the Exchange Act) or
sale of substantially all the assets of Agritope, except that Mr. Bouckaert's
agreement does not include a change-of-control provision. The agreements in each
case prohibit the officer from competing with Agritope for one year unless the
officer elects to waive the right to amounts otherwise payable. Mr. Bouckaert's
agreement prohibits him from competing with Vinifera for three years after
termination. The agreements do not expire by their terms, except that Mr.
Bouckaert's agreement terminates on May 31, 2000. The other agreements are
terminable by Agritope on 30 days' notice with cause or, subject to payment of
the salary amounts described above, on 90 days' notice without cause, and may be
terminated by the executive officer on 90 days' notice.
- 50 -
<PAGE>
1997 STOCK AWARD PLAN
GENERAL
The Agritope, Inc. 1997 Stock Award Plan (the "Award Plan") was adopted
by the Agritope Board and approved by Epitope as Agritope's sole stockholder in
November 1997. The Award Plan will continue in effect until awards have been
granted covering all shares available for issuance under the Award Plan or the
Award Plan is otherwise terminated by the Agritope Board. The Award Plan
provides for the issuance of a total of up to 2,000,000 shares of Agritope
Common, subject to adjustment for changes in capitalization. A summary
description of certain terms and provisions of the Award Plan and options
proposed to be granted thereunder follows. The following summary of the Award
Plan is subject to the detailed terms and provisions of the Plan.
PURPOSE
The purpose of the Award Plan is to promote and advance the interests
of Agritope and its stockholders by enabling Agritope to attract, retain, and
reward key employees, outside advisors, and directors. The Award Plan is
intended to strengthen the mutuality of interests between such employees,
advisors, and directors and Agritope's stockholders by offering equity-based
incentive awards to promote a proprietary interest in pursuing the long-term
growth, profitability, and financial success of Agritope.
AWARDS AND ELIGIBILITY
The Award Plan provides for stock-based awards to (i) employees of
Agritope and its subsidiaries (including individuals who may also be officers or
directors of Agritope or a subsidiary), (ii) members of scientific advisory
committees or other consultants to Agritope or its subsidiaries ("Advisors"),
and (iii) nonemployee directors of Agritope or its subsidiaries. Awards that may
be granted under the Award Plan include stock options, stock appreciation
rights, restricted awards, performance awards, and other stock-based awards
(collectively, " Awards"). The Compensation Committee of the Agritope Board (the
"Committee") will administer the Award Plan and determine the key employees and
Advisors of Agritope and its subsidiaries who are to receive Awards under the
plan and the types, amounts, and terms of Awards. The Award Plan authorizes the
Agritope Board to grant Awards to non-employee directors from time to time in
its discretion in accordance with its fiduciary obligations to Agritope and its
stockholders.
All employees are eligible to receive Awards under the Award Plan,
including each of Agritope's nonemployee directors and executive officers. No
options, stock appreciation rights ("SARs"), restricted awards, performance
awards, or other stock-based awards have been granted under the Award Plan.
NEW OPTIONS
Options ("New Options") to purchase a total of 1,253,394 shares of
Agritope Common have been granted to officers, employees and nonemployee
directors of Agritope under the Award Plan. New Options granted to executive
officers and nonemployee directors have an exercise price of $5.25 per share,
representing 75 percent of the fair market value of Agritope Common at the date
of grant. New Options granted to other employees have an exercise price of $7
per share, representing the fair market value of Agritope Common on the date of
grant. Each New Option becomes exercisable as to 25 percent of the shares
covered by such option on each of the first four anniversaries of the dates of
grant.
The following table shows the New Options that have been granted under
the Award Plan:
- 51 -
<PAGE>
<TABLE>
<CAPTION>
NEW PLAN BENEFITS
AGRITOPE, INC. 1997 STOCK AWARD PLAN
Number of
New
Name and Position Options
<S> <C>
Adolph J. Ferro, Ph.D. 407,759
Chairman of the Board, President and Chief Executive Officer
Gilbert N. Miller 211,593
Executive Vice President and Chief Financial Officer
Richard K. Bestwick, Ph.D. 143,900
Senior Vice President--Research and Development
Joseph A. Bouckaert 102,071
President and Chief Executive Officer--Vinifera, Inc.
Matthew G. Kramer,
Vice President--Product Development 102,071
All executive officers as a group 967,394
All nonemployee directors as a group 150,000
All employees as a group, excluding executive officers 136,000
</TABLE>
DESCRIPTION OF TERMS OF AWARDS
Following is a brief summary of the various types of Awards that may be
granted under the Award Plan.
Options. Options granted under the Award Plan may be either incentive
stock options, a tax-favored form of stock option meeting the requirements of
Section 422 of the Code, or nonqualified options, which are not entitled to
favorable income tax treatment. ISOs must expire not more than ten years from
the date of grant. The Award Plan does not limit the maximum term for
nonqualified options. The exercise price per share for options granted under the
Award Plan generally must be at least 100 percent (for incentive stock options)
or 75 percent (for nonqualified options) of the fair market value of a share of
Agritope Common on the date the option is granted. The Award Plan authorizes the
Committee (or the Agritope Board, with respect to Awards to nonemployee
directors) to issue nonqualified deferred compensation options with an option
price substantially less than the fair market value of a share of Agritope
Common on the date of grant (but not less than $1 per share) for the purpose of
deferring a specified amount of income for a recipient. The Committee (or the
Agritope Board), in its discretion, may provide in the agreement evidencing an
option that, to the extent that the option is exercised using previously
acquired shares of Agritope Common, the option holder shall automatically be
granted a replacement ("reload") option for a number of shares of Agritope
Common equal to the number of shares delivered upon exercise with an option
price equal to the fair market value of a share of Agritope Common on the date
of exercise and subject to such other terms as the Committee (or the Agritope
Board) determines. The aggregate fair market value of shares for which any
participant may be granted ISOs which are exercisable for the first time during
any calendar year may not exceed $100,000. In addition, no individual
participant may be granted options for more than 500,000 shares during any
fiscal year.
Stock Appreciation Rights. A recipient of SARs will receive, upon
exercise, a payment based on the increase in the price of a share of Agritope
Common between the date of grant and the date of exercise. Payment may be in
cash, in shares of Agritope Common, in the form of a deferred compensation
option or in any other form approved by the Committee (or the Agritope Board).
SARs may be granted in connection with options or other Awards granted under the
Award Plan or may be granted as independent Awards.
- 52 -
<PAGE>
Restricted Awards. Restricted Awards may take the form of restricted
shares or restricted units. Restricted shares are shares of Agritope Common that
may be subject to forfeiture if the recipient terminates employment or service
as a nonemployee director or Advisor during a specified period (the "Restriction
Period"). Stock certificates representing restricted shares are issued in the
name of the recipient, but are held by Agritope until the expiration of the
Restriction Period. From the date of issuance of restricted shares until any
forfeiture, the recipient is entitled to the rights of a stockholder with
respect to the shares, including voting and dividend rights. Upon expiration of
the Restriction Period and satisfaction of any other applicable conditions,
restricted shares vest and are delivered to the recipient. The Committee (or the
Agritope Board) may permit payment to be in cash, in installments or in the form
of a deferred compensation option.
Restricted units are Awards of units equivalent in value to a share of
Agritope Common, which similarly may be subject to forfeiture if the recipient
terminates employment or service as a nonemployee director or Advisor during a
Restriction Period. At the expiration of the Restriction Period, payment with
respect to restricted units is made in an amount equal to the value of the
number of shares of Agritope Common covered by the restricted units. Payment may
be in cash, unrestricted shares of Agritope Common, or any other form approved
by the Committee (or the Agritope Board).
Performance Awards. Performance Awards are designated in units
equivalent in value to a share of Agritope Common. A performance Award is
subject to forfeiture if or to the extent that Agritope, a subsidiary, an
operating group, or the recipient, as specified by the Committee (or the
Agritope Board) in the Award, fails to meet performance goals established for a
designated performance cycle. Performance Awards earned by attaining performance
goals are paid at the end of a performance cycle in cash, shares of Agritope
Common, or any other form approved by the Committee (or the Agritope Board).
Other Stock-Based Awards. The Committee (or the Agritope Board) may
grant other Awards that involve payments or grants of shares of Agritope Common
or are measured by or in relation to shares of Agritope Common. The Award Plan
thus provides needed flexibility to design future types of stock-based or
stock-related Awards to attract and retain employees, Advisors and directors in
a competitive environment.
The Board may amend or terminate the Award Plan without stockholder
approval, other than amendments that would materially increase the aggregate
number of shares of Agritope Common that may be issued under the Award Plan
(except for adjustments for changes in capitalization).
FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the principal anticipated federal
income tax consequences of Awards granted under the Award Plan to participants
and to Agritope.
Incentive Stock Options. An optionee does not realize taxable income
upon the grant or exercise of an ISO under the Award Plan.
If no disposition of shares issued to an optionee pursuant to the
exercise of an ISO is made by the optionee within two years from the date of
grant or within one year from the date of exercise, then (a) upon the sale of
the shares, any amount realized in excess of the option price (the amount paid
for the shares) is taxed to the optionee as mid-term (if the disposition is
within 18 months from the date of exercise) or long-term capital gain (if the
disposition is more than 18 months after the date of exercise) and any loss
sustained will be a mid-term or long-term capital loss, and (b) no deduction is
allowed to Agritope for federal income tax purposes. For purposes of computing
alternative minimum taxable income, an ISO is treated as a nonqualified option.
If shares of Agritope Common acquired upon the exercise of an ISO are
disposed of prior to the expiration of the two-year and one-year holding periods
- 53 -
<PAGE>
described above (a "disqualifying disposition"), then (a) the optionee realizes
compensation taxable at ordinary income tax rates in the year of disposition in
an amount equal to the excess (if any) of the fair market value of the shares at
exercise (or, if less, the amount realized on sale of the shares) over the
exercise price thereof and (b) Agritope is entitled to deduct such amount. Any
further appreciation or reduction
in value is treated as a short-term, mid-term or long-term capital gain or loss,
as applicable, to the optionee, and does not result in any deduction to
Agritope. A disqualifying disposition in the year of exercise will generally
avoid the alternative minimum tax consequences of the exercise of an ISO.
Nonqualified Options. No income is realized by the optionee at the time
a nonqualified option is granted. Upon exercise, (a) an optionee will generally
realize ordinary income in an amount equal to the difference between the
exercise price and the fair market value of the shares on the date of exercise
and (b) Agritope will receive a tax deduction for the same amount. The
optionee's cost basis in the acquired shares is the fair market value of the
shares on the exercise date. Upon sale of the shares thereafter, any
appreciation or reduction in value is treated as a short-term, mid-term, or
long-term capital gain or loss, as applicable, to the optionee, and will not
result in any deduction to Agritope.
Payment of Exercise Price in Shares. The Committee may permit
participants to pay all or a portion of the exercise price using previously
acquired shares of Agritope Common. If an option is exercised and payment is
made in previously held shares, there is no taxable gain or loss to the
participant other than any gain recognized as a result of exercise of the
option, as described above.
Stock Appreciation Rights. The grant of a SAR to a participant will not
cause the recognition of income by the participant. Upon exercise of a SAR, the
participant will realize ordinary income equal to the amount of cash payable to
the participant plus the fair market value of any shares of Agritope Common or
other property delivered to the participant. Agritope will be entitled to a
deduction equal to the amount of ordinary income realized by the participant in
connection with the exercise of a SAR.
Restricted Awards and Performance Awards. Generally, a participant will
not recognize any income upon issuance of a restricted Award or performance
Award that is subject to forfeiture during a Restriction Period or performance
cycle. Dividends paid with respect to Awards during a Restriction Period or
performance cycle prior to the vesting of the Awards will be taxable as ordinary
income to the participant. Generally, a participant will recognize ordinary
income upon the vesting of restricted Awards or performance Awards in an amount
equal to the amount of cash payable to the participant plus the fair market
value of shares of Agritope Common or other property delivered to the
participant. However, a participant may elect to recognize ordinary income upon
the grant of restricted shares, based on the fair market value of the shares of
Agritope Common subject to the Award at the date of grant. If a participant
makes such an election, dividends paid with respect to the restricted shares
will not be treated as ordinary income, but rather as dividend income, and the
participant will not recognize additional income when the restricted shares
vest. Agritope will be entitled to a deduction equal to the amount of ordinary
income recognized by the participant. If a participant who receives an Award of
restricted shares makes the special election described above, Agritope will not
be entitled to deduct dividends paid with respect to the restricted shares.
Limitation on Deductibility of Certain Compensation. Section 162(m) of
the Code generally makes nondeductible to Agritope taxable compensation paid to
a single individual in excess of $1 million in any calendar year if the
individual is the Chief Executive Officer or one of the next four highest-paid
executive officers, unless the excess compensation is considered to be
"performance based." Awards of options that are granted with an option price
equal to fair market value on the date of grant are considered performance based
for this purpose. Among other requirements contained in Section 162(m), the
material terms of a compensation plan must be approved by stockholders. Agritope
may in the future consider structuring other Awards to attempt to meet the
requirements of Section 162(m) if it determines the action to be advisable.
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<PAGE>
1997 EMPLOYEE STOCK PURCHASE PLAN
GENERAL
The Agritope, Inc. 1997 Employee Stock Purchase Plan (the "Agritope
Purchase Plan") was adopted by the Agritope Board and approved by Epitope as
sole stockholder of Agritope in November 1997. The Agritope Purchase Plan
provides for the issuance of up to 250,000 shares of Agritope Common. The
Compensation Committee of the Agritope Board (the "Committee") will administer
the Agritope Purchase Plan. The following summary of the Agritope Purchase Plan
is subject to the detailed terms and provisions of the plan.
PURPOSE
The purpose of the Agritope Purchase Plan is to give employees of
Agritope the opportunity to subscribe for shares of Agritope Common on an
installment basis through payroll deductions.
SUBSCRIPTIONS
The Agritope Purchase Plan provides for offering and purchase periods
to be set by the Committee, but no more than three regular offering periods may
be set during each fiscal year. The number of offering periods, the number of
shares offered, and the length of each period will be set by the Committee. The
Agritope Purchase Plan also provides for special offerings as described below.
Shares not subscribed for in any offering period and shares subscribed for that
cease to be subject to a subscription agreement will be available for
subscription in connection with a later offering period established by the
Committee.
The subscription price per share for each purchase period will be the
lesser of (i) 85 percent of the mean between the reported high and low sales
prices of shares of Agritope Common on the stock exchange or automated
securities interdealer quotation system on which the stock was traded on the
last trading day before the Offering Date (as defined in the Agritope Purchase
Plan) for the offering period (the "initial subscription price") and (ii) 85
percent of the mean between the reported high and low sales prices for the
shares on the date the purchase period ends, or on any earlier date of purchase
provided for in the Agritope Purchase Plan.
The total value of shares that may be subscribed for by an individual
in one or more regular offering periods within any calendar year is limited to
$21,250. Subject to this limitation, the Committee may set a minimum, a maximum,
or both a minimum and a maximum number of shares that may be subscribed for
during any offering period.
The Agritope Purchase Plan also provides for monthly special offering
dates pursuant to which any employee of Agritope may receive a one-year
subscription for a number of shares of Agritope Common equal to the amount by
which the employee's annual compensation would otherwise be increased during the
one-year period following the employee's annual compensation review divided by
the initial subscription price for the special offering date that occurs on or
immediately following the effective date of the increase in compensation. The
subscription may be provided to the employee at Agritope's discretion or
pursuant to the employee's irrevocable election in lieu of any increase in cash
compensation for the ensuing year.
An employee may terminate his or her subscription at any time before
the full purchase price for the subscribed shares has been paid and be refunded
the full amount withheld, plus interest at the rate of 6 percent per year. An
employee may also reduce the number of subscribed shares and (i) receive a
refund of the amount withheld that is in excess of the amount that would have
been withheld if his or her subscription had been for the reduced number of
shares, plus interest on the refund at the rate of 6 percent per year, or (ii)
have the excess applied to reduce the amount of future installments of the
purchase price.
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<PAGE>
An employee whose employment is terminated for any reason other than
retirement, disability or death (or the personal representative of an employee
who dies after such termination) may, at his or her election, (i) be refunded
the full amount withheld, plus interest at the rate of 6 percent per year or
(ii) receive the whole number of shares that could be purchased at the purchase
price with that amount together with a cash refund of any balance. An employee
who retires or is permanently disabled (or the personal representative of an
employee who dies while employed, retired or disabled) at any time before the
full purchase price of the subscribed shares has been paid has the rights
described above and in addition may prepay the entire unpaid balance for the
subscribed shares in a lump sum of cash and receive the shares. Any such
election must be made within three months following any termination of
employment and prior to the end of the respective purchase period.
The Agritope Board may amend or terminate the Agritope Purchase Plan
without stockholder approval, other than amendments that materially increase the
number of shares that may be issued under the plan or decrease the purchase
price of shares under the plan (except for adjustments for changes in
capitalization).
When the Agritope Purchase Plan becomes effective upon consummation of
the Distribution, approximately 50 employees are expected to be eligible to
participate in the Agritope Purchase Plan. Numbers of shares that may be subject
to future individual subscriptions under the Agritope Purchase Plan are not now
determinable.
FEDERAL INCOME TAX CONSEQUENCES
The Agritope Purchase Plan is intended to qualify as an "employee stock
purchase plan" under Section 423 of the Code. Participants do not realize
taxable income at the commencement of an offering or at the time shares are
purchased under the Agritope Purchase Plan.
If no disposition of shares purchased under the Agritope Purchase Plan
is made by the participant within two years from the offering commencement date
or within one year from the purchase date, then (a) upon sale of the shares, 15
percent of the fair market value of the shares at the commencement of the
offering period (or, if less, the amount of gain realized on sale of the shares)
is taxed to the participant as ordinary income, with any additional gain taxed
as a mid-term or long-term capital gain, as applicable, and any loss sustained
treated as a mid-term or long-term capital loss, as applicable, to the
participant, and (b) no deduction is allowed to Agritope for federal income tax
purposes.
If shares purchased under the Agritope Purchase Plan are disposed of
prior to the expiration of the two-year and one-year holding periods described
above, then (a) the participant realizes ordinary income in the year of
disposition in an amount equal to the excess (if any) of the fair market value
of the shares on the date of purchase (or, if less, the amount realized on sale
of the shares) over the purchase price thereof, and (b) Agritope is entitled to
deduct that amount. Any further gain realized is taxed as a short-term,
mid-term, or long-term capital gain to the participant and will not result in
any deduction to Agritope.
EMPLOYEE STOCK OWNERSHIP PLAN
The Agritope, Inc. Employee Stock Ownership Plan ("ESOP"), which covers
Agritope and those of its affiliates which elect to participate (the
"employers"), provides that all employees (including officers), other than
excluded classes (leased, union, nonresident alien, temporary and seasonal
employees) are eligible to participate immediately upon commencement of
employment. The ESOP is an "employee stock ownership plan" under Section
4975(e)(7) of the Code, designed to invest primarily in Agritope Common.
The employers' contribution to the ESOP each year is determined by the
Agritope Board, and may be made either in Agritope Common or in cash.
Contributions are allocated to participants in proportion to their compensation.
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<PAGE>
Each participant has a separate account attributable to employer
contributions. Participants will become fully vested in their accounts if they
attain age 65, die or become disabled prior to termination of employment. If
termination of employment occurs before age 65, death or disability, the vesting
in the accounts is based on the number of years of service (and the nonvested
portion is forfeited):
<TABLE>
<CAPTION>
Years of Service Percentage Vested
<S> <C>
Less than 2 years 0
At least 2 years, but less than 3 years 20
At least 3 years, but less than 4 years 40
At least 4 years, but less than 5 years 60
At least 5 years, but less than 6 years 80
At least 6 years 100
</TABLE>
Each participant may direct the voting of Agritope Common allocated to
the participant's account.
The participants' accounts are distributable at termination of
employment. Distribution must be in Agritope Common unless both the participant
and the trustees elect cash distribution.
401(K) PROFIT SHARING PLAN
The Agritope, Inc. 401(k) Profit Sharing Plan ("401(k) Plan") which
covers Agritope and those of its affiliates which elect to participate, provides
that all employees (including officers), other than excluded classes (leased,
union, nonresident alien, temporary and seasonal employees) are eligible to
participate immediately upon commencement of employment. The 401(k) Plan
includes a salary reduction feature under Section 401(k) of the Code.
All participants in the 401(k) Plan may contribute on a before-tax
basis a whole number percentage of their cash compensation each year up to a
maximum fixed by the Agritope Board not to exceed 17 percent, subject to an
annual maximum which is adjusted for the cost of living ($9,500 for 1997).
However, only the first 5 percent of a participant's compensation is eligible
for a pro-rata matching contribution by the employers. The aggregate amount of
the annual matching contribution is determined by the Agritope Board.
Matching contributions are invested in Agritope Common. Employee
contributions are pooled for investment at the direction of the employee in one
or more of the various investment funds established by Agritope, one of which
may provide for investment in Agritope Common.
Participants are at all times fully vested in their employee
contributions. Participants will become fully vested in their matching
contributions if they attain age 65, die or become disabled prior to termination
of employment. If termination of employment occurs before age 65, death or
disability, the vesting of matching contributions is based on the number of
years of service (and the nonvested portion is forfeited):
Years of Service Percentage Vested
Less than 2 years 0
At least 2 years, but less than 3 years 20
At least 3 years, but less than 4 years 40
At least 4 years, but less than 5 years 60
At least 5 years, but less than 6 years 80
At least 6 years 100
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<PAGE>
Withdrawals of employee contributions are permitted prior to
termination of employment in the case of hardship. Matching contributions and
any remaining amounts of employee contributions are distributable at termination
of employment; matching contributions, and any employee contributions which are
invested in Agritope Common at the participants' election, are customarily
distributed in Agritope Common.
CERTAIN TRANSACTIONS
On November 11, 1996, the Company amended an agreement pursuant to
which it acquired its patented ethylene control technology in 1987. Dr. Ferro, a
co-inventor of the technology, relinquished all rights to future payments under
the agreement in exchange for a one-time cash payment of $590,000. The amount is
included in Agritope's consolidated balance sheet under the caption "Patents and
proprietary technology (net)" and will be amortized over 15 years, the remaining
life of the related patent.
In November 1996, Agritope agreed to exchange $3.4 million principal
amount of Agritope 4 percent Convertible Notes Due 1997 for 250,367 shares of
Epitope Stock at a reduced exchange price of $13.50 per share. The original
terms of the notes permitted the holders to exchange them for Epitope Stock at
an exchange price of $19.53 per share. Holders exchanging their notes at the
reduced exchange price included Groupe des Assurances Nationales, the beneficial
owner of more than 5 percent of the outstanding Epitope Stock, which exchanged
$2,500,000 principal amount of notes for 185,185 shares of Epitope Stock.
American Equities has been engaged by the Company to act as placement
agent in connection with the Private Placement and the Preferred Stock Sale.
Michel de Beaumont is a co-founder and director of American Equities. Mr. de
Beaumont was elected to serve as a director of Agritope in September 1997.
American Equities will receive commissions equal to 5 percent of the gross
proceeds of the Private Placement and the sale of Series A Convertible
Preferred. In addition, American Equities or its designees will receive warrants
to purchase an aggregate of 500,000 shares of Agritope Common in consideration
for its services as placement agent. See "Shares Eligible for Future Sale."
Pierre Lefebvre, a director of Agritope, is chief executive officer of
Vilmorin. Agritope and Vilmorin have entered into the Vilmorin Research
Agreement, under which Vilmorin will fund certain research and development
projects of Agritope and receive certain rights in resulting technology.
Vilmorin has agreed to purchase 214,285 shares of Series A Convertible Preferred
for $7 per share in the Preferred Stock Sale, and has been granted the Series A
Option, to purchase up to an additional 785,715 shares of Series A Convertible
Preferred at that price. Holders of Series A Convertible Preferred will have the
right to elect one director to the Agritope Board so long as at least 214,285
shares of Series A Convertible Preferred remain outstanding. See "Description of
Business-Agritope Biotechnology Program--Vegetable and Flower Crops" and
"Description of Agritope Capital Stock-Agritope Series A Convertible Preferred."
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the anticipated
beneficial ownership of Agritope Common as of the Distribution Date after giving
effect to the Private Placement, the Preferred Stock Sale and the Distribution
by (a) each person who is expected by Agritope to be the beneficial owner of
more than 5 percent of Agritope Common outstanding after the Distribution, the
Private Placement and the Preferred Stock Sale, (b) each director of Agritope,
(c) each executive officer of Agritope named in the Summary Compensation table
above and (d) the executive officers and directors of Agritope as a group. The
table gives pro forma effect to the conversion of all Series A Convertible
Preferred. Except in the case of subscribers in the Private Placement and the
Preferred Stock Sale, this information is based on the Epitope Stock
beneficially owned by such persons as of December 1, 1997.
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<PAGE>
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
NAME NUMBER (1) PERCENT
<S> <C> <C>
Greenacres Enterprises, Inc. 428,572 10.1%
74 Aeulestrasse
9490 Vaduz
Liechtenstein
Vilmorin & Cie 1,000,000(2) 19.9%
71 Rue de Beaubourg
Paris 75003
France
W. Charles Armstrong - *
Michel de Beaumont
Richard K. Bestwick, Ph.D. 233(3)(4) *
Joseph A. Bouckaert - *
Nancy L. Buc
Adolph J. Ferro, Ph.D. 421(4) -
Pierre Lefebvre -(5) -
Gilbert N. Miller 566(4) -
Roger L. Pringle 3,525(6) *
</TABLE>
All directors and executive
officers as a group
(10 persons)
- ---------------
*Less than 1 percent
(1) Subject to community property laws where applicable, beneficial
ownership consists of sole voting and investment power except as
otherwise indicated. Information is based on Epitope's records and a
review of statements filed with the Commission under Sections 13(d) and
13(g) of the Exchange Act with respect to Epitope Stock.
(2) Includes 214,285 shares of Series A Convertible Preferred that Vilmorin
has agreed to purchase plus 785,715 shares issuable pursuant to the
Series A Option. Series A Convertible Preferred is initially
convertible into Agritope Common on a share-for-share basis. Shares of
Series A Convertible Preferred subject to the option have been included
for purposes of calculating the percent of capital stock beneficially
owned by Vilmorin but have been excluded for purposes of calculating
the percent of capital stock beneficially owned by other persons.
(3) Includes 60 shares of Agritope Common allocated to Dr. Bestwick's
spouse under the Epitope 401(k) plan.
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<PAGE>
(4) Includes the following shares allocated to each person's individual
accounts under the Epitope 401(k) plan: Dr. Bestwick - 173 shares, Dr.
Ferro - 253 shares, and Mr. Miller - 233 shares.
(5) Mr. Lefebvre is chief executive officer of Vilmorin and may have voting
power with respect to Agritope capital stock of which Vilmorin is the
beneficial owner. If Mr. Lefebvre is deemed to have such voting power,
he would be deemed the owner of the 1 million shares of Series A
Convertible Preferred beneficially owned by Vilmorin, constituting 19.9
percent of the Agritope capital stock, and all directors and executive
officers as a group would be deemed the beneficial owners of _______
shares, constituting ____ percent of Agritope capital stock.
(6) Includes 600 shares held by Mr. Pringle's spouse.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Distribution, there has not been any public market for
Agritope Common and there can be no assurance that a significant public market
for Agritope Common will be developed or be sustained after the Distribution.
Sales of substantial amounts of Agritope Common in the public market after the
Distribution, or the possibility of such sales occurring, could adversely affect
prevailing market prices for Agritope Common or the future ability of Agritope
to raise capital through an offering of equity securities.
After the Distribution, the Private Placement and the Preferred Stock
Sale, approximately 4.0 million shares of Agritope Common and 214,285 shares of
Series A Convertible Preferred will be outstanding. Pursuant to the Series A
Option, an additional 785,715 shares of Series A Convertible Preferred will be
subject to issuance and sale upon exercise. Shares distributed in the
Distribution will be freely tradeable in the public market without restriction
under the Securities Act, unless the shares are held by "affiliates" of the
Company, as that term is defined in Rule 144 under the Securities Act. See "The
Distribution--Trading of Agritope Common." The Agritope Common to be issued in
the Private Placement may not be sold in the U.S. without registration under the
Securities Act until 40 days following the closing of the Private Placement. The
Agritope Common issuable upon conversion of the Series A Convertible Preferred
may not be sold without registration under the Securities Act until 40 days
after issuance of the Series A Convertible Preferred Stock. See "Private
Placement" and "The Distribution--Trading of Agritope Common." Agritope has
granted purchasers in the Private Placement certain registration rights with
respect to their shares. Purchasers of the Series A Preferred will also be
granted certain registration rights effective upon conversion of their shares
into Agritope Common. Series A Convertible Preferred is initially convertible
into Agritope Common on a share-for-share basis.
As of the Record Date, options to purchase 1,253,394 shares of Agritope
Common were outstanding. As of the Record Date, 746,606 shares were available
for future grants of awards under Agritope's Award Plan, and 250,000 shares were
available for future issuance under Agritope's Purchase Plan.
Agritope intends to file after the Distribution Date Registration
Statements on Form S-8 to register an aggregate of 2,250,000 shares of Agritope
Common reserved for issuance under its Award Plan and Purchase Plan. The
Registration Statements will become effective automatically upon filing. Shares
issued under the foregoing plans, after the filing of the Registration
Statements on Form S-8, may be sold in the open market, subject, in the case of
certain holders, to the Rule 144 limitations applicable to affiliates and
vesting restrictions imposed by Agritope.
Epitope has retained Vector Securities International, Inc. ("Vector
Securities") as Epitope's exclusive financial advisor. In partial consideration
for services rendered in connection with the Distribution and the Epitope
Targeted Stock Proposal as well as strategic advice, Vector Securities will
receive warrants to purchase an aggregate of 83,333 shares of Agritope Common
and 416,667 shares of Epitope Stock, exercisable at a price equal to 110 percent
of the average closing price of the respective shares on the five consecutive
trading days beginning on the
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<PAGE>
Distribution Date. Epitope and Agritope expect to grant Vector Securities
certain registration rights with respect to the warrants.
Agritope has engaged American Equities to serve as placement agent in
connection with the Private Placement and sale of Series A Convertible
Preferred. American Equities or its designees will receive warrants to purchase
an aggregate of 500,000 shares of Agritope Common at $7 per share in partial
consideration for its services. Such warrants may be exercised at any time
within the three years following the closing of the Private Placement. Agritope
has granted certain registration rights with respect to the warrants.
DESCRIPTION OF AGRITOPE CAPITAL STOCK
Agritope's Certificate of Incorporation authorizes the issuance of up
to 30 million shares of Agritope Common and 10 million shares of Agritope
Preferred issuable in series. The following description of Agritope's capital
stock is qualified in all respects by reference to the Certificate of
Incorporation.
AGRITOPE COMMON
The holders of Agritope Common are entitled to one vote per share on
all matters on which stockholders are entitled to vote. Holders of Agritope
Common are entitled to receive dividends when and as declared by the Agritope
Board out of any funds lawfully available therefor and, in the event of
liquidation or distribution of assets, are entitled to participate ratably in
the distribution of such assets remaining after payment of liabilities, in each
case subject to any preferential rights granted to any series of Agritope
Preferred that may then be outstanding. Holders of Agritope Common do not have
cumulative voting rights with respect to any matter.
AGRITOPE PREFERRED
Subject to limitations prescribed by Delaware law, the Certificate of
Incorporation authorizes the Agritope Board, without further stockholder
authorization, to issue Agritope Preferred in one or more series and to fix the
terms and provisions of each series, including dividend rights and preferences,
conversion rights, voting rights, redemption rights, and rights on liquidation,
including preferences over Agritope Common, all of which could adversely affect
the rights of holders of Agritope Common. The issuance of a series of Agritope
Preferred under certain circumstances could have the effect of delaying or
preventing a change of control of Agritope, could adversely affect the rights of
the holders of Agritope Common, may discourage offers for the Agritope Common at
a premium over market price and may adversely affect the market price of, and
the voting and other rights of the holders of, the Agritope Common.
The Agritope Board has designated 1 million shares of Agritope
Preferred as Series A Convertible Preferred. Vilmorin has agreed to purchase
214,285 shares of Series A Convertible Preferred immediately after the
Distribution Date, and also has acquired the Series A Option. For a description
of the terms of the Series A Convertible Preferred, see "--Agritope Series A
Convertible Preferred," below.
The Agritope Board has adopted a Stockholder Rights Plan, as described
below, which enables holders of Agritope Common, under certain circumstances, to
purchase fractional shares of a series of Agritope Preferred. See "--Stockholder
Rights Plan," below. No Agritope Preferred is currently outstanding, and
Agritope has no present plans to issue any shares of Agritope Preferred other
than Series A Convertible Preferred.
AGRITOPE SERIES A CONVERTIBLE PREFERRED
Agritope has designated 1 million shares of Agritope Preferred as
Series A Convertible Preferred, which are being offered for sale at a price of
$7 per share. See "Sale of Series A Convertible Preferred" and "Description of
Business--Agritope Biotechnology Program--Vegetable and Flower Crops." The
following description of the
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<PAGE>
Series A Convertible Preferred is qualified by reference to the Certificate of
Designation, Preferences and Rights of the Series A Convertible Preferred (the
"Certificate of Designation").
Each share of Series A Convertible Preferred is convertible at any time
initially into one share of Agritope Common at the election of the holder of the
Series A Convertible Preferred, with the kind and/or number of shares issuable
upon conversion subject to adjustment in the event of stock splits, stock
dividends, reclassifications and other corporate reorganizations.
The Certificate of Designation prohibits Agritope from declaring,
setting aside or paying dividends or other distributions on Agritope Common
unless Agritope declares, sets aside or pays a dividend or other distribution
with respect to each outstanding share of Series A Convertible Preferred at
least equal to the amount the holders would have received if their shares of
Series A Convertible Preferred had then been converted into Agritope Common.
In the event of a liquidation, dissolution or winding up of Agritope,
the holders of outstanding shares of Series A Convertible Preferred would be
entitled to be paid, out of Agritope's distributable assets, an amount
equivalent to the amount they would have received if their Series A Convertible
Preferred had then been converted into Agritope Common.
So long as not less than 214,285 shares of Series A Convertible
Preferred are outstanding, the holders of Series A Convertible Preferred are
entitled to elect one director to the Agritope Board annually. Pierre Lefebvre
has been elected as the initial director representing the holders of Series A
Convertible Preferred. In addition, the holders of Series A Convertible
Preferred have equal voting rights with the holders of Agritope Common, with the
Series A Convertible Preferred having the number of votes equal to the number of
shares of Agritope Common into which the Series A Convertible Preferred is then
convertible. The holders of Series A Convertible Preferred and Agritope Common
will vote together as one class, except as otherwise required by law.
Subject to certain exceptions, the holders of Series A Convertible
Preferred have preemptive rights to acquire their pro rata share of any equity
security proposed to be issued by Agritope, at the same price and on the same
terms as other parties. Exceptions to these preemptive rights include, but are
not limited to: securities issued in mergers and other acquisition transactions;
securities issued upon exercise of warrants currently authorized for issuance to
Vector Securities and to American Equities and its designees; securities issued
to Agritope employees, directors or consultants pursuant to plans approved by
Agritope stockholders; securities issued in connection with a registered public
offering; securities issued to underwriters, brokers and financial institutions
in connection with certain Agritope financings; and securities issued in
connection with the Stockholder Rights Plan.
AGRITOPE WARRANTS
Vector Securities has provided advisory services to Epitope with
respect to the Distribution as well as strategic and advisory services in
connection with Epitope's Targeted Stock Proposal. In partial consideration for
services rendered in connection with the Distribution and the Epitope Targeted
Stock Proposal, Vector Securities will receive warrants to purchase 83,333
shares of Agritope Common and 416,667 shares of Epitope Stock, exercisable at a
price equal to 110 percent of the average closing price of the respective shares
on the five trading days beginning on the Distribution Date.
Agritope has also issued to American Equities or its designees warrants
to purchase an aggregate of 500,000 shares of Agritope Common in partial
consideration for its services as placement agent in connection with the Private
Placement and the sale of Series A Convertible Preferred. Each warrant entitles
the holder to purchase one share of Agritope Common at $7 per share at any time
within three years of the closing of the Private Placement.
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<PAGE>
PREEMPTIVE RIGHTS
The Certificate of Incorporation provides that no holder of any of
Agritope's shares is entitled to any preferential or preemptive rights to
acquire any securities of Agritope, except as such rights may be provided for by
contract or pursuant to the terms of any series of Agritope Preferred. Holders
of Series A Convertible Preferred have certain preemptive rights. See
"--Agritope Series A Convertible Preferred," above.
STOCKHOLDER RIGHTS PLAN
In November 1997, Agritope adopted the Rights Agreement. Accordingly,
each share of Agritope Common distributed in the Distribution will be issued
with one preferred stock purchase right ("Right").
Each Right represents the right to purchase, if and when the Rights are
exercisable, 1/1,000 of a share of Series A Junior Participating Preferred Stock
at an exercise price of $25. The exercise price and the number of shares
issuable upon exercise of the Rights are subject to adjustment in certain cases
to prevent dilution. The Rights are evidenced by the Agritope Common
certificates and are not exercisable, or transferable apart from the Agritope
Common, until 10 business days after (i) a person acquires 15 percent or more of
the Agritope Common; (ii) a person commences a tender offer which would result
in the ownership of 15 percent or more of the Agritope Common; or (iii) the
Agritope Board declares a person beneficially owning at least 10 percent of the
Agritope Common to be an Adverse Person (the "Rights Distribution Date"). In the
event any person becomes the beneficial owner of 15 percent or more of the
Agritope Common or the Agritope Board determines that a person is an Adverse
Person, each of the Rights (other than Rights held by the party triggering the
Rights and certain of their transferees, all of which will be voided) becomes a
discount right entitling the holder to acquire Agritope Common having a value
equal to twice the Right's exercise price. Vilmorin has been exempted from
triggering the Stockholder Rights Plan under certain circumstances.
In the event Agritope is acquired in a merger or other business
combination transaction (including one in which Agritope is the surviving
corporation), each Right will entitle its holder to purchase, at the then
current exercise price of the Right, that number of shares of common stock of
the surviving company which at the time of such transaction would have a market
value of two times the exercise price of the Right. The Rights do not have any
voting rights and are redeemable, at the option of Agritope, at a price of $.01
per Right at any time until 10 business days after a person acquires beneficial
ownership of at least 15 percent of the Agritope Common.
The Rights expire on November 14, 2007. So long as the Rights are not
separately transferable, Agritope will issue one Right with each new share of
Agritope Common issued.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire Agritope on
terms not approved by the Agritope Board. The Rights should not interfere with
any merger or other business combination approved by the Agritope Board because
the Rights may be redeemed by Agritope until the tenth business day following
the first public announcement that a person or group has become the beneficial
owner of 15 percent or more of the outstanding Agritope Common.
OTHER ANTI-TAKEOVER MEASURES
Agritope's Certificate of Incorporation and Bylaws contain certain
provisions that may have the effect of delaying, deferring or preventing a
change in control of Agritope. Such provisions include requirements for: (i) a
classified Board of Directors, with each class containing as nearly as possible
one-third of the total number of directors elected by the Agritope Common and
the members of each class serving for staggered three-year terms; (ii) removal
of directors only for cause; (iii) changing the size of the Agritope Board only
with supermajority approval of the directors then in office; (iv) notice not
less than 60 days prior to the anniversary date of the preceding annual meeting
of stockholders with respect to nominations of directors or other matters to be
voted on
- 63 -
<PAGE>
by stockholders other than by or at the direction of the Agritope Board; and (v)
approval of the holders of at least two-thirds of the outstanding Agritope
Common to approve certain provisions of the Certificate of Incorporation.
Classified Board of Directors. The Certificate of Incorporation
provides that those members of the Agritope Board that are elected by the
Agritope Common will be divided into three classes (Class 1, Class 2 and Class
3) with each class containing as nearly as possible one-third of the total
number of directors and the members of each class serving for staggered
three-year terms. The initial designation of directors to each of the three
classes has been made. See "Management." At each annual meeting of Agritope
stockholders, the number of directors equal to the number of the class whose
term expires at the time of such meeting will be elected to hold office until
the third succeeding annual meeting of Agritope stockholders.
Removal of Directors. Directors of Agritope may be removed only for
cause.
Changes in the Number of Directors. The Certificate of Incorporation
specifies that the Agritope Board will consist of no less than six nor more than
thirteen members, with the exact number to be set from time to time by the
Board. The Agritope Board is authorized to increase or decrease the size of the
Board (within the specified range) by the affirmative vote of two-thirds of the
directors then in office. Without the consent of all the directors then in
office: (i) no more than two additional directors may be added to the Agritope
Board within any 12-month period; and (ii) no person who is affiliated as an
owner, director, officer or employee of a company or business deemed by the
Board of Directors to be competitive with that of Agritope is eligible to serve
on the Agritope Board.
Nominations of Directors and Other Matters Brought by Stockholders. The
Bylaws require that, generally, in addition to other applicable requirements, in
order for an Agritope stockholder to (i) nominate a person for election to the
Agritope Board at an annual meeting of stockholders or (ii) properly bring a
matter before an annual meeting of stockholders, such stockholder must notify
Agritope of his or her intentions not less than 60 days prior to the anniversary
date of the preceding annual meeting of stockholders (with respect to the 1998
meeting of shareholders, not later than December 15, 1997). Moreover, in order
to be valid, any such notice must be in proper written form as more specifically
described in the Bylaws.
Amendment of Certificate of Incorporation. The Certificate of
Incorporation requires the approval of the holders of at least two-thirds of the
outstanding Agritope Common to amend certain provisions of the Certificate of
Incorporation, including certain of the anti-takeover measures described above.
- 64 -
<PAGE>
DELAWARE BUSINESS COMBINATIONS STATUTE
Agritope is subject to certain provisions of the Delaware General
Corporation Law that govern business combinations between corporations and
interested stockholders (the "Business Combinations Statute"). The Business
Combinations Statute generally provides that, if a person or entity acquires 15
percent or more of the outstanding voting stock of a Delaware corporation (an
"Interested Stockholder"), the corporation and the Interested Stockholder, or
any affiliated entity of the Interested Stockholder, may not engage in certain
business combination transactions for three years following the date the person
became an Interested Stockholder. Business combination transactions for this
purpose include: (a) certain mergers and consolidations; (b) certain
transactions involving the sale, lease, exchange, mortgage, pledge, transfer or
other disposition of 10 percent or more of the assets of the corporation; (c)
certain transactions which result in the issuance or transfer of stock to the
Interested Stockholder; (d) certain transactions which result in an increase in
the proportionate share of stock of the corporation which is owned by the
Interested Stockholder; and (e) certain transactions which result in the receipt
by the Interested Stockholder of the benefit of any loans, advances, guarantees,
pledges or financial benefits provided by or through the corporation.
These restrictions do not apply if: (a) the board of directors approves
the business combination or share acquisition before the Interested Stockholder
acquires 15 percent or more of the corporation's outstanding voting stock (as
has been the case with Vilmorin); (b) the Interested Stockholder, as a result of
the transaction in which such person became an Interested Stockholder, owns at
least 85 percent of the outstanding voting stock of the corporation
(disregarding shares owned by directors who are also officers and shares owned
by certain employee stock plans); or (c) the board of directors and, at a
meeting of stockholders, the holders of at least two-thirds of the outstanding
voting stock of the corporation (disregarding shares owned by the Interested
Stockholder) approve the transaction at the time or after the Interested
Stockholder acquires 15 percent or more of the corporation's outstanding voting
stock.
INDEMNIFICATION OF DIRECTORS AND OFFICERS; LIMITATION OF LIABILITY; INSURANCE
As permitted by Delaware law, Agritope's Certificate of Incorporation
permits, and its Bylaws require, the indemnification of a director or officer
made or threatened to be made a party to a proceeding (other than a proceeding
by or in the right of Agritope to procure a judgment in its favor) because such
person is or was a director or officer of Agritope or one of its subsidiaries
against certain liabilities and expenses, if the director or officer acted in
good faith and in a manner he or she reasonably believed was in or not opposed
to the best interests of Agritope, and, with respect to any criminal action or
proceeding, the director or officer, in addition, had no reasonable cause to
believe his or her conduct was unlawful. In the case of any proceeding by or in
the right of Agritope, a director or officer is entitled to indemnification of
certain expenses if he or she acted in good faith and in a manner he or she
reasonably believed was in or not opposed to the best interests of Agritope.
However, pursuant to Delaware law, the Bylaws and indemnity agreements
Agritope has entered into with its directors and officers, Agritope generally
will not indemnify its directors and officers: (i) in connection with a
proceeding by or in the right of Agritope in which the director or officer is
adjudged liable to Agritope; (ii) in connection with any other proceeding
charging improper personal benefit to the director or officer in which the
director or officer is adjudged liable on the basis that personal benefit was
improperly received by him or her; (iii) in connection with any claim made
against any director or officer for which payment is required to be made to or
on behalf of the director or officer under any insurance policy; (iv) in
connection with any claim made against any director or officer if a court having
jurisdiction in the matter determines that indemnification is not lawful under
any applicable statute or public policy; (v) in connection with any proceeding
(or part of any proceeding) initiated by the director or officer or any
proceeding by the director or officer against Agritope or its directors,
officers, employees or other agents; and (vi) for an accounting of profits made
from the purchase and sale by the director or officer of securities of Agritope
within the meaning of Section 16(b) of the Exchange Act or similar provision of
any state statutory law or common law. Agritope may also provide indemnification
to persons other than its directors or officers under certain circumstances.
- 65 -
<PAGE>
As permitted by Delaware law, the Certificate of Incorporation also
provides that no director will be liable to Agritope or its stockholders for
monetary damages for breach of fiduciary duty as a director, except that
personal liability may exist for any: (i) breach of the director's duty of
loyalty to Agritope or its stockholders; (ii) act or omission not in good faith
or that involves intentional misconduct or a knowing violation of the law; (iii)
unlawful distribution to stockholders; (iv) transaction from which the director
derives an improper personal benefit; or (v) profits made from the purchase and
sale by the director of securities of Agritope within the meaning of Section
16(b) of the Exchange Act or similar provision of any state statutory law or
common law.
As stated above, Agritope has entered into agreements to indemnify its
directors and officers. The agreements are generally intended to provide the
maximum indemnification permitted by Delaware law. The agreements, among other
provisions, will indemnify each of Agritope's directors and officers in any
action or proceeding for certain expenses (including attorney fees) and (other
than in an action or proceeding by or in the right of Agritope) judgments, fines
and settlement amounts incurred on account of such person's services as a
director or officer of Agritope or, at Agritope's request, as a director,
officer, employee or agent of another enterprise. The agreements also limit the
liability of Agritope's directors and officers in respect of their conduct in
serving Agritope to the extent permitted by Delaware law, as described above.
Agritope understands that the current position of the Commission is
that any indemnification of liabilities arising under the Securities Act is
against public policy and is, therefore, unenforceable.
Agritope intends to obtain insurance insuring its directors and
officers against certain liabilities, including liabilities under federal and
state securities laws.
LEGAL MATTERS
The validity of the Agritope Common will be passed upon by Tonkon Torp
LLP, Portland, Oregon. Miller, Nash, Wiener, Hager & Carlsen LLP has provided
the tax opinion in connection with the Distribution.
EXPERTS
The financial statements as of September 30, 1997 and 1996 and for each
of the three years in the period ended September 30, 1997 included in this
Information Statement/Prospectus have been so included in reliance on the report
of Price Waterhouse LLP, independent accountants, given on the authority of said
firm as experts in auditing and accounting.
- 66 -
<PAGE>
AGRITOPE, INC. AND SUBSIDIARIES
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
INDEX TO FINANCIAL STATEMENTS PAGE
<S> <C>
Report of Independent Accountants...............................................................................F-1
Consolidated Balance Sheets
at September 30, 1997 and September 30, 1996............................................................F-2
Consolidated Statements of Operations
for the years ended September 30, 1997, 1996, and 1995 .................................................F-3
Consolidated Statements of Changes in Shareholder's Equity
for the years ended September 30, 1997, 1996, and 1995 .................................................F-4
Consolidated Statements of Cash Flows
for the years ended September 30, 1997, 1996, and 1995..................................................F-5
Notes to Consolidated Financial Statements......................................................................F-6
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Epitope, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of changes in shareholder's equity and of
cash flows present fairly, in all material respects, the financial position of
Agritope, Inc. (as described in Note 1 to these financial statements) and its
subsidiaries at September 30, 1997 and 1996, and the results of their operations
and their cash flows for each of the three years in the period ended September
30, 1997, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
As described in Note 2, the basis of presentation of these financial statements
differs from previously issued Agritope Group financial statements in that
certain cash and cash equivalents and the related interest income that were
previously allocated to Agritope have not been allocated to Agritope in these
financial statements.
PRICE WATERHOUSE LLP
Portland, Oregon
October 31, 1997, except for Note 11, as to which the date is December 5, 1997
F-1
<PAGE>
AGRITOPE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
SEPTEMBER 30 1997 1996
ASSETS
Current assets
<S> <C> <C>
Cash and cash equivalents (Note 2)............................ $ 4,384 $ 476,512
Trade accounts receivable, net (Note 2)....................... 617,359 264,986
Other accounts receivable..................................... 5,554 32,337
Inventories (Note 2).......................................... 2,081,295 509,745
Prepaid expenses.............................................. 276,224 812
-------------- ---------------
Total current assets.......................................... 2,984,816 1,284,392
Property and equipment, net (Notes 2 and 4)................... 2,749,788 1,286,197
Patents and proprietary technology, net (Note 2).............. 1,276,692 510,244
Investment in affiliated companies (Note 3)................... 246,962 2,448,623
Other assets and deposits (Note 5)............................ 26,797 140,513
-------------- ---------------
$ 7,285,055 $ 5,669,969
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities
Accounts payable............................................... $ 100,945 $ 91,474
Current portion of installment notes payable................... 4,255 -
Convertible notes (Note 5)..................................... - 3,620,003
Current portion of lease liability (Note 9).................... 341,304 -
Salaries, benefits and other accrued liabilities............... 879,504 735,478
-------------- ---------------
Total current liabilities...................................... 1,326,008 4,446,955
Long-term portion of installment notes payable................. 14,569 -
Long-term portion of lease liability (Note 9).................. 450,805 -
Minority interest (Note 3)..................................... 730,947 215,407
Commitments and contingencies (Note 9)......................... - -
Shareholder's equity (Note 6)
Preferred stock, no par value
1,000,000 shares authorized;
no shares issued and outstanding............................. - -
Common stock, no par value
20,000,000 shares authorized;
2,000,000 shares issued and outstanding...................... 45,930,932 33,485,214
Accumulated deficit............................................ (41,168,206) (32,477,607)
-------------- ---------------
4,762,726 1,007,607
$ 7,285,055 $ 5,669,969
</TABLE>
The accompanying notes are an integral part of these statements.
F-2
<PAGE>
AGRITOPE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
FOR THE YEAR ENDED SEPTEMBER 30 1997 1996 1995
Revenues
<S> <C> <C> <C>
Product sales.............................................. $ 1,436,498 $ - $ 2,015,318
Grants and contracts (Note 8).............................. 114,692 585,485 94,370
---------- ---------- ---------
1,551,190 585,485 2,109,688
Costs and expenses
Product costs.............................................. 1,326,163 - 3,235,675
Research and development costs (Note 8).................... 1,681,646 1,338,703 2,204,993
Selling, general and administrative expenses
(Note 2)................................................. 3,081,074 1,482,694 4,479,498
--------- --------- ---------
6,088,883 2,821,397 9,920,166
Loss from operations.................................. (4,537,693) (2,235,912) (7,810,478)
---------- ---------- ----------
Other income (expense), net
Interest income....................................... - - 7,535
Interest expense...................................... (25,307) (265,356) (241,775)
Valuation loss........................................ (2,258,080) - -
Debt conversion ...................................... (1,216,654) - -
Other, net (Note 9)................................... (927,234) - (500)
---------- ---------- ----------
(4,427,275) (265,356) (234,740)
Minority interest in subsidiary net loss.............. 274,369 - -
---------- ---------- ----------
Net loss.............................................. $ (8,690,599) $ (2,501,268) $ (8,045,218)
Net loss per share.................................... $ (4.35) $ (1.25) $ (4.02)
Weighted average number
of shares outstanding .............................. 2,000,000 2,000,000 2,000,000
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
AGRITOPE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY
<TABLE>
COMMON ACCUMULATED
STOCK DEFICIT TOTAL
<S> <C> <C> <C>
Balances at September 30, 1994 ............................... $ 21,449,141 $ (21,931,121) $ (481,980)
Compensation expense for stock awards (Note 6)................ 69,998 - 69,998
Compensation expense for stock option grants
(Note 6).................................................... 318,375 - 318,375
Capital contributed by Epitope, Inc., upon exchange of
convertible notes (Note 5) ................................. 449,991 - 449,991
Equity issuance costs (Note 5) ............................... (22,487) - (22,487)
Cash from Epitope, Inc. ...................................... 7,786,338 - 7,786,338
Net loss for the year ........................................ - (8,045,218) (8,045,218)
------------ ----------- ----------
Balances at September 30, 1995 ............................... 30,051,356 (29,976,339) 75,017
Compensation expense for stock awards (Note 6)................ 14,500 - 14,500
Compensation expense for stock option grants (Note 6) ........ 229,164 - 229,164
Cash from Epitope, Inc. ...................................... 3,190,194 - 3,190,194
Net loss for the year ........................................ - (2,501,268) (2,501,268)
------------ ----------- -----------
Balances at September 30, 1996 ............................... 33,485,214 (32,477,607) 1,007,607
Compensation expense for stock awards (Note 6)................ 33,063 - 33,063
Compensation expense for stock option grants (Note 6)......... 20,832 - 20,832
Capital contributed by Epitope, Inc., upon exchange of
convertible notes (Note 5) ................................. 4,529,009 - 4,529,009
Equity issuance costs (Note 5)................................ (86,134) - (86,134)
Minority interest investment in subsidiary (Note 6)........... 742,752 - 742,752
Cash from Epitope, Inc. ...................................... 7,206,196 - 7,206,196
Net loss for the year ........................................ - (8,690,599) (8,690,599)
------------ ----------- -----------
Balances at September 30, 1997 ............................... $ 45,930,932 $ (41,168,206) $ 4,762,726
Note: There were 2,000,000 shares of common stock outstanding during all periods presented.
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
AGRITOPE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
FOR THE YEAR ENDED SEPTEMBER 30 1997 1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net loss......................................................$ (8,690,599) $ (2,501,268) $ (8,045,218)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization................................. 566,813 294,045 663,379
Compensation expense for stock awards......................... 33,063 14,500 69,998
Compensation expense for stock option grants ................. 20,832 229,164 318,375
Minority interest in subsidiary operating results............. (274,369) - -
Valuation loss................................................ 2,258,080 - -
Non-cash portion of cost of debt conversion................... 1,149,054 - -
Decrease (increase) in receivables............................ (325,590) 832,333 (945,501)
Decrease (increase) in inventories............................ (1,571,550) (509,745) 88,737
Decrease (increase) in prepaid expenses....................... (275,412) 55,252 (55,639)
Decrease (increase) in other assets and deposits.............. 21,462 (36,219) 9,137
Increase (decrease) in accounts payable and
accrued liabilities......................................... 945,606 494,633 (104,680)
Other......................................................... - - 500
--------- --------- ----------
Net cash used in operating activities (6,142,610) (1,127,305) (8,000,912)
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment........................... (1,927,209) (886,646) (238,558)
Proceeds from sale of property................................ - - 13,258
Expenditures for patents and proprietary
technology.................................................. (870,910) (411,943) (178,208)
Investment in affiliated companies............................ (56,419) (473,790) 610,146
---------- ---------- ----------
Net cash (used in) provided by investing activities (2,854,538) (1,772,379) 206,638
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of long-term debt.................................... 20,887 - -
Principal payments on long-term debt ......................... (242,063) (39,508) (16,137)
Minority interest investment in subsidiary (Note 6)........... 1,540,000 215,407 -
Cash from Epitope, Inc........................................ 7,206,196 3,190,194 7,786,338
--------- --------- ---------
Net cash provided by financing activities 8,525,020 3,366,093 7,770,201
Net increase (decrease) in cash and cash equivalents.......... (472,128) 466,409 (24,073)
Cash and cash equivalents at beginning of year................ 476,512 10,103 34,176
---------- --------- -----------
Cash and cash equivalents at end of year $ 4,384 $ 476,512 $ 10,103
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
AGRITOPE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 THE COMPANY
Agritope, Inc. (the "Company" or "Agritope") is an Oregon corporation utilizing
biotechnology to develop and market superior new plants and related products.
Through its 61 percent owned subsidiary, Vinifera, Inc. ("Vinifera"), Agritope
is also engaged in the business of propagation, growing, and distribution of
grapevine plants. Agrimax Floral Products, Inc. ("Agrimax") is an inactive
subsidiary that holds minority interests in two flower distribution businesses.
See Note 3, Investment in Affiliated Companies. Agritope is a wholly owned
subsidiary of Epitope, Inc. ("Epitope"), an Oregon corporation engaged in the
development and marketing of medical diagnostic products.
Agritope Spin-off. In July 1997, Epitope's board of directors approved a
management proposal to spin off Agritope, subject to obtaining financing for
Agritope and the satisfaction of certain other conditions. Agritope has agreed
to sell 1,343,704 shares of Agritope common stock in a private placement to
certain investors for an aggregate price of $9,406,000, immediately after the
spin-off. The spin-off will be accomplished by a distribution of Agritope common
stock to Epitope's shareholders. Epitope will not own or control any shares of
Agritope stock following the spin-off, which is expected to occur in December
1997.
Agritope and Epitope will enter into certain agreements governing the ongoing
relationship between the companies after the spin-off, including a Separation
Agreement, a Tax Allocation Agreement, a Transition Services and Facilities
Agreement and an Employee Benefits Agreement. Pursuant to the Employee Benefits
Agreement, Agritope has agreed to establish replacement plans that effectively
continue to provide benefits available under current Epitope benefit plans.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation. The accompanying consolidated financial statements
include the assets, liabilities, revenues and expenses of Agritope and its
majority owned subsidiaries. All significant intercompany transactions and
balances have been eliminated in consolidation. Minority-owned investments and
joint ventures are accounted for using the equity method. Investments of less
than 20 percent are carried at cost or estimated net realizable value, whichever
is lower. Intercompany balances with Epitope have been reflected as capital
contributions (common stock) in the accompanying consolidated financial
statements because they will be converted into a permanent capital contribution
in conjunction with the spin-off.
The basis of presentation of these financial statements differs from the
previously issued Agritope Group financial statements contained in Epitope's
most recent Form 10-K and 10-Q filings. In the previously issued financial
statements, cash and cash equivalents and the related interest income were
allocated to Agritope in connection with a contemplated targeted stock
transaction. The targeted stock proposal was subsequently withdrawn by the
Epitope board of directors. With respect to the spin-off, these items will not
be transferred to Agritope and therefore have not been allocated to Agritope in
these financial statements.
Certain corporate overhead services such as accounting, annual meeting costs,
annual report preparation, audit, executive management, facilities, finance,
general management, human resources, information systems, investor relations,
legal services, payroll and SEC filings are provided by Epitope on a centralized
basis for the benefit of Agritope ("Shared Services"). Such expenses have been
allocated to Agritope in the accompanying financial
F-6
<PAGE>
AGRITOPE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
statements using activity indicators which, in the opinion of management,
represent a reasonable measure of Agritope's utilization of such Shared
Services. These activity indicators, which are reviewed periodically and
adjusted to reflect changes in utilization, include number of employees, number
of computers, and level of expenditures. Management believes that the amount
allocated for these Shared Services is not materially different from the amount
which would be incurred by Agritope for such services provided on a stand-alone
basis. Allocated Shared Services of $1,402,895, $1,069,249 and $1,892,370,
respectively, for 1997, 1996 and 1995 are included under the caption "Selling,
general and administrative expenses."
Cash and Cash Equivalents. For purposes of the consolidated balance sheets and
statements of cash flows, all highly liquid investments with maturities at time
of purchase of three months or less are considered to be cash equivalents.
Inventories. Inventories, consisting principally of growing grapevine plants at
Vinifera, are recorded at the lower of average cost or market. Average cost
includes all direct and indirect costs attributable to the growing grapevine
plants. Inventory is summarized as follows:
<TABLE>
SEPTEMBER 30 1997 1996
<S> <C> <C>
Work-in-process ................................................................ $ 1,387,706 $ 471,208
Finished goods ................................................................. 693,589 38,537
----------- ---------
$ 2,081,295 $ 509,745
</TABLE>
Depreciation and Capitalization Policies. Property and equipment are stated at
cost less accumulated depreciation. Expenditures for repairs and maintenance are
charged to operating expense as incurred. Expenditures for renewals and
betterments are capitalized. Depreciation and amortization of property and
equipment are calculated primarily under the straight-line method over the
estimated useful lives of the related assets (three to seven years). Leasehold
improvements are amortized over the shorter of estimated useful lives or the
terms of the related leases. When assets are sold or otherwise disposed of, cost
and related accumulated depreciation or amortization are removed from the
accounts and any resulting gain or loss is included in operations.
Accounting for Long-Lived Assets. The Company reviews its long-lived assets for
impairment periodically or as events or circumstances indicate that the carrying
amount of long-lived assets may not be recoverable. If the estimated net cash
flows are less than the carrying amount of the long-lived assets, the Company
recognizes an impairment loss in an amount necessary to write down long-lived
assets to fair value as determined from expected discounted future cash flows.
This accounting policy is consistent with Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of." See Note 3, Investment in Affiliated
Companies.
Patents and Proprietary Technology. Direct costs associated with patent
submissions and acquired technology are capitalized and amortized over their
minimum estimated economic useful lives, generally five years.
In August 1996, the Company amended the 1987 agreement pursuant to which it
acquired its patented ethylene control technology. A co-inventor of the
technology relinquished all rights to future compensation under the agreement in
exchange for a one-time cash payment of $365,000, a research grant and a limited
non-exclusive license to use the technology for one crop. The amount is included
under the caption "Patents and proprietary technology" and is being amortized
over 15 years, the remaining life of the related patent.
On November 11, 1996, the Company further amended the ethylene control
technology agreement. A co-inventor
F-7
<PAGE>
AGRITOPE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
of the technology who is an officer of the Company relinquished all rights to
future payments under the agreement in exchange for a one-time cash payment of
$590,000. The amount is included under the caption "Patents and proprietary
technology" and is being amortized over 15 years, the remaining life of the
related patent.
Amortization and accumulated amortization are summarized as follows:
<TABLE>
1997 1996 1995
<S> <C> <C> <C>
Amortization for the year ended September 30,............. $ 63,489 $ 42,456 $ 23,964
Accumulated amortization ................................. 143,396 79,907 37,451
</TABLE>
Fair Value of Financial Instruments. The carrying amounts for cash equivalents,
accounts receivable, and accounts payable approximate fair value because of the
immediate or short-term maturity of these financial instruments. The carrying
amount for installment notes payable and convertible notes approximates fair
value because the related interest rates are comparable to rates currently
available to the Company for debt with similar terms and maturities.
Revenue Recognition. Product sales are recognized when the related products are
shipped. Grant and contract revenues include funds received under research and
development agreements with various entities. These grants and contracts
generally provide for progress payments as expenses are incurred and certain
research milestones are achieved. Revenue related to such grants and contracts
is recognized as research milestones are achieved. Accounts receivable are
stated net of an allowance for doubtful accounts of $57 as of September 30, 1997
and $19,571 as of September 30, 1996.
Research and Development. Research and development expenditures are comprised of
those costs associated with Agritope's ongoing research and development
activities to develop superior new plants. Expenditures for research and
development also include costs incurred under contracts to develop certain
products, including those contracts resulting in grant and contract revenues.
All research and development costs are expensed as incurred.
Income taxes. The Company accounts for certain revenue and expense items
differently for income tax purposes than for financial reporting purposes. These
differences arise principally from methods used in accounting for stock options
and depreciation rates. Deferred tax assets and liabilities are recognized based
on temporary differences between the financial statement and the tax bases of
assets and liabilities using enacted tax rates in effect for the year in which
the temporary differences are expected to reverse.
Stock-based Compensation. In October 1995, the Financial Accounting Standards
Board issued Statement of Financial Accounting No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"). SFAS 123 allows companies which have
stock-based compensation arrangements with employees to adopt a fair-value basis
of accounting for stock options and other equity instruments or to continue to
apply the existing accounting rules under Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to Employees ("APB 25"), but with additional
financial statement disclosure. In November 1997, the Company adopted two
stock-based compensation plans for employees. When options or other securities
are issued under these plans, the Company expects to continue to apply the
existing accounting rules under APB 25.
Net Loss Per Share. In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 128, Earnings Per Share
("SFAS 128"). This new standard is effective for interim and annual periods
ending after December 15, 1997. SFAS 128 will require the reporting of "basic"
and "diluted" earnings per share ("EPS") instead of "primary" and "fully
diluted" EPS as required under current accounting principles. Basic EPS
eliminates the common stock equivalents considered in calculating primary EPS.
Diluted
F-8
<PAGE>
AGRITOPE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
EPS is similar to fully diluted EPS. Since Agritope had no common stock
equivalents during the periods presented, basic EPS would have been the same as
primary EPS and there would be no diluted EPS calculation.
Supplemental Cash Flow Information. Non-cash financing and investing activities
not included in the consolidated statements of cash flows are summarized as
follows:
<TABLE>
YEAR ENDED SEPTEMBER 30 1997 1996 1995
<S> <C> <C> <C>
Conversion of notes to equity (Note 5)............... $ 3,380,000 $ - $ 472,478
Minority interest contribution of capital (Note 6)... 742,752 - -
Investment in affiliated companies (Note 3) ......... - - 2,584,979
</TABLE>
Management Estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
relating to assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements as well as the reported amounts of revenues and
expenses during the reporting period. Actual results could vary from these
estimates.
Reclassifications. Certain reclassifications have been made to prior years' data
to conform with the current year's presentation. These reclassifications had no
impact on previously reported results of operations or shareholders' equity.
NOTE 3 INVESTMENT IN AFFILIATED COMPANIES
Agrimax. Agritope's investment in affiliated companies includes two investments
owned by Agrimax; a 9 percent interest in UAF, Limited Partnership ("UAF"), a
fresh flower distribution operation in Charlotte, North Carolina, and a 19.5
percent interest in Petals USA, Inc. ("Petals"), an affiliate of a Canadian
fresh flower wholesaler.
In May 1995, Agritope's wholly owned subsidiary, Agrimax, ceased operations as
an independent entity. Agrimax had been engaged in the fresh flower packaging
and distribution business. Also in May 1995, the Company surrendered control of
its Charlotte facility and contributed inventory and operating supplies to a
limited liability company ("LLC") 60 percent owned by Universal American
Flowers, Inc. and 40 percent owned by the Company pursuant to an Operating and
Transition Agreement (the "Agreement"). Pursuant to the Agreement, on October
27, 1995, the assets and liabilities of LLC and of Universal American Flowers,
Inc., together with the Company's equipment and leasehold improvements located
at the Charlotte facility, were transferred to a newly formed entity, UAF. UAF
also assumed the liability for the lease of the Charlotte facility. In fiscal
1995, the Company removed the assets transferred to LLC from its books and
recorded the cost of such assets as "Investment in affiliated companies," less a
charge of $500,000, representing the Company's share in the losses of LLC during
the intervening period in which a 40 percent interest was held, and estimated
costs to discontinue the Agrimax business. Until May 1995, the Agrimax business
was included in the Company's financial statements. From May 1995 through
October 27, 1995, the Company followed the equity method of accounting for its
investment in UAF in accordance with Accounting Principles Board Opinion No. 18
("APB 18"). Since October 27, 1995, the investment in UAF has been accounted for
under the cost method in accordance with APB 18. In 1996, the equity interest of
Agrimax in UAF was reduced to 9 percent as the result of a recapitalization of
UAF.
In 1996, Agrimax contributed the operating assets of its discontinued St. Paul,
Minnesota operations to Petals, an
F-9
<PAGE>
AGRITOPE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
unrelated company, in exchange for a 19.5 percent equity interest in Petals. No
gain or loss was recognized on the transaction with Petals and the investment in
Petals was recorded at the net book value of the contributed assets.
Based on information that became available on December 26, 1996, including
information related to continued operating losses at UAF in the four months
ended October 31, 1996, coupled with a shortfall in sales and larger operating
loss than expected at Petals in the fourth quarter of calendar 1996, the Company
recorded a non-cash charge to results of operations of $1,900,000 during the
first quarter of fiscal 1997, reflecting the permanent impairment in the value
of its investment in affiliated companies, and reducing the carrying value of
the assets to management's estimate of the net realizable value.
In October 1997, the majority owner of Petals informed the Company that it had
entered into negotiations to sell Petals to an unrelated third party. Under the
proposed terms of sale, the Company's interest in Petals would be reduced to
less than 10 percent. The Company was further informed that the majority owner
did not intend to advance additional funds to Petals and that if a sale could
not be consummated, intended that Petals would cease operations and liquidate
its assets. Based on this information, the Company believes that its investment
in Petals has more than temporarily declined and, accordingly, recorded an
additional charge to operations of $358,080 in the fourth quarter of 1997.
The Company's investment in affiliated companies is summarized as follows:
<TABLE>
SEPTEMBER 30 1997 1996
<S> <C> <C>
Investment in UAF...................................................... $ - $ 1,847,148
Investment in Petals................................................... - 410,932
Vinifera Sud Americana................................................. 200,000 -
Other investments...................................................... 46,962 190,543
--------- -----------
Investment in affiliated companies..................................... $ 246,962 $ 2,448,623
</TABLE>
For the year ended September 30, 1995, the accompanying financial statements
include revenue of $1,914,000 and an operating losses of $3,299,000 attributable
to Agrimax. The accompanying statement of operations for the year ended
September 30, 1995 includes the results of operations of Agrimax through May
1995 and also includes a charge of $500,000 to selling, general and
administrative expenses attributable to the disposition of Agrimax's business.
Vinifera. In June 1995, Agritope agreed to sell its wholly owned grapevine plant
propagation subsidiary, Vinifera, to VF Holdings, Inc. ("VF"), an affiliate of a
Swiss investment group, pursuant to a stock purchase agreement. VF subsequently
failed to make the payments required under the VF Agreement. As part of a
settlement of claims based on VF's default, VF retained a 4 percent minority
interest in Vinifera and relinquished the remaining interest to Agritope in
August 1996. Additional minority investors in Vinifera reduced Agritope's
ownership to 76 percent as of September 30, 1996, and to 61 percent as of
September 30, 1997.
The reacquisition of Vinifera in August 1996 has been accounted for under the
purchase method. The net purchase price of $916,000 has been allocated to
tangible net assets. Vinifera's results of operations are included in the
consolidated statements of operations from October of 1994 through May of 1995,
for the month of September 1996 and for all of 1997. The following summarized,
unaudited pro forma results of operations are presented as if the reacquisition
had occurred on the first day of each period shown.
F-10
<PAGE>
AGRITOPE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
YEAR ENDED SEPTEMBER 30
1996 1995
Pro forma Pro forma
Historical adjustments Pro forma Historical adjustments Pro forma
<S> <C> <C> <C> <C> <C> <C>
Revenues...................$ 585,485 $ 833,949 $1,419,434 $2,109,688 $276,588 $2,386,276
Net loss...................(2,501,268) (1,464,002) (3,965,270) (8,045,218) (460,296) (8,505,514)
Net loss per share (1.25) (.73) (1.98) (4.02) (.23) (4.25)
</TABLE>
In 1997, Vinifera made a $200,000 investment in Vinifera Sudamericana, S.A.
("VSA"), an Argentina joint venture established to propagate and market
grapevine plants to the growing South American wine industry. Vinifera owns a 20
percent interest in VSA and accounts for this investment under the cost method.
NOTE 4 PROPERTY AND EQUIPMENT
Property and equipment are summarized as follows:
<TABLE>
SEPTEMBER 30 1997 1996
<S> <C> <C>
Land .................................................................. $ 30,020 $ 30,020
Grapevine propagation blocks .......................................... 1,160,430 384,063
Production equipment................................................... 79,289 38,075
Buildings and improvements ............................................ 2,127,237 717,508
Research and development laboratory equipment ......................... 353,380 220,919
Office furniture and equipment ........................................ 191,290 140,452
Leasehold improvements................................................. 23,962 23,962
Construction in progress .............................................. 10,000 499,981
------------- ------------
3,975,608 2,054,980
Less accumulated depreciation and amortization ........................ (1,225,820) (768,783)
------------- ------------
$ 2,749,788 $ 1,286,197
</TABLE>
NOTE 5 LONG-TERM DEBT
On June 30, 1992, Agritope completed a private placement with several European
institutional investors pursuant to which $5,495,000 of convertible notes were
issued. The notes were unsecured, matured on June 30, 1997 and bore interest at
the rate of 4 percent per annum which was payable on each June 30 and December
31. The notes were convertible into common stock of Epitope at a conversion
price of $19.53 per share.
During the year ended September 30, 1995, investors exchanged $449,991 principal
amount of convertible notes for Epitope common stock at a price of $19.53 per
share. Following these conversions, Epitope made a capital contribution to
Agritope equal to the amount of Epitope stock issued. In conjunction with the
exchange, unamortized debt issuance costs of $22,487 related to such notes were
recognized as equity issuance costs during 1995.
F-11
<PAGE>
AGRITOPE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In November 1996, Epitope exchanged $3,380,000 principal amount of Agritope
convertible notes for 250,367 shares of common stock of Epitope at a reduced
exchange price of $13.50 per share. The exchange price had previously been fixed
at $19.53 per share. Accordingly, Agritope recognized a charge to results of
operations of $1,216,654 in the first quarter of fiscal 1997 representing the
conversion expense. In conjunction with the exchange, unamortized debt issuance
costs of $86,134 related to such notes were recognized as equity issuance costs
during 1997. Concurrent with the note conversion, Epitope made a $4,529,009
capital contribution to Agritope. On June 30, 1997, Agritope paid in full the
remaining $240,000 principal amount outstanding.
Debt issuance costs were included in other assets and were being amortized over
the five-year life of the notes. Amortization expense of debt issuance costs for
the years ended September 30, 1997, 1996 and 1995, respectively, totaled $2,687,
$108,257 and $96,136.
NOTE 6 SHAREHOLDER'S EQUITY
Authorized Capital Stock. At September 30, 1997, Agritope's amended articles of
incorporation authorized 1,000,000 shares of preferred stock and 20,000,000
shares of common stock. The Company's board of directors has authority to
determine preferences, limitations and relative rights of the preferred stock.
Common Stock. Cash and cash equivalents provided to Agritope by Epitope have
been reflected in common stock. Also reflected in common stock are certain
transactions in Epitope common stock. The exchange of shares of Epitope common
stock for Agritope convertible debt and the related write-off of debt issuance
costs have been reflected as Agritope common stock.
As employees of a wholly owned subsidiary of Epitope, the employees of Agritope
and its subsidiaries have participated in stock award, employee stock purchase
and other benefit plans of Epitope. Compensation expense recognized for Epitope
stock grants and awards to Agritope employees totaling $53,895 in 1997, $243,664
in 1996 and $388,373 in 1995, has been recognized as operating expenses and
common stock of Agritope.
In the first quarter of fiscal 1997, a minority shareholder in Vinifera
contributed $100,000 to Vinifera in satisfaction of a stock subscription
agreement. In the third quarter of fiscal 1997, Agritope sold 770,000 shares of
common stock of Vinifera to outside parties for $1,540,000 in cash. In
accordance with the terms of the related stock purchase agreements, Agritope
contributed the proceeds of these stock sales to Vinifera's capital. These sales
of previously issued shares of Vinifera common stock reduced percentage
ownership of Vinifera voting stock from 76 percent to 61 percent.
F-12
<PAGE>
AGRITOPE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 INCOME TAXES
As of September 30, 1997, Agritope had net operating loss carryforwards of
approximately $34.1 million and $21.2 million, respectively, to offset federal
and Oregon state taxable income. These net operating loss carryforwards will
expire if not used by Agritope, as follows:
<TABLE>
YEAR OF EXPIRATION FEDERAL OREGON
<S> <C> <C>
2004................................................................... $ 111,000 $ 111,000
2005................................................................... 317,000 317,000
2006................................................................... 941,000 941,000
2007................................................................... 2,620,000 2,620,000
2008................................................................... 6,733,000 4,847,000
2009................................................................... 8,327,000 2,179,000
2010................................................................... 8,477,000 3,765,000
2011................................................................... 2,249,000 2,168,000
2012................................................................... 4,279,000 4,279,000
------------- --------------
$ 34,054,000 $ 21,227,000
Significant components of Agritope's deferred tax asset were as follows:
SEPTEMBER 30 1997 1996
Net operating loss carryforwards....................................... $ 12,215,000 $ 10,862,000
Deferred compensation.................................................. 513,000 493,000
Research and experimentation credit carryforwards...................... 418,000 339,000
Accrued expenses....................................................... 805,000 15,000
Other.................................................................. 622,000 59,000
------------- --------------
Gross deferred tax assets.............................................. 14,573,000 11,768,000
Valuation allowance.................................................... (14,573,000) (11,768,000)
------------- -------------
Net deferred tax asset................................................. $ - $ -
</TABLE>
No benefit for Agritope's deferred tax assets has been recognized in the
accompanying financial statements as they do not satisfy the recognition
criteria set forth in SFAS 109. The valuation allowance increased by $2.8
million in 1997. The research and experimentation tax credit carryforwards will
generally expire from 2004 through 2011 if not used by Agritope. Net operating
loss and tax credit carryforwards incurred by Agritope through the date of the
spin-off (see Note 1, The Company--Agritope Spin-off) will continue as
carryforwards of Agritope after the date of distribution. The issuance of voting
stock in future years may result in a change of ownership under federal tax
rules and regulations. Upon occurrence of such a change in ownership,
utilization of existing tax loss and tax credit carryforwards would be subject
to cumulative annual limitations.
The expected federal statutory tax benefit of $3.0 million for the year ended
September 30, 1997 is increased by approximately $323,000 for the effect of
state and local taxes (net of federal impact), and decreased by approximately
$2.8 million for the effect of the increase in valuation allowance, and by
$433,000 for permanent differences consisting primarily of debt to equity
conversion costs.
The 1997 consolidated financial statements include the financial results of
Vinifera, a 61 percent owned subsidiary
F-13
<PAGE>
AGRITOPE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(see Note 3). However, the tax disclosures above do not include the deferred tax
assets and related valuation allowance for Vinifera's carryforwards since
Vinifera is not included in the consolidated group for tax purposes. Vinifera
files its tax return separately on a stand-alone basis.
NOTE 8 RESEARCH AND DEVELOPMENT ARRANGEMENTS
Agritope performed research work in 1997, 1996 and 1995 with respect to
grapevine disease diagnostics funded by a grant from the U.S. Department of
Agriculture under the Small Business Innovation Research Program and in 1996 and
1995 with respect to raspberries which was partially funded by Sweetbriar
Development, Inc. under a License Agreement dated October 18, 1994. Agritope has
also received grant support from the U.S. Department of Agriculture, Oregon
Strawberry Commission, and Oregon Raspberry & Blackberry Commission for
antifungal biocontrol research and from several strategic partners.
Revenues from research and development arrangements are included in the
accompanying consolidated statements of operations under the caption "Grants and
contracts." Expenses related to such arrangements are included under the caption
"Research and development costs." The activity related to these arrangements is
summarized as follows:
<TABLE>
YEAR ENDED SEPTEMBER 30 1997 1996 1995
<S> <C> <C> <C>
Government research grants................................ $ 30,228 $ 144,987 $ 16,358
Research projects with strategic partners................. 52,770 326,462 40,000
Other..................................................... 31,694 114,036 38,012
----------- ----------- -----------
$ 114,692 $ 585,485 $ 94,370
Project related expenses.................................. $ 272,309 $ 461,460 $ 318,401
</TABLE>
In October 1997, Agritope was awarded a U.S. Department of Commerce grant
totaling $990,000 and covering a three-year period. Agritope was awarded the
grant for use in the application of its proprietary ripening control technology
to certain tree fruits and bananas.
NOTE 9 COMMITMENTS AND CONTINGENCIES
Vinifera leases office and greenhouse facilities under operating lease
agreements which require minimum annual payments as follows:
YEAR ENDING SEPTEMBER 30
<TABLE>
<S> <C>
1998 ..................................................... $ 153,000
1999 ..................................................... 153,000
2000 ..................................................... 153,000
2001 ..................................................... 53,000
--------------
$ 512,000
</TABLE>
F-14
<PAGE>
AGRITOPE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Agritope also occupies office, greenhouse and laboratory facilities which are
leased by Epitope. The occupancy costs associated with these facilities are
allocated to Agritope on the basis of square footage utilized. Rent expense
incurred by Agritope, including amounts allocated by Epitope, aggregated
$326,388, $218,100 and $353,816 for the years ended September 30, 1997, 1996 and
1995, respectively.
Agritope is also contingently liable for a lease which has been assigned to UAF
and the lease of property which has been subleased to Petals in the following
amounts:
YEAR ENDING SEPTEMBER 30
<TABLE>
<S> <C>
1998...................................................... $ 341,304
1999...................................................... 347,104
1999...................................................... 55,701
--------------
$ 744,109
</TABLE>
During 1997, the Company accrued its contingent obligation under these leases as
both UAF and Petals have defaulted on the related subleases. A charge of
$744,109 is reflected in other expense in 1997.
NOTE 10 PROFIT SHARING AND SAVINGS PLAN
Epitope established a profit sharing and deferred salary savings plan in 1986
and restated the plan in 1991. All Agritope employees are eligible to
participate in the plan. In addition, the plan permits certain voluntary
employee contributions to be excluded from the employees' current taxable income
under the provisions of Internal Revenue Code Section 401(k) and the regulations
thereunder. Effective October 1, 1991, Epitope replaced a discretionary profit
sharing provision with a matching contribution (either in cash, shares of
Epitope common stock, or partly in both forms) equal to 50 percent of an
employee's basic contribution, not to exceed 2.5 percent of an employee's
compensation. The board of directors of Epitope has the authority to increase or
decrease the 50 percent match at any time. During 1997, 1996 and 1995,
respectively, Agritope was charged $33,063, $14,500 and $29,877 by Epitope for
its share of the matching contribution under the plan.
NOTE 11 SUBSEQUENT EVENTS
Delaware Reincorporation; Recapitalization. In November 1997, in connection with
the spin-off of Agritope by Epitope, Agritope agreed to merge with Agritope,
Inc., a newly formed Delaware corporation. The purpose of the merger is to
change the Company's domicile from Oregon to Delaware and increase the Company's
authorized capital stock to 30 million shares of common stock, par value $.01
per share, and 10 million shares of preferred stock, par value $.01 per share.
On November 25, 1997, the Agritope board of directors declared a stock dividend
of approximately 690,866 shares of Agritope common stock to the sole Agritope
stockholder, with the exact number of shares to be issued as a dividend to be
the number needed to effect the spin-off based on a distribution ratio of one
share of Agritope common stock for each five shares of Epitope common stock
outstanding on the record date for the spin-off. Thus, approximately 2,690,866
shares of Agritope common stock will be distributed to the shareholders of
Epitope in the spin-off.
F-15
<PAGE>
AGRITOPE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Stock Award Plan. In November 1997, the Agritope, Inc. 1997 Stock Award Plan
(the "Award Plan") was adopted by Agritope's board of directors and approved by
Epitope as Agritope's sole stockholder. The Award Plan provides for stock-based
awards to employees, outside directors, members of scientific advisory
committees and other consultants. Awards which may be granted under the Award
Plan include incentive stock options, nonqualified stock options, stock
appreciation rights, restricted awards, performance awards and other stock-based
awards.
The Award Plan provides for the issuance of a total of up to 2,000,000 shares of
Agritope common stock, subject to adjustment for changes in capitalization.
Options to purchase a total of 1,253,394 shares, having exercise prices of $5.25
to $7.00 per share, have been granted to officers, employees and nonemployee
directors of Agritope under the Award Plan. In connection with the grants,
Agritope will incur compensation expense of $1,995,440, which will be amortized
over the four-year vesting period of the options.
Employee Stock Purchase Plan. Also in November 1997, Agritope's board of
directors and Epitope, as Agritope's sole stockholder, approved the Agritope,
Inc. 1997 Employee Stock Purchase Plan (the "Purchase Plan"), covering up to
250,000 shares of Agritope common stock which Agritope employees may subscribe
to purchase during offering periods to be established from time to time. The
Compensation Committee of Agritope's board of directors was granted authority to
determine the number of offering periods, the number of shares offered, and the
length of each period. No more than three offering periods (other than Special
Offering Subscriptions as defined in the Purchase Plan) may be set during each
fiscal year. The purchase price for stock purchased under the Purchase Plan is
the lesser of 85 percent of the fair market value of a share on the last trading
day before the offering date established for the offering period and 85 percent
of the fair market value of a share on the date the purchase period ends (or any
earlier purchase date provided for in the Purchase Plan).
Employee Stock Ownership Plan. Agritope's board of directors adopted the
Agritope, Inc. Employee Stock Ownership Plan ("ESOP") in November 1997. After
the spin-off, all employees, except excluded classes, of Agritope and those of
its affiliates which elect to participate will be eligible to participate in the
ESOP. The employers' contribution to the ESOP each year will be determined by
the Agritope board of directors, and may be made either in Agritope common stock
or in cash. Contributions are allocated to participants in proportion to their
compensation. Contributions vest over a six -year period, or upon the
participant's earlier death, disability, or attainment of age 65.
401(k) Profit Sharing Plan. Agritope established the Agritope, Inc. 401(k)
Profit Sharing Plan (the "401(k) Plan") in November 1997. After the spin-off,
all employees (including officers), other than excluded classes, will be
eligible to participate. Participants may contribute up to 17 percent of their
cash compensation on a before-tax basis, subject to an annual maximum amount
which is adjusted for the cost of living ($9,500 for 1997). The first 5 percent
of a participant's compensation is eligible for a discretionary, pro-rata
employer matching contribution which will be invested in Agritope common stock.
Agritope has not yet made any contributions to the 401(k) Plan and the plan does
not hold any shares of Agritope common stock.
Research and Development Agreement. As of December 5, 1997, Agritope and
Vilmorin & Cie ("Vilmorin") had entered into a research and development
agreement covering certain vegetable and flower crops. Under the terms of the
research agreement, Vilmorin will provide certain proprietary seed varieties and
germplasm for use by Agritope in research and development projects to be funded
by Vilmorin, in which Agritope technology, and possibly Vilmorin technology,
will be applied to the various covered crops. The specific research projects to
be conducted will be determined by agreement of the parties. Unless otherwise
agreed, Vilmorin will pay, on a quarterly basis, all Agritope's out-of-pocket
expenses, including employee salaries and overhead, for each selected
F-16
<PAGE>
AGRITOPE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
research project.
Agritope and Vilmorin have agreed to negotiate in good faith the terms of future
commercialization agreements applicable to any commercial-stage products that
arise out of Vilmorin-funded research. If the parties are unable to agree,
commercialization terms will be determined by binding arbitration.
Agritope's board of directors has designated 1 million shares of Agritope
preferred stock, par value $.01 per share, as Series A Preferred Stock ("Series
A Convertible Preferred"). Series A Convertible Preferred has preemptive rights
and the right to elect a director, but otherwise has rights substantially
equivalent to Agritope common stock and is convertible at any time into shares
of Agritope common stock, initially on a share-for-share basis. In connection
with the research agreement, Vilmorin has agreed to purchase 214,285 shares of
Series A Convertible Preferred at a price of $7 per share. Agritope has also
agreed to grant Vilmorin an option, expiring on January 15, 1998, to acquire all
or any portion of the remaining 785,714 shares of Series A Convertible Preferred
at $7 per share. Vilmorin has agreed to provide additional funding totaling $1
million either by exercising its option to purchase Series A Convertible
Preferred or through the financing of research and development projects.
F-17
<PAGE>
PART II
INFORMATION NOT REQUIRED IN INFORMATION STATEMENT/PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
Amount
SEC Registration Fee............................... $ 1,550
Accounting Fees and Expenses*...................... $ 25,000
Legal Fees and Expenses*........................... $ 150,000
Blue Sky Fees and Expenses*........................ $ 4,900
Printing, including Registration Statement, $ 50,000
Information Statement/Prospectus, etc.*..........
Miscellaneous Expenses*............................ $ 34,550
--------
TOTAL EXPENSES*.................. $266,000
- ------------
*Estimated
Item 14. Indemnification of Directors and Officers.
Indemnification. Generally, the Delaware General Corporation Law (the
"DGCL") requires the indemnification of an individual made a party to a
proceeding because the individual is or was a director, officer, employee or
agent of the corporation against reasonable expenses incurred by the director,
officer, employee or agent in the proceeding if the individual is wholly
successful on the merits or otherwise. In addition, the DGCL allows a
corporation to indemnify a director, officer, employee or agent of the
corporation if:
(a) The conduct of the individual was in good faith;
(b) The individual reasonably believed that the individual's
conduct was in the best interests of the corporation, or at least not
opposed to its best interests;
(c) In the case of any criminal proceeding, the individual had
no reasonable cause to believe that the individual's conduct was
unlawful; and
(d) In the case of any proceeding by or in the right of the
corporation, the individual was not adjudged liable to the corporation.
The DGCL provides that the indemnification described above is not
exclusive of any other rights to which directors, officers, employees or agents
may be entitled under the corporation's bylaws, or under any agreement, vote of
stockholders or disinterested directors or otherwise.
Article 8 of the certificate of incorporation of the Registrant permits
the Registrant to indemnify its directors, officers, employees, and agents to
the fullest extent permitted by law. Article 8 of the bylaws of the Registrant
requires such indemnification as to directors and officers, against expenses and
liability (other than in a proceeding by or in the right of the Registrant),
including attorney fees, actually and reasonably incurred by such
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<PAGE>
individual in connection with any threatened, pending, or completed action,
suit, or proceeding to which the individual is a party because of service to the
Registrant. Article 8 of the bylaws further provides that the foregoing right of
indemnification is not exclusive of any other rights to which the individual may
be entitled under the DGCL, certificate of incorporation, bylaws, agreement,
vote of stockholders or disinterested directors or otherwise. The Registrant
may, but is not required to, offer the same rights of indemnification, on a
case-by-case basis, to its employees and agents.
In addition to the foregoing right of indemnity, the Registrant will
enter into indemnification agreements with all of its officers and directors,
the forms of which are filed as Exhibits 10.11 and 10.12 hereto. Each
indemnification agreement makes provisions of the DGCL relating to permissive
indemnification mandatory and therefore restates the Registrant's obligation as
set forth in the bylaws, as discussed above. In addition, each indemnification
agreement sets forth the Registrant's obligation to indemnify the party to the
agreement in the event that the indemnitee is entitled to indemnification of
some but not all liability and expenses. The indemnification agreements and the
bylaws also set forth procedures for the defense of claims by the Registrant.
Section 174 of the DGCL provides in substance that any director held
liable pursuant to that section for the unlawful payment of a dividend or other
distribution of assets of a corporation shall be entitled to contribution from
the stockholders who accepted the dividend or distribution, knowing the dividend
or distribution was made in violation of the DGCL. The section also provides
that any such director shall be entitled to contribution from the other
directors who voted for or concurred in the unlawful dividend, stock purchase or
stock redemption.
The Registrant understands that the current position of the Securities
and Exchange Commission is that any indemnification of liabilities arising under
the Securities Act of 1933, as amended, is against public policy and is,
therefore, unenforceable.
The general effect of these provisions is to indemnify directors and
officers of the Registrant against all costs and expenses of liability incurred
by them in connection with any action, suit or proceeding in which they are
involved by reason of their affiliation with the Registrant, to the fullest
extent permitted by law.
Insurance. The Registrant intends to carry insurance protecting
officers and directors against certain liabilities that they may incur in their
capacities as such.
Item 15. Recent Sales of Unregistered Securities.
Agritope will sell 1,343,704 shares of Agritope Common at a price of $7
per share in the Private Placement to certain foreign investors for an aggregate
price of $9.4 million, immediately following the Distribution. Agritope and
Vilmorin have also agreed to the Preferred Stock Sale for the sale of 214,285
shares of Agritope Series A Convertible Preferred at a price of $7 per share for
an aggregate purchase price of $1.5 million. In addition, Agritope has agreed to
grant Vilmorin the Series A Option, exercisable by Vilmorin or its designees and
expiring January 15, 1998, to purchase up to 785,715 additional shares of Series
A Convertible Preferred at a price of $7 per share. Subscribers in the Private
Placement have entered stock purchase agreements and have deposited the purchase
price in an escrow account, pending completion of the Distribution and the
closing of the Private Placement. Shares sold in the Private Placement and the
sale of Series A Convertible Preferred will not be registered under the
Securities Act in reliance upon the exemption from registration provided by
Regulation S.
To facilitate the December 1997 merger (the "Merger") of Agritope,
Inc., an Oregon corporation, with and into the Registrant, on November 14, 1997,
the Registrant issued one share of its common stock, par value $.01 per share,
to Epitope, Inc., an Oregon corporation, in consideration for Epitope's payment
to the Registrant of $100. The share will be canceled when the Merger takes
effect.
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Item 16. Exhibits and Financial Statement Schedules.
(a) The exhibits to the Registration Statement required by Item 601 to
Regulation S-K are listed in the accompanying index to exhibits.
(b) No financial statement schedules have been filed because the
requested information is not applicable or is provided as part of the
consolidated financial statements in the Information Statement/Prospectus
included in this Registration Statement.
Item 17. Undertakings.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission, such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer, or controlling person of the Registrant in the
successful defense of any action, suit, or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Amendment No. 3 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
city of Beaverton, state of Oregon, on December 5, 1997.
AGRITOPE, INC.
By /s/ Gilbert N. Miller
Gilbert N. Miller, Executive Vice President
and Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 3 to the Registration Statement has been signed on December 5,
1997, by the following persons in the capacities indicated.
Signature Title
* ADOLPH J. FERRO, PH.D. Chairman of the Board, President, Chief
Adolph J. Ferro, Ph.D. Executive Officer and Director
(Principal Executive Officer)
/s/ Gilbert N. Miller Executive Vice President,
Gilbert N. Miller Chief Financial Officer, Secretary and Director
(Principal Financial Officer and
Principal Accounting Officer)
*W. CHARLES ARMSTRONG Director
W. Charles Armstrong
*ROGER L. PRINGLE Director
Roger L. Pringle
*NANCY L. BUC Director
Nancy L. Buc
*MICHEL de BEAUMONT Director
Michel de Beaumont
*By /s/ Gilbert N. Miller
Gilbert N. Miller
(Attorney-in-Fact)
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<PAGE>
EXHIBIT INDEX
Number Description
2. Separation Agreement between Epitope, Inc. ("Epitope"), and
Agritope, Inc. ("Agritope"), dated as of December 1, 1997.
3.1 Certificate of Incorporation of Agritope.
3.2 Bylaws of Agritope.
3.3 Certificate of Designation, preferences and rights of the
Series A Preferred Stock
4.1** Form of Common Stock Certificate.
4.2 Form of Rights Agreement between Agritope and ChaseMellon
Shareholder Services, L.L.C., as Rights Agent, which includes
as Exhibit A the form of the Designation of Terms of the
Series B Junior Participating Preferred Stock and as Exhibit B
the form of Rights Certificate.
4.3** Form of stock purchase agreement in connection with the
Private Placement.
4.4** Preferred Stock Purchase Agreement between Agritope and
Vilmorin dated December __, 1997.
5. Form of Opinion of Tonkon Torp LLP.
8. Form of Opinion of Miller, Nash, Wiener, Hager & Carlsen LLP.
10.1 Transition Services and Facilities Agreement between Epitope
and Agritope, dated as of December 1, 1997.
10.2 Tax Allocation Agreement between Epitope and Agritope, dated
as of December 1, 1997.
10.3 Employee Benefits Agreement between Epitope and Agritope,
dated as of December 1, 1997.
10.4 Agritope, Inc. 1997 Stock Award Plan.
10.5 Agritope, Inc. 1997 Employee Stock Purchase Plan.
10.6 Form of Employment Agreement between Agritope and Adolph J.
Ferro, Ph.D.
10.7 Form of Employment Agreement between Agritope and Gilbert N.
Miller.
10.8 Form of Employment Agreement between Agritope and Richard K.
Bestwick, Ph.D.
10.9 Form of Employment Agreement between Agritope and Matthew G.
Kramer.
10.10* Employment Agreement between Vinifera, Inc. and Joseph A.
Bouckaert.
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<PAGE>
10.11 Form of Indemnification Agreement for directors.
10.12 Form of Indemnification Agreement for officers.
10.13* Lease of Land and Certain Improvements located at 4288 Bodega
Avenue entered into by and between Gianni Neve and Maria Neve,
Landlord, and Vinifera, Inc., Tenant, dated as of February 1,
1996.
10.14 Option to License and Research Support Agreement between the
Salk Institute for Biological Studies and Epitope dated
February 25, 1997, including Amendment dated July 25, 1997,
and Assignment between Agritope and Epitope. Portions of this
exhibit have been omitted pursuant to a request for
confidential treatment.
10.15* Superior Tomato Associates, L.L.C. Operating Agreement dated
February 19, 1996.
10.16* Placement Agent Agreement between American Equities Overseas,
Inc., and Agritope, dated October 15, 1997.
10.17** Form of Warrant Agreement to be issued to Vector Securities in
partial consideration for services in connection with the
Distribution.
10.18* Form of Warrant Agreement to be issued in connection with the
Private Placement.
10.19** Research and Development Agreement between Agritope and
Vilmorin & Cie, dated as of December ____, 1997. Portions of
this exhibit have been omitted pursuant to a request for
confidential treatment.
10.20 Assignment and Modification of Lease dated November 7, 1997
among Pacific Realty Associates, L.P. ("Pacific"), American
Show Management, Inc. ("ASM"), and Agritope, Lease Amendment
dated June 3, 1996, between Pacific and ASM, and Lease dated
October 4, 1995, between Pacific and ASM.
21. The subsidiaries of Agritope are Vinifera, Inc., an Oregon
corporation, and Agrimax Floral Products, Inc., a Minnesota
corporation. Agritope owns a 662/3 percent interest in
Superior Tomato Associates, L.L.C.
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Tonkon Torp LLP (included in Exhibit 5).
23.3 Consent of Miller, Nash, Wiener, Hager & Carlsen LLP (included
in Exhibit 8).
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<PAGE>
24.* Powers of attorney
27. Financial Data Schedule.
Other exhibits listed in Item 601 of Regulation S-K are not applicable.
* Previously filed
** To be filed by amendment
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<PAGE>
SEPARATION AGREEMENT
between
Epitope, Inc.
and
Agritope, Inc.
Dated December 1, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
PAGE
ARTICLE 1
<S> <C> <C>
DEFINITIONS................................................................ 1
ARTICLE 2
PRE-DISTRIBUTION TRANSACTIONS....................................................... 4
2.1 Private Placement of Agritope Equity. ..................................................... 4
2.2 Agritope Corporate Actions.................................................................. 5
2.3 Epitope Approval............................................................................ 5
2.4 Related Agreements.......................................................................... 5
2.5 Securities Law Actions...................................................................... 5
ARTICLE 3
THE DISTRIBUTION.............................................................. 6
3.1 Discretion of Epitope Board; No Obligation.................................................. 6
3.2 Conditions to the Distribution.............................................................. 6
3.3 The Distribution............................................................................ 6
3.4 Fractional Shares........................................................................... 7
ARTICLE 4
INDEMNIFICATION, CLAIMS AND OTHER MATTERS................................................. 7
4.1 Indemnification by Epitope.................................................................. 7
4.2 Indemnification by Agritope................................................................. 7
4.3 Insurance Proceeds.......................................................................... 8
4.4 Procedure for Indemnification............................................................... 8
4.5 Other Claims................................................................................ 10
4.6 Contribution in Respect of Certain Indemnifiable Losses..................................... 10
4.7 No Beneficiaries............................................................................ 11
ARTICLE 5
CERTAIN ADDITIONAL MATTERS......................................................... 11
5.1 Construction of Agreements.................................................................. 11
5.2 Consents and Assignments.................................................................... 11
5.3 No Representations or Warranties............................................................ 11
5.4 Officers and Directors...................................................................... 11
5.5 Existing Intercompany Arrangements.......................................................... 12
5.6 Termination of Intercompany Accounts........................................................ 12
ARTICLE 6
ACCESS TO INFORMATION AND SERVICES; TECHNOLOGY............................................... 12
6.1 Provision of Corporate Records.............................................................. 12
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<PAGE>
6.2 Access to Information....................................................................... 12
6.3 Production of Witnesses and Individuals..................................................... 12
6.4 Retention of Records........................................................................ 13
6.5 Confidentiality............................................................................. 13
6.6 Privileged Matters.......................................................................... 14
6.7 Technology.................................................................................. 15
ARTICLE 7
INSURANCE................................................................. 16
7.1 Transition.................................................................................. 16
7.2 Post-Distribution Date Claims............................................................... 16
7.3 Allocation of Insurance Proceeds............................................................ 16
ARTICLE 8
DISPUTE RESOLUTION............................................................. 17
8.1 Negotiation and Binding Arbitration......................................................... 17
8.2 Initiation.................................................................................. 17
8.3 Submission to Arbitration................................................................... 17
8.4 Equitable Relief............................................................................ 17
ARTICLE 9
MISCELLANEOUS............................................................... 18
9.1 Entire Agreement............................................................................ 18
9.2 Expenses.................................................................................... 18
9.3 Governing Law............................................................................... 18
9.4 Jurisdiction and Venue...................................................................... 18
9.5 Notices..................................................................................... 18
9.6 Modification of Agreement................................................................... 19
9.7 Termination................................................................................. 19
9.8 Successors and Assigns...................................................................... 19
9.9 No Third Party Beneficiaries................................................................ 19
9.10 Titles and Headings; Interpretation......................................................... 19
9.11 Exhibits.................................................................................... 20
9.12 Severability................................................................................ 20
9.13 No Waiver................................................................................... 20
9.14 Survival.................................................................................... 20
9.15 Counterparts................................................................................ 20
</TABLE>
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<PAGE>
SEPARATION AGREEMENT
THIS SEPARATION AGREEMENT (this "Agreement") is entered into
by and between Epitope, Inc., an Oregon corporation ("Epitope"), and Agritope,
Inc., a Delaware corporation ("Agritope"), as of December 1, 1997.
RECITALS
A. Agritope is a wholly owned subsidiary of Epitope, principally
engaged in research and development of agricultural products using plant genetic
engineering.
B. The board of directors of Epitope has determined that it is in the
best interests of the shareholders of Epitope to separate Agritope from Epitope
by distributing as a dividend to holders of Epitope common stock, no par value
("Epitope Stock"), all of the issued and outstanding shares of Agritope common
stock, par value $.01 per share, including certain preferred stock purchase
rights attached thereto (the "Agritope Stock"), held by Epitope (the
"Distribution"), as provided herein; and
C. Epitope and Agritope have determined that it is necessary and
desirable to establish the principal corporate transactions required to effect
the separation of Agritope from Epitope, and to enter into certain other
agreements governing matters relating to the Distribution and the relationship
between Epitope and Agritope after the Distribution.
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements contained herein, Epitope and Agritope agree as
follows:
ARTICLE 1
DEFINITIONS
Capitalized terms shall have the meanings given below or
elsewhere in this Agreement.
Action: any action, claim, suit, arbitration, inquiry,
subpoena, discovery request, proceeding or investigation by or before any court
or grand jury, any governmental or other regulatory or administrative agency or
commission or any arbitration tribunal.
Affiliate: with respect to any specified person, a person
that, directly or indirectly, through one or more intermediaries, controls, or
is controlled by, or is under common control with such specified person;
provided, however, that unless otherwise expressly provided, the Agritope Units
and Epitope shall not be deemed to be Affiliates of one another for purposes of
this Agreement.
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<PAGE>
Agent: ChaseMellon Shareholder Services, L.L.C., the
distribution agent appointed by Epitope and Agritope to distribute the Agritope
Stock in connection with the Distribution.
Agritope Business: (i) the business of research and
development, marketing and sales of novel agricultural products using both plant
genetic engineering and other modern methods; (ii) the businesses of Vinifera
involving grapevine plant propagation and disease screening and elimination
programs; and (iii) any other business or operation conducted by an Agritope
Unit at any time. The Agritope Business does not include the business conducted
by Andrew and Williamson Sales, Co., a California corporation formerly owned by
Epitope.
Agritope Employee: any employee of a Core Company, and any
employee of Epitope who is assigned to a Core Company on or prior to the
Distribution Date.
Agritope Preferred: Agritope Series A preferred stock, par
value $.01 per share.
Agritope Unit: each Core Company and Related Company.
Books and Records: books and records (or true and complete
copies thereof), including computerized records, of Epitope that relate
principally to any Agritope Unit or the Agritope Business or decisions made by
Epitope that relate to Agritope, including, without limitation, all books and
records relating to Agritope Employees, the purchase of materials, supplies and
services by any Agritope Unit, and the technologies, customers, and business
partners of any Agritope Unit; and all files relating to any Action involving
any Agritope Unit or involving any Agritope Employee or director (including any
Action that arose when the Agritope Employee was employed by Epitope).
Code: the Internal Revenue Code of 1986, as amended.
Commission: the Securities and Exchange Commission.
Core Company: each of Agritope, Vinifera, and Agrimax Floral
Products, Inc., a Minnesota corporation.
Distribution Date: the effective date of the Distribution, as
determined by the Epitope Board.
Distribution Prospectus: the information statement/prospectus
to be distributed to holders of Epitope Stock in connection with the
Distribution.
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<PAGE>
Employee Benefits Agreement: the agreement, substantially in
the form of Exhibit A hereto, pursuant to which Epitope and Agritope will
provide for certain employee benefit matters.
Epitope Board: the board of directors of Epitope.
Form S-1: the Registration Statement on Form S-1 filed by
Agritope with the Commission to register the Agritope Stock to be distributed to
holders of Epitope Stock in the Distribution.
Indemnifiable Losses: with respect to any claim by an
Indemnitee for indemnification authorized pursuant to Article 4 hereof, any and
all losses, liabilities, claims, damages, obligations, payments, costs and
expenses (including, without limitation, the costs and expenses of any and all
Actions, demands, assessments, judgments, settlements and compromises relating
thereto and reasonable attorney fees and expenses in connection therewith,
including attorney fees before and at trial and in connection with any appeal or
petition for review) suffered by such Indemnitee with respect to such claim,
other than those arising out of an individual's service as a director, officer,
or employee of the entity that would be the Indemnifying Party but for this
exclusion.
Indemnifying Party: any party who is required to pay any other
person pursuant to Article 4 hereof.
Indemnitee: any party who is entitled to receive payment from
an Indemnifying Party pursuant to Article 4 hereof.
Indemnity Payment: the amount an Indemnifying Party is
required to pay an Indemnitee pursuant to Article 4 hereof.
Insurance Proceeds: those monies (i) received by an insured
from an insurance carrier or (ii) paid by an insurance carrier on behalf of the
insured, in either case net of any applicable premium adjustment,
retrospectively rated premium, deductible, retention, cost or reserve paid or
held by or for the benefit of such insured.
Insured Claims: those Liabilities that, individually or in the
aggregate, are covered within the terms and conditions of any of the Policies,
whether or not subject to deductibles, co-insurance, uncollectibility or
retrospectively-rated premium adjustments, but only to the extent that such
Liabilities are within applicable Policy limits, including aggregates.
Liabilities: any and all debts, liabilities and obligations,
whether accrued, contingent or reflected on a balance sheet, known or unknown,
including, without limitation, those arising under any law, rule, regulation,
Action, order or consent decree of any
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<PAGE>
governmental entity or any judgment of any court of any kind or award of any
arbitrator of any kind, and those arising under any contract, commitment or
undertaking.
Policies: insurance policies and insurance contracts of any
kind, including, without limitation, primary and excess policies, comprehensive
general liability policies, automobile and workers' compensation insurance
policies, and self-insurance arrangements, together with the rights and benefits
thereunder.
Private Placement: the sale of Agritope Stock or Agritope
Preferred to certain private investors in transactions intended to be exempt
from registration under the Securities Act pursuant to Regulation D or
Regulation S under the Securities Act.
Record Date: the date determined by the Epitope Board as the
record date for the Distribution.
Related Agreements: the Employee Benefits Agreement,
Transition Services and Facilities Agreement, Tax Allocation Agreement, and all
other agreements entered into by Epitope and Agritope pursuant to this Agreement
or otherwise in connection with the Distribution.
Related Company: each of UAF, Limited Partnership, a Delaware
limited partnership, Petals USA, Inc., a Minnesota corporation, and Superior
Tomato Associates, L.L.C., a Delaware limited liability company.
Securities Act: the Securities Act of 1933, as amended.
Shared Policies: all Policies owned or maintained by or on
behalf of Epitope prior to the Distribution Date, relating to both Epitope's
business and the Agritope Business.
Tax Allocation Agreement: the agreement, substantially in the
form of Exhibit B hereto, pursuant to which Epitope and Agritope will provide
for certain tax matters.
Transition Services and Facilities Agreement: the agreement,
substantially in the form of Exhibit C hereto, pursuant to which Epitope will
provide certain transitional services and facilities to Agritope following the
Distribution Date.
Vinifera: Vinifera, Inc., an Oregon corporation.
ARTICLE 2
PRE-DISTRIBUTION TRANSACTIONS
2.1 Private Placement of Agritope Equity. Agritope shall use
its best efforts to obtain commitments in the form of executed share purchase
agreements from investors
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<PAGE>
interested in investing in Agritope in a Private Placement to occur immediately
following the Distribution. Agritope shall use its best efforts to determine the
aggregate amount of committed investment capital as soon as practicable.
2.2 Agritope Corporate Actions. Prior to the Distribution Date,
Agritope will take all corporate action necessary to effect the Distribution and
comply with this Agreement and any Related Agreements, including but not limited
to authorizing a recapitalization such that a sufficient number of shares of
Agritope Stock are available to effect the Distribution, and approving
appropriate stock-based compensation or other plans, agreements and
arrangements, as provided for in the Employee Benefits Agreement.
2.3 Epitope Approval. Subject to the business judgment of the Epitope
Board, Epitope shall cooperate with Agritope in effecting any actions that are
reasonably necessary or desirable to be taken by Agritope in connection with the
transactions contemplated by this Agreement or any Related Agreements including,
without limitation, approving or ratifying as sole stockholder of Agritope, the
election or appointment of directors of Agritope to serve following the
Distribution, appropriate stock-based compensation or other plans for Agritope
Employees, board members and consultants, and any recapitalization necessary to
effect the Distribution.
2.4 Related Agreements. Epitope and Agritope will use their best
efforts to cause, on or before the Record Date, the execution and delivery by
each party of the Related Agreements and any other agreements deemed necessary
or desirable by the parties to establish and govern the post-Distribution
relationship of the parties.
2.5 Securities Law Actions.
(a) Epitope and Agritope will prepare, and file with the
Commission, the Form S-1, including the Distribution Prospectus.
Epitope and Agritope shall use reasonable efforts to cause the Form S-1
to become effective under the Securities Act, and, as soon as
practicable after the Distribution Date, Epitope shall mail the
Distribution Prospectus to holders of Epitope Stock as of the Record
Date. The joint obligations of Epitope and Agritope under this Section
2.4(a) shall not affect their respective obligations of indemnity under
Article 4 hereof.
(b) Epitope and Agritope shall take all such actions as may be
necessary or appropriate under the securities or blue sky laws of the
various states or other political subdivisions of the United States and
other countries in connection with the Distribution and the Private
Placement.
(c) Agritope will prepare and file, and will use its best
efforts to have approved, an application for inclusion of Agritope
Stock on The Nasdaq SmallCap Market.
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<PAGE>
ARTICLE 3
THE DISTRIBUTION
3.1 Discretion of Epitope Board; No Obligation. The Epitope Board will
have the sole discretion to determine, by resolution, the Record Date and all
appropriate procedures in connection with the Distribution. Nothing contained in
this section shall be interpreted to create any obligation on the part of
Epitope or Agritope to effect or to seek to effect the Distribution or in any
way limit Epitope's right to terminate this Agreement prior to the Record Date.
3.2 Conditions to the Distribution. The Distribution will not occur
prior to such time as each of the following conditions have been satisfied or
have been waived by the Epitope Board, in its sole discretion:
(a) Agritope shall have received binding commitments for
financing in an amount the Epitope Board deems sufficient to support
the operations of the Core Companies as businesses separate from
Epitope for a period of not less than two years;
(b) any waivers, consents, or amendments with respect to
agreements or other obligations entered into by or binding upon Epitope
or any Core Company shall have been executed and received to the extent
necessary to prevent Epitope or the Core Company from being in default
with respect to such agreements or obligations following the
Distribution;
(c) an opinion shall have been received from Miller, Nash,
Wiener, Hager & Carlsen LLP in form and substance satisfactory to the
Epitope Board, with respect to the federal income tax status of the
Distribution under Section 355 of the Code;
(d) the Form S-1 shall have been declared effective by the
Commission;
(e) any material approvals and consents necessary to
consummate the Distribution shall have been obtained and shall be in
full force and effect, and no Action shall be pending or threatened
with respect to the Distribution; and
(f) no other event or development shall have occurred that, in
the judgment of the Epitope Board, would have a material adverse effect
on Epitope or its shareholders.
3.3 The Distribution. On or prior to the Record Date, Epitope
will deliver its certificate or certificates for Agritope Stock to the Agent.
Epitope will deliver to the Agent a stock certificate or certificates
representing, in the aggregate (and rounded down to the nearest whole share),
the number of shares necessary so that one share of Agritope Stock may be
distributed to Epitope shareholders of record for every five shares of Epitope
Stock
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<PAGE>
outstanding on the Record Date. Thereafter, Epitope shall instruct the Agent to
distribute to holders of record of Epitope Stock on the Record Date, one share
of Agritope Stock for every five shares of Epitope Stock. All of the shares of
Agritope Stock issued in the Distribution will be fully paid, nonassessable and
free of preemptive rights. If the aggregate number of shares held by Epitope or
delivered to the Agent as of the Record Date exceeds the number to be
distributed to Epitope shareholders, Epitope shall return or instruct the Agent
to return the excess shares to Agritope for cancellation, as an additional
contribution to capital.
3.4 Fractional Shares. No certificates or scrip representing
fractional shares of Agritope Stock will be issued as a part of the
Distribution, and in lieu of receiving fractional shares, each holder of Epitope
Stock who would otherwise be entitled to receive a fractional share of Agritope
Stock pursuant to the Distribution will receive cash from Epitope for such
fractional share.
ARTICLE 4
INDEMNIFICATION, CLAIMS AND OTHER MATTERS
4.1 Indemnification by Epitope. Epitope will indemnify, defend
and hold harmless the Agritope Units and each of their directors, officers,
employees, and agents from and against any and all Indemnifiable Losses after
the Distribution Date arising out of or due to, directly or indirectly: (i)
Liabilities incurred in the course of the business or operations of Epitope
exclusive of the Agritope Business; (ii) any claim that the information included
in the Distribution Prospectus or the Form S-1 under (A) the captions "Summary
- -- Distributing Corporation and Business," "-- Financing of Agritope," "--
Distribution Ratio," "-- Record Date," "-- Distribution Date," "--Shares to be
Distributed," "-- Fractional Share Interests," "-- Primary Purposes of the
Distribution," "-- Tax Consequences," or "--Relationship with Epitope after the
Distribution," and the corresponding information appearing elsewhere in the
Distribution Prospectus, (B) the captions "The Distribution -- Reasons for the
Distribution," "-- Manner of Effecting the Distribution" and "-- Certain Federal
Income Tax Consequences," or (C) the information concerning Vector Securities
International, Inc. is false or misleading with respect to any material fact or
omits to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading; (iii) any third party claim of failure by
Epitope to perform under, or of any violation by Epitope of, any provision of
this Agreement or any Related Agreement, which is to be performed or complied
with by Epitope; and (iv) breaches of this Agreement or any Related Agreement by
Epitope.
4.2 Indemnification by Agritope. Agritope will indemnify,
defend and hold harmless Epitope and each of its directors, officers, employees,
and agents from and against any and all Indemnifiable Losses after the
Distribution Date arising out of or due to, directly or indirectly: (i)
Liabilities incurred in the course of the Agritope Business, including
obligations under any existing guaranty by Epitope of obligations of any
Agritope Unit; (ii) any claim that any information provided in connection with
the Private Placement, other than the information listed in Section 4.1(ii), is
false or misleading with respect to any material
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fact or omits to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, or that the Private Placement
otherwise violated the applicable law of any country; (iii) any claim that the
information included in the Distribution Prospectus or Form S-1, other than the
information listed in Section 4.1(ii) hereof, is false or misleading with
respect to any material fact or omits to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading; (iv) any claim by
any person or entity, other than Epitope or Agritope, that is a shareholder or
equity owner of an Agritope Unit, relating to such person's or entity's stock or
other equity interest in an Agritope Unit; (v) any third party claims of failure
by an Agritope Unit to perform under, or any violation by an Agritope Unit of,
any provision of this Agreement or any Related Agreement which is to be
performed or complied with by an Agritope Unit; and (vi) breaches of this
Agreement or any Related Agreement by an Agritope Unit.
4.3 Insurance Proceeds. The amount that any Indemnifying Party
is or may be required to pay to any Indemnitee pursuant to Section 4.1 or
Section 4.2 hereof will be reduced (including, without limitation,
retroactively) by any Insurance Proceeds and other amounts actually recovered by
or on behalf of such Indemnitee in reduction of the related Indemnifiable Loss.
If an Indemnitee shall have received an Indemnity Payment in respect of an
Indemnifiable Loss and shall subsequently actually receive Insurance Proceeds or
other amounts in respect of such Indemnifiable Loss as specified above, then
such Indemnitee will pay to such Indemnifying Party a sum equal to the amount of
such Insurance Proceeds or other amounts actually received. Notwithstanding the
foregoing, nothing in this section grants to an Indemnitee any direct or
indirect rights or benefits to insurance coverage, nor requires an Indemnifying
Party to make any claim for insurance coverage.
4.4 Procedure for Indemnification.
(a) If either party shall receive notice of any claim or
Action brought, asserted, commenced or pursued by any person or entity
not a party to this Agreement (hereinafter a "Third Party Claim"), with
respect to which the other party is or may be obligated to make an
Indemnity Payment, it shall give such other party prompt notice thereof
(including any pleadings relating thereto), specifying in such
reasonable detail as is known to it the nature of such Third Party
Claim and the amount or estimated amount thereof; provided, however,
that the failure of a party to give notice as provided in this Section
4.4 shall not relieve the other party of its indemnification
obligations under this Article 4, except to the extent that such other
party is actually prejudiced by such failure to give notice.
(b) For any Third Party Claim concerning which notice is
required to be given, and, in fact, is given under subparagraph (a) of
this Section 4.4, the Indemnifying Party shall defend in a timely
manner, to the extent permitted by law, such Third Party Claim through
counsel appointed by the Indemnifying Party and reasonably acceptable
to the Indemnitee. Once an Indemnifying Party has commenced
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its defense of an Indemnitee, it cannot withdraw from such defense
until conclusion of the matter, unless the Indemnified Party agrees to
the withdrawal or the Indemnitee is also defending the claim. The
Indemnitee shall have the right to participate in the defense of the
Third Party Claim by employing separate counsel at its own expense.
(c) If a party responds to a notice of a Third Party Claim by
denying its obligation to indemnify the other party, or if the
Indemnifying Party fails to defend in a timely or reasonably
satisfactory manner, the Indemnitee shall be entitled to defend such
Third Party Claim through counsel appointed by it. In addition, if it
is later determined that such party wrongfully denied such claim, or
the Indemnifying Party failed to defend timely or in a reasonably
satisfactory manner, then the Indemnifying Party shall (i) reimburse
the Indemnitee for all reasonable costs and expenses (including
attorney fees before and at trial and in connection with any appeal or
petition for review, but excluding salaries of officers and employees)
incurred by the Indemnitee in connection with its defense of such Third
Party Claim; and (ii) be estopped from challenging a judgment, order,
settlement, compromise, or consent judgment resolving the Third Party
Claim entered into in good faith by the Indemnitee (if such claim has
been resolved prior to the conclusion of the proceeding between the
Indemnitee and Indemnifying Party). An Indemnifying Party, after
initially rejecting a claim for defense or indemnification, may defend
and indemnify the Indemnitee, at any time prior to the resolution of
said Third Party Claim, for such claim, provided that (x) the
Indemnifying Party reimburses the Indemnitee for all reasonable costs
and expenses (including attorney fees before and at trial and in
connection with any appeal or petition for review, but excluding
salaries of officers and employees) incurred by the Indemnitee in
connection with its defense of such Third Party Claim up to the time
the Indemnifying Party assumes control of the defense of such claim
(including costs incurred in the transition of the defense from the
Indemnitee to the Indemnifying Party); and (y) the assumption of the
defense of the Third Party Claim is not expected to prejudice or cause
harm to the Indemnitee.
(d) With respect to any Third Party Claim for which
indemnification has been claimed hereunder, no party shall enter into
any compromise or settlement, or consent to the entry of any judgment
which (i) does not include as a term thereof the giving by the third
party of a release to the Indemnitee from all further liability
concerning such Third Party Claim on terms no less favorable than those
obtained by the party entering into such compromise, settlement or
consent; or (ii) imposes any obligation on the Indemnitee without such
Indemnitee's written consent (such consent not to be withheld
unreasonably), except an obligation to pay money which the Indemnifying
Party has agreed to pay and has the ability to pay on behalf of the
Indemnitee. In the event that an Indemnitee enters into any such
compromise, settlement or consent without the written consent of the
Indemnifying Party (other than as contemplated by Section 4.4(c)
hereof), the entry of such compromise, settlement or consent shall
relieve the Indemnifying Party of its indemnification obligation
related to the claims underlying such compromise, settlement or
consent.
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(e) Upon final judgment, determination, settlement or
compromise of any Third Party Claim, and unless otherwise agreed by the
parties in writing, the Indemnifying Party shall pay promptly on behalf
of the Indemnitee, or to the Indemnitee in reimbursement of any amount
theretofore required to be paid by the Indemnitee, the amount so
determined by final judgment, determination, settlement or compromise.
Upon the payment in full by the Indemnifying Party of such amount, the
Indemnifying Party shall succeed to the rights of such Indemnitee to
the extent not waived in settlement, against the third party who made
such Third Party Claim and any other person who may have been liable to
the Indemnitee with respect to the indemnified matter.
(f) In connection with defending against Third Party Claims,
the parties shall cooperate with and assist each other by making
available all employees, books, records, communications, documents,
items and matters within their knowledge, possession or control that
are necessary, appropriate or reasonably deemed relevant with respect
to defense of such claims; provided, however, that nothing in this
subparagraph (f) shall be deemed to require the waiver of any
privilege, including the attorney-client privilege, or protection
afforded by the attorney work product doctrine. In addition, regardless
of the party actually defending a Third Party Claim for which there is
an indemnity obligation under Section 4.1 or 4.2 hereof, the parties
shall give each other regular status reports relating to such action
with detail sufficient to permit the other party to assert and protect
its rights and obligations under this Agreement.
4.5 Other Claims. Any claim for an Indemnifiable Loss which
does not result from a Third Party Claim shall be asserted by written notice
from the Indemnitee to the Indemnifying Party within 120 days of first learning
thereof. All such claims that are not timely asserted pursuant to this section
shall be deemed to be forever waived. The Indemnitee's written notice shall
contain such information as the Indemnitee has regarding the alleged breach.
Such Indemnifying Party shall have a period of 120 days (or such shorter time
period as may be required by law as indicated by the Indemnitee in the written
notice) within which to respond thereto. If such Indemnifying Party does not
respond within such 120-day period (or lesser period), such Indemnifying Party
shall be deemed to have accepted responsibility to make payment for the amount
of Indemnifiable Loss and shall have no further right to contest the validity of
such claim. If such Indemnifying Party does respond within such 120-day (or
lesser) period and rejects such claim in whole or in part, such Indemnitee shall
be free to pursue such remedies as may be available under applicable law or
under this Agreement.
4.6 Contribution in Respect of Certain Indemnifiable Losses.
If the indemnification provided for in this Article 4 is unavailable to an
Indemnitee in respect of any Indemnifiable Loss arising out of, or related to,
information contained in the Distribution Prospectus or the related Form S-1 or
used in connection with the Private Placement, the Indemnifying Party, in lieu
of indemnifying such Indemnitee, shall contribute to the amount paid or payable
by such Indemnitee as a result of such Indemnifiable Loss, in such proportion as
is appropriate to reflect the relative fault of Agritope, its directors,
officers,
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employees or agents, on the one hand, and Epitope, its directors, officers,
employees or agents, on the other hand, in connection with the statements or
omissions which resulted in such Indemnifiable Loss. The relative fault of such
respective groups shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by either such group.
4.7 No Beneficiaries. Except to the extent expressly provided
otherwise in this Article 4, the indemnification provided for by this Article 4
shall not inure to the benefit of any third party or parties and shall not
relieve any insurer who would otherwise be obligated to pay any claim of the
responsibility with respect thereto or, solely by virtue of the indemnification
provisions hereof, provide any such subrogation rights with respect thereto and
each party agrees to waive such rights against the other to the fullest extent
permitted.
ARTICLE 5
CERTAIN ADDITIONAL MATTERS
5.1 Construction of Agreements. Notwithstanding any other
provisions in this Agreement to the contrary, in the event and to the extent
that there is a conflict between the provisions of this Agreement and the
provisions of any Related Agreement, the provisions of such Related Agreement
shall control.
5.2 Consents and Assignments. Epitope and Agritope shall use
reasonable efforts to obtain, either before or after the Distribution Date, any
consent, approval or amendment required to novate and/or assign to an Agritope
Unit or to Epitope, as appropriate, all agreements, leases, licenses and other
rights of any nature whatsoever relating solely to that party's business.
5.3 No Representations or Warranties. Agritope understands and
agrees that Epitope is not, in this Agreement, or in any Related Agreement or
any other agreement or document contemplated by this Agreement, representing or
warranting in any way as to the businesses and Liabilities retained, transferred
or assumed in connection with the Distribution, or that the obtaining of the
consents or approvals, the execution and delivery of any ancillary or amendatory
agreements or the making of the filings and applications contemplated by this
Agreement will satisfy the provisions of all applicable agreements or the
requirements of all applicable laws or judgments, it being understood and agreed
that, subject to Section 5.2 hereof, Agritope shall bear the economic and legal
risk of the business and Liabilities retained or assumed hereunder by Agritope,
and the legal and economic risk that any necessary consents or approvals are not
obtained or that any requirements of law or judgments are not complied with or
satisfied.
5.4 Officers and Directors. Agritope and Epitope shall take
all necessary actions to elect or otherwise appoint, as of the Distribution
Date, individuals to be directors or officers (or both) of Agritope, as set
forth in the Form S-1, and to cause the resignation of
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individuals as officers and directors of each so that there are only two common
directors of Agritope and Epitope as of the Distribution Date and no common
officers.
5.5 Existing Intercompany Arrangements. Except as otherwise
provided in this Agreement, any and all agreements, arrangements, commitments or
understandings, whether or not in writing, between Epitope and Agritope will be
terminated and of no further force and effect as of the Distribution Date.
Following the Distribution Date, the parties shall discuss in good faith the
provision of any services and products to be provided by the other, but which
inadvertently were not the subject of this Agreement or any other Related
Agreement.
5.6 Termination of Intercompany Accounts. Except as described
in Section 9.2, any intercompany receivable, payable or loan between Epitope and
Agritope outstanding on the Distribution Date will be deemed terminated as a
result of the consummation of the transactions contemplated in this Agreement
and will be treated as a capital contribution.
ARTICLE 6
ACCESS TO INFORMATION AND SERVICES; TECHNOLOGY
6.1 Provision of Corporate Records. Following the Distribution
Date, all Books and Records will remain the property of Epitope but will be made
available upon reasonable notice and during normal business hours to Agritope
for review and duplication until the earlier of (i) notice from Agritope that
such Books and Records are no longer needed by Agritope, or (ii) the seventh
anniversary of the Distribution Date.
6.2 Access to Information. From and after the Distribution
Date, Epitope and Agritope will afford to each other and to each other's
authorized accountants, legal counsel and other designated representatives
reasonable access and duplicating rights (with copying costs to be borne by the
requesting party) during normal business hours to all Books and Records and
documents, communications, items and matters, including computer data
(collectively, "Information") within each other's knowledge, possession or
control, relating to the Agritope Units or Agritope Employees, insofar as such
access is reasonably required by Epitope or Agritope (and shall use reasonable
efforts to cause persons or firms possessing Information to give similar
access). Information may be requested under this Article 6 for any legitimate
business purpose including, without limitation, audit, accounting, claims,
Actions, litigation and tax purposes, as well as for purposes of fulfilling
disclosure and reporting obligations, but not for competitive purposes.
6.3 Production of Witnesses and Individuals. From and after
the Distribution Date, Epitope and Agritope will use reasonable efforts to make
available to each other, upon written request, their respective officers,
directors, employees and agents for fact finding, consultation and interviews
and as witnesses to the extent that any such person may reasonably be required
in connection with any Actions in which the requesting party may
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from time to time be involved. Epitope and Agritope agree to reimburse each
other for reasonable out-of-pocket expenses (but not labor charges or salary
payments) incurred by the other in connection with providing individuals and
witnesses pursuant to this Section 6.3.
6.4 Retention of Records. Except when a longer retention
period is otherwise required by law or agreed to in writing, Epitope and
Agritope will retain, for seven years following the Distribution Date, all
material Information relating to Agritope. Notwithstanding the foregoing, in
lieu of retaining any specific Information, Epitope or Agritope may offer in
writing to deliver such Information to the other and, if such offer is not
accepted within 90 days, the offered Information may be destroyed or otherwise
disposed of at any time. If a recipient of such offer requests in writing that
any of the Information proposed to be destroyed or disposed of be delivered to
such requesting party, the party proposing the destruction or disposal will
promptly arrange for the delivery of the requested Information (at the cost of
the requesting party).
6.5 Confidentiality. During the period that Agritope has been
a wholly owned subsidiary of Epitope, employees of both Epitope and Agritope
have become aware of a wide variety of otherwise confidential business and
technical information of the other party. Such information of Epitope or the
Agritope Units (the "Disclosing Party") shall be protected by the other party
(the "Recipient") as follows:
(a) "Confidential Information" means nonpublic information
concerning the Disclosing Party's business, business plans, products,
or technology, whether disclosed before or after the Distribution Date,
including but not limited to strategic and long-range plans, financial
and operating results, identities of principal customers and suppliers,
plans for capital expenditures, plans for expansion into new markets,
research projects and results, and trade secrets.
(b) "Confidential Information" for purposes of this agreement
excludes:
(i) information which is or becomes publicly
available through no act of the Recipient, from and after the
date of public availability;
(ii) information disclosed to the Recipient by a
third party, provided: (A) under the circumstances of
disclosure the Recipient does not have a duty of
non-disclosure owed to such third party; (B) the third party's
disclosure does not violate a duty of non-disclosure owed to
another, including the Disclosing Party; and (C) the
disclosure by the third party is not otherwise unlawful; and
(iii) information developed by the Recipient
independent of any confidential information of the Disclosing
Party which is known by the Recipient on the Distribution Date
and/or disclosed by the Disclosing Party thereafter.
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(c) The Recipient will hold, and will cause its officers,
employees, agents, consultants, advisors and Affiliates to hold, in
strict confidence, and not to disclose, unless compelled to disclose by
judicial or administrative process or, in the opinion of its
independent legal counsel, by other requirements of law, all
Confidential Information of the Disclosing Party.
(d) The Recipient shall protect Confidential Information of
the Disclosing Party by using the same degree of care, but no less than
a reasonable degree of care, to prevent unauthorized disclosure as the
Recipient uses to protect its own confidential information of a like
nature.
(e) The Recipient may disclose Confidential Information of the
Disclosing Party to its employees, Affiliates, sublicensees, agents and
advisors (such as attorneys, accountants and other consultants) who
need to know the information and are obligated by policy, agreement or
otherwise to avoid unauthorized use and disclosure of Confidential
Information.
(f) The foregoing restrictions shall expire ten years after
the later of the Distribution Date or the date of disclosure, unless
and to the extent Epitope and Agritope agree to a longer period for the
foregoing restrictions with respect to specific categories of
Confidential Information.
6.6 Privileged Matters.
(a) Epitope and Agritope will each maintain, preserve and
assert all privileges, including, without limitation, any privilege or
protection arising under or relating to any attorney-client
relationship (including, without limitation, the attorney-client and
work product privileges), that existed prior to the Distribution Date
in favor of the other party ("Privilege" or "Privileges"). Neither
party will waive any Privilege that could be asserted under applicable
law by the other party (the "Privileged Party") without the prior
written consent of the Privileged Party. The rights and obligations
created by this paragraph apply to all information as to which, but for
the Distribution, a party would have been entitled to assert or did
assert the protection of a Privilege ("Privileged Information").
(b) Upon receipt by either party or any of its Affiliates of
any subpoena, discovery or other request that arguably calls for the
production or disclosure of Privileged Information of the other party,
or if a party obtains knowledge that any of its current or former
employees has received any subpoena, discovery or other request which
arguably calls for the production or disclosure of Privileged
Information of the other party, the party will promptly notify the
Privileged Party of the existence of the request and will provide the
Privileged Party a reasonable opportunity to review the information and
to assert any rights it may have under this Section 6.6 or otherwise to
prevent the production or disclosure of Privileged Information. Neither
party will produce or disclose any information it should reasonably
expect to be covered by a
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Privilege under this Section 6.6 unless (i) the Privileged Party has
provided its express written consent to such production or disclosure;
or (ii) a court of competent jurisdiction has entered a final,
non-appealable order finding that the information is not entitled to
protection under any applicable privilege.
(c) Either party's provision of information to the other
party, and either party's agreement to permit the other party to
possess copies of Privileged Information occurring or generated prior
to the Distribution Date, are made in reliance on the agreement, as set
forth in this Section 6.6, to maintain the confidentiality of
Privileged Information and to assert and maintain all applicable
Privileges. Any actions taken by either party in connection with the
Distribution and this Separation Agreement shall not be deemed a waiver
of any Privilege that has been or may be asserted by either party nor
shall they operate to reduce, minimize or condition the rights granted
to either party in, or the obligations imposed upon either party by,
this Section 6.6.
(d) Agritope shall cause the Core Companies to comply with the
restrictions imposed on it under this Section 6.6.
6.7 Technology.
(a) On or before the Distribution Date, Epitope shall assign
to Agritope, or as applicable Agritope shall assign to Epitope, those
patents, patent applications, trademarks or service marks and related
applications, copyrights, trade secrets, licenses, or agreements listed
on Schedule 1, which specifies the current owner or named party and the
party to which they are to be assigned. Epitope and Agritope shall
cooperate fully with each other to effect the assignments and cause
them to be made of record. The assignee shall pay any recording costs,
counsel fees, or similar charges incurred to cause the assignment to be
made of record.
(b) After the Distribution Date, Epitope, on the one hand, and
the Agritope Units, on the other, may use the patented inventions,
trademarks, service marks, copyrighted works, trade secrets, or
internally developed or licensed technology of the Agritope Units and
of Epitope, respectively, only to the extent permitted by this or
another written agreement.
(c) For a period not to exceed two years after the
Distribution Date, Agritope may continue to use the E design registered
trademark, Reg. Nos. 1,770,765 and 1,805,488, in connection with goods
and services of a quality comparable to those it provides as of the
Distribution Date. Agritope shall use reasonable efforts to adopt a
substitute corporate logo within six months after the Distribution
Date, and shall phase out use of the E design trademark as soon as
practicable.
(d) Epitope and Agritope will each make their employees (and
employees of the Core Companies) reasonably available to cooperate with
the other party in
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connection with any patent application filed after the Distribution
Date if such employees have knowledge relevant to the application. If
an employee of Epitope, on the one hand, or the Agritope Units, on the
other, is an inventor of an invention assigned to an Agritope Unit or
to Epitope, respectively, the employer will make the employee
reasonably available to sign patent applications or related documents,
testify in connection with patent interference or similar proceedings,
and take other actions reasonably requested by the assignee to obtain
or maintain patent or other rights in the invention. Nothing in this
paragraph requires the assignment of any invention to Epitope or the
Agritope Units.
ARTICLE 7
INSURANCE
7.1 Transition. Agritope shall use reasonable efforts to
obtain by and after the Distribution Date such insurance policies for the
Agritope Business as the Agritope board of directors deems advisable, and shall
keep Epitope informed of all new insurance policies obtained by Agritope that
replace Shared Policies. Epitope may have the Agritope Units removed as named
insureds from each Shared Policy covering losses of a type for which Agritope
obtains its own insurance policy, regardless of differences in the limits under
the Shared Policy and the policy obtained by Agritope. Epitope may have the
Agritope Units removed as named insureds on each Shared Policy at the time the
Shared Policy next comes due for renewal. For any period after the Distribution
Date during which an Agritope Unit remains a named insured under a Shared
Policy, Agritope shall pay Epitope a pro rata portion of the premiums
attributable to the period.
7.2 Post-Distribution Date Claims. If, subsequent to the
Distribution Date, any person, corporation, firm or entity shall assert a claim
against an Agritope Unit with respect to any injury, loss, liability, damage or
expense incurred or claimed to have been incurred in, or in connection with, the
conduct of the Agritope Business or, to the extent any claim is made against
Agritope, Epitope's business, and which injury, loss, liability, damage or
expense may arise out of insured or insurable occurrences or events under one or
more of the Shared Policies, Epitope shall at the time such claim is asserted be
deemed to assign, without need of further documentation, to Agritope any and all
rights of an insured party under the applicable Shared Policy(ies) with respect
to such asserted claim, specifically including rights of indemnity and the
right(s) to be defended by or at the expense of the insurer(s); provided,
however, that nothing in this sentence is intended to effectuate or shall be
deemed to constitute or reflect the assignment of the Shared Policies, or any of
them, to Agritope.
7.3 Allocation of Insurance Proceeds. Insurance Proceeds
received with respect to claims, costs and expenses under the Shared Policies
shall be paid to Agritope with respect to Agritope's Liabilities and to Epitope
with respect to Epitope's Liabilities. Payment of the allocable portions of
indemnity costs of Insurance Proceeds resulting from the liability policies will
be made to the appropriate party upon receipt from the insurance carrier. In the
event that the aggregate limits on any of the Shared Policies are exceeded, the
parties agree
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to provide an equitable allocation of Insurance Proceeds received after the
Distribution Date based upon their respective bona fide claims. The parties
shall use their best efforts to cooperate with respect to insurance matters.
ARTICLE 8
DISPUTE RESOLUTION
8.1 Negotiation and Binding Arbitration. Except with respect
to matters involving Section 6.6 hereof (Privileged Matters) and except as may
expressly be provided in any other agreement between the parties entered into
pursuant hereto, if a dispute, controversy or claim (collectively, a "Dispute")
between Epitope and Agritope arises out of or relates to this Agreement, a
Related Agreement or any other agreement entered into pursuant hereto or
thereto, including, without limitation, the breach, interpretation or validity
of any such agreement or any matter involving an Indemnifiable Loss, Epitope and
Agritope agree to use the following procedures, in lieu of either party pursuing
other available remedies and as the sole remedy (except as provided in Section
8.4 below), to resolve the Dispute.
8.2 Initiation. A party seeking to initiate the procedures
will give written notice to the other party, briefly describing the nature of
the Dispute. A meeting will be held between the parties within 30 days of the
receipt of such notice, attended by individuals with decision-making authority
regarding the Dispute, to attempt in good faith to negotiate a resolution of the
Dispute.
8.3 Submission to Arbitration. If, not later than 30 days
after such meeting, the parties have not succeeded in negotiating a resolution
of the Dispute, they will agree to submit the Dispute to binding arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association, by a sole arbitrator selected by the parties. The arbitration will
be held in Portland, Oregon, and governed by the Federal Arbitration Act, 9
U.S.C. Sections 1-16, and judgment upon the award rendered by the arbitrator may
be entered by any court having jurisdiction thereof. The costs of arbitration
will be apportioned between Epitope and Agritope as determined by the arbitrator
in such manner as the arbitrator deems reasonable, taking into account the
circumstances of the Dispute, the conduct of the parties during the proceeding,
and the result of the arbitration.
8.4 Equitable Relief. Nothing herein will preclude either
party from seeking equitable relief to prevent any immediate, irreparable harm
to its interests, including multiple breaches of this Agreement or the relevant
Related Agreement by the other party. Otherwise, these procedures are exclusive
and will be fully exhausted prior to the initiation of any litigation. Either
party may seek specific enforcement of any arbitrator's decision under this
Article. The arbitrator may consolidate an arbitration under this Agreement with
any arbitration arising under or relating to the Related Agreements or any other
agreement between the parties entered into pursuant hereto, as the case may be,
if the subjects of the Disputes thereunder arise out of or relate essentially to
the same set of facts or transactions. The determination of issues relating to
consolidation and the determination of any such
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consolidated arbitration will be determined by the arbitrator appointed for the
arbitration proceeding that was commenced first in time.
ARTICLE 9
MISCELLANEOUS
9.1 Entire Agreement. This Agreement, including the Exhibits
and the agreements and other documents referred to herein, shall constitute the
entire agreement between Epitope and Agritope with respect to the subject matter
hereof and shall supersede all previous negotiations, commitments and writings
with respect to such subject matter.
9.2 Expenses. Except as otherwise expressly provided in this
Agreement, any Related Agreement or any other agreement being entered into
between Epitope and Agritope in connection with this Agreement, Epitope and
Agritope shall each pay their own costs and expenses incurred in connection with
the Distribution and the consummation of the transactions contemplated by this
Agreement. Agritope shall also pay the expenses of the Private Placement and the
expenses described on Schedule 2. Beginning December 1, 1997, Agritope shall pay
all costs and expenses incurred in the course of the Agritope Business. In
addition, commencing December 1, 1997, Epitope shall furnish services to
Agritope, and Agritope shall pay Epitope for such services, pursuant to the
Transition Services and Facilities Agreement and "Shared Services" shall no
longer be allocated by Epitope to Agritope. To the extent expenses that are to
be borne by Agritope are advanced by Epitope, Agritope shall reimburse Epitope
for such expenses, without interest, within five business days after the
Distribution.
9.3 Governing Law. This Agreement, the Related Agreements and
any other agreement entered into in connection with the Distribution, shall be
governed by, and construed and enforced in accordance with, the laws of the
state of Oregon (regardless of the laws that might otherwise govern under
applicable principles of conflict of laws).
9.4 Jurisdiction and Venue. Subject to the arbitration
provisions of this Agreement, each party consents to the personal jurisdiction
of the state and federal courts located in the state of Oregon and hereby waives
any argument that venue in any such forum is not convenient or proper.
9.5 Notices. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given (i) on the date of service if served personally on the
party to whom notice is given; (ii) on the day of transmission if sent via
facsimile transmission to the facsimile number given below, provided telephonic
confirmation of receipt is obtained promptly after completion of transmission;
(iii) on the business day after delivery to an overnight courier service or the
express mail service maintained by the United States Postal Service, provided
receipt of delivery has been confirmed; or (iv) on the fifth day after mailing,
provided receipt of delivery is confirmed, if mailed to the party to whom notice
is to be given, by registered or
- 18 -
<PAGE>
certified mail, postage prepaid, properly addressed and return-receipt
requested, to the party as follows:
If to Epitope: Epitope, Inc.
8505 S.W. Creekside Place
Beaverton, Oregon 97008
Attn: President
Facsimile No. (503) 641-8665
If to Agritope: Agritope, Inc.
8505 S.W. Creekside Place
Beaverton, Oregon 97008
Attn: President
Facsimile No. (503) 520-6196
Any party may change its address and facsimile number by giving the other party
written notice of its new address and facsimile number in the manner set forth
above.
9.6 Modification of Agreement. No modification, amendment or
waiver of any provision of this Agreement shall be effective unless the same
shall be in writing and signed by each of the parties hereto and then such
modification, amendment or waiver shall be effective only in the specific
instance and for the purpose for which given.
9.7 Termination. This Agreement may be terminated and the
Distribution abandoned at any time prior to the Record Date by, and in the sole
discretion of, Epitope without the approval of Agritope. In the event of such
termination, neither party (or any of its directors of officers) shall have any
liability of any kind to the other party.
9.8 Successors and Assigns. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
and their respective successors and permitted assigns, but neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by either party without the prior written consent of the other party,
and such consent shall not be unreasonably withheld.
9.9 No Third Party Beneficiaries. Except for certain parties
entitled to indemnification under Sections 4.1 and 4.2 hereof and listed
therein, this Agreement is solely for the benefit of the parties hereto and is
not intended to confer upon any other person except the parties hereto any
rights or remedies hereunder.
9.10 Titles and Headings; Interpretation. The titles and
headings to articles and sections herein are inserted for convenience of
reference only and are not intended to constitute a part of or to affect the
meaning or interpretation of this Agreement.
- 19 -
<PAGE>
9.11 Exhibits. The exhibits and schedules to this Agreement
shall be construed with and as an integral part of this Agreement to the same
extent as if the same had been set forth verbatim herein.
9.12 Severability. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable, the
enforceability of the remaining provisions hereof shall not in any way be
affected or impaired thereby.
9.13 No Waiver. Neither the failure nor any delay on the part
of any party hereto to exercise any right under this Agreement shall operate as
a waiver thereof, nor shall any single or partial exercise of any right preclude
any other or further exercise of the same or any other right, nor shall any
waiver of any right with respect to any occurrence be construed as a waiver of
such right with respect to any other occurrence.
9.14 Survival. All covenants and agreements of the parties
contained in this Agreement will survive for ten years following the
Distribution Date, except for the covenants and agreements contained in Section
6.6, which shall continue indefinitely.
9.15 Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement,
and shall become a binding agreement when a counterpart has been signed by each
party and delivered to the other party.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed delivered on their behalf as of the date first written
above.
EPITOPE, INC.
By /s/ John W. Morgan
Title President and CEO
AGRITOPE, INC.
By /s/ Adolph J. Ferro
Title Chairman, President and CEO
- 20 -
<PAGE>
The undersigned consent to and agree to be bound by the terms
of this Agreement.
VINIFERA, INC.
By /s/ Gilbert N. Miller
Title Exec Vice President
AGRIMAX FLORAL PRODUCTS, INC.
By /s/ Gilbert N. Miller
Title Exec Vice President
- 21 -
<PAGE>
SCHEDULE 1
INTELLECTUAL PROPERTY TO BE ASSIGNED
NONE
- 22 -
<PAGE>
SCHEDULE 2
CERTAIN AGRITOPE EXPENSES
1. Miller Nash fees and expenses for Agritope Stock Purchase and R&D
Agreements of $12,408.
2. All Tonkon Torp fees and expenses
3. Travel expenses for Dr. Ferro and Mr. Miller for June, September,
and November trips to Europe made in connection with private placement of
Agritope Stock Purchase and R&D Agreements.
4. Capital Asset Acquisitions
- Precision Computers -- Pentium PC $ 2,734
- Computer System, CD Player 699
- HP Gas Chromatograph 21,208
- APCO Technologies Grafting Machine 10,000
5. Prepaid rent on new Agritope facility $ 21,445
== ========
- 23 -
<PAGE>
EXHIBIT A
[EMPLOYEE BENEFITS AGREEMENT]
EXHIBIT B
[TAX ALLOCATION AGREEMENT]
EXHIBIT C
[TRANSITION SERVICES AND FACILITIES AGREEMENT]
- 24 -
AGRITOPE, INC.
CERTIFICATE OF INCORPORATION
ARTICLE 1
NAME
The name of the Corporation is Agritope, Inc.
ARTICLE 2
REGISTERED AGENT AND OFFICE
The registered agent and the address of the Corporation's registered
office in the state of Delaware are:
The Corporation Trust Company
1209 Orange Street
County of New Castle
Wilmington, DE 19801
ARTICLE 3
PURPOSE
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 the state of Delaware (the "Delaware General Corporation Law").
ARTICLE 4
CAPITAL STOCK
Section 1. Authorized Capital Stock. The Corporation is authorized to
issue an aggregate of 40,000,000 shares of its capital stock, par value $.01 per
share, which shall be divided into classes as follows:
Class Number of Shares
----- ----------------
Common Stock 30,000,000 shares
Preferred Stock, issuable
in series 10,000,000 shares
Section 2. Common Stock. Holders of the Corporation's Common Stock
shall be entitled to one vote per share on each matter to be voted upon by the
Corporation's stockholders. Shares of Common Stock shall not have cumulative
voting rights with respect to any matter. All other rights to which holders of
the Corporation's capital stock are entitled, which are not
Page 1 - Certificate of Incorporation
<PAGE>
expressly granted to the Preferred Stock, are reserved to and vested in the
Common Stock.
Section 3. Preferred Stock. Subject to limitations prescribed by the
Delaware General Corporation Law, the Board of Directors is expressly vested
with authority to adopt a resolution or resolutions providing for the issuance
of Preferred Stock from time to time in one or more series, each such series to
be appropriately designated, prior to the issuance of any shares thereof, by
some distinguishing letter, number or title. The Board of Directors is expressly
authorized to fix, state and express, in the resolution or resolutions providing
for the issuance of any wholly unissued series of Preferred Stock, the powers,
designations, preferences, and relative, participating, optional and other
special rights, if any, and any qualifications, limitations and restrictions
thereof, including, without limitation:
(a) the rate of dividends upon which and the times at which dividends
on shares of such series shall be payable and the preference, if any, which
such dividends shall have relative to dividends on shares of any other
class or any other series of stock of the Corporation;
(b) whether such dividends shall be cumulative or noncumulative, and
if cumulative, the date or dates from which dividends on shares of such
series shall be cumulative;
(c) the voting rights, if any, to be provided for shares of such
series;
(d) the rights and preferences, if any, which the holders of shares of
such series shall have in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation;
(e) the rights, if any, which the holders of shares of such series
shall have to convert such shares into or exchange such shares for
securities or other property of the Corporation and the terms and
conditions, including price and rate of exchange, of such conversion or
exchange;
(f) the redemption provisions (including sinking fund provisions), if
any, applicable to shares of such series; and
Page 2 - Certificate of Incorporation
<PAGE>
(g) such other powers, rights, designations, preferences,
qualifications, limitations and restrictions as the Board of Directors may
desire to so fix.
If, upon any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, the assets available for distribution to holders
of shares of a series of Preferred Stock shall be insufficient to pay such
holders the full preferential amount to which they are entitled, such assets
shall be distributed ratably among the shares of such series of Preferred Stock
in proportion to the full amounts which would be payable on such shares if all
amounts payable thereon were paid in full.
To the extent, if any, that shares of any series of Preferred Stock
shall have voting rights, such shares shall, unless otherwise required by law or
pursuant to the terms of such series established by the Board of Directors, vote
together with all other series of Preferred Stock and with the Common Stock as a
single class or voting group. Shares of Preferred Stock shall not have
cumulative voting rights.
Section 4. Preemptive Rights. No holder of any shares of the
Corporation, whether now or hereafter authorized, shall have any preemptive or
preferential right to acquire any shares or securities of the Corporation,
except as such rights are expressly provided by contract or in the terms of any
series of Preferred Stock established hereunder.
ARTICLE 5
INCORPORATOR'S NAME AND MAILING ADDRESS
The incorporator's name and mailing address are:
Jeffrey S. Cronn
Tonkon Torp LLP
1600 Pioneer Tower
888 S.W. Fifth Avenue
Portland, Oregon 97204
ARTICLE 6
BOARD OF DIRECTORS
The following provisions are inserted for the management of the
business and for the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
(a) Number; Eligibility for Service. Except as otherwise provided in
this Certificate of Incorporation
Page 3 - Certificate of Incorporation
<PAGE>
or the bylaws of the Corporation relating to the rights of the holders of
any series of Preferred Stock, voting separately by class or series, to
elect additional directors under specified circumstances, the Board of
Directors shall consist of not less than six nor more than thirteen
members, the exact number to be set from time to time by the Board of
Directors as provided herein. The Board of Directors is authorized to
increase or decrease the size of the Board of Directors (within the range
specified above) at any time by the affirmative vote of two-thirds of the
directors then in office. Without the unanimous consent of the directors
then in office, no more than two additional directors shall be added to the
Board of Directors within any 12-month period. Without the unanimous
approval of the directors then in office, no person who is affiliated as an
owner, director, officer or employee of a company or business deemed by the
Board of Directors to be competitive with that of the Corporation shall be
eligible to serve on the Board of Directors of the Corporation.
(b) Classified Board of Directors.
(i) Establishment of Classified Board. The Board of Directors of
the Corporation shall be divided into three classes, each class to be
as nearly equal in number as possible. The classes shall be Class 1,
Class 2 and Class 3. The initial designation of directors to each of
the three classes shall be made by the Chairman of the Board. The term
of office of directors of Class 1 so designated shall expire at the
first annual meeting of stockholders after their election, that of
Class 2 shall expire at the second annual meeting after their
election, and that of Class 3 shall expire at the third annual meeting
after their election. At each annual meeting of stockholders, the
number of directors equal to the number of the class whose term
expires at the time of such meeting shall be elected to hold office
until the third succeeding annual meeting of stockholders.
(ii) Change in Number of Directors. In the event of any increase
or decrease in the authorized number of directors, then: (A) each
director then serving as such shall nevertheless continue as a
director of the class of which the director is a member until the
expiration of the director's current term, or upon the director's
earlier resignation, removal from office or death; and (B) the newly
created or eliminated directorships resulting from such increase or
decrease shall be
Page 4 - Certificate of Incorporation
<PAGE>
allocated by the Chairman of the Board of the Corporation among the
three classes of directors so as to maintain equal classes to the
extent possible.
(iii) Directors Elected by Holders of Preferred Stock.
Notwithstanding the foregoing, whenever the holders of any one or more
series of Preferred Stock issued by the Corporation shall have the
right, voting separately by class or series, to elect directors at an
annual or special meeting of stockholders, the election, term of
office, filling of vacancies and other features of such directorships
shall be governed by the terms of this Certificate of Incorporation
applicable thereto, as amended from time to time, and such directors
so elected shall not be divided into classes pursuant to this Article
6 unless expressly provided by such terms.
(c) Removal of Directors. Except as otherwise provided in this
Certificate of Incorporation or the bylaws of the Corporation relating to
the rights of the holders of any series of Preferred Stock, voting
separately by class or series, to elect directors under specified
circumstances, any director or directors may be removed from office at any
time, but only for cause, by the affirmative vote of not less than a
majority of the then outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors, voting together as
a single class. If the holders of any series of Preferred Stock, voting
separately by class or series, elect a director, that director may only be
removed by vote of the holders of that class or series of Preferred Stock.
ARTICLE 7
LIMITATION OF LIABILITY
To the fullest extent permitted by the Delaware General Corporation
Law, as it exists on the date hereof or may hereafter be amended, no director of
the Corporation shall be liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director occurring on or
after the date of adoption of this provision. Any amendment to or repeal of this
provision or the Delaware General Corporation Law shall not adversely affect any
right or protection of a director of the Corporation for or with respect to any
acts or omissions of such director occurring prior to such amendment or repeal.
No change in the Delaware General Corporation Law shall reduce or eliminate the
rights and protections set forth in this Article unless the change in the law
specifically requires such reduction or
Page 5 - Certificate of Incorporation
<PAGE>
elimination. This provision, however, shall not eliminate or limit the liability
of a director for:
(a) Any breach of the director's duty of loyalty to the Corporation or
its stockholders;
(b) Acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
(c) Any unlawful distribution under Section 174 of the Delaware
General Corporation Law;
(d) Any transaction from which the director derived an improper
personal benefit; or
(e) Profits made from the purchase and sale by the director of
Securities of the Corporation within the meaning of Section 16(b) of the
Securities Exchange Act of 1934, as amended, or similar provision of any
state statutory law or common law.
If the Delaware General Corporation Law is amended, after this Article
7 shall become effective, to authorize corporate action further eliminating or
limiting the personal liability of directors, officers, employees or agents,
then the liability of directors, officers, employees or agents of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the Delaware General Corporation Law, as so amended.
ARTICLE 8
INDEMNIFICATION
The Board of Directors of the Corporation may provide, pursuant to
bylaws or other actions or agreements, that the Corporation shall indemnify to
the fullest extent permitted by the Delaware General Corporation Law, as in
effect at the time of the determination, any person who is made, or threatened
to be made, a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative, investigative or otherwise
(including any action, suit or proceeding by or in the right of the
Corporation), by reason of the fact that the person is or was a director,
officer, employee or agent of the Corporation, or any of its subsidiaries, or a
fiduciary within the meaning of the Employee Retirement Income Security Act of
1974, as amended, with respect to any employee benefit plan of the Corporation
or any of its subsidiaries, or serves or served at the request of the
Corporation, or any of its subsidiaries, as a director, officer, employee or
agent, or as a fiduciary of an employee benefit plan, of another corporation,
partnership, joint venture, trust or enterprise. The rights of
Page 6 - Certificate of Incorporation
<PAGE>
indemnification provided in this Article 8 shall be in addition to any rights to
which any such person may otherwise be entitled under any future amendment to
this Certificate of Incorporation or under any bylaw, agreement, statute, policy
of insurance, vote of stockholders or Board of Directors, or otherwise, which
exists at or subsequent to the time such person incurs or becomes subject to
such liability and expense.
ARTICLE 9
RIGHT TO AMEND CERTIFICATE
The Corporation reserves the right at any time and from time to time
to amend, alter, rescind or repeal any provisions contained herein; and other
provisions authorized by the laws of the state of Delaware at the time in force
may be added or inserted, in the manner now or hereafter prescribed by law; and
all rights, preferences and privileges of whatsoever nature conferred upon
stockholders, directors or any other persons whomsoever by or pursuant to this
Certificate of Incorporation in its present form or as hereafter amended are
granted subject to the rights reserved in this Article 9.
ARTICLE 10
LIMITATION ON AMENDMENT OF CERTIFICATE
Notwithstanding any other provision of this Certificate of
Incorporation or the bylaws of the Corporation, the affirmative vote of not less
than 66-2/3 percent of the then outstanding shares of Common Stock shall be
required to amend or repeal, or to adopt any provision inconsistent with the
purpose or intent of, Articles 6, 7, 8, 9 and 10 of this Certificate of
Incorporation.
The undersigned incorporator of Agritope, Inc. hereby acknowledges,
under penalty of perjury, that the foregoing Certificate of Incorporation of
Agritope, Inc. is his act and deed and that the facts stated therein are true.
DATE: November 10, 1997.
/s/ Jeffrey S. Cronn
Jeffrey S. Cronn
Page 7 - Certificate of Incorporation
<PAGE>
STATE OF OREGON )
) ss.
County of Multnomah )
Before me, Suzanne J. Magee, a notary public within and for said
county and state, personally appeared Jeffrey S. Cronn, who, being first duly
sworn, acknowledged that he signed the foregoing Certificate of Incorporation as
his free and voluntary act and deed for the uses and purposes therein set forth,
and the facts stated therein are true.
Given under my hand and notarial seal this 10th day of November, 1997.
/s/ Suzanne J. Magee
Notary Public
My Commission Expires: 7/31/2000
Page 8 - Certificate of Incorporation
AGRITOPE, INC.
(A DELAWARE CORPORATION)
BYLAWS
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1 STOCKHOLDERS: MEETINGS AND VOTING
Section 1. PLACE OF MEETINGS................................1
Section 2. ANNUAL MEETINGS..................................1
Section 3. SPECIAL MEETINGS.................................3
Section 4. NOTICE OF MEETINGS...............................3
Section 5. QUORUM AND VOTING REQUIREMENTS FOR VOTING
GROUPS....................................................3
Section 6. VOTING RIGHTS....................................4
Section 7. VOTING OF SHARES BY CERTAIN HOLDERS..............4
Section 8. PROXIES..........................................5
Section 9. STOCKHOLDER LISTS................................6
Section 10. INSPECTORS.......................................6
ARTICLE 2 DIRECTORS: MANAGEMENT...............................6
Section 1. NUMBER AND TERM OF OFFICE........................6
Section 2. POWERS...........................................7
Section 3. VACANCIES........................................7
Section 4. RESIGNATION OF DIRECTORS.........................8
Section 5. REMOVAL..........................................8
Section 6. NOMINATION OF DIRECTORS..........................8
Section 7. MEETINGS.........................................9
Section 8. NOTICE OF SPECIAL MEETINGS......................10
Section 9. QUORUM AND VOTE.................................10
Section 10. COMPENSATION....................................11
Section 11. ORGANIZATION....................................11
ARTICLE 3 COMMITTEES OF THE BOARD OF DIRECTORS................12
Section 1. GENERALLY........................................12
Section 2. EXECUTIVE COMMITTEE..............................12
Section 3. AUDIT COMMITTEE..................................12
Section 4. COMPENSATION COMMITTEE...........................13
Section 5. NOMINATING COMMITTEE.............................14
Section 6. TERM.............................................14
ARTICLE 4 OFFICERS............................................15
Section 1. DESIGNATION; ELECTION...........................15
Section 2. COMPENSATION AND TERM OF OFFICE.................15
Section 3. CHAIRMAN OF THE BOARD...........................16
Section 4. CHIEF EXECUTIVE OFFICER ........................16
Section 5. PRESIDENT.......................................16
Section 6. VICE PRESIDENTS.................................17
Section 7. SECRETARY.......................................17
Section 8. CHIEF FINANCIAL OFFICER.........................17
Section 9. ASSISTANTS......................................18
Section 10. OTHER OFFICERS..................................18
ARTICLE 5 CORPORATE RECORDS AND REPORTS - INSPECTION..........18
Section 1. RECORDS.........................................18
Section 2. INSPECTION OF RECORDS...........................18
Section 3. CHECKS, DRAFTS, ETC.............................18
Section 4. EXECUTION OF DOCUMENTS..........................18
ARTICLE 6 CERTIFICATES AND TRANSFER OF SHARES ................19
Section 1. CERTIFICATES FOR SHARES.........................19
Section 2. TRANSFER ON THE BOOKS...........................19
Section 3. LOST, STOLEN OR DESTROYED CERTIFICATES..........20
Section 4. TRANSFER AGENTS AND REGISTRARS..................20
Section 5. RECORD DATE.....................................20
ARTICLE 7 GENERAL PROVISIONS..................................20
Section 1. SEAL............................................20
Section 2. AMENDMENT OF BYLAWS.............................20
Section 3. WAIVER OF NOTICE................................21
Section 4. ACTION WITHOUT A MEETING........................21
Section 5. PARTICIPATION AT MEETING........................22
Section 6. FISCAL YEAR.....................................23
ARTICLE 8 INDEMNIFICATION.....................................23
Section 1. DIRECTORS AND OFFICERS..........................23
Section 2. EMPLOYEES AND OTHER AGENTS......................24
Section 3. GOOD FAITH......................................24
Section 4. ADVANCES OF EXPENSES............................25
Section 5. ENFORCEMENT.....................................26
Section 6. NON-EXCLUSIVITY OF RIGHTS.......................27
Section 7. SURVIVAL OF RIGHTS..............................27
Section 8. INSURANCE.......................................27
Section 9. AMENDMENTS......................................27
Section 10. SAVINGS CLAUSE..................................27
Section 11. CERTAIN DEFINITIONS.............................28
Section 12. NOTIFICATION AND DEFENSE OF CLAIM...............29
Section 13. EXCLUSIONS......................................30
Section 14. SUBROGATION.....................................31
ARTICLE 9 TRANSACTIONS WITH INTEREST DIRECTORS................31
Section 1. VALIDITY OF TRANSACTION.........................31
Section 2. APPROVAL BY BOARD...............................32
Section 3. APPROVAL BY STOCKHOLDERS........................32
ARTICLE 10 LIMITATION OF DIRECTOR LIABILITY....................32
<PAGE>
AGRITOPE, INC.
BYLAWS
ARTICLE 1
STOCKHOLDERS: MEETINGS AND VOTING
Section 1. PLACE OF MEETINGS
Meetings of the stockholders of Agritope, Inc. (the "Corporation")
will be held at the principal office of the Corporation, or any other place,
either within or without the state of Delaware, selected by the Board of
Directors.
Section 2. ANNUAL MEETINGS
(a) The annual meeting of the stockholders will be held on the second
Thursday of February of each year, if not a legal holiday, and if a legal
holiday then on the next succeeding business day, at such time as may be
prescribed by the Board of Directors and specified in the notice of the meeting.
The Board of Directors shall have the discretion to designate a different annual
meeting date for any year provided that the date so designated is within 60 days
of the date specified in the preceding sentence. At the annual meeting, the
stockholders shall elect by vote directors, consider reports of the affairs of
the Corporation and transact such other business as may properly be brought
before the meeting.
(b) If the annual meeting is not held, or action by written consent to
elect directors in lieu of annual meeting is not taken, for a period of 30 days
after the date designated for the annual meeting, or if no date has been
designated, for a period of 13 months after the latest to occur of: (i) the
organization of the Corporation; (ii) the Corporation's last annual meeting; or
(iii) the last action by written consent to elect directors in lieu of meeting,
the Court of Chancery may summarily order a meeting to be held upon the
application of any stockholder of the Corporation entitled to participate in an
annual meeting or upon the application of any director.
(c) The Chairman of the Board or, in the absence of that officer, such
other officer of the Corporation as shall be designated by the Board of
Directors, shall call the annual meeting to order and shall act as presiding
officer thereof. Unless otherwise determined by the Board of Directors prior to
the meeting, the presiding officer shall also have the authority in his or her
sole discretion to regulate the conduct of the annual meeting, including,
without limitation, by imposing restrictions on the persons (other than
stockholders of the Corporation or their proxies) who may attend the meeting, by
ascertaining whether any stockholder or his or her proxy may be excluded from
the meeting based upon any determination by the
<PAGE>
presiding officer, in his or her discretion, that any such person has disrupted
or is likely to disrupt the proceedings thereat, and by determining the
circumstances in which any person may make a statement or ask questions at the
meeting.
(d) At the annual meeting of the stockholders, only such matters as
shall have been properly brought before the meeting shall be considered and
acted upon. To be properly brought before an annual meeting, a matter must be:
(i) specified in the notice of meeting (or any supplement thereto) given by or
at the direction of the Board of Directors; (ii) otherwise brought before the
meeting by or at the direction of the Board of Directors; or (iii) properly
brought before the meeting by a stockholder who is a stockholder of record on
the date notice of the meeting is given and on the record date for determination
of stockholders entitled to vote at the meeting. In addition to any other
applicable requirements, including, without limitation, requirements relating to
solicitations of proxies under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), for any matter to be properly brought before the annual
meeting by a stockholder, the stockholder must have given prior written notice
to the Secretary of the Corporation which must be received at the principal
executive offices of the Corporation not less than 60 days prior to the
anniversary date of the preceding annual meeting of stockholders (or, with
respect to the 1998 annual meeting of stockholders, not later than December 15,
1997). A stockholder's notice to the Secretary in order to be valid must set
forth as to each matter the stockholder proposes to bring before the annual
meeting: (i) a brief description of the matter proposed to be brought before the
annual meeting; (ii) the name and record address of such stockholder; (iii) the
class or series and number of shares of capital stock of the Corporation which
are owned beneficially or of record by such stockholder; and (iv) any material
interest of the stockholder in the matter. Information that is required to be
provided in connection with stockholder nominations for election of directors is
specified in Section 6 of Article 2 of these Bylaws. No other matter shall be
considered or acted upon at an annual meeting except in accordance with the
procedures set forth in this Section 2. The presiding officer at any annual
meeting shall determine whether any matter was properly brought before the
meeting in accordance with the provisions of this section. If the presiding
officer should determine that any matter has not been properly brought before
the meeting, he or she shall so declare at the meeting and any such matter shall
not be considered or acted upon.
2
<PAGE>
Section 3. SPECIAL MEETINGS
The Corporation shall hold a special meeting of stockholders upon the
call of the Corporation's Chairman, Chief Executive Officer or the Board of
Directors. Special meetings of the stockholders may not be called by any other
person or persons.
Section 4. NOTICE OF MEETINGS
(a) Except as otherwise provided by law, the Corporation shall notify
stockholders in writing of the date, time and place of each annual and special
stockholder meeting not earlier than 60 days nor less than 10 days before the
meeting date. Unless Delaware law or the Corporation's Certificate of
Incorporation, as it may be amended from time to time (the "Certificate"),
requires otherwise, the Corporation is required to give notice only to
stockholders entitled to vote at the meeting. Such notice is effective when
mailed if it is mailed postage prepaid and is correctly addressed to the
stockholder's address shown in the Corporation's current record of stockholders.
Unless required by law or by the Certificate, notice of an annual meeting need
not include a description of the purpose or purposes for which the meeting is
called. Notice of a special meeting shall include a description of the purpose
or purposes for which the meeting is called.
(b) If an annual or special stockholder meeting is adjourned to a
different date, time or place, notice need not be given of the new date, time or
place if the new date, time or place is announced at the meeting before
adjournment. If the adjournment is for more than 30 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.
(c) Notice of the time, place and purpose of any meeting of
stockholders may be waived in writing, signed by the person entitled to notice,
either before or after such meeting and a stockholder's attendance at a meeting
waives objection to lack of notice or defective notice of the meeting, unless
the stockholder at the beginning of the meeting objects to holding the meeting
or transacting business at the meeting.
Section 5. QUORUM AND VOTING REQUIREMENTS FOR VOTING GROUPS
(a) Shares entitled to vote as a separate voting group may take action
on a matter at a meeting only if a quorum of
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those shares exists with respect to that matter. Unless otherwise required by
law or the Certificate, a majority of the votes entitled to be cast on the
matter by the voting group constitutes a quorum of that voting group for action
on that matter. Once a share is represented for any purpose at a meeting, it is
deemed present for quorum purposes for the remainder of the meeting.
(b) In the absence of a quorum, a majority of those present in person
or represented by proxy may adjourn the meeting from time to time until a quorum
exists. Any business that might have been transacted at the original meeting may
be transacted at the adjourned meeting if a quorum exists.
Section 6. VOTING RIGHTS
(a) The persons entitled to receive notice of and to vote at any
stockholder meeting shall be determined from the records of the Corporation on
the close of business on the day before the mailing of the notice or on such
other date not more than 60 nor less than 10 days before such meeting as may be
fixed in advance by the Board of Directors in accordance with Section 5 of
Article 6 of these Bylaws. Only shares are entitled to vote.
(b) Unless otherwise provided in the Certificate or by law, if a
quorum exists, action on a matter, other than the election of directors, by a
voting group is approved if the votes cast within the voting group favoring the
action exceed the votes cast within the voting group opposing the action.
Section 7. VOTING OF SHARES BY CERTAIN HOLDERS
(a) If the name signed on a vote, consent, waiver or proxy appointment
corresponds to the name of a stockholder, the Corporation, if acting in good
faith, is entitled to accept the vote, consent, waiver or proxy appointment and
give it effect as the act of the stockholder. If the name signed on a vote,
consent, waiver or proxy appointment does not correspond to the name of a
stockholder, the Corporation, if acting in good faith, is nevertheless entitled
to accept the vote, consent, waiver or proxy appointment and give it effect as
the act of the stockholder if:
(i) the stockholder is an entity and the name signed purports to be
that of an officer or agent of the entity;
(ii) the name signed purports to be that of an administrator,
executor, guardian or conservator representing the stockholder and, if the
Corporation
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requests, evidence of fiduciary status acceptable to the Corporation has
been presented with respect to the vote, consent, waiver or proxy
appointment;
(iii) the name signed purports to be that of a receiver or trustee in
bankruptcy of the stockholder and, if the Corporation requests, evidence of
this status acceptable to the Corporation has been presented with respect
to the vote, consent, waiver or proxy appointment;
(iv) the name signed purports to be that of a pledgee, beneficial
owner or attorney-in-fact of the stockholder and, if the Corporation
requests, evidence acceptable to the Corporation of the signatory's
authority to sign for the stockholder has been presented with respect to
the vote, consent, waiver or proxy appointment; or
(v) two or more persons are the stockholder as co-tenants or
fiduciaries and the name signed purports to be the name of at least one of
the co-owners and the person signing appears to be acting on behalf of all
co-owners.
(b) Shares of the Corporation are not entitled to be voted if (i) they
are owned, directly or indirectly, by another domestic or foreign corporation,
and (ii) the Corporation owns, directly or indirectly, a majority of the shares
entitled to be voted for directors of such other corporation. This paragraph
does not limit the power of a corporation to vote any shares, including its own
shares, held by it in a fiduciary capacity.
(c) Any redeemable shares which the Corporation may issue are not
entitled to be voted after notice of redemption is mailed to the holders and a
sum sufficient to redeem the shares has been deposited with a bank, trust
company or other financial institution under an irrevocable obligation to pay
the holders the redemption price on surrender of the shares.
Section 8. PROXIES
A stockholder may vote shares either in person or by proxy. A
stockholder may appoint a proxy to vote or otherwise act for the stockholder by
signing an appointment form, either personally or by the stockholder's
attorney-in-fact. An appointment of a proxy is effective when received by the
Secretary or other officer or agent of the Corporation authorized to tabulate
votes. An appointment is valid for three years unless a longer period is
expressly provided in the appointment form. An appointment of a proxy is
revocable by the stockholder
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unless the appointment form conspicuously states that it is irrevocable and the
appointment is coupled with an interest.
Section 9. STOCKHOLDER LISTS
(a) After fixing a record date for a meeting, the Corporation shall
prepare an alphabetical list of the names of all of its stockholders showing the
address of each stockholder and the number of shares registered in the name of
each stockholder who is entitled to notice of the meeting.
(b) The stockholder list shall be available for inspection by any
stockholder, for a period of at least 10 days prior to the meeting and
continuing through the meeting. Such list shall be open to the examination of
any stockholder at a place within the city where the meeting is to be held,
which shall be identified in the meeting notice, or, if not specified, at the
place where the meeting will be held. A stockholder, or the stockholder's agent
or attorney, shall be entitled on written demand to inspect and, subject to the
requirements of law, to copy the list during regular business hours during the
period it is available for inspection.
(c) The Corporation shall make the stockholder list available at the
meeting, and any stockholder, or the stockholder's agent or attorney, is
entitled to inspect the list at any time during the meeting or any adjournment.
Section 10. INSPECTORS
The Chairman of the Board shall, in advance of any meeting of
stockholders, appoint one or more inspectors of election to act at the meeting
in accordance with applicable law and to make a written report thereon.
ARTICLE 2
DIRECTORS: MANAGEMENT
Section 1. NUMBER AND TERM OF OFFICE
Subject to amendment of the Certificate, the Board of Directors shall
consist of not less than six nor more than thirteen members, the exact number to
be set from time to time by resolution of the Board of Directors. Increases and
decreases in the size of the Board of Directors (within the permitted range)
shall be made only in accordance with the Certificate. Except as provided in
Section 3 of this Article 2, directors shall be elected by a plurality of the
votes of the shares present in person or represented by proxy and entitled to
vote on the election of directors at the annual meeting of stockholders in each
year. Directors so elected shall hold office until the
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third annual meeting following their election and until their successors shall
be duly elected and qualified or until their earlier death, resignation or
removal. No person shall be eligible for election or reelection as a director if
he or she is 70 years old, except upon the written request of the affected
person and agreement by a majority of the directors in office at the time of the
person's nomination for election or reelection, provided that a director
attaining such age shall complete the term for which he or she was elected and
shall continue to serve until his or her successor shall have been elected and
qualified or until his or her earlier death, resignation or removal.
Section 2. POWERS
The powers of the Corporation shall be exercised, its business
conducted and its property controlled by the Board of Directors, except as may
be otherwise provided by law, the Certificate or these Bylaws.
Section 3. VACANCIES
(a) A vacancy in the Board of Directors will exist upon the death,
resignation or removal of any director, upon an increase in the number of
directors, or if the stockholders fail at any meeting of stockholders at which
directors are to be elected to elect the number of directors then constituting
the whole of the class of directors whose terms have expired at the time of such
meeting.
(b) Unless the Certificate provides otherwise, if a vacancy occurs on
the Board of Directors, the Board of Directors may fill the vacancy. If the
directors remaining in office constitute fewer than a quorum of the Board, they
may fill the vacancy by the affirmative vote of a majority of all the directors
remaining in office. The term of a director elected by the Board of Directors to
fill a vacancy expires at the next stockholder meeting at which directors of
that class are elected.
(c) A vacancy that will occur at a specific later date, by reason of a
resignation effective at the later date or otherwise, may be filled before the
vacancy occurs, but the new director may not take office until the vacancy
occurs.
(d) If the vacancy has not been filled by action of the Board of
Directors prior to the next meeting of the stockholders occurring after the
vacancy was created, the stockholders may fill the vacancy.
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Section 4. RESIGNATION OF DIRECTORS
A director may resign at any time by delivering written notice to the
Chairman, the Chief Executive Officer or the Board of Directors. Unless the
notice specifies a later effective date, a resignation is effective at the
earliest of the following: (a) when received; (b) five days after its deposit in
the United States mail, as evidenced by the postmark, if mailed postage prepaid
and correctly addressed; or (c) on the date shown on the return receipt, if sent
by registered or certified mail, return receipt requested and the receipt is
signed by or on behalf of the addressee. Once delivered, a notice of resignation
is irrevocable unless revocation is permitted by the Board of Directors.
Section 5. REMOVAL
(a) Except as otherwise provided in the Certificate or these Bylaws
relating to the rights of the holders of any series of Preferred Stock, voting
separately by class or series, to elect directors under specified circumstances,
any director or directors may be removed from office at any time, but only for
cause, by the affirmative vote of not less than a majority of the total number
of votes of the then outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors, voting together as
single class. If the holders of any series of Preferred Stock, voting separately
by class or series, elect a director, that director may only be removed by vote
of the holders of that class or series of Preferred Stock.
(b) A director may be removed by the stockholders only at a meeting
called for the purpose of removing the director, and the meeting notice must
state that the purpose, or one of the purposes, of the meeting is removal of the
director.
Section 6. NOMINATION OF DIRECTORS
(a) Only persons who are nominated in accordance with the procedures
in this Section 6 shall be eligible for election as directors. If the presiding
officer at an annual meeting of stockholders determines that a nomination was
not made in accordance with the procedures set forth in this Section 6, the
presiding officer shall declare to the meeting that the nomination was defective
and such defective nomination shall be disregarded. Nominations of persons for
election to the Board of Directors may be made at any annual meeting of
stockholders: (i) by or at the direction of the Board of Directors; or (ii) by
any stockholder of the Corporation (A) who is a stockholder of record on the
date of the giving of notice provided for in this Section 6 and on the record
date for the determination of
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stockholders entitled to vote at such meeting, and (B) who complies with the
notice procedures in this Section 6. In addition to any other applicable
requirements, for a nomination to be made by a stockholder, such stockholder
must have given timely notice thereof in proper written form to the Secretary.
(b) To be timely, a stockholder's notice must be received by the
Secretary at the principal executive offices of the Corporation not less than 60
days prior to the anniversary date of the preceding annual meeting of
stockholders (or, with respect to the 1998 annual meeting of stockholders, not
later than December 15, 1997).
(c) To be in proper written form, a stockholder's notice to the
Secretary must: (i) set forth as to each person whom the stockholder proposes to
nominate for election as a director (A) the name, age, business address and
residence address of the nominee, (B) the principal occupation or employment of
the nominee, (C) the class or series and number of shares of capital stock of
the Corporation which are owned beneficially or of record by the nominee, and
(D) any other information relating to the nominee that would be required to be
disclosed in a proxy statement or other filings required to be made in
connection with solicitations of proxies for election of directors pursuant to
Section 14 of the Exchange Act, and the rules and regulations promulgated
thereunder; and (ii) set forth as to the stockholder giving the notice (A) the
name and record address of such stockholder, (B) the class or series and number
of shares of capital stock of the Corporation which are owned beneficially or of
record by such stockholder, (C) a description of all arrangements or
understandings between such stockholder and each proposed nominee and any other
person or persons (including their names) pursuant to which the nomination or
nominations are to be made by such stockholder, (D) a representation that such
stockholder intends to appear in person or by proxy at the annual meeting to
nominate the persons named in the notice, and (E) any other information relating
to such stockholder that would be required to be disclosed in a proxy statement
or other filings required to be made in connection with solicitations of proxies
for election of directors pursuant to Section 14 of the Exchange Act and the
rules and regulations promulgated thereunder. Such notice must be accompanied by
a signed written consent of each proposed nominee to being named as a nominee
and to serve as a director if elected.
Section 7. MEETINGS
(a) The Board of Directors may hold regular or special meetings in or
out of the state of Delaware.
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(b) Annual meetings of the Board of Directors will be held without
notice immediately following the adjournment of the annual meetings of the
stockholders.
(c) Unless the Certificate provides otherwise, regular meetings of the
Board of Directors may be held without notice of the date, time, place or
purpose of the meeting. The Board of Directors or the Chairman may determine the
time and place for the holding of regular meetings.
(d) Special meetings of the Board of Directors for any purpose or
purposes may be called at any time by the Corporation's Chairman, Chief
Executive Officer or a majority of the directors then in office. The person
calling a special meeting of the Board of Directors may fix the time and place
of the special meeting.
Section 8. NOTICE OF SPECIAL MEETINGS
(a) Special meetings of the Board of Directors shall be preceded by at
least 24 hours' notice of the date, time and place of the meeting. The notice
need not describe the purpose of the special meeting unless required by the
Certificate. The notice may be given orally, in person or by telephone, or
delivered in writing either personally, by mail or by telegram. If in writing,
such notice is effective at the earliest of the following: (i) when received;
(ii) five days after its deposit in the United States mail, as evidenced by the
postmark, if it is mailed postage prepaid and is correctly addressed to the
director's address shown in the Corporation's records; or (iii) on the date
shown on the return receipt, if sent by registered or certified mail, return
receipt requested, and the receipt is signed by or on behalf of the addressee.
If given orally, such notice is effective when communicated.
(b) A director's attendance at or participation in a meeting waives
any required notice to the director of the meeting unless the director at the
beginning of the meeting, or promptly upon the director's arrival, objects to
holding the meeting or transacting business at the meeting and does not
thereafter vote for or assent to action taken at the meeting.
(c) Notice of the time and place of holding an adjourned meeting need
not be given if such time and place are fixed at the meeting adjourned.
Section 9. QUORUM AND VOTE
(a) Unless the Certificate provides otherwise, a majority of the
directors in office shall constitute a quorum for the transaction of business. A
majority of the directors
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present, in the absence of a quorum, may adjourn from time to time but may not
transact any business.
(b) If a quorum is present when a vote is taken, the affirmative vote
of a majority of directors present is the act of the Board of Directors unless
the Certificate requires the vote of a greater number of directors.
(c) A director of the Corporation who is present at a meeting of the
Board of Directors or is present at a meeting of a committee of the Board of
Directors when corporate action is taken is deemed to have assented to the
action taken unless: (i) the director objects at the beginning of the meeting,
or promptly upon the director's arrival, to holding the meeting or transacting
business at the meeting; (ii) the director's dissent or abstention from the
action taken is entered in the minutes of the meeting; or (iii) the director
delivers written notice of dissent or abstention to the presiding officer of the
meeting before its adjournment or to the Corporation immediately after
adjournment of the meeting. The right of dissent or abstention is not available
to a director who votes in favor of the action taken.
Section 10. COMPENSATION
The Board of Directors may, by resolution, provide that the directors
be paid their expenses, if any, of attendance at each meeting of the Board of
Directors, and provide that nonemployee directors (as defined below) be paid a
fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. Nonemployee directors may also be awarded stock incentive
awards by the Board of Directors or the Compensation Committee. No such payment
or award shall preclude any director from serving the Corporation in any other
capacity and receiving compensation, including stock incentive awards, for that
service. With respect to director compensation matters (including stock
incentive awards), a "nonemployee director" is a director who, at the time the
compensation is to be paid or the award is to be granted, is not an employee of
the Corporation or any of its subsidiaries.
Section 11. ORGANIZATION
At every meeting of the directors, the Chairman of the Board, or, if
that officer is absent, a chairman of the meeting chosen by a majority of the
directors present, shall preside over the meeting. The Secretary or another
person directed to do so by the presiding officer shall act as secretary of the
meeting.
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ARTICLE 3
COMMITTEES OF THE BOARD OF DIRECTORS
Section 1. GENERALLY
The Board of Directors may, by resolution or resolutions passed by a
majority of the whole Board of Directors, from time to time appoint such
committees as may be permitted by law. Each committee shall consist of two or
more members of the Board of Directors who shall serve at the pleasure of the
Board of Directors. Articles 2 and 7 of these Bylaws governing meetings, action
without meeting, notice and waiver of notice and quorum and voting requirements
of the Board of Directors apply to committees and their members as well. Each
committee shall have such powers and perform such duties as may be prescribed by
resolution or resolutions of the Board of Directors and these Bylaws. Each
committee shall keep a written record of all actions taken by it. In no event
shall a committee have the powers denied to the Executive Committee pursuant to
Section 2 (a) and (b) below.
Section 2. EXECUTIVE COMMITTEE
The Board of Directors may, by resolution passed by a majority of the
whole Board of Directors, appoint an Executive Committee consisting of two or
more members of the Board of Directors. The Executive Committee, to the extent
permitted by law, shall have and may exercise all powers of the Board of
Directors in the management of the business and affairs of the Corporation;
provided, however, that, except as specifically permitted by the Delaware
General Corporation Law (the "General Corporation Law"), the Executive Committee
shall not have the power or authority to:
(a) approve, adopt or propose to stockholders actions that the General
Corporation Law requires to be approved by stockholders; or
(b) adopt, amend or repeal these Bylaws.
Section 3. AUDIT COMMITTEE
An Audit Committee of the Corporation, composed of at least two
members of the Board of Directors, none of whom shall be an officer or employee
of the Corporation or any of its subsidiaries, shall be appointed by the Board
of Directors. Directors who are appointed to the Audit Committee shall be free
of any relationship that, in the opinion of the Board of Directors, would
interfere with the exercise of independent judgment as a committee member. The
duties of the Audit Committee shall include, in addition to such other duties as
may
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be specified by resolution of the Board of Directors from time to time, the
following:
(a) review and make recommendations to the Board of Directors with
respect to the engagement or discharge of the Corporation's independent
auditors;
(b) review the scope of the annual audit and the engagement letter
with the Corporation's independent auditors;
(c) review the independence of the independent auditors;
(d) review the policies and procedures of the Corporation and
management with respect to maintaining the Corporation's books and records; and
(e) review with the independent auditors, upon completion of their
audit, the results of the auditing engagement and any other recommendations the
auditors may have with respect to the Corporation's financial, accounting or
auditing systems.
The Audit Committee is authorized to employ such experts and personnel,
including those who are already employed or engaged by the Corporation, as the
Audit Committee may deem to be reasonably necessary to enable it to ably perform
its duties and satisfy its responsibilities.
Section 4. COMPENSATION COMMITTEE
A Compensation Committee of the Corporation, composed of at least two
members of the Board of Directors, shall be appointed by the Board of Directors.
Directors who are appointed to the Compensation Committee may not be officers or
employees of the Corporation or of any of its subsidiaries. The duties of the
Compensation Committee shall include, in addition to such other duties as may be
specified by resolution of the Board of Directors from time to time, the
following:
(a) determine salaries and bonuses and consider employment agreements
for elected officers of the Corporation, and prepare such reports with respect
thereto as may be required by law;
(b) consider, review and grant stock options, stock appreciation
rights and other awards under the Corporation's stock-based and other
performance-based compensation plans, and administer such plans; and
(c) consider matters of director compensation, benefits and other
forms of remuneration.
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The Compensation Committee is authorized to employ such experts and personnel,
including those who are already employed or engaged by the Corporation, as the
Compensation Committee may deem to be reasonably necessary to enable it to ably
perform its duties and satisfy its responsibilities.
Section 5. NOMINATING COMMITTEE
A Nominating Committee of the Corporation, composed of at least two
members of the Board of Directors, shall be appointed by the Board of Directors.
The duties of the Nominating Committee shall include, in addition to such other
duties as may be specified by resolution of the Board of Directors from time to
time, the following:
(a) identify qualified candidates for nomination for election to the
Board of Directors, obtain the consent of such candidates to such nomination and
nominate such consenting candidates for election to the Board of Directors on
behalf of the Board of Directors; and
(b) review and make recommendations to the Board of Directors
concerning the composition and size of the Board of Directors and its
committees.
Section 6. TERM
The members of all committees of the Board of Directors shall serve as
such members at the pleasure of the Board of Directors. The Board of Directors
may at any time and for any reason remove any individual committee member and
the Board of Directors may fill any committee vacancy created by death,
resignation, removal or increase in the number of members of the committee. The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee, and, in addition, in the absence or disqualification of any
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he, she or they constitute a
quorum, may unanimously appoint another qualified member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member.
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ARTICLE 4
OFFICERS
Section 1. DESIGNATION; ELECTION
(a) The officers of the Corporation shall be a Chairman of the Board,
a Chief Executive Officer, a President, a Secretary, and such other officers and
assistant officers as the Board of Directors shall from time to time appoint.
The officers shall be elected by, and hold office at the pleasure of, the Board
of Directors. A duly appointed officer may appoint one or more officers or
assistant officers if such appointment is authorized by the Board of Directors.
The same individual may simultaneously hold more than one office in the
Corporation.
(b) A vacancy in any office because of death, resignation, removal or
any other cause shall be filled in the manner prescribed in these Bylaws for
regular appointments to such office.
Section 2. COMPENSATION AND TERM OF OFFICE
(a) The compensation and term of office of all the officers of the
Corporation shall be fixed by the Board of Directors.
(b) The Board of Directors may remove any officer at any time, either
with or without cause.
(c) Any officer may resign at any time by giving written notice to the
Board of Directors, the Chief Executive Officer or the Secretary of the
Corporation. Unless the notice specifies a later effective date, a resignation
is effective at the earliest of the following: (i) when received; (ii) five days
after its deposit in the United States mail, as evidenced by the postmark, if
mailed postage prepaid and correctly addressed; or (iii) on the date shown on
the return receipt, if sent by registered or certified mail, return receipt
requested and the receipt is signed by or on behalf of the addressee. Once
delivered, a notice of resignation is irrevocable unless revocation is permitted
by the Board of Directors. If a resignation is proposed to take effect at a
later date and if the Corporation, in its sole discretion, approves the proposed
or any other future effective date, the Board of Directors may fill the pending
vacancy before the approved effective date. In such case, the Board of Directors
shall provide that the successor not take office until the effective date.
(d) This section will not affect the rights of the Corporation or any
officer under any express contract of employment.
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Section 3. CHAIRMAN OF THE BOARD
The Chairman of the Board shall preside at all meetings of the Board
of Directors and stockholders, and shall have all powers and responsibilities
attendant therewith. The Chairman of the Board may be designated the Chief
Executive Officer of the Corporation, with the rights and duties specified in
Section 4 of this Article 4. The Chairman of the Board shall have such other
powers and duties as may be prescribed by the Board of Directors or these
Bylaws.
Section 4. CHIEF EXECUTIVE OFFICER
The Board shall designate the Chairman of the Board or the President
as the Chief Executive Officer of the Corporation. Subject to the control of the
Board, the Chief Executive Officer shall have general supervision, direction and
control of the business and affairs of the Corporation. The Chief Executive
Officer also shall have the power, either in person or by proxy, to vote all
voting securities held by the Corporation of any other corporation or entity,
and to execute, on behalf of the Corporation, such agreements, contracts and
instruments, including, without limitation, negotiable instruments, as shall be
necessary or appropriate in furtherance of the conduct of the Corporation's
normal business activities.
Section 5. PRESIDENT
The President may be designated the Chief Executive Officer of the
Corporation, with the rights and duties specified in Section 4 of this Article
4. If the Chairman of the Board has been designated the Corporation's Chief
Executive Officer, the President may be designated the Corporation's Chief
Operating Officer. If appointed the Chief Operating Officer, the President
shall, subject to the control of the Chairman of the Board and the Board of
Directors, have general supervision, direction and control of the day-to-day
operations of the Corporation. The President shall have the power to execute, on
behalf of the Corporation, such agreements, contracts and instruments,
including, without limitation, negotiable instruments, as shall be necessary or
appropriate in furtherance of the conduct of the Corporation's normal business
activities. In the absence of the Chairman of the Board, the President shall
perform the duties and have the powers and responsibilities of the Chairman of
the Board. The President shall have such other powers and duties as may be
prescribed by the Board of Directors or these Bylaws.
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Section 6. VICE PRESIDENTS
The Vice Presidents, if any, in the order of their seniority as
designated by the Board of Directors, may assume and perform the duties of the
President in the absence or disability of the President or whenever the office
of President is vacant. The Vice Presidents, if any, shall perform other duties
commonly incident to their office and shall also perform such other duties and
have such other powers as the Chief Executive Officer or the Board of Directors
shall designate from time to time.
Section 7. SECRETARY
(a) The Secretary shall keep or cause to be kept at the principal
office, or such other place as the Board of Directors may order, a book of
minutes of all meetings of directors and stockholders showing the time and place
of the meeting, and if a special meeting, how authorized, the notice given, the
names of those present at director meetings, the number of shares present or
represented at stockholder meetings and the proceedings thereof.
(b) The Secretary shall keep or cause to be kept, at the principal
office or at the office of the Corporation's transfer agent, a share register,
or a duplicate share register, showing the names of the stockholders and their
addresses, the number and classes of shares held by each, the number and date of
certificates issued for such shares and the number and date of cancellation of
certificates surrendered for cancellation.
(c) The Secretary shall give or cause to be given such notice of the
meetings of the stockholders and of the Board of Directors as is required by
these Bylaws. If the Corporation elects to have a seal, the Secretary shall keep
the seal and affix it to all documents requiring a seal. The Secretary shall
have such other powers and perform such other duties as may be prescribed by the
Chief Executive Officer, the Board of Directors or these Bylaws.
Section 8. CHIEF FINANCIAL OFFICER
The Chief Financial Officer, if any, shall be responsible for the
funds of the Corporation, shall pay them out only on the checks of the
Corporation signed in the manner authorized by the Board of Directors, shall
deposit and withdraw such funds in such depositories as may be authorized by the
Board of Directors, and shall keep full and accurate accounts of receipts and
disbursements in books maintained at the Corporation's principal offices. The
Chief Financial Officer, if any, shall perform such other duties as are
prescribed by the Chief Executive Officer or the Board of Directors.
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Section 9. ASSISTANTS
The Board of Directors may appoint or authorize the appointment of
assistants to the Secretary or the Chief Financial Officer. Such assistants may
exercise the powers of the Secretary or the Chief Financial Officer, as the case
may be, and shall perform such duties as are prescribed by the Chief Executive
Officer or the Board of Directors.
Section 10. OTHER OFFICERS
Such other officers as the Board of Directors may designate shall
perform such duties and have such powers as from time to time may be assigned to
them by the Board of Directors. The Board of Directors may delegate to any other
officer of the Corporation the power to choose such other officers and to
prescribe their respective duties and powers.
ARTICLE 5
CORPORATE RECORDS AND REPORTS - INSPECTION
Section 1. RECORDS
The Corporation shall maintain all records required by law. All such
records shall be kept at the Corporation's principal office, registered office
or at any other place designated by the Corporation's Chief Executive Officer,
or as otherwise provided by law.
Section 2. INSPECTION OF RECORDS
The records of the Corporation shall be open to inspection by the
stockholders or the stockholders' agents or attorneys and by any director in the
manner and to the extent required by law.
Section 3. CHECKS, DRAFTS, ETC.
All checks, drafts or other orders for payment of money, notes or
other evidences of indebtedness, issued in the name of or payable to the
Corporation, shall be signed or endorsed by such person or persons and in such
manner as may be determined from time to time by resolution of the Board of
Directors.
Section 4. EXECUTION OF DOCUMENTS
The Board of Directors may, except as otherwise provided in these
Bylaws, authorize any officer or agent of the Corporation to enter into any
contract or execute any instrument
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in the name of and on behalf of the Corporation. Such authority may be general
or confined to specific instances. Unless so authorized by the Board of
Directors, or unless inherent in the authority vested in the office under the
applicable provision of these Bylaws, no officer, agent or employee of the
Corporation shall have any power or authority to bind the Corporation by any
contract or engagement, or to pledge its credit, or to render it liable for any
purpose or for any amount.
ARTICLE 6
CERTIFICATES AND TRANSFER OF SHARES
Section 1. CERTIFICATES FOR SHARES
(a) Certificates for shares shall be in such form as the Board of
Directors may designate, shall designate the name of the Corporation and the
state law under which the Corporation is organized, shall state the name of the
person to whom the shares represented by the certificate are issued, and shall
state the number and class of shares and the designation of the series, if any,
the certificate represents. If the Corporation is authorized to issue different
classes of shares or different series within a class, the designations, relative
rights, preferences and limitations applicable to each class, the variations and
rights, preferences and limitations determined for each series and the authority
of the Board of Directors to determine variations for future series shall be
summarized on the front or back of each certificate, or each certificate may
state conspicuously on its front or back that the Corporation will furnish
stockholders with this information on request in writing and without charge.
(b) Each certificate for shares shall be signed, either manually or in
facsimile, by the Chairman of the Board, the President or a Vice President and
the Secretary or an Assistant Secretary of the Corporation. The certificates may
bear the corporate seal or its facsimile.
(c) If any officer who has signed a share certificate, either manually
or in facsimile, no longer holds office when the certificate is issued, the
certificate is nevertheless valid.
Section 2. TRANSFER ON THE BOOKS
Upon surrender to the Corporation of a certificate for shares duly
endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, and subject to any limitations on transfer appearing on
the certificate or in the Corporation's stock transfer records, the Corporation
shall issue a new certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon its books.
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Section 3. LOST, STOLEN OR DESTROYED CERTIFICATES
In the event a certificate is represented to be lost, stolen or
destroyed, a new certificate shall be issued in place thereof upon such proof of
the loss, theft or destruction and upon the giving of such bond or other
indemnity as may be required by the Board of Directors.
Section 4. TRANSFER AGENTS AND REGISTRARS
The Board of Directors may from time to time appoint one or more
transfer agents and one or more registrars for the shares of the Corporation who
shall have such powers and duties as the Board of Directors may specify.
Section 5. RECORD DATE
In order that the Corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which shall
not be more than 60 nor less than 10 days before the date of such meeting, nor
more than 60 days prior to any other action. If no record date is fixed by the
Board of Directors, the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be the close of business
on the day before the day on which notice of such meeting is given, or, if
notice is waived, at the close of business on the day before the day on which
the meeting is held.
ARTICLE 7
GENERAL PROVISIONS
Section 1. SEAL
If the Corporation elects to have a corporate seal, the seal shall be
circular in form and shall have inscribed thereon the name of the Corporation
and the state of its incorporation.
Section 2. AMENDMENT OF BYLAWS
(a) Except as otherwise provided by law or by the Certificate, the
Board of Directors may amend or repeal these Bylaws unless:
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(i) the Certificate or the General Corporation Law reserves this power
exclusively to the stockholders in whole or in part; or
(ii) the stockholders in amending or repealing a particular Bylaw
provide expressly that the Board of Directors may not amend or repeal that
Bylaw.
(b) The Corporation's stockholders may amend or repeal these Bylaws in
accordance with the provisions of the Certificate even though these Bylaws may
also be amended or repealed by the Board of Directors.
(c) Whenever an amendment or new Bylaw is adopted, it shall be copied
in the minute book with the original Bylaws in the appropriate place. If any
Bylaw is repealed, the fact of repeal and the date on which the repeal occurred
shall be stated in such book and place.
Section 3. WAIVER OF NOTICE
(a) A stockholder may at any time waive any notice required by law,
the Certificate or these Bylaws. Except as otherwise provided in Section 4(c) of
Article 1 of these Bylaws, the waiver shall be in writing, shall be signed by
the stockholder entitled to the notice, and shall be delivered to the
Corporation for inclusion in the minutes or filing with the corporate records.
(b) A director may at any time waive any notice required by law, the
Certificate or these Bylaws. Except as otherwise provided in Section 8(b) of
Article 2 of these Bylaws, the waiver shall be in writing, shall be signed by
the director entitled to the notice, shall specify the meeting for which notice
is waived and shall be filed with the minutes or appropriate records.
Section 4. ACTION WITHOUT A MEETING
(a) Action required or permitted by law to be taken at a stockholder
meeting may be taken without a meeting, without prior notice and without a vote,
if a consent or consents in writing, setting forth the action so taken, 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 and
shall be delivered to the Corporation by delivery to its registered office, its
principal place of business, or its Secretary. Every consent shall bear the date
of signature of each stockholder who signs the consent. Action taken under this
Section 4(a) shall be effective to take the
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corporate action described therein only if written consents signed by a
sufficient number of stockholders to take action are delivered to the
Corporation within 60 days of the earliest dated consent. If not otherwise
determined by law, the record date for determining stockholders entitled to take
action without a meeting is the date the first stockholder signs the consent. A
consent signed under this Section 4(a) has the effect of a meeting vote and may
be described as such in any document. 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 and who, if the
action had been taken at a meeting, would have been entitled to notice of the
meeting if the record date for such meeting had been the date that written
consents signed by a sufficient number of stockholders to take the action were
delivered to the Corporation.
(b) Unless the Certificate or these Bylaws provide otherwise, action
required or permitted by law to be taken at a meeting of the Board of Directors,
or at a meeting of a committee of the Board of Directors, may be taken without a
meeting if the action is taken by all members of the Board of Directors or
committee, as the case may be. The action shall be evidenced by one or more
written consents describing the action taken, signed by each director or each
member of the committee, as the case may be, and included in the minutes or
filed with the corporate records reflecting the action taken. Action taken under
this Section 4(b) is effective when the last director signs the consent, unless
the consent specifies an earlier or later effective date. A consent signed under
this Section 4(b) has the effect of a meeting vote and may be described as such
in any document.
Section 5. PARTICIPATION AT MEETING
(a) Unless the Certificate provides otherwise, the Board of Directors
or any committee of the Board may permit any or all stockholders or directors,
as the case may be, to participate in a regular, special or committee meeting
by, or conduct the meeting through, use of any means of communication by which
all stockholders or directors participating may simultaneously hear each other
during the meeting. Permission for stockholder participation by this means in
annual or special meetings shall be granted by the Board of Directors by
resolution adopted in advance either specifically with respect to a particular
meeting or generally with respect to future meetings. A stockholder or director
participating in a meeting by this means is deemed to be present in person at
the meeting.
(b) The notice of each annual or special meeting of stockholders at
which participation in the manner referred to in
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subsection (a) above is permitted shall state that fact and shall describe how
any stockholder desiring to participate may notify the Corporation of the
stockholder's desire to be included in the meeting.
Section 6. FISCAL YEAR
The fiscal year of the Corporation shall extend from October 1 through
September 30 of the following calendar year.
ARTICLE 8
INDEMNIFICATION
Section 1. DIRECTORS AND OFFICERS
(a) Indemnity in Third-Party Proceedings. To the fullest extent
permitted by law, the Corporation shall indemnify its directors and officers in
accordance with the provisions of this Section 1(a) if the director or officer
was or is a party to, or is threatened to be made a party to, any proceeding
(other than a proceeding by or in the right of the Corporation to procure a
judgment in its favor), against all expenses, judgments, fines and amounts paid
in settlement, actually and reasonably incurred by the director or officer in
connection with such proceeding if the director or officer acted in good faith
and in a manner the director or officer reasonably believed was in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, the director or officer, in addition, had no
reasonable cause to believe that the director's or officer's conduct was
unlawful; provided, however, that the director or officer shall not be entitled
to indemnification under this Section 1(a): (i) in connection with any
proceeding charging improper personal benefit to the director or officer in
which the director or officer is adjudged liable on the basis that personal
benefit was improperly received by the director or officer unless and only to
the extent that the court conducting such proceeding or any other court of
competent jurisdiction determines upon application that, despite such
adjudication of liability, the director or officer is fairly and reasonably
entitled to indemnification in view of all the relevant circumstances of the
case, or (ii) in connection with any proceeding (or part of any proceeding)
initiated by such person or any proceeding by such person against the
Corporation or its directors, officers, employees or other agents unless (A) the
Corporation is expressly required by law to make the indemnification, (B) the
proceeding was authorized by the Board of Directors or (C) such indemnification
is provided by the Corporation, in its sole discretion, pursuant to the powers
vested in the Corporation under the General Corporation Law.
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(b) Indemnity in Proceedings by or in the Right of the Corporation. To
the fullest extent permitted by law, the Corporation shall indemnify its
directors and officers in accordance with the provisions of this Section 1(b) if
the director or officer was or is a party to, or is threatened to be made a
party to, any proceeding by or in the right of the Corporation to procure a
judgment in its favor, against all expenses actually and reasonably incurred by
the director or officer in connection with the defense or settlement of such
proceeding if the director or officer acted in good faith and in a manner the
director or officer reasonably believed was in or not opposed to the best
interests of the Corporation; provided, however, that the director or officer
shall not be entitled to indemnification under this Section 1(b): (i) in
connection with any proceeding in which the director or officer has been
adjudged liable to the Corporation unless and only to the extent that the court
conducting such proceeding or any other court of competent jurisdiction
determines upon application that, despite such adjudication of liability, the
director or officer is fairly and reasonably entitled to indemnification for
such expenses in view of all the relevant circumstances of the case, or (ii) in
connection with any proceeding (or part thereof) initiated by such person or any
proceeding by such person against the Corporation or its directors, officers,
employees or other agents unless (A) the Corporation is expressly required by
law to make the indemnification, (B) the proceeding was authorized by the Board
of Directors or (C) such indemnification is provided by the Corporation, in its
sole discretion, pursuant to the powers vested in the Corporation under the
General Corporation Law.
Section 2. EMPLOYEES AND OTHER AGENTS
The Corporation may, to the extent authorized from time to time by the
Board of Directors, provide rights to indemnification and to the advancement of
expenses to employees and agents of the Corporation similar to those conferred
in this Article 8 to directors and officers of the Corporation.
Section 3. GOOD FAITH
(a) For purposes of any determination under this Article 8, a director
or officer shall be deemed to have acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
Corporation, and with respect to any criminal action or proceeding, to have had
no reasonable cause to believe that his or her conduct was unlawful, if his or
her action was based on information, opinions, reports or statements, including
financial statements and other financial data, in each case prepared or
presented by:
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(i) one or more officers or employees of the Corporation whom the
director or officer believed to be reliable and competent in the matters
presented;
(ii) counsel, independent accountants or other persons as to matters
which the director or officer believed to be within such person's
professional or expert competence; or
(iii) with respect to a director, a committee of the Board upon which
such director does not serve, as to matters within such committee's
designated authority, which committee the director believes to merit
confidence; so long as, in each case, the director or executive officer
acts without knowledge that would cause such reliance to be unwarranted.
(b) The termination of any proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he or she reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal proceeding, that
he or she had reasonable cause to believe that his or her conduct was unlawful.
(c) The provisions of this Section 3 shall not be deemed to be
exclusive or to limit in any way the circumstances in which a person may be
deemed to have met the applicable standard of conduct set forth by the General
Corporation Law.
Section 4. ADVANCES OF EXPENSES
The Corporation shall pay the expenses incurred by its directors or
officers in any proceeding (other than a proceeding brought for an accounting of
profits made from the purchase and sale by the director or officer of securities
of the Corporation within the meaning of Section 16(b) of the Exchange Act, or
similar provision of any state statutory law or common law) in advance of the
final disposition of the proceeding at the written request of the director or
officer, if the director or officer: (a) furnishes the Corporation a written
affirmation of the director's or officer's good faith belief that the director
or officer is entitled to be indemnified under this Article 8, and (b) furnishes
the Corporation a written undertaking to repay the advance to the extent that it
is ultimately determined that the director or officer is not entitled to be
indemnified by the Corporation. Such undertaking shall be an unlimited general
obligation of the director or officer but need not be secured. Advances pursuant
to this Section 4 shall be made no later than 10 days after receipt by the
Corporation of the affirmation and
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undertaking described in clauses (a) and (b) above, and shall be made without
regard to the director's or officer's ability to repay the amount advanced and
without regard to the director's or officer's ultimate entitlement to
indemnification under this Article 8. The Corporation may establish a trust,
escrow account or other secured funding source for the payment of advances made
and to be made pursuant to this Section 4 or of other liability incurred by the
director or officer in connection with any proceeding.
Section 5. ENFORCEMENT
Without the necessity of entering into an express contract, all rights
to indemnification and advances to directors and officers under this Article 8
shall be deemed to be contractual rights and be effective to the same extent and
as if provided for in a contract between the Corporation and the director or
officer. Any director or officer may enforce any right to indemnification or
advances under this Article 8 in any court of competent jurisdiction if: (a) the
Corporation denies the claim for indemnification or advances in whole or in
part, or (b) the Corporation does not dispose of such claim within 45 days of
request therefor. It shall be a defense to any such enforcement action (other
than an action brought to enforce a claim for advancement of expenses pursuant
to, and in compliance with, Section 4 of this Article 8) that the director or
officer is not entitled to indemnification under this Article 8. However, except
as provided in Section 12 of this Article 8, the Corporation shall not assert
any defense to an action brought to enforce a claim for advancement of expenses
pursuant to Section 4 of this Article 8 if the director or officer has tendered
to the Corporation the affirmation and undertaking required thereunder. The
burden of proving by clear and convincing evidence that indemnification is not
appropriate shall be on the Corporation. Neither the failure of the Corporation
(including its Board of Directors or independent legal counsel) to have made a
determination prior to the commencement of such action that indemnification is
proper in the circumstances because the director or officer has met the
applicable standard of conduct nor an actual determination by the Corporation
(including its Board of Directors or independent legal counsel) that
indemnification is improper because the director or officer has not met such
applicable standard of conduct, shall be asserted as a defense to the action or
create a presumption that the director or officer is not entitled to
indemnification under this Article 8 or otherwise. The director's or officer's
expenses incurred in connection with successfully establishing such person's
right to indemnification or advances, in whole or in part, in any proceeding
shall also be paid or reimbursed by the Corporation.
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Section 6. NON-EXCLUSIVITY OF RIGHTS
The rights conferred on any person by this Article 8 shall not be
exclusive of any other right which such person may have or hereafter acquire
under any statute, provision of the Certificate, Bylaws, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
or her official capacity and as to action in another capacity while holding
office. The Corporation is specifically authorized to enter into individual
contracts with any or all of its directors, officers, employees or agents
respecting indemnification and advances, to the fullest extent not prohibited by
the General Corporation Law.
Section 7. SURVIVAL OF RIGHTS
The rights conferred on any person by this Article 8 shall continue as
to a person who has ceased to be a director, officer, employee or other agent
and shall inure to the benefit of the heirs, executors and administrators of
such a person.
Section 8. INSURANCE
To the fullest extent permitted by law, the Corporation, upon approval
by the Board of Directors, may purchase insurance on behalf of any person
required or permitted to be indemnified pursuant to this Article 8.
Section 9. AMENDMENTS
Any repeal or modification of this Article 8 shall only be prospective
and shall not affect the rights under this Article 8 in effect at the time of
the alleged occurrence of any action or omission to act that is the cause of any
proceeding against any director, officer, employee or agent of the Corporation.
Section 10. SAVINGS CLAUSE
If this Article 8 or any portion hereof shall be invalidated on any
ground by any court of competent jurisdiction, then the Corporation shall
nevertheless indemnify each director and officer to the fullest extent not
prohibited by any applicable portion of this Article 8 that shall not have been
invalidated, or by any other applicable law.
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Section 11. CERTAIN DEFINITIONS
For the purposes of this Article 8, the following definitions shall
apply:
(a) The term "proceeding" shall include any threatened, pending or
completed action, suit or proceeding, whether formal or informal, whether
brought in the right of the Corporation or otherwise, and whether of a civil,
criminal, administrative or investigative nature, in which the director or
officer may be or may have been involved as a party, witness or otherwise, by
reason of the fact that the director or officer is or was a director or officer
of the Corporation, or is or was serving at the request of the Corporation as a
director, officer, partner, trustee, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, whether or not serving in
such capacity at the time any liability or expense is incurred for which
indemnification or reimbursement can be provided under this Article 8.
(b) The term "expenses" includes, without limitation thereto, expenses
of investigations, judicial or administrative proceedings or appeals, attorney,
accountant and other professional fees and disbursements and any expenses of
establishing a right to indemnification under this Article 8, but shall not
include amounts paid in settlement by the director or officer or the amount of
judgments or fines against the director or officer.
(c) References to "other enterprise" include, without limitation,
employee benefit plans; references to "fines" include, without limitation, any
excise taxes assessed on a person with respect to any employee benefit plan;
references to "serving at the request of the Corporation" include, without
limitation, any service as a director, officer, employee or agent which imposes
duties on, or involves services by, such director, officer, employee or agent
with respect to an employee benefit plan, its participants, or its
beneficiaries; and a person who acted in good faith and in a manner such person
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this Article
8.
(d) References to "the Corporation" shall include, in addition to the
resulting Corporation, any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a
director, officer or employee of such constituent corporation, or is or was
serving at the request of such constituent
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corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under this Article 8 with respect to the resulting or surviving
corporation as such person would have with respect to such constituent
corporation if its separate existence had continued.
(e) The meaning of the phrase "to the fullest extent permitted by law"
shall include, but not be limited to: (i) to the fullest extent authorized or
permitted by any amendments to or replacements of the General Corporation Law
adopted after the date of this Article 8 that increase the extent to which a
corporation may indemnify its directors and officers, and (ii) to the fullest
extent permitted by any provision of the General Corporation Law that authorizes
or contemplates additional indemnification by agreement, or the corresponding
provision of any amendment to or replacement of the General Corporation Law.
Section 12. NOTIFICATION AND DEFENSE OF CLAIM
As a condition precedent to indemnification under this Article 8, not
later than 30 days after receipt by the director or officer of notice of the
commencement of any proceeding, the director or officer shall, if a claim in
respect of the proceeding is to be made against the Corporation under this
Article 8, notify the Corporation in writing of the commencement of the
proceeding. The failure to properly notify the Corporation shall not relieve the
Corporation from any liability which it may have to the director or officer
unless the Corporation shall be shown to have suffered actual damages as a
result of such failure, or otherwise than under this Article 8. With respect to
any proceeding as to which the director or officer so notifies the Corporation
of the commencement:
(a) The Corporation shall be entitled to participate in the proceeding
at its own expense.
(b) Except as otherwise provided in this Section 12, the Corporation
may, at its option and jointly with any other indemnifying party similarly
notified and electing to assume such defense, assume the defense of the
proceeding, with legal counsel reasonably satisfactory to the director or
officer. The director or officer shall have the right to use separate legal
counsel in the proceeding, but the Corporation shall not be liable to the
director or officer under this Article 8 for the fees and expenses of separate
legal counsel incurred after notice from the Corporation of its assumption of
the defense, unless (i) the director or officer reasonably concludes that there
may be a conflict of interest between the Corporation and the director or
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officer in the conduct of the defense of the proceeding, or (ii) the Corporation
does not use legal counsel to assume the defense of such proceeding. The
Corporation shall not be entitled to assume the defense of any proceeding
brought by or on behalf of the Corporation or as to which the director or
officer has made the conclusion provided for in (i) above.
(c) If two or more persons who may be entitled to indemnification from
the Corporation, including the director or officer seeking indemnification, are
parties to any proceeding, the Corporation may require the director or officer
to use the same legal counsel as the other parties. The director or officer
shall have the right to use separate legal counsel in the proceeding, but the
Corporation shall not be liable to the director or officer under this Article 8
for the fees and expenses of separate legal counsel incurred after notice from
the Corporation of the requirement to use the same legal counsel as the other
parties, unless the director or officer reasonably concludes that there may be a
conflict of interest between the director or officer and any of the other
parties required by the Corporation to be represented by the same legal counsel.
(d) The Corporation shall not be liable to indemnify the director or
officer under this Article 8 for any amounts paid in settlement of any
proceeding effected without its written consent, which shall not be unreasonably
withheld. The director or officer shall permit the Corporation to settle any
proceeding that the Corporation assumes the defense of, except that the
Corporation shall not settle any action or claim in any manner that would impose
any penalty or limitation on the director or officer without such person's
written consent.
Section 13. EXCLUSIONS
Notwithstanding any provision in this Article 8, the Corporation shall
not be obligated under this Article 8 to make any indemnification in connection
with any claim made against any director or officer: (a) for which payment is
required to be made to or on behalf of the director or officer under any
insurance policy, except with respect to any deductible amount, self-insured
retention or any excess amount to which the director or officer is entitled
under this Article 8 beyond the amount of payment under such insurance policy;
(b) if a court having jurisdiction in the matter finally determines that such
indemnification is not lawful under any applicable statute or public policy; (c)
in connection with any proceeding (or part of any proceeding) initiated by the
director or officer, or any proceeding by the director or officer against the
Corporation or its directors, officers, employees or other persons entitled to
be indemnified by the Corporation, unless: (i) the Corporation is expressly
required by law to make the indemnification; (ii) the
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proceeding was authorized by the Board of Directors of the Corporation; or (iii)
the director or officer initiated the proceeding pursuant to Section 5 of this
Article 8 and the director or officer is successful in whole or in part in such
proceeding; or (d) for an accounting of profits made from the purchase and sale
by the director or officer of securities of the Corporation within the meaning
of Section 16(b) of the Exchange Act, or similar provision of any state
statutory law or common law.
Section 14. SUBROGATION
In the event of payment under this Article 8, the Corporation shall be
subrogated to the extent of such payment to all of the rights of recovery of the
director or officer. The director or officer shall execute all documents
required and shall do all acts that may be necessary to secure such rights and
to enable the Corporation effectively to bring suit to enforce such rights.
ARTICLE 9
TRANSACTIONS WITH INTERESTED DIRECTORS
Section 1. VALIDITY OF TRANSACTION
No transaction involving the Corporation shall be voidable by the
Corporation solely because of a director's direct or indirect interest in the
transaction if:
(a) the material facts of the transaction and the director's interest
were disclosed or known to the Board of Directors or a committee of the Board of
Directors, and the Board of Directors or committee authorized, approved or
ratified the transaction; or
(b) the material facts of the transaction and the director's interest
were disclosed or known to the stockholders entitled to vote and a majority of
those stockholders authorized, approved or ratified the transaction; or
(c) the transaction was fair to the Corporation.
Solely for purposes of this Article 9, a director of the Corporation
has an indirect interest in a transaction if another entity in which the
director has a material financial interest or in which the director is a general
partner is a party to the transaction or the transaction is with another entity
of which the director is a director, officer or trustee and the transaction is
or should be considered by the Board of Directors.
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Section 2. APPROVAL BY BOARD
For purposes of Section 1, a transaction in which a director has an
interest is authorized, approved or ratified if it receives the affirmative vote
of a majority of the directors on the Board of Directors, or on the committee,
who have no direct or indirect interest in the transaction. A transaction may
not be authorized, approved or ratified under this Article 9 by a single
director. If a majority of the directors who have no direct or indirect interest
in the transaction vote to authorize, approve or ratify the transaction, a
quorum shall be deemed to be present for the purpose of taking action under this
Article 9. The presence of, or a vote cast by, a director with a direct or
indirect interest in the transaction does not affect the validity of any action
taken by the Board of Directors or a committee thereof if the transaction is
otherwise authorized, approved or ratified in any manner as provided in Section
1.
Section 3. APPROVAL BY STOCKHOLDERS
For purposes of Section 1, a transaction in which a director has an
interest is authorized, approved or ratified if it receives the vote of a
majority of the shares entitled to be counted under this Article 9, voting as a
single voting group. Shares owned by or voted under the control of a director
who has a direct or indirect interest in the transaction, and shares owned by or
voted under the control of any entity affiliated with the director as described
in Section 1 may be counted in a vote of stockholders to determine whether to
authorize, approve or ratify a transaction by vote of the stockholders under
this Article 9. A majority of the shares, whether or not present, that are
entitled to be counted in a vote on the transaction under this Article 9
constitutes a quorum for the purpose of taking action under this Article 9.
ARTICLE 10
LIMITATION OF DIRECTOR LIABILITY
To the fullest extent permitted by the General Corporation Law, as it
exists on the date hereof or may hereafter be amended, no director of the
Corporation shall be liable to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director occurring on or after the
date of adoption of this provision. Any amendment to or repeal of this provision
or the General Corporation Law shall not adversely affect any right or
protection of a director of the Corporation for or with respect to any acts or
omissions of such director occurring prior to such amendment or repeal. No
change in the General Corporation Law shall reduce or eliminate the rights and
protections set forth in this Article unless the change in the law specifically
requires such reduction or elimination. This
32
<PAGE>
provision, however, shall not eliminate or limit the liability of a director
for:
(a) any breach of the director's duty of loyalty to the Corporation or
its stockholders;
(b) acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
(c) any unlawful distribution under Section 174 of the General
Corporation Law;
(d) any transaction from which the director derived an improper
personal benefit; or
(e) profits made from the purchase and sale by the director of
securities of the Corporation within the meaning of Section 16(b) of the
Exchange Act, or similar provision of any state statutory law or common law.
If the General Corporation Law is amended, after this Article 10 shall
become effective, to authorize corporate action further eliminating or limiting
the personal liability of directors, officers, employees or agents, then the
liability of directors, officers, employees or agents of the Corporation shall
be eliminated or limited to the fullest extent permitted by the General
Corporation Law, as so amended.
CERTIFICATE OF DESIGNATION,
PREFERENCES AND RIGHTS OF
THE SERIES A PREFERRED STOCK
OF
AGRITOPE, INC.
(Pursuant to Section 151 of the General Corporation Law
of the state of Delaware)
----------------------
The undersigned officers of Agritope, Inc., a corporation organized
and existing under the General Corporation Law of the state of Delaware (the
"Corporation"), in accordance with the provisions of Section 103 thereof, do
hereby certify:
That, pursuant to authority conferred upon the Board of Directors of
the Corporation by its Certificate of Incorporation, and pursuant to Section 151
of the Delaware General Corporation Law , the Board of Directors adopted the
following resolution creating a series of 1,000,000 shares of Preferred Stock,
par value $.01 per share, designated as Series A Preferred Stock:
RESOLVED, that, pursuant to the authority vested in the Board of
Directors of the Corporation in accordance with the provisions of its
Certificate of Incorporation, a new series of Preferred Stock of the Corporation
be, and it hereby is, created, and that the designation and amount thereof and
the voting powers, preferences and relative, participating, optional and other
special rights of the shares of such series, and the qualifications, limitations
or restrictions thereof are as follows:
SERIES A PREFERRED STOCK
1. Designation and Amount. The shares of such series of Preferred
Stock shall be designated as "Series A Preferred Stock," and the number of
shares constituting such series be 1,000,000.
2. Par Value. The par value of the Series A Preferred Stock shall be
$.01 per share.
3. Dividends and Distributions
(a) The Corporation shall not declare, set aside or pay any
dividends or other distributions (as defined below) on shares of Common Stock
unless and until the Corporation shall have declared, set aside or paid a
dividend or other distribution with respect to each share of Series A Preferred
Stock then
<PAGE>
outstanding in an amount at least equal to the product of (i) the per share
amount, if any, of the dividends or other distributions to be declared, paid or
set aside for the Common Stock, multiplied by (ii) the number of whole shares of
Common Stock into which the shares of Series A Preferred Stock are then
convertible.
(b) For purposes of this Section 3, unless the context requires
otherwise, "distribution" shall mean the transfer of cash or property without
consideration, whether by way of dividend or otherwise, payable other than in
Common Stock, or the purchase or redemption of shares of the Corporation (other
than repurchases of Common Stock held by employees or directors of, or
consultants to, the Corporation upon termination of their employment or services
and other than redemptions in liquidation or dissolution of the Corporation) for
cash or property, including any such transfer, purchase or redemption by a
subsidiary of this Corporation. All payments due under this Section 3 shall be
made to the nearest cent.
(c) Anything in this Section 3 to the contrary notwithstanding,
stock dividends on Series A Preferred Stock shall be made in shares of Series A
Preferred Stock only.
4. Liquidation, Dissolution or Winding Up
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of shares of Series A
Preferred Stock then outstanding shall be entitled to be paid out of the assets
of the Corporation available for distribution to its stockholders, pari passu
with the payment of all amounts required to be distributed to the holders of
Common Stock, but before any payment shall be made to the holders of any other
class or series of stock ranking on liquidation junior to the Series A Preferred
Stock.
5. Voting
(a) In addition to voting rights provided by the General
Corporation Law of the state of Delaware, the holders of the Series A Preferred
Stock voting as one class shall have the right to elect one director to the
Corporation's Board of Directors annually, so long as not less than 214,285 of
the shares of Series A Preferred Stock originally issued are outstanding. The
holders of the Series A Preferred Stock also shall have voting rights for any
other purpose pari passu with holders of Common Stock as one class, provided
that each share of Series A Preferred Stock shall entitle the holder to such
number of votes equal to the number of shares of Common Stock (rounded
- 2 -
<PAGE>
to the nearest whole number) into which the Series A Preferred Stock is then
convertible under the terms provided below.
(b) The Corporation shall not amend, alter or repeal the
preferences, special rights or other powers of the Series A Preferred Stock so
as to affect adversely the Series A Preferred Stock, without the written consent
or affirmative vote of the holders of a majority of the then outstanding shares
of Series A Preferred Stock, given in writing or by vote at a meeting. The
number of authorized shares of Series A Preferred Stock may be decreased (but
not below the number of shares then outstanding) by the directors of the
Corporation pursuant to the General Corporation Law of Delaware, but may be
increased (other than increases necessary to issue stock dividends of Series A
Preferred Stock on the outstanding shares of Series A Preferred Stock) only by
the affirmative vote of the holders of a majority of the then outstanding shares
of Series A Preferred Stock, voting as a single class.
6. Optional Conversion. The holders of the Series A Preferred Stock
shall have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Series A Preferred Stock
shall be convertible, at the option of the holder thereof, at any time and from
time to time, and without the payment of additional consideration by the holder
thereof, into such number of fully paid and nonassessable shares of Common Stock
as is determined by dividing (i) $7.00 by (ii) the Series A Conversion Price, in
each instance as such Conversion Price is in effect at the time of conversion.
The "Series A Conversion Price" initially shall be $7.00. The rate at which
shares of Series A Preferred Stock may be converted into shares of Common Stock
shall be subject to adjustment as provided below; such adjusted Conversion Price
and rate of conversion thereafter shall be applicable to the outstanding shares
of Series A Preferred Stock and any newly issued shares of such series (as, for
example, the result of a stock dividend).
In the event of a liquidation, dissolution or winding up of the
Corporation, the Conversion Rights shall terminate at the close of business on
the fifth business day preceding the date fixed for the payment of any amounts
distributable on liquidation to the holders of Series A Preferred Stock.
- 3 -
<PAGE>
(b) Fractional Shares. No fractional shares of Common Stock shall
be issued upon conversion of Series A Preferred Stock. In lieu of any fractional
shares to which the holder would otherwise be entitled, the Corporation shall
pay cash equal to such fraction multiplied by the then effective Conversion
Price.
(c) Mechanics of Conversion
(i) In order for a holder of Series A Preferred Stock to
convert shares of Series A Preferred Stock into shares of Common Stock, such
holder shall surrender the certificate or certificates for such shares of Series
A Preferred Stock, at the office of the Corporation's transfer agent (or at the
principal office of the Corporation if the Corporation serves as its own
transfer agent), together with written notice that such holder elects to convert
all or any number of the shares of the Series A Preferred Stock represented by
such certificate or certificates. Such notice shall state such holder's name or
the names of the nominees in which such holder wishes the certificate or
certificates for shares of Common Stock to be issued. If required by the
Corporation, certificates surrendered for conversion shall be endorsed or
accompanied by a written instrument or instruments of transfer, in form
satisfactory to the Corporation, duly executed by the registered holder or the
holder's attorney duly authorized in writing. The date of receipt of such
certificates and notice to the transfer agent (or to the Corporation if the
Corporation serves as its own transfer agent) shall be the conversion date (the
"Conversion Date"). The Corporation shall, as soon as practicable after the
Conversion Date, issue and deliver at such office to such holder of Series A
Preferred Stock, or to the holder's nominees, a certificate or certificates for
the number of shares of Common Stock to which such holder shall be entitled,
together with cash in lieu of any fraction of a share.
(ii) The Corporation shall at all times when any Series A
Preferred Stock shall be outstanding, reserve and keep available out of its
authorized but unissued stock, for the purpose of effecting the conversion of
such Series A Preferred Stock, such number of its duly authorized shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding shares of such Series A Preferred Stock.
(iii) Upon any such conversion, no adjustment to the
Conversion Price shall be made for any declared or accrued but unpaid dividends
on any Series A Preferred Stock surrendered for conversion or on the Common
Stock delivered upon conversion.
- 4 -
<PAGE>
(iv) All shares of Series A Preferred Stock which shall have
been surrendered for conversion as herein provided shall no longer be deemed to
be outstanding and all rights with respect to such shares, including the rights,
if any, to receive notices and to vote, shall immediately cease and terminate on
the Conversion Date, except only the right of the holders thereof to receive
shares of Common Stock (and cash in lieu of any fractional share) in exchange
therefor and payment of any dividends declared but unpaid thereon. Any shares of
Series A Preferred Stock so converted shall be retired and canceled and shall
not be reissued, and the Corporation (without the need for stockholder action)
may from time to time take such appropriate action as may be necessary to reduce
the authorized Series A Preferred Stock accordingly.
(v) The Corporation shall pay any and all issue and other
taxes that may be payable in respect of any issuance or delivery of shares of
Common Stock upon conversion of shares of Series A Preferred Stock pursuant to
this Section 6. The Corporation shall not, however, be required to pay any tax
which may be payable in respect of any transfer involved in the issuance and
delivery of shares of Common Stock in a name other than that in which the shares
of the Series A Preferred Stock so converted were registered, and no such
issuance or delivery shall be made unless and until the person or entity
requesting such issuance has paid to the Corporation the amount of any such tax
or has established, to the satisfaction of the Corporation, that such tax has
been paid.
(d) Adjustment for Stock Splits and Combinations. If the
Corporation shall, at any time or from time to time after the date on which a
share of Series A Preferred Stock was first issued (the "Original Issue Date"),
effect a subdivision of the outstanding Common Stock, the Conversion Price then
in effect immediately before that subdivision shall be proportionately
decreased. If the Corporation shall at any time or from time to time after the
Original Issue Date combine the outstanding shares of Common Stock, the
Conversion Price then in effect immediately before the combination shall be
proportionately increased. Any adjustment under this paragraph shall become
effective at the close of business on the date the subdivision or combination
becomes effective.
(e) Adjustment for Certain Dividends and Distributions. In the
event the Corporation, at any time or from time to time after the Original Issue
Date, shall make or issue, or fix a record date for the determination of holders
of Common Stock entitled to receive, a dividend or other distribution
- 5 -
<PAGE>
payable in additional shares of Common Stock, then and in each such event the
Conversion Price for Series A Preferred Stock then in effect shall be decreased
as of the time of such issuance or, in the event such a record date shall have
been fixed, as of the close of business on such record date, by multiplying the
Conversion Price then in effect by a fraction:
(1) the numerator of which shall be the total number of shares of
Common Stock issued and outstanding immediately prior to the time
of such issuance or the close of business on such record date,
and
(2) the denominator of which shall be the total number of shares of
Common Stock issued and outstanding immediately prior to the time
of such issuance or the close of business on such record date
plus the number of shares of Common Stock issuable in payment of
such dividend or distribution;
provided, however, if such record date shall have been fixed and such dividend
is not fully paid or if such distribution is not fully made on the date fixed
therefor, the Conversion Price for Series A Preferred Stock shall be recomputed
accordingly as of the close of business on such record date and thereafter the
Conversion Price for Series A Preferred Stock shall be adjusted pursuant to this
paragraph as of the time of actual payment of such dividends or distributions.
Notwithstanding the foregoing, the shares of Common Stock issuable
upon conversion of the Series A Preferred Stock shall be deemed outstanding for
all calculations under this Subsection 6(e).
(f) Adjustments for Other Dividends and Distributions. In the
event the Corporation, at any time or from time to time after the Original Issue
Date for Series A Preferred Stock, shall make or issue, or fix a record date for
the determination of holders of Common Stock entitled to receive, a dividend or
other distribution payable in securities of the Corporation other than shares of
Common Stock, then and in each such event provision shall be made so that the
holders of Series A Preferred Stock shall receive upon conversion thereof, in
addition to the number of shares of Common Stock receivable thereupon, the
amount of securities of the Corporation that they would have received had such
Series A Preferred Stock been converted into Common Stock on the date of such
event and had thereafter, during the period from the date of such event to and
including the conversion date, retained such securities receivable by them as
aforesaid during such period, giving
- 6 -
<PAGE>
application to all adjustments called for during such period under this
paragraph with respect to the rights of the holders of Series A Preferred Stock.
(g) Adjustment for Reclassification, Exchange or Substitution. If
the Common Stock issuable upon the conversion of Series A Preferred Stock shall
be changed into the same or a different number of shares of any class or classes
of stock, whether by capital reorganization, reclassification or otherwise
(other than a subdivision or combination of shares or stock dividend provided
for above, or a reorganization, merger, consolidation or sale of assets provided
for below), then and in each such event the holder of each such share of Series
A Preferred Stock shall have the right thereafter to convert such share into the
kind and amount of shares of stock and other securities and property receivable
upon such reorganization, reclassification or other change, by holders of the
number of shares of Common Stock into which such shares of Series A Preferred
Stock might have been converted immediately prior to such reorganization,
reclassification or change, all subject to further adjustment as provided
herein.
(h) Adjustment for Merger or Reorganization, etc. In case of any
consolidation or merger of the Corporation with or into another corporation, or
the sale of all or substantially all of the assets of the Corporation to another
corporation each share of Series A Preferred Stock shall thereafter be
convertible (or shall be converted into a security which shall be convertible)
into the kind and amount of shares of stock or other securities or property to
which a holder of the number of shares of Common Stock of the Corporation
deliverable upon conversion of Series A Preferred Stock would have been entitled
upon such consolidation, merger or sale; and, in such case, appropriate
adjustment (as determined in good faith by the Board of Directors) shall be made
in the application of the provisions in this Section 6 set forth with respect to
the rights and interest thereafter of the holders of Series A Preferred Stock,
to the end that the provisions set forth in this Section 6 (including provisions
with respect to changes in and other adjustments of the Conversion Price) shall
thereafter be applicable, as nearly as reasonably may be, in relation to any
shares of stock or other property thereafter deliverable upon the conversion of
Series A Preferred Stock.
(i) No Impairment. The Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of
- 7 -
<PAGE>
any of the terms to be observed or performed hereunder by the Corporation, but
will at all times in good faith assist in the carrying out of all the provisions
of this Section 6 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of Series A
Preferred Stock against impairment.
(j) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Price pursuant to this Section 6,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder of
Series A Preferred Stock a certificate, signed by the Corporation's chief
financial officer, setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based. The
Corporation shall, upon the written request at any time of any holder of Series
A Preferred Stock, furnish or cause to be furnished to such holder a similar
certificate setting forth (i) such adjustments and readjustments, (ii) the
Conversion Price then in effect, and (iii) the number of shares of Common Stock
and the amount, if any, of other property which then would be received upon the
conversion of Series A Preferred Stock.
(k) Notice of Record Date. In the event:
(i) that the Corporation declares a dividend (or any other
distribution) on its Common Stock payable in Common Stock or
other securities of the Corporation;
(ii) that the Corporation subdivides or combines its outstanding
shares of Common Stock;
(iii) of any reclassification of the Common Stock of the Corporation
(other than a subdivision or combination of its outstanding
shares of Common Stock or a stock dividend or stock distribution
thereon), or of any consolidation or merger of the Corporation
into or with another corporation, or of the sale of all or
substantially all of the assets of the Corporation; or
(iv) of the involuntary or voluntary dissolution, liquidation or
winding up of the Corporation;
then the Corporation shall cause to be filed at its principal office and shall
cause to be mailed to the holders of Series A Preferred Stock at their last
addresses as shown on the records
- 8 -
<PAGE>
of the Corporation or its transfer agent, at least 10 days prior to the date
specified in (A) below or 20 days before the date specified in (B) below, a
notice stating
(A) the record date of such dividend, distribution, subdivision or
combination, or, if a record is not to be taken, the date as of
which the holders of Common Stock of record to be entitled to
such dividend, distribution, subdivision or combination are to be
determined, or
(B) the date on which such reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up is expected to
become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities or other property
deliverable upon such reclassification, consolidation, merger,
sale, dissolution or winding up.
7. Preemptive Rights.
(a) Subject to the provisions of Section 7(f), in case of the
proposed issuance or granting by the Corporation of shares of any class of
capital stock (whether heretofore or hereafter authorized) or notes, bonds,
debentures or other securities convertible into, or carrying options or warrants
to purchase shares of any class of capital stock (all of which are collectively
referred to herein as "equity securities"), the Corporation shall afford to each
holder of Series A Preferred Stock the preemptive right to subscribe for,
purchase or receive such securities, in such proportion as would, as nearly as
practicable, preserve such holder's relative equity position on a Common Stock
equivalent basis arising from such holder's ownership of shares of Series A
Preferred Stock (including for these purposes all options, warrants and other
securities convertible into or exercisable for Series A Preferred Stock then
held by such stockholder), on the terms and conditions provided in Sections 7(b)
through 7(f), inclusive.
(b) Notice. Written notice of the proposed issuance or granting
of securities within the scope of Section 7(a) shall be given to each holder of
Series A Preferred Stock not less than 30 days prior to the proposed date of
issuance or granting, setting forth the principal terms and conditions of the
proposed issuance or granting, including the aggregate number of securities to
be issued or granted, the price therefor, and, if a security other than shares
or authorized capital stock, the
- 9 -
<PAGE>
significant terms thereof, the proportionate amount of such securities which
such holder shall have the right to purchase pursuant to Section 7(a) and the
price to be paid by and other terms offered to the holder therefor, which price
and principal terms shall be not less favorable than the price and terms at
which such securities are proposed to be offered for sale to others.
(c) Subscription. A shareholder of Series A Preferred Stock by
written notice given to the Corporation not less than 15 days prior to the
proposed date of issuance or granting, may subscribe for or agree to purchase up
to the entire amount of securities covered by the holder's proportionate right
at the price and upon the terms set forth in said notice.
(d) Enforceability. Upon giving notice to the Company in
accordance with Section 7(c), such holder of Series A Preferred Stock shall be
obligated as if the holder had executed a subscription agreement containing the
price and terms stated in the notice given pursuant to Section 7(a) and the
Corporation thereafter may enforce such agreement pursuant to the provisions of
Delaware law; provided, however, that a stockholder's obligation to purchase any
securities hereunder shall be conditioned upon the issuance or granting by the
Corporation of the securities at the price and on the terms and conditions set
forth in the Corporation's notice given to the stockholder in accordance with
Section 7(b).
(e) Free Period. If a holder of Series A Preferred Stock shall
not exercise such holder's preemptive rights in the manner and time set forth in
Section 7(c), then the Corporation may thereafter for a period not exceeding 120
days following the expiration of said time period issue, grant, sell or subject
to rights or options (upon the terms and conditions and at the price or prices
set forth in the Corporation's notice) the securities described in the notice
given to such stockholder by the Corporation in accordance with Section 7(b),
which such stockholder would have been entitled to purchase, free of the
stockholder's preemptive rights herein provided; any such securities not so
issued, granted, sold or subjected to rights or options of others during such
120-day period shall thereafter again be subject to the preemptive rights
provided in Section 7(a).
(f) Exempt Transactions. Shares of capital stock or other
securities proposed to be issued or granted by the Corporation shall not be
subject to preemptive rights under Section 7(a) if they (a) are securities
issued by the Corporation to effect a merger, consolidation or acquisition of a
business or
- 10 -
<PAGE>
company on a stock-for-stock or stock-for-assets basis or are offered or subject
to rights or options for consideration other than cash as part of such
acquisition; (b) are to be issued to satisfy conversion, option or contingent
Common Stock issuances or warrant rights heretofore authorized or granted by the
Corporation; (c) are sold, issued or granted to employees, directors or
consultants pursuant to a plan or agreement approved by vote of the
Corporation's stockholders; (d) are treasury shares; (e) are to be issued under
a plan of reorganization approved in a proceeding under any applicable act of
Congress relating to reorganization of corporations; (f) are issued in
connection with a registered public offering of the Corporation's securities on
behalf of the Corporation pursuant to an effective Registration Statement
pursuant to the Securities Act of 1933, as amended; (g) are granted in
transactions not to exceed, in each case, an amount equal to 5 percent of the
total of outstanding shares of Common Stock as at the date of such transaction
with (i) underwriters in connection with the public offering of the
Corporation's securities on behalf of the Corporation pursuant to an effective
Registration Statement pursuant to the Securities Act of 1933, as amended; (ii)
finders or brokers in connection with a private placement or public offering of
the Corporation's securities on behalf of the Corporation; or (iii) financial
institutions (including, but not limited to, banks, trust companies, investment
companies, insurance companies or pension or profit-sharing trusts) in
connection with financing furnished to the Corporation, if such financing is in
the form of loans or non-convertible debt or is approved by the Corporation's
stockholders; or (h) are issuable in connection with the exercise of rights
under the Corporation's stockholder rights plan.
- 11 -
<PAGE>
IN WITNESS WHEREOF, we have executed and attested this Certificate of
Designation on behalf of the Corporation this ____ day of __________, 1997. We
further declare under penalty of perjury under the laws of the state of Delaware
that the matters set forth herein are, to our knowledge, true and correct.
AGRITOPE, INC.
By------------------------------
Adolph J. Ferro
Chairman, President and Chief
Executive Officer
Attest:
- ----------------------------
Gilbert N. Miller,
Secretary
- 12 -
AGRITOPE, INC.
(a Delaware corporation)
and
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
Rights Agent
Rights Agreement
Dated as of November 14, 1997
<PAGE>
TABLE OF CONTENTS
Section Page
1. Certain Definitions 1
2. Appointment of Rights Agent 6
3. Issue of Rights Certificates 6
4. Form of Rights
Certificates 8
5. Countersignature and Registration 9
6. Transfer, Split Up, Combination and Exchange of
Rights Certificates; Mutilated, Destroyed, Lost or
Stolen
Rights Certificates 10
7. Exercise of Rights; Purchase Price; Expiration Date
of Rights 11
8. Cancellation and Destruction of Rights Certificates 14
9. Reservation and Availability of Capital Stock 14
10. Preferred Stock Record Date 16
11. Adjustment of Purchase Price, Number and Kind of
Shares or Number of Rights 17
12. Certificate of Adjusted Purchase Price or Number of
Shares 28
13. Consolidation, Merger or
Sale or Transfer of Assets or Earning Power 28
14. Fractional Rights and Fractional Shares 31
15. Rights of Action 33
16. Agreement of Rights Holders 33
17. Rights Holder and Rights Certificate Holder Not
Deemed a Stockholder 34
18. Concerning the Rights Agent 34
<PAGE>
19. Merger or Consolidation or Change of Name of
Rights Agent 35
20. Duties of Rights Agent 36
21. Change of Rights Agent 38
22. Issuance of New Rights Certificates 39
23. Redemption and Termination 40
24. Exchange 40
25. Notice of Certain Events 42
26. Notices 43
27. Supplements and Amendments 44
28. Successors 44
29. Determinations and Actions by the Board of
Directors, Etc. 45
30. Benefits of This Agreement 45
31. Severability 45
32. Governing Law 46
33. Counterparts 46
34. Descriptive Headings 46
Exhibit A -- Designation of Terms of Series B Junior
Participating Preferred Stock
Exhibit B -- Form of Rights Certificate
ii
<PAGE>
TABLE OF DEFINED TERMS
Term Defined Section
- ------------ -------
Acquiring Person 1(a)
Adjustment Shares 11(a)(ii)
Adverse Person 1(b)
Affiliate 1(c)
Agreement Intro
Associate 1(c)
Beneficial Owner; beneficially own 1(d)
Board of Directors Intro
Business Day 1(e)
Certificate of Incorporation 11(a)(iii)
Close of Business 1(f)
Common Stock Intro;
1(g)
Common Stock Equivalents 11(a)(iii)
Company (Agritope, Inc.) Intro
Company (following a Section 13 Event) 13(a)
Current Value 11(a)(iii)
Distribution Date 3(a)
Epitope 1(a)
equivalent preferred stock 11(b)
Exchange Act 1(a)
Exchange Date 7(a)
Exchange Ratio 24(a)
iii
<PAGE>
Expiration Date 7(a)
Term Defined Section
- ------------ -------
Final Expiration Date 7(a)
Exchange Act 1(a)
Nasdaq 11(d)(i)
Person 1(h)
Original Rights 1(d)
Preferred Stock Intro;
1(i);
11(a)(ii)
Principal Party 13(b)
Purchase Price 1(j);
11(a)(ii)
Qualifying Offer
11(a)(ii)(A)
Record Date Intro
Redemption Date 7(a)
Redemption Price 23(a)
Rights Intro
Rights Agent Intro
Rights Certificates 3(a)
Rights Dividend Declaration Date Intro
Section 11(a)(ii) Event 11(a)(ii)
Section 11(a)(ii) Trigger Date 11(a)(iii)
Section 13 Event 13(a)
Securities Act 7(c)
iv
<PAGE>
Spread 11(a)(iii)
Stock Acquisition Date 1(m)
Term Defined Section
- ------------ -------
Strategic Partners 1(a)(vi)
Subsidiary 1(n)
Substitution Period 11(a)(iii)
Trading Day 11(d)(i)
Triggering Event 11(a)
v
<PAGE>
RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of November 14, 1997 (the "Agreement"),
between Agritope, Inc., a Delaware corporation (the "Company"), and ChaseMellon
Shareholder Services, L.L.C., a New Jersey limited liability company (the
"Rights Agent").
W I T N E S E T H
WHEREAS, on November 14, 1997 (the "Rights Dividend Declaration
Date"), the Board of Directors of the Company (the "Board of Directors")
authorized and declared a dividend distribution of one Right for each share of
the Company's common stock, par value $.01 per share (the "Common Stock"),
outstanding at the close of business on ----------, 1997 (the "Record Date"),
and has authorized the issuance of one Right (as such number may hereinafter be
adjusted pursuant to the provisions of Section 11(p) hereof) for each share of
Common Stock of the Company issued between the Record Date and the Distribution
Date, each Right initially representing the right to purchase 1/1,000 of a share
of the Company's Series B Junior Participating Preferred Stock (the "Preferred
Stock") having the rights, powers and preferences set forth in Exhibit A
attached hereto, upon the terms and subject to the conditions hereinafter set
forth (the "Rights");
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which,
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 15 percent or more of the shares of Common Stock then
outstanding, but shall not include:
(i) Epitope, Inc.; an Oregon corporation ("Epitope"), prior
to the distribution of the Company's Common Stock held by Epitope to the
shareholders of Epitope;
(ii) the Company;
(iii) any Subsidiary of the Company;
(iv) any employee benefit plan of the Company or of any
Subsidiary of the Company;
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(v) any Person or entity organized, appointed or established
by the Company for or pursuant to the terms of any such plan;
(vi) any of the Company's strategic partners that are stated
to be covered by this subparagraph in an amendment to this Agreement adopted
pursuant to Section 27 hereof (a "Strategic Partner"); provided, however, that
if such Strategic Partners, together with their Affiliates and Associates,
collectively acquire Beneficial Ownership of more than 20 percent of the shares
of Common Stock then outstanding (including as outstanding shares of Common
Stock, for purposes of this subparagraph, all unissued shares of Common Stock
that are then Beneficially Owned by any such Persons) by any means other than
direct issuances by the Corporation or transactions receiving prior approval of
the Board of Directors, each Strategic Partner, including each Affiliate and
Associate of a Strategic Partner, which is then the Beneficial Owner of any
shares of Common Stock, shall then be deemed an Acquiring Person; and, provided
further, that, if the Strategic Partners, together with their Affiliates and
Associates, are divested or divest themselves of Beneficial Ownership of Common
Stock such that such Persons collectively Beneficially Own less than 15 percent
of the Common Stock outstanding (including as outstanding shares of Common
Stock, for purposes of this subparagraph, all unissued shares of Common Stock
that are then Beneficially Owned by any such Persons), and then a Strategic
Partner, including its Affiliates and Associates, becomes the Beneficial Owner
of any additional shares of Common Stock by any means other than direct
issuances by the Corporation or transactions receiving prior approval of the
Board of Directors, then all such Persons which are then the Beneficial Owners
of any Common Stock shall be deemed to be "Acquiring Persons"; or
(vii) any such Person who has reported or is required to
report Beneficial Ownership of 15 percent or more (but less than 25 percent) of
the shares of Common Stock then outstanding on Schedule l3G under the Exchange
Act of 1934, as amended (the "Exchange Act") (or any comparable or successor
report), or on Schedule l3D under the Exchange Act (or any comparable or
successor report) which Schedule l3D does not state any intention to or reserve
the right to control or influence the management or policies of the Company or
engage in any of the actions specified in Item 4 of such Schedule (other than
the disposition of the Common Stock) and, within 10 Business Days of being
requested by the Company to advise it regarding the same, certifies to the
Company that such Person acquired shares of Common Stock in excess of l4.9
percent inadvertently or without knowledge of the terms of the Rights or
consequences of such Beneficial Ownership under this Agreement and who, together
with
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all Affiliates and Associates, thereafter does not acquire additional shares of
Common Stock while the Beneficial Owner of 15 percent or more of the shares of
Common Stock then outstanding; provided, however, that if the Person requested
to so certify fails to do so within 10 Business Days, then such Person shall
become an Acquiring Person immediately after such 10 Business Day Period.
Notwithstanding the foregoing, no Person shall become an "Acquiring Person"
solely as the result of an acquisition of Common Stock by the Company which, by
reducing the number of shares outstanding, increases the proportionate number of
shares beneficially owned by a Person to l5 percent or more of the Common Stock
of the Company then outstanding as determined above; provided, however, that if
a Person becomes the Beneficial Owner of l5 percent or more of the Common Stock
of the Company then outstanding (as determined above) solely by reason of
acquisitions of Common Stock by the Company and shall, after such acquisitions
by the Company, become the Beneficial Owner of any additional shares of Common
Stock by any means whatsoever, then such Person shall be deemed to be an
"Acquiring Person." Any determination made by the Board of Directors as to
whether any Person is or is not an "Acquiring Person" shall be conclusive and
binding upon all holders of Rights.
(b) "Adverse Person" shall mean any Person declared to be an
Adverse Person by the Board of Directors upon determination that the criteria
set forth in Section 11(a)(ii)(B) apply to such Person; provided, however, that
the Board of Directors shall not declare any Person who is the Beneficial Owner
of l0 percent or more of the outstanding Common Stock of the Company to be an
Adverse Person if such Person has reported or is required to report such
ownership on Schedule l3G under the Exchange Act (or any comparable or successor
report) or on Schedule 13D under the Exchange Act (or any comparable or
successor report) which Schedule 13D does not state any intention to or reserve
the right to control or influence the management or policies of the Company or
engage in any of the actions specified in Item 4 of such Schedule (other than
the disposition of the Common Stock) so long as such Person neither reports nor
is required to report such ownership other than as described in this paragraph
(b).
(c) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act, as in effect on the date of this Agreement.
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(d) A Person shall be deemed the "Beneficial Owner" of, and shall
be deemed to "beneficially own," any securities:
(i) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether such right
is exercisable immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (whether or not in writing) or upon the
exercise of conversion rights, exchange rights, rights, warrants or options, or
otherwise; provided, however, that a Person shall not be deemed the "Beneficial
Owner" of, or to "beneficially own:" (A) securities tendered pursuant to a
tender or exchange offer made by such Person or any of such Person's Affiliates
or Associates until such tendered securities are accepted for purchase or
exchange; or (B) securities issuable upon exercise of Rights at any time prior
to the occurrence of a Triggering Event; or (C) securities issuable upon
exercise of Rights from and after the occurrence of a Triggering Event which
Rights were acquired by such Person or any of such Person's Affiliates or
Associates prior to the Distribution Date or pursuant to Section 3(a) or Section
22 hereof (the "Original Rights") or pursuant to Section 11(i) hereof in
connection with an adjustment made with respect to any Original Rights;
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose of or has
"beneficial ownership" of (as determined pursuant to Rule 13d-3 of the General
Rules and Regulations under the Exchange Act, as in effect on the date of this
Agreement), including pursuant to any agreement, arrangement or understanding,
whether or not in writing; provided, however, that a Person shall not be deemed
the "Beneficial Owner" of, or to "beneficially own," any security under this
subparagraph (ii) as a result of an agreement, arrangement or understanding to
vote such security if such agreement, arrangement or understanding: (A) arises
solely from a revocable proxy given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable provisions
of the General Rules and Regulations under the Exchange Act, and (B) is not also
then reportable by such Person on Schedule 13D under the Exchange Act (or any
comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly,
by any other Person (or an Affiliate or Associate thereof) with which such
Person (or any of such Person's Affiliates or Associates) has any agreement,
arrangement or understanding (whether or not in writing), for the purpose of
acquiring, holding, voting (except pursuant to a revocable proxy
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as described in the proviso to subparagraph (ii) of this paragraph (c)) or
disposing of any voting securities of the Company; provided, however, that
nothing in this paragraph (c) shall cause a person engaged in business as an
underwriter of securities to be the "Beneficial Owner" of, or to "beneficially
own," any securities acquired through such person's participation in good faith
in a firm commitment underwriting until the expiration of 40 days after the date
of such acquisition.
(e) "Business Day" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in the state of Oregon are
authorized or obligated by law or executive order to close.
(f) "Close of Business" on any given date shall mean 5 p.m.,
Pacific time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5 p.m., Pacific time, on the next succeeding Business
Day.
(g) "Common Stock" shall mean the common stock, par value $.01
per share, of the Company, except that "Common Stock" when used with reference
to any Person other than the Company shall mean the capital stock of such Person
with the greatest voting power, or the equity securities or other equity
interest having power to control or direct the management, of such Person.
(h) "Person" shall mean any individual, firm, corporation,
partnership, limited liability company or other entity.
(i) "Preferred Stock" shall mean shares of Series B Junior
Participating Preferred Stock of the Company, and, to the extent that there is
not a sufficient number of shares of Series B Junior Participating Preferred
Stock authorized to permit the full exercise of the Rights, any other series of
Preferred Stock of the Company designated for such purpose containing terms
substantially similar to the terms of the Series B Junior Participating
Preferred Stock.
(j) "Purchase Price" shall mean the price to be paid for each
1/1,000 of a share of Preferred Stock pursuant to the exercise of a Right, which
price is, as of the date hereof, as set forth in Section 7(b) hereof. The
Purchase Price is subject to adjustment from time to time as set forth in
Sections 11 and 13 hereof.
(k) "Section 11(a)(ii) Event" shall mean any event described in
Section 11(a)(ii) hereof.
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(l) "Section 13 Event" shall mean any event described in clauses
(i),(ii) or (iii) of Section 13(a) hereof.
(m) "Stock Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) under the Exchange Act) by
the Company or an Acquiring Person that an Acquiring Person has become such.
(n) "Subsidiary" shall mean, with reference to any Person, any
corporation of which an amount of voting securities sufficient to elect at least
a majority of the directors of such corporation is beneficially owned, directly
or indirectly, by such Person, or otherwise controlled by such Person.
(o) "Triggering Event" shall mean any Section 11(a)(ii) Event or
any Section 13 Event.
Section 2. Appointment of Rights Agent. The Company hereby appoints
the Rights Agent to act as agent for the Company in accordance with the terms
and conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such Co-Rights Agents as it may deem
necessary or desirable. The Rights Agent shall in no way be held responsible for
the actions of any such Co-Rights Agent.
Section 3. Issue of Rights Certificates.
(a) Until the earliest of: (i) the Close of Business on the tenth
Business Day after the Stock Acquisition Date; (ii) the Close of Business on the
tenth Business Day (or such later date as the Board of Directors shall
determine) after the date that a tender or exchange offer by any Person (other
than the Company, any Subsidiary of the Company, any employee benefit plan of
the Company or of any Subsidiary of the Company, or any Person or entity
organized, appointed or established by the Company for or pursuant to the terms
of any such plan) is first published or sent or given within the meaning of Rule
14d-2(a) of the General Rules and Regulations under the Exchange Act, as in
effect on the date of this Agreement, if upon consummation thereof, such Person
would be the Beneficial Owner of l5 percent or more of the shares of Common
Stock then outstanding; or (iii) the Close of Business on the tenth Business Day
after the Board of Directors determines, pursuant to the criteria set forth in
Section 11(a)(ii)(B) hereof, that a Person is an Adverse Person (the earliest of
(i), (ii) and (iii) being herein referred to as the "Distribution Date"), then
the following shall apply: (x) the Rights will be evidenced (subject to the
provisions of paragraph (b) of this Section 3) by the
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certificates for the Common Stock registered in the names of the holders of the
Common Stock (which certificates for Common Stock shall be deemed also to be
certificates for Rights) and not by separate certificates, and (y) the Rights
will be transferable only in connection with the transfer of the underlying
shares of Common Stock (including a transfer to the Company). As soon as
practicable after the Distribution Date, the Rights Agent will send by
first-class, postage prepaid mail, to each holder of the Common Stock as of the
Close of Business on the Distribution Date, at the address of such holder shown
on the records of the Company, one or more right certificates, in substantially
the form of Exhibit B hereto (the "Rights Certificates"), evidencing one Right
for each share of Common Stock so held, subject to adjustment as provided
herein. In the event that an adjustment in the number of Rights per share of
Common Stock has been made pursuant to Section 11(p) hereof, at the time of
distribution of the Rights Certificates, the Company shall make the necessary
and appropriate rounding adjustments (in accordance with Section 14(a) hereof)
so that Rights Certificates representing only whole numbers of Rights are
distributed and cash is paid in lieu of any fractional Rights. As of and after
the Distribution Date, the Rights will be evidenced solely by such Rights
Certificates.
(b) With respect to certificates for the shares of Common Stock
outstanding as of the Record Date, until the Distribution Date, the Rights will
be evidenced by such certificates for the Common Stock and the registered
holders of the Common Stock shall also be the registered holders of the
associated Rights. Until the earlier of the Distribution Date or the Expiration
Date (as such term is defined in Section 7 hereof), the transfer of any
certificates representing shares of Common Stock in respect of which Rights have
been issued shall also constitute the transfer of the Rights associated with
such shares of Common Stock.
(c) Rights shall be issued in respect of all shares of Common
Stock which are issued (whether originally issued or from the Company's
treasury) after the Record Date but prior to the earlier of the Distribution
Date or the Expiration Date or in certain circumstances provided in Section 22
hereof, after the Distribution Date. Certificates representing such shares of
Common Stock shall also be deemed to be certificates for Rights, and shall bear
the following legend:
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in the Rights Agreement between Agritope,
Inc. (the "Company") and ChaseMellon Shareholder Services, L.L.C. (the
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"Rights Agent"), dated as of November 14, 1997, as amended from time
to time (the "Rights Agreement"), the terms of which are hereby
incorporated herein by reference and a copy of which is on file at the
principal offices of the Company. Under certain circumstances, as set
forth in the Rights Agreement, such Rights will be evidenced by
separate certificates and will no longer be evidenced by this
certificate. The Company will mail to the holder of this certificate a
copy of the Rights Agreement, as in effect on the date of mailing,
without charge promptly after receipt of a written request therefor.
Under certain circumstances set forth in the Rights Agreement, Rights
issued to, or held by, any Person who is, was or becomes an Acquiring
Person or an Adverse Person or any Affiliate or Associate thereof (as
such terms are defined in the Rights Agreement), whether currently
held by or on behalf of such Person or by any subsequent holder, may
become null and void.
With respect to certificates containing the foregoing legend, until the earlier
of (i) the Distribution Date or (ii) the Expiration Date, the Rights associated
with the Common Stock represented by such certificates shall be evidenced by
such certificates alone and registered holders of Common Stock shall also be the
registered holders of the associated Rights, and the transfer of any of such
certificates shall also constitute the transfer of the Rights associated with
the Common Stock represented by such certificates.
Section 4. Form of Rights Certificates.
(a) The Rights Certificates (and the forms of election to
purchase and of assignment to be printed on the reverse thereof), when, as and
if issued, shall each be substantially in the form set forth in Exhibit B hereto
and may have such marks of identification or designation and such legends,
summaries or endorsements printed thereon as the Company may deem appropriate
and as are not inconsistent with the provisions of this Agreement, or as may be
required to comply with any applicable law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any stock exchange or
transaction reporting system on which the Rights may from time to time be listed
or traded, or to conform to usage. Subject to the provisions of Sections 11 and
22 hereof, the Rights Certificates, whenever issued, which are issued in respect
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of Common Stock which was issued and outstanding as of the Close of Business on
the Distribution Date, shall be dated as of the Distribution Date, and on their
face shall entitle the holders thereof to purchase such number of 1/1,000s of a
share of Preferred Stock as shall be set forth therein at the price set forth
therein (such exercise price per 1/1,000 of a share, the "Purchase Price"), but
the amount and type of securities purchasable upon the exercise of each Right
and the Purchase Price thereof shall be subject to adjustment as provided
herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or 22
hereof that represents Rights beneficially owned by: (i) an Acquiring Person or
Adverse Person or any Associate or Affiliate of an Acquiring Person or Adverse
Person; (ii) a transferee of an Acquiring Person or Adverse Person (or of any
such Associate or Affiliate) who becomes a transferee after the Acquiring Person
or Adverse Person becomes such; or (iii) a transferee of an Acquiring Person or
Adverse Person (or of any such Associate or Affiliate) who becomes a transferee
prior to or concurrently with the Acquiring Person or Adverse Person becoming
such and receives such Rights pursuant to either (A) a transfer (whether or not
for consideration) from the Acquiring Person or Adverse Person to holders of
equity interests in such Acquiring Person or Adverse Person or to any Person
with whom such Acquiring Person or Adverse Person has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a transfer
which the Board of Directors of the Company has determined is part of a plan,
arrangement or understanding which has as a primary purpose or effect avoidance
of Section 7(e) hereof, and any Rights Certificate issued pursuant to Section 6
or 11 hereof upon transfer, exchange, replacement or adjustment of any other
Rights Certificate referred to in this sentence, shall contain (to the extent
feasible) the following legend:
The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person
or Adverse Person or an Affiliate or Associate of an Acquiring Person
or Adverse Person (as such terms are defined in the Rights Agreement).
Accordingly, this Rights Certificate and the Rights represented hereby
may become null and void in the circumstances specified in Section
7(e) of such Agreement.
Section 5. Countersignature and Registration.
(a) The Rights Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its President or any Vice President,
manually or by facsimile signature, and
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shall have affixed thereto the Company's seal or a facsimile thereof which shall
be attested by the Secretary or an Assistant Secretary of the Company, either
manually or by facsimile signature. The Rights Certificates shall be
countersigned by the Rights Agent, either manually or by facsimile signature,
and shall not be valid for any purpose unless so countersigned. In case any
officer of the Company who shall have signed any of the Rights Certificates
shall cease to be such officer of the Company before countersignature by the
Rights Agent and issuance and delivery by the Company, such Rights Certificates,
nevertheless, may be countersigned by the Rights Agent and issued and delivered
by the Company with the same force and effect as though the person who signed
such Rights Certificates had not ceased to be such officer of the Company; and
any Rights Certificates may be signed on behalf of the Company by any person
who, at the actual date of the execution of such Rights Certificate, shall be a
proper officer of the Company to sign such Rights Certificate, although at the
date of the execution of this Rights Agreement any such person was not such an
officer.
(b) Following the Distribution Date, the Rights Agent will keep
or cause to be kept, at its principal office or offices designated as the
appropriate place for surrender of Rights Certificates upon exercise or
transfer, books for registration and transfer of the Rights Certificates issued
hereunder. Such books shall show the names and addresses of the respective
holders of the Rights Certificates, the number of Rights evidenced on its face
by each of the Rights Certificates and the date of each of the Rights
Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
(a) Subject to the provisions of Sections 4(b), 7(e) and l4
hereof, at any time after the Close of Business on the Distribution Date, and at
or prior to the Close of Business on the Expiration Date, any Rights Certificate
(other than a Rights Certificate representing Rights that have been exchanged
pursuant to Section 24 hereof) may be transferred, split up, combined or
exchanged for another Rights Certificate, entitling the registered holder to
purchase a like number of 1/1,000s of a share of Preferred Stock (or, following
a Triggering Event, Common Stock, other securities, cash or other assets, as the
case may be) as the Rights Certificate surrendered then entitled such holder (or
former holder in the case of a transfer) to purchase. Any registered holder
desiring to transfer, split up, combine or exchange any Rights Certificate or
Certificates shall make such request in writing delivered to the Rights Agent,
and shall surrender the Rights Certificate to be transferred, split up,
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combined or exchanged at the principal office or offices of the Rights Agent
designated for such purpose. Neither the Rights Agent nor the Company shall be
obligated to take any action whatsoever with respect to the transfer of any such
surrendered Rights Certificate until the registered holder shall have completed
and signed the certificate contained in the form of assignment on the reverse
side of such Rights Certificate and shall have provided such additional evidence
of the identity of the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Company or Rights Agent shall reasonably
request. Thereupon the Rights Agent shall, subject to Sections 4(b), 7(e), 14
and 24 hereof, countersign and deliver to the Person entitled thereto a Rights
Certificate or Rights Certificates, as the case may be, as so requested. The
Company may require payment of a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any transfer, split up,
combination or exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and reimbursement to the Company
and the Rights Agent of all reasonable expenses incidental thereto, and upon
surrender to the Rights Agent and cancellation of the Rights Certificate if
mutilated, the Company will execute and deliver a new Rights Certificate of like
tenor to the Rights Agent for countersignature and delivery to the registered
owner in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
Rights.
(a) Subject to Section 7(e) hereof, the registered holder of any
Rights Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein including, without limitation, the restrictions on
exercisability set forth in Sections 9(c), 11(a)(iii) and 23(a) hereof) in whole
or in part at any time after the Distribution Date upon surrender of the Rights
Certificate, with the form of election to purchase and the certificate on the
reverse side thereof duly executed, to the Rights Agent at the principal office
or offices of the Rights Agent designated for such purpose, together with
payment of the aggregate Purchase Price with respect to the total number of
1/1,000s of a share (or other securities, cash or other assets, as the case may
be) as to which such surrendered Rights are then exercisable, at or prior to the
earliest of: (i) the Close of Business on November 14, 2007 (the "Final
Expiration Date");
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(ii) the time at which the Rights are redeemed (the "Redemption Date"), as
provided in Section 23 hereof; or (iii) the time at which such Rights are
exchanged (the "Exchange Date"), as provided in Section 24 hereof (the earliest
of (i), (ii) and (iii) being herein referred to as the "Expiration Date").
(b) The Purchase Price for each 1/1,000 of a share of Preferred
Stock pursuant to the exercise of a Right shall initially be $25, and shall be
subject to adjustment from time to time as provided in Sections 11 and 13(a)
hereof and shall be payable in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase and the certificate duly executed,
accompanied by payment, with respect to each Right so exercised, of the Purchase
Price per 1/1,000 of a share of Preferred Stock (or other shares, securities,
cash or other assets, as the case may be) to be purchased as set forth below and
an amount equal to any applicable transfer tax, the Rights Agent shall, subject
to Section 20(k) hereof, thereupon promptly: (i)(A) requisition from any
transfer agent of the shares of Preferred Stock (or make available, if the
Rights Agent is the transfer agent for such shares) certificates for the total
number of 1/1,000s of a share of Preferred Stock to be purchased and the Company
hereby irrevocably authorizes its transfer agent to comply with all such
requests, or (B) if the Company shall have elected to deposit the total number
of shares of Preferred Stock issuable upon exercise of the Rights hereunder with
a depository agent, requisition from the depository agent depository receipts
representing such number of 1/1,000s of a share of Preferred Stock as are to be
purchased (in which case certificates for the shares of Preferred Stock
represented by such receipts shall be deposited by the transfer agent with the
depository agent) and the Company will direct the depository agent to comply
with such request; (ii) requisition from the Company the amount of cash, if any,
to be paid in lieu of fractional shares in accordance with Section 14 hereof;
(iii) after receipt of such certificates or depository receipts, cause the same
to be delivered to or upon the order of the registered holder of such Rights
Certificate, registered in such name or names as may be designated by such
holder; and (iv) after receipt thereof, deliver such cash, if any, to or upon
the order of the registered holder of such Rights Certificate. The payment of
the Purchase Price (as such amount may be adjusted pursuant to Section
11(a)(iii) hereof) shall be made in cash or by certified bank check or bank
draft payable to the order of the Company. In the event that the Company is
obligated to issue other securities (including Common Stock) of the Company, pay
cash and/or distribute other property pursuant to Section 11(a) hereof, the
Company will make all arrangements necessary so that such other
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securities, cash and/or other property are available for distribution by the
Rights Agent, if and when appropriate. The Company reserves the right to require
prior to the occurrence of a Triggering Event that, upon any exercise of Rights,
a number of Rights be exercised so that only whole shares of Preferred Stock
would be issued. Notwithstanding the foregoing provisions of this Section 7(c),
the Company may suspend the issuance of Preferred Stock upon exercise of Rights
for a reasonable period, not in excess of 90 days, during which the Company
seeks to register under the Securities Act of 1933, as amended (the "Securities
Act"), and any applicable securities law of any jurisdiction, the Preferred
Stock to be issued pursuant to the Rights; provided, however, that nothing
contained in this Section 7(c) shall relieve the Company of its obligations
under Section 9(c) hereof.
(d) In case the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent and delivered to, or upon the order of, the registered
holder of such Rights Certificate, registered in such name or names as may be
designated by such holder, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary,
from and after the first occurrence of a Section 11(a)(ii) Event, any Rights
beneficially owned by (i) an Acquiring Person or Adverse Person or an Associate
or Affiliate of an Acquiring Person or Adverse Person, (ii) a transferee of an
Acquiring Person or Adverse Person (or of any such Associate or Affiliate) who
becomes a transferee after the Acquiring Person or Adverse Person becomes such,
or (iii) a transferee of an Acquiring Person or Adverse Person (or of any such
Associate or Affiliate) who becomes a transferee prior to or concurrently with
the Acquiring Person or Adverse Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from the
Acquiring Person or Adverse Person to holders of equity interests in such
Acquiring Person or Adverse Person or to any Person with whom the Acquiring
Person or Adverse Person has any continuing agreement, arrangement or
understanding regarding the transferred Rights or (B) a transfer which the Board
of Directors of the Company has determined is part of a plan, arrangement or
understanding which has as a primary purpose or effect the avoidance of this
Section 7(e), shall become null and void without any further action, and no
holder of such Rights (whether or not such holder is an Acquiring Person or an
Adverse Person or an Affiliate or Associate of an Acquiring Person or Adverse
Person) shall have any rights whatsoever with respect to such Rights, whether
under any provision of this Agreement or
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otherwise. The Company shall use all reasonable efforts to ensure that the
provisions of this Section 7(e) and Section 4(b) hereof are complied with, but
shall have no liability to any holder of Rights Certificates or other Person as
a result of the Company's failure to make any determination with respect to an
Acquiring Person or Adverse Person or any of their respective Affiliates,
Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless such registered holder shall
have: (i) completed and signed the certificate contained in the form of election
to purchase set forth on the reverse side of the Rights Certificate surrendered
for such exercise; and (ii) provided such additional evidence of the identity of
the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company or Rights Agent shall reasonably request.
Section 8. Cancellation and Destruction of Rights Certificates. All
Rights Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any provision of this Agreement. The Company shall deliver to the Rights Agent
for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Rights Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
cancelled Rights Certificates to the Company or shall, at the written request of
the Company, destroy such cancelled Rights Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Capital Stock.
(a) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued shares of
Preferred Stock (and, following the occurrence of a Triggering Event, out of its
authorized and unissued shares of Common Stock and/or other securities or out of
its authorized and issued shares held in its treasury), the number of shares of
Preferred Stock (and, following the occurrence of a Triggering Event, Common
Stock and/or other securities) that, as provided in this Agreement including
Section 11(a)(iii) hereof, will be
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sufficient to permit the exercise in full of all outstanding Rights.
(b) So long as the shares of Preferred Stock (and, following the
occurrence of a Triggering Event, Common Stock and/or other securities) issuable
and deliverable upon the exercise of the Rights may be listed on any national
securities exchange or included for quotation on any transaction reporting
system, the Company shall use its best efforts to cause, from and after such
time as the Rights become exercisable (but only to the extent that it is
reasonably likely that the Rights will be exercised), all shares reserved for
such issuance to be listed on such exchange or included for quotation on such
transaction reporting system upon official notice of issuance upon such
exercise.
(c) The Company shall use its best efforts to: (i) file, as soon
as practicable following the earliest date after the first occurrence of a
Section 11(a)(ii) Event on which the consideration to be delivered by the
Company upon exercise of the Rights has been determined in accordance with
Section 11(a)(iii) hereof, a registration statement under the Securities Act
with respect to the securities purchasable upon exercise of the Rights on an
appropriate form; (ii) cause such registration statement to become effective as
soon as practicable after such filing; and (iii) cause such registration
statement to remain effective (with a prospectus at all times meeting the
requirements of the Securities Act) until the earlier of (A) the date as of
which the Rights are no longer exercisable for such securities, and (B) the date
of the expiration of the Rights. The Company will also take such action as may
be appropriate under, or to ensure compliance with, the securities or "blue sky"
laws of the various states in connection with the exercisability of the Rights.
The Company may temporarily suspend, for a period of time not to exceed 90 days
after the date set forth in clause (i) of the first sentence of this Section
9(c), the exercisability of the Rights in order to prepare and file such
registration statement and permit it to become effective. Upon any such
suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect. In addition,
if the Company shall determine that a registration statement is required
following the Distribution Date, the Company may temporarily suspend the
exercisability of the Rights until such time as a registration statement has
been declared effective. Notwithstanding any provision of this Agreement to the
contrary, the Rights shall not be exercisable in any jurisdiction if the
requisite qualification in such jurisdiction shall not have been obtained, the
exercise thereof shall not be permitted under
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applicable law or a registration statement shall not have been declared
effective.
(d) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all 1/1,000s of a share of Preferred
Stock (and, following the occurrence of a Triggering Event, Common Stock and/or
other securities) delivered upon exercise of Rights shall, at the time of
delivery of the certificates for such shares (subject to payment of the Purchase
Price), be duly and validly authorized and issued and fully paid and
nonassessable.
(e) The Company further covenants and agrees that it will pay
when due and payable any and all federal and state transfer taxes and charges
which may be payable in respect of the issuance or delivery of the Rights
Certificates and of any certificates for a number of 1/1,000s of a share of
Preferred Stock (or Common Stock and/or other securities, as the case may be)
upon the exercise of Rights. The Company shall not, however, be required to pay
any transfer tax which may be payable in respect of any transfer or delivery of
Rights Certificates to a Person other than, or the issuance or delivery of a
number of 1/1,000s of a share of Preferred Stock (or Common Stock and/or other
securities, as the case may be) in respect of a name other than that of, the
registered holder of the Rights Certificates evidencing Rights surrendered for
exercise or to issue or deliver any certificates for a number of 1/1,000s of a
share of Preferred Stock (or Common Stock and/or other securities, as the case
may be) in a name other than that of the registered holder upon the exercise of
any Rights until such tax shall have been paid (any such tax being payable by
the holder of such Rights Certificate at the time of surrender) or until it has
been established to the Company's satisfaction that no such tax is due.
Section 10. Preferred Stock Record Date. Each Person in whose name any
certificate for a number of 1/1,000s of a share of Preferred Stock (or for
Common Stock and/or other securities, as the case may be) is issued upon the
exercise of Rights shall for all purposes be deemed to have become the holder of
record of the Preferred Stock (or Common Stock and/or other securities, as the
case may be) represented thereby on, and such certificate shall be dated, the
date upon which the Rights Certificate evidencing such Rights was duly
surrendered and payment of the Purchase Price (and all applicable transfer
taxes) was made; provided, however, that if the date of such surrender and
payment is a date upon which the Preferred Stock (or Common Stock and/or other
securities, as the case may be) transfer books of the Company are closed, such
Person shall be deemed to have become the record holder of such shares
(fractional or otherwise) on, and such certificate shall be dated, the next
succeeding Business
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Day on which the Preferred Stock (or Common Stock and/or other securities, as
the case may be) transfer books of the Company are open. Prior to the exercise
of the Rights evidenced thereby, the holder of a Rights Certificate shall not be
entitled to any rights of a stockholder of the Company with respect to shares
for which the Rights shall be exercisable, including, without limitation, the
right to vote, to receive dividends or other distributions or to exercise any
preemptive rights, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights. The Purchase Price, the number and kind of shares covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
(a)(i) In the event the Company shall at any time after the
date of this Agreement (A) declare a dividend on the Preferred Stock payable in
shares of Preferred Stock, (B) subdivide the outstanding Preferred Stock, (C)
combine the outstanding Preferred Stock into a smaller number of shares, or (D)
issue any shares of its capital stock in a reclassification of the Preferred
Stock (including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation), then
and in each such event, except as otherwise provided in this Section 11(a) and
Section 7(e) hereof, the Purchase Price in effect at the time of the record date
for such dividend or of the effective date of such subdivision, combination or
reclassification, and the number and kind of shares of Preferred Stock or
capital stock, as the case may be, issuable on such date, shall be
proportionately adjusted so that the holder of any Right exercised after such
time shall be entitled to receive, upon payment of the Purchase Price then in
effect, the aggregate number and kind of shares of Preferred Stock or capital
stock, as the case may be, which, if such Right had been exercised immediately
prior to such date and at a time when the Preferred Stock transfer books of the
Company were open, he or she would have owned upon such exercise and been
entitled to receive by virtue of such dividend, subdivision, combination or
reclassification. If an event occurs which would require an adjustment under
both this Section 11(a)(i) and Section 11(a)(ii) hereof, the adjustment provided
for in this Section 11(a)(i) shall be in addition to, and shall be made prior
to, any adjustment required pursuant to Section 11(a)(ii) hereof.
(ii) In the event that:
(A) any Person (other than the Company, any Subsidiary
of the Company, any employee benefit
17
<PAGE>
plan of the Company or of any Subsidiary of the Company, or any Person
or entity organized, appointed or established by the Company for or
pursuant to the terms of any such plan), alone or together with its
Affiliates and Associates, shall become an Acquiring Person, unless
the event causing the Person to become an Acquiring Person is (l) a
transaction set forth in Section 13(a) hereof or (2) an acquisition of
shares of Common Stock pursuant to a tender offer or an exchange offer
for all outstanding shares of Common Stock at a price and on terms
determined by at least a majority of the members of the Board of
Directors who are not officers of the Company and who are not
representatives, nominees, Affiliates or Associates of an Acquiring
Person, after receiving advice from one or more investment banking
firms, to be (a) at a price which is fair to stockholders (taking into
account all factors which such members of the Board of Directors deem
relevant including, without limitation, prices which could reasonably
be achieved if the Company or its assets were sold on an orderly basis
designed to realize maximum value) and (b) otherwise in the best
interests of the Company and its stockholders (a "Qualifying Offer");
or
(B) The Board of Directors of the Company shall declare
any Person to be an Adverse Person, upon a determination that such
Person, alone or together with its Affiliates and Associates, has, at
any time after this Agreement has been filed with the Securities and
Exchange Commission as an exhibit to a filing under the Securities Act
or Exchange Act, become the Beneficial Owner of a number of shares of
Common Stock which the Board of Directors of the Company determines to
be substantial (which number of shares shall in no event represent
less than l0 percent of the outstanding shares of Common Stock) and a
determination by the Board of Directors of the Company, after
reasonable inquiry and investigation, including consultation with such
persons as such directors shall deem appropriate and consideration of
such factors as are permitted by applicable law, that (a) such
Beneficial Ownership by such Person is intended to cause the Company
to repurchase the shares of Common Stock beneficially owned by such
Person or to cause pressure on the Company to take action or enter
into a transaction or series of transactions intended to provide such
Person with short-term financial gain under circumstances where the
Board of Directors determines that the best long-term interests of the
18
<PAGE>
Company would not be served by taking such action or entering into
such transaction or series of transactions at the time or (b) such
Beneficial Ownership is causing or reasonably likely to cause a
material adverse impact (including, but not limited to, impairment of
relationships with customers or impairment of the Company's ability to
maintain its competitive position) on the business or prospects of the
Company;
then, promptly following the occurrence of any event described in Section
11(a)(ii)(A) or (B) hereof (a "Section 11(a)(ii) Event"), proper provision shall
be made so that each holder of a Right (except as provided below and in Section
7(e) hereof) shall thereafter have the right to receive, upon exercise thereof
at the then current Purchase Price in accordance with the terms of this
Agreement, in lieu of a number of 1/1,000s of a share of Preferred Stock, such
number of shares of Common Stock of the Company as shall equal the result
obtained by (x) multiplying the then current Purchase Price by the then number
of 1/1,000s of a share of Preferred Stock for which a Right was exercisable
immediately prior to the first occurrence of a Section 11(a)(ii) Event, and (y)
dividing that product (which, following such first occurrence, shall thereafter
be referred to as the "Purchase Price" for each Right and for all purposes of
this Agreement) by 50 percent of the current market price (determined pursuant
to Section 11(d) hereof) per share of Common Stock on the date of such first
occurrence (such number of shares, the "Adjustment Shares").
(iii) In the event that the number of shares of Common Stock
which are authorized by the Company's Certificate of Incorporation, as amended
at the time (the "Certificate of Incorporation"), but not outstanding or
reserved for issuance for purposes other than upon exercise of the Rights are
not sufficient to permit the exercise in full of the Rights in accordance with
the foregoing subparagraph (ii) of this Section 11(a), the Company shall: (A)
determine the value of the Adjustment Shares issuable upon the exercise of a
Right (the "Current Value"); and (B) with respect to each Right (subject to
Section 7(e) hereof), make adequate provision to substitute for the Adjustment
Shares, upon the exercise of a Right and payment of the applicable Purchase
Price: (l) cash, (2) a reduction in the Purchase Price, (3) Common Stock or
other equity securities of the Company (including, without limitation, shares,
or units of shares, of preferred stock, such as the Preferred Stock, which the
Board has deemed to have essentially the same value or economic rights as shares
of Common Stock (such shares of preferred stock being referred to as "Common
Stock Equivalents")), (4) debt securities of the Company, (5) other
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<PAGE>
assets, or (6) any combination of the foregoing, having an aggregate value equal
to the Current Value (less the amount of any reduction in the Purchase Price),
where such aggregate value has been determined by the Board of Directors based
upon the advice of a nationally recognized investment banking firm selected by
the Board of Directors; provided, however, that if the Company shall not have
made adequate provision to deliver value pursuant to clause (B) above within 30
days following the later of (x) the first occurrence of a Section 11(a)(ii)
Event and (y) the date on which the Company's right of redemption pursuant to
Section 23(a) expires (the later of (x) and (y) being referred to herein as the
"Section 11(a)(ii) Trigger Date"), then the Company shall be obligated to
deliver, upon the surrender for exercise of a Right and without requiring
payment of the Purchase Price, shares of Common Stock (to the extent available)
and then, if necessary, cash, which shares and/or cash have an aggregate value
equal to the Spread. For purposes of the preceding sentence, the term "Spread"
shall mean the excess of (i) the Current Value over (ii) the Purchase Price. If
the Board determines in good faith that it is likely that sufficient additional
shares of Common Stock could be authorized for issuance upon exercise in full of
the Rights, the 30-day period set forth above may be extended to the extent
necessary, but not more than 90 days after the Section 11(a)(ii) Trigger Date,
in order that the Company may seek stockholder approval for the authorization of
such additional shares (such 30-day period, as it may be extended, is herein
called the "Substitution Period"). To the extent that action is to be taken
pursuant to the first and/or third sentences of this Section 11(a)(iii), the
Company (l) shall provide, subject to Section 7(e) hereof, that such action
shall apply uniformly to all outstanding Rights, and (2) may suspend the
exercisability of the Rights until the expiration of the Substitution Period in
order to seek such stockholder approval for such authorization of additional
shares and/or to decide the appropriate form of distribution to be made pursuant
to such first sentence and to determine the value thereof. In the event of any
such suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect. For purposes
of this Section 11(a)(iii), the value of each Adjustment Share shall be the
Current Market Price per share of the Common Stock on the Section 11(a)(ii)
Trigger Date and the per-share or per-unit value of any Common Stock Equivalent
shall be deemed to equal the Current Market Price per share of the Common Stock
on such date.
(b) In case the Company shall fix a record date for the issuance
of rights (other than the Rights), options or warrants to all holders of
Preferred Stock entitling them to
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<PAGE>
subscribe for or purchase (for a period expiring within 45 calendar days after
such record date) Preferred Stock (or shares having the same rights, privileges
as the shares of Preferred Stock ("equivalent preferred stock")) or securities
convertible into Preferred Stock or equivalent preferred stock at a price per
share of Preferred Stock or per share of equivalent preferred stock (or having a
conversion price per share, if a security convertible into Preferred Stock or
equivalent preferred stock) less than the Current Market Price (as determined
pursuant to Section 11(d) hereof) per share of Preferred Stock on such record
date, the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the number of shares
of Preferred Stock outstanding on such record date, plus the number of shares of
Preferred Stock which the aggregate offering price of the total number of shares
of Preferred Stock and/or equivalent preferred stock so to be offered (and/or
the aggregate initial conversion price of the convertible securities so to be
offered) would purchase at such Current Market Price, and the denominator of
which shall be the number of shares of Preferred Stock outstanding on such
record date, plus the number of additional shares of Preferred Stock and/or
equivalent preferred stock to be offered for subscription or purchase (or into
which the convertible securities so to be offered are initially convertible). In
case such subscription price may be paid by delivery of consideration part or
all of which may be in a form other than cash, the value of such consideration
shall be as determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a statement filed with the Rights
Agent and shall be binding on the Rights Agent and the holders of the Rights.
Shares of Preferred Stock owned by or held for the account of the Company shall
not be deemed outstanding for the purpose of any such computation. Such
adjustments shall be made successively whenever such a record date is fixed, and
in the event that such rights or warrants are not so issued, the Purchase Price
shall be adjusted to be the Purchase Price which would then be in effect if such
record date had not been fixed.
(c) In case the Company shall fix a record date for a
distribution to all holders of Preferred Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing corporation) of evidences of indebtedness, cash (other than a regular
quarterly cash dividend out of the earnings or retained earnings of the
Company), assets (other than a dividend payable in Preferred Stock, but
including any dividend payable in stock other than Preferred Stock) or
subscription rights or warrants (excluding those referred to in Section 11(b)
hereof), the Purchase Price to
21
<PAGE>
be in effect after such record date shall be determined by multiplying the
Purchase Price in effect immediately prior to such record date by a fraction,
the numerator of which shall be the Current Market Price (as determined pursuant
to Section 11(d) hereof) per share of Preferred Stock on such record date, less
the fair market value (as determined in good faith by the Board of Directors of
the Company, whose determination shall be described in a statement filed with
the Rights Agent and shall be binding on the Rights Agent and the holders of the
Rights) of the portion of the cash, assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants applicable to a share of
Preferred Stock and the denominator of which shall be such Current Market Price
(as determined pursuant to Section 11(d) hereof) per share of Preferred Stock.
Such adjustments shall be made successively whenever such a record date is
fixed, and in the event that such distribution is not so made, the Purchase
Price shall be adjusted to be the Purchase Price which would have been in effect
if such record date had not been fixed.
(d)(i) For the purpose of any computation hereunder, other than
computations made pursuant to Section 11(a)(iii) hereof, the Current Market
Price per share of Common Stock on any date shall be deemed to be the average of
the daily closing prices per share of such Common Stock for the 30 consecutive
Trading Days immediately prior to such date, and for purposes of computations
made pursuant to Section 11(a)(iii) hereof, the Current Market Price per share
of Common Stock on any date shall be deemed to be the average of the daily
closing prices per share of such Common Stock for the 10 consecutive Trading
Days immediately following such date; provided, however, that in the event that
the Current Market Price per share of the Common Stock is determined during a
period following the announcement by the issuer of such Common Stock of (A) a
dividend or distribution on such Common Stock payable in shares of such Common
Stock or securities convertible into shares of such Common Stock (other than the
Rights), or (B) any subdivision, combination or reclassification of such Common
Stock, and the ex-dividend date for such dividend or distribution, or the record
date for such subdivision, combination or reclassification shall not have
occurred prior to the commencement of the requisite 30 Trading Day or 10 Trading
Day period, as set forth above, then, and in each such case, the Current Market
Price shall be properly adjusted to take into account ex-dividend trading or the
subdivision, combination or reclassification, as the case may be. The closing
price for each day shall be the last sale price, regular way, or, in case no
such sale takes place on such day, the average of the closing bid and asked
prices, regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the principal national securities exchange on which
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<PAGE>
the shares of Common Stock are listed or admitted to trading or, if the shares
of Common Stock are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices, as reported by the National Association of Securities
Dealers, Inc. Automated Quotation System ("Nasdaq") or such other system then in
use, or, if on any such date the shares of Common Stock are not quoted by any
such organization, the average of the closing bid and asked prices as furnished
by a professional market maker making a market in the Common Stock selected by
the Board of Directors of the Company. If on any such date no market maker is
making a market in the Common Stock, the fair va1ue of the Common Stock on such
date as determined in good faith by the Board of Directors shall be used. The
term "Trading Day" shall mean a day on which the principal national securities
exchange or principal transaction reporting system on which the shares of Common
Stock are listed or admitted to trading is open for the transaction of business
or, if the shares of Common Stock are not listed or admitted to trading on any
national securities exchange or transaction reporting system, a Business Day. If
the Common Stock is not publicly held or not so listed or traded, Current Market
Price per share shall mean the fair value per share as determined in good faith
by the Board of Directors, whose determination shall be described in a statement
filed with the Rights Agent and shall be conclusive for all purposes.
(ii) For the purpose of any computation hereunder, the
Current Market Price per share (or per 1/1,000 of a share) of Preferred Stock
shall be determined in the same manner as set forth above for the Common Stock
in clause (i) of this Section 11(d) (other than the last sentence thereof). If
the Current Market Price per share of Preferred Stock cannot be determined in
the manner provided above or if the Preferred Stock is not publicly held or
listed or traded in a manner described in clause (i) of this Section 11(d), the
Current Market Price per share of Preferred Stock shall be conclusively deemed
to be an amount equal to 1,000 (as such number may be appropriately adjusted for
such events as stock splits, stock dividends, combinations, reclassifications,
recapitalizations and similar transactions with respect to the Common Stock
occurring after the date of this Agreement) multiplied by the Current Market
Price per share of the Common Stock. If neither the Common Stock nor the
Preferred Stock is publicly held or so listed or traded, Current Market Price
per share of the Preferred Stock shall mean the fair value per share as
determined in good faith by the Board of Directors, whose determination shall be
described in a statement filed with the Rights Agent and shall be conclusive for
all purposes.
23
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(e) Anything herein to the contrary notwithstanding, no
adjustment in the Purchase Price shall be required unless such adjustment would
require an increase or decrease of at least 1 percent in the Purchase Price;
provided, however, that any adjustments which by reason of this Section 11(e)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Section 11 shall be made
to the nearest cent or to the nearest 1/10,000 of a share of Common Stock or
other share or 1/1,000,000 of a share of Preferred Stock, as the case may be.
(f) If, as a result of an adjustment made pursuant to Section
11(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter exercised
shall become entitled to receive any shares of capital stock other than
Preferred Stock, thereafter the number of such other shares so receivable upon
exercise of any Right and the Purchase Price thereof shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Preferred Stock contained in
this Section 11, and the provisions of Sections 7, 9, 10, 13 and 14 hereof with
respect to the Preferred Stock shall apply on like terms to any such other
shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of 1/1,000s of a share of
Preferred Stock purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as
provided in Section 11(i), upon each adjustment of the Purchase Price as a
result of the calculations made in Sections 11(b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
1/1,000s of a share of Preferred Stock (calculated to the nearest 1/1,000,000)
obtained by (i) multiplying (x) the number of 1/1,000s of a share covered by a
Right immediately prior to this adjustment, by (y) the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price, and (ii) dividing
the product so obtained by the Purchase Price in effect immediately after such
adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment
of the Purchase Price to adjust the number of Rights, in lieu of any adjustment
in the number of 1/1,000s of a share of Preferred Stock purchasable upon the
exercise of a Right. Each of the Rights outstanding after the adjustment in the
number of Rights shall be exercisable for the number of 1/1,000s of a
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<PAGE>
share of Preferred Stock for which a Right was exercisable immediately prior to
such adjustment. Each Right held of record prior to such adjustment of the
number of Rights shall become that number of Rights (calculated to the nearest
1/10,000) obtained by dividing the Purchase Price in effect immediately prior to
adjustment of the Purchase Price by the Purchase Price in effect immediately
after adjustment of the Purchase Price. The Company shall make a public
announcement of its election to adjust the number of Rights, indicating the
record date for the adjustment, and, if known at the time, the amount of the
adjustment to be made. This record date may be the date on which the Purchase
Price is adjusted or any day thereafter, but, if the Rights Certificates have
been issued, shall be at least 10 days later than the date of the public
announcement. If Rights Certificates have been issued, upon each adjustment of
the number of Rights pursuant to this Section 11(i), the Company shall, as
promptly as practicable, cause to be distributed to holders of record of Rights
Certificates on such record date Rights Certificates evidencing, subject to
Section 14 hereof, the additional Rights to which such holders shall be entitled
as a result of such adjustment, or, at the option of the Company, shall cause to
be distributed to such holders of record in substitution and replacement for the
Rights Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Company, new Rights Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Rights Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein (and may bear, at the option
of the Company, the adjusted Purchase Price) and shall be registered in the
names of the holders of record of Rights Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase
Price or the number of 1/1,000s of a share of Preferred Stock issuable upon the
exercise of the Rights, the Rights Certificates theretofore and thereafter
issued may continue to express the Purchase Price per 1/1,000 of a share and the
number of 1/1,000s of a share which were expressed in the initial Rights
Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below the then stated value, if any, of the number
of 1/1,000s of a share of Preferred Stock issuable upon exercise of the Rights,
the Company shall take any corporate action which may, in the opinion of its
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counsel, be necessary in order that the Company may validly and legally issue
fully paid and nonassessable such number of 1/1,000s of a share of Preferred
Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
the number of 1/1,000s of a share of Preferred Stock and other capital stock or
securities of the Company, if any, issuable upon such exercise over and above
the number of 1/1,000s of a share of Preferred Stock and other capital stock or
securities of the Company, if any, issuable upon such exercise on the basis of
the Purchase Price in effect prior to such adjustment; provided, however, that
the Company shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive such additional shares
(fractional or otherwise) or securities upon the occurrence of the event
requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding,
the Company shall be entitled to make such further adjustments in the number of
1/1,000s of a share of Preferred Stock which may be acquired upon exercise of
the Rights, and such adjustments in the Purchase Price, in addition to those
adjustments expressly required by this Section 11, as and to the extent that in
its good faith judgment the Board of Directors of the Company shall determine to
be advisable in order that any (i) consolidation or subdivision of the Preferred
Stock, (ii) issuance wholly for cash of any shares of Preferred Stock at less
than the current market price, (iii) issuance wholly for cash of shares of
Preferred Stock or securities which by their terms are convertible into or
exchangeable for shares of Preferred Stock, (iv) stock dividends or (v) issuance
of rights, options or warrants referred to in this Section 11, hereafter made by
the Company to holders of its Preferred Stock shall not be taxable to such
stockholders or shall reduce the taxes payable by such holders.
(n) The Company covenants and agrees that it shall not, at any
time after the Distribution Date, (i) consolidate with any other Person (other
than a Subsidiary of the Company in a transaction which complies with Section
11(o) hereof), (ii) merge with or into any other Person (other than a Subsidiary
of the Company in a transaction which complies with Section 11(o) hereof), or
(iii) sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of related transactions, assets or earning power
aggregating more
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than 50 percent of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other than the
Company and/or any of its Subsidiaries in one or more transactions each of which
complies with Section 11(o) hereof), if (x) at the time of or immediately after
such consolidation, merger or sale there are any rights, warrants or other
instruments or securities outstanding or agreements in effect which would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights or (y) prior to, simultaneously with or immediately after
such consolidation, merger or sale, the stockholders of the Person who
constitutes, or would constitute, the "Principal Party" for purposes of Section
13(a) hereof shall have received a distribution of Rights previously owned by
such Person or any of its Affiliates and Associates; provided, however, that
this Section 11(n) shall not affect the ability of any Subsidiary of the Company
to consolidate with, merge with or into, or sell or transfer assets or earning
power to, any other Subsidiary of the Company.
(o) The Company covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Section 23 or 27 hereof, take (or
permit any Subsidiary to take) any action if at the time such action is taken it
is reasonably foreseeable that such action will diminish substantially or
otherwise eliminate the benefits intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary notwithstanding,
in the event that the Company shall at any time after the Rights Dividend
Declaration Date and prior to the Distribution Date (i) declare a dividend on
the outstanding shares of Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding shares of Stock, or (iii) combine the outstanding
shares of Common Stock into a smaller number of shares, the number of Rights
associated with each share of Common Stock then outstanding, or issued or
delivered thereafter but prior to the Distribution Date, shall be
proportionately adjusted so that the number of Rights thereafter associated with
each share of Common Stock following any such event shall equal the result
obtained by multiplying the number of Rights associated with each share of
Common Stock immediately prior to such event by a fraction the numerator which
shall be the total number of shares of Common Stock outstanding immediately
prior to the occurrence of the event and the denominator of which shall be the
total number of shares of Common Stock outstanding immediately following the
occurrence of such event.
(q) The failure of the Board of Directors of the Company to
declare a Person to be an Adverse Person following such Person becoming the
Beneficial Owner of shares of Common
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Stock representing 10 percent or more of the outstanding shares of Common Stock
shall not imply that such Person is not an Adverse Person or limit the Board of
Directors' right at any time in the future to declare such Person to be an
Adverse Person.
Section 12. Certificate of Adjusted Purchase Price or Number of
Shares. Whenever an adjustment is made as provided in Sections 11 and 13 hereof,
the Company shall: (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment;
(b) promptly file with the Rights Agent, and with each transfer agent for the
Preferred Stock and the Common Stock, a copy of such certificate; and (c) mail a
brief summary thereof to each holder of a Rights Certificate (or, if prior to
the Distribution Date, to each holder of a certificate representing shares of
Common Stock) in accordance with Section 26 hereof. The Rights Agent shall be
fully protected in relying on any such certificate and on any adjustment therein
contained.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power.
(a) In the event that, following the Stock Acquisition Date,
directly or indirectly, (i) the Company shall consolidate with, or merge with
and into, any other Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o) hereof), and the Company shall not
be the continuing or surviving corporation of such consolidation or merger, (ii)
any Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o) hereof) shall consolidate with, or merge with or
into, the Company, and the Company shall be the continuing or surviving
corporation of such consolidation or merger and, in connection with such
consolidation or merger, all or part of the outstanding shares of Common Stock
shall be changed into or exchanged for stock or other securities of the Company
or any other Person or cash or any other property, or (iii) the Company shall
sell or otherwise transfer (or one or more of its Subsidiaries shall sell or
otherwise transfer), in one transaction or a series of related transactions,
assets or earning power aggregating more than 50 percent of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to any
Person or Persons (other than the Company or any Subsidiary of the Company in
one or more transactions each of which complies with Section 11(o) hereof) (any
event described in clauses (i), (ii) or (iii) of this Section 13(a) being a
"Section 13 Event"), then, and in each such case (except as may be contemplated
by Section 13(d) hereof), proper provision shall be made so that: (A) each
holder of a Right, except as provided in Section 7(e) hereof, shall thereafter
have the right to receive, upon the exercise thereof
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at the then current Purchase Price in accordance with the terms of this
Agreement, such number of validly authorized and issued, fully paid,
nonassessable and freely tradable shares of Common Stock of the Principal Party
(as such term is hereinafter defined), not subject to any liens, encumbrances,
rights of first refusal or other adverse claims, as shall be equal to the result
obtained by (1) multiplying the then current Purchase Price by the number of
1/1,000s of a share of Preferred Stock for which a Right is exercisable
immediately prior to the first occurrence of a Section 13 Event (or, if a
Section 11(a)(ii) Event has occurred prior to the first occurrence of a Section
13 Event, multiplying the number of such 1/1,000s of a share for which a Right
was exercisable immediately prior to the first occurrence of such Section
11(a)(ii) Event by the Purchase Price in effect immediately prior to such first
occurrence), and dividing that product (which, following the first occurrence of
a Section 13 Event, shall be referred to as the "Purchase Price" for each Right
and for all purposes of this Agreement) by (2) 50 percent of the Current Market
Price (determined pursuant to Section 11(d)(i) hereof) per share of the Common
Stock of such Principal Party on the date of consummation of such Section 13
Event; (B) such Principal Party shall thereafter be liable for, and shall
assume, by virtue of such Section 13 Event, all the obligations and duties of
the Company pursuant to this Agreement; (C) the term "Company" shall thereafter
be deemed to refer to such Principal Party, it being specifically intended that
the provisions of Section 11 hereof apply only to such Principal Party following
the first occurrence of a Section 13 Event; (D) such Principal Party shall take
such steps (including, but not limited to, the reservation of a sufficient
number of shares of its Common Stock) in connection with the consummation of any
such transaction as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to its
shares of Common Stock thereafter deliverable upon the exercise of the Rights;
and (E) the provisions of Section 11(a)(ii) hereof shall be of no effect
following the first occurrence of any Section 13 Event.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in clause (i) or
(ii) of the first sentence of Section 13(a) hereof, the Person that is the
issuer of any securities into which shares of Common Stock of the Company
are converted in such merger or consolidation, and if no securities are so
issued, the Person that is the other party to such consolidation or merger;
and
(ii) in the case of any transaction described in clause (iii) of
the first sentence of Section 13(a) hereof,
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<PAGE>
the Person that is the party receiving the largest portion of the assets or
earning power transferred pursuant to such transaction or transactions;
provided, however, that in any such case, (1) if the Common Stock of such Person
is not at such time and has not been continuously over the preceding 12-month
period registered under Section 12 of the Exchange Act, and such Person is a
direct or indirect Subsidiary of another Person the Common Stock of which is and
has been so registered, "Principal Party" shall refer to such other Person; and
(2) in case such Person is a Subsidiary, directly or indirectly, of more than
one Person, the Common Stocks of two or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such Persons is the
issuer of the Common Stock having the greatest aggregate market value.
(c) The Company shall not consummate any such consolidation,
merger, sale or transfer unless the Principal Party shall have a sufficient
number of authorized shares of its Common Stock which have not been issued or
reserved for issuance to permit the exercise in full of the Rights in accordance
with this Section 13 and unless prior thereto the Company and such Principal
Party shall have executed and delivered to the Rights Agent a supplemental
agreement providing for the terms set forth in paragraphs (a) and (b) of this
Section 13 and further providing that, as soon as practicable after the date of
any consolidation, merger, or sale or transfer mentioned in paragraph (a) of
this Section 13, the Principal Party will:
(i) prepare and file a registration statement under the
Securities Act, with respect to the Rights and the securities purchasable
upon exercise of the Rights on an appropriate form, and will use its best
efforts to cause such registration statement to (A) become effective as
soon as practicable after such filing and (B) remain effective (with a
prospectus at all times meeting the requirements of the Securities Act)
until the Expiration Date, and similarly comply with applicable state
securities laws;
(ii) use its best efforts to list (or continue the listing of)
the Rights and the securities purchasable upon exercise of the Rights on a
national securities exchange or to meet the eligibility requirements for
quotation on Nasdaq or such other system then in use; and
(iii) will deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates which comply
in all respects with the
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requirements for registration on Form 10 (or any successor form) under the
Exchange Act.
The provisions of this Section 13 shall similarly apply to successive
consolidations, mergers, sales or other transfers. In the event that a Section
13 Event shall occur at any time after the occurrence of a Section 11(a)(ii)
Event, the Rights which have not theretofore been exercised shall thereafter
become exercisable in the manner described in Section 13(a).
(d) Notwithstanding anything in this Agreement to the contrary,
Section 13 shall not be applicable to a transaction described in subparagraphs
(i) and (ii) of Section 13(a) if: (i) such transaction is consummated with a
Person or Persons who acquired shares of Common Stock pursuant to a Qualifying
Offer (or a wholly owned Subsidiary of any such Person or Persons); (ii) the
price per share of Common Stock offered in such transaction is not less than the
price per share of Common Stock paid to all holders of shares of Common Stock
whose shares were purchased pursuant to such tender offer or exchange offer; and
(iii) the form of consideration being offered to the remaining holders of shares
of Common Stock pursuant to such transaction is the same as the form of
consideration paid pursuant to such tender offer or exchange offer. Upon
consummation of any such transaction contemplated by this Section 13(d), all
Rights hereunder shall expire.
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of
Rights, except prior to the Distribution Date as provided in Section 11(p)
hereof, or to distribute Rights Certificates which evidence fractional Rights
(i.e., Rights to acquire less than 1/1,000 of a share of Preferred Stock). In
lieu of such fractional Rights, there shall be paid to the registered holders of
the Rights Certificates with regard to which such fractional Rights would
otherwise be issuable, an amount in cash equal to the same fraction of the
current market value of a whole Right. For purposes of this Section 14(a), the
current market value of a whole Right shall be the closing price of the Rights
for the Trading Day immediately prior to the date on which such fractional
Rights would have been otherwise issuable. The closing price of the Rights for
any day shall be the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the principal national securities exchange on which the Rights are
listed or admitted to trading, or, if the Rights are not listed or admitted
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<PAGE>
to trading on any national securities exchange, the last quoted price or, if not
so quoted, the average of the high bid and low asked prices, as reported by
Nasdaq or such other system then in use or, if on any such date the Rights are
not quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the Rights
selected by the Board of Directors of the Company. If on any such date no such
market maker is making a market in the Rights, the fair value of the Rights on
such date as determined in good faith by the Board of Directors of the Company
shall be used.
(b) The Company shall not be required to issue fractions of
shares of Preferred Stock (other than fractions which are integral multiples of
1/1,000 of a share of Preferred Stock) upon exercise of the Rights or to
distribute certificates which evidence fractional shares of Preferred Stock
(other than fractions which are integral multiples of 1/1,000 of a share of
Preferred Stock). In lieu of fractional shares of Preferred Stock that are not
integral multiples of 1/1,000 of a share of Preferred Stock, the Company may pay
to the registered holders of Rights Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of the
current market value of 1/1,000 of a share of Preferred Stock. For purposes of
this Section 14(b), the current market value of 1/1,000 of a share of Preferred
Stock shall be 1/1,000 of the closing price of a share of Preferred Stock (as
determined pursuant to Section 11(d)(ii) hereof) for the Trading Day immediately
prior to the date of such exercise.
(c) Following the occurrence of a Triggering Event, the Company
shall not be required to issue fractions of shares of Common Stock upon exercise
of the Rights or to distribute certificates which evidence fractional shares of
Common Stock. In lieu of fractional shares of Common Stock, the Company may pay
to the registered holders of Rights Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of the
current market value of one share of Common Stock. For purposes of this Section
14(c), the current market value of one share of Common Stock shall be the
closing price of one share of Common Stock (as determined pursuant to Section
11(d)(i) hereof) for the Trading Day immediately prior to the date of such
exercise.
(d) The holder of a Right by the acceptance of the Rights
expressly waives his or her right to receive any fractional Rights or any
fractional shares upon exercise of a Right, except as permitted by this Section
14.
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Section 15. Rights of Action. All rights of action in respect of this
Agreement are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Rights Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Stock), may, in his or her own behalf and for
his or her own benefit, enforce, and may institute and maintain any suit, action
or proceeding against the Company to enforce, or otherwise act in respect of,
his or her right to exercise the Rights evidenced by such Rights Certificate in
the manner provided in such Rights Certificate and in this Agreement. Without
limiting the foregoing or any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not have an adequate
remedy at law for any breach of this Agreement and shall be entitled to specific
performance of the obligations hereunder and injunctive relief against actual or
threatened violations of the obligations hereunder of any Person subject to this
Agreement.
Section 16. Agreement of Rights Holders. Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be evidenced
by the certificates for shares of Common Stock registered in the name of the
holders of the Common Stock (which certificates for Common Stock shall also
constitute certificates for Rights) and each Right will be transferable only in
connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office or offices of the Rights Agent designated for such
purposes, duly endorsed or accompanied by a proper instrument of transfer and
with the appropriate forms and certificates fully executed;
(c) subject to Sections 6(a) and 7(f) hereof, the Company and the
Rights Agent may deem and treat the Person in whose name a Rights Certificate
(or, prior to the Distribution Date, the associated Common Stock certificate) is
registered as the absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on the Rights
Certificates or the associated Common Stock certificate made by anyone other
than the Company or the Rights Agent) for all purposes whatsoever, and neither
the Company nor the Rights
33
<PAGE>
Agent, subject to the last sentence of Section 7(e) hereof, shall be required to
be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any holder
of a Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company must use its best
efforts to have any such order, decree or ruling lifted or otherwise overturned
as soon as possible.
Section 17. Rights Holder and Rights Certificate Holder Not Deemed a
Stockholder. No holder, as such, of any Right or Rights Certificate shall be
entitled to vote, receive dividends or be deemed for any purpose the holder of
the number of 1/1,000s of a share of Preferred Stock or any other securities of
the Company which may at any time be issuable on the exercise of the Rights
represented thereby, nor shall anything contained herein or in any Rights
Certificate be construed to confer upon the holder of any Right or Rights
Certificate, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 25 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Rights Certificate shall have been exercised in accordance with the
provisions hereof.
Section 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and attorney fees and
disbursements and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and
34
<PAGE>
expenses of defending against any claim of liability arising therefrom. Anything
to the contrary notwithstanding, in no event shall the Rights Agent be liable
for special, indirect, consequential or incidental loss or damage of any kind
whatsoever (including but not limited to lost profits), even if the Rights Agent
has been advised of the likelihood of such loss or damage.
(b) The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Agreement in reliance upon any Rights
Certificate or certificate representing Preferred Stock or Common Stock or other
securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document believed by the Rights Agent
to be genuine and to be signed, executed and, where necessary, verified or
acknowledged, by the proper Person or Persons, or otherwise upon the advice of
its counsel as set forth in Section 20 hereof.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
(a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights Agent
or any successor Rights Agent shall be a party, or any corporation succeeding to
the corporate trust or shareholder services business of the Rights Agent or any
successor Rights Agent, shall be the successor to the Rights Agent under this
Agreement without the execution or filing of any paper or any further act on the
part of either of the parties hereto; provided, however, that such corporation
would be eligible for appointment as a successor Rights Agent under the
provisions of Section 21 hereof. If at the time such successor Rights Agent
shall succeed to the agency created by this Agreement, any of the Rights
Certificates shall have been countersigned but not delivered, any such successor
Rights Agent may adopt the countersignature of a predecessor Rights Agent and
deliver such Rights Certificates so countersigned; and if at that time any of
the Rights Certificates shall not have been countersigned, any successor Rights
Agent may countersign such Rights Certificates either in the name of the
predecessor or in the name of the successor Rights Agent; and in all such cases
such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
(b) If at any time the name of the Rights Agent shall be changed
and at such time any of the Rights Certificates shall have been countersigned
but not delivered, the Rights Agent
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<PAGE>
may adopt the countersignature under its prior name and deliver Rights
Certificates so countersigned; and if at that time any of the Rights
Certificates shall not have been countersigned, the Rights Agent may countersign
such Rights Certificates either in its prior name or in its changed name; and in
all such cases such Rights Certificates shall have the full force provided in
the Rights Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be
legal counsel for the Company), and the opinion of such counsel shall be full
and complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact or
matter (including, without limitation, the identity of any Acquiring Person or
Adverse Person and the determination of "current market price") be proved or
established by the Company prior to taking or suffering any action hereunder,
such fact or matter (unless other evidence in respect thereof be herein
specifically prescribed) may be deemed to be conclusively proved and established
by a certificate signed by the Chairman of the Board, the President, any Vice
President, the Chief Financial Officer or the Secretary of the Company and
delivered to the Rights Agent; and such certificate shall be full authorization
to the Rights Agent for any action taken or suffered in good faith by it under
the provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any
of the statements of fact or recitals contained in this Agreement or in the
Rights Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or
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<PAGE>
execution of any Rights Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Rights Certificate; nor shall it
be responsible for any change in the exercisability of the Rights (including the
Rights becoming void pursuant to Section 7(e) hereof); nor shall it be
responsible for any adjustment required under the provisions of Section 11, 13
or 24 hereof or responsible for the manner, method or amount of any such
adjustment or the ascertaining of the existence of facts that would require any
such adjustment (except with respect to the exercise of Rights evidenced by
Rights Certificates after actual notice of any such adjustment or change in
exercisability); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any shares
of Common Stock or Preferred Stock to be issued pursuant to this Agreement or
any Rights Certificate or as to whether any shares of Common Stock or Preferred
Stock will, when so issued, be validly authorized and issued, fully paid and
nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman of the Board, the President, any Vice President, the Chief Financial
Officer or the Secretary of the Company, and to apply to such officers for
advice or instructions in connection with its duties, and it shall not be liable
for any action taken or suffered to be taken by it in good faith in accordance
with instructions of any such officer.
(h) The Rights Agent and any shareholder, director, officer,
member or employee of the Rights Agent may buy, sell or deal in any of the
Rights or other securities of the Company or become pecuniarily interested in
any transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were not
Rights Agent under this Agreement. Nothing herein shall preclude the Rights
Agent from acting in any other capacity for the Company or for any other legal
entity.
(i) The Rights Agent may execute and exercise any of the rights
or powers hereby vested in it or perform any duty hereunder either itself or by
or through its attorneys or agents,
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<PAGE>
and the Rights Agent shall not be answerab1e or accountable for any act,
default, neglect or misconduct of any such attorneys or agents or for any loss
to the Company resulting from any such act, default, neglect or misconduct;
provided, however, reasonable care was exercised in the selection and continued
employment thereof.
(j) No provision of this Agreement shall require the Rights Agent
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of its rights
if there shall be reasonable grounds for believing that repayment of such funds
or adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause l and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise of transfer without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company and to each transfer agent
of the Common Stock and Preferred Stock, by registered or certified mail, and to
the holders of the Rights Certificates by first-class mail. The Company may
remove the Rights Agent or any successor Rights Agent upon 30 days' notice in
writing, mailed to the Rights Agent or successor Rights Agent, as the case may
be, and to each transfer agent of the Common Stock and Preferred Stock, by
registered or certified mail, and to the holders of the Rights Certificates by
first-class mail. If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor to
the Rights Agent. If the Company shall fail to make such appointment within a
period of 30 days after giving notice of such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Rights Certificate (who shall,
with such notice, submit his or her Rights Certificate for inspection by the
Company), then any registered holder of any Rights Certificate may apply to any
court of competent jurisdiction for the appointment of a new Rights Agent. Any
successor Rights Agent, whether appointed by the Company or by such a court,
shall be a corporation organized and doing business under the laws of the United
States or any state of the United States, so long as such corporation is
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authorized to do business as a banking institution, is authorized to exercise
corporate trust powers, is in good standing, is subject to supervision or
examination by federal or state authority, and has at the time of its
appointment as Rights Agent a combined capital and surplus of at least $100
million. After appointment, the successor Rights Agent shall be vested with the
same powers, rights, duties and responsibilities as if it had been originally
named as Rights Agent without further act or deed; but the predecessor Rights
Agent shall deliver and transfer to the successor Rights Agent any property at
the time held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Not later than the effective
date of any such appointment, the Company shall file notice thereof in writing
with the predecessor Rights Agent and each transfer agent of the Common Stock
and the Preferred Stock, and mail a notice thereof in writing to the registered
holders of the Rights Certificates. Failure to give any notice provided for in
this Section 21, however, or any defect therein, shall not affect the legality
or validity of the resignation or removal of the Rights Agent or the appointment
of the successor Rights Agent, as the case may be.
Section 22. Issuance of New Rights Certificates. Notwithstanding any
of the provisions of this Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Rights Certificates evidencing Rights in
such form as may be approved by its Board of Directors to reflect any adjustment
or change in the Purchase Price and the number or kind or class of shares or
other securities or property purchasable under the Rights Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale of shares of Common Stock following the Distribution
Date and prior to the redemption or expiration of the Rights, the Company (a)
shall, with respect to shares of Common Stock so issued or sold pursuant to the
exercise of stock options or under any employee plan or arrangement, granted or
awarded as of the Distribution Date, or upon the exercise, conversion or
exchange of securities hereinafter issued by the Company, and (b) may, in any
other case, if deemed necessary or appropriate by the Board of Directors, issue
Rights Certificates representing the appropriate number of Rights in connection
with such issuance or sale; provided, however, that (i) no such Rights
Certificate shall be issued if, and to the extent that, the Company shall be
advised by counsel that such issuance would create a significant risk of
material adverse tax consequences to the Company or the Person to whom such
Rights Certificate would be issued, and (ii) no such Rights Certificate shall be
issued if, and to the extent that, appropriate adjustment shall otherwise have
been made in lieu of the issuance thereof.
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Section 23. Redemption and Termination.
(a) The Board of Directors of the Company may, at its option, at
any time prior to the earlier of (i) the Close of Business on the tenth Business
Day following the Stock Acquisition Date, or (ii) the Close of Business on the
Final Expiration Date, redeem all, but not less than all, the then outstanding
Rights at a redemption price of $.01 per Right, as such amount may be
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such redemption price being
hereinafter referred to as the "Redemption Price"). The Board of Directors may
not redeem any Rights following a determination pursuant to Section 11(a)(ii)(B)
that any Person is an Adverse Person. Notwithstanding anything contained in this
Agreement to the contrary, the Rights shall not be exercisable after the first
occurrence of a Section 11(a)(ii) Event until such time as the Company's right
of redemption hereunder has expired. The Company may, at its option, pay the
Redemption Price in cash, shares of Common Stock (based on the Current Market
Price, as defined in Section 11(d)(i) hereof, of the Common Stock at the time of
redemption) or any other form of consideration deemed appropriate by the Board
of Directors.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights, evidence of which shall have been
filed with the Rights Agent and without any further action and without any
notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price for
each Right so held. Promptly after the action of the Board of Directors ordering
the redemption of the Rights, the Company shall give notice of such redemption
to the Rights Agent and the holders of the then outstanding Rights by mailing
such notice to all such holders at each holder's last address as it appears on
the registry books of the Rights Agent or, prior to the Distribution Date, on
the registry books of the transfer agent for the Common Stock. Any notice which
is mailed in the manner herein provided shall be deemed given, whether or not
the holder receives the notice. Each such notice of redemption will state the
method by which the payment of the Redemption Price will be made.
Section 24. Exchange.
(a) The Board of Directors of the Company may, at its option, at
any time after any Person becomes an Acquiring Person or is determined to be an
Adverse Person pursuant to Section 11(a)(ii)(B), exchange all or part of the
then outstanding and exercisable Rights (which shall not include
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Rights that have become void pursuant to the provisions of Section 7(e) hereof)
for shares of Common Stock at an exchange ratio of one share of Common Stock per
Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the "Exchange Ratio"). Notwithstanding the foregoing,
the Board of Directors of the Company shall not be empowered to effect such
exchange at any time after any Person (other than the Company, any Subsidiary of
the Company, any employee benefit plan of the Company or any such Subsidiary, or
any entity holding Common Stock for or pursuant to the terms of any such plan),
together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of 50 percent or more of the Common Stock then outstanding.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to Section 24(a) hereof and
without any further action and without any notice, the right to exercise such
Rights shall terminate and the only right thereafter of a holder of such Rights
shall be to receive that number of shares of Common Stock equal to the number of
such Rights held by such holder multiplied by the Exchange Ratio. The Company
shall promptly give public notice of any such exchange; provided, however, that
the failure to give, or any defect in, such notice shall not affect the validity
of such exchange. The Company promptly shall mail a notice of any such exchange
to all of the holders of such Rights at their last addresses as they appear on
the registry books of the Rights Agent. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of exchange will state the method by which the exchange
of the Common Stock for Rights will be effected and, in the event of any partial
exchange, the number of Rights which will be exchanged. Any partial exchange
shall be effected pro rata based on the number of Rights (other than Rights
which have become void pursuant to the provisions of Section 7(e) hereof) held
by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the Company, at
its option, may substitute shares of Preferred Stock (or equivalent preferred
stock, as such term is defined in Section 11(b) hereof) for shares of Common
Stock exchangeable for Rights, at the initial rate of 1/1,000 of a share of
Preferred Stock (or equivalent preferred stock) for each share of Common Stock,
as appropriately adjusted to reflect adjustments in the voting rights of the
Preferred Stock pursuant to Section 3(A) of the rights, powers and preferences
attached hereto as Exhibit A, so that the fraction of a share of Preferred Stock
delivered in lieu of each share of Common Stock shall have the same voting
rights as one share of Common Stock.
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(d) In the event that there shall not be sufficient shares of
Common Stock issued but not outstanding or authorized but unissued to permit any
exchange of Rights as contemplated in accordance with this Section 24, the
Company shall take all such action as may be necessary to authorize additional
shares of Common Stock for issuance upon exchange of the Rights.
(e) The Company shall not be required to issue fractions of
shares of Common Stock or to distribute certificates which evidence fractional
shares of Common Stock. In lieu of such fractional shares of Common Stock, there
shall be paid to the registered holders of the Right Certificates, with regard
to which such fractional share of Common Stock would otherwise be issuable, an
amount in cash equal to the same fraction of the current market value of a whole
share of Common Stock. For the purposes of this paragraph (e), the current
market value of a whole share of Common Stock shall be the closing price of a
share of Common Stock (as determined pursuant to the second sentence of Section
11(d)(i) hereof) for the Trading Day immediately prior to the date of exchange
pursuant to this Section 24.
Section 25. Notice of Certain Events.
(a) In case the Company shall propose, at any time after the
Distribution Date, (i) to pay any dividend payable in stock of any class to the
holders of Preferred Stock or to make any other distribution to the holders of
Preferred Stock (other than a regular quarterly cash dividend out of earnings or
retained earnings of the Company), or (ii) to offer to the holders of Preferred
Stock rights or warrants to subscribe for or to purchase any additional shares
of Preferred Stock or shares of stock of any class or any other securities,
rights or options, or (iii) to effect any reclassification of its Preferred
Stock (other than a reclassification involving only the subdivision of
outstanding shares of Preferred Stock), or (iv) to effect any consolidation or
merger into or with any other Person (other than a Subsidiary of the Company in
a transaction which complies with Section 11(o) hereof), or to effect any sale
or other transfer (or to permit one or more of its Subsidiaries to effect any
sale or other transfer), in one transaction or a series of related transactions,
of more than 50 percent of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to, any other Person or Persons (other than the
Company and/or any of its Subsidiaries in one or more transactions each of which
complies with Section 11(o) hereof), or (v) to effect the liquidation,
dissolution or winding up of the Company, then, in each such case, the Company
shall give to each holder of a Rights Certificate, to the extent feasible and in
accordance with
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Section 26 hereof, a notice of such proposed action, which shall specify the
record date for the purposes of such stock dividend, distribution of rights or
warrants, or the date on which such reclassification, consolidation, merger,
sale, transfer, liquidation, dissolution, or winding up is to take place and the
date of participation therein by the holders of the shares of Preferred Stock,
if any such date is to be fixed, and such notice shall be so given in the case
of any action covered by clause (i) or (ii) above at least 20 days prior to the
record date for determining holders of the shares of Preferred Stock for
purposes of such action, and in the case of any such other action, at least 20
days prior to the date of the taking of such proposed action or the date of
participation therein by the holders of the shares of Preferred Stock, whichever
shall be the earlier.
(b) If any Section 11(a)(ii) Event shall occur, then, in any such
case, (i) the Company shall as soon as practicable thereafter give to each
holder of a Rights Certificate, to the extent feasible and in accordance with
Section 26 hereof, a notice of the occurrence of such event, which shall specify
the event and the consequences of the event to holders of Rights under Section
11(a)(ii) hereof, and (ii) all references in the preceding paragraph to
Preferred Stock shall be deemed thereafter to refer to Common Stock and/or, if
appropriate, other securities.
Section 26. Notices. Notices or demands authorized by this Agreement
to be given or made by the Rights Agent or by the holder of any Rights
Certificate to or on the Company shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
Agritope, Inc.
8505 S.W. Creekside Place
Beaverton, Oregon 97008
Attention: Chief Financial Officer
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows:
ChaseMellon Shareholder Services, L.L.C.
520 Pike Street, Suite 1220
Seattle, Washington 98101
Attention: Dennis Treibel
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Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed to such holder at his or her
address as shown on the registry books of the Company.
Section 27. Supplements and Amendments. Prior to the Distribution Date
and subject to the penultimate sentence of this Section 27, the Company may by
action of the Board of Directors, and the Rights Agent shall if the Company so
directs, supplement or amend any provision of this Agreement in any manner
without the approval of any holders of Common Stock. From and after the
Distribution Date and subject to the penultimate sentence of this Section 27,
the Company may by action of the Board of Directors, and the Rights Agent shall
if directed by the Company, from time to time, supplement or amend this
Agreement without the approval of any holders of Rights Certificates in order
(i) to cure any ambiguity, (ii) to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provisions herein,
(iii) to shorten or lengthen any time period herein or (iv) to change or
supplement any other provisions herein in any manner which the Board of
Directors may deem necessary or desirable so long as the interests of the
holders of the Rights or Rights Certificates (other than an Acquiring Person or
Adverse Person or any Affiliate or Associate of an Acquiring Person or Adverse
Person) shall not be materially and adversely affected thereby; provided,
however, this Agreement may not be supplemented or amended to lengthen, pursuant
to clause (iii) of this sentence, (A) a time period relating to when the Rights
may be redeemed at such time and the Rights are not then redeemable, or (B) any
other time period unless such lengthening is for the purpose of protecting,
enhancing or clarifying the rights of, and/or the benefits to, the holders of
Rights (other than an Acquiring Person or Adverse Person or any Affiliate or
Associate of an Acquiring Person or Adverse Person). Upon the delivery of a
certificate from an appropriate officer of the Company, which states that the
proposed supplement or amendment is in compliance with the terms of this Section
27, the Rights Agent shall execute such supplement or amendment. Prior to the
Distribution Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of Common Stock of the Company. b
Section 28. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
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Section 29. Determinations and Actions By the Board of Directors,
Etc. For all purposes of this Agreement, any calculation of the number of shares
of Common Stock outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of Common Stock
of which any Person is the Beneficial Owner, shall be made in accordance with
the last sentence of Rule 13d-3(d)(l)(i) of the General Rules and Regulations
under the Exchange Act, as in effect on the date of this Agreement. The Board of
Directors of the Company have the exclusive power and authority to administer
this Agreement and to exercise all rights and powers specifically granted to the
Board of Directors or to the Company, or as may be necessary or advisable in the
administration of this Agreement, including, without limitation, the right and
power to (a) interpret provisions of this Agreement, and (b) make all
determinations deemed necessary or advisable for the administration of this
Agreement (including a determination to redeem or not redeem the Rights or to
amend this Agreement). All such actions, calculations, interpretations and
determinations (including, for purposes of clause (ii) below, all omissions with
respect to the foregoing) which are done or made by the Board of Directors in
good faith, shall (i) be final, conclusive and binding on the Company, the
Rights Agent, the holders of the Rights and all other parties, and (ii) not
subject the Board of Directors to any liability to the holders of the Rights.
Section 30. Benefits of This Agreement. Nothing in this Agreement
shall be construed to give to any Person other than the Company, the Rights
Agent and the registered holders of the Rights Certificates (and, prior to the
Distribution Date, registered holders of the Common Stock) any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of the Common Stock).
Section 31. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any term, provision, covenant or restriction is held by such court
or authority to be invalid, void or unenforceable and the Board of Directors of
the Company determines in its good faith judgment that severing the invalid
language from this Agreement would adversely affect the purpose or effect of
this Agreement, the right of redemption set forth in
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Section 23 hereof shall be reinstated and shall not expire until the Close of
Business on the tenth Business Day following the date of such determination by
the Board of Directors. Without limiting the foregoing, if any provision
requiring a majority of the members of the Board of Directors who are not
officers of the Company and who are not representatives, nominees, Affiliates or
Associates of an Acquiring Person to act is held by any court of competent
jurisdiction or other authority to be invalid, void or unenforceable, such
determination shall be made by the Board of Directors of the Company in
accordance with applicable law and the Company's Certificate of Incorporation
and Bylaws, as in effect at that time.
Section 32. Governing Law. This Agreement, each Right and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the state of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such state applicable to contracts made
and to be performed entirely within such state.
Section 33. Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
Section 34. Descriptive Headings. Descriptive headings of the several
sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Rights
Agreement to be duly executed and attested as of the date first written above.
AGRITOPE, INC.
Attest:
By-------------------------- By-------------------------------
Secretary Title----------------------------
CHASEMELLON SHAREHOLDER SERVICES,
L.L.C.
Attest:
By-------------------------- By--------------------------------
Secretary Title-----------------------------
47
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EXHIBIT A
---------
FORM OF
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
OF SERIES B JUNIOR PARTICIPATING
PREFERRED STOCK
OF
AGRITOPE, INC.
(Pursuant to Section 151 of the General Corporation Law
of the state of Delaware)
-------------------
The undersigned officers of Agritope, Inc., a corporation
organized and existing under the General Corporation Law of the state of
Delaware (the "Corporation"), in accordance with the provisions of Section 103
thereof, do hereby certify:
That, pursuant to the authority conferred upon the Board of Directors
by the Certificate of Incorporation of the Corporation, the Board of Directors
on November 14, 1997 adopted the following resolution, as required by Section
151 of the Delaware General Corporation Law, creating a series of 30,000 shares
of Preferred Stock, par value $.01 per share, designated as Series B Junior
Participating Preferred Stock:
RESOLVED, that, pursuant to the authority vested in the Board of
Directors of the Corporation in accordance with the provisions of its
Certificate of Incorporation, a new series of Preferred Stock of the Corporation
be, and it hereby is, created, and that the designation and amount thereof and
the voting powers, preferences and relative, participating, optional and other
special rights of the shares of such series, and the qualifications, limitations
or restrictions thereof are as follows:
SERIES B JUNIOR PARTICIPATING PREFERRED STOCK
Section 1. Designation, Amount and Par Value. The shares of such
series shall be designated as "Series B Junior Participating Preferred Stock"
and the number of shares constituting such series shall be 30,000. Such series
is hereinafter referred to as the "Series B Preferred Stock." The par value of
the Series B Preferred Stock shall be $.01 per share.
<PAGE>
Section 2. Dividends and Distributions.
The holders of shares of Series B Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors out of
funds legally available for the purpose, quarterly dividends payable in cash on
the last day of March, June, September and December in each year (each such date
being referred to herein as a "Quarterly Dividend Payment Date"), commencing on
the first Quarterly Dividend Payment Date after the first issuance of a share or
fraction of a share of Series B Preferred Stock, in an amount per share (rounded
to the nearest cent) equal to the greater of (a) $.01 or (b) subject to the
provisions for adjustment hereinafter set forth, 1,000 times the aggregate per
share amount of all cash dividends, and 1,000 times the aggregate per share
amount (payable in kind) of all non-cash dividends or other distributions other
than a dividend payable in shares of Common Stock or a subdivision of the
outstanding shares of Common Stock (by reclassification or otherwise), declared
on the Common Stock, par value $.01 per share, of the Corporation (the "Common
Stock") since the immediately preceding Quarterly Dividend Payment Date or, with
respect to the first Quarterly Dividend Payment Date, since the first issuance
of any share or fraction of a share of Series B Preferred Stock. In the event
the Corporation shall at any time after ----------, 1997 (the "Rights
Declaration Date") (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the amount to which holders of shares of Series B Preferred Stock were entitled
immediately prior to such event under clause (b) of the preceding sentence shall
be adjusted by multiplying such amount by a fraction the numerator of which is
the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the
Series B Preferred stock as provided in Paragraph (A) above immediately after it
declares a dividend or distribution on the Common Stock (other than a dividend
payable in shares of Common Stock); provided that, in the event no dividend or
distribution shall have been declared on the Common Stock during the period
between any Quarterly Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $0.01 per share on the series A Preferred
Stock shall nevertheless be payable on such subsequent quarterly Dividend
Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series B Preferred Stock from the
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Quarterly Dividend Payment Date next preceding the date of issue of such shares
of Series B Preferred Stock, unless the date of issue of such shares is prior to
the record date for the first Quarterly Dividend Payment Date, in which case
dividends on such shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a
date after the record date for the determination of holders of shares of Series
B Preferred Stock entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which events such dividends shall
begin to accrue and be cumulative from such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall not bear interest. Dividends paid on the
shares of Series B Preferred Stock in an amount less than the total amount of
such dividends at the time accrued and payable on such shares shall be allocated
pro rata on a share-by-share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date for the determination
of holders of shares of Series B Preferred Stock entitled to receive payment of
a dividend or distribution declared thereon, which record date shall be no more
than 30 days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series B Preferred
stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Series B Preferred Stock shall entitle the holder thereof to 1,000
votes (and each 1/1,000 of a share of Series B Preferred Stock shall entitle the
holder thereof to one vote) on all matters submitted to a vote of the
stockholders of the Corporation. In the event the Corporation shall at any time
after the Rights Declaration Date (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock,
or (iii) combine the outstanding Common Stock into a smaller number of shares,
then in each such case the number of votes per share to which holders of shares
of Series B Preferred Stock were entitled immediately prior to such event shall
be adjusted by multiplying such number by a fraction the numerator of which is
the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of
shares of Series B Preferred Stock and the holders of shares of Common Stock
shall vote together as one class on all matters submitted to a vote of
stockholders of the Corporation.
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(C) (i) If at any time dividends on any Series B Preferred Stock shall
be in arrears in an amount equal to six quarterly dividends thereon, the
occurrence of such contingency shall mark the beginning of a period (herein
called a "default period") which shall extend until such time when all
accrued and unpaid dividends for all previous quarterly dividend periods
and for the current quarterly dividend period on all shares of Series B
Preferred Stock then outstanding shall have been declared and paid or set
apart for payment. During each default period, all holders of Preferred
Stock (including holders of the Series B Preferred Stock) with dividends in
arrears in an amount equal to six quarterly dividends thereon, voting as a
class, irrespective of series, shall have the right to elect two directors
in addition to any number of directors that the holders of any series of
Preferred Stock may otherwise be entitled to elect.
(ii) During any default period, such voting right of the holders of
Series B Preferred Stock may be exercised initially at a special meeting
called pursuant to subparagraph (iii) of this Section 3(C) or at any annual
meeting of stockholders, and thereafter at annual meetings of stockholders,
provided that such voting right shall not be exercised unless the holders
of 10 percent in number of shares of Preferred Stock outstanding shall be
present at the meeting in person or by proxy. The absence of a quorum of
the holders of Common Stock shall not affect the exercise by the holders of
Preferred Stock of such voting right. At any meeting at which the holders
of Preferred Stock shall exercise such voting right initially during an
existing default period, they shall have the right, voting as a class, to
elect directors to fill such vacancies, if any, in the Board of Directors
as may then exist up to two directors or, if such right is exercised at an
annual meeting, to elect two directors. If the number which may be so
elected at any special meeting does not amount to the required number, the
holders of the Preferred Stock shall have the right to make such increase
in the number of directors as shall be necessary to permit the election by
them of the required number. After the holders of the Preferred Stock shall
have exercised their right to elect directors in any default period and
during the continuance of such period, the number of directors shall not be
increased or decreased except by vote of the holders of Preferred Stock as
herein provided or pursuant to the rights of any equity securities ranking
senior to or pari passu with the Series B Preferred Stock.
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(iii) Unless the holders of Preferred Stock shall, during an existing
default period, have previously exercised their right to elect directors,
the Board of Directors may order, or any stockholder or stockholders owning
in the aggregate not less than 10 percent of the total number of shares of
Preferred Stock outstanding, irrespective of series, may request, the
calling of a special meeting of the holders of Preferred Stock, which
meeting shall thereupon be called by the Chairman, President, a Vice
President or the Secretary of the Corporation. Notice of such meeting and
of any annual meeting at which holders of Preferred Stock are entitled to
vote pursuant to this paragraph (C)(iii) shall be given to each holder of
record of Preferred Stock by mailing a copy of such notice to the holder at
the holder's last address appearing on the books of the Corporation. Such
meeting shall be called for a time not earlier than 10 days and not later
than 50 days after such order or request or in default of the calling of
such meeting within 50 days after such order or request, such meeting may
be called on similar notice by any stockholder or stockholders owning in
the aggregate not less than 10 percent of the total number of shares of
Preferred Stock outstanding. Notwithstanding the provisions of this
paragraph (C)(iii), no such special meeting shall be called during the
period within 50 days immediately preceding the date fixed for the next
annual meeting of the stockholders.
(iv) In any default period, the holders of Common Stock, and other
classes of stock of the Corporation, if applicable, shall continue to be
entitled to elect the whole number of directors until the holders of
Preferred Stock shall have exercised their right to elect two directors
voting as a class, after the exercise of which right (x) the directors so
elected by the holders of Preferred Stock shall continue in office until
their successors shall have been elected by such holders or until the
expiration of the default period, and (y) any vacancy in the Board of
Directors may, except as provided in paragraph (C)(ii) of this Section 3,
be filled by vote of a majority of the remaining directors theretofore
elected by the holders of the class of stock which elected the director
whose office shall have become vacant. References in this paragraph (C) to
directors elected by the holders of a particular class of stock shall
include directors elected by such directors to fill vacancies, as provided
in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x) the right
of the holders of Preferred Stock as a class to elect directors shall
cease, (y) the term of any
5
<PAGE>
directors elected by the holders of Preferred Stock as a class shall
terminate, and (z) the number of directors shall be such number as may be
provided for in the Certificate of Incorporation or Bylaws irrespective of
any increase made pursuant to the provisions of paragraph (C)(ii) of this
Section 3 (such number being subject, however, to change thereafter in any
manner provided by law or in the Certificate of Incorporation or Bylaws).
Any vacancies in the Board of Directors effected by the provisions of
clauses (y) and (z) in the preceding sentence may be filled by a majority
of the remaining directors.
(D) Except as set forth herein, holders of Series B Preferred Stock
shall have no special voting rights and their consent shall not be required
(except to the extent they are entitled to vote with holders of Common Stock as
set forth herein) for taking any corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series B Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series B Preferred Stock outstanding shall have
been paid in full, the Corporation shall not:
(i) declare or pay dividends on, make any other distributions on, or
redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series B Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on
any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series B Preferred Stock,
except dividends paid ratably on the Series B Preferred Stock and all such
parity stock on which dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such shares are then
entitled;
(iii) redeem or purchase or otherwise acquire for consideration shares
of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series B Preferred Stock,
provided that the Corporation may at any time redeem, purchase or otherwise
acquire shares of any such parity stock in exchange for shares of any stock
of the Corporation ranking junior (either as to dividends or upon
dissolution,
6
<PAGE>
liquidation or winding up) to the Series B Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares of
Series B Preferred Stock, or any shares of stock ranking on a parity with
the Series B Preferred Stock, except in accordance with a purchase offer
made in writing or by publication (as determined by the Board of Directors)
to all holders of such shares upon such terms as the Board of Directors,
after consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among
the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under Section 4(A), purchase or
otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series B Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock, without designation as to series, and may be reissued as part
of a new series of Preferred Stock to be created by resolution or resolutions of
the Board of Directors, subject to the conditions and restrictions on issuance
set forth herein or in the Certificate of Incorporation.
Section 6. Liquidation, Dissolution or Winding Up.
(A) Upon any liquidation (voluntary or otherwise), dissolution or
winding up of the Corporation, no distribution shall be made to:
(i) the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series B
Preferred Stock, unless, prior thereto, the holders of shares of Series B
Preferred Stock shall have received the higher of (a) $0.01 per share, plus
an amount equal to accrued and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment, or (b) an aggregate
amount per share, subject to the provision for adjustment hereinafter set
forth, equal to 1,000 times the aggregate amount to be distributed per
share to holders of Common Stock; or
7
<PAGE>
(ii) the holders of stock ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with the Series B Preferred
Stock, except distributions made ratably on the Series B Preferred Stock
and all other such parity stock in proportion to the total amounts to which
the holders of all such shares are entitled upon such liquidation,
dissolution or winding up.
(B) In the event the Corporation shall at any time (i) declare any
dividend on Common Stock payable in shares of Common Stock, or (ii) subdivide,
combine or consolidate the outstanding shares of Common Stock (by
reclassification or otherwise) into a greater or smaller number of shares, then
in each such case the aggregate amount to which holders of shares of Series B
Preferred Stock are entitled under clause (i)(b) of Section 6(A) hereof shall be
adjusted by multiplying such amount by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 7. Consolidation, Merger, Etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series B Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 1,000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, or (iii) combine the outstanding Common Stock into a smaller
number of shares, then in each such case the amount set forth in the preceding
sentence with respect to the exchange or change of shares of Series B Preferred
Stock shall be adjusted by multiplying such amount by a fraction the numerator
of which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series B Preferred Stock shall
not be redeemable. Notwithstanding the foregoing, the Corporation may acquire
shares of Series B Preferred Stock in any other manner permitted by law, the
Certificate of Incorporation or this amendment thereof.
8
<PAGE>
Section 9. Rank. Unless otherwise provided in the Certificate of
Incorporation or an amendment thereof relating to a subsequent series of
Preferred Stock of the Corporation, the Series B Preferred Stock shall rank
junior to all other series of the Corporation's Preferred Stock as to the
payment of dividends and the distribution of assets on liquidation, dissolution
or winding up, and senior to the Common Stock of the Corporation.
Section 10. Amendment. The Certificate of Incorporation shall not be
further amended in any manner which would materially alter or change the powers,
preferences or special rights of the Series B Preferred Stock so as to affect
them adversely without the affirmative vote of the holders of at least a
majority of the outstanding shares of Series B Preferred Stock, voting
separately as a class.
Section l1. Fractional Shares. Series B Preferred Stock may be issued
in fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series B Preferred Stock.
IN WITNESS WHEREOF, we have executed and attested this Certificate of
Designation on behalf of the Corporation this ---- day of ----------, 1997. We
further declare under penalty of perjury under the laws of the state of Delaware
that the matters set forth herein are, to our knowledge, true and correct.
AGRITOPE, INC.
By-----------------------------------------------
Title--------------------------------------------
Attest:
- -------------------
Secretary
9
<PAGE>
EXHIBIT B
---------
Form of Rights Certificate
Certificate No. R- ------- Rights
NOT EXERCISABLE AFTER ----------, 2007 OR EARLIER IF REDEEMED BY THE COMPANY.
THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $0.01 PER
RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR ADVERSE
PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT
HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. {THE RIGHTS REPRESENTED BY THIS
RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME
AN ACQUIRING PERSON OR ADVERSE PERSON OR AN AFFILIATE OR ASSOCIATE OF AN
ACQUIRING PERSON OR ADVERSE PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED
HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e)
OF SUCH AGREEMENT.}1
Rights Certificate
AGRITOPE, INC.
This certifies that --------------------------------, or registered
assigns, is the registered owner of the number of Rights set forth above, each
of which entitles the owner thereof, subject to the terms, provisions and
conditions of the Rights Agreement, dated as of November 14, 1997 (the "Rights
Agreement"), between Agritope, Inc., a Delaware corporation (the "Company"), and
ChaseMellon Shareholder Services, L.L.C. (the "Rights Agent"), to purchase from
the Company at any time prior to 5 p.m. (Pacific time) on November 14, 2007 at
the office or offices of the Rights Agent designated for such purpose, or its
successors as Rights Agent, 1/1,000 of a fully paid, nonassessable share of
Series B Junior Participating Preferred Stock (the "Preferred Stock") of the
Company, at a purchase price of $------ per 1/1,000 of a share (the "Purchase
Price"), upon presentation and surrender of this Rights
- --------
1 The portion of the legend in brackets shall be inserted only if applicable and
shall replace the preceding sentence.
1
<PAGE>
Certificate with the Form of Election to Purchase and related Certificate duly
executed. The number of Rights evidenced by this Rights Certificate (and the
number of shares which may be purchased upon exercise thereof) set forth above,
and the Purchase Price per share set forth above, are the number and Purchase
Price as of -----------, based on the Preferred Stock as constituted at such
date. The Company reserves the right to require prior to the occurrence of a
Triggering Event (as such term is defined in the Rights Agreement) that a number
of Rights be exercised so that only whole shares of Preferred Stock will be
issued.
Upon the occurrence of a Section 11(a)(ii) Event (as such term is
defined in the Rights Agreement), if the Rights evidenced by this Rights
Certificate are beneficially owned by (i) an Acquiring Person or Adverse Person
or an Affiliate or Associate of any such Acquiring Person or Adverse Person (as
such terms are defined in the Rights Agreement), (ii) a transferee of any such
Acquiring Person or Adverse Person, Associate or Affiliate, or (iii) under
certain circumstances specified in the Rights Agreement, a transferee of a
person who, after such transfer, became an Acquiring Person or Adverse Person,
or an Affiliate or Associate of an Acquiring Person or Adverse Person, such
Rights shall become null and void and no holder hereof shall have any right with
respect to such Rights from and after the occurrence of such Section 11(a)(ii)
Event.
As provided in the Rights Agreement, the Purchase Price and the number
and kind of shares of Preferred Stock or other securities which may be purchased
upon the exercise of the Rights evidenced by this Rights Certificate are subject
to modification and adjustment upon the happening of certain events, including
Triggering Events. In certain circumstances described in the Rights Agreement,
the Rights evidenced hereby may entitle the holder hereof to purchase capital
stock of an entity other than the Company or receive cash or other assets, all
as prescribed in the Rights Agreement.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the principal executive offices of
the Company and are also available upon written request to the Rights Agent.
2
<PAGE>
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the principal office or offices of the Rights Agent designated
for such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of 1/1,000s of a share of Preferred Stock as
the Rights evidenced by the Rights Certificate or Rights Certificates
surrendered shall have entitled such holder to purchase. If this Rights
Certificate shall be exercised in part, the holder shall be entitled to receive
upon surrender hereof another Rights Certificate or Rights Certificates for the
number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Company at its option at a
redemption price of $0.01 per Right at any time prior to the earlier of the
close of business on (i) the tenth business day following the Stock Acquisition
Date (as such time period may be extended pursuant to the Rights Agreement), and
(ii) the Final Expiration Date. In addition, the Rights may be exchanged, in
whole or in part, for shares of the Common Stock, or shares of preferred stock
of the Company having essentially the same value or economic rights as such
shares. Immediately upon the action of the Board of Directors of the Company
authorizing any such exchange, and without any further action or any notice, the
Rights (other than Rights which are not subject to such exchange) will terminate
and the Rights will only enable holders to receive the shares issuable upon such
exchange.
No fractional shares of Preferred Stock will be issued upon the
exercise of any Right or Rights evidenced hereby (other than fractions which are
integral multiples of 1/1,000 of a share of Preferred Stock, which may, at the
election of the Company, be evidenced by depository receipts), but in lieu
thereof a cash payment will be made, as provided in the Rights Agreement.
No holder of this Rights Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of shares of Preferred
Stock or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or, to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights
3
<PAGE>
evidenced by this Rights Certificate shall have been exercised as provided in
the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal.
Dated as of ---------------
ATTEST: AGRITOPE, INC.
By----------------------- By----------------------------
Secretary Title-------------------------
Countersigned:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
By--------------------------------------
Authorized Signature
4
<PAGE>
Form of Reverse Side of Rights Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to
transfer the Rights Certificate.)
FOR VALUE RECEIVED ---------------------------------------------- hereby sells,
assigns and transfer unto-------------------------------------------------------
(Please print name and address of transferee)
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ----------------- Attorney,
to transfer the within Rights Certificate on the books of the within-named
Company, with full power of substitution.
Dated: -----------------
--------------------------------
Signature
Signature Guaranteed:
5
<PAGE>
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes
that:
(l) this Rights Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person or
Adverse Person or an Affiliate or Associate of any such Acquiring Person or
Adverse Person (as such terms are defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from
any Person who is, was or subsequently became an Acquiring Person or Adverse
Person or an Affiliate or Associate of an Acquiring Person or Adverse Person.
Dated:------------------------- ----------------------------------
Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
6
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise Rights represented by the
Rights Certificate)
To: AGRITOPE, INC.
The undersigned hereby irrevocably elects to exercise ----------
Rights represented by this Rights Certificate to purchase the shares of
Preferred Stock issuable upon the exercise of the Rights (or such other
securities of the Company or of any other person which may be issuable upon the
exercise of the Rights) and requests that certificates for such shares be issued
in the name of and delivered to:
Please insert social security
or other identifying number:----------------------------
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number:----------------------------
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
Dated:----------------------------
---------------------------------------------
Signature
Signature Guaranteed:
7
<PAGE>
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes
that:
(l) the Rights evidenced by this Rights Certificate [ ] are [ ] are
not being exercised by or on behalf of a Person who is or was an Acquiring
Person or Adverse Person or an Affiliate or Associate of any such Acquiring
Person or Adverse Person (as such terms are defined pursuant to the Rights
Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from
any Person who is, was or became an Acquiring Person or Adverse Person or an
Affiliate or Associate of an Acquiring Person or Adverse Person.
Dated: --------, -- -----------------------------------
Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Election to Purchase and Certificate
must correspond to the name as written upon the face of this Rights Certificate
in every particular, without alteration or enlargement or any change whatsoever.
8
TONKON TORP LLP
1600 PIONEER TOWER
888 SW FIFTH AVENUE
PORTLAND, OREGON 97204
503-241-1440
Carol Dey Hibbs 503-802-2016
FAX 503-972-3716
[email protected]
---------------, 1997
To the Board of Directors
of Agritope, Inc.
8505 S.W. Creekside Place
Beaverton, Oregon 97008
Re: Registration Statement on Form S-1
We have acted as counsel to Agritope, Inc., a Delaware corporation
("Agritope"), in connection with the preparation and filing with the Securities
and Exchange Commission (the "Commission"), under the Securities Act of 1933, as
amended (the "Securities Act"), of Agritope's Registration Statement on Form S-1
(Registration No. 333-345) (the "Registration Statement"). The Registration
Statement relates to the distribution as a dividend of shares of Agritope's
common stock, par value $.01 per share, including certain preferred stock
purchase rights (the "Agritope Stock"), to shareholders of Epitope, Inc., an
Oregon corporation ("Epitope") pursuant to Agritope's spin-off from Epitope (the
"Spin-Off").
In our capacity as such counsel, we have examined and relied upon the
originals, or copies certified or otherwise identified to our satisfaction, of
the Registration Statement and such corporate records, documents, certificates
and other agreements and instruments as we have deemed necessary
<PAGE>
or appropriate to enable us to render the opinions hereinafter expressed.
Based on the foregoing, and having regard for such legal
considerations as we deem relevant, we are of the following opinions:
1. The Agritope Stock has been duly authorized by all necessary
corporate action of Agritope.
2. When distributed by Epitope to its shareholders pursuant to the
Spin-Off, the Agritope Stock will be validly issued, fully paid and
nonassessable.
Our opinion is limited to matters of Delaware General Corporation Law.
We hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement and to the reference to us under the heading "Legal
Matters" in the related prospectus.
Very truly yours,
October --, 1997
Epitope, Inc.
8505 S.W. Creekside Place
Beaverton, Oregon 97008
Subject: Proposed Section 355 Spin-off of Agritope, Inc.
Ladies and Gentlemen:
You have requested our opinion regarding the material U. S. federal
income tax consequences of the proposed spin-off (the "Distribution") of
Agritope, Inc. ("Agritope") by Epitope, Inc. ("Epitope"). Capitalized terms not
otherwise defined in this letter have the meanings given to them in the
Information Statement/Prospectus of Agritope which constitutes a part of the
Registration Statement on Form S-1 (the "Registration Statement") filed in
respect of the shares of Agritope being distributed to Epitope shareholders in
connection with the Distribution. This opinion is delivered in accordance with
the requirements of Item 601(b)(8) of Regulation S-K under the Securities Act.
In rendering our opinion, we have reviewed the Separation Agreement
(the "Agreement") and the Information Statement/Prospectus and such other
material as we have deemed necessary or appropriate as a basis for our opinion.
We have relied, with the consent of Epitope, upon certain representations
contained in the representation letter given us by Epitope (a copy of which is
attached to this opinion). We have also assumed that the transactions
contemplated by the Distribution will be consummated in accordance with the
Agreement and as described in the Information Statement/Prospectus. In addition,
we have considered the applicable provisions of the Internal Revenue Code of
1986, as amended, Treasury Regulations, pertinent judicial authorities, rulings
of the Internal Revenue Service, and such other authorities as we have
considered relevant.
Based upon the foregoing, it is our opinion that under presently
applicable law, for federal income tax purposes the Distribution will constitute
a distribution within the meaning of Section 355 of the Internal Revenue Code.
Accordingly, it is our opinion that the material federal income tax consequences
of the Distribution will be as follows:
<PAGE>
Epitope, Inc. - 2 - October --, 1997
1. No gain or loss will be recognized by Agritope as a result
of the Distribution.
2. No gain or loss will be recognized by Epitope shareholders
upon their receipt of Agritope Stock, except that an Epitope
shareholder who receives cash proceeds in lieu of a fractional share
interest in Agritope Stock will recognize gain or loss equal to the
difference between such proceeds and the tax basis allocated to the
fractional share interest, and such gain or loss will constitute
capital gain or loss if such shareholder's Epitope Stock with respect
to which the shares of Agritope stock are received is held as a capital
asset on the date of the Distribution.
3. The aggregate basis of the shares (including any fractional
shares) of Epitope Stock and Agritope Stock in the hands of the Epitope
shareholders immediately after the Distribution will be the same as the
basis of the Epitope Stock held immediately before the Distribution,
allocated between the shares (including any fractional shares) in
proportion to the fair market values of each on the date of the
Distribution.
4. The holding period of the Agritope Stock (including any
fractional shares) received by the Epitope shareholders will include
the holding period of the Epitope Stock with respect to which the
Distribution was made, provided that the Epitope Stock is held as a
capital asset on the date of the Distribution.
We express no opinion concerning the income tax consequences
of the Distribution to Epitope.
We have reviewed the discussion in the Information
Statement/Prospectus under the caption "THE DISTRIBUTION--Certain Federal Income
Tax Consequences" (the "Tax Discussion"). In our opinion the Tax Discussion,
insofar as it relates to statements of tax law or conclusions thereunder, is
correct and complete in all material respects. We hereby confirm that the Tax
Discussion accurately sets forth our opinion.
This opinion is being furnished in connection with the
Registration Statement. You may rely upon and refer to the foregoing opinion in
the Information Statement/Prospectus and the Registration Statement. Any
variation or difference in the facts from those set forth or assumed either in
this opinion or the Information Statement/Prospectus may affect the conclusions
stated in this opinion.
<PAGE>
Epitope, Inc. - 3 - October --, 1997
We hereby consent to the use of our name in the Information
Statement/Prospectus under the caption "THE DISTRIBUTION--Certain Federal Income
Tax Consequences" and "Legal Matters" and to the filing of this opinion as an
Exhibit to the Registration Statement. In giving this consent, we do not admit
that we come within the category of persons whose consent is required under
Section 7 of the Securities Act or the rules and regulations of the Commission
thereunder.
Very truly yours,
Miller, Nash, Wiener, Hager & Carlsen LLP
<PAGE>
[EPITOPE LETTERHEAD]
[date]
Miller, Nash, Wiener, Hager & Carlsen LLP
111 S.W. Fifth Avenue, Suite 3500
Portland, Oregon 97204
Subject: Proposed Section 355 Spin-off of Agritope, Inc.
Gentlemen:
In connection with the distribution (the "Distribution") of
the stock of Agritope, Inc. ("Agritope") to the shareholders of Epitope, Inc.
("Epitope") under Section 355 of the Internal Revenue Code (the "Code") and as
described in the Information Statement/Prospectus filed as part of the
Registration Statement on Form S-1 (Registration No. 333-34597) with the
Securities and Exchange Commission, Epitope has requested that its counsel,
Miller, Nash, Wiener, Hager & Carlsen LLP ("Miller Nash"), render an opinion as
the federal income tax consequences of the Distribution to Epitope and to
Epitope shareholders. Miller Nash would not render such opinion but for certain
factual representations from Epitope and Agritope. Capitalized terms not
otherwise defined in this letter have the meanings given to them in the
Information Statement/Prospectus.
This letter sets forth certain representations in connection
with your tax opinion in connection with the Distribution. Epitope, on its own
behalf and on behalf of Agritope, hereby makes the following representations to
Miller Nash with the intention that Miller Nash rely on such representations in
rendering its opinion as to the federal income tax consequences of the
Distribution. Epitope and Agritope represent that to the best knowledge and
belief of the management of Epitope and Agritope:
1. The facts that relate to the Distribution and the related
transactions pursuant to the Separation Agreement dated as of September
--, 1997 (the "Agreement"), described in the Information
Statement/Prospectus are true, correct, and complete in all material
respects.
2. The Distribution will be consummated in compliance with the
material terms of the Agreement and none of the material terms and
conditions of the Agreement have been waived or modified and Epitope
has no plan or intention to waive or modify any such material term or
condition.
3. Agritope has agreed to issue --- shares of Agritope stock
in a private placement to certain investors for between $6 and $7 per
share, or an aggregate price of $--- million (the "Private Placement")
subsequent to the Distribution, but as part
- 1 -
<PAGE>
of an overall plan. The Distribution is conditioned on Agritope
receiving payments in escrow prior to the Distribution for financing in
an amount the Epitope board of directors deems sufficient to support
the operations of Agritope as a separate business for a period of not
less than two years.
4. The primary purpose of the Distribution is to allow
Agritope to raise immediately needed working capital through the sale
of its own equity securities. Epitope believes that equity financing
for Agritope can only be accomplished if Agritope becomes an
independent public company.
5. Agritope is a majority owner of Vinifera, Inc.
("Vinifera"). Prior to the Distribution, Agritope offered to exchange
up to an aggregate of ---- shares of Agritope Stock for shares of
Vinifera preferred stock and Vinifera common stock (together "Vinifera
Stock") held by minority holders of Vinifera. The exchange of Agritope
Stock for Vinifera Stock will immediately follow the Distribution.
6. As a result of the Private Placement and the Vinifera Stock
exchange, the Agritope Stock distributed to Epitope's shareholders
in the Distribution will represent approximately percent of all the
Agritope Stock outstanding after completion of the Distribution and the
two subsequent transactions.
7. No property other than Agritope Stock will be distributed
in the Distribution.
8. The fair market value of the Agritope Stock to be
distributed is less than the income tax cost basis of the Agritope
Stock in the hands of Epitope.
9. All shares of Agritope Stock held by Epitope will be
distributed. Epitope will make a distribution to holders of record of
Epitope Stock, of one share of Agritope Stock for every shares of
Epitope Stock.
10. Epitope and Agritope have no accumulated earnings and
profits at the beginning of their respective tax year and expect to
have no current earnings and profits for the current tax year.
11. There is no plan or intention by any shareholder who owns
5 percent or more of the Epitope Stock, and the management of Epitope,
to the best of its knowledge, is not aware of any plan or intention on
the part of any particular remaining shareholder or security holder of
Epitope to sell, exchange, transfer by gift, or otherwise dispose of
any stock in, or securities of, either Epitope or Agritope after the
Distribution.
12. At the time of the Distribution, all outstanding Agritope
Stock will be held by Epitope. Epitope will distribute all of the
Agritope Stock to its shareholders of record at the time of the
Distribution. Subsequently, Agritope will exchange newly issued
Agritope Stock for Vinifera shares, and will raise capital through the
Private
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<PAGE>
Placement. Neither the exchange nor the Private Placement could occur
without the successful completion of the Distribution.
13. Both Epitope and Agritope have been actively engaged in a
separate trade or business for more than the five-year period ending
with the date of the Distribution and neither such active trade or
business was acquired within such five-year period in a taxable
transaction.
14. After the Distribution, both Agritope and Epitope will
continue to conduct their respective active businesses.
15. There is no intercorporate indebtedness existing between
Agritope and Epitope that was issued, acquired, or will be settled at a
discount.
16. Neither Agritope nor Epitope is an investment company as
defined in Internal Revenue Code sections 368(a)(2)(f)(iii) and (iv).
17. The payment of cash in lieu of fractional shares of
Agritope common stock is solely for the purpose of avoiding the expense
and inconvenience to Agritope of issuing fractional shares and does not
represent separately bargained-for consideration.
18. We will promptly and timely notify Miller Nash if, for any
reason, whatever, any of the above representations are not correct
immediately prior to the Distribution.
Insofar as any of the foregoing representations pertain to any
person other than Epitope or Agritope, the representations are only as to the
knowledge of the undersigned without specific inquiry. You are authorized to
rely on the foregoing representations in issuing your tax opinion in connection
with the Distribution.
Very truly yours,
EPITOPE, INC.
By:---------------------------------------
Its:--------------------------------------
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TRANSITION SERVICES AND FACILITIES AGREEMENT
This TRANSITION SERVICES AND FACILITIES AGREEMENT (this "Agreement"),
dated as of December 1, 1997, is between EPITOPE, INC., an Oregon corporation
("Epitope"), and AGRITOPE, INC., a Delaware corporation ("Agritope").
Agritope desires to engage Epitope to provide certain services and
facilities for Agritope, and Epitope desires to provide such services and
facilities for Agritope, on the terms and conditions set forth herein.
Capitalized terms not otherwise defined shall have the meanings given
in Section 6.
Epitope and Agritope agree as follows:
1. Services. Agritope hereby engages Epitope to provide Services to
Agritope at such times as Agritope may reasonably request. In performing
Services, Epitope shall use the same degree of care that it uses in connection
with its own business. Nothing in this Agreement shall require Epitope to
provide Services at a time or in a manner that would interfere with the normal
conduct of Epitope's business.
2. Facilities. Epitope hereby agrees to provide Facilities to Agritope
until such time as Agritope relocates its office and research and development
operation to other leased Facilities.
3. Subcontractors. With Agritope's consent, which shall not be
unreasonably withheld, Epitope may engage third parties to provide Services
under this Agreement to Agritope. Epitope may do so without Agritope's consent
for Services usually provided to Epitope by third parties.
4. Payments for Services and Facilities.
4.1 Services Payments. Agritope shall reimburse Epitope for all
Services Costs. After the end of each month or such other period as the parties
may agree, Epitope shall submit an invoice to Agritope for Services Costs
incurred during the period. Any delay in delivering the invoice shall not
relieve Agritope of its reimbursement obligations. Agritope shall pay the amount
of each invoice within 10 days after receiving it. Amounts not paid when due
shall, at Epitope's option, accrue late charges at the rate of 1.5 percent per
month.
<PAGE>
4.2 Calculation of Services Costs. "Services Costs" are all
direct and indirect costs incurred by Epitope in providing Services, whether
paid or accrued. Services Costs shall be determined using Epitope's internal
cost accounting system. Epitope shall allocate costs of personnel who provide
services to both Epitope and Agritope, and indirect costs such as general and
administrative costs, on a reasonable basis consistent with Epitope's internal
cost accounting system. Upon reasonable notice to Epitope, Agritope personnel
shall have the right to review Epitope records to verify the determination of
Services Costs.
4.3 Facilities Payment. Agritope shall pay Epitope a monthly fee
of $15,945 for use of the Facilities on the first day of each month.
5. Term and Termination.
5.1 Initial Term and Renewals. The initial term of this Agreement
shall expire on December 31, 1997, but this Agreement shall continue in effect
for successive one-month terms thereafter unless either party gives the other
written notice of termination at least 15 days before expiration of any term.
5.2 Termination. Either party may terminate this Agreement
effective immediately upon written notice to the other party if such other party
fails to perform any of its material obligations under this Agreement and such
failure continues for a period of 60 days, or 10 days in the case of a failure
to make payment, after written notice thereof from the non-breaching party.
6. Definitions. Capitalized terms not otherwise defined in this
Agreement shall have the respective meanings set forth below:
6.1 "Affiliate" of a Person means a Person that directly, or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with such Person.
6.2 "Agritope Personnel" means Agritope, its successors and
assigns, and the directors, officers, employees, and agents thereof.
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6.3 "Facilities" means the portion of Epitope's office space and
research and development facilities in Beaverton, Oregon, consisting of
approximately 6,300 square feet of office, manufacturing and laboratory space
currently used by Agritope and the related fixtures and furniture.
6.4 "Force Majeure" means any act of nature, accident, explosion,
fire, storm, earthquake, flood, drought, peril of the sea, riot, embargo, war,
foreign, federal, state or municipal order of general application, seizure,
requisition, allocation, failure or delay of transportation, shortage of
supplies, equipment, fuel or labor, or other circumstance or event beyond the
reasonable control of affected party.
6.5. "Services" means the services listed in Schedule A, as
amended from time to time, and any other services requested by Agritope that
Epitope agrees to provide.
6.6. "Services Costs" has the meaning given in Section 4.2.
7. General.
7.1 Amendments. Any modification of this Agreement or waiver of
terms must be in writing and signed by the party to be bound.
7.2 Assignment. Except as provided below or in Section 3, neither
may assign its rights or delegate its obligations under this Agreement without
the written consent of the other party. Epitope may assign its rights and
delegate its obligations to an Affiliate or a successor to Epitope's business if
the Affiliate or successor assumes all of Epitope's obligations under this
Agreement.
7.3 Attorney Fees. In any litigation concerning this Agreement,
the prevailing party shall be entitled to recover all reasonable expenses of
litigation, including reasonable attorney fees at trial and on any appeal or
petition for review.
7.4 Execution in Counterparts. This Agreement may be executed in
counterparts which together shall constitute one instrument.
7.5 Entire Agreement. This Agreement constitutes the entire
agreement and understanding between the parties with respect to its subject
matter and supersedes any prior agreement or understanding.
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7.6 Force Majeure. Neither party shall be liable for any failure
or delay in performing its obligations, other than payment obligations, caused
by Force Majeure. The other party may, however, terminate this Agreement as
permitted in Section 5.2 if such failure or delay continues for more than 60
days.
7.7 Governing Law. This Agreement shall be governed by and
construed in accordance with Oregon law.
7.8 Headings. Headings in this Agreement are for convenience only
and shall not affect its meaning.
7.9 No Agency. Nothing in this Agreement creates any partnership,
employment or agency relationship between the parties. Neither party shall have
the right to act on behalf of or bind the other, and neither shall take any
action that could lead a third party to believe it has the right to do so.
7.10 Notices. Notices under this Agreement shall be in writing,
shall refer specifically to this Agreement, and shall be personally delivered,
sent by electronic facsimile transmission promptly confirmed by mail, or sent by
registered or certified mail, return receipt requested, postage prepaid, in each
case to the respective address or facsimile number specified below (or such
other address or number as may be specified by notice to the other party):
Epitope, Inc.
8505 S.W. Creekside Place
Beaverton, Oregon 97008
Attention: President
Fax: (503) 641-8665
Agritope, Inc.
8505 S.W. Creekside Place
Beaverton, Oregon 97008
Attention: President
Fax: (503) 520-6196
Any notice or communication given in conformity with this Section 7.10 shall be
deemed to be effective when received by the addressee, if delivered by hand or
electronic facsimile transmission, or three days after mailing, if mailed.
7.11 Severability. If any provision of this Agreement is held
invalid or unenforceable in any jurisdiction, then, to the fullest extent
permitted by law, (a) the affected provision shall remain in full force and
effect in all other jurisdictions, (b) all other provisions shall remain in full
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force and effect, and (c) the parties will use their best efforts to find and
employ other means to achieve the same or substantially the same result as that
contemplated by the provision held invalid or unenforceable.
The parties have executed this Agreement as of the date first stated
above.
EPITOPE, INC.
By /s/ John W. Morgan
President and Chief
Executive Officer
AGRITOPE, INC.
By /s/ Adolph J. Ferro
Chairman, President and Chief
Executive Officer
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SCHEDULE A
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1.Management information services consisting of software support and
hardware maintenance at the rate of $1,690 per month.
2. Telephone services based on third-party billings.
3. Equipment maintenance, other than computer hardware, on call at the rate
of $25 per hour.
4. Front desk receptionist services at no charge (Agritope will provide its
own telephone receptionist services).
TAX ALLOCATION AGREEMENT
This agreement (the "Agreement") dated as of December 1, 1997, is being
entered into by Epitope, Inc., an Oregon corporation, and Agritope, Inc., a
Delaware corporation, in connection with a Separation Agreement (the "Separation
Agreement") dated as of December 1, 1997 by and between such parties.
RECITALS
A. Agritope is currently a wholly owned subsidiary of Epitope, and, as
such, Epitope and Agritope have joined in filing consolidated federal Tax
Returns (as defined below) and certain consolidated, combined or unitary state,
local, or foreign Tax Returns;
B. Pursuant to the Separation Agreement, Epitope will, among other
things, distribute to holders of its common stock all the issued and outstanding
common stock of Agritope, together with associated preferred stock purchase
rights (the "Distribution");
C. Following the Distribution, Epitope and Agritope will be operated as
independent public companies, and Agritope will no longer be a wholly owned
subsidiary of Epitope; and
D. Epitope and Agritope want to provide for the allocation between the
Epitope Group and the Agritope Group (both defined below) of all
responsibilities, liabilities, and benefits relating to or affecting Taxes
(defined below) paid or payable by either of them for all taxable periods,
whether beginning before or after the Distribution Date (defined below) and to
provide for certain other matters.
ACCORDINGLY, in consideration of the foregoing and the mutual covenants
and agreements contained in this Agreement, Epitope and Agritope agree as
follows:
1. ADDITIONAL DEFINITIONS; CERTAIN TAX PERIODS.
1.1 ADDITIONAL TAX DEFINITIONS. As used in this Agreement, capitalized
terms defined immediately after their use will have the respective meanings so
provided, and the following additional terms will have the following meanings
(such meanings to be equally applicable to both the singular and plural forms of
the terms defined):
"Agritope" means Agritope, Inc., a Delaware corporation, the successor
corporation in that certain merger with Agritope, Inc., an Oregon corporation,
dated December 1, 1997.
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"Agritope Group" means Agritope and all of its present and future
subsidiaries.
"Agritope Taxes" means, subject to Section 1.3, (i) all Taxes
imposed on, assessed against, collected with respect to, or measured by the net
or gross income, profits, receipts, assets, equity, or other basis related to
the Agritope Group or its respective assets or operations that arise in or are
attributable to any and all Pre-Closing Periods and Post-Closing Periods and
(ii) all Reserved Taxes.
"Agritope Tax Returns" means all Tax Returns filed or required to
be filed by or with respect to any member of the Agritope Group or its assets or
operations (including any consolidated, combined, or unitary Tax Returns).
"Code" means the Internal Revenue Code of 1986, as amended from
time to time.
"Distribution Date" means the date on which Epitope distributes
the stock of Agritope in accordance with the Separation Agreement.
"Epitope" means only Epitope, Inc., an Oregon corporation, as a
separate legal entity, excluding all other affiliated corporations.
"Epitope Group" means Epitope and all of its present and future
subsidiaries (excluding members of the Agritope Group).
"Epitope Taxes" means, subject to Section 1.3, all Taxes imposed
on, assessed against, collected with respect to, or measured by the net or gross
income, profits, receipts, assets, equity, or other basis related to the Epitope
Group or its respective assets or operations that arise in or are attributable
to any and all Pre-Closing Periods, excluding any Reserved Tax and excluding any
Agritope Taxes.
"Pre-Closing Periods" means all taxable periods (i) ending on or
before the Distribution Date and (ii) the portion, to and including the
Distribution Date, of any taxable period that begins on or before the
Distribution Date and ends after the Distribution Date.
"Post-Closing Periods" means all taxable periods (i) beginning
after the Distribution Date and (ii) the portion after the Distribution Date of
any taxable period that begins on or before the Distribution Date and ends after
the Distribution Date.
"Reserved Tax" means a Tax liability separately accrued or
deferred on the balance sheet of any member of the Agritope Group as of the
Distribution Date. Taxes will be accrued on such balance sheet in a manner
consistent with past practices.
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"Tax" means any and all liability for any taxes imposed on the
income or assets of a corporation, including without limitation, any liability
under the Code and all federal, state, local, and foreign income, alternative
minimum, franchise, profits, gross receipts, and unitary taxes or similar taxes
or other fees or assessments imposed with respect to such items irrespective of
the basis on which such taxes are measured and any interest, penalties, or
additions in respect of such tax.
"Tax Return" means any return, report, information return, or
other documents (including any related supporting schedules, statements or
information) filed or required to be filed with any tax authority or
governmental entity in connection with the determination, assessment, or
collection of any Taxes of any party or the administration of any laws,
regulations, or administrative requirements relating to any such Taxes.
1.2 TAX PERIODS INCLUDING PRE-CLOSING PERIOD AND POST-CLOSING PERIOD
ACTIVITY. For purposes of determining Agritope Taxes, for Tax periods that begin
on or before the Distribution Date and end after the Distribution Date, such
Taxes will be determined on the basis of an interim "closing of the books"
computation as of the end of the Distribution Date, and any net operating losses
(or other tax attributes) will be subject to Section 1.3. With respect to the
Epitope federal consolidated income tax return for the taxable year including
the Distribution Date, appropriate allocation and cutoff of income or loss will
be made as required in the federal consolidated income tax return regulations.
Any subsequent adjustments occurring with respect to such period, including the
Distribution Date, will be appropriately allocated to the Pre-Closing Period and
the Post-Closing Period based on a simulated Tax Return for each period.
1.3 PRE-CLOSING PERIOD NET OPERATING LOSSES.
(a) In accordance with Treasury Regulations Section 1.1502-11(b), net
operating losses of the Agritope Group will not be used to offset gain or income
recognized by Epitope in connection with the Distribution.
(b) Subject to the limitations of Section 1.3((a)), any net operating
losses (or other tax attributes) of a member of the Agritope Group or Epitope
Group that arise in a Pre-Closing Period will be available to offset taxable
income of members of the other group for such Pre-Closing Period under
applicable federal or state law. The provisions of this Section 1.3((b)) will
apply to any net operating losses (or other tax attributes) existing on the
Distribution Date and such net operating losses (or tax attributes) that may
arise subsequently on audit or examination of any Pre-Closing Period. No member
of a group will be liable to a member of the other group under Section 2 for
using net operating losses (or other tax attributes) generated by members of
such other group.
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2. INDEMNIFICATION AND PAYMENT
2.1 PAYMENT OF AND INDEMNIFICATION FOR TAXES.
(a) Epitope will pay when due, without setoff, and be responsible for
all Epitope Taxes assessed against it by any jurisdiction, including any Taxes
incurred by the Epitope Group in connection with the Distribution. Epitope will
indemnify and hold harmless the Agritope Group against any and all such Taxes.
(b) Agritope will pay when due, without setoff, and be responsible for
all Agritope Taxes assessed against it by any jurisdiction, including, without
limitation, any liability imposed subsequently for Agritope Taxes for
Pre-Closing Periods. Agritope will indemnify and hold harmless the Epitope Group
against any such Taxes.
(c) No member of the Epitope Group will be obligated to indemnify or
hold harmless any member of the Agritope Group for any decrease to any net
operating loss carryovers or credit (or the carryovers of any other tax
attributes) available to any member of the Agritope Group resulting from
adjustments to any item of income, deduction, credit, or exclusion on Tax
Returns for which Epitope is responsible (including the Epitope Consolidated
Returns, as defined below).
(d) No member of the Agritope Group will be obligated to indemnify or
hold harmless any member of the Epitope Group for any increase to any net
operating loss carryovers or credit (or the carryovers of any other tax
attributes) available to any member of the Agritope Group.
3. REFUNDS
3.1 EPITOPE REFUNDS. Agritope will promptly assign and remit (or cause to
be promptly assigned and remitted) to Epitope an amount equal to any refunds of
or credits against any Taxes received and realized by Agritope (including
interest, if any) to the extent attributable to Epitope Taxes, other than a
refund or credit (or the right to a refund or credit) that is reflected on the
balance sheet of Agritope as of the Distribution Date (a "Balance Sheet
Refund").
3.2 AGRITOPE REFUNDS. Epitope will promptly assign and remit (or cause to
be promptly assigned and remitted) to Agritope an amount equal to all Balance
Sheet Refunds.
3.3 CARRYBACK FROM AN AGRITOPE POST-CLOSING PERIOD RETURN TO ANY EPITOPE
SEPARATE, CONSOLIDATED OR COMBINED FEDERAL OR STATE TAX RETURN. Unless: (i)
Epitope, in its sole and absolute discretion, consents to do so or (ii) such
carryback is specifically required by law, Agritope will not carry back any
losses or credits accruing
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after the Distribution Date in any Post-Closing Period to any Epitope separate,
consolidated, or combined federal or state Tax Return. Agritope will make any
elections and take all such actions necessary to avoid and relinquish any such
carryback pursuant to Code Section 172(b)(3) and, to the extent feasible, any
similar provision of any state, local, or foreign law. Even if such carryback is
required by law, the Epitope Group will make no payment to the Agritope Group,
and the Agritope Group will be entitled to no refund to the extent that the use
of such carryback prevents the Epitope Group or its affiliates from using a
credit or loss that it would otherwise use in the year or years to which the
Agritope credit or loss is carried back. To the extent that the Epitope Group's
utilization of such loss or credit does not have such effect, however, the
Epitope Group will pay to Agritope an amount equal to the reduction in its Tax
liability for such year that is attributable to the utilization of such Agritope
Group credit or loss.
4. TAX RETURNS
4.1 PREPARATION AND FILING.
(a) Epitope will file (upon execution of such Tax Return by an
authorized officer of Agritope, which authorization will not be unreasonably
withheld) all Agritope Group Tax Returns for Pre-Closing Periods ("Agritope
Group Pre-Closing Returns"), including, without limitation, all Agritope Group
Tax Returns that are (or are a part of) a consolidated or combined Tax Return
that includes entities other than members of the Agritope Group, even if the Tax
period with respect to such other entities ends after the Distribution Date
("Epitope Consolidated Returns").
(b) Epitope will prepare the Epitope Consolidated Returns (to the
extent they relate to the Agritope Group or its assets or operations) and the
Agritope Group Pre-Closing Returns in a manner that: (i) is consistent with
prior practice (including without limitation as to Tax and accounting methods,
conventions, and elections) and (ii) apportions items equitably from period to
period consistent with Section 1.2. Epitope will cause the Epitope Consolidated
Returns to include and reflect the activities, transactions, and operations of
the Agritope Group for all Pre-Closing Periods.
(c) Agritope will file all Agritope Group Tax Returns required to be
filed for all Post-Closing Periods other than Agritope Group Pre-Closing Returns
and Epitope Consolidated Returns (the "Agritope Group Post-Closing Returns").
However, with respect to an Agritope Group Post-Closing Return that is for (i)
Taxes of Agritope and (ii) a Tax year with respect to the Agritope Group that
begins on or before the Distribution Date (an "Agritope Overlap Return"),
Agritope will (a) have a national "Big 6" accounting firm prepare the Agritope
Overlap Return consistent with prior practice, including, without limitation, as
to Tax and accounting methods, conventions, and elections and (b) provide
Epitope with an opportunity to review and comment on such Tax Return at least
four weeks before its due date, including extensions. The parties will use all
reasonable efforts to resolve any disagreements with respect to any such Tax
Return as soon as possible. If
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they cannot resolve the matter before the due date for such Agritope Overlap
Return, including extensions, Agritope may nevertheless file such Tax Return.
Subsequently, the parties will refer the matter to a mutually acceptable
accounting firm (other than the firm that prepared the returns) of nationally
recognized standing (an "Independent Firm") whose fees are to be borne by
Agritope and Epitope equally. The Independent Firm will seek to resolve the
matter as soon as practicable. Upon the Independent Firm's determination, an
amended Agritope Overlap Return will be filed in accordance with such
determination if it differs materially from the Tax Return filed originally.
(d) Agritope, upon its request, will be entitled to copies of Agritope
Group Pre-Closing Returns and Epitope Consolidated Returns following the filing
to the extent they relate to any member of the Agritope Group.
4.2 TAX RETURN PAYMENTS. Amounts shown due on any Agritope Group Tax
Returns will be timely paid by the party responsible for such Taxes as
determined in accordance with Section 2 of this Agreement (the "Responsible
Party") regardless of which party is obligated to prepare or file such Agritope
Group Tax Return under this Section 4. The party obligated to file a particular
Agritope Group Tax Return (the "Filing Party") has the right, but not the
obligation unless it is the Responsible Party, to pay the Tax shown due, in
which case the Responsible Party will immediately reimburse the Filing Party for
the payment of such Tax.
5. INFORMATION EXCHANGE AND CONFIDENTIALITY
5.1 COOPERATION. Upon the reasonable request of any party to this
Agreement, the other party will promptly provide the requesting party with such
cooperation and assistance, documents, and other information as may reasonably
be requested by such party in connection with: (i) the preparation and filing of
any original or amended Tax Return; (ii) the conduct of any audit or other
examination or any judicial or administrative proceeding involving to any extent
Taxes or Tax Returns within the scope of this Agreement; or (iii) the
verification by a party of an amount payable to or receivable from another party
under this Agreement (collectively, "Tax Data"). Such cooperation and assistance
will include, without limitation: (i) the provision on demand of books, records,
Tax Returns, documentation, or other information relating to any relevant Tax
Return; (ii) the execution of any document that may be necessary or reasonably
helpful in connection with the filing of any Tax Return or in connection with
any audit, proceeding, suit, or action of the type generally referred to in the
preceding sentence; (iii) the prompt and timely filing of appropriate claims for
refund; and (iv) the use of reasonable efforts to obtain any documentation from
a governmental authority or a third party that may be necessary or helpful in
connection with the foregoing (collectively, "Tax Documentation"). Each party
will make its employees and facilities available on a mutually convenient basis
to facilitate such cooperation.
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5.2 RETENTION. The Tax Data and the Tax Documentation will be retained
until the later of (i) 90 days after the expiration of the applicable statute of
limitations (including any waivers or extensions for any Taxes or net operating
loss carryovers available in any tax year); (ii) eight (8) years after the
Distribution Date; and (iii) any retention period required by law or pursuant to
any record retention agreement; provided, however, if an audit, examination,
investigation, or other proceeding is instituted before the expiration of the
applicable statute of limitations (or in the event of any claim under this
Agreement), such Tax Data and Tax Documentation will be retained until there is
a final determination and the time for any appeal has expired.
5.3 EXPENSES. Subject only to the provisions of Section 6, each party will
cooperate in the manner described in this Section 5 at its own expense.
5.4 NOTIFICATION OF CARRYOVERS. Epitope will undertake reasonable efforts
to notify Agritope of (i) any carryover of losses or credits that could be
partially or totally attributed to and carried over by Agritope pursuant to
Treasury Regulations Section 1.1502-79 or any similar law, rule or regulation
and (ii) any subsequent adjustment that could affect any such item.
5.5 NOTIFICATION TO SHAREHOLDERS. Epitope will undertake reasonable efforts
to provide each Epitope shareholder who receives Agritope Common Stock pursuant
to the Separation Agreement with the information necessary to permit such
shareholder to properly report the receipt of shares of Agritope stock in the
Distribution for federal income tax purposes.
5.6 CONFIDENTIALITY. Except as required by law or with the prior written
consent of the other party, all (i) Tax Returns, (ii) Tax Data, (iii) Tax
Documentation, (iv) similar documents, schedules, work papers and items, and (v)
all information contained in such items which are within the scope of this
Agreement will be kept confidential by the parties and their representatives,
will not be disclosed to any other person or entity, and will be used only for
the purposes provided in this Agreement.
6. CONTESTS AND AUDITS
6.1 NOTICE AND COOPERATION.
(a) If any claim, demand, assessment (including a notice of proposed
assessment), or other assertion, whether oral or written, is made for Taxes
("Tax Claim") against a party entitled to indemnification with respect to such
Taxes pursuant to this Agreement (an "Indemnitee"), or if the Indemnitee
receives any notice, whether oral or written, from any jurisdiction with respect
to any current or future audit, examination, investigation or other proceeding
("Proceeding"), the Indemnitee will promptly notify the party obligated to so
indemnify the Indemnitee (the "Indemnitor") of such Tax Claim or
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notice of a Proceeding. If an Indemnitor receives notice of a Tax Claim or
notice of a Proceeding, whether oral or written, for which the Indemnitor is
responsible under this Agreement, such Indemnitor will promptly notify the
Indemnitee of such claim, demand, or assessment if such Tax Claim or Proceeding
could directly or indirectly affect (adversely or otherwise) any Indemnitee,
determined without regard to this Agreement.
(b) The party controlling the defense, settlement, or compromise of
any Proceeding or any Tax Claim with respect to a Tax Return or any Tax (as
determined pursuant to Section 6.2) will keep the other party duly informed of
the progress of such Proceeding or Tax Claim to the extent such Proceeding or
Tax Claim could directly or indirectly affect (adversely or otherwise) such
other party, determined without regard to this Agreement.
(c) If the Indemnitor controls the defense, settlement or compromise
of any Proceeding or Tax Claim for which it is responsible, the Indemnitee will
nevertheless cooperate in such defense, settlement, or compromise as and to the
extent reasonably requested by Indemnitor. Such cooperation will be at
Indemnitor's expense (on a current basis), including all liabilities, costs, and
expenses (including reasonable attorney fees and accounting fees but excluding
in-house legal or tax assistance) incurred in connection with such cooperation
and authorized by the Indemnitor.
(d) If the Indemnitor does not control the defense, settlement, or
compromise of any Proceeding or Tax Claim for which it is responsible, it will
nevertheless (i) cooperate at its own expense in such defense, settlement, or
compromise to the extent reasonably requested by Indemnitee, and (ii) indemnify
(on a current basis) the Indemnitee against any reasonable liabilities, costs,
and expenses (including reasonable attorney and accounting fees but excluding
in-house legal or tax assistance) arising out of or incident to the Proceeding
or Tax Claim, including without limitation, those incurred in connection with
the defense, settlement, or compromise of such Proceeding or Tax Claim.
6.2 CONTROL.
(a) Except as otherwise provided in Section 6.2((b)) or Section 6.3,
the Indemnitor will have the right to control the defense, settlement, or
compromise of any Proceeding or Tax Claim to the extent that it may be liable
under Section 2 of this Agreement.
(b) Notwithstanding the provisions of Section 6.2((a)) (and subject to
the provisions of Section 6.3):
(1) an Indemnitee (in lieu of the Indemnitor) will have the right
(but not the obligation) to control the defense, compromise, or settlement of
any Proceeding or Tax Claim if the Indemnitor fails to do so or requests the
Indemnitee to do so;
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(2) an Indemnitee (in lieu of the Indemnitor) will have the right
(but not the obligation) to control the defense, compromise, or settlement of
any Proceeding or Tax Claim if the Indemnitor is (a) the subject of a voluntary
bankruptcy, (b) an adjudicated bankrupt, or (c) the subject of an involuntary
petition in bankruptcy that has been filed and which has not been discharged
within 90 days;
(3) Epitope will control the defense, settlement, or compromise
of any Proceeding or Tax Claim with respect to any Epitope Consolidated Return
and any Agritope Group Pre-Closing Return; and
(4) Agritope will control the defense, settlement, or compromise
of any Proceeding or Tax Claim with respect to any Agritope Group Post-Closing
Return, including any Agritope Overlap Return (but exclusive of any Agritope
Group Pre-Closing Return). With respect to Agritope Overlap Returns, Epitope
may, at its own expense, attend meetings or conferences with the Tax authorities
and receive copies of all relevant correspondence.
6.3 APPROVAL.
(a) The Indemnitee will not settle or compromise any Proceeding or Tax
Claim without the prior consent of the Indemnitor (which consent will not be
unreasonably withheld) if such settlement or compromise will result in an
obligation of the Indemnitor pursuant to this Agreement.
(b) Agritope will not settle or compromise any Proceeding or Tax Claim
with respect to an Agritope Group Post-Closing Return (including an Agritope
Overlap Return) involving a Tax period beginning before the Distribution Date
without the prior consent of Epitope, which consent will not be unreasonably
withheld.
(c) A party receiving a request for consent pursuant to this Section
6.3 will respond as soon as practicable and in no event after the tenth day
preceding the expiration of the period for appealing the assessment or claim.
The parties will seek to resolve any dispute with respect to such matter as
quickly as possible. However, if the parties are unable to resolve such dispute
promptly, the matter will be referred to an Independent Firm for resolution.
7. MISCELLANEOUS
7.1 EFFECTIVENESS AND TERM. This Agreement will be effective from and after
the Distribution Date and will survive until the later of (i) 90 days after the
expiration of any applicable statute of limitations (including any waivers or
extensions) related to any Taxes or carryovers of net operating losses or
credits to any taxable year or (ii) the final conclusion of any Proceeding,
including any applicable litigation and appeals of any liability for Taxes;
provided, however, that this Agreement will terminate immediately upon a
termination of the Separation Agreement.
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7.2 ENTIRE AGREEMENT. This Agreement contains the entire agreement among
the parties with respect to the subject matter. This Agreement terminates and
supersedes, on a prospective basis only, all Tax agreements (other than this
Agreement) between the Epitope Group and the Agritope Group (or any other
predecessor). However, nothing in the preceding sentence will limit or reduce
(i) the obligation of Agritope for Reserved Taxes as separately accrued on the
balance sheet of the Agritope Group as of the Distribution Date or (ii) the
right of the Agritope Group to any Balance Sheet Refund.
7.3 GOVERNING LAW. This Agreement will be governed by and construed and
enforced in accordance with the laws of the State of Oregon (regardless of the
laws that might otherwise govern under applicable principles of conflict of
laws) as to all matters, including, without limitation, matters of validity,
construction, effect, performance, and remedies.
7.4 JURISDICTION AND VENUE. Subject to the arbitration provisions of the
Separation Agreement, each party consents to the personal jurisdiction of the
state and federal courts located in the State of Oregon and waives any argument
that venue in any such forum is not convenient or proper.
7.5 NOTICES. Notices under this Agreement will be in writing, will refer
specifically to this Agreement, and will be personally delivered, sent by
electronic facsimile transmission promptly confirmed by mail, or sent by
registered or certified mail, return receipt requested, postage prepaid, in each
case to the respective address or facsimile number specified below (or such
other address or number as may be specified by notice to the other party):
If to Epitope:
Epitope, Inc.
8505 SW Creekside Place
Beaverton, Oregon 97008
Attention: President
Fax: (503) 641-8665
If to Agritope:
Agritope, Inc.
8505 SW Creekside Place
Beaverton, Oregon 97008
Attention: President
Fax: (503) 520-6196
Any notice or communication given in conformity with this Section
7.5 will be deemed to be effective when received by the addressee if delivered
by hand or electronic facsimile transmission, or three days after mailing if
mailed.
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7.6 MODIFICATION OF AGREEMENT. No modification, amendment, or waiver of any
provision of this Agreement will be effective unless in writing and signed by
each of the parties and then such modification, amendment, or waiver will be
effective only in the specific instance and for the purpose for which given.
7.7 SUCCESSORS AND ASSIGNS. A party's rights and obligations under this
Agreement may not be assigned or transferred without the prior written consent
of the other party. Subject to the foregoing, this Agreement will be binding
upon and inure to the benefit of the parties, the Epitope Group, the Agritope
Group, and their respective successors and permitted assigns and will survive
any acquisition, disposition, or other corporate restructuring or transaction
involving either party.
7.8 NO THIRD-PARTY BENEFICIARIES. This Agreement is solely for the benefit
of the parties to this Agreement and should not be deemed to confer upon third
parties any remedy, claim, liability, reimbursement, claim of action, or other
right in excess of those existing without this Agreement.
7.9 TITLES AND HEADINGS. The titles and headings to Sections are inserted
for convenience of reference only and are not intended to constitute a part of
or to affect the meaning or interpretation of this Agreement. Unless otherwise
indicated, Section references are to the relevant Sections in this Agreement.
7.10 SEVERABILITY. In case any one or more of the provisions contained in
this Agreement should be invalid, illegal, or unenforceable, the enforceability
of the remaining provisions will in no way be affected or impaired. If any such
term, provision, covenant, or restriction is held to be invalid, void, or
unenforceable, the parties will use their best efforts to find and employ
another means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant, or restriction.
7.11 NO WAIVER. Neither the failure nor any delay on the part of any party
to exercise any right under this Agreement will operate as a waiver, nor will
any single or partial exercise of any right preclude any other or further
exercise of the same or any other right, nor will any waiver of any right with
respect to any occurrence be construed as a waiver of such right with respect to
any other occurrence.
7.12 SURVIVAL OF OBLIGATIONS. Notwithstanding anything in this Agreement or
the Separation Agreement to the contrary, this Agreement will survive the
consummation of the transactions contemplated by the Separation Agreement and
will continue throughout the period ending on the later of (i) 90 days after the
expiration of all applicable statutes of limitation (including extensions) or
(ii) the final determination of (and the expiration of the time to appeal) any
Proceeding relating to Taxes or Tax matters covered by (or any claim under) this
Agreement and the payment of any corresponding obligation.
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7.13 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which will be considered one and the same agreement, and
will become a binding agreement when one or more counterparts have been signed
by each party and delivered to the other party.
As evidence of their agreement, the parties have caused this Agreement to
be executed and delivered as of the date first written above.
EPITOPE, INC. AGRITOPE, INC.
By: /s/ John W. Morgan By: /s/ Adolph J. Ferro
Its: President and Its: Chairman, President and
Chief Executive Officer Chief Executive Officer
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EMPLOYEE BENEFITS AGREEMENT
THIS EMPLOYEE BENEFITS AGREEMENT (this "Agreement") is entered
into by and between Epitope, Inc., an Oregon corporation ("Epitope"), and
Agritope, Inc., a Delaware corporation ("Agritope"), as of December 1, 1997.
RECITALS
A. The board of directors of Epitope has determined that it is
in the best interests of Epitope and its shareholders to separate the businesses
of Epitope and Agritope.
B. In furtherance of the plan to separate the businesses,
Epitope and Agritope have entered into that certain Separation Agreement dated
December 1, 1997 (the "Separation Agreement"), pursuant to which Epitope will
make a dividend distribution to its shareholders (the "Distribution") of all the
issued and outstanding shares of Agritope common stock, par value $.01 per
share, including certain preferred stock purchase rights attached thereto, held
by Epitope, on the terms and conditions contained therein.
C. In connection with the Distribution, Epitope and Agritope
desire to provide for the allocation between them of assets, liabilities and
responsibilities with respect to certain employee compensation and benefit plans
and programs following the Distribution.
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements contained herein, Epitope and Agritope agree as
follows:
ARTICLE 1
DEFINITIONS
Capitalized terms shall have the meanings given below or
elsewhere in this Agreement, or as set forth in the Separation Agreement.
401(k) Retirement Plan: A defined contribution plan maintained
pursuant to Section 401(k) or 401(a) of the Code for Employees and their
beneficiaries. The following are specific 401(k) Retirement Plans:
(i) Agritope 401(k) Plan: The Agritope, Inc. 401(k)
Profit Sharing Plan to be adopted by Agritope prior
to the Distribution Date pursuant to Section 5.1(a)
of this Agreement.
(ii) Epitope 401(k) Plan: The Epitope, Inc. 401(k) Profit
Sharing Plan, in effect as of the date hereof.
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Additional Insurance Plans: Insurance plans providing
insurance benefits other than Medical/Dental Plan benefits to Employees,
including Life Insurance and Accidental Death and Dismemberment Insurance.
Agritope Board: The board of directors of Agritope.
Agritope Option Plan: The Agritope, Inc. 1997 Stock Award Plan
to be adopted pursuant to Section 3.4 of this Agreement.
Agritope Stock Distribution Value: See definition in Section
3.1(b).
Agritope Stock Plans: The Agritope Option Plan and the
Agritope Purchase Plan. Each Agritope Stock Plan will contain substantially the
same material provisions as the corresponding Epitope Plan.
Distribution Date: The effective date of the Distribution, as
determined by the Epitope board of directors.
Distribution Ratio: The number (which may be or include a
fraction) of shares of Agritope Stock to be issued in the Distribution to
Epitope shareholders for each share of Epitope Stock as determined by the
Epitope Board.
Employee: An individual who, on the Distribution Date, is an
employee of either Epitope or Agritope or any of its subsidiaries. There will be
two categories of Employees after the Distribution:
Agritope Employee: Any individual who is an employee
of Agritope or any of its subsidiaries immediately after the
Distribution.
Epitope Employee: Any individual who is an employee
of Epitope immediately after the Distribution.
Epitope Option Plans: The Epitope, Inc. Incentive Stock Option
Plan and the Epitope, Inc. 1991 Stock Award Plan.
ERISA: The Employee Retirement Income Security Act of 1974, as
amended, or any successor legislation.
Existing Agritope Option Plan: The Agritope, Inc. 1992 Stock
Award Plan.
Existing Epitope Option: Each unexercised option to purchase
Epitope Stock outstanding as of the close of business on the day before the
Distribution Date, issued pursuant to an Epitope Option Plan or the Existing
Agritope Option Plan.
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Medical/Dental Plan: A plan providing health benefits to
Employees and their dependents, including:
(i) Agritope Medical/Dental Plans: The Medical/Dental Plans to
be established by Agritope in accordance with Section 5.2 hereof and
(ii) Epitope Medical/Dental Plans: The Epitope Medical/Dental
Plans in effect as of the date hereof and continued by Epitope after
the Distribution Date.
Plan: Any plan, policy, arrangement, contract or agreement
providing compensation or benefits for any group of Employees or for any
individual Employee or the dependents or beneficiaries of any such Employee,
including without limitation any employee welfare and employee pension benefit
plans (as defined in ERISA) and any employee option plans. The term "Plan" as
used in this Agreement does not include any contract, agreement or understanding
entered into by Epitope or Agritope relating to settlement of actual or
potential employee-related litigation claims.
Purchase Plan: A stock-based Plan meeting the requirements of
Section 423 of the Code. The following are specific Purchase Plans:
(i) Agritope Purchase Plan: The Agritope, Inc. 1997
Employee Stock Purchase Plan to be adopted by Agritope prior
to the Distribution Date pursuant to Section 4.2.
(ii) Epitope Purchase Plan: The Epitope, Inc. 1993
Employee Stock Purchase Plan, as amended, in effect as of the
date hereof.
Qualified Beneficiary: An individual (or dependent thereof)
who either (1) experiences a "qualifying event" (as that term is defined in Code
Section 4980B(f)(3) and ERISA Section 603) while a participant in any
Medical/Dental Plan, or (2) becomes a "qualified beneficiary" (as that term is
defined in Code Section 4980B(g)(1) and ERISA Section 607(3)) under any
Medical/Dental Plan.
Service Time: The period taken into account under any Plan for
purposes of determining length of service or plan participation to satisfy
eligibility, vesting, benefit accrual and similar requirements under such Plan.
Welfare Plan: Any Plan that provides medical, health,
disability, accident, life insurance, death, dental or any other welfare
benefit, including, without limitation, any post-employment benefit.
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ARTICLE 2
EMPLOYMENT AND CREDITS
2.1 Allocation of Responsibilities on Distribution Date. On the
Distribution Date, except as otherwise agreed between the parties, Agritope
shall retain or assume, as the case may be, sole responsibility as employer for
Agritope Employees, and shall cause any Agritope Employee that is then a party
to any employment, change in control or other employment-related agreement with
Epitope to terminate such agreement effective as of the Distribution Date
(except confidentiality, indemnification, and similar agreements relating
primarily to past services to Epitope). Except as otherwise provided in this
Agreement, the fact that Agritope assumes or retains responsibility as employer
of Agritope Employees as of the Distribution Date shall not, of itself, cause
such employee to be deemed terminated under any Plan maintained by Epitope or
Agritope.
2.2 Service Time. For purposes of determining Service Time under any
Welfare Plan, Agritope shall credit each Agritope Employee with such Employee's
Service Time and original hire date as may be reflected in Epitope's employment
records as of the Distribution Date. Such Service Time and hire date shall
continue to be maintained for as long as the Employee's employment with Agritope
does not terminate. Agritope shall be free to make such determinations relating
to Service Time under any Agritope Stock Plans as Agritope, in its sole
discretion, deems appropriate. Subject to the provisions of ERISA, Agritope may,
in its sole discretion, make such decisions as it deems appropriate with respect
to determining Service Time for any Agritope Employee whose employment with
Agritope is terminated following the Distribution Date but who is subsequently
reemployed by Agritope.
ARTICLE 3
STOCK OPTIONS
3.1 Amendment of Epitope Option Plans. Prior to the Distribution Date,
Epitope shall take all action necessary and appropriate to amend the Epitope
Option Plans and, to the extent necessary and permissible without the consent of
option holders, outstanding options issued under the plans to be consistent with
the terms of this Section 3.1.
(a) Effect of Employment by Agritope. For purposes of
determining the period during which Existing Epitope Options remain
exercisable, employment by Agritope or any of its majority owned
subsidiaries following the Distribution Date shall be deemed employment
by Epitope, notwithstanding the fact that Agritope will no longer be a
subsidiary of Epitope after the Distribution Date. For continued or
future vesting and all other purposes relating to Existing Epitope
Options, employment by Agritope or any of its majority owned
subsidiaries after the Distribution Date shall not be deemed employment
by Epitope. Accordingly, any affected holder of an Existing Epitope
Options granted under Epitope Option Plans will be treated as a
terminated employee and options will continue to vest according to the
schedule provided in the applicable award agreement.
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(b) Adjustment to Exercise Price of Existing Epitope Options.
The per share exercise price of each Existing Epitope Option issued
under the Epitope Option Plans shall be reduced ten days after the
Distribution Date by subtracting the Agritope Stock Distribution Value
(as defined below) from the stated exercise price. "Agritope Stock
Distribution Value" is an amount intended to reflect the value of the
Agritope Stock distributed on each share of Epitope Stock, and is equal
to the product of (a) the average of the reported closing prices of
Agritope Stock on The Nasdaq SmallCap Market during the five
consecutive trading days beginning on the Distribution Date, multiplied
by (b) the Distribution Ratio.
3.2 Amendment of Existing Agritope Option Plan. Prior to the
Distribution Date, Agritope shall take all action necessary and appropriate to
amend the Existing Agritope Option Plan and/or outstanding Award Agreements (as
defined in the Existing Agritope Option Plan) entered into in connection with
the Plan to be consistent with the terms of this Section 3.2.
(a) Issuance of Epitope Stock Upon Exercise. Epitope Stock
shall be issued upon exercise of Existing Epitope Options granted
pursuant to the Existing Agritope Option Plan, notwithstanding the fact
that the options are denominated in shares of Agritope Stock. The
existing agreement between Epitope and Agritope providing for issuance
of Epitope Stock upon exercise of such options will be amended to
remain in effect following the Distribution.
(b) Effect of the Distribution. If the holder of Existing
Epitope Options granted under the Existing Agritope Option Plan is an
Agritope Employee after the Distribution, such holder shall for
continued or future vesting purposes be deemed terminated on the
Distribution Date but, for purposes of determining the period options
remain exercisable, such holder shall not be deemed terminated until
employment by Agritope is terminated. Accordingly, Existing Epitope
Options granted under the Existing Agritope Option Plan shall continue
to vest following the Distribution Date according to the vesting
schedule applicable to terminated employees set forth in the applicable
Award Agreement. If such option holder is an Epitope Employee, such
options shall continue to vest and be exercisable as set forth in the
Existing Agritope Option Plan or outstanding Award Agreements.
(c) Adjustment to Exercise Price of Options Issued Under
Existing Agritope Plan. The per share exercise price of each Existing
Epitope Option issued under the Existing Agritope Option Plan (which
price is stated in terms of Agritope Stock) shall be reduced ten days
after the Distribution Date by subtracting from the stated exercise
price the product of (a) the Agritope Stock Distribution Value,
multiplied by (b) the number (which will be a fraction) of shares of
Epitope Stock to be exchanged for each share of Agritope Stock for
which the option is exercised.
(d) No Further Option Grants. Agritope shall not grant any
additional options under the Existing Agritope Option Plan.
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3.3 Effect of the Distribution on Change in Control Provisions. Nothing
in this Agreement or in any amendment to the Epitope Option Plans, the Existing
Agritope Option Plan or to any award agreement issued under any Plan shall be
interpreted to modify the change in control provisions in any Existing Epitope
Options. Existing Epitope Options shall continue to become immediately and fully
vested and exercisable as to all shares covered by such option upon a Change in
Control Date (as defined in the terms and conditions applicable to Existing
Epitope Options).
3.4 Adoption of Agritope Option Plan. Prior to the Distribution Date,
Agritope shall take, or cause to be taken, all action necessary and appropriate
(i) to prepare and ratify the adoption of the Agritope Option Plan, and (ii) to
present the Agritope Option Plan to Epitope, as the sole shareholder of
Agritope, for approval. Agritope and Epitope shall cooperate in the adoption of
the Agritope Option Plan and the reservation for issuance under the plan of such
shares of Agritope Stock as are deemed necessary and appropriate by the Agritope
Board.
3.5 Communication Regarding Termination Of Employment. Agritope shall
notify Epitope of the termination of employment of any Agritope Employee holding
an Existing Epitope Option within ten days of such termination. Such notice with
respect to termination shall specify the date of termination, whether the
termination was for cause or came as a result of retirement, and such other
information as Epitope shall reasonably request.
ARTICLE 4
STOCK PURCHASE PLANS
4.1 Epitope Purchase Plan. The Epitope Purchase Plan will continue in
full force and effect in accordance with its terms. Participants under the
Epitope Purchase Plan will be eligible to participate in the Distribution only
to the extent that, by operation of the Epitope Purchase Plan or otherwise, they
are shareholders of record on the Record Date; provided, however, that
participants who are entitled to receive shares of Epitope Common Stock under
the Epitope Purchase Plan as of the Record Date but have not yet been
mechanically recorded as shareholders of record on the Record Date will be
treated as shareholders of record for purposes of the Distribution. Employment
by Agritope or any of its majority-owned subsidiaries following the Distribution
Date shall not be deemed employment by Epitope for purposes of the Epitope
Purchase Plan and any Agritope Employee shall be treated as a terminated
employee under the Epitope Purchase Plan. For purposes of the continuing
operation of the Epitope Purchase Plan, Epitope will adjust the Maximum Purchase
Price (as defined in the Epitope Purchase Plan) to account for the effect of the
Distribution by subtracting the Agritope Stock Distribution Value from the
Maximum Purchase Price.
4.2 Adoption of Agritope Purchase Plan. Prior to the Distribution Date,
Agritope shall take, or cause to be taken, all action necessary and appropriate
(i) to ratify the adoption of the Agritope Purchase Plan, and (ii) to present
the Agritope Purchase Plan to Epitope, as the sole shareholder of Agritope, for
approval.
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ARTICLE 5
OTHER BENEFIT PLANS
5.1 401(k) Retirement Plans.
(a) Establishment of Agritope 401(k) Plan. Effective January
1, 1998, Agritope shall establish and thereafter administer the
Agritope 401(k) Plan, in such form as may be approved by the Agritope
Board, which is intended to qualify under Sections 401(a), 501(a) and
401(k) of the Code and to be in compliance with the requirements of
ERISA. The Agritope 401(k) Plan will provide credit for services
rendered to Epitope or any of its subsidiaries prior to the
Distribution Date in determining Service Time.
(b) Continuation of Benefits. Agritope Employees shall
continue to be eligible to participate in the Epitope 401(k) Plan until
such time as the Agritope 401(k) Plan is established and becomes
effective. Effective as of the effective date of the Agritope 401(k)
Plan, which is expected to be January 1, 1998, Agritope will provide
benefits under the Agritope 401(k) Plan to all Agritope Employees who
were participants in, or otherwise entitled to benefits under, the
Epitope 401(k) Plan. All Agritope Employees who wish to participate in
the Agritope 401(k) Plan will be required to enroll in the Agritope
401(k) Plan in accordance with its terms.
(c) Vesting and Distribution of Accounts. Agritope Employees
shall become fully vested (if not already fully vested) in their
Matching Accounts, as defined under the Epitope 401(k) Plan, as of the
Distribution Date. Agritope Employees shall be entitled to distribution
from the Epitope 401(k) Plan of all of their accounts within a
reasonable time after the Distribution Date. The Agritope 401(k) Plan
shall accept a rollover contribution from any Agritope Employee who
elects that their distribution from the Epitope 401(k) Plan be rolled
over to the Agritope 401(k) Plan.
(d) Epitope to Provide Information. Epitope shall provide
Agritope, as soon as practicable after the Distribution Date, with a
list of Agritope Employees who, to the best knowledge of Epitope, were
participants in or otherwise entitled to benefits under the Epitope
401(k) Plan on the Distribution Date, together with a listing of each
participant's Service Time under the Epitope 401(k) Plan and a listing
of each such Agritope Employee's account balance thereunder. Epitope
shall provide Agritope with such additional information in the
possession of Epitope or Epitope's agent as may be reasonably requested
by Agritope related to the effective administration of the Agritope
401(k) Plan.
(e) Cooperation. Agritope and Epitope shall, in connection
with the plan-to-plan transfer described in 5.1(c), use their best
efforts to cooperate in the plan-to-plan transfer of funds and in
making any and all appropriate filings required
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by the Commission or the Internal Revenue Service, or required under
the Code, ERISA, or any applicable securities laws and the regulations
thereunder.
(f) Effect of the Distribution. The Distribution and
subsequent transfer of account balances shall not be treated as a
termination or partial termination of the Epitope 401(k) Plan or of
Agritope Employees under the Epitope 401(k) Plan.
5.2 Medical/Dental Plan Liability and Coverage.
(a) Continuation of Coverages After the Distribution. Epitope
shall continue to provide coverage to Agritope Employees under Epitope
Medical/Dental Plans after the Distribution Date until such time as new
medical/dental plans are established by Agritope. If during the period
from the Distribution Date until the establishment of Agritope Medical
and Dental Plans, Epitope, in its reasonable discretion, determines
that continued coverage of Agritope Employees under Epitope
Medical/Dental Plans will have an adverse effect on the business plans
or strategies of Epitope, Epitope may, upon 90 days written notice to
Agritope, terminate such coverage. After the Distribution Date,
Agritope shall be responsible for all costs under the Epitope
Medical/Dental Plans attributable to Agritope Employees, as shall be
determined by Epitope in its reasonable discretion.
(b) Agritope Medical/Dental Plans. Unless the parties
otherwise agree, Agritope shall establish Agritope Medical/Dental Plans
to provide coverages to Agritope Employees substantially similar to
those available under the corresponding Epitope Medical/Dental Plans on
or before January 1, 1999. In connection with the establishment of
Agritope Medical/Dental Plans, Agritope Employees and their eligible
dependents and beneficiaries shall have no preexisting condition
limitation imposed other than that which is or was imposed under the
plan or plans in which they were enrolled before the date Agritope
Medical/Dental Plans are established and become effective (the "Cutoff
Date"), and will be credited with any expenses incurred toward
deductibles, out-of-pocket expenses, maximum benefit payments, and any
benefit usage toward plan limits that would have been applicable under
the plan or plans in which they were enrolled before the Cutoff Date.
(c) Responsibility for Coverages after the Cutoff Date.
Immediately after the Cutoff Date, Agritope shall provide coverage to
Agritope Employees under Agritope Medical/Dental Plans. Epitope
Medical/Dental Plans shall continue to be responsible for claims that
arise prior to the Cutoff Date subject to the cost reimbursement
provisions set forth in Section 5.2(a).
(d) COBRA. Epitope shall be responsible for complying with the
requirement of Code Section 4980B and Part 6 of Title I of ERISA
("COBRA Requirements") with respect to any Employee in its group health
plan and their "qualified beneficiaries" whose "qualifying event" (as
such terms are defined in Code Section 4980B) occurs prior to the
Distribution Date. After the Distribution Date,
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Agritope shall be responsible for compliance with COBRA Requirements
with respect to Agritope Employees whose "qualifying event" occurs on
or after the Distribution Date.
(e) No Qualifying Event. The Distribution described in the
Separation Agreement shall not, by itself, create a "qualifying event"
(as described in Code Section 4980B(f)(3) and ERISA Section 603).
(f) Refunds. In the event that subsequent to the Cutoff Date,
refunds are received from carriers providing medical or dental
insurance, such refunds will belong to Epitope, to the extent
attributable to Epitope Employees. Agritope shall receive such refunds
to the extent attributable to Agritope Employees, as shall be
determined by Epitope in its reasonable discretion.
5.3 Life Insurance/Accidental Death and Dismemberment Coverages.
(a) Continuation of Coverages After the Distribution. Epitope
shall continue to provide coverage to Agritope Employees under
Epitope's Additional Insurance Plans after the Distribution Date until
such time as Additional Insurance Plans are established by Agritope. If
during the period from the Distribution Date until the establishment by
Agritope of Additional Insurance Plans, Epitope, in its reasonable
discretion, determines that continued coverage of Agritope Employees
under Epitope's Additional Insurance Plans will have an adverse effect
on the business plans or strategies of Epitope, Epitope may, upon 90
days' written notice to Agritope, terminate such coverage. After the
Distribution Date, Agritope shall be responsible for all costs under
Epitope's Additional Insurance Plans attributable to Agritope
Employees, as shall be determined by Epitope in its reasonable
discretion.
(b) Agritope's Additional Insurance Plans. Unless the parties
otherwise agree, Agritope shall establish Additional Insurance Plans to
provide coverages to Agritope Employees substantially similar to those
available under Epitope's corresponding Additional Insurance Plans on
or before January 1, 1999.
(c) Responsibility for Coverages. Immediately after Agritope's
Additional Insurance Plans become effective, Agritope shall be solely
responsible for providing all coverages relating to Additional
Insurance Plans to Agritope Employees.
5.4 Vacation And Sick Pay Liabilities. Effective on the Distribution
Date, Epitope shall retain, as to Epitope Employees, and Agritope shall assume
or retain, as the case may be, as to Agritope Employees, all liabilities
(whether vested or unvested, and whether funded or unfunded) for vacation and
sick leave accrued as of the Distribution Date. Agritope shall be solely
responsible for the payment of such vacation or sick leave to Agritope Employees
after the Distribution Date. Each of Epitope and Agritope shall provide to its
own Employees on the Distribution Date the same vested and unvested balances of
vacation and sick leave as credited to such Employee on the Epitope payroll
systems as of the Distribution
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Date. Nothing in this Agreement shall be construed to limit the right of either
Epitope or Agritope to change its vacation or sick leave policies as it deems
appropriate.
5.5 Flexible Spending Accounts. Effective as of the Distribution Date,
Agritope shall establish Flexible Spending Account Plans that are substantially
equivalent to those currently provided by Epitope. Spending account balances for
Agritope Employees will not be transferred by Epitope to the new plans
established by Agritope. Agritope Employees will have 90 days after the
Distribution Date to make claims for payment from their existing spending
account balances.
ARTICLE 6
RELATED MATTERS
6.1 Notice of Costs. Epitope and Agritope acknowledge that Epitope and
Agritope may have incurred or may incur costs and expenses, including, but not
limited to, contributions to Plans and the payment of insurance premiums arising
from or related to any of the Plans that are, as set forth in this Agreement,
the responsibility of the other party hereto. Accordingly, Epitope and Agritope
shall (i) give notice to the other party of the costs and expenses incurred or
the costs and expenses to be incurred and (ii) demand that the other party, if
it has the obligation to pay, pay or reimburse the cost and expense.
6.2 Payroll Reporting And Withholding.
(a) Agritope and Epitope hereby adopt the "standard procedure"
for preparing and filing IRS Forms W-2 (Wage and Tax Statements) and
W-3 (Transmittal of Income and Tax Statements), as described in Section
4 of Revenue Procedure 96-60 ("Rev. Proc. 96-60"). Under this procedure
Epitope must perform all reporting duties for the wages and other
compensation it has paid to Employees prior to the Distribution Date,
including the furnishing and filing of Forms W-2 and W-3. Agritope will
be responsible for all reporting duties for the wages and other
compensation it pays to Agritope Employees.
(b) Epitope will keep on file all Forms W-4 (Employee's
Withholding Allowance Certificate) and W-5 (Earned Income Credit
Advance Payment Certificate) provided by Agritope Employees. Agritope
Employees must provide Agritope with new Forms W-4 and W-5 for the year
in which the Distribution occurs.
(c) With respect to Agritope Employees with garnishments, tax
levies, child support orders, qualified medical child support orders,
and wage assignments in effect with Epitope on the Distribution Date,
Agritope shall be responsible for honoring such payroll deduction
authorizations or court or governmental orders applicable to Agritope
Plans, and will continue to make payroll deductions and payments to any
authorized payee, as specified by the court or governmental order that
was filed with Epitope. Epitope shall provide Agritope with full
information about any such matters before the Distribution Date.
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<PAGE>
(d) Unless otherwise prohibited by law or provided by this
Agreement or another agreement entered into in connection with the
Distribution, or by a Plan document, with respect to Agritope Employees
with authorizations for payroll deductions in effect with Epitope on
the Distribution Date, Agritope as the successor employer will honor
such payroll deduction authorizations relating to each Agritope
Employee, and shall not require that such Agritope Employee submit a
new authorization to the extent that the type of deduction by Agritope
does not differ from that made by Epitope. Any such payroll deduction
in favor of Epitope shall continue to be withheld by Agritope for
Epitope's benefit.
6.3 Access to Records and Confidentiality. Epitope shall retain all
employment records, personnel files, and other information relating to Epitope
Employees and payroll records relating to Agritope Employees. Agritope shall
take possession of all personnel and employment records, except payroll records,
relating to Agritope Employees after the Distribution Date. Agritope and Epitope
will make available to the other party such records, documents, and other
information relating to employment matters involving Agritope Employees and
other matters covered in this Agreement as may be reasonably requested. The
parties shall cooperate in providing any information necessary for the
resolution of any dispute that may arise between Epitope or Agritope and any
third party arising out of subject matter covered by this Agreement after the
Distribution Date. Epitope and Agritope will each, upon adequate notice and
reasonable request, make its employees and facilities available to the other
party and shall permit the other party to copy at its own expense records
relating to Agritope Employees as necessary and appropriate. Except as required
by law or with the prior written consent of Epitope and any affected Employee,
all records, documents, and other information provided to Agritope by Epitope
related to Agritope Employees and other matters covered in this Agreement shall
be kept confidential by Agritope and its representatives and shall not be
disclosed to any other person or entity.
ARTICLE 7
EMPLOYMENT MATTERS
7.1 Separate Employers. After the Distribution Date, Epitope and
Agritope will be separate and independent employers.
7.2 Employment Policies And Practices. Epitope and Agritope may adopt
such employment policies, compensation practices, retirement plans, welfare
benefit plans, and other employee benefit plans or policies of any kind or
description, as each may determine, in its sole discretion, are necessary and
appropriate, in addition to those required under this Agreement. Except as
otherwise expressly provided herein, no provision of this Agreement shall be
construed as a limitation on the right of Epitope or Agritope to amend or
terminate any policies, practices, or Plan.
7.3 Funding Of Plans. Any claims by or on behalf of Employees or any
federal, state or local government agency for alleged underfunding of, or
failure to make payments to, health and welfare funds based on acts or omissions
occurring on or before the
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<PAGE>
Distribution Date or arising from or in connection with the Distribution, will
be the sole responsibility of each party as to its own employees (i.e., Epitope
with respect to Epitope Employees and Agritope with respect to Agritope
Employees).
7.4 Employment Tax Rates. Agritope shall comply with ORS Chapter 657 in
determining whether to assume the state unemployment tax experience of Epitope
for purposes of establishing its own unemployment tax experience rates.
ARTICLE 8
MISCELLANEOUS
8.1 Indemnification. Each party to this Agreement shall indemnify,
defend, and hold harmless the other party against losses incurred as a result of
claims relating to matters covered in this Agreement to the extent provided in
the Separation Agreement. In addition, subject to the indemnification procedures
set forth in the Separation Agreement:
(a) Indemnification by Epitope. Epitope shall indemnify,
defend, and hold harmless Agritope and its subsidiaries from and
against any liabilities incurred as a result of claims made against
Agritope by Epitope Employees relating to or arising out of employment
of Epitope Employees by Epitope after the Distribution Date, employee
benefits provided to Epitope Employees after the Distribution Date, or
termination in connection with the Distribution of any Employee who
becomes or remains an Epitope Employee on or after the Distribution
Date; and
(b) Indemnification by Agritope. Agritope shall indemnify,
defend, and hold harmless Epitope and any future subsidiary of Epitope
from and against any liabilities incurred as a result of claims made
against Epitope by Agritope Employees relating to or arising out of
employment of Agritope Employees by Agritope after the Distribution
Date, employee benefits provided to Agritope Employees after the
Distribution Date, or termination in connection with the Distribution
of any Employee who becomes or remains an Agritope Employee on or after
the Distribution Date.
8.2 No Third-Party Beneficiaries. No provision of this Agreement shall
be construed to create a right in any Employee, or dependent or beneficiary of
such Employee, including without limitation any right under a Plan which such
person would not otherwise have under the terms of the Plan itself. This
Agreement is for the benefit of the parties hereto and is not intended to confer
upon any other person except the parties hereto any rights or remedies.
8.3 Attorney-Client Privilege. Consistent with the provisions of
Section 6.6 of the Separation Agreement, provisions requiring either party to
this Agreement to cooperate shall not be deemed to be a waiver of the
attorney/client privilege for either party nor shall they require either party
to waive its attorney/client privilege.
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<PAGE>
8.4 Dispute Resolution. Any disputes between the parties arising out of
or related to this Agreement shall be resolved or decided as set forth in the
Separation Agreement.
8.5 Relationship of the Parties. Neither party is an agent of the other
party and neither party has any authority to bind the other party, transact any
business in the other party's name or on its behalf, or make any promises or
representations on behalf of the other party unless otherwise agreed to in
writing. Each party will perform all of its respective obligations under this
Agreement as an independent contractor.
8.6 Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
prior written or oral agreements between the parties with respect to the subject
matter hereof.
8.7 Governing Law. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the state of Oregon.
8.8 Jurisdiction and Venue. Subject to the arbitration provisions of
the Separation Agreement, each party consents to the personal jurisdiction of
the state and federal courts located in the state of Oregon and hereby waives
any argument that venue in any such forum is not convenient or proper.
8.9 Notices. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given (i) on the date of service if served personally on the party to whom
notice is given; (ii) on the day of transmission if sent via facsimile
transmission to the facsimile number given below, provided telephonic
confirmation of receipt is obtained promptly after completion of transmission;
(iii) on the business day after delivery to an overnight courier service or the
express mail service maintained by the United States Postal Service, provided
receipt of delivery has been confirmed; or (iv) on the fifth day after mailing,
provided receipt of delivery is confirmed, if mailed to the party to whom notice
is to be given, by registered or certified mail, postage prepaid, properly
addressed and return-receipt requested, to the party as follows:
If to Epitope: Epitope, Inc.
8505 S.W. Creekside Place
Beaverton, Oregon 97008
Facsimile No. (503) 641-8665
If to Agritope: Agritope, Inc.
8505 S.W. Creekside Place
Beaverton, Oregon 97008
Facsimile No. (503) 520-6196
Any party may change its address and facsimile number by giving the other party
written notice of its new address and facsimile number in the manner set forth
above.
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<PAGE>
8.10 Modification of Agreement. No modification, amendment or waiver of
any provision of this Agreement shall be effective unless the same shall be in
writing and signed by each of the parties hereto and then such modification,
amendment or waiver shall be effective only in the specific instance and for the
purpose for which given.
8.11 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns, but neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by either party without the prior
written consent of the other party, and such consent shall not be unreasonably
withheld.
8.12 Titles and Headings. Titles and headings included are for
convenience and are not intended to constitute a part of or to affect the
meaning or interpretation of this Agreement.
8.13 Severability. In case any one or more of the provisions contained
in this Agreement should be invalid, illegal or unenforceable, the
enforceability of the remaining provisions hereof shall not in any way be
affected or impaired thereby.
8.14 No Waiver. Neither the failure nor any delay on the part of any
party hereto to exercise any right under this Agreement shall operate as a
waiver thereof, nor shall any single or partial exercise of any right preclude
any other or further exercise of the same or any other right, nor shall any
waiver of any right with respect to any occurrence be construed as a waiver of
such right with respect to any other occurrence.
8.15 Survival. All covenants and agreements of the parties contained in
this Agreement will survive for five years following the Distribution Date.
8.16 Counterparts. This Agreement may be executed in counterparts, all
of which shall be considered one and the same agreement, and shall become a
binding agreement when a counterpart has been signed by each party and delivered
to the other party.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered as of the date first written above.
EPITOPE, INC.
By: /s/ John W. Morgan
Its: President and CEO
AGRITOPE, INC.
By: /s/ Adolph J. Ferro
Its: Chairman, Pres. and CEO
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1997 STOCK AWARD PLAN
AGRITOPE, INC.
ARTICLE 1
ESTABLISHMENT AND PURPOSE
1.1 Establishment. Agritope, Inc., a Delaware corporation
("Corporation"), hereby establishes the Agritope, Inc. 1997 Stock Award Plan
(the "Plan"), effective as of November 14, 1997.
1.2 Purpose. The purpose of the Plan is to promote and advance
the interests of Corporation and its stockholders by enabling Corporation to
attract, retain, and reward employees, outside advisors, and directors of
Corporation and its subsidiaries. It is also intended to strengthen the
mutuality of interests between such employees, advisers, and directors and
Corporation's stockholders. The Plan is designed to meet this intent by offering
stock options and other equity-based incentive awards, thereby providing a
proprietary interest in pursuing the long-term growth, profitability, and
financial success of Corporation.
ARTICLE 2
DEFINITIONS
2.1 Defined Terms. For purposes of the Plan, the following
terms shall have the meanings set forth below:
"ADVISOR" means a member of an Advisory Committee of
Corporation or a Subsidiary, or any other consultant selected by the Committee,
who is neither an employee of Corporation or a Subsidiary nor a Non-Employee
Director.
"ADVISORY COMMITTEE" means a scientific advisory committee to
Corporation or a Subsidiary.
"AWARD" means an award or grant made to a Participant of
Options, Stock Appreciation Rights, Restricted Awards, Performance Awards, or
Other Stock-Based Awards pursuant to the Plan.
"AWARD AGREEMENT" means an agreement as described in Section
6.4.
"BOARD" means the Board of Directors of Corporation.
"CODE" means the Internal Revenue Code of 1986, as amended and
in effect from time to time, or any successor thereto, together with rules,
regulations, and interpretations promulgated thereunder. Where the context so
requires, any reference to a particular Code section shall be construed to refer
to the successor provision to such Code section.
"COMMITTEE" means the committee appointed by the Board to
administer the Plan as provided in Article 3 of the Plan.
"COMMON STOCK" means the Common Stock, par value $.01 per
share, of Corporation or any security of Corporation issued in substitution,
exchange, or in lieu of such stock.
"CONTINUING RESTRICTION" means a Restriction contained in
Sections 6.5(g), 16.4, 16.5, and 16.7 of the Plan and any other Restrictions
expressly designated by the Committee in an Award Agreement as a Continuing
Restriction.
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<PAGE>
"CORPORATION" means Agritope, Inc., a Delaware corporation, or
any successor corporation.
"DEFERRED COMPENSATION OPTION" means a Nonqualified Option
granted with an option price less than Fair Market Value on the date of grant
pursuant to Section 7.9 of the Plan.
"DISABILITY" means the condition of being "disabled" within
the meaning of Section 422(c)(7) of the Code. However, the Committee may change
the foregoing definition of "Disability" or may adopt a different definition for
purposes of specific Awards.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended and in effect from time to time, or any successor statute. Where the
context so requires, any reference to a particular section of the Exchange Act,
or to any rule promulgated under the Exchange Act, shall be construed to refer
to successor provisions to such section or rule.
"FAIR MARKET VALUE" means the mean between the reported high
and low sale prices, or, if there is no sale on such day, the mean between the
reported bid and asked prices, for the Common Stock on that day or, if that day
is not a trading day, the last prior trading day, on the securities exchange or
automated securities interdealer quotation system on which such Common Stock
shall have been listed or traded.
"INCENTIVE STOCK OPTION" or "ISO" means any Option granted
pursuant to the Plan that is intended to be and is specifically designated in
its Award Agreement as an "incentive stock option" within the meaning of Section
422 of the Code.
"NON-EMPLOYEE DIRECTOR" means a member of the Board or of the
Board of Directors of a Subsidiary who is not an employee of Corporation or any
Subsidiary.
"NONQUALIFIED OPTION" or "NQO" means any Option, including a
Deferred Compensation Option, granted pursuant to the Plan that is not an
Incentive Stock Option.
"OPTION" means an ISO, an NQO, or a Deferred Compensation
Option.
"OTHER STOCK-BASED AWARD" means an Award as defined in Section
11.1.
"PARTICIPANT" means an employee of Corporation or a
Subsidiary, an Advisor, or a Non-Employee Director who is granted an Award under
the Plan.
"PERFORMANCE AWARD" means an Award granted pursuant to the
provisions of Article 10 of the Plan, the Vesting of which is contingent on
performance attainment.
"PERFORMANCE CYCLE" means a designated performance period
pursuant to the provisions of Section 10.3 of the Plan.
"PERFORMANCE GOAL" means a designated performance objective
pursuant to the provisions of Section 10.4 of the Plan.
"PLAN" means this Agritope, Inc. 1997 Stock Award Plan as it
may be hereafter amended from time to time.
"REPORTING PERSON" means a Participant who is subject to the
reporting requirements of Section 16(a) of the Exchange Act.
"RESTRICTED AWARD" means a Restricted Share or a Restricted
Unit granted pursuant to Article 9 of the Plan.
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<PAGE>
"RESTRICTED SHARE" means an Award described in Section 9.1(a)
of the Plan.
"RESTRICTED UNIT" means an Award of units representing Shares
described in Section 9.1(b) of the Plan.
"RESTRICTION" means a provision in the Plan or in an Award
Agreement which limits the exercisability or transferability, or which governs
the forfeiture, of an Award or the Shares, cash, or other property payable
pursuant to an Award.
"RETIREMENT" means:
(a) For Participants who are employees, retirement from active
employment with Corporation and its Subsidiaries at or after age 50, or
such earlier retirement date as approved by the Committee for purposes
of the Plan;
(b) For Participants who are Non-Employee Directors,
termination of membership on the Board or on the Board of Directors of
any Subsidiary after attaining age 50, or such earlier retirement date
as approved by the Committee for purposes of the Plan; and
(c) For Participants who are Advisors, termination of service
as an Advisor after attaining age 50, or such earlier retirement date
as approved by the Committee for purposes of the Plan.
However, the Committee may change the foregoing definition of "Retirement" or
may adopt a different definition for purposes of specific Awards.
"SHARE" means a share of Common Stock.
"STOCK APPRECIATION RIGHT" or "SAR" means an Award to benefit
from the appreciation of Common Stock granted pursuant to the provisions of
Article 8 of the Plan.
"SUBSIDIARY" means a "subsidiary corporation" of Corporation
within the meaning of Section 424 of the Code, namely any corporation in which
Corporation directly or indirectly controls 50 percent or more of the total
combined voting power of all classes of stock having voting power.
"VEST" or "VESTED" means:
(a) In the case of an Award that requires exercise, to be or
to become immediately and fully exercisable and free of all
Restrictions (other than Continuing Restrictions);
(b) In the case of an Award that is subject to forfeiture, to
be or to become nonforfeitable, freely transferable, and free of all
Restrictions (other than Continuing Restrictions);
(c) In the case of an Award that is required to be earned by
attaining specified Performance Goals, to be or to become earned and
nonforfeitable, freely transferable, and free of all Restrictions
(other than Continuing Restrictions); or
(d) In the case of any other Award as to which payment is not
dependent solely upon the exercise of a right, election, exercise, or
option, to be or to become immediately payable and free of all
Restrictions (except Continuing Restrictions).
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<PAGE>
2.2 Gender and Number. Except where otherwise indicated by the
context, any masculine or feminine terminology used in the Plan shall also
include the opposite gender; and the definition of any term in Section 2.1 in
the singular shall also include the plural, and vice versa.
ARTICLE 3
ADMINISTRATION
3.1 General. Except as provided in Section 3.7, the Plan shall
be administered by a Committee composed as described in Section 3.2.
3.2 Composition of the Committee. The Committee shall be
appointed by the Board and shall consist of two or more members of the Board.
The Board may from time to time remove members from, or add members to, the
Committee. Vacancies on the Committee, however caused, shall be filled by the
Board.
3.3 Authority of the Committee. The Committee shall have full
power and authority (subject to such orders or resolutions as may be issued or
adopted from time to time by the Board) to administer the Plan in its sole
discretion, including the authority to:
(a) Construe and interpret the Plan and any Award Agreement;
(b) Promulgate, amend, and rescind rules and procedures
relating to the implementation of the Plan;
(c) With respect to employees and Advisors:
(i) Select the employees and Advisors who shall be
granted Awards;
(ii) Determine the number and types of Awards to be
granted to each such Participant;
(iii) Determine the number of Shares, or Share
equivalents, to be subject to each Award;
(iv) Determine the option price, purchase price, base
price, or similar feature for any Award; and
(v) Determine all the terms and conditions of all
Award Agreements, consistent with the requirements of the
Plan.
Decisions of the Committee, or any delegate as permitted by the Plan, shall be
final, conclusive, and binding on all Participants.
3.4 A majority of the members of the Committee shall
constitute a quorum for the transaction of business. Action approved by a
majority of the members present at any meeting at which a quorum is present, or
action in writing by all the members of the Committee, shall be the valid acts
of the Committee.
3.5 No member of the Committee shall be liable for any action
or determination made in good faith with respect to the Plan, any Award, or any
Participant.
3.6 The Board may grant Awards from time to time to
Non-Employee Directors. With respect to an Award granted to a Non-Employee
Director, all references to the
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<PAGE>
"Committee" in the Sections of this Plan relating to that particular Award shall
be deemed to be references to the "Board". Awards to Non-Employee Directors
shall be governed by and shall be subject to the terms and conditions set forth
in an Award Agreement in a form approved by the Board.
3.7 The costs and expenses of administering the Plan shall be
borne by Corporation.
ARTICLE 4
DURATION OF THE PLAN AND SHARES SUBJECT TO THE PLAN
4.1 Duration of the Plan. The Plan is effective ----------,
1997. The Plan shall remain in effect until Awards have been granted covering
all the available Shares or the Plan is otherwise terminated by the Board.
Termination of the Plan shall not affect outstanding Awards.
4.2 Shares Subject to the Plan
4.2.1 General. The shares which may be made subject to Awards
under the Plan shall be shares of Common Stock, which may be either authorized
and unissued Shares or reacquired Shares. No fractional Shares shall be issued
under the Plan.
4.2.2 Number of Shares. The maximum number of Shares for which
Awards may be granted under the Plan is 2,000,000 Shares, subject to adjustment
pursuant to Article 14.
4.2.3 Availability of Shares for Future Awards. If an Award
under the Plan is canceled or expires for any reason prior to having been fully
Vested or exercised by a Participant or is settled in cash in lieu of Shares or
is exchanged for other Awards, all Shares covered by such Awards shall be made
available for future Awards under the Plan. Furthermore, any Shares used as full
or partial payment to Corporation by a Participant of the option, purchase, or
other exercise price of an Award and any Shares covered by a Stock Appreciation
Right which are not issued upon exercise shall become available for future
Awards.
ARTICLE 5
ELIGIBILITY
5.1 Employees and Advisors. Officers and other employees of
Corporation and its Subsidiaries (who may also be directors of Corporation or a
Subsidiary) and Advisors who, in the Committee's judgment, are or will be
contributors to the long-term success of Corporation shall be eligible to
receive Awards under the Plan.
5.2 Non-Employee Directors. All Non-Employee Directors shall
be eligible to receive Awards as provided in Section 3.6 of the Plan.
ARTICLE 6
AWARDS
6.1 The types of Awards that may be granted under the Plan
are:
(a) Options governed by Article 7 of the Plan;
(b) Stock Appreciation Rights governed by Article 8 of the
Plan;
(c) Restricted Awards governed by Article 9 of the Plan;
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<PAGE>
(d) Performance Awards governed by Article 10 of the Plan; and
(e) Other Stock-Based Awards or combination awards governed by
Article 11 of the Plan.
In the discretion of the Committee, any Award may be granted alone, in addition
to, or in tandem with other Awards under the Plan.
6.2 General. Subject to the limitations of the Plan, the
Committee may cause Corporation to grant Awards to such Participants, at such
times, of such types, in such amounts, for such periods, with such option
prices, purchase prices, or base prices, and subject to such terms, conditions,
limitations, and restrictions as the Committee, in its discretion, shall deem
appropriate. Awards may be granted as additional compensation to a Participant
or in lieu of other compensation to such Participant. A Participant may receive
more than one Award and more than one type of Award under the Plan.
6.3 Nonuniform Determinations. The Committee's determinations
under the Plan or under one or more Award Agreements, including without
limitation, (a) the selection of Participants to receive Awards, (b) the type,
form, amount, and timing of Awards, (c) the terms of specific Award Agreements,
and (d) elections and determinations made by the Committee with respect to
exercise or payments of Awards, need not be uniform and may be made by the
Committee selectively among Participants and Awards, whether or not Participants
are similarly situated.
6.4 Award Agreements. Each Award shall be evidenced by a
written Award Agreement between Corporation and the Participant. Award
Agreements may, subject to the provisions of the Plan, contain any provision
approved by the Committee.
6.5 Provisions Governing All Awards. All Awards shall be
subject to the following provisions:
(a) Alternative Awards. If any Awards are designated in their
Award Agreements as alternative to each other, the exercise of all or
part of one Award automatically shall cause an immediate equal (or pro
rata) corresponding termination of the other alternative Award or
Awards.
(b) Rights as Stockholders. No Participant shall have any
rights of a stockholder with respect to Shares subject to an Award
until such Shares are issued in the name of the Participant.
(c) Employment Rights. Neither the adoption of the Plan nor
the granting of any Award shall confer on any person the right to
continued employment with Corporation or any Subsidiary or the right to
remain as a director of Corporation or a Subsidiary or a member of any
Advisory Committee, as the case may be, nor shall it interfere in any
way with the right of Corporation or a Subsidiary to terminate such
person's employment or to remove such person as an Advisor or as a
director at any time for any reason, with or without cause.
(d) Termination Of Employment. The terms and conditions under
which an Award may be exercised, if at all, after a Participant's
termination of employment or service as an Advisor or as a Non-Employee
Director shall be determined by the Committee and specified in the
applicable Award Agreement.
(e) Change in Control. The Committee, in its discretion, may
provide in any Award Agreement that in the event of a change in control
of Corporation (as the Committee may define such term in the Award
Agreement), as of the date of such change in control:
(i) All, or a specified portion of, Awards requiring
exercise shall become fully and immediately exercisable,
notwithstanding any other limitations on exercise;
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<PAGE>
(ii) All, or a specified portion of, Awards subject
to Restrictions shall become fully Vested; and
(iii) All, or a specified portion of, Awards subject
to Performance Goals shall be deemed to have been fully
earned.
The Committee, in its discretion, may include change-in-control
provisions in some Award Agreements and not in others, may include
different change-in-control provisions in different Award Agreements,
and may include change in control provisions for some Awards or some
Participants and not for others.
(f) Reporting Persons. Award Agreements for Awards to
Reporting Persons shall comply with any restrictions imposed by Rule
16b-3 under the Exchange Act.
(g) Service Periods. At the time of granting Awards, the
Committee may specify, by resolution or in the Award Agreement, the
period or periods of service performed or to be performed by the
Participant in connection with the grant of the Award.
(h) Restrictions on Transfer. An Award shall not be
transferable otherwise than by will or the laws of descent and
distribution; provided, however, that, with the consent of the
Committee, which consent may be withheld in its sole discretion or
conditioned on such requirements as the Committee shall deem
appropriate, all or any portion of a NQO may be assigned or transferred
without consideration to the Participant's immediate family (i.e.,
children, stepchildren, grandchildren, spouse, parents and siblings),
to trusts for the benefit of the Participant's immediate family
members, to partnerships or limited liability companies for the
Participant's immediate family members, and pursuant to qualified
domestic relations orders.
ARTICLE 7
OPTIONS
7.1 Types of Options. Options granted under the Plan may be in
the form of Incentive Stock Options or Nonqualified Options (including Deferred
Compensation Options). The grant of each Option and the Award Agreement
governing each Option shall identify the Option as an ISO or an NQO. In the
event the Code is amended to provide for tax-favored forms of stock options
other than or in addition to Incentive Stock Options, the Committee may grant
Options under the Plan meeting the requirements of such forms of options.
7.2 General. Options shall be subject to the terms and
conditions set forth in Article 6 and this Article 7 and shall contain such
additional terms and conditions, not inconsistent with the express provisions of
the Plan, as the Committee shall deem desirable.
7.3 Option Price. Each Award Agreement for Options shall state
the option exercise price per Share of Common Stock purchasable under the
Option, which shall not be less than:
(a) $1 per share in the case of a Deferred Compensation
Option;
(b) 75 percent of the Fair Market Value of a Share on the date
of grant for all other Nonqualified Options; or
(c) 100 percent of the Fair Market Value of a Share on the
date of grant for all Incentive Stock Options.
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7.4 Option Term. The Award Agreement for each Option shall
specify the term of each Option, which may be unlimited or may have a specified
period during which the Option may be exercised, as determined by the Committee.
7.5 Time of Exercise. The Award Agreement for each Option
shall specify, as determined by the Committee:
(a) The time or times when the Option shall become exercisable
and whether the Option shall become exercisable in full or in graduated
amounts over a period specified in the Award Agreement;
(b) Such other terms, conditions, and restrictions as to when
the Option may be exercised as shall be determined by the Committee;
and
(c) The extent, if any, to which the Option shall remain
exercisable after the Participant ceases to be an employee, Advisor, or
director of Corporation or a Subsidiary.
An Award Agreement for an Option may, in the discretion of the Committee,
provide whether, and to what extent, the Option will become immediately and
fully exercisable (i) in the event of the death, Disability, or Retirement of
the Participant, or (ii) upon the occurrence of a change in control of
Corporation.
7.6 The Award Agreement for each Option shall specify the
method or methods of payment acceptable upon exercise of an Option. An Award
Agreement may provide that the option price is payable in full in cash or, at
the discretion of the Committee:
(a) In installments on such terms and over such period as the
Committee shall determine;
(b) In previously acquired Shares (including Restricted
Shares);
(c) By surrendering outstanding Awards under the Plan
denominated in Shares or in Share-equivalent units;
(d) By delivery (in a form approved by the Committee) of an
irrevocable direction to a securities broker acceptable to the
Committee:
(i) To sell Shares subject to the Option and to
deliver all or a part of the sales proceeds to Corporation in
payment of all or a part of the option price and withholding
taxes due; or
(ii) To pledge Shares subject to the Option to the
broker as security for a loan and to deliver all or a part of
the loan proceeds to Corporation in payment of all or a part
of the option price and withholding taxes due; or
(e) In any combination of the foregoing or in any other form
approved by the Committee.
If Restricted Shares are surrendered in full or partial payment of an Option
price, a corresponding number of the Shares issued upon exercise of the Option
shall be Restricted Shares subject to the same Restrictions as the surrendered
Restricted Shares.
7.7 Special Rules for Incentive Stock Options. In the case of
an Option designated as an Incentive Stock Option, the terms of the Option and
the Award Agreement shall be in conformance with the statutory and regulatory
requirements specified in Section 422 of the Code, as in effect on the date such
ISO is granted. ISOs may be granted only to employees of Corporation or a
Subsidiary. ISOs may not be granted under the Plan after ------------, 2007,
unless the ten-year limitation of Section 422(b)(2) of the Code is removed or
extended.
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7.8 Restricted Shares. In the discretion of the Committee, the
Shares issuable upon exercise of an Option may be Restricted Shares if so
provided in the Award Agreement.
7.9 Deferred Compensation Options. The Committee may, in its
discretion, grant Deferred Compensation Options with an option price less than
Fair Market Value to provide a means for deferral of compensation to future
dates. The option price shall be determined by the Committee subject to Section
7.3(a) of the Plan. The number of Shares subject to a Deferred Compensation
Option shall be determined by the Committee, in its discretion, by dividing the
amount of compensation to be deferred by the difference between the Fair Market
Value of a Share on the date of grant and the option price of the Deferred
Compensation Option. Amounts of compensation deferred with Deferred Compensation
Options may include amounts earned under Awards granted under the Plan or under
any other compensation program or arrangement of Corporation as permitted by the
Committee. The Committee shall grant Deferred Compensation Options only if it
reasonably determines that the recipient of such an Option is not likely to be
deemed to be in constructive receipt for income tax purposes of the income being
deferred.
7.10 Reload Options. The Committee, in its discretion, may
provide in an Award Agreement for an Option that in the event all or a portion
of the Option is exercised by the Participant using previously acquired Shares,
the Participant shall automatically be granted a replacement Option (with an
option price equal to the Fair Market Value of a Share on the date of such
exercise) for a number of Shares equal to (or equal to a portion of) the number
of shares surrendered upon exercise of the Option. Such reload Option features
may be subject to such terms and conditions as the Committee shall determine,
including without limitation, a condition that the Participant retain the Shares
issued upon exercise of the Option for a specified period of time.
7.11 Limitation on Number of Shares Subject to Options. In no
event may options for more than 500,000 Shares be granted to any individual
under the Plan during any fiscal year period.
ARTICLE 8
STOCK APPRECIATION RIGHTS
8.1 General. Stock Appreciation Rights shall be subject to the
terms and conditions set forth in Article 6 and this Article 8 and shall contain
such additional terms and conditions, not inconsistent with the express terms of
the Plan, as the Committee shall deem desirable.
8.2 Nature of Stock Appreciation Right. A Stock Appreciation
Right is an Award entitling a Participant to receive an amount equal to the
excess (or if the Committee shall determine at the time of grant, a portion of
the excess) of the Fair Market Value of a Share of Common Stock on the date of
exercise of the SAR over the base price, as described below, on the date of
grant of the SAR, multiplied by the number of Shares with respect to which the
SAR shall have been exercised. The base price shall be designated by the
Committee in the Award Agreement for the SAR and may be the Fair Market Value of
a Share on the grant date of the SAR or such other higher or lower price as the
Committee shall determine.
8.3 Exercise. A Stock Appreciation Right may be exercised by a
Participant in accordance with procedures established by the Committee. The
Committee may also provide that a SAR shall be automatically exercised on one or
more specified dates or upon the satisfaction of one or more specified
conditions. In the case of SARs granted to Reporting Persons, exercise of the
SAR shall be limited by the Committee to the extent required to comply with the
applicable requirements of Rule 16b-3 under the Exchange Act.
8.4 Form of Payment. Payment upon exercise of a Stock
Appreciation Right may be made in cash, in installments, in Shares, by issuance
of a Deferred Compensation Option, or in any combination of the foregoing, or in
any other form as the Committee shall determine.
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8.5 Limitation on Number of Shares Subject to Stock
Appreciation Rights. In no event may SARs for more than 500,000 Shares be
granted to any individual under the Plan during any fiscal year period.
ARTICLE 9
RESTRICTED AWARDS
9.1 Types of Restricted Awards. Restricted Awards granted
under the Plan may be in the form of either Restricted Shares or Restricted
Units.
(a) Restricted Shares. A Restricted Share is an Award of
Shares transferred to a Participant subject to such terms and
conditions as the Committee deems appropriate, including, without
limitation, restrictions on the sale, assignment, transfer, or other
disposition of such Restricted Shares and may include a requirement
that the Participant forfeit such Restricted Shares back to Corporation
upon termination of Participant's employment (or service as an Advisor
or Non-Employee Director) for specified reasons within a specified
period of time or upon other conditions, as set forth in the Award
Agreement for such Restricted Shares. Each Participant receiving a
Restricted Share shall be issued a stock certificate in respect of such
Shares, registered in the name of such Participant, and shall execute a
stock power in blank with respect to the Shares evidenced by such
certificate. The certificate evidencing such Restricted Shares and the
stock power shall be held in custody by Corporation until the
Restrictions thereon shall have lapsed.
(b) Restricted Units. A Restricted Unit is an Award of units
(with each unit having a value equivalent to one Share) granted to a
Participant subject to such terms and conditions as the Committee deems
appropriate, and may include a requirement that the Participant forfeit
such Restricted Units upon termination of Participant's employment (or
service as an Advisor or Non-Employee Director) for specified reasons
within a specified period of time or upon other conditions, as set
forth in the Award Agreement for such Restricted Units.
9.2 General. Restricted Awards shall be subject to the terms
and conditions of Article 6 and this Article 9 and shall contain such additional
terms and conditions, not inconsistent with the express provisions of the Plan,
as the Committee shall deem desirable.
9.3 Restriction Period. Restricted Awards shall provide that
such Awards, and the Shares subject to such Awards, may not be transferred, and
may provide that, in order for a Participant to Vest in such Awards, the
Participant must remain in the employment (or remain as an Advisor or
Non-Employee Director) of Corporation or its Subsidiaries, subject to relief for
reasons specified in the Award Agreement, for a period commencing on the date of
the Award and ending on such later date or dates as the Committee may designate
at the time of the Award (the "Restriction Period"). During the Restriction
Period, a Participant may not sell, assign, transfer, pledge, encumber, or
otherwise dispose of Shares received under or governed by a Restricted Award
grant. The Committee, in its sole discretion, may provide for the lapse of
restrictions in installments during the Restriction Period. Upon expiration of
the applicable Restriction Period (or lapse of Restrictions during the
Restriction Period where the Restrictions lapse in installments) the Participant
shall be entitled to settlement of the Restricted Award or portion thereof, as
the case may be. Although Restricted Awards shall usually Vest based on
continued employment (or service as an Advisor or Non-Employee Director) and
Performance Awards under Article 10 shall usually Vest based on attainment of
Performance Goals, the Committee, in its discretion, may condition Vesting of
Restricted Awards on attainment of Performance Goals as well as continued
employment (or service as an Advisor or Non-Employee Director). In such case,
the Restriction Period for such a Restricted Award shall include the period
prior to satisfaction of the Performance Goals.
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<PAGE>
9.4 Forfeiture. If a Participant ceases to be an employee,
Non-Employee Director or Advisor of Corporation or a Subsidiary during the
Restriction Period for any reason other than reasons which may be specified in
an Award Agreement (such as death, Disability, or Retirement), the Award
Agreement may require that all non-Vested Restricted Awards previously granted
to the Participant be forfeited and returned to Corporation.
9.5 Settlement of Restricted Awards.
(a) Restricted Shares. Upon Vesting of a Restricted Share
Award, the legend on such Shares will be removed and the Participant's stock
power will be returned and the Shares will no longer be Restricted Shares. The
Committee may also, in its discretion, permit a Participant to receive, in lieu
of unrestricted Shares at the conclusion of the Restriction Period, payment in
cash, installments, or by issuance of a Deferred Compensation Option equal to
the Fair Market Value of the Restricted Shares as of the date the Restrictions
lapse.
(b) Restricted Units. Upon Vesting of a Restricted Unit Award,
a Participant shall be entitled to receive payment for Restricted Units in an
amount equal to the aggregate Fair Market Value of the Shares covered by such
Restricted Units at the expiration of the applicable Restriction Period. Payment
in settlement of a Restricted Unit shall be made as soon as practicable
following the conclusion of the applicable Restriction Period in cash, in
installments, in Shares equal to the number of Restricted Units, by issuance of
a Deferred Compensation Option, or in any other manner or combination of such
methods as the Committee, in its sole discretion, shall determine.
9.6 Rights as a Stockholder. A Participant shall have, with
respect to unforfeited Shares received under a grant of Restricted Shares, all
the rights of a stockholder of Corporation, including the right to vote the
shares, and the right to receive any cash dividends. Stock dividends issued with
respect to Restricted Shares shall be treated as additional Shares covered by
the grant of Restricted Shares and shall be subject to the same Restrictions.
ARTICLE 10
PERFORMANCE AWARDS
10.1 General. Performance Awards shall be subject to the terms
and conditions set forth in Article 6 and this Article 10 and shall contain such
other terms and conditions not inconsistent with the express provisions of the
Plan, as the Committee shall deem desirable.
10.2 Nature of Performance Awards. A Performance Award is an
Award of units (with each unit having a value equivalent to one Share) granted
to a Participant subject to such terms and conditions as the Committee deems
appropriate, including, without limitation, the requirement that the Participant
forfeit such Performance Award or a portion thereof in the event specified
performance criteria are not met within a designated period of time.
10.3 Performance Cycles. For each Performance Award, the
Committee shall designate a performance period (the "Performance Cycle") with a
duration to be determined by the Committee in its discretion within which
specified Performance Goals are to be attained. There may be several Performance
Cycles in existence at any one time and the duration of Performance Cycles may
differ from each other.
10.4 Performance Goals. The Committee shall establish
Performance Goals for each Performance Cycle on the basis of such criteria and
to accomplish such objectives as the Committee may from time to time select.
Performance Goals may be based on performance criteria for Corporation, a
Subsidiary, or an operating group, or based on a Participant's individual
performance. Performance Goals may include objective and subjective criteria.
During any Performance Cycle, the Committee may adjust the Performance Goals for
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such Performance Cycle as it deems equitable in recognition of unusual or
nonrecurring events affecting Corporation, changes in applicable tax laws or
accounting principles, or such other factors as the Committee may determine.
10.5 Determination of Awards. As soon as practicable after the
end of a Performance Cycle, the Committee shall determine the extent to which
Performance Awards have been earned on the basis of performance in relation to
the established Performance Goals.
10.6 Timing and Form of Payment. Settlement of earned
Performance Awards shall be made to the Participant as soon as practicable after
the expiration of the Performance Cycle and the Committee's determination under
Section 10.5, in the form of cash, installments, Shares, Deferred Compensation
Options, or any combination of the foregoing or in any other form as the
Committee shall determine.
ARTICLE 11
OTHER STOCK-BASED AND COMBINATION AWARDS
11.1 The Committee (or the Board with respect to Awards to
Non-Employee Directors) may grant other Awards under the Plan pursuant to which
Shares are or may in the future be acquired, or Awards denominated in or
measured by Share-equivalent units, including Awards valued using measures other
than the market value of Shares. Such Other Stock-Based Awards may be granted
either alone, in addition to, or in tandem with, any other type of Award granted
under the Plan.
11.2 Combination Awards. The Committee may also grant Awards
under the Plan in tandem or combination with, in exchange for, or as
alternatives to, other Awards, or in tandem or combination with, in exchange
for, or as alternatives to, grants or rights under any other employee plan of
Corporation or any Subsidiary, including the plan of any acquired entity. No
action authorized by this section shall reduce the amount of any existing
benefits or change the terms and conditions thereof without the Participant's
consent.
ARTICLE 12
DEFERRAL ELECTIONS
The Committee may permit a Participant to elect to defer
receipt of the payment of cash or the delivery of Shares that would otherwise be
due to such Participant by virtue of the exercise, earn-out, or Vesting of an
Award made under the Plan. If any such election is permitted, the Committee
shall establish rules and procedures for such payment deferrals, including, but
not limited to: (a) payment or crediting of reasonable interest on such deferred
amounts credited in cash, (b) the payment or crediting of dividend equivalents
in respect of deferrals credited in Share equivalent units, or (c) granting of
Deferred Compensation Options.
ARTICLE 13
DIVIDEND EQUIVALENTS
Any Awards may, at the discretion of the Committee, earn
dividend equivalents. In respect of any such Award which is outstanding on a
dividend record date for Common Stock, the Participant may be credited with an
amount equal to the amount of cash or stock dividends that would have been paid
on the Shares covered by such Award, had such covered Shares been issued and
outstanding on such dividend record date. The Committee shall establish such
rules and procedures governing the crediting of dividend equivalents, including
the timing, form of payment, and payment contingencies of such dividend
equivalents, as it deems are appropriate or necessary.
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ARTICLE 14
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, ETC.
14.1 Plan Does Not Restrict Corporation. The existence of the
Plan and the Awards granted hereunder shall not affect or restrict in any way
the right or power of the Board or the stockholders of Corporation to make or
authorize any adjustment, recapitalization, reorganization, or other change in
Corporation's capital structure or its business, any merger or consolidation of
the Corporation, any issue of bonds, debentures, preferred or prior preference
stocks ahead of or affecting Corporation's capital stock or the rights thereof,
the dissolution or liquidation of Corporation or any sale or transfer of all or
any part of its assets or business, or any other corporate act or proceeding.
14.2 Adjustments by the Committee. In the event of any change
in capitalization affecting the Common Stock of Corporation, such as a stock
dividend, stock split, recapitalization, merger, consolidation, split-up,
combination or exchange of shares or other form of reorganization, or any other
change affecting the Common Stock, such proportionate adjustments, if any, as
the Committee, in its sole discretion, may deem appropriate to reflect such
change, shall be made with respect to the aggregate number of Shares for which
Awards in respect thereof may be granted under the Plan, the maximum number of
Shares which may be sold or awarded to any Participant, the number of Shares
covered by each outstanding Award, and the price per Share in respect of
outstanding Awards. The Committee may also make such adjustments in the number
of Shares covered by, and price or other value of, any outstanding Awards in the
event of a spin-off or other distribution (other than normal cash dividends) of
Corporation assets to stockholders.
ARTICLE 15
AMENDMENT AND TERMINATION
Without further approval of Corporation's stockholders, the
Board may at any time terminate the Plan, or may amend it from time to time in
such respects as the Board may deem advisable, except that the Board may not,
without approval of the stockholders, make any amendment that would materially
increase the aggregate number of shares of Common Stock that may be issued under
the Plan (except for adjustments pursuant to Article 14 of the Plan). Without
further stockholder approval, the Board may amend the Plan to take into account
changes in applicable securities laws, federal income tax laws, and other
applicable laws. Further, should the provisions of Rule 16b-3, or any successor
rule, under the Exchange Act be amended, the Board, without further stockholder
approval, may amend the Plan as necessary to comply with any modifications to
such rule.
ARTICLE 16
MISCELLANEOUS
. 16.1 Tax Withholding
16.1.1 General. Corporation shall have the right to deduct
from any settlement, including the delivery or vesting of Shares, made under the
Plan any federal, state, or local taxes of any kind required by law to be
withheld with respect to such payments or to take such other action as may be
necessary in the opinion of Corporation to satisfy all obligations for the
payment of such taxes. The recipient of any payment or distribution under the
Plan shall make arrangements satisfactory to Corporation for the satisfaction of
any such withholding tax obligations. Corporation shall not be required to make
any such payment or distribution under the Plan until such obligations are
satisfied.
16.1.2 Stock Withholding. The Committee, in its sole
discretion, may permit a Participant to satisfy all or a part of the withholding
tax obligations incident to the settlement of an Award involving payment or
delivery of Shares to the Participant by having Corporation withhold a portion
of the Shares that would otherwise be issuable to the Participant. Such Shares
shall be valued based on their Fair Market Value on the date the tax withholding
is required to be made. Any stock withholding with respect to a Reporting Person
shall be subject to such limitations as the Committee may impose to comply with
the requirements of the Exchange Act.
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16.2 Unfunded Plan. The Plan shall be unfunded and Corporation
shall not be required to segregate any assets that may at any time be
represented by Awards under the Plan. Any liability of Corporation to any person
with respect to any Award under the Plan shall be based solely upon any
contractual obligations that may be effected pursuant to the Plan. No such
obligation of Corporation shall be deemed to be secured by any pledge of, or
other encumbrance on, any property of Corporation.
16.3 Payments to Trust. The Committee is authorized to cause
to be established a trust agreement or several trust agreements whereunder the
Committee may make payments of amounts due or to become due to Participants in
the Plan.
16.4 Annulment of Awards. Any Award Agreement may provide that
the grant of an Award payable in cash is provisional until cash is paid in
settlement thereof or that grant of an Award payable in Shares is provisional
until the Participant becomes entitled to the certificate in settlement thereof.
In the event the employment (or service as an Advisor or membership on the
Board) of a Participant is terminated for cause (as defined below), any Award
which is provisional shall be annulled as of the date of such termination for
cause. For the purpose of this Section 16.4, the term "for cause" shall have the
meaning set forth in the Participant's employment agreement, if any, or
otherwise means any discharge (or removal) for material or flagrant violation of
the policies and procedures of Corporation or for other job performance or
conduct which is materially detrimental to the best interests of Corporation, as
determined by the Committee.
16.5 Engaging in Competition With Corporation. Any Award
Agreement may provide that, if a Participant terminates employment with
Corporation or a Subsidiary for any reason whatsoever, and within 18 months
after the date thereof accepts employment with any competitor of (or otherwise
engages in competition with) Corporation, the Committee, in its sole discretion,
may require such Participant to return to Corporation the economic value of any
Award that is realized or obtained (measured at the date of exercise, Vesting,
or payment) by such Participant at any time during the period beginning on the
date that is six months prior to the date of such Participant's termination of
employment with Corporation.
16.6 Other Corporation Benefit and Compensation Programs.
Payments and other benefits received by a Participant under an Award made
pursuant to the Plan shall not be deemed a part of a Participant's regular,
recurring compensation for purposes of the termination indemnity or severance
pay law of any state or country and shall not be included in, or have any effect
on, the determination of benefits under any other employee benefit plan or
similar arrangement provided by Corporation or a Subsidiary unless expressly so
provided by such other plan or arrangements, or except where the Committee
expressly determines that an Award or portion of an Award should be included to
accurately reflect competitive compensation practices or to recognize that an
Award has been made in lieu of a portion of cash compensation. The Plan
notwithstanding, Corporation or any Subsidiary may adopt such other compensation
programs and additional compensation arrangements as it deems necessary to
attract, retain, and reward employees and directors for their service with
Corporation and its Subsidiaries.
16.7 Securities Law Restrictions. No Shares shall be issued
under the Plan unless counsel for Corporation shall be satisfied that such
issuance will be in compliance with applicable federal and state securities
laws. Certificates for Shares delivered under the Plan may be subject to such
stop-transfer orders and other restrictions as the Committee may deem advisable
under the rules, regulations, and other requirements of the Securities and
Exchange Commission, any stock exchange or automated securities interdealer
quotation system upon which the Common Stock is then listed or traded, and any
applicable federal or state securities law. The Committee may cause a legend or
legends to be put on any such certificates to make appropriate reference to such
restrictions.
16.8 Governing Law. Except with respect to references to the
Code or federal securities laws, the Plan and all actions taken thereunder shall
be governed by and construed in accordance with the laws of the state of Oregon.
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AGRITOPE, INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE OF THE PLAN. This plan, effective , 1997 (the
"Plan"), shall be known as the "Agritope, Inc. 1997 Employee Stock Purchase
Plan." The purpose of the Plan is to permit employees of Agritope, Inc., a
Delaware corporation ("Corporation"), and of its Subsidiaries (as hereinafter
defined) to obtain or increase a proprietary interest in Corporation by
permitting them to make installment purchases of shares of Corporation's Common
Stock (as hereinafter defined) through payroll deductions. The Plan is intended
to qualify as an "employee stock purchase plan" within the meaning of Section
423 of the Internal Revenue Code of 1986, as amended (the "Code").
2. DEFINITIONS.
BOARD OF DIRECTORS. The Board of Directors of Corporation or
a committee thereof duly authorized for the purposes of administering
this Plan.
COMMON STOCK. Corporation's common stock, par value $.01 per
share, and any security of Corporation issued in substitution,
exchange, or in lieu of such stock.
ELIGIBLE EMPLOYEES. Those persons who on the applicable
Offering Date are employees of Corporation or a Subsidiary except those
who, immediately prior to the applicable Offering Date, would be deemed
under Section 423(b)(3) of the Code to own stock possessing 5 percent
or more of the total combined voting power or value of all classes of
stock of Corporation or any other corporation that constitutes a parent
or subsidiary corporation of Corporation within the meaning of that
section.
MAXIMUM PURCHASE PRICE. 85 percent of the mean between the
reported high and low sale prices, or, if there is no sale on such day,
the mean between the reported bid and asked prices, of Common Stock on
the securities exchange or automated securities interdealer quotation
system on which Common Stock shall have been traded on the last trading
day preceding the applicable Offering Date.
MONTHLY COMPENSATION. For an Eligible Employee on the payroll
of Corporation or a Subsidiary for the entire calendar month preceding
the applicable Offering Date, the compensation paid or accrued to such
Eligible Employee for such month plus, in the case of such an Eligible
Employee whose compensation for such month was based wholly or partly
on a bonus, commission, profit sharing, or similar arrangement for
which no accrual was made for such month, an amount equal to the
portion attributable to one month of the amount accrued to such
Eligible Employee as of the day preceding the applicable Offering Date,
on the books of Corporation or its Subsidiaries in accordance with such
arrangement. For all other Eligible Employees, Monthly Compensation
shall be the monthly rate of compensation in effect immediately prior
to the applicable Offering Date. For all purposes of the Plan, Monthly
Compensation shall include any amount which is contributed by
Corporation or a Subsidiary pursuant to a salary reduction agreement
and which is not includable in the gross income of an Eligible Employee
under Code Sections 125 (relating to "cafeteria plans") or 402(a)(8)
(relating to elective contributions under a "401(k)" plan).
OFFERING DATES. Such dates as may be set by the Board of
Directors, provided that no more than three Offering Dates (other than
Special Offering Dates for purposes of Special Offerings pursuant to
Section of this Plan) may be set during each fiscal year. The first day
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of each calendar month, commencing January 1, 1998, shall be a Special
Offering Date. Except as otherwise expressly provided in this Plan, all
references to Offering Dates shall include Special Offering Dates.
OFFERING PERIODS. Such periods as may be set by the Board of
Directors for the offering of Common Stock pursuant to this Plan.
PARTICIPANT. An Eligible Employee who subscribes for the
purchase of shares of Common Stock under the Plan in accordance with
the Plan (including an Eligible Employee who participates in a Special
Offering pursuant to Section of this Plan.
PURCHASE DATES. Such dates as may be set by the Board of
Directors for the purchase of Common Stock, provided that (i) Purchase
Dates shall be no less than six months and no more than 24 months after
the termination of the applicable Offering Period and (ii) Purchase
Dates may be any earlier date of purchase pursuant to the terms of this
Plan, including Sections (termination of employment), (retirement or
disability), and (death).
PURCHASE PERIODS. The period beginning on the termination of
an Offering Period and ending on the applicable Purchase Date.
PURCHASE PRICE. The lesser of (i) the Maximum Purchase Price
or (ii) 85 percent of the mean between the reported high and low sale
prices, or, if there is no sale on such day, the mean between the
reported bid and asked prices, of Common Stock on the securities
exchange or automated securities interdealer quotation system on which
Common Stock shall have been traded on the applicable Purchase Date or,
if the Purchase Date is not a trading day, on the last trading day
preceding such date. The Purchase Price per share shall be subject to
adjustment in accordance with the provisions of Section of this Plan.
SPECIAL OFFERING. An offering pursuant to Section of this
Plan.
SUBSIDIARY. A domestic corporation of which, on the applicable
Offering Date, Corporation or a Subsidiary of Corporation owns at least
50 percent of the total combined voting power of all classes of stock
and whose employees are authorized to participate in the Plan by the
Board of Directors of Corporation.
3. THE OFFERING. The number of shares of Common Stock subject
to the Plan shall be 250,000 shares, subject to adjustment as provided in
Section 17 of this Plan. During each Offering Period, Corporation may offer, at
the applicable Purchase Price, for subscription by Eligible Employees in
accordance with the terms of the Plan, such number of authorized and unissued
shares of its Common Stock subject to the Plan as may be determined by the Board
of Directors.
4. SUBSCRIPTIONS.
a. SHARES SUBJECT TO SUBSCRIPTION. Except as provided in
Section of this Plan with respect to Special Offerings, during each Offering
Period, each Eligible Employee shall be entitled to subscribe for the number of
whole shares of Common Stock offered during such Offering Period designated by
him or her in accordance with the terms of the Plan; provided, however, that for
any Offering Period, the Board of Directors may set a minimum, a maximum, or
both a minimum and a maximum number of shares that may be subscribed for during
such Offering Period. In no event may any employee subscribe for shares (under
any one or more Offering Periods which have Offering Dates within any calendar
year) which would have a total value (computed as the number of shares
subscribed for during each such Offering Period multiplied by the Maximum
Purchase Price for each such Offering Period) in excess of $21,250.
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b. FURTHER LIMITATION ON SUBSCRIPTIONS. Notwithstanding
Section of this Plan, the maximum number of shares that may be subscribed for by
an Eligible Employee shall be further limited and reduced to the extent that the
number of shares owned by such Eligible Employee immediately after any Offering
Date for purposes of Section 423(b)(3) of the Code plus the maximum number of
shares set forth in Section of this Plan would exceed 5 percent of the total
combined voting power or value of all classes of stock of Corporation or a
parent or subsidiary corporation of Corporation within the meaning set forth in
Section 423(b)(3) of the Code.
c. SUBSCRIPTION AGREEMENTS. Subscriptions pursuant to the Plan
shall be evidenced by the completion and execution of subscription agreements in
the form provided by Corporation and delivery of such agreements to Corporation,
at the place designated by Corporation, prior to the expiration of each Offering
Period. No subscription agreement shall be subject to termination or reduction
during the Offering Period to which it relates without written consent of
Corporation.
d. OVER SUBSCRIPTION. In the event that the aggregate number
of shares of Common Stock subscribed for pursuant to the Plan as of any Purchase
Date shall exceed the number of shares of Common Stock offered for sale during
the Offering Period related to such Purchase Date, then each subscription for
such Offering Period pursuant to which a purchase is effected shall be reduced
to the number of shares of Common Stock that such subscription would cover in
the event of a proportionate reduction of all subscriptions for such Offering
Period outstanding on such Purchase Date so that the aggregate number of shares
subject to all such subscriptions would not exceed the number of shares offered
for sale during such Offering Period. In making such reductions, fractions of
shares shall be disregarded and each subscription shall be for a whole number of
shares.
5. PAYMENT OF PURCHASE PRICE. Except as otherwise specifically
provided in the Plan, the Purchase Price of all shares purchased hereunder shall
be paid in equal installments through payroll deduction from the Participant's
compensation during the applicable Purchase Period, without the right of
prepayment. The Maximum Purchase Price multiplied by the number of shares
subscribed for shall be withheld in substantially equal installments on each pay
period during the applicable Purchase Period.
6. SPECIAL OFFERS.
a. DEFINITIONS. For purposes of this Section , the following
terms shall have the following meanings:
ANNUAL INCREASE. The gross annual amount (before any
applicable withholding) by which an employee's compensation would
otherwise be increased during the one-year period following an Annual
Review Date for such employee had the employee not been subject to a
Special Offering Subscription pursuant to this Section .
ANNUAL REVIEW DATE. The effective date, which may be an
employee's anniversary date, of an increase in compensation on account
of the employee's annual compensation review by Corporation.
SPECIAL OFFERING DATE. The first day of each calendar month
commencing January 1, 1998.
SPECIAL OFFERING SUBSCRIPTION. A subscription pursuant to this
Section 6 for the number of whole shares of Common Stock equal to an
Eligible Employee's Annual Increase as of an Annual Review Date divided
by the Maximum Purchase Price for the Special Offering Date which falls
on or immediately follows the Annual Review Date.
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SPECIAL PURCHASE DATE. For each Participant with a Special
Offering Subscription, the one-year anniversary of the Annual Review
Date corresponding to the subscription.
SPECIAL PURCHASE PERIOD. The period from a Participant's
Annual Review date preceding a Special Offering Date through the
corresponding Special Purchase Date.
b. SUBSCRIPTION. As of each Annual Review Date for each
Eligible Employee:
i. Corporation may, in its discretion, provide the Eligible
Employee a Special Offering Subscription in lieu of any increase in
cash compensation during the following year; or
ii. The Eligible Employee may make an irrevocable election to
receive a Special Offering Subscription in lieu of any increase in cash
compensation during the following year.
c. SUBSCRIPTION AGREEMENT. Each Special Offering Subscription
shall be evidenced by the completion of a Special Offering Subscription
Agreement in the form provided by Corporation.
d. PAYMENT OF PURCHASE PRICE. For each Special Offering
Subscription, Corporation shall credit to an account for the Participant an
amount equal to the Annual Increase in equal installments as of each payment
date for the Participant during the Special Purchase Period.
e. RIGHT TO TERMINATE ELECTION OR REDUCE NUMBER OF SHARES.
Notwithstanding Sections and of this Plan, a Participant subject to a Special
Offering Subscription may terminate the Special Offering Subscription or reduce
the number of shares covered by the Special Offering Subscription only as of the
Special Purchase Date (or an earlier Purchase Date upon the occurrence of one or
more of the events described in Sections , , or ). Such a termination or
reduction must be made by written notice to Corporation and must be received by
Corporation no later than the last business day before the Special Purchase Date
(or such earlier Purchase Date).
f. WITHHOLDING. Participants shall be subject to applicable
state and federal tax withholding and employment taxes on the shares purchased
pursuant to a Special Offering Subscription or upon payment of the amounts
credited to the Participant's account. Corporation's obligation to issue shares
shall be conditioned on the payment by the Participant (or other arrangement
satisfactory to Corporation) of all applicable withholding taxes.
7. APPLICATION OF FUNDS; PARTICIPANTS' ACCOUNTS. All amounts
withheld from and paid by Participants hereunder shall be deposited in
Corporation's general corporate account to be used for any corporate purposes;
provided, however, that Corporation shall maintain a separate bookkeeping
account for each Participant hereunder reflecting all amounts withheld from and
paid by such Participant with respect to each Purchase Period under the Plan. No
interest shall be credited to such separate accounts.
8. ISSUANCE OF SHARES. Shares purchased under the Plan shall,
for all purposes, be considered to have been issued, sold, and purchased at the
close of business on the applicable Purchase Date. Prior to each applicable
Purchase Date, no Participant shall have any rights as a holder of any shares
covered by a subscription agreement. Promptly after each Purchase Date,
Corporation shall issue and deliver to the Participant a stock certificate or
certificates representing the whole number of shares purchased by the
Participant during the Purchase Period ending with such Purchase Date and refund
to the Participant in cash any excess amount in his or her account relating to
such Purchase Period. No adjustment shall be made for dividends or for the other
rights for which the record date is prior to the applicable Purchase Date,
except as may otherwise be provided in Section .
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<PAGE>
9. RIGHT TO TERMINATE SUBSCRIPTION. Except as provided in
Section of this Plan, each Participant shall have the right, at any time after
the expiration of each Offering Period and prior to the applicable Purchase
Date, to terminate his or her subscription relating to such Offering Period by
written notice to Corporation and receive a prompt refund in cash of the total
amount in his or her account with respect to the applicable Purchase Period.
10. RIGHT TO REDUCE NUMBER OF SHARES. Except as provided in
Section of this Plan, each Participant shall have the right, at any time after
the expiration of each Offering Period and prior to the applicable Purchase
Date, to make, by written notice to Corporation, a one-time-only reduction in
the number of shares covered by his or her subscription agreement relating to
such Offering Period, provided that such right shall only apply to Purchase
Periods of 12 months or more. Upon such reduction of shares, an appropriate
reduction shall be made in the Participant's future payroll deductions during
the applicable Purchase Period and the excess amount in the Participant's
account with respect to such Purchase Period resulting from such reduction shall
be promptly refunded to the Participant in cash or, at the option of the
Participant, shall be applied in equal amounts against all future installment
payments of the Maximum Purchase Price of the reduced number of shares to be
purchased during the applicable Purchase Period.
11. TERMINATION OF EMPLOYMENT. Upon termination of employment
of a Participant for any reason other than retirement, disability or death,
including by reason of the sale of the Subsidiary by which the Participant is
employed such that Corporation or a Subsidiary of Corporation no longer owns at
least 50 percent of the total combined voting power of all classes of stock of
the Subsidiary, a Participant shall have, during the period of three months
following his or her termination date, but prior to the applicable Purchase
Date, the right with respect to each Purchase Period for which he or she has an
account under the Plan to elect to receive either a refund in cash of the total
amount of his or her account relating to such Purchase Period or the whole
number of shares that can be purchased at the applicable Purchase Price with
such amount together with any remaining cash in his or her account relating to
such Purchase Period. Each election must be in writing and delivered to
Corporation within the aforementioned period. If the Participant elects to
receive shares, the Purchase Date shall be the date the Participant's election
is delivered to Corporation. In the event the Participant does not make a timely
election with respect to any Purchase Period for which he or she has an account
under the Plan, he or she shall be deemed to have elected to receive a cash
refund of the amount of his or her account relating to such Purchase Period.
12. RETIREMENT; DISABILITY. A participant who retires or whose
employment is terminated by reason of any injury or illness of such a serious
nature as to disable the Participant from resuming employment with Corporation
shall have all of the rights described in Section above and shall have the
additional right to elect, in the manner described in Section , to prepay in
cash in a lump sum the entire unpaid balance of the Purchase Price of the shares
covered by his or her subscription agreement relating to each Purchase Period
and to receive such shares. The Purchase Date for this purpose shall be the date
on which both the Participant's election and the lump-sum cash payment shall
have been delivered to Corporation. For purposes of the Plan, a termination of
employment at or after age 50 for any reason shall be considered retirement.
13. DEATH. In the event of the death of a Participant while in
the employ of Corporation or a Subsidiary and prior to full payment of the
Maximum Purchase Price for the shares covered by his or her subscription with
respect to each Purchase Period, or the death of a retired or disabled
Participant prior to the exercise of his or her rights described in Section
above, his or her personal representative shall have, during the period of three
months following the Participant's death, but prior to the applicable Purchase
Date, the rights described in Section . In the event of the death of a
Participant who previously terminated employment by reason other than retirement
or disability prior to full payment of the Maximum Purchase Price for the shares
covered by his or her subscription with respect to each Purchase Period and
prior to the exercise of his or her rights described in Section , his or her
personal representative shall have the rights described in Section .
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<PAGE>
14. TEMPORARY LAYOFF; LEAVES OF ABSENCE. A Participant's
installment payments with respect to each Purchase Period shall be suspended
during any period of absence from work due to temporary layoff or leave of
absence without pay. If such Participant returns to active employment within the
applicable Purchase Period, installment payments shall resume and, except as
provided below with respect to Special Offering Subscriptions, the Participant
shall be entitled to elect either to make up the deficiency in his or her
account with respect to such Purchase Period immediately with a lump-sum cash
payment, or to have future installments with respect to such Purchase Period
uniformly increased to make up the deficiency, or to have an appropriate
reduction made in the number of shares covered by his or her subscription
agreement with respect to such Purchase Period to eliminate the deficiency. The
election (together with the lump-sum cash payment, if applicable) must be
delivered to Corporation within ten days of the Participant's return to active
employment but prior to the applicable Purchase Date. If the Participant fails
to make a timely election, the appropriate reduction of shares shall be made in
accordance with the above. If the Participant does not return to active
employment within the applicable Purchase Period, he or she shall have the right
to elect to receive either a refund in cash of the total amount of his or her
account with respect to such Purchase Period or the whole number of shares which
can be purchased at the applicable Purchase Price with such amount together with
any remaining cash in his or her account with respect to the Purchase Period.
The election must be in writing and delivered to Corporation prior to, and shall
be effective as of, the applicable Purchase Date. In the event the Participant
does not make a timely election with respect to any Purchase Period, he or she
shall be deemed to have elected to receive the cash refund with respect to that
Purchase Period. For Special Offering Subscriptions under Section of the Plan,
no amounts with respect to Annual Increase will be credited during a period of
absence from work due to temporary layoff or leave of absence without pay and
such amounts will not be made up after return to active employment.
15. INSUFFICIENCY OF COMPENSATION. In the event that for any
payroll period, for reasons other than termination of employment for any reason,
temporary layoff, or leave of absence without pay, a Participant's compensation
(after all other proper deductions from his or her compensation) becomes
insufficient to permit the full withholding of his or her installment payment,
the Participant may pay the deficiency in cash when it becomes due. In the event
that, in a subsequent payroll period, the Participant's compensation becomes
sufficient to make the full installment payment and there still remains a
deficiency in his or her account, the deficiency must then be eliminated through
the election of one of the alternatives described in Section . The Participant
must deliver his or her election to Corporation within ten days of the end of
such subsequent payroll period but prior to the applicable Purchase Date. In the
event that on the applicable Purchase Date there remains a deficiency in such a
Participant's account or, in the event a Participant described above fails to
make a timely election, the appropriate reduction of shares shall be made in
accordance with Section 14.
16. INTEREST. Any person who becomes entitled to receive any
amount of cash refund from any account maintained for him or her pursuant to any
provision of the Plan shall be entitled to receive in cash, at the same time,
simple interest on the amount of such refund at the rate of 6 percent per annum.
Any refund shall be deemed to be made from the most recent payment or payments
made by the Participant pursuant to the Plan.
17. EFFECT OF CERTAIN STOCK TRANSACTIONS. If at any time after
the day preceding the Offering Date for each Purchase Period, and prior to the
issue and sale by Corporation of all the shares of Common Stock covered by
Participants' subscription agreements with respect to each Purchase Period for
which the Offering Date has occurred, Corporation shall effect a subdivision of
shares of Common Stock or other increase (by stock dividend or otherwise) of the
number of shares of Common Stock outstanding, without the receipt of
consideration by Corporation or another corporation in which it is financially
interested and otherwise than in discharge of Corporation's obligation to make
further payment for assets theretofore acquired by it or such other corporation
or upon conversion of stock or other securities issued for consideration, or
shall reduce the number of shares of Common Stock outstanding by a consolidation
of shares, then (a) in the event of such an increase in the number of such
shares outstanding, the number of shares of Common Stock then subject to
Participants' subscription agreements with respect to such Purchase Period shall
be proportionately increased
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<PAGE>
and the Maximum Purchase Price and the Purchase Price per share for such
Purchase Period shall be proportionately reduced, and (b) in the event of such a
reduction in the number of such shares outstanding, the number of shares of
Common Stock then subject to subscription agreements with respect to such
Purchase Period shall be proportionately reduced and the Maximum Purchase Price
and the Purchase Price per share for such Purchase Period shall be
proportionately increased. Except as provided in this Section , no adjustment
shall be made under this Plan or any subscription agreement by reason of any
dividend or other distribution declared or paid by Corporation.
18. MERGER, CONSOLIDATION, LIQUIDATION OR DISSOLUTION. In the
event of any merger or consolidation of which Corporation is not to be the
survivor (or in which Corporation is the survivor, but becomes a subsidiary of
another corporation), or the liquidation or dissolution of Corporation, each
Participant shall have the right immediately prior to such event to elect to
receive the number of whole shares that can be purchased at the Purchase Price
applicable to each Purchase Period with respect to which such Participant has
subscribed for purchase of Common Stock with the full amount that has been
withheld from and paid by him or her pursuant to the subscription agreement
relating to such Purchase Period, together with any remaining excess cash in his
or her account relating to such Purchase Period. If such election is not made
with respect to the amount in a Participant's account for any Purchase Period,
the Participant's subscription agreement shall terminate and he or she shall
receive a prompt refund in cash of the total amount in such account.
19. LIMITATION ON RIGHT TO PURCHASE. Notwithstanding any
provision of the Plan to the contrary, if at any time a Participant is entitled
to purchase shares of Common Stock on a Purchase Date, taking into account such
Participant's rights, if any, to purchase Common Stock under the Plan and all
other stock purchase plans of Corporation and of other corporations that
constitute parent or subsidiary corporations of Corporation within the meaning
of Sections 424(e) and (f) of the Code, the result would be that, during the
then current calendar year, such Participant would have first become entitled to
purchase under the Plan and all such other plans a number of shares of Common
Stock of Corporation that would exceed the maximum number of shares permitted by
the provisions of Section 423(b)(8) of the Code, then the number of shares that
such Participant shall be entitled to purchase pursuant to the Plan on such
Purchase Date shall be reduced by the number that is one more than the number of
shares that represents the excess, and any excess amount in his or her account
resulting from such reduction shall be promptly refunded to him or her in cash.
20. NON-ASSIGNABILITY. None of the rights of an Eligible
Employee under the Plan or any subscription agreement entered into pursuant
hereto shall be transferable by such Eligible Employee otherwise than by will or
the laws of descent and distribution, and during the lifetime of an Eligible
Employee such rights shall be exercisable only by him or her.
21. SHARES NOT PURCHASED. Shares of Common Stock subject to
the Plan that are not subscribed for during each successive Offering Period and
shares subscribed for pursuant to such Offering Period that thereafter cease to
be subject to any subscription agreement hereunder shall remain subject to and
reserved for use in connection with a later Offering Period established by the
Board of Directors.
22. CONSTRUCTION; ADMINISTRATION. All questions with respect
to the construction and application of the Plan and subscription agreements
thereunder and the administration of the Plan shall be settled by the
determination of the Board of Directors or of one or more other persons
designated by it, which determinations shall be final, binding and conclusive on
Corporation and all employees and other persons. All Eligible Employees shall
have the same rights and privileges under the Plan.
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<PAGE>
23. TERMINATION OR AMENDMENT. Without further approval of
Corporation's stockholders, the Board of Directors may at any time terminate the
Plan or may amend the Plan from time to time in such respects as the Board of
Directors may deem advisable, except that the Board of Directors may not,
without the approval of Corporation's stockholders, make any amendment that
would materially increase the aggregate number of Shares that may be issued
under the Plan or decrease the price per Share (except for adjustments pursuant
to Section of the Plan).
24. GOVERNING LAW. Except with respect to references to the
Code or federal securities laws, the Plan and all actions taken under the Plan
shall be governed by and construed in accordance with the laws of the state of
Oregon.
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EMPLOYMENT AGREEMENT
This Employment Agreement is entered into as of December ----, 1997, by and
between Adolph J. Ferro, Ph.D. ("Employee") and Agritope, Inc., a Delaware
corporation (the "Company").
1. Services.
1.1 Employment. The Company agrees to employ Employee as the Chairman of
the Board, President and Chief Executive Officer of the Company, and Employee
hereby accepts such employment in accordance with the terms and conditions of
this Agreement. Employment shall commence on the date of this Agreement and
shall continue until terminated pursuant to the terms of this Agreement.
1.2 Duties. Employee shall have the position named in Section 1.1 with such
powers and duties appropriate to that office (a) as may be provided by the
bylaws of the Company, (b) as set forth on Schedule 1.2 to this Agreement, and
(c) as determined by the Board of Directors from time to time. Subject to the
provisions of Section 5.2.1, Employee's position and duties may be changed from
time to time during the term of this Agreement, and Employee's place of work may
be relocated, at the sole discretion of the Company's Board of Directors.
Employee shall devote his full business time, attention and best efforts to the
affairs of the Company and its subsidiaries during the term of this Agreement.
1.3 Outside Activities. Employee may engage in other activities, such as
activities involving charitable, educational, religious and similar types of
organizations (all of which are deemed to benefit Employer), speaking
engagements, and similar type activities, and may serve on the board of
directors of other corporations approved by the Board of Directors of Company,
in each case to the extent that such other activities do not materially detract
from or limit the performance of his duties under this Agreement, or inhibit or
conflict in any material way with the business of the Company and its
subsidiaries.
1.4 Direction of Services. Employee shall at all times discharge his duties
in consultation with and under the supervision and direction of the Company's
Board of Directors.
2. Compensation.
2.1 Salary. As compensation for services under this Agreement, the Company
shall pay to Employee a regular salary to
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be established each year by the Compensation Committee of the Board of
Directors, if there is such a committee, or if not, then by the Board of
Directors. Effective January 1 of each year that this Agreement is in effect,
such salary may be adjusted annually unless the Board of Directors in its
discretion determines not to do so. Payment shall be made on a monthly basis,
less all amounts required by law to be withheld or deducted, at such times as
shall be determined by the Board of Directors.
2.2 Additional Employee Benefits. Employee shall also have the right to
receive or participate in (a) any additional benefits, including, but not
limited to, vacation and sick leave policies, insurance programs, profit sharing
or pension plans, and medical reimbursement plans, which may from time to time
be made available by the Company to its employees and, (b) subject to meeting
eligibility requirements, all incentive compensation plans of the Company. The
Company shall reimburse Employee for all reasonable and necessary expenses
incurred in carrying out his duties under this Agreement, and substantiated by
Employee.
2.3 Extraordinary Compensation. Employee shall have the right, in addition
to all other compensation provided for in this Section 2, to additional
extraordinary compensation in accordance with the following terms:
2.3.1 Termination. In the event of termination of employment of
Employee pursuant to Section 5.2.1, Employee shall continue to be paid the
salary provided in Section 2.1 for 24 months in the manner and at the times at
which regular compensation was paid to Employee during the term of his
employment under the Agreement.
2.3.2 Termination after Change in Control. In the event that the
termination of the employment of Employee pursuant to Section 5.2.1 either (a)
occurs within 12 months following a change in control, within the meaning of the
Securities Exchange Act of 1934, or sale of substantially all of the assets of
the Company, or (b) is contingent upon such a change in control or sale of
assets, Employee shall continue to be paid the salary provided in Section 2.1
for 36 months, provided, however, that the present value of the stream of
payments to be made to Employee shall not exceed 295 percent of Employee's
Annualized Includable Compensation (in which event the payments shall be reduced
pro rata such that the present value thereof does not exceed such amount).
2.3.3 Definitions. The term Annualized Includable Compensation shall
mean the average annual compensation payable by the Company that was includable
in the gross income of Employee for the taxable years in the Base Period. The
term Base
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Period shall mean the period consisting of the most recent five taxable years
ending before the date on which the change in ownership or control occurs.
Present value shall be determined by using a discount rate equal to 120 percent
of the applicable Federal Rate (determined under Section 1274(d) of the Internal
Revenue Code of 1986, as amended) compounded semi-annually.
2.3.4 Change in Law. The parties agree that in the event Section 280G
or Section 4999 of the Internal Revenue Code is amended after the date hereof
with the effect that any of the compensation payable to Employee by the Company
pursuant to the foregoing provisions either (i) is not deductible for tax
purposes from the gross income of the Company, or (ii) subjects Employee to a
federal excise tax thereon, then, unless the parties otherwise agree, the
foregoing provisions may be modified at the discretion of the Board of Directors
in order to comply with the amended provisions of the Internal Revenue Code in
order that, to the greatest extent possible, such compensation shall be so
deductible by the Company and Employee shall not be subject to an excise tax
thereon.
2.4 Fees.
2.4.1 All compensation earned by Employee, other than pursuant to this
Agreement, as a result of services performed on behalf of the Company or as a
result of or arising out of any work done by Employee in any way related to the
scientific or business activities of the Company or its subsidiaries shall
belong to the Company or such subsidiary. Employee shall pay or deliver such
compensation to the Company or the subsidiary promptly upon receipt.
2.4.2 For the purposes of Section 2.4, "compensation" shall include,
but is not limited to, all professional and nonprofessional fees, lecture fees,
expert testimony fees, publishing fees, license fees, royalties, and any related
income, earnings or other things of value; and "scientific or business
activities of the Company" shall include, but not be limited to, any project or
projects in which the Company or its subsidiaries are involved and any subject
matter that is directly or indirectly researched, tested, developed, promoted or
marketed by the Company or its subsidiaries.
3. Confidential Information.
3.1 Access to Information. Employee acknowledges that in the course of his
employment he will have access to proprietary information, trade secrets, and
other confidential information, that such information is a valuable asset of the
Company and that its disclosure or unauthorized use will cause the Company
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<PAGE>
substantial harm. As used in this Agreement, the term "Confidential Information"
means: any and all information of a proprietary or secret nature of the Company
and its subsidiaries which is or may be either applicable to or related in any
way to (i) their present or future businesses, (ii) their research and
development or investigations, or (iii) the business of any of their licensees,
licensors or customers. The term "Confidential Information" includes, without
limitation, trade secrets, processes, data, know-how, improvements, inventions,
techniques, marketing plans, research and development contracts and grants,
strategies and information concerning customers or vendors, customer lists and
customer leads, new project ideas and leads, all non-public financial
information, and all information which is maintained in confidence or is
designated as confidential by the Company or its subsidiaries for the protection
of their businesses.
3.2 Ownership. Employee acknowledges that all Confidential Information
shall continue to be the exclusive property of the Company or its subsidiaries,
whether or not prepared in whole or in part by Employee and whether or not
disclosed to Employee or entrusted to his custody in connection with his
employment by the Company.
3.3 Nondisclosure and Nonuse. Unless authorized or instructed in writing by
the Company, or required by legally constituted authority, Employee will not,
except as required in the course of the Company's business, during or after his
employment, disclose to others or use any Confidential Information, unless and
until, and then only to the extent that, such items become available to the
public other than by his act or failure to prevent accidental or negligent loss
or release to any unauthorized person of the Confidential Information.
3.4 Return of Confidential Information. Upon request by the Company during
or after his employment, and without request upon termination of employment
pursuant to this Agreement, Employee will deliver immediately to the Company all
Confidential Information; Employee will thereafter retain no excerpts, notes,
photographs, reproductions or copies thereof.
3.5 Work Made for Hire. Employee agrees that all creative work, including
without limitation designs, drawings, specifications, techniques, models and
processes, prepared or originated by Employee for the Company or its
subsidiaries, or during or within the scope of employment by the Company, which
may be subject to protection under federal copyright law, constitutes work made
for hire, all rights to which are owned by the Company; and, in any event,
Employee assigns to the Company all rights, title, and interest, whether by way
of copyright,
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<PAGE>
trade secret, or otherwise, in all such work, whether or not subject to
protection by copyright or similar laws.
3.6 Duration. The obligations set forth in this Section 3 will continue
beyond the term of employment of Employee by the Company and for so long as
Employee possesses Confidential Information.
4. Noncompetition.
4.1 Covenant. Subject to the provisions of Section 4.3, Employee covenants
that Employee will not, throughout the United States, either individually or as
a director, officer, partner, employee, agent, representative, or consultant
with any business, directly or indirectly during the term of employment and for
one year thereafter:
4.1.1 Engage or prepare to engage in any business which competes with
the Company or its subsidiaries;
4.1.2 Induce or attempt to induce any person who is an employee of the
Company or its subsidiaries during the term of this covenant to leave the employ
of the Company or its subsidiaries; or
4.1.3 Solicit, divert or accept orders for products or services that
are substantially competitive with the products or services sold by the Company
or its subsidiaries from any customer of the Company or its subsidiaries.
4.2 Enforcement. Employee acknowledges and agrees that the time, scope and
other provisions of this Section 4 have been specifically negotiated by
sophisticated parties with the advice and consultation of counsel and
specifically hereby agrees that such time, scope and other provisions are
reasonable under the circumstances. Employee further agrees that if, at any
time, despite the express agreement of the parties hereto, a court of competent
jurisdiction holds that any portion of this Section 4 is unenforceable for any
reason, the maximum restrictions reasonable under the circumstances, as
determined by such court, will be substituted for any restrictions held
unenforceable.
4.3 Release from Obligation. In the event that Employee shall be entitled
to extraordinary compensation pursuant to the provisions of Section 2.3,
Employee may elect to waive all rights to receive such compensation from and
after the date of such waiver in exchange for the release of Employee from the
obligations of Sections 4.1.1 and 4.1.3. Such waiver shall be in writing, shall
state that it is in consideration for the release of Employee from the
obligations of Sections 4.1.1 and 4.1.3, and
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<PAGE>
shall be effective when delivered to the Company. In the event of such a waiver,
the amounts payable pursuant to the provisions of Section 2.3 shall be prorated
through the period commencing on the date of termination of employment and
ending on the date of delivery of the written notice of waiver to the Company.
For example, if such waiver is delivered to the Company six months after the
commencement of the one year period set forth in this Section, Employee shall be
paid one-half of the amounts otherwise payable pursuant to the provisions of
Section 2.3; in the event that the Employee shall have received more than such
prorata share of such compensation, it shall be a condition of the Employee's
rights under this Section that he shall have returned to the Company any amounts
in excess of such prorata share with the delivery of the waiver notice to the
Company.
5. Termination.
5.1 Voluntary Resignation. Employee may terminate his employment under this
Agreement by 90 days' written notice to the Company.
5.2 Termination by the Company.
5.2.1 The Company may terminate Employee's employment under this
Agreement without cause by 90 days' written notice to the Employee. If the
Company shall substantially diminish Employee's salary, duties or title, or
shall relocate the principal place where Employee's duties are performed to a
place outside of the Portland metropolitan area, then Employee may elect (but
shall not be required to do so) to treat such event as a termination without
cause.
5.2.2 The Company may terminate Employee's employment under this
Agreement by 30 days' written notice given at any time within six months after
the Company determines that Employee (a) has committed a material breach of his
obligations under this Agreement, and failed to cure such breach promptly after
receipt of written notice thereof from the Board of Directors of the Company,
(b) has willfully and continuously failed or refused to comply with the material
policies, standards and regulations of the Company, (c) has been guilty of
fraud, dishonesty or other acts of misconduct in rendering services on behalf of
the Company, or (d) has failed to otherwise comply with the standards of
behavior which an employer reasonably has the right to expect of an employee.
5.2.3 In the event that the Board of Directors shall reasonably
determine that Employee has become physically or mentally disabled such that
Employee shall be unable to render services to the Company to the same nature
and extent as such
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<PAGE>
services were rendered immediately prior to the disability, the Board of
Directors may terminate Employee's employment under this Agreement by 60 days'
written notice effective any time after the date 13 weeks following the
determination of disability.
5.3 Compensation Upon Termination.
5.3.1 In the event of a termination under Section 5.1 or 5.2.2,
Employee shall not be entitled to receive any compensation otherwise payable
pursuant to Sections 2.2 or 2.3. Employee will be entitled to receive only: (i)
salary payable under Section 2.1 through the day on which Employee's employment
is terminated, together with salary, compensation or benefits which have been
earned or become payable as of the date of termination but which have not yet
been paid to Employee; and (ii) such other benefits, if any, as shall be
determined to be applicable under the circumstances and in accordance with the
Company's plans and practices in effect on the date of termination.
5.3.2 In the event of a termination under Section 5.2.1, Employee
shall be entitled to receive extraordinary compensation payable pursuant to
Section 2.3, if applicable. Employee will also be entitled to receive: (i)
salary payable under Section 2.1 through the end of the month on which
Employee's employment is terminated, together with salary, compensation or
benefits which have been earned or become payable as of the date of termination
but which have not yet been paid to Employee; (ii) maintenance in effect for the
continued benefit of Employee and his dependents, at the expense of the Company,
of all insured and self-insured medical and dental benefit plans in which
Employee was participating immediately prior to termination, provided continued
participation is possible under the general terms and conditions of such plans,
until the earlier of the end of the salary period provided for in Section 2.3.2
or the date on which Employee obtains comparable insurance coverage from a new
employer; and (iii) such other benefits, if any, as shall be determined to be
applicable under the circumstances and in accordance with the Company's plans
and practices in effect on the date of termination.
5.3.3 In the event of a termination under Section 5.2.3, or as a
result of Employee's retirement or death, Employee (or Employee's estate) will
be entitled to receive: (i) salary payable under Section 2.1 through the end of
the month on which Employee's employment is terminated, together with salary,
compensation or benefits which have been earned or become payable as of the date
of termination but which have not yet been paid to Employee; (ii) such other
benefits, if any, as shall be determined to be applicable under the
circumstances and in
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<PAGE>
accordance with the Company's plans and practices in effect on the date of
termination; and (iii) such other awards or bonuses as the Board of Directors in
its sole discretion may determine.
6. Remedies.
The respective rights and duties of the Company and Employee under this
Agreement are in addition to, and not in lieu of, those rights and duties
afforded to and imposed upon them by law or at equity. Employee acknowledges
that breach of this Agreement will cause irreparable harm to the Company and
agrees to the entry of a temporary restraining order and preliminary and
permanent injunction by any court of competent jurisdiction to prevent breach or
further breach of this Agreement. Such remedy shall be in addition to any other
remedy available to the Company at law or in equity.
7. Severability of Provisions.
The provisions of this Agreement are severable, and if any provision hereof
is held or unenforceable, it shall be enforced to the maximum extent
permissible, and the remaining provisions of the Agreement shall continue in
full force and effect.
8. Attorney Fees.
In the event a suit or action is filed to enforce this Agreement or with
respect to this Agreement, the prevailing party shall be reimbursed by the other
party for all costs and expenses incurred in connection with the suit or action,
including without limitation reasonable attorneys' fees at the pre-trial stage,
at trial or on appeal.
9. Nonwaiver.
Failure of the Company at any time to require performance of any provision
of this Agreement shall not limit the right of the Company to enforce the
provision. No provision of this Agreement or breach thereof may be waived by
either party except by a writing signed by that party. Any waiver of any breach
of any provision of this Agreement shall be construed narrowly and shall not be
deemed to be a waiver of any succeeding breach of that provision or a waiver of
that provision itself or of any other provision.
10. Mediation and Arbitration.
10.1 Disputes. Except as provided in Sections 3 and 4, the Company and
Employee agree to comply with the following two-step dispute resolution process
with regard to any controversy or
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<PAGE>
claim arising out of or relating to this Agreement or their employment
relationship ("Dispute").
10.2 Mediation. In the event of a Dispute the Company and Employee agree to
submit it to mediation pursuant to the mediation services of Arbitration Service
of Portland, Inc. ("ASP"). The mediation shall be conducted in Portland, Oregon,
under the rules of ASP. The mediation will be conducted as promptly as possible,
and in no event later than 90 days from the date when one party notifies the
other of its intent to submit the Dispute to mediation or the termination of
Employee's employment, whichever is later. The Company will pay the mediator's
fees and other administrative costs of the mediation process. The parties shall
bear their own attorneys' fees and other costs.
10.3 Arbitration. In the event the Dispute is not successfully resolved
through mediation, the parties agree that it shall be settled by arbitration
administered through the arbitration services of ASP in accordance with its
rules. Judgment on the award rendered by the arbitrators may be entered in any
court having jurisdiction thereof.
The arbitrators shall have the authority to award such remedies or relief
that a court of the State of Oregon could order or grant in an action governed
by Oregon law, including, without limitation, specific performance of any
obligation created under this Agreement, the issuance of an injunction, or the
imposition of sanctions for abuse or frustration of the arbitration process, but
shall not be empowered to award punitive damages. The arbitration proceedings
shall be conducted in Portland, Oregon.
11. Notices.
All notices or other communications hereunder shall be deemed to have been
duly given and made if in writing and if served by personal delivery upon the
party for whom it is intended, if delivered by registered or certified mail,
return receipt requested, or by a national courier service, or if sent by
telecopier, provided that the telecopy is promptly confirmed by telephone
confirmation thereof, to the person at the address set forth below, or such
other address as may be designated in
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<PAGE>
writing hereunder, in the same manner, by such person:
To Employee:
Adolph J. Ferro, Ph.D.
5868 Suncreek Drive
Lake Oswego, OR 97035
Telephone: (503) 520-6210
Facsimile: (503) 520-6196
To Company:
Agritope, Inc.
8505 SW Creekside Place
Beaverton, OR 97008
Telephone: (503) 641-6115
Facsimile: (503) 641-8665
Attention: Chief Executive Officer
With a copy to:
Tonkon, Torp, Galen, Marmaduke & Booth
888 SW Fifth Avenue, Suite 1600
Portland, OR 97204
Telephone: (503) 802-2004
Facsimile: (503) 972-3704
Attention: Brian G. Booth
12. Withholding.
All payments to be made to Employee under this Agreement will be subject to
required withholding taxes and other deductions.
13. Successors; Binding Agreement.
13.1 Any Successor (as hereinafter defined) to Company shall be bound by
this Agreement. At Employee's request, Company will seek to have any Successor
assent to the fulfillment by Company of its obligations under this Agreement.
For purposes of this Agreement, "Successor" shall mean any person that succeeds
to, or has the practical ability to control (either immediately or with the
passage of time), Company's business directly, by merger or consolidation, or
indirectly, by purchase of the Employer's voting securities, all or
substantially all of its assets or otherwise.
13.2 For purposes of this Agreement, "Company" shall include any
corporation or other entity which is the surviving or continuing entity in
respect of any amalgamation, merger,
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<PAGE>
consolidation, dissolution, asset or stock acquisition or other form of business
combination.
14. Miscellaneous.
14.1 Except to the extent that the terms of this Agreement confer benefits
that are more favorable to Employee than are available under any other employee
benefit or executive compensation plan of Company in which Employee is a
participant, Employee's rights under any such employee benefit or executive
compensation plan shall be determined in accordance with the terms of such plan
(as it may be modified or added to by Company from time to time).
14.2 This Agreement constitutes the entire understanding between Company
and Employee relating to the employment of Employee by Company and its
subsidiaries and supersedes and cancels all prior agreements and understandings
with respect to the subject matter of this Agreement. Employee shall not be
entitled to any payment or benefit under this Agreement which duplicates a
payment or benefit received or receivable by Employee under such prior
agreements and understandings.
14.3 This Agreement may be amended but only by a subsequent written
agreement of the parties.
14.4 This Agreement shall be binding upon and shall inure to the benefit of
Employee, his heirs, executors, administrators and beneficiaries, and shall be
binding upon and inure to the benefit of Company and its successors and assigns.
14.5 This Agreement shall be construed in accordance with the laws of the
state of Oregon, without regard to any conflicts of laws rules thereof. 14.6 All
captions used herein are intended solely for convenience of reference and shall
in no way limit any of the provisions of this Agreement.
IN WITNESS HEREOF, the parties have executed this Employment Agreement as
of the date first hereinabove written.
AGRITOPE, INC.
Adolph J. Ferro, Ph.D. Executive Vice President
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<PAGE>
Schedule 1.2 to Employment Agreement
Specific Duties of Employee
---------------------------
Duties of Employee as
---------------------
Chairman of the Board, President and Chief Executive Officer.
-------------------------------------------------------------
Dr. Ferro, as the Chairman of the Board, President and Chief Executive
Officer of the Company shall be responsible for directing all phases of the
operations and the overall management of the Company, subject to direction by
the Board of Directors, as such positions are more particularly described in
Article 4 of the Bylaws of the Company. As President and Chief Executive
Officer, he shall report directly to the Chairman of the Board of Directors when
that position is occupied by another person. In such capacities, Dr. Ferro shall
be the key executive responsible for formulating and directing execution of
Company strategy in all phases of operations, development and planning. As Chief
Executive Officer, Dr. Ferro shall be the Company's principal spokesman and will
serve as a director on the Board of Directors and as operating management's
principal liaison to the Board of Directors.
Schedule 1.2
EMPLOYMENT AGREEMENT
This Employment Agreement is entered into as of December ---, 1997, by and
between Gilbert N. Miller ("Employee") and Agritope, Inc., a Delaware
corporation (the "Company").
1. Services.
1.1 Employment. The Company agrees to employ Employee as the Executive Vice
President and Chief Financial Officer of the Company, and Employee hereby
accepts such employment in accordance with the terms and conditions of this
Agreement. Employment shall commence on the date of this Agreement and shall
continue until terminated pursuant to the terms of this Agreement.
1.2 Duties. Employee shall have the position named in Section 1.1 with such
powers and duties appropriate to that office (a) as may be provided by the
bylaws of the Company, (b) as set forth on Schedule 1.2 to this Agreement, and
(c) as determined by the Board of Directors from time to time. Subject to the
provisions of Section 5.2.1, Employee's position and duties may be changed from
time to time during the term of this Agreement, and Employee's place of work may
be relocated, at the sole discretion of the Company's Board of Directors.
Employee shall devote his full business time, attention and best efforts to the
affairs of the Company and its subsidiaries during the term of this Agreement.
1.3 Outside Activities. Employee may engage in other activities, such as
activities involving charitable, educational, religious and similar types of
organizations (all of which are deemed to benefit Employer), speaking
engagements, and similar type activities, and may serve on the board of
directors of other corporations approved by the Board of Directors of Company,
in each case to the extent that such other activities do not materially detract
from or limit the performance of his duties under this Agreement, or inhibit or
conflict in any material way with the business of the Company and its
subsidiaries.
1.4 Direction of Services. Employee shall at all times discharge his duties
in consultation with and under the supervision and direction of the Company's
Board of Directors.
2. Compensation.
2.1 Salary. As compensation for services under this Agreement, the Company
shall pay to Employee a regular salary to be established each year by the
Compensation Committee of the
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<PAGE>
Board of Directors, if there is such a committee, or if not, then by the Board
of Directors. Effective January 1 of each year that this Agreement is in effect,
such salary may be adjusted annually unless the Board of Directors in its
discretion determines not to do so. Payment shall be made on a monthly basis,
less all amounts required by law to be withheld or deducted, at such times as
shall be determined by the Board of Directors.
2.2 Additional Employee Benefits. Employee shall also have the right to
receive or participate in (a) any additional benefits, including, but not
limited to, vacation and sick leave policies, insurance programs, profit sharing
or pension plans, and medical reimbursement plans, which may from time to time
be made available by the Company to its employees and, (b) subject to meeting
eligibility requirements, all incentive compensation plans of the Company. The
Company shall reimburse Employee for all reasonable and necessary expenses
incurred in carrying out his duties under this Agreement, and substantiated by
Employee.
2.3 Extraordinary Compensation. Employee shall have the right, in addition
to all other compensation provided for in this Section 2, to additional
extraordinary compensation in accordance with the following terms:
2.3.1 Termination. In the event of termination of employment of
Employee pursuant to Section 5.2.1, Employee shall continue to be paid the
salary provided in Section 2.1 for 24 months in the manner and at the times at
which regular compensation was paid to Employee during the term of his
employment under the Agreement.
2.3.2 Termination after Change in Control. In the event that the
termination of the employment of Employee pursuant to Section 5.2.1 either (a)
occurs within 12 months following a change in control, within the meaning of the
Securities Exchange Act of 1934, or sale of substantially all of the assets of
the Company, or (b) is contingent upon such a change in control or sale of
assets, Employee shall continue to be paid the salary provided in Section 2.1
for 36 months, provided, however, that the present value of the stream of
payments to be made to Employee shall not exceed 295 percent of Employee's
Annualized Includable Compensation (in which event the payments shall be reduced
pro rata such that the present value thereof does not exceed such amount).
2.3.3 Definitions. The term Annualized Includable Compensation shall
mean the average annual compensation payable by the Company that was includable
in the gross income of Employee for the taxable years in the Base Period. The
term Base Period shall mean the period consisting of the most recent five
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<PAGE>
taxable years ending before the date on which the change in ownership or control
occurs. Present value shall be determined by using a discount rate equal to 120
percent of the applicable Federal Rate (determined under Section 1274(d) of the
Internal Revenue Code of 1986, as amended) compounded semi-annually.
2.3.4 Change in Law. The parties agree that in the event Section 280G
or Section 4999 of the Internal Revenue Code is amended after the date hereof
with the effect that any of the compensation payable to Employee by the Company
pursuant to the foregoing provisions either (i) is not deductible for tax
purposes from the gross income of the Company, or (ii) subjects Employee to a
federal excise tax thereon, then, unless the parties otherwise agree, the
foregoing provisions may be modified at the discretion of the Board of Directors
in order to comply with the amended provisions of the Internal Revenue Code in
order that, to the greatest extent possible, such compensation shall be so
deductible by the Company and Employee shall not be subject to an excise tax
thereon.
2.4 Fees.
2.4.1 All compensation earned by Employee, other than pursuant to this
Agreement, as a result of services performed on behalf of the Company or as a
result of or arising out of any work done by Employee in any way related to the
scientific or business activities of the Company or its subsidiaries shall
belong to the Company or such subsidiary. Employee shall pay or deliver such
compensation to the Company or the subsidiary promptly upon receipt.
2.4.2 For the purposes of Section 2.4, "compensation" shall include,
but is not limited to, all professional and nonprofessional fees, lecture fees,
expert testimony fees, publishing fees, license fees, royalties, and any related
income, earnings or other things of value; and "scientific or business
activities of the Company" shall include, but not be limited to, any project or
projects in which the Company or its subsidiaries are involved and any subject
matter that is directly or indirectly researched, tested, developed, promoted or
marketed by the Company or its subsidiaries.
3. Confidential Information.
3.1 Access to Information. Employee acknowledges that in the course of his
employment he will have access to proprietary information, trade secrets, and
other confidential information, that such information is a valuable asset of the
Company and that its disclosure or unauthorized use will cause the Company
substantial harm. As used in this Agreement, the term
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<PAGE>
"Confidential Information" means: any and all information of a proprietary or
secret nature of the Company and its subsidiaries which is or may be either
applicable to or related in any way to (i) their present or future businesses,
(ii) their research and development or investigations, or (iii) the business of
any of their licensees, licensors or customers. The term "Confidential
Information" includes, without limitation, trade secrets, processes, data,
know-how, improvements, inventions, techniques, marketing plans, research and
development contracts and grants, strategies and information concerning
customers or vendors, customer lists and customer leads, new project ideas and
leads, all non-public financial information, and all information which is
maintained in confidence or is designated as confidential by the Company or its
subsidiaries for the protection of their businesses.
3.2 Ownership. Employee acknowledges that all Confidential Information
shall continue to be the exclusive property of the Company or its subsidiaries,
whether or not prepared in whole or in part by Employee and whether or not
disclosed to Employee or entrusted to his custody in connection with his
employment by the Company.
3.3 Nondisclosure and Nonuse. Unless authorized or instructed in writing by
the Company, or required by legally constituted authority, Employee will not,
except as required in the course of the Company's business, during or after his
employment, disclose to others or use any Confidential Information, unless and
until, and then only to the extent that, such items become available to the
public other than by his act or failure to prevent accidental or negligent loss
or release to any unauthorized person of the Confidential Information.
3.4 Return of Confidential Information. Upon request by the Company during
or after his employment, and without request upon termination of employment
pursuant to this Agreement, Employee will deliver immediately to the Company all
Confidential Information; Employee will thereafter retain no excerpts, notes,
photographs, reproductions or copies thereof.
3.5 Work Made for Hire. Employee agrees that all creative work, including
without limitation designs, drawings, specifications, techniques, models and
processes, prepared or originated by Employee for the Company or its
subsidiaries, or during or within the scope of employment by the Company, which
may be subject to protection under federal copyright law, constitutes work made
for hire, all rights to which are owned by the Company; and, in any event,
Employee assigns to the Company all rights, title, and interest, whether by way
of copyright,
Page 4 - EMPLOYMENT AGREEMENT
<PAGE>
trade secret, or otherwise, in all such work, whether or not subject to
protection by copyright or similar laws.
3.6 Duration. The obligations set forth in this Section 3 will continue
beyond the term of employment of Employee by the Company and for so long as
Employee possesses Confidential Information.
4. Noncompetition.
4.1 Covenant. Subject to the provisions of Section 4.3, Employee covenants
that Employee will not, throughout the United States, either individually or as
a director, officer, partner, employee, agent, representative, or consultant
with any business, directly or indirectly during the term of employment and for
one year thereafter:
4.1.1 Engage or prepare to engage in any business which competes with
the Company or its subsidiaries;
4.1.2 Induce or attempt to induce any person who is an employee of the
Company or its subsidiaries during the term of this covenant to leave the employ
of the Company or its subsidiaries; or
4.1.3 Solicit, divert or accept orders for products or services that
are substantially competitive with the products or services sold by the Company
or its subsidiaries from any customer of the Company or its subsidiaries.
4.2 Enforcement. Employee acknowledges and agrees that the time, scope and
other provisions of this Section 4 have been specifically negotiated by
sophisticated parties with the advice and consultation of counsel and
specifically hereby agrees that such time, scope and other provisions are
reasonable under the circumstances. Employee further agrees that if, at any
time, despite the express agreement of the parties hereto, a court of competent
jurisdiction holds that any portion of this Section 4 is unenforceable for any
reason, the maximum restrictions reasonable under the circumstances, as
determined by such court, will be substituted for any restrictions held
unenforceable.
4.3 Release from Obligation. In the event that Employee shall be entitled
to extraordinary compensation pursuant to the provisions of Section 2.3,
Employee may elect to waive all rights to receive such compensation from and
after the date of such waiver in exchange for the release of Employee from the
obligations of Sections 4.1.1 and 4.1.3. Such waiver shall be in writing, shall
state that it is in consideration for the release of Employee from the
obligations of Sections 4.1.1 and 4.1.3, and
Page 5 - EMPLOYMENT AGREEMENT
<PAGE>
shall be effective when delivered to the Company. In the event of such a waiver,
the amounts payable pursuant to the provisions of Section 2.3 shall be prorated
through the period commencing on the date of termination of employment and
ending on the date of delivery of the written notice of waiver to the Company.
For example, if such waiver is delivered to the Company six months after the
commencement of the one year period set forth in this Section, Employee shall be
paid one-half of the amounts otherwise payable pursuant to the provisions of
Section 2.3; in the event that the Employee shall have received more than such
prorata share of such compensation, it shall be a condition of the Employee's
rights under this Section that he shall have returned to the Company any amounts
in excess of such prorata share with the delivery of the waiver notice to the
Company.
5. Termination.
5.1 Voluntary Resignation. Employee may terminate his employment under this
Agreement by 90 days' written notice to the Company.
5.2 Termination by the Company.
5.2.1 The Company may terminate Employee's employment under this
Agreement without cause by 90 days' written notice to the Employee. If the
Company shall substantially diminish Employee's salary, duties or title, or
shall relocate the principal place where Employee's duties are performed to a
place outside of the Portland metropolitan area, then Employee may elect (but
shall not be required to do so) to treat such event as a termination without
cause.
5.2.2 The Company may terminate Employee's employment under this
Agreement by 30 days' written notice given at any time within six months after
the Company determines that Employee (a) has committed a material breach of his
obligations under this Agreement, and failed to cure such breach promptly after
receipt of written notice thereof from the Board of Directors of the Company,
(b) has willfully and continuously failed or refused to comply with the material
policies, standards and regulations of the Company, (c) has been guilty of
fraud, dishonesty or other acts of misconduct in rendering services on behalf of
the Company, or (d) has failed to otherwise comply with the standards of
behavior which an employer reasonably has the right to expect of an employee.
5.2.3 In the event that the Board of Directors shall reasonably
determine that Employee has become physically or mentally disabled such that
Employee shall be unable to render services to the Company to the same nature
and extent as such
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<PAGE>
services were rendered immediately prior to the disability, the Board of
Directors may terminate Employee's employment under this Agreement by 60 days'
written notice effective any time after the date 13 weeks following the
determination of disability.
5.3 Compensation Upon Termination.
5.3.1 In the event of a termination under Section 5.1 or 5.2.2,
Employee shall not be entitled to receive any compensation otherwise payable
pursuant to Sections 2.2 or 2.3. Employee will be entitled to receive only: (i)
salary payable under Section 2.1 through the day on which Employee's employment
is terminated, together with salary, compensation or benefits which have been
earned or become payable as of the date of termination but which have not yet
been paid to Employee; and (ii) such other benefits, if any, as shall be
determined to be applicable under the circumstances and in accordance with the
Company's plans and practices in effect on the date of termination.
5.3.2 In the event of a termination under Section 5.2.1, Employee
shall be entitled to receive extraordinary compensation payable pursuant to
Section 2.3, if applicable. Employee will also be entitled to receive: (i)
salary payable under Section 2.1 through the end of the month on which
Employee's employment is terminated, together with salary, compensation or
benefits which have been earned or become payable as of the date of termination
but which have not yet been paid to Employee; (ii) maintenance in effect for the
continued benefit of Employee and his dependents, at the expense of the Company,
of all insured and self-insured medical and dental benefit plans in which
Employee was participating immediately prior to termination, provided continued
participation is possible under the general terms and conditions of such plans,
until the earlier of the end of the salary period provided for in Section 2.3.2
or the date on which Employee obtains comparable insurance coverage from a new
employer; and (iii) such other benefits, if any, as shall be determined to be
applicable under the circumstances and in accordance with the Company's plans
and practices in effect on the date of termination.
5.3.3 In the event of a termination under Section 5.2.3, or as a
result of Employee's retirement or death, Employee (or Employee's estate) will
be entitled to receive: (i) salary payable under Section 2.1 through the end of
the month on which Employee's employment is terminated, together with salary,
compensation or benefits which have been earned or become payable as of the date
of termination but which have not yet been paid to Employee; (ii) such other
benefits, if any, as shall be determined to be applicable under the
circumstances and in
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<PAGE>
accordance with the Company's plans and practices in effect on the date of
termination; and (iii) such other awards or bonuses as the Board of Directors in
its sole discretion may determine.
6. Remedies.
The respective rights and duties of the Company and Employee under this
Agreement are in addition to, and not in lieu of, those rights and duties
afforded to and imposed upon them by law or at equity. Employee acknowledges
that breach of this Agreement will cause irreparable harm to the Company and
agrees to the entry of a temporary restraining order and preliminary and
permanent injunctions by any court of competent jurisdiction to prevent breach
or further breach of this Agreement. Such remedy shall be in addition to any
other remedy available to the Company at law or in equity.
7. Severability of Provisions.
The provisions of this Agreement are severable, and if any provision hereof
is held or unenforceable, it shall be enforced to the maximum extent
permissible, and the remaining provisions of the Agreement shall continue in
full force and effect.
8. Attorney Fees.
In the event a suit or action is filed to enforce this Agreement or with
respect to this Agreement, the prevailing party shall be reimbursed by the other
party for all costs and expenses incurred in connection with the suit or action,
including without limitation reasonable attorney's fees at the pre-trial stage,
at trial or on appeal.
9. Nonwaiver.
Failure of the Company at any time to require performance of any provision
of this Agreement shall not limit the right of the Company to enforce the
provision. No provision of this Agreement or breach thereof may be waived by
either party except by a writing signed by that party. Any waiver of any breach
of any provision of this Agreement shall be construed narrowly and shall not be
deemed to be a waiver of any succeeding breach of that provision or a waiver of
that provision itself or of any other provision.
10. Mediation and Arbitration.
10.1 Disputes. Except as provided in Sections 3 and 4, the Company and
Employee agree to comply with the following two-step dispute resolution process
with regard to any controversy or
Page 8 - EMPLOYMENT AGREEMENT
<PAGE>
claim arising out of or relating to this Agreement or their employment
relationship ("Dispute").
10.2 Mediation. In the event of a Dispute the Company and Employee agree to
submit it to mediation pursuant to the mediation services of Arbitration Service
of Portland, Inc. ("ASP"). The mediation shall be conducted in Portland, Oregon,
under the rules of ASP. The mediation will be conducted as promptly as possible,
and in no event later than 90 days from the date when one party notifies the
other of its intent to submit the Dispute to mediation or the termination of
Employee's employment, whichever is later. The Company will pay the mediator's
fees and other administrative costs of the mediation process. The parties shall
bear their own attorneys' fees and other costs.
10.3 Arbitration. In the event the Dispute is not successfully resolved
through mediation, the parties agree that it shall be settled by arbitration
administered through the arbitration services of ASP in accordance with its
rules. Judgment on the award rendered by the arbitrators may be entered in any
court having jurisdiction thereof.
The arbitrators shall have the authority to award such remedies or relief
that a court of the State of Oregon could order or grant in an action governed
by Oregon law, including, without limitation, specific performance of any
obligation created under this Agreement, the issuance of an injunction, or the
imposition of sanctions for abuse or frustration of the arbitration process, but
shall not be empowered to award punitive damages. The arbitration proceedings
shall be conducted in Portland, Oregon.
11. Notices.
All notices or other communications hereunder shall be deemed to have been
duly given and made if in writing and if served by personal delivery upon the
party for whom it is intended, if delivered by registered or certified mail,
return receipt requested, or by a national courier service, or if sent by
telecopier, provided that the telecopy is promptly confirmed by telephone
confirmation thereof, to the person at the address set forth below, or such
other address as may be designated in
Page 9 - EMPLOYMENT AGREEMENT
<PAGE>
writing hereunder, in the same manner, by such person:
To Employee:
Gilbert N. Miller
9 SW 68th Avenue
Portland, OR 97225
Telephone: (503) 520-6217
Facsimile: (503) 641-8665
To Company:
Agritope, Inc.
8505 SW Creekside Place
Beaverton, OR 97008
Telephone: (503) 641-6115
Facsimile: (503) 641-8665
Attention: Chief Executive Officer
With a copy to:
Tonkon, Torp, Galen, Marmaduke & Booth
888 SW Fifth Avenue, Suite 1600
Portland, OR 97204
Telephone: (503) 802-2004
Facsimile: (503) 972-3704
Attention: Brian G. Booth
12. Withholding.
All payments to be made to Employee under this Agreement will be subject to
required withholding taxes and other deductions.
13. Successors; Binding Agreement.
13.1 Any Successor (as hereinafter defined) to Company shall be bound by
this Agreement. At Employee's request, Company will seek to have any Successor
assent to the fulfillment by Company of its obligations under this Agreement.
For purposes of this Agreement, "Successor" shall mean any person that succeeds
to, or has the practical ability to control (either immediately or with the
passage of time), Company's business directly, by merger or consolidation, or
indirectly, by purchase of the Employer's voting securities, all or
substantially all of its assets or otherwise.
13.2 For purposes of this Agreement, "Company" shall include any
corporation or other entity which is the surviving or continuing entity in
respect of any amalgamation, merger,
Page 10 - EMPLOYMENT AGREEMENT
<PAGE>
consolidation, dissolution, asset or stock acquisition or other form of business
combination.
14. Miscellaneous.
14.1 Except to the extent that the terms of this Agreement confer benefits
that are more favorable to Employee than are available under any other employee
benefit or executive compensation plan of Company in which Employee is a
participant, Employee's rights under any such employee benefit or executive
compensation plan shall be determined in accordance with the terms of such plan
(as it may be modified or added to by Company from time to time).
14.2 This Agreement constitutes the entire understanding between Company
and Employee relating to the employment of Employee by Company and its
subsidiaries and supersedes and cancels all prior agreements and understandings
with respect to the subject matter of this Agreement. Employee shall not be
entitled to any payment or benefit under this Agreement which duplicates a
payment or benefit received or receivable by Employee under such prior
agreements and understandings.
14.3 This Agreement may be amended but only by a subsequent written
agreement of the parties.
14.4 This Agreement shall be binding upon and shall inure to the benefit of
Employee, his heirs, executors, administrators and beneficiaries, and shall be
binding upon and inure to the benefit of Company and its successors and assigns.
14.5 This Agreement shall be construed in accordance with the laws of the
state of Oregon, without regard to any conflicts of laws rules thereof.
14.6 All captions used herein are intended solely for convenience of
reference and shall in no way limit any of the provisions of this Agreement.
IN WITNESS HEREOF, the parties have executed this Employment Agreement as
of the date first hereinabove written.
AGRITOPE, INC.
Gilbert N. Miller President and
Chief Executive Officer
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<PAGE>
Schedule 1.2 to Employment Agreement
Specific Duties of Employee
---------------------------
Duties of Employee as
---------------------
Executive Vice President and Chief Financial Officer
----------------------------------------------------
Responsible for the long-term financial stability of Agritope's functional
units. Responsible for review of possible acquisitions, new business
opportunities and partnering prospects.
Develops and maintains long-term relationship with investment banking
community and chosen investment banker. Assists President/CEO in communication
with investors, brokers and analysts.
Involved in significant contract, marketing, technology transfer and equity
negotiations. Responsible for financial forecasts, possible divestitures or
spin-offs.
Reports to President/CEO on financial issues and managerial aspects of
Agritope operations.
EMPLOYMENT AGREEMENT
This Employment Agreement is entered into as of December ---, 1997, by and
between Richard K. Bestwick, Ph.D. ("Employee") and Agritope, Inc., a Delaware
corporation (the "Company").
1. Services.
1.1 Employment. The Company agrees to employ Employee as the Senior Vice
President - Research and Development of the Company, and Employee hereby accepts
such employment in accordance with the terms and conditions of this Agreement.
Employment shall commence on the date of this Agreement and shall continue until
terminated pursuant to the terms of this Agreement.
1.2 Duties. Employee shall have the position named in Section 1.1 with such
powers and duties appropriate to that office (a) as may be provided by the
bylaws of the Company, (b) as set forth on Schedule 1.2 to this Agreement, and
(c) as determined by the Board of Directors from time to time. Subject to the
provisions of Section 5.2.1, Employee's position and duties may be changed from
time to time during the term of this Agreement, and Employee's place of work may
be relocated, at the sole discretion of the Company's Board of Directors.
Employee shall devote his full business time, attention and best efforts to the
affairs of the Company and its subsidiaries during the term of this Agreement.
1.3 Outside Activities. Employee may engage in other activities, such as
activities involving charitable, educational, religious and similar types of
organizations (all of which are deemed to benefit Employer), speaking
engagements, and similar type activities, and may serve on the board of
directors of other corporations approved by the Board of Directors of Company,
in each case to the extent that such other activities do not materially detract
from or limit the performance of his duties under this Agreement, or inhibit or
conflict in any material way with the business of the Company and its
subsidiaries.
1.4 Direction of Services. Employee shall at all times discharge his duties
in consultation with and under the supervision and direction of the Company's
Board of Directors.
2. Compensation.
2.1 Salary. As compensation for services under this Agreement, the Company
shall pay to Employee a regular salary to
Page 1 - EMPLOYMENT AGREEMENT
<PAGE>
be established each year by the Compensation Committee of the Board of
Directors, if there is such a committee, or if not, then by the Board of
Directors. Effective January 1 of each year that this Agreement is in effect,
such salary may be adjusted annually unless the Board of Directors in its
discretion determines not to do so. Payment shall be made on a monthly basis,
less all amounts required by law to be withheld or deducted, at such times as
shall be determined by the Board of Directors.
2.2 Additional Employee Benefits. Employee shall also have the right to
receive or participate in (a) any additional benefits, including, but not
limited to, vacation and sick leave policies, insurance programs, profit sharing
or pension plans, and medical reimbursement plans, which may from time to time
be made available by the Company to its employees and, (b) subject to meeting
eligibility requirements, all incentive compensation plans of the Company. The
Company shall reimburse Employee for all reasonable and necessary expenses
incurred in carrying out his duties under this Agreement, and substantiated by
Employee.
2.3 Extraordinary Compensation. Employee shall have the right, in addition
to all other compensation provided for in this Section 2, to additional
extraordinary compensation in accordance with the following terms:
2.3.1 Termination. In the event of termination of employment of
Employee pursuant to Section 5.2.1, Employee shall continue to be paid the
salary provided in Section 2.1 for 12 months in the manner and at the times at
which regular compensation was paid to Employee during the term of his
employment under the Agreement.
2.3.2 Termination after Change in Control. In the event that the
termination of the employment of Employee pursuant to Section 5.2.1 either (a)
occurs within 12 months following a change in control, within the meaning of the
Securities Exchange Act of 1934, or sale of substantially all of the assets of
the Company, or (b) is contingent upon such a change in control or sale of
assets, Employee shall continue to be paid the salary provided in Section 2.1
for 24 months, provided, however, that the present value of the stream of
payments to be made to Employee shall not exceed 295 percent of Employee's
Annualized Includable Compensation (in which event the payments shall be reduced
pro rata such that the present value thereof does not exceed such amount).
2.3.3 Definitions. The term Annualized Includable Compensation shall
mean the average annual compensation payable by the Company that was includable
in the gross income of Employee for the taxable years in the Base Period. The
term Base
Page 2 - EMPLOYMENT AGREEMENT
<PAGE>
Period shall mean the period consisting of the most recent five taxable years
ending before the date on which the change in ownership or control occurs.
Present value shall be determined by using a discount rate equal to 120 percent
of the applicable Federal Rate (determined under Section 1274(d) of the Internal
Revenue Code of 1986, as amended) compounded semi-annually.
2.3.4 Change in Law. The parties agree that in the event Section 280G
or Section 4999 of the Internal Revenue Code is amended after the date hereof
with the effect that any of the compensation payable to Employee by the Company
pursuant to the foregoing provisions either (i) is not deductible for tax
purposes from the gross income of the Company, or (ii) subjects Employee to a
federal excise tax thereon, then, unless the parties otherwise agree, the
foregoing provisions may be modified at the discretion of the Board of Directors
in order to comply with the amended provisions of the Internal Revenue Code in
order that, to the greatest extent possible, such compensation shall be so
deductible by the Company and Employee shall not be subject to an excise tax
thereon.
2.4 Fees.
2.4.1 All compensation earned by Employee, other than pursuant to this
Agreement, as a result of services performed on behalf of the Company or as a
result of or arising out of any work done by Employee in any way related to the
scientific or business activities of the Company or its subsidiaries shall
belong to the Company or such subsidiary. Employee shall pay or deliver such
compensation to the Company or the subsidiary promptly upon receipt.
2.4.2 For the purposes of Section 2.4, "compensation" shall include,
but is not limited to, all professional and nonprofessional fees, lecture fees,
expert testimony fees, publishing fees, license fees, royalties, and any related
income, earnings or other things of value; and "scientific or business
activities of the Company" shall include, but not be limited to, any project or
projects in which the Company or its subsidiaries are involved and any subject
matter that is directly or indirectly researched, tested, developed, promoted or
marketed by the Company or its subsidiaries.
3. Confidential Information.
3.1 Access to Information. Employee acknowledges that in the course of his
employment he will have access to proprietary information, trade secrets, and
other confidential information, that such information is a valuable asset of the
Company and that its disclosure or unauthorized use will cause the Company
Page 3 - EMPLOYMENT AGREEMENT
<PAGE>
substantial harm. As used in this Agreement, the term "Confidential Information"
means: any and all information of a proprietary or secret nature of the Company
and its subsidiaries which is or may be either applicable to or related in any
way to (i) their present or future businesses, (ii) their research and
development or investigations, or (iii) the business of any of their licensees,
licensors or customers. The term "Confidential Information" includes, without
limitation, trade secrets, processes, data, know-how, improvements, inventions,
techniques, marketing plans, research and development contracts and grants,
strategies and information concerning customers or vendors, customer lists and
customer leads, new project ideas and leads, all non-public financial
information, and all information which is maintained in confidence or is
designated as confidential by the Company or its subsidiaries for the protection
of their businesses.
3.2 Ownership. Employee acknowledges that all Confidential Information
shall continue to be the exclusive property of the Company or its subsidiaries,
whether or not prepared in whole or in part by Employee and whether or not
disclosed to Employee or entrusted to his custody in connection with his
employment by the Company.
3.3 Nondisclosure and Nonuse. Unless authorized or instructed in writing by
the Company, or required by legally constituted authority, Employee will not,
except as required in the course of the Company's business, during or after his
employment, disclose to others or use any Confidential Information, unless and
until, and then only to the extent that, such items become available to the
public other than by his act or failure to prevent accidental or negligent loss
or release to any unauthorized person of the Confidential Information.
3.4 Return of Confidential Information. Upon request by the Company during
or after his employment, and without request upon termination of employment
pursuant to this Agreement, Employee will deliver immediately to the Company all
Confidential Information; Employee will thereafter retain no excerpts, notes,
photographs, reproductions or copies thereof.
3.5 Work Made for Hire. Employee agrees that all creative work, including
without limitation designs, drawings, specifications, techniques, models and
processes, prepared or originated by Employee for the Company or its
subsidiaries, or during or within the scope of employment by the Company, which
may be subject to protection under federal copyright law, constitutes work made
for hire, all rights to which are owned by the Company; and, in any event,
Employee assigns to the Company all rights, title, and interest, whether by way
of copyright,
Page 4 - EMPLOYMENT AGREEMENT
<PAGE>
trade secret, or otherwise, in all such work, whether or not subject to
protection by copyright or similar laws.
3.6 Duration. The obligations set forth in this Section 3 will continue
beyond the term of employment of Employee by the Company and for so long as
Employee possesses Confidential Information.
4. Noncompetition.
4.1 Covenant. Subject to the provisions of Section 4.3, Employee covenants
that Employee will not, throughout the United States, either individually or as
a director, officer, partner, employee, agent, representative, or consultant
with any business, directly or indirectly during the term of employment and for
one year thereafter:
4.1.1 Engage or prepare to engage in any business which competes with
the Company or its subsidiaries;
4.1.2 Induce or attempt to induce any person who is an employee of the
Company or its subsidiaries during the term of this covenant to leave the employ
of the Company or its subsidiaries; or
4.1.3 Solicit, divert or accept orders for products or services that
are substantially competitive with the products or services sold by the Company
or its subsidiaries from any customer of the Company or its subsidiaries.
4.2 Enforcement. Employee acknowledges and agrees that the time, scope and
other provisions of this Section 4 have been specifically negotiated by
sophisticated parties with the advice and consultation of counsel and
specifically hereby agrees that such time, scope and other provisions are
reasonable under the circumstances. Employee further agrees that if, at any
time, despite the express agreement of the parties hereto, a court of competent
jurisdiction holds that any portion of this Section 4 is unenforceable for any
reason, the maximum restrictions reasonable under the circumstances, as
determined by such court, will be substituted for any restrictions held
unenforceable.
4.3 Release from Obligation. In the event that Employee shall be entitled
to extraordinary compensation pursuant to the provisions of Section 2.3,
Employee may elect to waive all rights to receive such compensation from and
after the date of such waiver in exchange for the release of Employee from the
obligations of Sections 4.1.1 and 4.1.3. Such waiver shall be in writing, shall
state that it is in consideration for the release of Employee from the
obligations of Sections 4.1.1 and 4.1.3, and
Page 5 - EMPLOYMENT AGREEMENT
<PAGE>
shall be effective when delivered to the Company. In the event of such a waiver,
the amounts payable pursuant to the provisions of Section 2.3 shall be prorated
through the period commencing on the date of termination of employment and
ending on the date of delivery of the written notice of waiver to the Company.
For example, if such waiver is delivered to the Company six months after the
commencement of the one year period set forth in this Section, Employee shall be
paid one-half of the amounts otherwise payable pursuant to the provisions of
Section 2.3; in the event that the Employee shall have received more than such
prorata share of such compensation, it shall be a condition of the Employee's
rights under this Section that he shall have returned to the Company any amounts
in excess of such prorata share with the delivery of the waiver notice to the
Company.
5. Termination.
5.1 Voluntary Resignation. Employee may terminate his employment under this
Agreement by 90 days' written notice to the Company.
5.2 Termination by the Company.
5.2.1 The Company may terminate Employee's employment under this
Agreement without cause by 90 days' written notice to the Employee. If the
Company shall substantially diminish Employee's salary, duties or title, or
shall relocate the principal place where Employee's duties are performed to a
place outside of the Portland metropolitan area, then Employee may elect (but
shall not be required to do so) to treat such event as a termination without
cause.
5.2.2 The Company may terminate Employee's employment under this
Agreement by 30 days' written notice given at any time within six months after
the Company determines that Employee (a) has committed a material breach of his
obligations under this Agreement, and failed to cure such breach promptly after
receipt of written notice thereof from the Board of Directors of the Company,
(b) has willfully and continuously failed or refused to comply with the material
policies, standards and regulations of the Company, (c) has been guilty of
fraud, dishonesty or other acts of misconduct in rendering services on behalf of
the Company, or (d) has failed to otherwise comply with the standards of
behavior which an employer reasonably has the right to expect of an employee.
5.2.3 In the event that the Board of Directors shall reasonably
determine that Employee has become physically or mentally disabled such that
Employee shall be unable to render services to the Company to the same nature
and extent as such
Page 6 - EMPLOYMENT AGREEMENT
<PAGE>
services were rendered immediately prior to the disability, the Board of
Directors may terminate Employee's employment under this Agreement by 60 days'
written notice effective any time after the date 13 weeks following the
determination of disability.
5.3 Compensation Upon Termination.
5.3.1 In the event of a termination under Section 5.1 or 5.2.2,
Employee shall not be entitled to receive any compensation otherwise payable
pursuant to Sections 2.2 or 2.3. Employee will be entitled to receive only: (i)
salary payable under Section 2.1 through the day on which Employee's employment
is terminated, together with salary, compensation or benefits which have been
earned or become payable as of the date of termination but which have not yet
been paid to Employee; and (ii) such other benefits, if any, as shall be
determined to be applicable under the circumstances and in accordance with the
Company's plans and practices in effect on the date of termination.
5.3.2 In the event of a termination under Section 5.2.1, Employee
shall be entitled to receive extraordinary compensation payable pursuant to
Section 2.3, if applicable. Employee will also be entitled to receive: (i)
salary payable under Section 2.1 through the end of the month on which
Employee's employment is terminated, together with salary, compensation or
benefits which have been earned or become payable as of the date of termination
but which have not yet been paid to Employee; (ii) maintenance in effect for the
continued benefit of Employee and his dependents, at the expense of the Company,
of all insured and self-insured medical and dental benefit plans in which
Employee was participating immediately prior to termination, provided continued
participation is possible under the general terms and conditions of such plans,
until the earlier of the end of the salary period provided for in Section 2.3.2
or the date on which Employee obtains comparable insurance coverage from a new
employer; and (iii) such other benefits, if any, as shall be determined to be
applicable under the circumstances and in accordance with the Company's plans
and practices in effect on the date of termination.
5.3.3 In the event of a termination under Section 5.2.3, or as a
result of Employee's retirement or death, Employee (or Employee's estate) will
be entitled to receive: (i) salary payable under Section 2.1 through the end of
the month on which Employee's employment is terminated, together with salary,
compensation or benefits which have been earned or become payable as of the date
of termination but which have not yet been paid to Employee; (ii) such other
benefits, if any, as shall be determined to be applicable under the
circumstances and in
Page 7 - EMPLOYMENT AGREEMENT
<PAGE>
accordance with the Company's plans and practices in effect on the date of
termination; and (iii) such other awards or bonuses as the Board of Directors in
its sole discretion may determine.
6. Remedies.
The respective rights and duties of the Company and Employee under this
Agreement are in addition to, and not in lieu of, those rights and duties
afforded to and imposed upon them by law or at equity. Employee acknowledges
that breach of this Agreement will cause irreparable harm to the Company and
agrees to the entry of a temporary restraining order and preliminary and
permanent injunction by any court of competent jurisdiction to prevent breach or
further breach of this Agreement. Such remedy shall be in addition to any other
remedy available to the Company at law or in equity.
7. Severability of Provisions.
The provisions of this Agreement are severable, and if any provision hereof
is held or unenforceable, it shall be enforced to the maximum extent
permissible, and the remaining provisions of the Agreement shall continue in
full force and effect.
8. Attorney Fees.
In the event a suit or action is filed to enforce this Agreement or with
respect to this Agreement, the prevailing party shall be reimbursed by the other
party for all costs and expenses incurred in connection with the suit or action,
including without limitation reasonable attorney's fees at the pre-trial stage,
at trial or on appeal.
9. Nonwaiver.
Failure of the Company at any time to require performance of any provision
of this Agreement shall not limit the right of the Company to enforce the
provision. No provision of this Agreement or breach thereof may be waived by
either party except by a writing signed by that party. Any waiver of any breach
of any provision of this Agreement shall be construed narrowly and shall not be
deemed to be a waiver of any succeeding breach of that provision or a waiver of
that provision itself or of any other provision.
10. Mediation and Arbitration.
10.1 Disputes. Except as provided in Sections 3 and 4, the Company and
Employee agree to comply with the following two-step dispute resolution process
with regard to any controversy or
Page 8 - EMPLOYMENT AGREEMENT
<PAGE>
claim arising out of or relating to this Agreement or their employment
relationship ("Dispute").
10.2 Mediation. In the event of a Dispute the Company and Employee agree to
submit it to mediation pursuant to the mediation services of Arbitration Service
of Portland, Inc. ("ASP"). The mediation shall be conducted in Portland, Oregon,
under the rules of ASP. The mediation will be conducted as promptly as possible,
and in no event later than 90 days from the date when one party notifies the
other of its intent to submit the Dispute to mediation or the termination of
Employee's employment, whichever is later. The Company will pay the mediator's
fees and other administrative costs of the mediation process. The parties shall
bear their own attorneys' fees and other costs.
10.3 Arbitration. In the event the Dispute is not successfully resolved
through mediation, the parties agree that it shall be settled by arbitration
administered through the arbitration services of ASP in accordance with its
rules. Judgment on the award rendered by the arbitrators may be entered in any
court having jurisdiction thereof.
The arbitrators shall have the authority to award such remedies or relief
that a court of the State of Oregon could order or grant in an action governed
by Oregon law, including, without limitation, specific performance of any
obligation created under this Agreement, the issuance of an injunction, or the
imposition of sanctions for abuse or frustration of the arbitration process, but
shall not be empowered to award punitive damages. The arbitration proceedings
shall be conducted in Portland, Oregon.
11. Notices.
All notices or other communications hereunder shall be deemed to have been
duly given and made if in writing and if served by personal delivery upon the
party for whom it is intended, if delivered by registered or certified mail,
return receipt requested, or by a national courier service, or if sent by
telecopier, provided that the telecopy is promptly confirmed by telephone
confirmation thereof, to the person at the address set forth below, or such
other address as may be designated in writing hereunder, in the same manner, by
such person:
To Employee:
Richard K. Bestwick, Ph.D.
--------------------------
--------------------------
Telephone: (503) --------
Facsimile: (503) --------
To Company:
Agritope, Inc.
8505 SW Creekside Place
Beaverton, OR 97008
Telephone: (503) 641-6115
Facsimile: (503) 641-8665
Attention: Chief Executive Officer
With a copy to:
Tonkon, Torp, Galen, Marmaduke & Booth
888 SW Fifth Avenue, Suite 1600
Portland, OR 97204
Telephone: (503) 802-2004
Facsimile: (503) 972-3704
Attention: Brian G. Booth
12. Withholding.
All payments to be made to Employee under this Agreement will be subject to
required withholding taxes and other deductions.
13. Successors; Binding Agreement.
13.1 Any Successor (as hereinafter defined) to Company shall be bound by
this Agreement. At Employee's request, Company will seek to have any Successor
assent to the fulfillment by Company of its obligations under this Agreement.
For purposes of this Agreement, "Successor" shall mean any person that succeeds
to, or has the practical ability to control (either immediately or with the
passage of time), Company's business directly, by merger or consolidation, or
indirectly, by purchase of the Employer's voting securities, all or
substantially all of its assets or otherwise.
13.2 For purposes of this Agreement, "Company" shall include any
corporation or other entity which is the surviving or continuing entity in
respect of any amalgamation, merger,
Page 9 - EMPLOYMENT AGREEMENT
<PAGE>
consolidation, dissolution, asset or stock acquisition or other form of business
combination.
14. Miscellaneous.
14.1 Except to the extent that the terms of this Agreement confer benefits
that are more favorable to Employee than are available under any other employee
benefit or executive compensation plan of Company in which Employee is a
participant, Employee's rights under any such employee benefit or executive
compensation plan shall be determined in accordance with the terms of such plan
(as it may be modified or added to by Company from time to time).
14.2 This Agreement constitutes the entire understanding between Company
and Employee relating to the employment of Employee by Company and its
subsidiaries and supersedes and cancels all prior agreements and understandings
with respect to the subject matter of this Agreement. Employee shall not be
entitled to any payment or benefit under this Agreement which duplicates a
payment or benefit received or receivable by Employee under such prior
agreements and understandings.
14.3 This Agreement may be amended but only by a subsequent written
agreement of the parties.
14.4 This Agreement shall be binding upon and shall inure to the benefit of
Employee, his heirs, executors, administrators and beneficiaries, and shall be
binding upon and inure to the benefit of Company and its successors and assigns.
14.5 This Agreement shall be construed in accordance with the laws of the
state of Oregon, without regard to any conflicts of laws rules thereof.
14.6 All captions used herein are intended solely for convenience of
reference and shall in no way limit any of the provisions of this Agreement.
IN WITNESS HEREOF, the parties have executed this Employment Agreement as
of the date first hereinabove written.
AGRITOPE, INC.
Richard K. Bestwick, Ph.D. President and
Chief Executive Officer
Page 10 - EMPLOYMENT AGREEMENT
<PAGE>
Schedule 1.2 to Employment Agreement
Specific Duties of Employee
---------------------------
Duties of Employee as
---------------------
Senior Vice President - Research and Development
------------------------------------------------
Responsible for research and development activities. Duties include
supervising and planning all research and development activities, patent
prosecution and defense, regulatory filings and approval, grant applications and
administration of grants, publication of scientific results, liaison with
scientific community, the Company's representative on scientific advisory board,
liaison with respect to research activities of strategic partners and licensees,
and participation in negotiation of licenses and strategic partner agreements.
Schedule 1.2
EMPLOYMENT AGREEMENT
This Employment Agreement is entered into as of December ---, 1997, by and
between Matthew G. Kramer ("Employee") and Agritope, Inc., a Delaware
corporation (the "Company").
1. Services.
1.1 Employment. The Company agrees to employ Employee as the Vice President
- - Product Development of the Company, and Employee hereby accepts such
employment in accordance with the terms and conditions of this Agreement.
Employment shall commence on the date of this Agreement and shall continue until
terminated pursuant to the terms of this Agreement.
1.2 Duties. Employee shall have the position named in Section 1.1 with such
powers and duties appropriate to that office (a) as may be provided by the
bylaws of the Company, (b) as set forth on Schedule 1.2 to this Agreement, and
(c) as determined by the Board of Directors from time to time. Subject to the
provisions of Section 5.2.1, Employee's position and duties may be changed from
time to time during the term of this Agreement, and Employee's place of work may
be relocated, at the sole discretion of the Company's Board of Directors.
Employee shall devote his full business time, attention and best efforts to the
affairs of the Company and its subsidiaries during the term of this Agreement.
1.3 Outside Activities. Employee may engage in other activities, such as
activities involving charitable, educational, religious and similar types of
organizations (all of which are deemed to benefit Employer), speaking
engagements, and similar type activities, and may serve on the board of
directors of other corporations approved by the Board of Directors of Company,
in each case to the extent that such other activities do not materially detract
from or limit the performance of his duties under this Agreement, or inhibit or
conflict in any material way with the business of the Company and its
subsidiaries.
1.4 Direction of Services. Employee shall at all times discharge his duties
in consultation with and under the supervision and direction of the Company's
Board of Directors.
2. Compensation.
2.1 Salary. As compensation for services under this Agreement, the Company
shall pay to Employee a regular salary to be established each year by the
Compensation Committee of the Board of Directors, if there is such a committee,
or if not, then
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by the Board of Directors. Effective January 1 of each year that this Agreement
is in effect, such salary may be adjusted annually unless the Board of Directors
in its discretion determines not to do so. Payment shall be made on a monthly
basis, less all amounts required by law to be withheld or deducted, at such
times as shall be determined by the Board of Directors.
2.2 Additional Employee Benefits. Employee shall also have the right to
receive or participate in (a) any additional benefits, including, but not
limited to, vacation and sick leave policies, insurance programs, profit sharing
or pension plans, and medical reimbursement plans, which may from time to time
be made available by the Company to its employees and, (b) subject to meeting
eligibility requirements, all incentive compensation plans of the Company. The
Company shall reimburse Employee for all reasonable and necessary expenses
incurred in carrying out his duties under this Agreement, and substantiated by
Employee.
2.3 Extraordinary Compensation. Employee shall have the right, in addition
to all other compensation provided for in this Section 2, to additional
extraordinary compensation in accordance with the following terms:
2.3.1 Termination. In the event of termination of employment of
Employee pursuant to Section 5.2.1, Employee shall continue to be paid the
salary provided in Section 2.1 for 12 months in the manner and at the times at
which regular compensation was paid to Employee during the term of his
employment under the Agreement.
2.3.2 Termination after Change in Control. In the event that the
termination of the employment of Employee pursuant to Section 5.2.1 either (a)
occurs within 12 months following a change in control, within the meaning of the
Securities Exchange Act of 1934, or sale of substantially all of the assets of
the Company, or (b) is contingent upon such a change in control or sale of
assets, Employee shall continue to be paid the salary provided in Section 2.1
for 24 months, provided, however, that the present value of the stream of
payments to be made to Employee shall not exceed 295 percent of Employee's
Annualized Includable Compensation (in which event the payments shall be reduced
pro rata such that the present value thereof does not exceed such amount).
2.3.3 Definitions. The term Annualized Includable Compensation shall
mean the average annual compensation payable by the Company that was includable
in the gross income of Employee for the taxable years in the Base Period. The
term Base Period shall mean the period consisting of the most recent five
taxable years ending before the date on which the change in
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ownership or control occurs. Present value shall be determined by using a
discount rate equal to 120 percent of the applicable Federal Rate (determined
under Section 1274(d) of the Internal Revenue Code of 1986, as amended)
compounded semi-annually.
2.3.4 Change in Law. The parties agree that in the event Section 280G
or Section 4999 of the Internal Revenue Code is amended after the date hereof
with the effect that any of the compensation payable to Employee by the Company
pursuant to the foregoing provisions either (i) is not deductible for tax
purposes from the gross income of the Company, or (ii) subjects Employee to a
federal excise tax thereon, then, unless the parties otherwise agree, the
foregoing provisions may be modified at the discretion of the Board of Directors
in order to comply with the amended provisions of the Internal Revenue Code in
order that, to the greatest extent possible, such compensation shall be so
deductible by the Company and Employee shall not be subject to an excise tax
thereon.
2.4 Fees.
2.4.1 All compensation earned by Employee, other than pursuant to this
Agreement, as a result of services performed on behalf of the Company or as a
result of or arising out of any work done by Employee in any way related to the
scientific or business activities of the Company or its subsidiaries shall
belong to the Company or such subsidiary. Employee shall pay or deliver such
compensation to the Company or the subsidiary promptly upon receipt.
2.4.2 For the purposes of Section 2.4, "compensation" shall include,
but is not limited to, all professional and nonprofessional fees, lecture fees,
expert testimony fees, publishing fees, license fees, royalties, and any related
income, earnings or other things of value; and "scientific or business
activities of the Company" shall include, but not be limited to, any project or
projects in which the Company or its subsidiaries are involved and any subject
matter that is directly or indirectly researched, tested, developed, promoted or
marketed by the Company or its subsidiaries.
3. Confidential Information.
3.1 Access to Information. Employee acknowledges that in the course of his
employment he will have access to proprietary information, trade secrets, and
other confidential information, that such information is a valuable asset of the
Company and that its disclosure or unauthorized use will cause the Company
substantial harm. As used in this Agreement, the term "Confidential Information"
means: any and all information of a
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proprietary or secret nature of the Company and its subsidiaries which is or may
be either applicable to or related in any way to (i) their present or future
businesses, (ii) their research and development or investigations, or (iii) the
business of any of their licensees, licensors or customers. The term
"Confidential Information" includes, without limitation, trade secrets,
processes, data, know-how, improvements, inventions, techniques, marketing
plans, research and development contracts and grants, strategies and information
concerning customers or vendors, customer lists and customer leads, new project
ideas and leads, all non-public financial information, and all information which
is maintained in confidence or is designated as confidential by the Company or
its subsidiaries for the protection of their businesses.
3.2 Ownership. Employee acknowledges that all Confidential Information
shall continue to be the exclusive property of the Company or its subsidiaries,
whether or not prepared in whole or in part by Employee and whether or not
disclosed to Employee or entrusted to his custody in connection with his
employment by the Company.
3.3 Nondisclosure and Nonuse. Unless authorized or instructed in writing by
the Company, or required by legally constituted authority, Employee will not,
except as required in the course of the Company's business, during or after his
employment, disclose to others or use any Confidential Information, unless and
until, and then only to the extent that, such items become available to the
public other than by his act or failure to prevent accidental or negligent loss
or release to any unauthorized person of the Confidential Information.
3.4 Return of Confidential Information. Upon request by the Company during
or after his employment, and without request upon termination of employment
pursuant to this Agreement, Employee will deliver immediately to the Company all
Confidential Information; Employee will thereafter retain no excerpts, notes,
photographs, reproductions or copies thereof.
3.5 Work Made for Hire. Employee agrees that all creative work, including
without limitation designs, drawings, specifications, techniques, models and
processes, prepared or originated by Employee for the Company or its
subsidiaries, or during or within the scope of employment by the Company, which
may be subject to protection under federal copyright law, constitutes work made
for hire, all rights to which are owned by the Company; and, in any event,
Employee assigns to the Company all rights, title, and interest, whether by way
of copyright, trade secret, or otherwise, in all such work, whether or not
subject to protection by copyright or similar laws.
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3.6 Duration. The obligations set forth in this Section 3 will continue
beyond the term of employment of Employee by the Company and for so long as
Employee possesses Confidential Information.
4. Noncompetition.
4.1 Covenant. Subject to the provisions of Section 4.3, Employee covenants
that Employee will not, throughout the United States, either individually or as
a director, officer, partner, employee, agent, representative, or consultant
with any business, directly or indirectly during the term of employment and for
one year thereafter:
4.1.1 Engage or prepare to engage in any business which competes with
the Company or its subsidiaries;
4.1.2 Induce or attempt to induce any person who is an employee of the
Company or its subsidiaries during the term of this covenant to leave the employ
of the Company or its subsidiaries; or
4.1.3 Solicit, divert or accept orders for products or services that
are substantially competitive with the products or services sold by the Company
or its subsidiaries from any customer of the Company or its subsidiaries.
4.2 Enforcement. Employee acknowledges and agrees that the time, scope and
other provisions of this Section 4 have been specifically negotiated by
sophisticated parties with the advice and consultation of counsel and
specifically hereby agrees that such time, scope and other provisions are
reasonable under the circumstances. Employee further agrees that if, at any
time, despite the express agreement of the parties hereto, a court of competent
jurisdiction holds that any portion of this Section 4 is unenforceable for any
reason, the maximum restrictions reasonable under the circumstances, as
determined by such court, will be substituted for any restrictions held
unenforceable.
4.3 Release from Obligation. In the event that Employee shall be entitled
to extraordinary compensation pursuant to the provisions of Section 2.3,
Employee may elect to waive all rights to receive such compensation from and
after the date of such waiver in exchange for the release of Employee from the
obligations of Sections 4.1.1 and 4.1.3. Such waiver shall be in writing, shall
state that it is in consideration for the release of Employee from the
obligations of Sections 4.1.1 and 4.1.3, and shall be effective when delivered
to the Company. In the event of such a waiver, the amounts payable pursuant to
the provisions of Section 2.3 shall be prorated through the period commencing on
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the date of termination of employment and ending on the date of delivery of the
written notice of waiver to the Company. For example, if such waiver is
delivered to the Company six months after the commencement of the one year
period set forth in this Section, Employee shall be paid one-half of the amounts
otherwise payable pursuant to the provisions of Section 2.3; in the event that
the Employee shall have received more than such prorata share of such
compensation, it shall be a condition of the Employee's rights under this
Section that he shall have returned to the Company any amounts in excess of such
prorata share with the delivery of the waiver notice to the Company.
5. Termination.
5.1 Voluntary Resignation. Employee may terminate his employment under this
Agreement by 90 days' written notice to the Company.
5.2 Termination by the Company.
5.2.1 The Company may terminate Employee's employment under this
Agreement without cause by 90 days' written notice to the Employee. If the
Company shall substantially diminish Employee's salary, duties or title, or
shall relocate the principal place where Employee's duties are performed to a
place outside of the Portland metropolitan area, then Employee may elect (but
shall not be required to do so) to treat such event as a termination without
cause.
5.2.2 The Company may terminate Employee's employment under this
Agreement by 30 days' written notice given at any time within six months after
the Company determines that Employee (a) has committed a material breach of his
obligations under this Agreement, and failed to cure such breach promptly after
receipt of written notice thereof from the Board of Directors of the Company,
(b) has willfully and continuously failed or refused to comply with the material
policies, standards and regulations of the Company, (c) has been guilty of
fraud, dishonesty or other acts of misconduct in rendering services on behalf of
the Company, or (d) has failed to otherwise comply with the standards of
behavior which an employer reasonably has the right to expect of an employee.
5.2.3 In the event that the Board of Directors shall reasonably
determine that Employee has become physically or mentally disabled such that
Employee shall be unable to render services to the Company to the same nature
and extent as such services were rendered immediately prior to the disability,
the Board of Directors may terminate Employee's employment under this
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Agreement by 60 days' written notice effective any time after the date 13 weeks
following the determination of disability.
5.3 Compensation Upon Termination.
5.3.1 In the event of a termination under Section 5.1 or 5.2.2,
Employee shall not be entitled to receive any compensation otherwise payable
pursuant to Sections 2.2 or 2.3. Employee will be entitled to receive only: (i)
salary payable under Section 2.1 through the day on which Employee's employment
is terminated, together with salary, compensation or benefits which have been
earned or become payable as of the date of termination but which have not yet
been paid to Employee; and (ii) such other benefits, if any, as shall be
determined to be applicable under the circumstances and in accordance with the
Company's plans and practices in effect on the date of termination.
5.3.2 In the event of a termination under Section 5.2.1, Employee
shall be entitled to receive extraordinary compensation payable pursuant to
Section 2.3, if applicable. Employee will also be entitled to receive: (i)
salary payable under Section 2.1 through the end of the month on which
Employee's employment is terminated, together with salary, compensation or
benefits which have been earned or become payable as of the date of termination
but which have not yet been paid to Employee; (ii) maintenance in effect for the
continued benefit of Employee and his dependents, at the expense of the Company,
of all insured and self-insured medical and dental benefit plans in which
Employee was participating immediately prior to termination, provided continued
participation is possible under the general terms and conditions of such plans,
until the earlier of the end of the salary period provided for in Section 2.3.2
or the date on which Employee obtains comparable insurance coverage from a new
employer; and (iii) such other benefits, if any, as shall be determined to be
applicable under the circumstances and in accordance with the Company's plans
and practices in effect on the date of termination.
5.3.3 In the event of a termination under Section 5.2.3, or as a
result of Employee's retirement or death, Employee (or Employee's estate) will
be entitled to receive: (i) salary payable under Section 2.1 through the end of
the month on which Employee's employment is terminated, together with salary,
compensation or benefits which have been earned or become payable as of the date
of termination but which have not yet been paid to Employee; (ii) such other
benefits, if any, as shall be determined to be applicable under the
circumstances and in accordance with the Company's plans and practices in effect
on
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the date of termination; and (iii) such other awards or bonuses as the Board of
Directors in its sole discretion may determine.
6. Remedies.
The respective rights and duties of the Company and Employee under this
Agreement are in addition to, and not in lieu of, those rights and duties
afforded to and imposed upon them by law or at equity. Employee acknowledges
that breach of this Agreement will cause irreparable harm to the Company and
agrees to the entry of a temporary restraining order and preliminary and
permanent injunction by any court of competent jurisdiction to prevent breach or
further breach of this Agreement. Such remedy shall be in addition to any other
remedy available to the Company at law or in equity.
7. Severability of Provisions.
The provisions of this Agreement are severable, and if any provision hereof
is held or unenforceable, it shall be enforced to the maximum extent
permissible, and the remaining provisions of the Agreement shall continue in
full force and effect.
8. Attorney Fees.
In the event a suit or action is filed to enforce this Agreement or with
respect to this Agreement, the prevailing party shall be reimbursed by the other
party for all costs and expenses incurred in connection with the suit or action,
including without limitation reasonable attorney's fees at the pre-trial stage,
at trial or on appeal.
9. Nonwaiver.
Failure of the Company at any time to require performance of any provision
of this Agreement shall not limit the right of the Company to enforce the
provision. No provision of this Agreement or breach thereof may be waived by
either party except by a writing signed by that party. Any waiver of any breach
of any provision of this Agreement shall be construed narrowly and shall not be
deemed to be a waiver of any succeeding breach of that provision or a waiver of
that provision itself or of any other provision.
10. Mediation and Arbitration.
10.1 Disputes. Except as provided in Sections 3 and 4, the Company and
Employee agree to comply with the following two-step dispute resolution process
with regard to any controversy or claim arising out of or relating to this
Agreement or their employment relationship ("Dispute").
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10.2 Mediation. In the event of a Dispute the Company and Employee agree to
submit it to mediation pursuant to the mediation services of Arbitration Service
of Portland, Inc. ("ASP"). The mediation shall be conducted in Portland, Oregon,
under the rules of ASP. The mediation will be conducted as promptly as possible,
and in no event later than 90 days from the date when one party notifies the
other of its intent to submit the Dispute to mediation or the termination of
Employee's employment, whichever is later. The Company will pay the mediator's
fees and other administrative costs of the mediation process. The parties shall
bear their own attorneys' fees and other costs.
10.3 Arbitration. In the event the Dispute is not successfully resolved
through mediation, the parties agree that it shall be settled by arbitration
administered through the arbitration services of ASP in accordance with its
rules. Judgment on the award rendered by the arbitrators may be entered in any
court having jurisdiction thereof.
The arbitrators shall have the authority to award such remedies or relief
that a court of the State of Oregon could order or grant in an action governed
by Oregon law, including, without limitation, specific performance of any
obligation created under this Agreement, the issuance of an injunction, or the
imposition of sanctions for abuse or frustration of the arbitration process, but
shall not be empowered to award punitive damages. The arbitration proceedings
shall be conducted in Portland, Oregon.
11. Notices.
All notices or other communications hereunder shall be deemed to have been
duly given and made if in writing and if served by personal delivery upon the
party for whom it is intended, if delivered by registered or certified mail,
return receipt requested, or by a national courier service, or if sent by
telecopier, provided that the telecopy is promptly confirmed by telephone
confirmation thereof, to the person at the address set forth below, or such
other address as may be designated in writing hereunder, in the same manner, by
such person:
To Employee:
Matthew G. Kramer
--------------------------
--------------------------
Telephone: (503) --------
Facsimile: (503) --------
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To Company:
Agritope, Inc.
8505 SW Creekside Place
Beaverton, OR 97008
Telephone: (503) 641-6115
Facsimile: (503) 641-8665
Attention: Chief Executive Officer
With a copy to:
Tonkon, Torp, Galen, Marmaduke & Booth
888 SW Fifth Avenue, Suite 1600
Portland, OR 97204
Telephone: (503) 802-2004
Facsimile: (503) 972-3704
Attention: Brian G. Booth
12. Withholding.
All payments to be made to Employee under this Agreement will be subject to
required withholding taxes and other deductions.
13. Successors; Binding Agreement.
13.1 Any Successor (as hereinafter defined) to Company shall be bound by
this Agreement. At Employee's request, Company will seek to have any Successor
assent to the fulfillment by Company of its obligations under this Agreement.
For purposes of this Agreement, "Successor" shall mean any person that succeeds
to, or has the practical ability to control (either immediately or with the
passage of time), Company's business directly, by merger or consolidation, or
indirectly, by purchase of the Employer's voting securities, all or
substantially all of its assets or otherwise.
13.2 For purposes of this Agreement, "Company" shall include any
corporation or other entity which is the surviving or continuing entity in
respect of any amalgamation, merger, consolidation, dissolution, asset or stock
acquisition or other form of business combination.
14. Miscellaneous.
14.1 Except to the extent that the terms of this Agreement confer benefits
that are more favorable to Employee than are available under any other employee
benefit or executive compensation plan of Company in which Employee is a
participant, Employee's rights under any such employee benefit or executive
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compensation plan shall be determined in accordance with the terms of such plan
(as it may be modified or added to by Company from time to time).
14.2 This Agreement constitutes the entire understanding between Company
and Employee relating to the employment of Employee by Company and its
subsidiaries and supersedes and cancels all prior agreements and understandings
with respect to the subject matter of this Agreement. Employee shall not be
entitled to any payment or benefit under this Agreement which duplicates a
payment or benefit received or receivable by Employee under such prior
agreements and understandings.
14.3 This Agreement may be amended but only by a subsequent written
agreement of the parties.
14.4 This Agreement shall be binding upon and shall inure to the benefit of
Employee, his heirs, executors, administrators and beneficiaries, and shall be
binding upon and inure to the benefit of Company and its successors and assigns.
14.5 This Agreement shall be construed in accordance with the laws of the
state of Oregon, without regard to any conflicts of laws rules thereof.
14.6 All captions used herein are intended solely for convenience of
reference and shall in no way limit any of the provisions of this Agreement.
IN WITNESS HEREOF, the parties have executed this Employment Agreement as
of the date first hereinabove written.
AGRITOPE, INC.
Matthew G. Kramer President and
Chief Executive Officer
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Schedule 1.2 to Employment Agreement
Specific Duties of Employee
---------------------------
Duties of Employee as
---------------------
Vice President - Product Development
------------------------------------
Responsible for product and business development activities. Duties include
providing assistance to Senior Vice President - Research and Development in
overseeing overall research and development activities; supervise field trials;
perform market research; develop commercialization strategy; perform facilities
planning and oversee logistics activities; serve as the Company's spokesman to
media; oversee joint venture activities; and participate in negotiation of
licenses and strategic partner agreements.
Schedule 1.2
AGRITOPE, INC.
(A DELAWARE CORPORATION)
AGREEMENT CONCERNING INDEMNIFICATION AND RELATED MATTERS
(DIRECTORS)
This Agreement is made as of November , 1997, by and between AGRITOPE,
INC., a Delaware corporation (the "Corporation"), and ------------ (the
"Director"), a director of the Corporation.
WHEREAS, it is essential to the Corporation to retain and attract as
directors of the Corporation the most capable persons available and persons who
have significant experience in business, corporate and financial matters; and
WHEREAS, the Corporation has identified the Director as a person
possessing the background and abilities desired by the Corporation and desires
the Director to serve as a director of the Corporation; and
WHEREAS, the substantial increase in corporate litigation may, from
time to time, subject directors to burdensome litigation, the risks of which
frequently far outweigh the advantages of serving in such capacity; and
WHEREAS, in recent times the cost of liability insurance has increased
and the availability of such insurance is, from time to time, severely limited;
and
WHEREAS, the Corporation and the Director recognize that serving as a
director of a corporation at times calls for subjective evaluations and
judgments upon which reasonable persons may differ and that, in that context, it
is anticipated and expected that directors of corporations will and do from time
to time commit actual or alleged errors or omissions in the good faith exercise
of their corporate duties and responsibilities; and
WHEREAS, it is the express policy of the Corporation
to indemnify its directors to the fullest extent permitted by
law; and
WHEREAS, the Certificate of Incorporation of the Corporation permits,
and the Bylaws of the Corporation require, indemnification of the directors of
the Corporation to the fullest extent permitted by law, including but not
limited to the General Corporation Law of Delaware (the "GCL"), and the GCL
expressly provides that the indemnification provisions set forth therein are not
exclusive, and thereby contemplates that contracts may be entered into between
the Corporation and its directors with respect to indemnification; and
<PAGE>
WHEREAS, the Corporation and the Director desire to articulate clearly
in contractual form their respective rights and obligations with regard to the
Director's service on behalf of the Corporation as a director and with regard to
claims for loss, liability, expense or damage which, directly or indirectly, may
arise out of or relate to such service.
NOW THEREFORE, the Corporation and the Director agree as follows:
1. Agreement to Serve.
The Director shall serve as a director of the Corporation for so long
as the Director is duly elected or until the Director tenders a resignation in
writing. This Agreement creates no obligation on either party to continue the
service of the Director for a particular term or any term.
2. Definitions.
As used in this Agreement:
(a) The term "Proceeding" shall include any threatened, pending
or completed action, suit or proceeding, whether formal or informal,
whether brought by or in the right of the Corporation or otherwise, and
whether of a civil, criminal, administrative or investigative nature, in
which the Director may be or may have been involved as a party, witness or
otherwise, by reason of the fact that the Director is or was a director of
the Corporation, or is or was serving at the request of the Corporation as
a director, officer, partner, trustee, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, whether
or not serving in such capacity at the time any liability or expense is
incurred for which exculpation, indemnification or reimbursement can be
provided under this Agreement.
(b) The term "Expenses" includes, without limitation thereto,
expenses of investigations, judicial or administrative proceedings or
appeals, attorney, accountant and other professional fees and disbursements
and any expenses of establishing a right to indemnification under Section
12 of this Agreement, but shall not include amounts paid in settlement by
the Director or the amount of judgments or fines against the Director.
(c) References to "other enterprise" include, without limitation,
employee benefit plans; references to "fines" include, without limitation,
any excise taxes assessed on a person with respect to any employee benefit
plan; references to "serving at the request of the Corporation" include,
without limitation, any service as a
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director, officer, employee or agent which imposes duties on, or involves
services by, such director, officer, employee or agent with respect to an
employee benefit plan, its participants, or its beneficiaries; and a person
who acted in good faith and in a manner such person reasonably believed to
be in the interest of the participants and beneficiaries of an employee
benefit plan shall be deemed to have acted in a manner "not opposed to the
best interests of the Corporation" as referred to in this Agreement.
(d) References to "the Corporation" shall include, in addition to
the resulting corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have had power and authority
to indemnify its directors, officers, and employees or agents, so that any
person who is or was a director, officer or employee of such constituent
corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall
stand in the same position under this Agreement with respect to the
resulting or surviving corporation as such person would have with respect
to such constituent corporation if its separate existence had continued.
(e) For purposes of this Agreement, the meaning of the phrase "to
the fullest extent permitted by law" shall include, but not be limited to:
(i) to the fullest extent authorized or permitted by any
amendments to or replacements of the GCL adopted after the date of
this Agreement that increase the extent to which a corporation may
indemnify or exculpate its directors; and
(ii) to the fullest extent permitted by the provision of the
GCL that authorizes or contemplates additional indemnification by
agreement, or the corresponding provision of any amendment to or
replacement of the GCL.
3. Limitation of Liability.
(a) To the fullest extent permitted by law, the Director shall
have no monetary liability of any kind or nature whatsoever in respect of
the Director's errors or omissions (or alleged errors or omissions) in
serving the Corporation or any of its subsidiaries, their respective
stockholders or any other enterprise at the request of the Corporation, so
long as such errors or omissions (or alleged
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errors or omissions), if any, are not shown by clear and convincing
evidence to have involved:
(i) any breach of the Director's duty of loyalty to such
corporations, stockholders or enterprises;
(ii) any act or omission not in good faith or which involved
intentional misconduct or a knowing violation of law;
(iii) any unlawful distribution as defined in the GCL
(including, without limitation, dividends, stock repurchases and stock
redemptions);
(iv) any transaction from which the Director derived an
improper personal benefit; or
(v) profits made from the purchase and sale by the Director
of securities of the Corporation within the meaning of Section 16(b)
of the Securities Exchange Act of 1934, as amended, or similar
provision of any state statutory law or common law.
(b) Without limiting the generality of subparagraph (a) above and
to the fullest extent permitted by law, the Director shall have no personal
liability to the Corporation or any of its subsidiaries, their respective
stockholders or any other person claiming derivatively through the
Corporation, regardless of the theory or principle under which such
liability may be asserted, for:
(i) punitive, exemplary or consequential damages;
(ii) treble or other damages computed based upon any
multiple of damages actually and directly proved to have been
sustained;
(iii) fees of attorneys, accountants, expert witnesses or
professional consultants; or
(iv) civil fines or penalties of any kind or nature
whatsoever.
4. Indemnity in Third-Party Proceedings.
The Corporation shall indemnify the Director in accordance with the
provisions of this Section 4 if the Director was or is a party to, or is
threatened to be made a party to, any Proceeding (other than a Proceeding by or
in the right of the Corporation to procure a judgment in its favor), against all
Expenses, judgments, fines and amounts paid in settlement,
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actually and reasonably incurred by the Director in connection with such
Proceeding if the Director acted in good faith and in a manner the Director
reasonably believed was in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, the
Director, in addition, had no reasonable cause to believe that the Director's
conduct was unlawful. However, the Director shall not be entitled to
indemnification under this Section 4 in connection with any Proceeding charging
improper personal benefit to the Director in which the Director is adjudged
liable on the basis that personal benefit was improperly received by the
Director unless and only to the extent that the court conducting such Proceeding
or any other court of competent jurisdiction determines upon application that,
despite such adjudication of liability, the Director is fairly and reasonably
entitled to indemnification in view of all the relevant circumstances of the
case.
5. Indemnity in Proceedings by or in the Right of the Corporation.
The Corporation shall indemnify the Director in accordance with the
provisions of this Section 5 if the Director was or is a party to, or is
threatened to be made a party to, any Proceeding by or in the right of the
Corporation to procure a judgment in its favor, against all Expenses actually
and reasonably incurred by the Director in connection with the defense or
settlement of such Proceeding if the Director acted in good faith and in a
manner the Director reasonably believed was in or not opposed to the best
interests of the Corporation. However, the Director shall not be entitled to
indemnification under this Section 5 in connection with any Proceeding in which
the Director has been adjudged liable to the Corporation unless and only to the
extent that the court conducting such Proceeding or any other court of competent
jurisdiction determines upon application that, despite such adjudication of
liability, the Director is fairly and reasonably entitled to indemnification for
such Expenses in view of all the relevant circumstances of the case.
6. Indemnification of Expenses of Successful Party.
Notwithstanding any other provisions of this Agreement other than
Section 8, to the extent that the Director has been successful, on the merits or
otherwise, in defense of any Proceeding or in defense of any claim, issue or
matter therein, including the dismissal of an action without prejudice, the
Corporation shall indemnify the Director against all Expenses actually and
reasonably incurred in connection therewith.
7. Additional Indemnification.
Notwithstanding any limitation in Sections 4, 5 or 6, the Corporation
shall indemnify the Director to the fullest extent permitted by law with respect
to any Proceeding (including a
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Proceeding by or in the right of the Corporation to procure a judgment in its
favor), against all Expenses, judgments, fines and amounts paid in settlement,
actually and reasonably incurred by the Director in connection with such
Proceeding.
8. Exclusions.
Notwithstanding any provision in this Agreement, the Corporation shall
not be obligated under this Agreement to make any indemnification in connection
with any claim made against the Director:
(a) for which payment is made to or on behalf of the Director
under any insurance policy, except with respect to any deductible amount,
self-insured retention or any excess amount to which the Director is
entitled under this Agreement beyond the amount of payment under such
insurance policy;
(b) if a court having jurisdiction in the matter finally
determines that such indemnification is not lawful under any applicable
statute or public policy;
(c) in connection with any Proceeding (or part of any Proceeding)
initiated by the Director, or any Proceeding by the Director against the
Corporation or its directors, officers, employees or other persons entitled
to be indemnified by the Corporation, unless:
(i) the Corporation is expressly required by law to make the
indemnification;
(ii) the Proceeding was authorized by the Board of Directors
of the Corporation; or
(iii) the Director initiated the Proceeding pursuant to
Section 12 of this Agreement and the Director is successful in whole
or in part in such Proceeding; or
(d) for an accounting of profits made from the purchase and sale
by the Director of securities of the Corporation within the meaning of
Section 16(b) of the Securities Exchange Act of 1934, as amended, or
similar provision of any state statutory law or common law.
9. Advances for Expenses.
The Corporation shall pay the Expenses incurred by the Director in any
Proceeding (other than a Proceeding brought for an accounting of profits made
from the purchase and sale by the Director of securities of the Corporation
within the meaning of Section 16(b) of the Securities Exchange Act of 1934, as
amended,
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or similar provision of any state statutory law or common law) in advance of the
final disposition of the Proceeding at the written request of the Director, if
the Director:
(a) furnishes the Corporation a written affirmation of the
Director's good faith belief that the Director is entitled to be
indemnified under this Agreement; and
(b) furnishes the Corporation a written undertaking to repay the
advance to the extent that it is ultimately determined that the Director is
not entitled to be indemnified by the Corporation. Such undertaking shall
be an unlimited general obligation of the Director but need not be secured.
Advances pursuant to this Section 9 shall be made no later than 10
days after receipt by the Corporation of the affirmation and undertaking
described in subparagraphs (a) and (b) above, and shall be made without regard
to the Director's ability to repay the amount advanced and without regard to the
Director's ultimate entitlement to indemnification under this Agreement. The
Corporation may establish a trust, escrow account or other secured funding
source for the payment of advances made and to be made pursuant to this Section
9 or of other liability incurred by the Director in connection with any
Proceeding.
10. Nonexclusivity and Continuity of Rights.
The indemnification, advancement of Expenses, and exculpation from
liability provided by this Agreement shall not be deemed exclusive of any other
rights to which the Director may be entitled under any other agreement,
certificate of incorporation, bylaws, vote of stockholders or directors, the
GCL, or otherwise, both as to action in the Director's official capacity and as
to action in another capacity while holding such office or occupying such
position. The indemnification under this Agreement shall continue as to the
Director even though the Director may have ceased to be a director of the
Corporation or a director, officer, employee or agent of an enterprise related
to the Corporation and shall inure to the benefit of the heirs, executors,
administrators and personal representatives of the Director.
11. Procedure Upon Application for Indemnification.
Any indemnification under Sections 4, 5, 6 or 7 shall be made no later
than 45 days after receipt of the written request of the Director, unless a
determination that the Director is not entitled to indemnification under this
Agreement is made within such 45-day period by:
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(a) the Board of Directors by majority vote of a quorum
consisting of directors not at the time parties to the applicable
Proceeding;
(b) if such quorum cannot be obtained, majority vote of a
committee duly designated by the Board of Directors consisting solely of
two or more directors not at the time parties to the proceeding;
(c) special legal counsel selected by the Board of Directors or
its committee in the manner prescribed in subparagraph (a) or (b) above or,
if a quorum of the Board of Directors cannot be obtained under subparagraph
(a) above and a committee cannot be designated under subparagraph (b)
above, the special legal counsel shall be selected by majority vote of the
full Board of Directors, including directors who are parties to the
proceeding; or
(d) the stockholders of the Corporation.
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12. Enforcement.
The Director may enforce any right to indemnification, advances or
exculpation provided by this Agreement in any court of competent jurisdiction
if:
(a) the Corporation denies the claim for indemnification,
advances or exculpation, in whole or in part; or
(b) the Corporation does not dispose of such claim within the
time period required by this Agreement.
It shall be a defense to any such enforcement action (other than an action
brought to enforce a claim for advancement of Expenses pursuant to, and in
compliance with, Section 9 of this Agreement) that the Director is not entitled
to indemnification or exculpation under this Agreement. However, except as
provided in Section 13 of this Agreement, the Corporation shall not assert any
defense to an action brought to enforce a claim for advancement of Expenses
pursuant to Section 9 of this Agreement if the Director has tendered to the
Corporation the affirmation and undertaking required thereunder. The burden of
proving by clear and convincing evidence that indemnification or exculpation is
not appropriate shall be on the Corporation. Neither the failure of the
Corporation (including its Board of Directors or independent legal counsel) to
have made a determination prior to the commencement of such action that
indemnification or exculpation is proper in the circumstances because the
Director has met the applicable standard of conduct nor an actual determination
by the Corporation (including its Board of Directors or independent legal
counsel) that indemnification or exculpation is improper because the Director
has not met such applicable standard of conduct, shall be asserted as a defense
to the action or create a presumption that the Director is not entitled to
indemnification or exculpation under this Agreement or otherwise. The Director's
expenses incurred in connection with successfully establishing the Director's
right to indemnification, advances or exculpation, in whole or in part, in any
Proceeding shall also be paid or reimbursed by the Corporation.
The termination of any Proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere, or its equivalent, shall not, of
itself, create a presumption that:
(i) the Director is not entitled to indemnification under
Sections 4, 5 or 7 of this Agreement because the Director did not act in
good faith and in a manner which the Director reasonably believed to be in
or not opposed to the best interests of the Corporation, and, with respect
to any criminal action or proceeding, had reasonable cause to believe that
the Director's conduct was unlawful; or
(ii) the Director is not entitled to exculpation under Section 3
of this Agreement.
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13. Notification and Defense of Claim.
As a condition precedent to indemnification under this Agreement, not
later than 30 days after receipt by the Director of notice of the commencement
of any Proceeding the Director shall, if a claim in respect of the Proceeding is
to be made against the Corporation under this Agreement, notify the Corporation
in writing of the commencement of the Proceeding. The failure to properly notify
the Corporation shall not relieve the Corporation from any liability which it
may have to the Director: (a) unless the Corporation shall be shown to have
suffered actual damages as a result of such failure; or (b) otherwise than under
this Agreement. With respect to any Proceeding as to which the Director so
notifies the Corporation of the commencement:
(a) The Corporation shall be entitled to participate in the
Proceeding at its own expense.
(b) Except as otherwise provided in this Section 13, the
Corporation may, at its option and jointly with any other indemnifying
party similarly notified and electing to assume such defense, assume the
defense of the Proceeding, with legal counsel reasonably satisfactory to
the Director. The Director shall have the right to use separate legal
counsel in the Proceeding, but the Corporation shall not be liable to the
Director under this Agreement, including Section 9 above, for the fees and
expenses of separate legal counsel incurred after notice from the
Corporation of its assumption of the defense, unless (i) the Director
reasonably concludes that there may be a conflict of interest between the
Corporation and the Director in the conduct of the defense of the
Proceeding, or (ii) the Corporation does not use legal counsel to assume
the defense of such Proceeding. The Corporation shall not be entitled to
assume the defense of any Proceeding brought by or on behalf of the
Corporation or as to which the Director has made the conclusion provided
for in (i) above.
(c) If two or more persons who may be entitled to indemnification
from the Corporation, including the Director, are parties to any
Proceeding, the Corporation may require the Director to use the same legal
counsel as the other parties. The Director shall have the right to use
separate legal counsel in the Proceeding, but the Corporation shall not be
liable to the Director under this Agreement, including Section 9 above, for
the fees and expenses of separate legal counsel incurred after notice from
the Corporation of the requirement to use the same legal counsel as the
other parties, unless the Director reasonably concludes that there may be a
conflict of interest between the Director and any of the other parties
required by the Corporation to be represented by the same legal counsel.
(d) The Corporation shall not be liable to indemnify the Director
under this Agreement for any amounts paid in settlement of any Proceeding
effected without its
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written consent, which shall not be unreasonably withheld. The Director
shall permit the Corporation to settle any Proceeding that the Corporation
assumes the defense of, except that the Corporation shall not settle any
action or claim in any manner that would impose any penalty, limitation,
disqualification or disenfranchisement on the Director without the
Director's written consent.
14. Partial Indemnification.
If the Director is entitled under any provision of this Agreement to
indemnification by the Corporation for some or a portion of the Expenses,
judgments, fines or amounts paid in settlement, actually and reasonably incurred
by the Director in connection with such Proceeding, but not, however, for the
total amount thereof, the Corporation shall nevertheless indemnify the Director
for the portion of such Expenses, judgments, fines or amounts paid in settlement
to which the Director is entitled.
15. Interpretation and Scope of Agreement.
Nothing in this Agreement shall be interpreted to constitute a
contract of service for any particular period or pursuant to any particular
terms or conditions. The Corporation retains the right, in its discretion, to
terminate the service relationship of the Director, with or without cause, or to
alter the terms and conditions of the Director's service all without prejudice
to any rights of the Director which may have accrued or vested prior to such
action by the Corporation.
16. Severability.
If this Agreement or any portion thereof shall be invalidated on any
ground by any court of competent jurisdiction, the remainder of this Agreement
shall continue to be valid and the Corporation shall nevertheless indemnify the
Director as to Expenses, judgments, fines and amounts paid in settlement with
respect to any Proceeding to the fullest extent permitted by any applicable
portion of this Agreement that shall not have been invalidated.
17. Subrogation.
In the event of payment under this Agreement, the Corporation shall be
subrogated to the extent of such payment to all of the rights of recovery of the
Director. The Director shall execute all documents required and shall do all
acts that may be necessary to secure such rights and to enable the Corporation
effectively to bring suit to enforce such rights.
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18. Notices.
All notices, requests, demands and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given upon
delivery by hand to the party to whom the notice or other communication shall
have been directed, or on the third business day after the date on which it is
mailed by United States mail with first-class postage prepaid, addressed as
follows:
(a) If to the Director, to the address indicated on the signature
page of this Agreement.
(b) If to the Corporation, to:
Agritope, Inc.
8505 S.W. Creekside Place
Beaverton, Oregon 97008
Attention: Chairman of the Board
With a copy to:
Brian G. Booth
Tonkon Torp LLP
1600 Pioneer Tower
888 S.W. Fifth Avenue
Portland, Oregon 97204-2099
or to any other address as either party may designate to the other in writing.
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19. Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall constitute the original.
20. Applicable Law.
This Agreement shall be governed by and construed in accordance with
the internal laws of the state of Delaware without regard to the conflict of
laws provisions thereof.
21. Successors and Assigns.
This Agreement shall be binding upon the Corporation and its
successors and assigns.
22. Attorney Fees.
If any suit or action (including, without limitation, any bankruptcy
proceeding) is instituted to enforce or interpret any provision of this
Agreement, the prevailing party shall be entitled to recover from the party not
prevailing, in addition to other relief that may be provided by law, an amount
determined reasonable as attorney fees at trial and on any appeal of such suit
or action.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
CORPORATION: DIRECTOR:
AGRITOPE, INC.
By:----------------------------- --------------------------------
Title:--------------------------
--------------------------------
Address
--------------------------------
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AGRITOPE, INC.
(A DELAWARE CORPORATION)
AGREEMENT CONCERNING INDEMNIFICATION AND RELATED MATTERS
(OFFICERS)
This Agreement is made as of November , 1997, by and between AGRITOPE,
INC., a Delaware corporation (the "Corporation"), and ------------ (the
"Officer"), an officer of the Corporation.
WHEREAS, it is essential to the Corporation to retain and attract as
officers of the Corporation the most capable persons available and persons who
have significant experience in business, corporate and financial matters; and
WHEREAS, the Corporation has identified the Officer as a person
possessing the background and abilities desired by the Corporation and desires
the Officer to serve as an officer of the Corporation; and
WHEREAS, the substantial increase in corporate litigation may, from
time to time, subject corporate officers to burdensome litigation, the risks of
which frequently far outweigh the advantages of serving in such capacity; and
WHEREAS, in recent times the cost of liability insurance has increased
and the availability of such insurance is, from time to time, severely limited;
and
WHEREAS, the Corporation and the Officer recognize that serving as an
officer of a corporation at times calls for subjective evaluations and judgments
upon which reasonable persons may differ and that, in that context, it is
anticipated and expected that officers of corporations will and do from time to
time commit actual or alleged errors or omissions in the good faith exercise of
their corporate duties and responsibilities; and
WHEREAS, it is the express policy of the Corporation to indemnify its
officers to the fullest extent permitted by law; and
WHEREAS, the Certificate of Incorporation of the Corporation permits,
and the Bylaws of the Corporation require, indemnification of the officers of
the Corporation to the fullest extent permitted by law, including but not
limited to the General Corporation Law of Delaware (the "GCL"), and the GCL
expressly provides that the indemnification provisions set forth therein are not
exclusive, and thereby contemplates that contracts may be entered into between
the Corporation and its officers with respect to indemnification; and
<PAGE>
WHEREAS, the Corporation and the Officer desire to articulate clearly
in contractual form their respective rights and obligations with regard to the
Officer's service on behalf of the Corporation as an officer and with regard to
claims for loss, liability, expense or damage which, directly or indirectly, may
arise out of or relate to such service.
NOW THEREFORE, the Corporation and the Officer agree as follows:
1. Agreement to Serve.
The Officer shall serve as an officer of the Corporation for so long
as the Officer is duly appointed or until the Officer tenders a resignation in
writing. This Agreement creates no obligation on either party to continue the
service of the Officer for a particular term or any term.
2. Definitions.
As used in this Agreement:
(a) The term "Proceeding" shall include any threatened, pending
or completed action, suit or proceeding, whether formal or informal,
whether brought by or in the right of the Corporation or otherwise, and
whether of a civil, criminal, administrative or investigative nature, in
which the Officer may be or may have been involved as a party, witness or
otherwise, by reason of the fact that the Officer is or was an officer of
the Corporation, or is or was serving at the request of the Corporation as
a director, officer, partner, trustee, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, whether
or not serving in such capacity at the time any liability or expense is
incurred for which exculpation, indemnification or reimbursement can be
provided under this Agreement.
(b) The term "Expenses" includes, without limitation thereto,
expenses of investigations, judicial or administrative proceedings or
appeals, attorney, accountant and other professional fees and disbursements
and any expenses of establishing a right to indemnification under Section
12 of this Agreement, but shall not include amounts paid in settlement by
the Officer or the amount of judgments or fines against the Officer.
(c) References to "other enterprise" include, without limitation,
employee benefit plans; references to "fines" include, without limitation,
any excise taxes assessed on a person with respect to any employee benefit
plan; references to "serving at the request of the Corporation" include,
without limitation, any service as a
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director, officer, employee or agent which imposes duties on, or involves
services by, such director, officer, employee or agent with respect to an
employee benefit plan, its participants, or its beneficiaries; and a person
who acted in good faith and in a manner such person reasonably believed to
be in the interest of the participants and beneficiaries of an employee
benefit plan shall be deemed to have acted in a manner "not opposed to the
best interests of the Corporation" as referred to in this Agreement.
(d) References to "the Corporation" shall include, in addition to
the resulting corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have had power and authority
to indemnify its directors, officers, and employees or agents, so that any
person who is or was a director, officer or employee of such constituent
corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall
stand in the same position under this Agreement with respect to the
resulting or surviving corporation as such person would have with respect
to such constituent corporation if its separate existence had continued.
(e) For purposes of this Agreement, the meaning of the phrase "to
the fullest extent permitted by law" shall include, but not be limited to:
(i) to the fullest extent authorized or permitted by any
amendments to or replacements of the GCL adopted after the date of
this Agreement that increase the extent to which a corporation may
indemnify or exculpate its officers or directors; and
(ii) to the fullest extent permitted by the provision of the
GCL that authorizes or contemplates additional indemnification by
agreement, or the corresponding provision of any amendment to or
replacement of the GCL.
3. Limitation of Liability.
(a) To the fullest extent permitted by law, the Officer shall
have no monetary liability of any kind or nature whatsoever in respect of
the Officer's errors or omissions (or alleged errors or omissions) in
serving the Corporation or any of its subsidiaries, their respective
stockholders or any other enterprise at the request of the Corporation, so
long as such errors or omissions (or alleged errors or omissions), if any,
are not shown by clear and
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convincing evidence to have involved:
(i) any breach of the Officer's duty of loyalty to such
corporations, stockholders or enterprises;
(ii) any act or omission not in good faith or which involved
intentional misconduct or a knowing violation of law;
(iii) any unlawful distribution as defined in the GCL
(including, without limitation, dividends, stock repurchases and stock
redemptions);
(iv) any transaction from which the Officer derived an
improper personal benefit; or
(v) profits made from the purchase and sale by the Officer
of securities of the Corporation within the meaning of Section 16(b)
of the Securities Exchange Act of 1934, as amended, or similar
provision of any state statutory law or common law.
(b) Without limiting the generality of subparagraph (a) above and
to the fullest extent permitted by law, the Officer shall have no personal
liability to the Corporation or any of its subsidiaries, their respective
stockholders or any other person claiming derivatively through the
Corporation, regardless of the theory or principle under which such
liability may be asserted, for:
(i) punitive, exemplary or consequential damages;
(ii) treble or other damages computed based upon any
multiple of damages actually and directly proved to have been
sustained;
(iii) fees of attorneys, accountants, expert witnesses or
professional consultants; or
(iv) civil fines or penalties of any kind or nature
whatsoever.
4. Indemnity in Third-Party Proceedings.
The Corporation shall indemnify the Officer in accordance with the
provisions of this Section 4 if the Officer was or is a party to, or is
threatened to be made a party to, any Proceeding (other than a Proceeding by or
in the right of the Corporation to procure a judgment in its favor), against all
Expenses, judgments, fines and amounts paid in settlement, actually and
reasonably incurred by the Officer in connection with
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such Proceeding if the Officer acted in good faith and in a manner the Officer
reasonably believed was in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, the
Officer, in addition, had no reasonable cause to believe that the Officer's
conduct was unlawful. However, the Officer shall not be entitled to
indemnification under this Section 4 in connection with any Proceeding charging
improper personal benefit to the Officer in which the Officer is adjudged liable
on the basis that personal benefit was improperly received by the Officer unless
and only to the extent that the court conducting such Proceeding or any other
court of competent jurisdiction determines upon application that, despite such
adjudication of liability, the Officer is fairly and reasonably entitled to
indemnification in view of all the relevant circumstances of the case.
5. Indemnity in Proceedings by or in the Right of the Corporation.
The Corporation shall indemnify the Officer in accordance with the
provisions of this Section 5 if the Officer was or is a party to, or is
threatened to be made a party to, any Proceeding by or in the right of the
Corporation to procure a judgment in its favor, against all Expenses actually
and reasonably incurred by the Officer in connection with the defense or
settlement of such Proceeding if the Officer acted in good faith and in a manner
the Officer reasonably believed was in or not opposed to the best interests of
the Corporation. However, the Officer shall not be entitled to indemnification
under this Section 5 in connection with any Proceeding in which the Officer has
been adjudged liable to the Corporation unless and only to the extent that the
court conducting such Proceeding or any other court of competent jurisdiction
determines upon application that, despite such adjudication of liability, the
Officer is fairly and reasonably entitled to indemnification for such Expenses
in view of all the relevant circumstances of the case.
6. Indemnification of Expenses of Successful Party.
Notwithstanding any other provisions of this Agreement other than
Section 8, to the extent that the Officer has been successful, on the merits or
otherwise, in defense of any Proceeding or in defense of any claim, issue or
matter therein, including the dismissal of an action without prejudice, the
Corporation shall indemnify the Officer against all Expenses actually and
reasonably incurred in connection therewith.
7. Additional Indemnification.
Notwithstanding any limitation in Sections 4, 5 or 6, the Corporation
shall indemnify the Officer to the fullest extent permitted by law with respect
to any Proceeding (including a Proceeding by or in the right of the Corporation
to procure a
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judgment in its favor), against all Expenses, judgments, fines and amounts paid
in settlement, actually and reasonably incurred by the Officer in connection
with such Proceeding.
8. Exclusions.
Notwithstanding any provision in this Agreement, the Corporation shall
not be obligated under this Agreement to make any indemnification in connection
with any claim made against the Officer:
(a) for which payment is made to or on behalf of the Officer
under any insurance policy, except with respect to any deductible amount,
self-insured retention or any excess amount to which the Officer is
entitled under this Agreement beyond the amount of payment under such
insurance policy;
(b) if a court having jurisdiction in the matter finally
determines that such indemnification is not lawful under any applicable
statute or public policy;
(c) in connection with any Proceeding (or part of any Proceeding)
initiated by the Officer, or any Proceeding by the Officer against the
Corporation or its directors, officers, employees or other persons entitled
to be indemnified by the Corporation, unless:
(i) the Corporation is expressly required by law to make the
indemnification;
(ii) the Proceeding was authorized by the Board of Directors
of the Corporation; or
(iii) the Officer initiated the Proceeding pursuant to Section
12 of this Agreement and the Officer is successful in whole or in part
in such Proceeding; or
(d) for an accounting of profits made from the purchase and sale
by the Officer of securities of the Corporation within the meaning of
Section 16(b) of the Securities Exchange Act of 1934, as amended, or
similar provision of any state statutory law or common law.
9. Advances for Expenses.
The Corporation shall pay the Expenses incurred by the Officer in any
Proceeding (other than a Proceeding brought for an accounting of profits made
from the purchase and sale by the Officer of securities of the Corporation
within the meaning of Section 16(b) of the Securities Exchange Act of 1934, as
amended, or similar provision of any state statutory law or common law) in
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advance of the final disposition of the Proceeding at the written request of the
Officer, if the Officer:
(a) furnishes the Corporation a written affirmation of the
Officer's good faith belief that the Officer is entitled to be indemnified
under this Agreement; and
(b) furnishes the Corporation a written undertaking to repay the
advance to the extent that it is ultimately determined that the Officer is
not entitled to be indemnified by the Corporation. Such undertaking shall
be an unlimited general obligation of the Officer but need not be secured.
Advances pursuant to this Section 9 shall be made no later than 10
days after receipt by the Corporation of the affirmation and undertaking
described in subparagraphs (a) and (b) above, and shall be made without regard
to the Officer's ability to repay the amount advanced and without regard to the
Officer's ultimate entitlement to indemnification under this Agreement. The
Corporation may establish a trust, escrow account or other secured funding
source for the payment of advances made and to be made pursuant to this Section
9 or of other liability incurred by the Officer in connection with any
Proceeding.
10. Nonexclusivity and Continuity of Rights.
The indemnification, advancement of Expenses, and exculpation from
liability provided by this Agreement shall not be deemed exclusive of any other
rights to which the Officer may be entitled under any other agreement,
certificate of incorporation, bylaws, vote of stockholders or directors, the
GCL, or otherwise, both as to action in the Officer's official capacity and as
to action in another capacity while holding such office or occupying such
position. The indemnification under this Agreement shall continue as to the
Officer even though the Officer may have ceased to be an officer of the
Corporation or a director, officer, employee or agent of an enterprise related
to the Corporation and shall inure to the benefit of the heirs, executors,
administrators and personal representatives of the Officer.
11. Procedure Upon Application for Indemnification.
Any indemnification under Sections 4, 5, 6 or 7 shall be made no later
than 45 days after receipt of the written request of the Officer, unless a
determination that the Officer is not entitled to indemnification under this
Agreement is made within such 45-day period by:
(a) the Board of Directors by majority vote of a quorum
consisting of directors not at the time parties to the applicable
Proceeding;
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(b) if such quorum cannot be obtained, majority vote of a
committee duly designated by the Board of Directors consisting solely of
two or more directors not at the time parties to the proceeding;
(c) special legal counsel selected by the Board of Directors or
its committee in the manner prescribed in subparagraph (a) or (b) above or,
if a quorum of the Board of Directors cannot be obtained under subparagraph
(a) above and a committee cannot be designated under subparagraph (b)
above, the special legal counsel shall be selected by majority vote of the
full Board of Directors, including directors who are parties to the
proceeding; or
(d) the stockholders of the Corporation.
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<PAGE>
12. Enforcement.
The Officer may enforce any right to indemnification, advances or
exculpation provided by this Agreement in any court of competent jurisdiction
if:
(a) the Corporation denies the claim for indemnification,
advances or exculpation, in whole or in part; or
(b) the Corporation does not dispose of such claim within the
time period required by this Agreement.
It shall be a defense to any such enforcement action (other than an action
brought to enforce a claim for advancement of Expenses pursuant to, and in
compliance with, Section 9 of this Agreement) that the Officer is not entitled
to indemnification or exculpation under this Agreement. However, except as
provided in Section 13 of this Agreement, the Corporation shall not assert any
defense to an action brought to enforce a claim for advancement of Expenses
pursuant to Section 9 of this Agreement if the Officer has tendered to the
Corporation the affirmation and undertaking required thereunder. The burden of
proving by clear and convincing evidence that indemnification or exculpation is
not appropriate shall be on the Corporation. Neither the failure of the
Corporation (including its Board of Directors or independent legal counsel) to
have made a determination prior to the commencement of such action that
indemnification or exculpation is proper in the circumstances because the
Officer has met the applicable standard of conduct nor an actual determination
by the Corporation (including its Board of Directors or independent legal
counsel) that indemnification or exculpation is improper because the Officer has
not met such applicable standard of conduct, shall be asserted as a defense to
the action or create a presumption that the Officer is not entitled to
indemnification or exculpation under this Agreement or otherwise. The Officer's
expenses incurred in connection with successfully establishing the Officer's
right to indemnification, advances or exculpation, in whole or in part, in any
Proceeding shall also be paid or reimbursed by the Corporation.
The termination of any Proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere, or its equivalent, shall not, of
itself, create a presumption that:
(i) the Officer is not entitled to indemnification under Sections
4, 5 or 7 of this Agreement because the Officer did not act in good faith
and in a manner which the Officer reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that the
Officer's conduct was unlawful; or
(ii) the Officer is not entitled to exculpation under Section 3 of
this Agreement.
9
<PAGE>
13. Notification and Defense of Claim.
As a condition precedent to indemnification under this Agreement, not
later than 30 days after receipt by the Officer of notice of the commencement of
any Proceeding the Officer shall, if a claim in respect of the Proceeding is to
be made against the Corporation under this Agreement, notify the Corporation in
writing of the commencement of the Proceeding. The failure to properly notify
the Corporation shall not relieve the Corporation from any liability which it
may have to the Officer: (a) unless the Corporation shall be shown to have
suffered actual damages as a result of such failure; or (b) otherwise than under
this Agreement. With respect to any Proceeding as to which the Officer so
notifies the Corporation of the commencement:
(a) The Corporation shall be entitled to participate in the
Proceeding at its own expense.
(b) Except as otherwise provided in this Section 13, the
Corporation may, at its option and jointly with any other indemnifying
party similarly notified and electing to assume such defense, assume the
defense of the Proceeding, with legal counsel reasonably satisfactory to
the Officer. The Officer shall have the right to use separate legal counsel
in the Proceeding, but the Corporation shall not be liable to the Officer
under this Agreement, including Section 9 above, for the fees and expenses
of separate legal counsel incurred after notice from the Corporation of its
assumption of the defense, unless (i) the Officer reasonably concludes that
there may be a conflict of interest between the Corporation and the Officer
in the conduct of the defense of the Proceeding, or (ii) the Corporation
does not use legal counsel to assume the defense of such Proceeding. The
Corporation shall not be entitled to assume the defense of any Proceeding
brought by or on behalf of the Corporation or as to which the Officer has
made the conclusion provided for in (i) above.
(c) If two or more persons who may be entitled to indemnification
from the Corporation, including the Officer, are parties to any Proceeding,
the Corporation may require the Officer to use the same legal counsel as
the other parties. The Officer shall have the right to use separate legal
counsel in the Proceeding, but the Corporation shall not be liable to the
Officer under this Agreement, including Section 9 above, for the fees and
expenses of separate legal counsel incurred after notice from the
Corporation of the requirement to use the same legal counsel as the other
parties, unless the Officer reasonably concludes that there may be a
conflict of interest between the Officer and any of the other parties
required by the Corporation to be represented by the same legal counsel.
(d) The Corporation shall not be liable to indemnify the Officer
under this Agreement for any amounts paid in settlement of any Proceeding
effected without its
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<PAGE>
written consent, which shall not be unreasonably withheld. The Officer
shall permit the Corporation to settle any Proceeding that the Corporation
assumes the defense of, except that the Corporation shall not settle any
action or claim in any manner that would impose any penalty, limitation,
disqualification or disenfranchisement on the Officer without the Officer's
written consent.
14. Partial Indemnification.
If the Officer is entitled under any provision of this Agreement to
indemnification by the Corporation for some or a portion of the Expenses,
judgments, fines or amounts paid in settlement, actually and reasonably incurred
by the Officer in connection with such Proceeding, but not, however, for the
total amount thereof, the Corporation shall nevertheless indemnify the Officer
for the portion of such Expenses, judgments, fines or amounts paid in settlement
to which the Officer is entitled.
15. Interpretation and Scope of Agreement.
Nothing in this Agreement shall be interpreted to constitute a
contract of service for any particular period or pursuant to any particular
terms or conditions. The Corporation retains the right, in its discretion, to
terminate the service relationship of the Officer, with or without cause, or to
alter the terms and conditions of the Officer's service all without prejudice to
any rights of the Officer which may have accrued or vested prior to such action
by the Corporation.
11
<PAGE>
16. Severability.
If this Agreement or any portion thereof shall be invalidated on any
ground by any court of competent jurisdiction, the remainder of this Agreement
shall continue to be valid and the Corporation shall nevertheless indemnify the
Officer as to Expenses, judgments, fines and amounts paid in settlement with
respect to any Proceeding to the fullest extent permitted by any applicable
portion of this Agreement that shall not have been invalidated.
17. Subrogation.
In the event of payment under this Agreement, the Corporation shall be
subrogated to the extent of such payment to all of the rights of recovery of the
Officer. The Officer shall execute all documents required and shall do all acts
that may be necessary to secure such rights and to enable the Corporation
effectively to bring suit to enforce such rights.
18. Notices.
All notices, requests, demands and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given upon
delivery by hand to the party to whom the notice or other communication shall
have been directed, or on the third business day after the date on which it is
mailed by United States mail with first-class postage prepaid, addressed as
follows:
(a) If to the Officer, to the address indicated on the signature
page of this Agreement.
(b) If to the Corporation, to:
Agritope, Inc.
8505 S.W. Creekside Place
Beaverton, Oregon 97008
Attention: Chairman of the Board
With a copy to:
Brian G. Booth
Tonkon Torp LLP
1600 Pioneer Tower
888 S.W. Fifth Avenue
Portland, Oregon 97204-2099
or to any other address as either party may designate to the other in writing.
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<PAGE>
19. Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall constitute the original.
20. Applicable Law.
This Agreement shall be governed by and construed in accordance with
the internal laws of the state of Delaware without regard to the conflict of
laws provisions thereof.
21. Successors and Assigns.
This Agreement shall be binding upon the Corporation and its
successors and assigns.
22. Attorney Fees.
If any suit or action (including, without limitation, any bankruptcy
proceeding) is instituted to enforce or interpret any provision of this
Agreement, the prevailing party shall be entitled to recover from the party not
prevailing, in addition to other relief that may be provided by law, an amount
determined reasonable as attorney fees at trial and on any appeal of such suit
or action.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
CORPORATION: OFFICER:
AGRITOPE, INC.
By:----------------------------- --------------------------------
Title:--------------------------
--------------------------------
Address
--------------------------------
13
OPTION TO LICENSE AND RESEARCH SUPPORT AGREEMENT
BETWEEN
THE SALK INSTITUTE FOR BIOLOGICAL STUDIES
AND
EPITOPE, INC.
DATED FEBRUARY 25, 1997
<PAGE>
OPTION TO LICENSE AND RESEARCH SUPPORT AGREEMENT
BETWEEN
THE SALK INSTITUTE FOR BIOLOGICAL STUDIES
AND
EPITOPE, INC.
1. DEFINITIONS 1
2. GRANT OF OPTION RIGHTS LICENSE 2
3. PAYMENTS 3
4. EXERCISE OF THE OPTION 3
5. TERMS OF PROPOSED LICENSE 4
6. OWNERSHIP OF INTELLECTUAL PROPERTY 5
7. DISCLAIMERS 5
8. INDEMNIFICATION 6
9. PROSECUTION AND MAINTENANCE OF PATENT RIGHTS 6
10. TERM AND TERMINATION 8
11. CONFIDENTIAL INFORMATION 9
12. CHOICE OF LAW; DISPUTE RESOLUTION 9
13. DUE DILIGENCE 10
14. NOTICES 10
15. RESEARCH AND SHARING OF INFORMATION 10
16. MISCELLANEOUS 11
<PAGE>
OPTION TO LICENSE AND RESEARCH SUPPORT AGREEMENT
This Option to License and Research Support Agreement (the
"Agreement") is made and entered into as of Feb. 25, 1997, by and between The
Salk Institute for Biological Studies, a nonprofit public benefit corporation
organized under the laws of the State of California ("Salk"), and EPITOPE, INC.,
a corporation organized under the laws of the State of Oregon ("Epitope").
BACKGROUND
Salk is the owner or co-owner of certain Patent Rights
(defined below) and of the Technical Information (defined below) relating to the
Patent Rights. The development of certain inventions included within the Patent
Rights was sponsored in part by agencies of the Federal Government and, as a
consequence, this Agreement is subject to overriding obligations to the Federal
Government as set forth in 35 U.S.C. Section 200 et seq. Salk desires that the
Patent Rights be developed and utilized to the fullest extent possible so that
products resulting from them may be available for public use and benefit. Salk
has determined that the best method for disseminating the Patent Rights is
through the grant of licenses to entities willing to evaluate and develop
products and services covered by the Patent Rights. Epitope has, or has access
to, the scientific talent, know-how and facilities to further evaluate, develop
and potentially market products which may result from the use of the Patent
Rights. Epitope wishes to obtain and Salk is willing to grant to Epitope an
option to license the Technical Information so that Epitope can further evaluate
and develop the technology for commercial application in plants.
NOW, THEREFORE, IN CONSIDERATION OF THE ABOVE PREMISES, AND
THE MUTUAL COVENANTS CONTAINED HEREIN, THE PARTIES HEREBY AGREE AS FOLLOWS:
TERMS AND CONDITIONS
1. DEFINITIONS.
1.1 The term "AFFILIATE" shall mean any entity which controls,
is controlled by or is under common control with Epitope, where "control" means
beneficial ownership of more than fifty percent (50%) of the outstanding shares
or securities or the ability otherwise to elect a majority of the board of
directors or other managing authority.
1.2 The term "PLANT BIOLOGY LABORATORY" shall mean
collectively the research laboratories at Salk devoted to plant biology
research, including, but not limited to, those under the direction of Dr.
Christopher Lamb, Dr. Joanne Chory, and Dr. Detlef Weigel.
1.3 The term "FIELD OF USE" shall mean certain fruit and
vegetable crops and certain horticultural plants, as spelled out in Schedule A,
attached hereto and incorporated by reference herein, but in no event shall
include, without limitation, corn, canola, sunflower, safflower, soybeans,
cotton, cereals, sorghum, forestry trees, all fruitwood or hardwood species
grown primarily for wood or as ornamental trees, plants of any species grown as
ornamentals, and other plants not specifically listed in Schedule A.
1.4 The term "LICENSED TECHNOLOGY" shall mean collectively the
Patent Rights and the Technical Information (defined below).
1.5 The term "PATENT RIGHTS" shall mean all information,
inventions or discoveries covered by the patent applications listed on Schedule
A, attached hereto and
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<PAGE>
incorporated by reference herein, which Schedule may be modified from time to
time by the parties as specified herein, and any and all patents issuing
thereon, owned by or licensed to Salk with the right to sublicense. The term
"patents" as used in this Agreement shall include, without limitation, all
provisional and utility applications, substitutions, continuations,
continuations-in-part, divisions, reissues, extensions and foreign counterparts
of the aforementioned.
1.6 The term "TECHNICAL INFORMATION" shall mean all know-how,
trade secrets, data, processes, procedures, methods, formulas, protocols and
information which are not covered by the Patent Rights or any other patent
rights of Salk, but which are necessary or useful for the commercial
exploitation of the Patent Rights, and which are known or become known during
the Term (as hereinafter defined) in the Plant Biology Laboratory and which Salk
has the lawful right to license and disclose without accounting to any third
party.
1.7 The term "TERM" shall be as defined in Section 10.1.
1.8 The term "TERRITORY" shall mean the territory listed with
respect to each entry in Schedule A.
2. GRANT OF OPTION RIGHTS LICENSE.
2.1 PATENT RIGHTS AND TECHNICAL INFORMATION. Subject to the
limitations set forth in this Agreement, Salk hereby grants to Epitope and its
Affiliates an option (the "Option") (exclusive or nonexclusive as stipulated on
the attached Schedule A), for the Term to acquire (1) an exclusive with the
right to sublicense, or nonexclusive without the right to sublicense, worldwide
commercial license under the Patent Rights in the Field of Use and in the
Territory as stipulated for each entry in the attached Schedule A; and (2) a
non-exclusive commercial license in and to the Technical Information in the
Field of Use and in the Territory as stipulated for each entry in the attached
Schedule A, with the right to grant sublicenses to such Technical Information in
conjunction with sublicenses of Patent Rights pursuant to an exclusive license
under this Section 2.1; which licenses under (1) and (2) are to make, have made,
use and sell in the Field of Use and in the Territory products which are
composed of or incorporate the Licensed Technology or the production, use or
sale of which products is within the scope of any claim in a pending patent
application or an issued patent included in the Patent Rights.
For the duration of the Term of this Agreement, Salk grants to
Epitope a non-exclusive license under the Licensed Technology, to use the
Licensed Technology for research and evaluation purposes in each specified Field
of Use to determine Epitope's interest in exercising the Option; provided
further that Epitope may also be granted the right to contract with third party
independent contractors to use the Licensed Technology for research and
evaluation purposes in one or more of the respective Fields of Use upon
notification in writing to Salk so long as necessary to help Epitope determine
its interest in exercising the option and so long as such contracts are made
under conditions at least as protective to Salk as those under this Agreement.
2.2 GOVERNMENT RIGHTS. Epitope acknowledges that certain of
the Licensed Technology was developed in part with funds furnished by the
Government of the United States of America and that the Government has certain
rights relative thereto. This Agreement is explicitly made subject to the
Government's rights under any applicable law or regulation. To the extent that
there is a conflict between any such applicable law or regulation and this
Agreement, the terms of such applicable law or regulation shall prevail.
2.3 SUBLICENSES. Epitope shall have the right to grant
sublicenses to third party independent contractors contracted with under Section
2.1 above, which sublicenses shall be limited in duration to the Term and shall
include, without limitation, a provision binding
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<PAGE>
sublicensees to all terms hereof intended for the protection of Salk and other
indemnified parties against liability or loss. Epitope further agrees to deliver
to Salk for informational purposes (and under an obligation of confidentiality)
a true and correct copy of each sublicense under the Option granted by Epitope,
and any modification or termination thereof, within thirty (30) days after
execution, modification, or termination.
2.4 RIGHT OF FIRST NEGOTIATION FOR NEW TECHNOLOGY. For the
term of this Agreement, prior to granting any rights to third parties in any of
the Fields of Use and any of the Territories as stipulated in the attached
Schedule A (collectively referred to as the "Area of Rights") with respect to
any new technology not within the definition of Licensed Technology developed in
the Plant Biology Laboratory with the access fees paid by Epitope under this
Agreement (the "New Technology"), Salk shall first offer rights in such New
Technology in the Area of Rights to Epitope. Any such offer shall include an
identification of the New Technology and initial data regarding such technology
for review by Epitope. Epitope shall have [ ]* days from the date it
receives such offer to determine whether or not it wishes to purchase an option
to such New Technology at that time and to so notify Salk. Salk shall not
negotiate with any third parties regarding such New Technology in the Area of
Rights within such [ ]* day period or until Epitope has notified Salk that
it does not wish to obtain rights in such New Technology, whichever occurs
first. If Epitope desires to obtain rights in such New Technology, such rights
may be added to this Agreement or become subject to a new agreement as desired
by the parties. If Epitope decides not to obtain rights to such New Technology
at that time or if Salk and Epitope cannot negotiate an agreement within [
]* months following the [ ]* day period after such offer, then Salk may
offer the New Technology to one or more third parties in the Area of Rights (as
well as continuing to offer the New Technology to third parties outside the Area
of Rights).
3. PAYMENTS.
3.1 ACCESS FEE. As consideration for the rights granted to
Epitope under this Agreement, Epitope agrees to pay to Salk the Access Fees each
year specified in the attached Schedule A for each Technology referred to there.
Such fees will be due and payable in four equal installments on the first day of
each quarter, i.e., January 1, April 1, July 1 and October 1 for the term of the
Agreement except as limited in Section 4. [ ]*
Epitope represents that the execution and delivery of this Agreement and the
payment of the Access Fees have been duly and validly authorized by all
necessary corporate action by Epitope.
3.2 OTHER PAYMENTS. Epitope shall pay Salk amounts received by
Epitope in consideration of any sublicense to this Agreement and under this
Agreement with any third party (other than an Affiliate of Epitope) in an amount
equal to [ ]* of the actual amount received by Epitope under such sublicense;
with the understanding that this Section 3.2 applies to sublicenses under the
option provided herein.
4. EXERCISE OF THE OPTION.
If Epitope elects to exercise its option rights to enter into
a license agreement, Epitope shall notify Salk in writing pursuant to Section 14
(Notices) prior to the expiration of this Agreement.
* Bracketed material has been omitted and filed separately with the Commission
pursuant to a request for confidential treatment.
3
<PAGE>
When Epitope exercises its option hereunder with respect to a
given Schedule A entry in the particular Field of Use and Territory specified in
said Schedule A, and the parties shall accordingly diligently work to execute a
license agreement within the guidelines provided herein. Once such license
agreement has been executed by the parties, the terms therein shall replace and
supersede the terms of this Agreement as to the Schedule A entry covered by the
license agreement and Epitope shall not be liable to Salk for any additional
Access Fees in regard thereto under this Agreement.
Epitope may notify Salk in writing during the Term of this
Agreement, that it no longer has any interest in pursuing commercial development
of a particular Schedule A entry (the "Rejected Technology"). In such event, the
option for a license of such Rejected Technology shall be terminated as to that
technology, such technology shall be deemed to be removed from this Agreement
and Epitope shall not be obligated for any future Patent Costs related to such
Rejected Technology. [ ]*
5. TERMS OF PROPOSED LICENSE.
If and when Epitope exercises its Option under this Agreement
for any of the Schedule A entries, then Epitope and Salk shall thereupon
negotiate in good faith to arrive at mutually agreeable, reasonable terms and
conditions for the license agreement. The terms of the license agreement shall
include, but not be limited to, the following provisions:
(A) a right to sublicense the rights being licensed
if the license is exclusive.
(B) a license issue fee equivalent to [ ]*
for the Schedule A entry being licensed.
(C) a royalty rate to be based on the added value of
the technology to the product, taking into consideration
additional third party technology licenses needed to market
the products covered, but in any event not to exceed [ ]*
from the sale of products incorporating the Licensed
Technology, with the royalty rates being determined with
regard to each Schedule A entry such that if more than one
Schedule A entry is incorporated into the products, the
royalty rates will be additive [ ]*
(D) fees paid to Salk on sublicenses at a rate of [
]* of amounts actually received by Epitope from
sublicensees.
(E) diligence terms requiring Epitope to use
reasonable efforts based on reasonably prudent business
judgment in evaluating the Licensed Technology and producing
products for sale that incorporate the Schedule A entry to be
licensed.
(F) disclaimer and indemnification terms similar to
those set out in Sections 7 and 8.
(G) patent cost obligations similar to those in
Section 9.
(H) termination provisions similar to those in
Section 10.
* Bracketed material has been omitted and filed separately with the Commission
pursuant to a request for confidential treatment.
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<PAGE>
5.2 The license agreement contemplated in Section 5.1 shall be
subject to all the applicable provisions pertaining to the rights of the
Government of the United States as specified in Section 2.2.
6. OWNERSHIP OF INTELLECTUAL PROPERTY.
6.1 Epitope (for itself, its Affiliates and sublicensees)
acknowledges and agrees that Salk is and shall remain (as to Epitope) the sole
owner of the Patent Rights, subject to the rights of the Federal Government as
set forth in 35 U.S.C. Section 200 et seq., and that Epitope (including its
Affiliates and sublicensees) has no rights in or to the Patent Rights other than
the rights specifically granted herein.
6.2 Salk warrants to Epitope that it has the lawful right to
enter into this Agreement and grant the option contained herein. Epitope is
aware that certain technology listed in Schedule A is owned in part by The
Samuel Roberts Noble Foundation.
7. DISCLAIMERS.
7.1 WARRANTY DISCLAIMER. Nothing in this Agreement is or shall
be construed as:
(A) a warranty or representation by Salk as to the
validity or scope of any Patent Rights;
(B) a warranty or representation that anything made,
used, sold or otherwise disposed of under any license granted
pursuant to this Agreement is or will be free from
infringement of patents, copyrights and other rights of third
parties;
(C) an obligation to bring or prosecute actions or
suits against third parties for infringement, except to the
extent and in the circumstances described in Section 9.3; or
(D) a grant by implication, estoppel, or otherwise of
any licenses under patent applications or patents of Salk or
other persons other than as provided in Section 2 hereof.
7.2 NO WARRANTY. Except as expressly set forth in this
agreement, Salk makes no representation and extends no warranty of any kind,
either express or implied, including, without limitation, the condition,
originality or accuracy of the research or any invention or product, whether
tangible or intangible, conceived, discovered or developed under this Agreement;
or the merchantability or fitness for a particular purpose of the research or
any such invention or product. Salk shall not be liable for any direct,
consequential, or other damages suffered by Epitope, any licensee, or any other
resulting from the use of the research or any such invention or product.
5
<PAGE>
8. INDEMNIFICATION.
8.1 INDEMNIFICATION BY EPITOPE. Except to the extent of the
limited waiver and indemnity by Salk set forth in Section 8.2, Epitope hereby
waives any claims it may have, and agrees to indemnify, defend and hold harmless
Salk and its present and former officers, trustees, employees, agents and
co-owners of technology from any claim, loss, cost, expense, or liability of any
kind including reasonable attorneys' fees and expenses arising out of or related
to (a) use by Epitope, its Affiliates or its sublicensees of the Licensed
Technology or the results of any work performed pursuant to this Agreement or
(b) any manufacture, use, sale or other disposition by Epitope, its Affiliates
or its licensees of products made by use of such Licensed Technology or the
results of any work performed pursuant to this Agreement. Salk shall promptly
notify Epitope of any such claim and shall cooperate with Epitope and its
insurance carrier in defense of the claim at Epitope's expense.
8.2 INDEMNIFICATION BY SALK. Salk hereby waives any claims it
may have, and agrees to indemnify, defend and hold harmless Epitope and its
present and former officers, directors, employees and agents from any claims,
loss, cost, expense, or liability of any kind including reasonable attorneys'
fees and expenses resulting from the injury or death of an employee or agent of
Salk engaged in conducting the research contemplated by or performed under this
Agreement, working in the facility in which such research is conducted, or
damage to or loss of the property of Salk, caused by the negligence or willful
misconduct of Salk in conducting such research.
9. PROSECUTION AND MAINTENANCE OF PATENT RIGHTS.
9.1 PROSECUTION AND MAINTENANCE. As between Salk and Epitope,
Salk shall have full control over prosecution and maintenance of the patent
applications and patents contained in the Patent Rights. Salk shall diligently
prosecute and maintain or use its best efforts to cause a co-owner to prosecute
and maintain the United States and foreign patent applications and patents in
the Patent Rights. Salk will keep Epitope advised of the status of such
prosecution and maintenance by providing Epitope in confidence with prompt and
complete copies of all official communications with respect to the patent
applications and patents contained in the Patent Rights. Salk agrees to consider
carefully adding claims reasonably requested by Epitope to any patent
application in the Patent Rights which Epitope believes are necessary to protect
products contemplated to be sold under a potential License Agreement.
9.2 PATENT COSTS.
(A) Upon execution of this Agreement, Epitope shall
pay to Salk [ ]*
as reimbursement for the percentages of Patent Costs incurred
through 1996 specified in Schedule A. Epitope shall reimburse
Salk for said percentages of Patent Costs thereafter incurred
during the term of this Agreement with respect to the Patent
Rights; provided that each percentage of Patent Costs to be
borne by Epitope is to be based on and shared with other
licensees and options under the Patent Rights on a pro rata
basis, with the number of licensees. If Epitope exercises its
option rights under this Agreement, Epitope's pro rata share
of the Patent Costs shall be determined based upon the number
of licenses then existing and the extent of the Field of Use
and Territory on a Schedule A entry by entry basis. If Salk
subsequently obtains additional licensees, then Epitope's pro
rata share of the Patent Costs shall be reduced by Salk
accordingly. Conversely, if one or more licensees terminate
their interest then Epitope's share of the Patent Costs shall
increase. "Patent Costs" as used in this Agreement shall mean
only out-of-pocket
* Bracketed material has been omitted and filed separately with the Commission
pursuant to a request for confidential treatment.
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<PAGE>
expenses incurred in connection with the preparation, filing,
prosecution up to and through appeal from a final rejection by
an Examiner of the United States Patent Office and maintenance
of United States patent applications and patents, including
the fees and expenses of attorneys and patent agents, filing
fees and maintenance fees, and the filing of an application
under the Patent Cooperation Treaty, but excluding costs
associated with any patent infringement actions. Salk will
provide an invoice to Epitope for Epitope's pro rata share of
any such Patent Costs on a semiannual basis, and Epitope shall
reimburse Salk for its share of Patent Costs within thirty
(30) days after delivery of any such invoice. Notwithstanding
anything above to the contrary:
(i) Epitope will not pay Patent Costs
associated with [ ]*
without Epitope's agreement in advance [ ]*
(ii) Epitope will not pay extension fees and
will not pay more than [ ]*
of Patent Costs associated with an application,
including continuations from an initial parent
application without Epitope's agreement in advance
that such expenses are desirable and reasonably
necessary business expenses; and
(iii) Epitope will not pay for fees in
connection with an interference in the United States
Patent Office or in a court of law, without Epitope's
agreement in advance that such expenses are desirable
and reasonably necessary business expenses.
(B) Except with regard to any patent rights that
result from applications for which Epitope did not pay fees
and costs in accordance with Section 9.2(a) (ii) and (iii)
above, in the event Epitope elects to discontinue payment for
the filing, prosecution and/or maintenance of any patent
application and/or patent contained in the Patent Rights, any
such patent application or patent shall be excluded from the
definition of the Patent Rights and from the scope of the
license granted under this Agreement, and all rights relating
thereto shall revert to Salk and may be freely licensed by
Salk.
(C) Salk shall provide notice to Epitope at least 4
months before the deadline for any patent application of the
Patent Rights to be filed in a country other than the United
States and Epitope shall, using reasonable business judgment
and with consultation with Salk, determine and notify Salk
before one month from the foreign filing deadline which
countries Epitope elects to pay for the filing, prosecution
and maintenance of such patents. If Epitope elects not to
support in a given country a patent application or patent
included in the Patent Rights and Salk, acting in reliance
thereon, ceases to prosecute such patent application or
maintain such patent, Epitope warrants that it will not sell a
product covered by the claims of any such patent as issued or,
in the case of an application, covered in the claims as
written at the time Epitope notified Salk of its decision not
to support the application, unless Epitope is obligated to pay
royalties and/or other payments under this Agreement on sales
in said country because such product is covered by another
patent or patent application licensed hereunder. If Epitope
elects not to support in a given country a patent application
or patent included in the Patent Rights and subsequently Salk
or another licensee of Salk elects to support such a patent
application or patent, then Salk shall so inform Epitope and
Epitope shall be entitled to another opportunity to elect to
share in the costs of such support on a pro
* Bracketed material has been omitted and filed separately with the Commission
pursuant to a request for confidential treatment.
7
<PAGE>
rata basis with Salk and/or such licensee and shall have
rights according to this Agreement under such patent or patent
application. All costs relating to patent applications or
patents Epitope elects to support shall be deemed to be
included in the definition of Patent Costs and Epitope shall
be responsible for its pro rata share as set out in Section
9.2(a).
9.3 DEFENSE AGAINST INFRINGEMENT. In the event Epitope or Salk
becomes aware of any actual or threatened infringement of any Patent Rights,
that party shall promptly notify the other and the parties shall discuss the
most appropriate action to take. Both parties shall use their best efforts in
cooperating with each other to terminate such infringement without litigation.
If, within one hundred twenty (120) days after the date of notification of
infringement, attempts to abate such infringement are unsuccessful, then Epitope
and other optionees and/or licensees similarly situated may bring such action at
their own expense, in which event Salk shall cooperate with Epitope as
reasonably requested, at Epitope's expense. Salk may, on its own initiative,
join in such suit. All recoveries, damages and awards in such suit, after
reimbursement of any litigation expenses of Salk not previously reimbursed,
shall belong to Epitope and any other optionees and/or licensees, but to the
extent in excess of the litigation expenses of Epitope and any other such
optionees and/or licensees shall be considered income subject to royalty payable
to Salk hereunder. In the event that Epitope elects not to institute or
prosecute any suit to enjoin or recover damages from any infringer, then Salk
alone may, in its sole discretion and at its expense, initiate and conduct an
infringement action and keep any settlement or award which may be obtained.
Epitope and Salk agree that neither will settle any action commenced by it in a
manner that is prejudicial to any Patent Rights without the other party's prior
written approval.
10. TERM AND TERMINATION.
10.1 TERM. This Agreement shall become effective as of the
date of this Agreement set forth above and continue for a period of three years,
unless earlier terminated as permitted herein. The Term may be renewed upon
written agreement by both parties.
10.2 TERMINATION BY EITHER PARTY. This Agreement may be
terminated by either party, if the other party substantially fails to perform or
otherwise materially breaches any of the material terms, covenants or provisions
of this Agreement, such termination to be effected by giving written notice of
intent to terminate to the breaching party stating the grounds therefor. The
party receiving the notice shall have thirty (30) days thereafter to correct
such breach. If such breach is not corrected within said thirty (30) days after
notice as aforesaid, then this Agreement shall automatically terminate.
10.3 TERMINATION BASED ON THIRD PARTY CONFLICTS. Epitope may
terminate this Agreement as to any Patent Rights effective upon notice to Salk,
at its sole discretion if a patent or patent application of the Patent Rights is
subjected to an interference in the United States Patent Office or in a court of
law or if Salk or Epitope is sued or threatened with suit by a third party for
infringement or other exercise of the Patent Rights and the technologies
associated with them.
10.4 TERMINATION BASED ON EMPLOYMENT OF KEY INDIVIDUALS. The
parties recognize that Dr. Christopher Lamb's management of and involvement in
the research at Salk contemplated under this Agreement is crucial to the success
of that research, and therefore agree that, in the event Salk's employment of
Dr. Lamb is terminated for any reason during the Term of this Agreement, Salk
will so notify Epitope within fifteen (15) days of such termination and Epitope
may then terminate this Agreement by written notice to Salk, which termination
shall be effective sixty (60) days after the date of termination of Dr. Lamb's
employment.
* Bracketed material has been omitted and filed separately with the Commission
pursuant to a request for confidential treatment.
8
<PAGE>
10.5 CONSEQUENCES OF TERMINATION. In the event of expiration
of this Agreement or termination of the Agreement for any reason whatsoever:
(A) Epitope shall not thereby be discharged from any
liability or obligation to Salk which became due or payable
prior to the effective date of such expiration or termination;
and
(B) The rights and obligations of the parties under
Sections 7, 8, 10.5 and 11 shall survive any termination of
this Agreement.
11. CONFIDENTIAL INFORMATION.
All confidential scientific and technical information
communicated by one party hereunder (the "Provider") to the other party, its
affiliates or sublicensees (the "Recipient"), including, without limitation,
information contained in patent applications, shall be received in strict
confidence by the Recipient, used only for the purposes of this Agreement and
not disclosed by the Recipient or their respective agents or employees without
the prior written consent of the Provider, unless such information (i) was in
the public domain at the time of disclosure, (ii) later became part of the
public domain through no act or omission of the recipient party, its employees,
agents, successors, or assigns, (iii) was lawfully disclosed to the recipient by
a third party having the right to disclose it, (iv) was already known by the
recipient at the time of disclosure and recipient can so demonstrate by
competent written proof or (v) is required to be disclosed to a governmental
agency pursuant to such agency's rule and regulations in order to secure
regulatory approval, provided that Recipient shall first give notice to Provider
of such disclosure and shall have made a reasonable effort to maintain the
confidentiality of such information. Nothing contained herein shall prevent
Epitope or its Affiliates from disclosing information to sublicensees or Salk
disclosing information to its other optionees and/or licensees so long as such
sublicensees, licensees and optionees agree to be bound by these confidentiality
provisions. Notwithstanding the above, there shall be no restrictions on the
right of Salk and or Epitope to publish the results of the work hereunder.
12. CHOICE OF LAW; DISPUTE RESOLUTION.
12.1 GOVERNING LAW. This Agreement is made in accordance with
and shall be governed and construed in accordance with the laws of the State of
California, as applied to contracts executed and performed entirely within the
State of California, without regard to conflicts of laws rules.
12.2 ARBITRATION. If a dispute arises between the parties
relating to the interpretation or performance of this Agreement or the grounds
for the termination thereof, the parties agree to hold a meeting, attended by
individuals with decision-making authority regarding the dispute, to attempt in
good faith to negotiate a resolution of the dispute prior to pursuing other
available remedies. If, within thirty (30) days after such meeting, the parties
have not succeeded in negotiating a resolution of the dispute, such dispute
shall be submitted to final and binding arbitration under the then current
Licensing Agreement Arbitration Rules of the American Arbitration Association
("AAA"), with a panel of three (3) arbitrators in Oregon if the arbitration is
called for by Salk and in San Diego, California if the arbitration is called for
by Epitope. Such arbitrators shall be selected by the mutual agreement of the
parties or, failing such agreement, shall be selected according to the aforesaid
AAA rules. The parties shall bear the costs of arbitration equally unless the
arbitrators, pursuant to their right, but not their obligation, require the
non-prevailing party to bear all or any unequal portion of the prevailing
party's costs. The decision of the arbitrator shall be final and may be sued on
or enforced by the party in whose favor it runs in
9
<PAGE>
any court of competent jurisdiction at the option of the successful party. The
arbitrators will be instructed to prepare and deliver a written, reasoned
opinion conferring their decision. The rights and obligations of the parties to
arbitrate any dispute relating to the interpretation or performance of this
Agreement or the grounds for the termination thereof shall survive the
expiration or termination of this Agreement for any reason.
13. DUE DILIGENCE.
Epitope shall diligently undertake the requisite research and
testing of the Licensed Technology necessary to evaluate its interest in
exercising the option. Epitope shall be entitled to exercise prudent and
reasonable business judgment in meeting its due diligence obligations hereunder.
14. NOTICES.
The payments to be made hereunder to Salk shall be made by
wiring the required amount to Salk's bank in accordance with Salk's instructions
or by mailing or sending by commercial courier checks for the required amount to
Salk's address. Notices provided for herein shall effectively be given by
mailing the same by certified or registered mail or by delivery by commercial
courier, in each case properly addressed with charges prepaid. For the purposes
of making payments and giving notices, the addresses of the parties hereto are
as follows:
The Salk Institute for Biological Studies
10010 North Torrey Pines Road
La Jolla, CA 92037
Attn: Director, Legal Services & Technology Transfer
Epitope, Inc.
8505 S.W. Creekside Place
Beaverton, Oregon 97008-7108
Attn: President
or to such subsequent addresses as either party may furnish the other by giving
notice thereof as provided in this Section 14.
15. RESEARCH AND SHARING OF INFORMATION.
15.1 It is expected that the two parties will work together to
further develop the technologies set out on Schedule A. The role each party will
play will depend upon how advanced the underlying technology of interest is,
with Salk providing primarily the necessary basic research and Epitope
evaluating the technology for commercial utility and expansion to numerous plant
products. Each party will report to each other at least quarterly at a mutually
convenient time the findings of their respective research and will share ideas
regarding future projects. Epitope would expect to continue research with the
relevant technology, gene etc. in multiple plant varieties or crops.
15.2 DISCLOSURE OF INFORMATION. Salk agrees to provide Epitope
with research data or other information which bears upon the practice and use of
the Licensed Technology so that Epitope can be apprised as timely as possible
regarding both positive and negative features of the technology which may assist
Epitope in evaluating the commercial application of the technologies covered
under this Agreement. Salk agrees to promptly provide
10
<PAGE>
written correspondence which henceforth is addressed to or otherwise received by
the Technology Transfer Department of Salk from sources other than patent
offices (see Section 9.1) which is known by Salk to be materially relevant to
the patentability of any of the Patent Rights, including such correspondence
about potential interferences. There will be frequent communications, written
oral or both, between scientists from both parties, at least once quarterly at
the mutual convenience of the parties. Salk agrees to send to Epitope at least
once quarterly a written report drafted under the direction of Dr. Lamb that
specifies which research projects are funded hereunder by title, the amounts
from Epitope allocated to each project, the names of the personnel involved in
the project and a brief description of the research status for each of the
projects funded by the fees provided to Salk under this Agreement. Salk will
promptly provide Epitope copies of all publications and manuscripts of Salk
emanating from the Plant Biology Laboratory accepted for publication which
relate to the Licensed Technology. Salk further agrees to provide Epitope
promptly with copies of all United States and, upon request and to the extent
not duplicative, foreign patent applications which Salk files and patents which
may issue thereon, in each case which are included in the Patent Rights.
15.3 EPITOPE TECHNOLOGY. Rights to inventions, improvements
and/or discoveries, whether patentable or not, relating to the work out of this
Agreement conceived or made solely by employees of Epitope or its agents shall
belong to Epitope. Such inventions, improvements, and/or discoveries shall not
be subject to the terms and conditions of this Agreement.
15.4 COLLABORATION. It is understood that the Salk
investigators shall be free to discuss the research with other investigators and
to collaborate with them. Notwithstanding Salk's commitments under this
Agreement, in the event any inventions, discoveries, biological material, or
software result from such collaboration, Salk shall grant to Epitope the rights
outlined in this Agreement 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, Salk shall exert its good faith efforts to
enable Epitope to obtain rights.
16. MISCELLANEOUS.
16.1 ASSIGNMENT. Neither this Agreement nor any of the rights
or obligations hereunder may be assigned by either party without the prior
written consent of the other party (such consent not to be unreasonably withheld
with respect to an assignment in the event of a sale of all or substantially all
of a party's assets). This Agreement shall be binding upon and inure to the
benefit of Salk, Epitope and their respective assigns and successors in
interest.
16.2 HEADINGS. The headings used in this Agreement are for
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Agreement.
16.3 AMENDMENT. No amendment or modification hereof shall be
valid or binding upon the parties unless made in writing and signed by both
parties.
16.4 FORCE MAJEURE. Any delays in performance by any party
under this Agreement (other than the payment of monies due) shall not be
considered a breach of this Agreement if and to the extent caused by occurrences
beyond the reasonable control of the party affected, including but not limited
to, acts of God, embargoes, governmental restrictions, strikes or other
concerted acts of workers, fire, flood, explosion, riots, wars, civil disorder,
rebellion or sabotage. The party suffering such occurrence shall immediately
notify the other party and any time for performance hereunder shall be extended
by the actual time of delay caused by the occurrence.
11
<PAGE>
16.5 INDEPENDENT CONTRACTORS. In making and performing this
Agreement, Salk and Epitope act and shall act at all times as independent
contractors and nothing contained in this Agreement shall be construed or
implied to create an agency, partnership or employer and employee relationship
between Salk and Epitope. At no time shall one party make commitments or incur
any charges or expenses for or in the name of the other party except as
specifically provided herein.
16.6 SEVERABILITY. If any term, condition or provision of this
Agreement is held to be unenforceable for any reason, it shall, if possible, be
interpreted rather than voided, in order to achieve the intent of the parties to
this Agreement to the extent possible. In any event, all other terms, conditions
and provisions of this Agreement shall be deemed valid and enforceable to the
full extent.
16.7 WAIVER. None of the terms, covenants, and conditions of
this Agreement can be waived except by the written consent of the party waiving
compliance.
16.8 ENTIRE AGREEMENT. This Agreement contains the entire
agreement and understanding between the parties with respect to the subject
matter hereof, and merges all prior discussions, representations and
negotiations with respect to the subject matter of this Agreement.
16.9 USE OF SALK'S NAME. Epitope shall have no right to
publicize this Agreement or its relationship with Salk without Salk's prior
written approval, except as provided in this Section 16.9 and as may be required
to obtain sublicensees and to comply with federal or state laws and regulations.
Salk agrees that Epitope may make known in promotional and technical literature
that the Licensed Technology was developed by scientists at Salk and that
products are offered under license from Salk; provided, however, that such use
shall not state or imply that Salk has any relationship with Epitope other than
as licensor.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement by their duly authorized officers or representatives.
ATTEST: THE SALK INSTITUTE
FOR BIOLOGICAL STUDIES
By: /s/ D. D. Busch By: /s/ Thomas D. Pollard
Title: Assistant Secretary Title: President
ATTEST: EPITOPE, INC.
By: /s/ Richard K. Bestwick By: /s/ Adolph J. Ferro
Richard K. Bestwick, Ph.D. Adolf J. Ferro, Ph.D.
Title: Sr. Vice President, COO Title: President, CEO
12
<PAGE>
SCHEDULE A
OPTION TO LICENSE AND RESEARCH SUPPORT AGREEMENT
BETWEEN
THE SALK INSTITUTE FOR BIOLOGICAL STUDIES
AND
EPITOPE, INC.
Technology: The gene SAR-1 or DIR-1, including any modified or
mutant forms and related research developed jointly
in Dr. Christopher Lamb's laboratory and at the
Ardmore Laboratories of The Samuel Roberts Noble
Foundation which confers constitutive Systemic
Acquired Resistance (SAR) in transgenic plants and
any technology developed through studies of SAR-1
relating thereto that results in or enables or
improves the function of Systemic Acquired
Resistance.
Patent Rights: U.S. Serial No., [ ]* by
the Samuel Roberts Noble Foundation, entitled [ ]*
Access Fee: [ ]* per year; provided that such fees shall
increase to [ ]* if Salk obtains ownership rights
in the technology held by The Samuel Roberts Noble
Foundation before July 1, 1997. The first two
quarterly payments shall be [ ]*.
Field of Use: Fruit, vegetable and horticultural crops as defined
by the following list of plant genera and species. In
those cases where the genus name is followed by
"sp.", all species of that genus are included.
[ ]*
* Bracketed material has been omitted and filed separately with the Commission
pursuant to a request for confidential treatment.
13
<PAGE>
[ ]*
Territory: Worldwide
Exclusivity in the field of use and in the territory of option and license:
Exclusive except for [ ]*
which shall be non-exclusive; and [ ]*
which shall be exclusive for all [ ]* varieties, and
non-exclusive for all [ ]* varieties.
Initial Share of Patent Costs: [ ]*
INITIALED:
Epitope, Inc.
2/25/97 Date /s/ RKB
Salk Institute
2/27/97 Date /s/ DDB
* Bracketed material has been omitted and filed separately with the Commission
pursuant to a request for confidential treatment.
14
<PAGE>
SCHEDULE A
OPTION TO LICENSE AND RESEARCH SUPPORT AGREEMENT
BETWEEN
THE SALK INSTITUTE FOR BIOLOGICAL STUDIES
AND
EPITOPE, INC.
Technology: LEAFY gene (Dr. Detlef Weigel, lead researcher)
Patent Rights: LEAFY Salk File Nos. S94047 & S95098
U.S. Serial No. [ ]*
entitled [ ]*
U.S. Serial No. [ ]*
entitled [ ]*
Foreign: PCT Appln. [ ]*
designating [ ]*
Access Fee: [ ]* per year
Field of Use: Fruit, vegetable and horticultural crops as defined
by the following list of plant genera and species. In
those cases where the genus name is followed by
"sp.", all species of that genus are included.
[ ]*
* Bracketed material has been omitted and filed separately with the Commission
pursuant to a request for confidential treatment.
15
<PAGE>
[ ]*
Territory: Worldwide
Exclusivity in the field of use and in the territory of option and license:
Exclusive, except for [ ]*, which shall be exclusive for all
[ ]* varieties, and non-exclusive for all [ ]* varieties.
Initial Share of Patent Costs: [ ]*
INITIALED:
Epitope, Inc.
2/25/97 Date /s/ RKB
Salk Institute
2/27/97 Date /s/ DDB
* Bracketed material has been omitted and filed separately with the Commission
pursuant to a request for confidential treatment.
16
<PAGE>
SCHEDULE A
OPTION TO LICENSE AND RESEARCH SUPPORT AGREEMENT
BETWEEN
THE SALK INSTITUTE FOR BIOLOGICAL STUDIES
AND
EPITOPE, INC.
Technology: DET2 gene (Dr. Joanne Chory, lead researcher). DET2
encodes a steroid 5a hydroxylase and is a key enzyme
in the synthesis of brassinosteroid hormones in
plants. Ectopic expression of DET2 in transgenic
Arabidopsis leads to enhanced growth.
Patent Rights: det2 Salk File No. S96011
U.S. Serial No. [ ]*
entitled [ ]*
Access Fee: [ ]* per year
Field of Use: Fruit, vegetable, and horticultural crops
as defined by the following list of plant genera and
species. In those cases where the genus name is
followed by "sp.", all species of that genus are
included.
[ ]*
* Bracketed material has been omitted and filed separately with the Commission
pursuant to a request for confidential treatment.
17
<PAGE>
[ ]*
Territory: Worldwide
Exclusivity in the field of use and in the territory of option and license:
Exclusive except for [
]*, which shall be non-exclusive; and [ ]*
which shall be exclusive for all [ ]* varieties, and non-exclusive
for all [ ]* varieties.
Initial Share of Patent Costs: [ ]*
INITIALED:
Epitope, Inc.
2/25/97 Date /s/ RKB
Salk Institute
2/27/97 Date /s/ DDB
* Bracketed material has been omitted and filed separately with the Commission
pursuant to a request for confidential treatment.
18
<PAGE>
SCHEDULE A
OPTION TO LICENSE AND RESEARCH SUPPORT AGREEMENT
BETWEEN
THE SALK INSTITUTE FOR BIOLOGICAL STUDIES
AND
EPITOPE, INC.
Technology: Booster Element (BE) (Dr. Christopher Lamb, lead
researcher). A booster element, comprising
essentially [ ]* when placed in the TATA proximal
region of various plant promoters, markedly
stimulates transcription without altering the
promoter's intrinsic pattern of expression
specificity. The booster cis element interacts with a
novel trans factor comprising domains related to
histone H1 and the high mobility group protein I/Y
respectively, between which is a glutamine-rich
domain.
Patent Rights: Booster Element Salk File No. S96005
U.S. Serial No. [ ]*
entitled [ ]*
Access Fee: [ ]* per year
Field of Use: The Field of Use includes all plant species for this
Technology.
Territory: Worldwide
Exclusivity of License: Non-exclusive
Initial Share of Patent Costs: [ ]*
INITIALED:
Epitope, Inc.
2/25/97 Date /s/ RKB
Salk Institute
2/27/97 Date /s/ DDB
* Bracketed material has been omitted and filed separately with the Commission
pursuant to a request for confidential treatment.
19
<PAGE>
SCHEDULE A
OPTION TO LICENSE AND RESEARCH SUPPORT AGREEMENT
BETWEEN
THE SALK INSTITUTE FOR BIOLOGICAL STUDIES
AND
EPITOPE, INC.
Technology: Cyclin gene (Dr. Peter Doerner, lead researcher).
Ectopic expression of a cdc2::cyc1 transgene enhances
plant growth without altering morphogenesis or
causing neoplasms, leading to accelerated vegetative
development and more rapid generation of biomass.
Patent Rights: Cyclin Salk File No. S96006
U.S. Serial No. [ ]*
entitled. [ ]*
Access Fee: [ ]* per annum
Field of Use: Fruit, vegetable and horticultural crops as defined
by the following list of plant genera and species. In
those cases where the genus name is followed by
"sp.", all species of that genus are included.
[ ]*
* Bracketed material has been omitted and filed separately with the Commission
pursuant to a request for confidential treatment.
20
<PAGE>
[ ]*
Territory: Worldwide
Exclusivity in the field of use and in the territory of option and license:
Exclusive except for [
]*, which shall be non-exclusive; and
[ ]*, which shall be exclusive for all [ ]*
varieties, and non-exclusive for all [ ]* varieties.
Initial Share of Patent Costs: [ ]*
INITIALED:
Epitope, Inc.
2/25/97 Date /s/ RKB
Salk Institute
2/27/97 Date /s/ DDB
* Bracketed material has been omitted and filed separately with the Commission
pursuant to a request for confidential treatment.
21
<PAGE>
AMENDMENT
TO
OPTION TO LICENSE AND RESEARCH SUPPORT AGREEMENT
BETWEEN
THE SALK INSTITUTE FOR BIOLOGICAL STUDIES
AND
EPITOPE, INC.
This Amendment to the Option To License And Research Support Agreement
("Agreement") is made and entered into this 25th day of July, 1997 (the
"Effective Date"), by and between The Salk Institute for Biological Studies, a
nonprofit public benefit corporation organized under the laws of the State of
California ("Salk"), and Epitope, Inc., a corporation organized under the laws
of the State of Oregon ("Epitope").
WHEREAS, Dr. Joanne Chory has been identified as a candidate for a
position as an associate investigator of the Howard Hughes Medical Institute
("HHMI");
WHEREAS, HHMI policy does not allow HHMI investigators to be subject to
an option of the type granted under the Agreement, nor to receive research funds
from commercial companies;
WHEREAS, the appointment of Dr. Joanne Chory as an HHMI investigator is
being delayed pending resolution of this matter;
WHEREAS, Epitope has agreed to modify the Agreement to remove reference
to the research of Dr. Joanne Chory past the Effective Date;
WHEREAS, Epitope will have had the benefit of this research prior to
the Effective Date in accordance with the terms of the Agreement;
WHEREAS, The total amount of access fees paid to Salk by Epitope will
remain unchanged and Salk will allocate the fees to other research;
WHEREAS, Certain technology developed prior to the Effective Date by
Dr. Chory outside of the Agreement will now be included by Salk within the
Agreement to the benefit of Epitope; and
WHEREAS, Salk has agreed to include Epitope among those notified of any
licensable inventions arising in the future from the work of Dr. Chory as an
HHMI Investigator.
THEREFORE, in consideration of the mutual covenants contained herein,
the Agreement between Salk and Epitope is hereby amended as follows:
I. Section 1.2 is hereby revised to read in its entirety as
follows:
1.2 The term "PLANT BIOLOGY LABORATORY" shall mean
collectively the research laboratories at Salk devoted to
plant biology research, including, but not limited to, those
under the
<PAGE>
direction of Dr. Christopher Lamb and Dr. Detlef Weigel.
Notwithstanding the foregoing, after the Effective Date, the
term Plant Biology Laboratory shall not include the laboratory
under the direction of Dr. Joanne Chory.
II. Schedule A, pages 17 and 18, referring to the research of Dr.
Joanne Chory concerning the DET2 gene, is hereby modified as attached hereto.
Such research shall cease being
subject to this Agreement as of the Effective Date. Such research prior to the
Effective Date shall remain subject to the Agreement.
III. Schedule A, pages 22 and 23 is hereby added to and made part of
the Agreement effective as of February 25, 1997 and ending as of the Effective
Date. The research described therein conducted prior to the Effective Date shall
remain subject to the Agreement.
IV. The access fee of [ ]* per year called for in the original
Schedule A, pages 17 and 18 shall be prorated for the first year (five months of
twelve) so that the access fee obligation of Epitope under the Agreement with
regard to that research of Dr. Joanne Chory shall be [ ]*. The remaining
[ ]* for the first year and [ ]* per year thereafter shall be
allocated to other research within the Plant Biology Laboratory of Salk as
further delineated in Schedule A, pages 24 and 25, possibly including, but not
limited to, research already listed in Schedule A.
V. Notwithstanding anything to the contrary in the Agreement or herein,
the parties agree that Epitope shall not have a right of first negotiation with
respect to technology developed after the Effective Date in the laboratory under
the direction of Dr. Joanne Chory.
Except as expressly amended above, the Agreement remains in full force
and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment on the
date and year first written above.
ATTEST: THE SALK INSTITUTE
FOR BIOLOGICAL STUDIES
By: /s/ D. D. Busch By: /s/ Delbert E. Glanz
Title: Assistant Secretary Title: Executive Vice President
ATTEST: EPITOPE, INC.
By: /s/ Richard K. Bestwick, Ph.D. By: /s/ Adolph J. Ferro, Ph.D
Title: Sr. Vice President, R&D Title: President, CEO
* Bracketed material has been omitted and filed separately with the Commission
pursuant to a request for confidential treatment.
<PAGE>
SCHEDULE A
OPTION TO LICENSE AND RESEARCH SUPPORT AGREEMENT
BETWEEN
THE SALK INSTITUTE FOR BIOLOGICAL STUDIES
AND
EPITOPE, INC.
Technology: DET2 gene (Dr. Joanne Chory, lead researcher) up to July 25,
1997. DET2 encodes a steroid 5a hydroxylase and is a key
enzyme in the synthesis of brassinosteriod hormones in
plants. Ectopic expression of DET2 in transgenic Arabidopsis
leads to enhanced growth.
Patent Rights: det2 Salk File No. S96011
U.S. Serial No. [ ]*, entitled
[ ]*
Access Fee: [ ]*
Field of Use: Fruit, vegetable, and horticultural crops as defined by the
following list of plant genera and species. In those cases
where the genus name is followed by "sp.", all species of
that genus are included.
[ ]*
* Bracketed material has been omitted and filed separately with the Commission
pursuant to a request for confidential treatment.
- 17 -
<PAGE>
[ ]*
Territory: Worldwide
Exclusivity in the field of use and in the territory of option and license:
Exclusive except for [
]*, which shall be non-exclusive; and [ ]*, which shall
be exclusive for all [ ]* varieties, and non-exclusive for all [ ]*
varieties.
Initial Share of Patent Costs: [ ]
Initialed:
Epitope, Inc.
/s/ RKB Date 7/24/97
Salk Institute
/s/ DEG Date 7/24/97
* Bracketed material has been omitted and filed separately with the Commission
pursuant to a request for confidential treatment.
- 18 -
<PAGE>
SCHEDULE A
OPTION TO LICENSE AND RESEARCH SUPPORT AGREEMENT
BETWEEN
THE SALK INSTITUTE FOR BIOLOGICAL STUDIES
AND
EPITOPE, INC.
Technology: BIN1 receptor (Dr. Joanne Chory, lead researcher) up to July
25, 1997. BIN1 encodes a putative leucine-rich-repeat
receptor kinase that acts in brassinosteroid signal
transduction. Ectopic expression of BIN1 or activated
derivatives of BIN1 is expected to enhance growth and yield
and cause an increased resistance to disease.
Patent Rights: BIN1, Salk File No. S97020
U.S. Serial No. ------------ filed June 24, 1997, entitled
[ ]*
Access Fee: As consideration for this technology, an access fee for this
(retroactively) or other research as allocated from time to
time by Dr. Chris Lamb shall be provided by Epitope as
provided in Schedule A, pages 24 and 25.
Field of Use: Fruit, vegetable, and horticultural crops as defined by the
following list of plant genera and species. In those cases
where the genus name is followed by "sp.", all species of
that genus are included.
[ ]*
* Bracketed material has been omitted and filed separately with the Commission
pursuant to a request for confidential treatment.
- 22 -
<PAGE>
[ ]*
Territory: Worldwide
Exclusivity in the field of use and in the territory of option and license:
Exclusive except for [
]*, which shall be non-exclusive; and [ ]*, which shall
be exclusive for all [ ]* varieties, and non-exclusive for all [ ]*
varieties.
Initial Share of Patent Costs: [ ]*
Initialed:
Epitope, Inc.
/s/ RKB Date 7/24/97
Salk Institute
/s/ DEG Date 7/24/97
* Bracketed material has been omitted and filed separately with the Commission
pursuant to a request for confidential treatment.
- 23 -
<PAGE>
SCHEDULE A
OPTION TO LICENSE AND RESEARCH SUPPORT AGREEMENT
BETWEEN
THE SALK INSTITUTE FOR BIOLOGICAL STUDIES
AND
EPITOPE, INC.
Technology: That developed from research projects, in the Plant Biology
Laboratory, to which funds are specifically allocated from
time to time by Dr. Chris Lamb.
Patent Rights: None at present, except to the extent funds are used to
support research described elsewhere in this Schedule A.
Access Fee: [ ]* for the first year, [ ]*/year thereafter.
Field of Use: As specified in the appropriate Schedule A; provided,
however, that licensed technology resulting from new work
not currently listed in Schedule A shall be subject to the
following Field of Use: Fruit, vegetable, and horticultural
crops as defined by the following list of plant genera and
species. In those cases where the genus name is followed by
"sp.", all species of that genus are included.
[ ]*
* Bracketed material has been omitted and filed separately with the Commission
pursuant to a request for confidential treatment.
- 24 -
<PAGE>
[ ]*
Territory: Worldwide
Exclusivity in the field of use and in the territory of option and license:
Exclusive except for [
]*, which shall be non-exclusive; and [ ]*, which shall
be exclusive for all [ ]* varieties, and non-exclusive for all [ ]*
varieties.
Initial Share of Patent Costs: [ ]*
Initialed:
Epitope, Inc.
/s/ RKB Date 7/24/97
Salk Institute
/s/ DEG Date 7/24/97
* Bracketed material has been omitted and filed separately with the Commission
pursuant to a request for confidential treatment.
- 25 -
<PAGE>
ASSIGNMENT OF AGREEMENT
This Assignment relates to a certain OPTION TO LICENSE AND RESEARCH SUPPORT
AGREEMENT between The Salk Institute for Biological Studies and Epitope, Inc.,
effective February 25, 1997, as amended to date, including the amendment dated
July 25, 1997 ("Agreement"). Agritope, Inc., an Oregon corporation has rights
under the Agreement as an affiliate of Epitope, Inc. As of Sept. 23, 1997,
Agritope, Inc. will no longer be an affiliate of Epitope, Inc. and, accordingly,
the parties wish to allocate the rights under the Agreement by this Assignment.
Accordingly, based on the background provided above, Epitope, Inc., and
Agritope, Inc. agree as follows:
Epitope, Inc. hereby assigns all of its rights and obligations under the
Agreement to Agritope, Inc.
IN WITNESS WHEREOF, the parties have executed this Assignment on the date and
year first written above.
ATTEST: EPITOPE, INC.
By: /s/ Trang Jewell By: /s/ C. Bergeron
Title: Executive Assistant Title: VP Operations
ASSIGNMENT ACCEPTED BY
ATTEST: AGRITOPE, INC.
By: /s/ Trang Jewell By: /s/ Adolph J. Ferro
Title: Executive Assistant Title: President/CEO
THE ABOVE ASSIGNMENT IS SPECIFICALLY AGREED TO BY THE SALK INSTITUTE OF
BIOLOGICAL STUDIES
ATTEST: THE SALK INSTITUTE
FOR BIOLOGICAL STUDIES
By: /s/ D. D. Busch By: Delbert E. Glanz
Title: Assistant Secretary Title: Exec. Vice President
ASSIGNMENT AND MODIFICATION OF LEASE
AGREEMENT FOR PREPAID RENT AND DELIVERY OF
PREMISES UNDER ASSIGNMENT OF LEASE FOR
PREMISES LOCATED AT PACTRUST BUSINESS CENTER
We hereby agree to the following:
1. Agritope, Inc., shall post security in the form of cash to assure
payment of rent under the above-referenced Lease during the period
which American Show Management, Inc., ("ASM") remains liable to Pacific
Realty Associates, LP. An amount of $113,135.00 shall be placed in an
escrow account to be released beginning April 1, 1998. Each month
thereafter, $10,285.00 shall be released from escrow for payment of the
base rent. Agritope, Inc., shall be entitled to receive all interest to
accrue on the escrow fund and shall be responsible for all escrow fees.
Upon Signature of this Lease, Agritope, Inc., shall provide March 1998,
rent of $10,285.00 as well as an amount equal to $11,210.00 as a
security deposit to be held by ASM, Inc., for the last month of the
lease term. Upon termination of the lease guarantee by ASM, Inc., the
security deposit will be forwarded to Pacific Realty Associates, LP for
replacement of its security deposit.
2. ASM, Inc., agrees to deliver possession of the Premises on or before
January 15, 1998. If delivery is delayed past this date, ASM, Inc.,
will reimburse Agritope, Inc., in an amount equal to $338.14 per day
for each day past January 15, 1998, that possession is delayed, unless
delay is caused by a force majeure. Total reimbursement shall not
exceed $15,210.00.
AGREED AND ACCEPTED: AGREED AND ACCEPTED:
/s/ [illegible] /s/ Matthew A. Kramer
American Show Management, Inc. Agritope, Inc.
- 1 -
<PAGE>
ASSIGNMENT AND MODIFICATION OF LEASE
DATED: NOVEMBER 7, 1997
BETWEEN: PACIFIC REALTY ASSOCIATES, L.P., LANDLORD
A DELAWARE LIMITED PARTNERSHIP
AND: AMERICAN SHOW MANAGEMENT, INC.,
AN OREGON CORPORATION ASSIGNOR
AND: AGRITOPE, INC.,
AN OREGON CORPORATION ASSIGNEE
Pacific Realty Associates, L.P., a Delaware limited
partnership, as Landlord and Assignor, as Tenant, entered into a written lease
dated October 4, 1995, covering approximately 11,059 square feet of office and
warehouse space located in Building C, PacTrust Business Center, 16160 S.W.
Upper Boones Ferry Road, Portland, Oregon 97224 (hereinafter referred to as "the
Premises"). By Lease Amendment dated June 3, 1996, the Lease was amended. Such
documents are hereinafter jointly referred to as "the Lease." The Lease expires
May 31, 2001.
Assignor wishes to assign unto Assignee all of Assignor's
interest under the Lease.
NOW, THEREFORE, the parties agree as follows:
1. Assignor hereby assigns unto Assignee all of Assignor's interest
under the Lease effective as of March 1, 1998. Assignee accepts such assignment
and agrees to perform all obligations of Tenant accruing after such date,
including payment of rent and all other charges imposed upon Tenant by the
Lease.
2. Assignor shall be released from all its responsibilities for
performance of all of Assignor's obligations under the Lease as of February 28,
1999, provided that:
2.1. Upon execution of this Assignment and Modification of
Lease Agreement, Assignee's market capitalization is greater than or equal to
Twenty Million and No/100 dollars ($20,000,000.00); and
2.2. Assignee is not then in default and has not been in
default under the Lease prior to February 28, 1999.
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<PAGE>
3. The Use of the Premises as defined in Paragraph 1(a) of the Lease
shall be modified to read "Tenant shall use the Premises only for the purpose of
conducting the following business: General office and laboratory space for an
agricultural biotechnology company. If such use is prevented by any law or
governmental regulation, Tenant may use the Premises for other reasonable uses."
4. Provided that, as of February 28, 1999, Assignee is not in default
under the Lease, the Lease shall be extended for an additional 22 months
commencing June 1, 2001 and continuing through February 28, 2003.
5. Base rent shall be according to the following schedule:
- -----------------------------------------------------------------------------
BASE RENT
PERIOD PER MONTH
- -----------------------------------------------------------------------------
March 1, 1998 through May 31, 2001 $10,285.00
- -----------------------------------------------------------------------------
June 1, 2001 through February 28, 2003 $11,210.00
- -----------------------------------------------------------------------------
6. Effective March 1, 1998 the Lease shall become a "triple net" lease,
therefore:
6.1. Utility Charges: Maintenance.
6.1.1. Tenant shall pay when due all charges for
electricity, natural gas, water, garbage collection, janitorial service, sewer,
and all other utilities of any kind furnished to the Premises during the lease
term. If charges are not separately metered or stated, Landlord shall apportion
the utility charges on an equitable basis. Landlord shall have no liability
resulting from any interruption of utility services caused by fire or other
casualty, strike, riot, vandalism, the making of necessary repairs or
improvements, or any other cause beyond Landlord's reasonable control. Tenant
shall control the temperature in the Premises to prevent freezing of any
sprinkler system.
6.1.2. Landlord shall repair and maintain the roof,
gutters, downspouts, exterior walls, building structure, foundation, exterior
paved areas, and curbs of the Premises in good condition. Except for such
obligations of Landlord, Tenant shall keep the Premises neatly maintained and in
good order and repair. Tenant's responsibility shall include maintenance and
repair of the electrical system, plumbing, drainpipes to sewers,
air-conditioning and heating systems, overhead and personnel doors, and the
replacement of all broken or cracked glass with glass of the same quality.
Tenant shall refrain from any discharge that will damage the septic tank or
sewers serving the Premises.
6.1.3. If the Premises have a separate entrance,
Tenant shall keep the sidewalks abutting the Premises or the separate entrance
free and clear of snow, ice, debris, and obstructions of every kind.
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<PAGE>
6.2. Taxes, Assessments, and Operating Expenses.
6.2.1. In conjunction with monthly rent payments,
Tenant shall each month pay a sum representing Tenant's proportionate share of
real property taxes and operating expenses for the Premises. Such amount shall
annually be estimated by Landlord in good faith to reflect actual or anticipated
costs. Upon termination of the Lease or at periodic intervals during the term
hereof, Landlord shall compute its actual costs for such expenses during such
period. Any overpayment by Tenant shall be credited to Tenant, and any
deficiency shall be paid by Tenant within fifteen (15) days after receipt of
Landlord's statement. Landlord's records of expenses for taxes and operating
expenses may be inspected by Tenant at reasonable times and intervals.
6.2.2. Tenant's proportionate share of real property
taxes shall mean that percentage of the total assessment affecting the Premises
which is me same as the percentage which the rentable area of the Premises bears
to the total rentable area of all buildings covered by the tax statement.
Tenant's proportionate share of operating expenses for the Building shall be
computed by dividing the rentable area of the Premises by the total rentable
area of the Building. If in Landlord's reasonable judgment either of these
methods of allocation results in an inappropriate allocation to Tenant, Landlord
shall select some other reasonable method of determining Tenant's proportionate
share.
6.2.3. Real property taxes charged to Tenant
hereunder shall include all general real property taxes assessed against the
Premises or payable during the lease term, installment payments on Bancrofted
special assessments, and any rent tax, tax on Landlord's interest under the
Lease, or any tax in lieu of the foregoing, whether or not any such tax is now
in effect. Tenant shall not, however, be obligated to pay any tax based upon
Landlord's net income.
6.2.4. Operating expenses charged to Tenant hereunder
shall include all usual and necessary costs of operating and maintaining the
Premises, Building, and any surrounding common areas including, but not limited
to, the cost of all utilities or services not paid directly by Tenant, property
insurance, property management, maintenance and repair of landscaping, parking
areas, and any other common facilities. Operating expenses shall not include
roof replacement or correction of structural deficiencies of the Building.
7. The following environmental language will be in effect effective
March 1, 1998 and continuing though the extended term:
7.1. Definitions. The term "Environmental Law" shall mean any
federal, state or local statute, regulation or ordinance or any judicial or
other governmental order pertaining to the protection of health, safety or the
environment. The term "Hazardous Substance" shall mean any hazardous, toxic,
infectious or radioactive substance, waste and material as defined or listed by
any Environmental Law and shall include, without limitation, petroleum oil and
its fractions.
- 4 -
<PAGE>
7.2. Use of Hazardous Substances. Tenant shall not cause or
permit any Hazardous Substance to be spilled, leaked, disposed of or otherwise
released on or under the Premises. Tenant may use and sell on the Premises only
those Hazardous Substances typically used and sold in the prudent and safe
operation of the business permitted by Paragraph 1 of the Lease. Tenant may
store such Hazardous Substances on the Premises, but only in quantities
necessary to satisfy Tenant's reasonably anticipated needs. Tenant shall comply
with all Environmental Laws and exercise the highest degree of care in the use,
handling and storage of Hazardous Substances and shall take all practicable
measures to minimize the quantity and toxicity of Hazardous Substances used,
handled or stored on the Premises.
7.3. Notices. Tenant shall immediately notify Landlord upon
becoming aware of the following: (a) any spill, leak, disposal or other release
of a Hazardous Substance on, under or adjacent to the Premises; (b) any notice
or communication from a governmental agency or any other person relating to any
Hazardous Substance on, under or adjacent to the Premises; or (c) any violation
of any Environmental Law with respect to the Premises or Tenant's activities on
or in connection with the Premises.
7.4. Spills and Releases. In the event of a spill, leak,
disposal or other release of a Hazardous Substance on or under the Premises
caused by any party other than Landlord or any of Landlord's contractors, agents
or employees or invitees, or the suspicion or threat of the same, Tenant shall
(i) immediately undertake all emergency response necessary to contain, cleanup
and remove the released Hazardous Substance, (ii) promptly undertake all
investigatory, remedial, removal and other response action necessary or
appropriate to ensure that any Hazardous Substances contamination is eliminated
to Landlord's reasonable satisfaction, and (iii) provide Landlord copies of all
correspondence with any governmental agency regarding the release (or threatened
or suspected release) or the response action, a detailed report documenting all
such response action, and a certification that any contamination has been
eliminated. All such response action shall be performed, all such reports shall
be prepared and all such certifications shall be made by an environmental
consultant reasonably acceptable to Landlord.
7.5. Condition Upon Termination. Upon expiration of the Lease
or sooner termination of the Lease for any reason, Tenant shall remove all
Hazardous Substances and facilities used for the storage or handling of
Hazardous Substances from the Premises and restore the affected areas by
repairing any damage caused by the installation or removal of the facilities.
Following such removal, Tenant shall have a qualified engineer certify in
writing to Landlord that all such removal is complete.
7.6. Assignment and Subletting. Notwithstanding the provisions
of Paragraph 9 of the Lease, it shall not be unreasonable for Landlord to
withhold its consent to any assignment, sublease or other transfer of the
Tenant's interest in the Lease if a proposed transferee's anticipated use of the
Premises involves the generation, storage, use, sale, treatment, release or
disposal of any Hazardous Substance.
- 5 -
<PAGE>
7.7. Indemnity.
7.7.1 By Tenant. Tenant shall indemnify, defend and
hold harmless Landlord, its employees and agents, any persons holding a security
interest in the Premises, and the respective successors and assigns of each of
them from and against any and all claims, demands, liabilities, damages, fines,
losses, costs (including without limitation the cost of any investigation,
remedial, removal or other response action required by Environmental Law) and
expenses (including without limitation attorneys' fees and expert fees in
connection with any trial, appeal, petition for review or administrative
proceeding) arising out of or in any way relating to the use, treatment,
storage, generation, transport, release, leak, spill, disposal or other handling
of Hazardous Substances on the Premises by Tenant or any of its contractors,
agents or employees or invitees. Tenant's obligations under under this paragraph
shall survive the expiration or termination of the Lease for any reason.
Landlord's rights under this paragraph are in addition to and not in lieu of any
other rights or remedies to which Landlord may be entitled under this agreement
or otherwise.
7.7.2. By Landlord. Landlord shall indemnify, defend
and hold harmless Tenant and its employees and agents and the respective
successors and assigns of each of them from and against any and all claims,
demands, liabilities, damages, fines, losses, costs (including without
limitation the cost of any investigation, remedial, removal or other response
action required by Environmental Law) and expenses (including without limitation
attorneys' fees and expert fees in connection with any trial, appeal, petition
for review or administrative proceeding) arising out of or in any way relating
to the actual or alleged use, treatment, storage, generation, transport,
release, leak, spill, disposal or other handling of Hazardous Substances on the
Premises by Landlord, or any of its contractors, agents or employees or by
Landlord's previous tenants of the Premises. Landlord's obligations under this
paragraph shall survive the expiration or termination of the Lease for any
reason. Tenant's rights under this paragraph are in addition to and not in lieu
of any other rights or remedies to which Tenant may be entitled under this
Agreement or otherwise.
8. Subject to the provisions of Paragraph 7, above, Tenant shall be
entitled to use and store those substances listed on the attached Exhibit A.
Tenant shall not store substances in amounts in excess of those listed on
Exhibit A without first obtaining Landlord's approval and the approval of any
governmental agency with such authority.
9. The cost of all tenant improvements, which must be mutually
acceptable to all parties, shall be at Assignor's and/or Assignee's sole cost
and expense.
10. Indemnification.
10.1. Indemnity by Assignor. Assignor hereby agrees to
indemnify, defend, protect, and hold harmless Assignee from and against any and
all losses, liabilities, claims, costs, and expenses (including reasonably
attorney fees) arising out of or in any way related to Assignor's failure to
perform its obligations under the Lease or this Assignment or arising
- 6 -
<PAGE>
out of use of the Premises by Assignor or its agents, employees, contractors,
customers, or invitees before the effective date of this Assignment.
10.2. Indemnity by Assignee. Assignee hereby agrees to
indemnify, defend, protect, and hold harmless Assignor from and against any and
all losses, liabilities, claims, costs, and expenses (including reasonably
attorney fees) arising out of or in any way related to Assignee's failure to
perform its obligations under the Lease or this Assignment or arising out of use
of the Premises by Assignee or its agents, employees, contractors, customers, or
invitees before the effective date of this Assignment.
11. Status of Lease; Property Removal.
11.1. Status of Lease. Assignor represents and warrants:
11.1.1. That the Lease is in full force and effect in
accordance with its terms;
11.1.2. That the Lease has not been amended or
modified except as stated in this Assignment;
11.1.3. That Assignor is not in default of the Lease;
and
11.1.4. That as of the execution of this Agreement,
Assignor is not delinquent in the payment of any rental under the Lease.
11.2 Property Removal. Assignor hereby agrees not to remove
any improvements, alterations, or fixtures from the Premises. Assignor agrees to
remove all of its personal property from the Premises prior to March 1, 1998
12. This agreement shall be contingent upon and shall only become
effective when the separation of Assignee from its current sole shareholder,
Epitope, Inc., has bee completed by distribution to the existing shareholders of
Epitope, Inc., all of the outstanding stock of Assignee. In the event such
separation has not occurred within ------- (---) days of the date of this
Assignment, then this Assignment shall become null and void.
13. Except as expressly modified hereby, all terms of the Lease shall
remain in full force and effect and shall continue through the extended term.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first written above.
LANDLORD:
PACIFIC REALTY ASSOCIATES, L.P.,
a Delaware limited partnership
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<PAGE>
By: PacTrust Realty, Inc.
a Delaware corporation,
its General Partner
Date: Nov 14 , 1997 By: /s/ Sam K. Briggs
Sam K. Briggs
Marketing Director
ASSIGNOR:
AMERICAN SHOW MANAGEMENT, INC.,
an Oregon corporation
Date: Nov 13 , 1997 By: /s/ [illegible]
Name: Patrick J. [illegible]
Title: President
ASSIGNEE:
AGRITOPE, INC.,
an Oregon corporation
By: /s/ Gilbert Miller
Name: Gilbert Miller
Title: Exec. VP
By: /s/ Adolph Ferro
Name: Adolph Ferro
Title: President, CEO
Address for Legal Notices/Invoices to
Assignee:
---------------------------------------
---------------------------------------
---------------------------------------
(Note: Unless a different address is
indicated above, notices to Assignee
will be addressed to the Premises.)
Assignee Employer Identification
Number:
---------------------------------------
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<PAGE>
LEASE AMENDMENT
DATED: JUNE 3, 1996
BETWEEN: PACIFIC REALTY ASSOCIATES, L.P.,
A DELAWARE LIMITED PARTNERSHIP LANDLORD
AND: AMERICAN SHOW MANAGEMENT,INC.,
AN OREGON CORPORATION TENANT
By written lease dated October 4, 1995, Tenant leased from Landlord
approximately 11,059 square feet of space in Building C, PacTrust Business
Center, 16160 S.W. Upper Boones Ferry Road, Portland, Oregon 97224 (hereinafter
referred to as the "Premises"). Such document is hereinafter referred to as the
"Lease."
Tenant's occupancy of the Premises was delayed until January 1, 1996.
NOW, THEREFORE, the parties agree as follows:
1. The improvements required to be constructed by Landlord under the Lease
have been substantially completed and are accepted by Tenant.
2. The Commencement Date of the Lease is January 1, 1996.
3. The Termination Date of the Lease is May 31, 2001.
4. Base rent shall be according to the revised schedule:
Base Rent
Period Per Month
------------------------------------------ ---------
January 1, 1996 through March 31, 1996 $ 0.00
April 1, 1996 through December 31, 1997 $ 9,900.00
January 1, 1998 through February 28, 1998 $ 0.00
March 1, 1998 through May 31, 2001 $ 10,200.00
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<PAGE>
5. Except as expressly modified hereby, all terms of the Lease shall
remain in full force and effect and shall continue through the termination date.
IN WITNESS WHEREOF, the parties have executed this agreement
as of the day and year first written above.
PACIFIC REALTY ASSOCIATES, LP., AMERICAN SHOW MANAGEMENT,
A DELAWARE LIMITED PARTNERSHIP INC.,
AN OREGON CORPORATION
BY PACTRUST REALTY, INC., A DELAWARE
CORPORATION, ITS GENERAL PARTNER
By /s/ Sam K. Briggs By [illegible]
Sam K. Briggs Name Patrick J. [illegible]
Marketing Director Title President & COO
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<PAGE>
LEASE
DATED: OCTOBER 4, 1995
BETWEEN: PACIFIC REALTY ASSOCIATES, L.P.,
A DELAWARE LIMITED PARTNERSHIP LANDLORD
AND: AMERICAN SHOW MANAGEMENT, INC.,
AN OREGON CORPORATION TENANT
Tenant wishes to lease from Landlord the following described
property, hereinafter referred to as "the Premises":
Approximately 11,058 square feet of space located in Building
C, PacTrust Business Center, 16160 S.W. Upper Boones Ferry Road, Portland,
Oregon 97224 and as further described on the attached Exhibits A, B and C.
If the Premises consist of a portion but not all of a
building, the building housing the Premises is hereinafter referred to as "the
Building."
Landlord leases the Premises to Tenant for a term of 65.5
months commencing December 15, 1995 and continuing through May 31, 2001. No base
rent shall be due for the first three (3) months and the 25th and 26th months of
the lease term. Base rent shall be according to the following schedule:
Base Rent
Period Per Month
-------------------------------------------- ---------
December 15, 1995 through March 14, 1996 $ 0.00
March 15 1996 through December 31, 1997 $ 9,900.00
January 1, 1998 through February 28, 1998 $ 0.00
March 1, 1998 through May 31, 2001 $10,200.00
If Landlord consents, Tenant may occupy the Premises prior to such commencement
date on a rent-free basis and upon compliance with all terms of this lease. Rent
for the third month of the lease term has been paid upon execution of this
lease.
Delivery of possession shall occur when the Premises are
occupied by Tenant or are ready to be occupied by Tenant with all work to be
performed by Landlord substantially completed. No notice shall be required from
Landlord if the Premises are ready on the date set for commencement of the term
or on the first business day thereafter. If Landlord is unable to deliver
possession of the Premises to Tenant because of strikes, acts of
- 1 -
<PAGE>
God, or any other cause beyond Landlord's control, then Tenant may take
possession when Landlord notifies Tenant that the Premises are ready for
possession, and the term of this lease shall commence on the first day of the
first month following such date and continue for the specified number of months
thereafter, notwithstanding the commencement and termination dates stated above.
Tenant shall owe no rent until the Premises are ready for possession. Landlord
shall have no liability for such delays in delivery of possession, and neither
party shall have the right to terminate except that Landlord may cancel this
lease without liability if permission to construct, use, or furnish necessary
utilities to the Premises is denied or revoked by any governmental agency or
public utility with such authority.
This lease is subject to the following additional terms to
which the parties agree:
1. USE OF THE PREMISES.
(a) Tenant shall use the Premises only for the purpose of
conducting the following business:
General office for trade show management.
If such use is prevented by any law or governmental regulation, Tenant may use
the Premises for other reasonable uses.
(b) In connection with its use, Tenant shall at its expense
comply with all applicable laws, ordinances, and regulations of any public
authority, including those requiring alteration of the Premises because of
Tenant's specific use; shall create no nuisance nor allow any objectionable
liquid, odor, or noise to be emitted from the Premises; shall store no gasoline
or other highly combustible materials on the Premises which would violate any
applicable fire code or regulation nor conduct any operation that will increase
Landlord's fire insurance rates for the Premises; and shall not overload the
floors or electrical circuits of the Premises. Landlord shall have the right to
approve the installation of any power-driven machinery by Tenant and may select
a qualified electrician whose opinion will control regarding electrical circuits
and a qualified engineer or architect whose opinion will control regarding floor
loads. Allowable ground floor load shall be 300 pounds per square foot.
(c) Tenant may erect a sign stating its name, business, and
product after first securing Landlord's written approval of the size, color,
design, wording, and location, and all necessary governmental approvals. No
signs shall be painted on the Building or exceed the height of the Building. All
signs installed by Tenant shall be removed upon termination of this lease with
the sign location restored to its former state.
(d) Tenant shall make no alterations, additions, or
improvements to the Premises or change the color of the exterior without
Landlord's prior written consent and without a valid building permit issued by
the appropriate governmental agency. Upon termination of this lease, any such
alterations, additions, or improvements (including without
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<PAGE>
limitation all electrical, lighting, plumbing, heating and air-conditioning
equipment, doors, windows, partitions, drapery, carpeting, shelving, counters,
and physically attached fixtures) shall at once become part of the realty and
belong to Landlord unless the terms of the applicable consent provide otherwise,
or Landlord requests that part or all of the additions, alterations, or
improvements be removed. In such case, Tenant shall at its sole cost and expense
promptly remove the specified additions, alterations, or improvements and repair
and restore the Premises to its original condition.
2. SECURITY DEPOSIT.
Tenant has deposited with Landlord the sum of $10,200.00,
hereinafter referred to as "the Security Deposit," to secure the faithful
performance by Tenant of each term, covenant, and condition of this lease. If
Tenant shall at any time fail to make any payment or fail to keep or perform any
term, covenant, and condition on its part to be made or performed or kept under
this lease. Landlord may, but shall not be obligated to and without waiving or
releasing Tenant from any obligation under this lease, use, apply or retain the
whole or any part of the Security Deposit (i) to the extent of any sum due to
Landlord; or (ii) to make any required payment on Tenant's behalf; or (iii) to
compensate Landlord for any loss, damage, attorneys' fees, or expense sustained
by Landlord due to Tenant's default. In such event, Tenant shall, within 5 days
of written demand by Landlord, remit to Landlord sufficient funds to restore the
Security Deposit to its original sum; Tenant's failure to do so shall be a
material breach of this lease. Landlord shall not be required to keep the
Security Deposit separate from its general funds, and Tenant shall not be
entitled to interest on such deposit. Should Tenant comply with all of the
terms, covenants, and conditions of this lease and at the end of the term of
this lease leave the Premises in the condition required by this lease, then the
Security Deposit, less any sums owing to Landlord, shall be returned to Tenant
(or, at Landlord's option, to the last assignee of Tenant's interests hereunder)
within 30 days after the termination of this lease and vacancy of the Premises
by Tenant.
3. UTILITY CHARGES; MAINTENANCE.
(a) Tenant shall pay when due all charges for electricity,
natural gas, garbage collection, janitorial service, and all other utilities of
any kind furnished to the Premises during the lease term. If charges are not
separately metered or stated, Landlord shall apportion the utility charges on an
equitable basis. Landlord shall have no liability resulting from any
interruption of utility services caused by fire or other casualty, strike, riot,
vandalism, the making of necessary repairs or improvements, or any other cause
beyond Landlord's reasonable control. Tenant shall control the temperature in
the Premises to prevent freezing of any sprinkler system.
(b) Landlord shall repair and maintain the roof, gutters,
downspouts, exterior walls, building structure, foundation, exterior paved
areas, and curbs of the Premises in good condition. Except for such obligations
of Landlord, Tenant shall keep the Premises neatly maintained and in good order
and repair. Tenant's responsibility shall include maintenance and repair of the
exposed electrical system, above-slab plumbing, drainpipes to
- 3 -
<PAGE>
sewers, air-conditioning and heating systems, overhead and personnel doors, and
the replacement of all broken or cracked glass with glass of the same quality.
Tenant shall refrain from any discharge that will damage the septic tank or
sewers serving the Premises.
(c) If the Premises have a separate entrance, Tenant shall
keep the sidewalks abutting the Premises or the separate entrance free and clear
of snow, ice, debris, and obstructions of every kind.
4. TAXES AND ASSESSMENTS.
(a) Landlord shall pay as due all taxes and assessments levied
against the Premises during the lease term. Tenant shall reimburse Landlord for
any increase in real property taxes and assessments on the Premises over those
assessed for the fiscal year January through December, 1996, or the first fiscal
year during which the Premises are assessed as a completed structure, whichever
is later. If the tax statement covers property in addition to the Premises, then
Tenant shall pay only that portion of the increase which is in proportion to the
area of the Premises compared to the area of all property covered by the tax
statement. Landlord shall annually furnish Tenant with a statement showing its
share of such tax increases, and Tenant shall pay the entire amount within 10
days.
(b) Tenant shall pay all personal property taxes assessed
against its property or trade fixtures on the Premises.
(c) If during the lease term a tax is assessed upon the
Landlord's interest under this lease which is in lieu of the ad valorem real
property tax, then to the extent permitted by law, Tenant shall pay a portion of
the new tax equivalent to the portion of the ad valorem taxes which it was
paying prior to the imposition of such tax. Tenant, however, shall have no
obligation to pay any income, profits, or franchise tax levied upon the net
income derived by Landlord from this lease.
5. PARKING AND STORAGE AREAS.
(a) Tenant, its employees, and customers shall have the
exclusive right to use any private parking spaces immediately adjacent to the
Premises. Landlord shall mark six (6) spaces for Tenant's visitors. Tenant shall
control the use of such parking spaces so that there will be no unreasonable
intereference with the normal traffic flow, and shall permit no parking on any
landscaped or unpaved surface. Under no circumstances shall trucks serving the
Premises be permitted to block streets.
(b) Tenant shall not store any materials, supplies, or
equipment outside in any unapproved or unscreened area. If Tenant erects any
visual barriers for storage areas, Landlord shall have the right to approve the
design and location. Trash and garbage receptacles shall be kept covered at all
times.
- 4 -
<PAGE>
6. LIABILITY.
(a) Tenant shall not allow any liens to attach to the Premises
as a result of its activities. Tenant shall indemnify and defend Landlord from
any claim, liability, damage, or loss arising out of any activity on the
Premises by Tenant, its agents, or invitees or resulting from Tenant's failure
to comply with any term of this lease.
(b) Tenant shall carry general liability insurance on an
occurrence basis with combined single limits of not less than $1,000,000. Such
insurance shall be provided by an insurance carrier reasonably acceptable to
Landlord and shall be evidenced by a certificate delivered to Landlord stating
that the coverage will not be canceled or materially altered without 10 days'
advance written notice to Landlord. Landlord shall be named as an additional
insured on such policy.
7. PROPERTY DAMAGE; SUBROGATION WAIVER.
(a) If fire or other casualty causes damage to the Building or
the Premises in an amount exceeding 30 percent of the full
construction-replacement cost of the Building or Premises, respectively,
Landlord may elect to terminate this lease as of the date of the damage by
notice in writing to Tenant within 30 days after such date. Otherwise, Landlord
shall promptly repair the damage and restore the Premises to their former
condition as soon as practicable. Rent shall be reduced during the period to the
extent the Premises are not reasonably usable for the use permitted by this
lease because of such damage and required repairs.
(b) Landlord shall be responsible for insuring the Building,
and Tenant shall be responsible for insuring its personal property and trade
fixtures located on the Premises.
(c) Neither party shall be liable to the other for any loss or
damage caused by water damage, sprinkler leakage, or any of the risks covered by
a standard fire insurance policy with extended coverage and sprinkler leakage
endorsements, and there shall be no subrogated claim by one party's insurance
carrier against the other party arising out of any such loss.
8. CONDEMNATION.
If a condemning authority takes the entire Premises or a
portion sufficient to render the remainder unsuitable for Tenant's use, then
either party may elect to terminate this lease effective on the date that title
passes to the condemning authority. Otherwise, Landlord shall proceed as soon as
practicable to restore the remaining Premises to a condition comparable to that
existing at the time of the taking. Rent shall be abated during the period of
restoration to the extent the Premises are not reasonably usable by Tenant, and
rent shall be reduced for the remainder of the term in an amount equal to the
reduction in rental value of the Premises caused by the taking. All condemnation
proceeds shall belong to Landlord.
- 5 -
<PAGE>
9. ASSIGNMENT AND SUBLETTING.
(a) Tenant shall not assign its interest under this lease nor
sublet the Premises without first obtaining Landlord's consent in writing. This
provision shall apply to all transfers by operation of law or through mergers
and changes in control of Tenant. No assignment shall relieve Tenant of its
obligation to pay rent or perform other obligations required by this lease and
no one assignment or subletting shall be a consent to any further assignment or
subletting.
(b) Subject to the above limitations on transfer of Tenant's
interest, this lease shall bind and inure to the benefit of the parties, their
respective heirs, successors, and assigns.
10. DEFAULT.
Any of the following shall constitute a default by Tenant
under this lease:
(a) Tenant's failure to pay rent or any other charge under
this lease within 10 days after it is due, or failure to comply with any other
term or condition within 20 days following written notice from Landlord
specifying the noncompliance. If such noncompliance cannot be cured within the
20-day period, this provision shall be satisfied if Tenant commences connection
with such period and thereafter proceeds in good faith and with reasonable
diligence to effect compliance as soon as possible.
(b) Tenant's insolvency; assignment for the benefit of its
creditors; Tenant's voluntary petition in bankruptcy or adjudication as
bankrupt, or the appointment of a receiver for Tenant's properties.
- 6 -
<PAGE>
[Exhibit A - Map of Premises]
- 7 -
<PAGE>
[Exhibit D - Map of Space in Building]
- 8 -
<PAGE>
11. REMEDIES FOR DEFAULT.
In case of default as described in paragraph 10 above,
Landlord shall have the right to the following remedies which are intended to be
cumulative and in addition to any other remedies provided under applicable law:
(a) Terminate this lease without relieving Tenant from its
obligation to pay damages.
(b) Retake possession of the Premises by summary proceedings
or otherwise, in which case Tenant's liability to Landlord for damages shall
survive the tenancy. Landlord may, after such retaking of possession, relet the
Premises upon any reasonable terms. No such reletting shall be construed as an
acceptance of a surrender of Tenant's leasehold interest.
(c) Recover damages caused by Tenant's default which shall
include reasonable attorneys' fees at trial and on any appeal therefrom.
Landlord may sue periodically to recover damages as they occur throughout the
lease term, and no action for accrued damages shall bar a later action for
damages subsequently accruing. Landlord may elect in any one action to recover
accrued damages plus damages attributable to the remaining term of the lease
equal to the difference between the rent under this lease and the reasonable
rental value of the Premises for the remainder of the term, discounted to the
time of judgment at the rate of 6 percent per annum.
(d) Make any payment or perform any obligation required of
Tenant so as to cure Tenant's default, in which case Landlord shall be entitled
to recover all amounts so expended from Tenant, plus interest at the rate of 10
percent per annum from the date of the expenditure.
12. SURRENDER ON TERMINATION.
(a) On expiration or early termination of this lease, Tenant
shall deliver all keys to Landlord, have final utility readings made on the date
of move out, and surrender the Premises clean and free of debris inside and out,
with all mechanical, electrical, and plumbing systems in good operating
condition, all signing removed and defacement corrected, and all repairs called
for under this lease completed. The Premises shall be delivered in the same
condition as at the commencement of the term, subject only to depreciation and
wear from ordinary use. Tenant shall remove all of its furnishings and trade
fixtures that remain its property and restore all damage resulting from such
removal. Failure to remove said property shall be an abandonment of same, and
Landlord may dispose of it in any manner without liability.
(b) If Tenant fails to vacate the Premises when required,
Landlord may elect either to treat Tenant as a tenant from month to month,
subject to all provisions of this
- 9 -
<PAGE>
lease except the provision for term, or to eject Tenant from the Premises and
recover damages caused by wrongful holdover.
13. LANDLORD'S LIABILITY.
(a) Landlord warrants that so long as Tenant complies with all
terms of this lease it shall be entitled to peaceable and undisturbed possession
of the Premises free from any eviction or disturbance by Landlord or persons
claiming through Landlord.
(b) All persons dealing with Pacific Realty Associates, L.P.
("Partnership") must look solely to the property and assets of Partnership for
the payment of any claim against Partnership or for the performance of any
obligation of Partnership as neither the general partner, limited partners,
employees, nor agents of Partnership assume any personal liability for
obligations entered into on behalf of Partnership (or its predecessors in
interest) and their respective properties shall not be subject to the claims of
any person in respect of any such liability or obligation. As used herein, the
words "property and assets of partnership" exclude any rights of Partnership for
the payment of capital contributions or other obligations to it by the general
partner or any limited partner in such capacity.
14. MORTGAGE OR SALE BY LANDLORD; ESTOPPEL CERTIFICATES.
(a) This lease is and shall be prior to any mortgage or deed
of trust ("Encumbrance") recorded after the date of this lease and affecting the
Building and the land upon which the Building is located. However, if any lender
holding an Encumbrance secured by the Building and the land underlying the
Building requires that this lease be subordinate to the Encumbrance, then Tenant
agrees that this lease shall be subordinate to the Encumbrance if the holder
thereof agrees in writing with Tenant that so long as Tenant performs its
obligations under this lease no foreclosure, deed given in lieu of the
foreclosure, or sale pursuant to the terms of the Encumbrance, or other steps or
procedures taken under the Encumbrance shall affect Tenant's rights under this
lease. If the foregoing condition is met, Tenant shall execute the written
agreement and any other documents required by the holder of the Encumbrance to
accomplish the purposes of this paragraph.
(b) If the Building is sold as a result of foreclosure of any
Encumbrance thereon or otherwise transferred by Landlord or any successor,
Tenant shall attach to the purchaser or transferee, and the transferor shall
have no further liability hereunder.
(c) Either party shall within 20 days after notice from the
other execute and deliver to the other party a certificate stating whether or
not this lease has been modified and is in full force and effect and specifying
any modifications or alleged breaches by the other party. The certificate shall
also state the amount of monthly base rent, the dates to which rent has been
paid in advance, and the amount of any security deposit or prepaid rent. Failure
to deliver the certificate within the specified time shall be conclusive upon
the party of whom the certificate was requested that the lease is in full force
and effect and has not been modified except as may be represented by the party
requesting the certificate.
- 10 -
<PAGE>
15. DISPUTES - ATTORNEYS' FEES.
In the event of any litigation arising out of this lease, the
prevailing party shall be entitled to recover from the other party, in addition
to all other relief provided by law or judgement, its reasonable costs and
attorneys' fees incurred both at and in preparation for trial and any appeal or
review, such amount to be as determined by the court(s) before which the matter
is heard. Disputes between the parties which are to be litigated shall be tried
before a judge without a jury.
16. SEVERABILITY.
If any provision of this lease is held to be invalid,
unenforceable or illegal the remaining provisions shall not be affected and
shall be enforced to the fullest extent permitted by law.
17. INTEREST AND LATE CHARGES.
Rent not paid within 10 days of when due shall bear interest
from the date due until paid at the rate of 10 percent per annum. Landlord may
at its option impose a late charge of $.05 for each $1.00 of rent for rent
payments made more than 10 days late in addition to interest and other remedies
available for default.
18. GENERAL PROVISIONS.
(a) Waiver by either party of strict performance of any
provision of this lease shall not be a waiver of nor prejudice the party's right
otherwise to require performance of the same provision or any other provision.
(b) Subject to the limitations on transfer of Tenant's
interest, this lease shall bind and inure to the benefit of the parties, their
respective heirs, successors, and assigns.
(c) Landlord shall have the right to enter upon the Premises
with reasonable notice (except in the case of an emergency) to determine
Tenant's compliance with this lease, to make necessary repairs to the Building
or the Premises, or to show the Premises to any prospective tenant or
purchasers. During the last two months of the term, Landlord may place and
maintain upon the Premises notices for leasing or sale of the Premises.
(d) If this lease commences or terminates at a time other than
the beginning or end of one of the specified rental periods, then the rent
(including Tenant's share of real property taxes, if any) shall be prorated as
of such date, and in the event of termination for reasons other than default all
prepaid rent shall be refunded to Tenant or paid on its account.
- 11 -
<PAGE>
(e) Tenant shall within 10 days following Landlord's written
request deliver to Landlord a written statement specifying the dates to which
the rent and other charges have been paid, whether the lease is unmodified and
in full force and effect, and any other matters that may reasonably be requested
by Landlord.
(f) Notices between the parties relating to this lease shall
be in writing, effective when delivered, or if mailed, effective on the second
day following mailing, postage prepaid, to the address for the party stated in
this lease or to such other address as either party may specify by notice to the
other. Rent shall be payable to Landlord at the same address and in the same
manner.
19. REPAYMENT OF FREE RENT.
This lease provides for a period of "free" rent (hereinafter
referred to as "the Abated Rent"). Tenant shall be credited with having paid all
of the Abated Rent on the expiration of the lease term only if Tenant has fully,
faithfully, and punctually performed all of Tenant's obligations hereunder,
including the payment of all rent (other than the Abated Rent) and all other
monetary obligations and the surrender of the Property in the physical condition
required by this lease. Tenant acknowledges that the Tenant's right to receive
credit for the Abated Rent is absolutely conditioned upon Tenant's full faithful
and punctual performance of its obligations under this lease. The Abated Rent
shall immediately become due and payable in full and this lease shall be
enforced as if there were no such rent abatement or other rent concessions, in
the event of default by Tenant under this lease and such default is not cured
within any applicable grace period.
20. TENANT IMPROVEMENTS.
(a) Landlord shall, at its expense, perform the following work
within the Premises:
1. Configure the Premises generally as shown on the
attached Exhibit C.
2. Repaint the walls.
3. Provide and install new carpet.
4. Provide and install new vinyl composition tile in
the kitchen area.
The improvements shall be done in a workmanlike manner and
shall be to PacTrust Business Center tenant finish standards.
(b) Landlord shall provide Tenant with a $2,500.00 allowance
to rehabilitate the reception counter.
- 12 -
<PAGE>
21. EXPANSION OPTION.
Tenant shall have the right to expand into a larger space
located within PacTrust Business Center with 90 days written notice to Landlord,
provided such space is available.
22. WARRANTY.
Landlord shall grant Tenant an 18-month warranty for the
heating, ventilating, and air conditioning system, provided that Tenant
contracts with a reputable service contractor to provide proper maintenance for
the system. Such warranty shall be in effect for 18 months from occupancy.
- 13 -
<PAGE>
IN WITNESS WHEREOF, the duly authorized representatives of the parties
have executed this lease as of the day and year first written above.
PACIFIC REALTY ASSOCIATES, LP., AMERICAN SHOW MANAGEMENT,
A DELAWARE LIMITED PARTNERSHIP INC., AN OREGON CORPORATION
BY PACTRUST REALTY, INC., A DELAWARE
CORPORATION, ITS GENERAL PARTNER
By /s/ David G. Hicks By /s/ [illegible]
David G. Hicks Name Patrick J. [illegible]
Vice President Title President & COO
By --------------------------
Name --------------------------
Title --------------------------
ADDRESS FOR NOTICES/RENT PAYMENTS TO ADDRESS FOR LEGAL NOTICES TO
LANDLORD: TENANT:
15350 S.W. Sequoia Parkway, Suite 300 ---------------------------------
Portland, Oregon 97224 ---------------------------------
---------------------------------
ADDRESS FOR INVOICES TO TENANT:
---------------------------------
---------------------------------
---------------------------------
- 14 -
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated October 31, 1997, except
as to Note 11, which is as of December 5, 1997, relating to the financial
statements of Agritope, Inc., which appears in such Prospectus. We also consent
to the reference to us under the heading "Experts" in such Prospectus.
/s/ PRICE WATERHOUSE LLP
Portland, Oregon
December 5, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed consolidated financial statements included herein and is qualified in
its entirety by reference to such financial statements
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
<CASH> 4,384
<SECURITIES> 0
<RECEIVABLES> 622,913
<ALLOWANCES> (57)
<INVENTORY> 2,081,295
<CURRENT-ASSETS> 2,984,816
<PP&E> 3,975,608
<DEPRECIATION> (1,225,820)
<TOTAL-ASSETS> 7,285,055
<CURRENT-LIABILITIES> 1,326,008
<BONDS> 0
0
0
<COMMON> 45,930,932
<OTHER-SE> (41,168,206)
<TOTAL-LIABILITY-AND-EQUITY> 7,285,055
<SALES> 1,436,498
<TOTAL-REVENUES> 1,551,190
<CGS> 1,326,163
<TOTAL-COSTS> 6,088,883
<OTHER-EXPENSES> (2,143,888)
<LOSS-PROVISION> (2,258,080)
<INTEREST-EXPENSE> (25,307)
<INCOME-PRETAX> (8,690,599)
<INCOME-TAX> 0
<INCOME-CONTINUING> (8,690,599)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,690,599)
<EPS-PRIMARY> (4.35)
<EPS-DILUTED> (4.35)
</TABLE>
