REGISTRATION NO. 333-________
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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AGRITOPE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Oregon 8731
(STATE OF INCORPORATION) (PRIMARY STANDARD INDUSTRIAL
CLASSIFICATION CODE NUMBER)
93-0820945
(IRS EMPLOYER IDENTIFICATION 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., 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, Galen, Marmaduke
& Carlsen LLP & Booth
111 S.W. Fifth Avenue Suite 1600
Portland, Oregon 97204-3699 888 S.W. Fifth Avenue
(503) 224-5858 Portland, Oregon 97204
(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. |_|
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE REGISTRATION FEE
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Common Stock, no par value (including
Preferred Stock Purchase Rights) to be
<S> <C> <C> <C> <C>
distributed to holders of Epitope, Inc.(1) 5,000,000(2) ---- ---- $100(3)
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(1) Prior to the occurrence of certain events, the Preferred Stock Purchase
Rights will not be evidenced separately from Agritope common stock.
(2) Approximate number of shares of Agritope common stock expected to be
distributed based upon distribution ratio of one share of Agritope common
stock for every ____ shares of Epitope common stock held by each
shareholder.
(3) No separate consideration will be received for shares of Agritope common
stock to be distributed to holders of common stock of Epitope, Inc. Pursuant
to Section 6(b) of the Securities Act of 1993, as amended, the registration
fee for the securities is $100.
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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<PAGE>
[Epitope letterhead]
[Date]
Dear Shareholder:
We are pleased to inform you that the Board of Directors has authorized
a spin-off of 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 Stock to certain investors in a private
placement. Agritope also plans to allow minority shareholders of its Vinifera,
Inc. subsidiary to convert their holdings into Agritope Common Stock. The shares
being distributed as a dividend to Epitope shareholders will represent
approximately ____ percent of the Agritope Common Stock outstanding after these
two transactions are completed.
You will receive one share of Agritope Common Stock for every _____
shares of Epitope Common Stock that you owned on the record date of
_____________, 1997. You will receive cash for any fractional share of Agritope
Common Stock that you would have received. The distribution should be tax-free
to you, 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 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,
<PAGE>
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 ___________________, 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., an Oregon corporation ("Epitope"), in connection
with the spin-off of Epitope's 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,
no par value, including associated preferred stock purchase rights ("Agritope
Stock") 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 ______________, 1997 (the "Record
Date") of one share of Agritope Stock for every ___ shares of Epitope Stock
outstanding, subject to the satisfaction of certain conditions described below.
On the Record Date, Epitope had outstanding ____________ shares of Epitope
Stock, its only outstanding class of stock. Therefore, an aggregate of
approximately _______________ shares of Agritope Stock will be issued in the
Distribution. Epitope expects that the Distribution will occur on or about
__________, 1997 (the "Distribution Date").
In order to finance the operations of Agritope after the Distribution,
Agritope will sell ______ shares of Agritope Stock in a private placement (the
"Private Placement") to certain investors pursuant to Regulation S under the
Securities Act of 1933, as amended (the "Securities Act"), for an aggregate
price of $___ million immediately following the Distribution. The Distribution
is contingent upon Agritope having received binding commitments for financing in
an amount the Epitope board of directors (the "Epitope Board") deems sufficient
to support the operations of Agritope as a separate business for a period of not
less than two years. In addition, prior to the Distribution, Agritope plans to
offer to exchange shares of preferred stock and common stock of Vinifera, Inc.
("Vinifera") held by minority holders of Vinifera, for an aggregate of ______
shares of Agritope Stock (the "Vinifera Exchange"). The Vinifera Exchange would
occur immediately following the Distribution. As a result of the Private
Placement and the Vinifera Exchange (which will both be effected after the
Distribution), the shares of Agritope Stock distributed to Epitope shareholders
in the Distribution will represent approximately ____ percent of all Agritope
Stock outstanding after completion of the Distribution and these two
transactions.
Currently, no public market for Agritope Stock exists. Agritope has
applied to have Agritope Stock approved for quotation on The Nasdaq SmallCap
Market under the symbol "AGTO." Agritope Stock 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."
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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.
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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.
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The date of this Information Statement/Prospectus is _________, 1997.
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<TABLE>
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TABLE OF CONTENTS
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AVAILABLE INFORMATION........................................................................................... 2
NOTE REGARDING FORWARD-LOOKING STATEMENTS....................................................................... 2
SUMMARY ....................................................................................................... 3
The Distribution....................................................................................... 3
Related Transactions................................................................................... 5
Agritope .............................................................................................. 6
Summary Financial Data................................................................................. 7
INTRODUCTION.................................................................................................... 9
THE DISTRIBUTION................................................................................................ 9
Reasons for the Distribution........................................................................... 9
Manner of Effecting the Distribution................................................................... 10
Trading of Agritope Stock.............................................................................. 11
Certain Federal Income Tax Consequences................................................................ 12
RISK FACTORS.................................................................................................... 14
RELATED TRANSACTIONS............................................................................................ 17
RELATIONSHIP BETWEEN AGRITOPE AND EPITOPE AFTER THE DISTRIBUTION................................................ 18
Separation Agreement................................................................................... 18
Employee Benefits Agreement............................................................................ 19
Tax Allocation Agreement............................................................................... 20
Transition Services Agreement.......................................................................... 21
SELECTED FINANCIAL DATA......................................................................................... 22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS........................................................ 23
Overview .............................................................................................. 23
Results of Operations.................................................................................. 24
Liquidity and Capital Resources........................................................................ 25
DESCRIPTION OF BUSINESS......................................................................................... 26
General .............................................................................................. 26
Agritope Biotechnology Program......................................................................... 26
Commercialization Strategy............................................................................. 31
Grants And Contracts................................................................................... 31
Vinifera .............................................................................................. 31
Competition............................................................................................ 32
Government Regulation.................................................................................. 32
Patents and Proprietary Information.................................................................... 33
Personnel.............................................................................................. 34
Scientific Advisory Board.............................................................................. 34
Properties............................................................................................. 34
Legal Proceedings...................................................................................... 35
DIVIDEND POLICY................................................................................................. 35
TRANSFER AGENT.................................................................................................. 35
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MANAGEMENT...................................................................................................... 36
Directors and Executive Officers....................................................................... 36
Committees of the Board................................................................................ 37
Compensation of Directors.............................................................................. 38
Executive Compensation................................................................................. 38
Grants of Options to Purchase Agritope Stock........................................................... 39
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-end Option Values...................... 39
Change in Control Agreements........................................................................... 40
1997 STOCK AWARD PLAN........................................................................................... 41
General .............................................................................................. 41
Purpose .............................................................................................. 41
Awards and Eligibility................................................................................. 41
New Options............................................................................................ 41
Description of Terms of Awards......................................................................... 42
Federal Income Tax Consequences........................................................................ 43
1997 EMPLOYEE STOCK PURCHASE PLAN............................................................................... 45
General .............................................................................................. 45
Purpose .............................................................................................. 45
Subscriptions.......................................................................................... 45
Federal Income Tax Consequences........................................................................ 46
CERTAIN TRANSACTIONS............................................................................................ 46
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.................................................. 47
SHARES ELIGIBLE FOR FUTURE SALE................................................................................. 48
DESCRIPTION OF AGRITOPE CAPITAL STOCK........................................................................... 48
Agritope Common........................................................................................ 48
Agritope Preferred..................................................................................... 48
Agritope Warrants...................................................................................... 49
Preemptive Rights...................................................................................... 49
Shareholder Rights Plan................................................................................ 49
Other Anti-takeover Measures........................................................................... 50
Indemnification of Directors and Officers; Limitation of Liability; Insurance.......................... 51
LEGAL MATTERS................................................................................................... 52
EXPERTS ....................................................................................................... 52
</TABLE>
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AVAILABLE INFORMATION
After the Distribution of Agritope Stock, 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 Stock 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 furnish shareholders with annual reports containing
audited financial statements. Agritope does not intend 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. 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., an Oregon corporation, currently a 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 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."
CONDITIONS TO THE DISTRIBUTION............................... The Distribution is contingent upon, among other things,
Agritope having received binding commitments for financing in an
amount the Epitope Board deems sufficient to support the
operations of Agritope as a separate business for a period of
not less than two years. See "Relationship Between Agritope and
Epitope After the Distribution--Separation Agreement." Agritope
will issue _____ shares of Agritope Stock in the Private
Placement for an aggregate price of $______ million, immediately
after the Distribution. See "Related Transactions."
DISTRIBUTION RATIO........................................... Each Epitope shareholder will receive one share of Agritope
Stock for every ____ shares of Epitope Stock held as of the
Record Date.
RECORD DATE.................................................. Close of business on ______________, 1997.
DISTRIBUTION DATE............................................ On or about _______________________, 1997.
DISTRIBUTION AGENT........................................... ChaseMellon Shareholder Services, L.L.C.
SHARES TO BE DISTRIBUTED..................................... An aggregate of approximately ___ million shares of Agritope
Stock will be issued in the Distribution. Following the
Distribution, Private Placement, and Vinifera Exchange,
approximately ______ million shares of Agritope Stock will be
outstanding. Shares distributed to Epitope shareholders in the
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Distribution will represent approximately ______ percent of all
Agritope Stock outstanding following the Distribution.
FRACTIONAL SHARE INTERESTS................................... Fractional shares of Agritope Stock will not be issued in the
Distribution. If the number of shares of Agritope Stock to be
issued to any record holder of Epitope Stock includes a fraction
of a whole share, Epitope will pay an amount in cash for the
fractional share. See "The Distribution--Fractional Shares."
TRADING MARKET............................................... Agritope has applied to include Agritope Stock for quotation on
The Nasdaq SmallCap Market under the symbol "AGTO." There is
currently no public market for Agritope Stock. There can be no
assurance that Agritope will meet the requirements for continued
inclusion on The Nasdaq SmallCap Market or that an active
trading market will develop after the Distribution. See "The
Distribution--Trading of Agritope Stock" and "Risk Factors--No
Assurance as to Market Performance of Agritope Stock."
RISK FACTORS................................................. Shareholders should carefully consider the matters discussed in
the section entitled "Risk Factors."
PRIMARY PURPOSES OF THE DISTRIBUTION......................... The primary purpose of the Distribution is to allow 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 to the effect that
the Distribution should be treated as a non-taxable transaction
for Epitope and its shareholders. 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 Agritope
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
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Distribution. Epitope and Agritope will, however, continue to
have a relationship as a result of agreements being entered into
between Epitope and Agritope 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, and one individual as an officer, 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 restated articles of
incorporation ("Articles") and restated bylaws ("Bylaws") and of
Oregon 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 Shareholder
Rights Plan (the "Rights Agreement") designed to protect
Agritope and its shareholders from inequitable offers to acquire
Agritope. In addition, Agritope's Articles and Bylaws contain
certain provisions designed to deter changes in the composition
of the Agritope Board, and to allow the Agritope Board to issue
preferred stock ("Agritope Preferred") and common stock
("Agritope Common") without shareholder approval. Each of these
provisions may discourage tender offers or other bids for
Agritope Stock. See "Risk Factors--Anti-takeover Considerations"
and "Description of Agritope Capital Stock."
DIVIDEND POLICY ............................................. Agritope does not anticipate paying dividends in the foreseeable
future.
RELATED TRANSACTIONS
PRIVATE PLACEMENT ........................................... Agritope will sell ______ shares of Agritope Stock in the
Private Placement for an aggregate price of $_________ million,
immediately following the Distribution. See "Related
Transactions."
VINIFERA EXCHANGE............................................ Prior to the Distribution, Agritope plans to offer to exchange
shares of Vinifera preferred stock and Vinifera common stock
(together, the "Vinifera Stock") held by minority holders of
Vinifera for an aggregate of _____ shares of Agritope Stock.
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Vinifera is a 61 percent owned subsidiary of Agritope. The
Vinifera Exchange would occur immediately following the
Distribution. See "Related Transactions."
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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 five
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 an exclusive worldwide
license to use the Salk Genes in a variety of plants and in nearly all fruit and
vegetable crops.
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 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 was incorporated under Oregon law in 1987. Its principal
offices are located at 8505 S.W. Creekside Drive, Beaverton, Oregon 97008.
Agritope's telephone number is (503) 641-6115.
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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, 1996, and 1995 and the
operating results data for the years ended September 30, 1996, 1995, and 1994
have been derived from audited consolidated financial statements and notes
thereto included in this Information Statement/Prospectus. The balance sheet
data at June 30, 1997 and the operating results data for the nine months ended
June 30, 1997 and 1996 have been derived from unaudited interim condensed
consolidated financial statements and notes thereto included in this Information
Statement/Prospectus and, in the opinion of management, include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial position and results of operations for the interim
periods. Results for the nine months ended June 30, 1997, may not be indicative
of full-year results. 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."
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NINE MONTHS ENDED
JUNE 30 YEAR ENDED SEPTEMBER 30
1997 1996 1996 1995(1) 1994(1)
(UNAUDITED)
CONSOLIDATED OPERATING RESULTS
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Revenues......................................... $ 668 $ 514 $ 585 $ 2,110 $ 2,213
Operating costs and expenses..................... 4,063 2,055 2,821 9,920 11,703
Other income (expense), net...................... (2,862)(2) 81 97 166 (94)
Net loss......................................... (6,257) (1,460) (2,139) (7,645) (9,584)
Pro forma net loss per share (3)................. (3.13) (.73) (1.07) (3.82) (4.79)
Pro forma shares used in
per share calculations (3)..................... 2,000 2,000 2,000 2,000 2,000
JUNE 30, 1997 SEPTEMBER 30
AS ADJUSTED(4) ACTUAL 1996 1995
(UNAUDITED)
CONSOLIDATED BALANCE SHEET
Working capital.................................. $3,209 $1,264 $5,082
Total assets..................................... 8,524 10,097 8,303
Long-term debt................................... 16 16 - 22
Convertible notes, due 1997...................... - - 3,620 3,620
Accumulated deficit.............................. (37,538) (37,538) (31,280) (29,141)
Shareholder's equity............................. 6,509 5,435 4,312
</TABLE>
(1) Data for 1995 and 1994 include revenues of $2.0 million and $2.2
million, and operating losses of $3.8 million and $6.4 million,
respectively, attributable to business units which were divested. See
Note 3 to consolidated financial statements.
(2) Includes non-cash charges of $1.9 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 Note 11 to
consolidated financial statements.
(3) Net income (loss) per share is presented on a pro forma basis assuming
that the Distribution of Agritope Stock pursuant to the Agritope
spin-off had occurred on October 1, 1993.
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<PAGE>
(4) The capitalization of Agritope as adjusted reflects the effects of the
Private Placement and the Vinifera Exchange as if such transactions had
occurred on June 30, 1997.
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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
Stock 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 Stock for every ______ 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 Stock. After the
Distribution, Agritope will cease to be a subsidiary of Epitope and will operate
as an independent public company. The Distribution Date is expected to be on or
about ______________, 1997.
The Distribution is contingent upon, among other things, Agritope
having received binding commitments for financing in an amount the Epitope Board
deems sufficient to support the operations of Agritope as a separate business
for a period of not less than two years. Agritope will sell ______ shares of
Agritope Stock in the Private Placement for an aggregate price of $_______
million immediately following the Distribution.
In addition, Agritope plans to offer minority holders of Vinifera Stock
the opportunity to exchange shares of Vinifera Stock for Agritope Stock. The
Vinifera Exchange will occur immediately following the Distribution.
See "Related Transactions."
As a result of the Private Placement and the Vinifera Exchange (which
will both be effected after the Distribution), the shares of Agritope Stock
distributed to Epitope shareholders in the Distribution will represent
approximately _____ percent of all Agritope Stock outstanding immediately
following the Distribution.
Agritope will operate separately from Epitope 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.
Agritope will temporarily use certain facilities of Epitope pursuant to the
Transition Services Agreement. In addition, Epitope will make some
administrative staff available to Agritope for up to ______________ to assist
with the transition.
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 Stock should contact Agritope's investor relations representative at
Agritope's executive offices.
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 allow 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
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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 reduced Epitope's access to the capital necessary to fund
Agritope. 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 "Related Transactions." Epitope now believes that equity
financing for Agritope would not be possible under the previously proposed
targeted stock structure and that the proposed Private Placement transaction can
only be accomplished if Agritope becomes an independent public company.
The Distribution also 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 Stock held by a shareholder
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--No Assurance as to Market Performance of Agritope Stock."
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
______________, 1997.
Holders of Epitope Stock on the Record Date will not be required to pay
cash or other consideration for the Agritope Stock received in the Distribution
or to surrender or exchange certificates representing shares of Epitope Stock in
order to receive Agritope Stock in the Distribution.
Under the Separation Agreement, on or before the Distribution Date,
Epitope will deliver to the Distribution Agent a certificate or certificates
representing all of the then outstanding shares of Agritope Stock 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 Stock for every ______ 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 ____ shares of
Agritope Stock will be issued in the Distribution.
Fractional shares of Agritope Stock will not be issued in the
Distribution. If the aggregate number of shares due an Epitope shareholder of
record includes a fraction of a whole share, Epitope will pay the cash value
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of the fractional share to the holder, based on the trading price of Agritope
Stock as of the close of trading on the Distribution Date. 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 Stock will be mailed by
the Distribution Agent commencing on the first day following the Distribution
Date. The distributed shares of Agritope Stock 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--Shareholder Rights Plan."
TRADING OF AGRITOPE STOCK
After the Distribution, Epitope and Agritope will operate as
independent public companies. Immediately after the Distribution and the
consummation of the Private Placement and Vinifera Exchange, Agritope expects to
have ______ holders of record of Agritope Stock and ______ shares of Agritope
Stock outstanding, based on the number of holders of record of outstanding
Epitope Stock and the distribution ratio. The actual number of shares of
Agritope Stock to be distributed will be determined as of the Record Date.
Agritope has applied to include Agritope Stock for quotation on The
Nasdaq SmallCap Market under the symbol "AGTO." There can be no assurance,
however, that Agritope will meet the requirements for continued inclusion on The
Nasdaq SmallCap Market, or that an active trading market for shares of Agritope
Stock will develop after the Distribution.
A "when-issued" market in Agritope Stock is expected to develop on or
after the Record Date. Prices at which Agritope Stock 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 Stock occurs may be subject
to significant fluctuations, particularly in the period immediately preceding
the Distribution and until an orderly trading market develops, if at all. See
"Risk Factors--No Assurance as to Market Performance of Agritope Stock."
The transfer agent and registrar for the Agritope Stock will be
ChaseMellon Shareholder Services, L.L.C.
Shares of Agritope Stock 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 shareholders of Agritope, if any.
Persons who are affiliates of Agritope will be permitted to sell their shares of
Agritope Stock 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. Agritope believes that persons who may be deemed to be affiliates of
Agritope after the Distribution will initially beneficially own in the aggregate
____ percent of the outstanding shares of Agritope Stock.
The shares of Agritope Stock being sold in the Private Placement and
being issued in the Vinifera Exchange have not been registered under the
Securities Act. Pursuant to Regulation S of the Securities Act, shares of
Agritope Stock purchased 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. Shares issued in the Vinifera Exchange under
Regulation D may be sold in the U.S. pursuant to a registration statement or an
available exemption from the registration requirements of the Securities Act,
such as the exemption afforded by Rule 144. Sale of a significant number of
shares by these holders could adversely affect the market price of Agritope
Stock. See "Shares Eligible for Future Sale."
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In general, under Rule 144, any affiliate of Agritope or any person
owning unregistered Agritope Stock (Agritope Stock 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 Stock
(approximately _____ shares immediately after the Distribution), or (ii) the
average weekly trading volume of Agritope Stock 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. Under Rule
144(k), a person who is not deemed to have been an affiliate of Agritope at any
time during the 90 days preceding a sale and who has beneficially owned the
shares proposed to be sold for at least two years (including the holding period
of any prior owner who is not an affiliate of Agritope) is entitled to sell such
shares without complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Epitope has received an opinion from Miller, Nash, Wiener, Hager &
Carlsen LLP ("Miller Nash") to the effect that (i) the Distribution should be
treated as a tax-free transaction qualifying under Section 355 of the Internal
Revenue Code of 1986, as amended (the "Code"), and (ii) the following discussion
insofar as it relates to statements of tax law or conclusions thereunder is
correct and complete in all material respects. 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"). Epitope has not requested,
and does not anticipate requesting, a 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 post-Distribution transactions described in
"Related Transactions," 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, the Distribution will have the following
federal income tax consequences if treated as non-taxable under Section 355 of
the Code:
(1) An Epitope shareholder will not recognize any income, gain or loss
upon the receipt of Agritope Stock 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 Stock is received will be apportioned between the
shareholder's Epitope shares and the shares of Agritope Stock received by the
shareholder (including any fractional shares of Agritope Stock deemed received)
in proportion to the relative aggregate fair market values of Epitope Stock and
Agritope Stock on the Distribution Date.
(3) An Epitope shareholder's holding period for Agritope Stock received
in the Distribution will include the period during which the shareholder held
the Epitope Stock with respect to which the Agritope Stock 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 Stock in the Distribution will be treated as if the fractional
share of Agritope Stock 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
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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 Stock.
The gain or loss will be capital gain or loss if the fractional share of
Agritope Stock would have been held by the shareholder as a capital asset.
(5) Neither Epitope nor Agritope will recognize any income, gain or
loss as a result of the Distribution.
Current U.S. Treasury regulations require that each Epitope shareholder
who receives shares of Agritope Stock 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), Epitope has
represented that it will provide 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
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 Stock received by the shareholder plus the amount of any
cash received in lieu of fractional shares of Agritope Stock. 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 (as discussed below)) 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 Stock 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 Stock
received in the Distribution would equal the fair market value of the Agritope
Stock on the Distribution Date, and the shareholder's holding period for the
shares of Agritope Stock 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 Stock, 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
Stock 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
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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.
(4) Epitope would recognize gain in an amount equal to the excess, if
any, of the fair market value of the shares of Agritope Stock distributed over
Epitope's basis in the shares of Agritope Stock. Any such gain to Epitope may be
offset by available net operating losses, if any. The gain could also have a
limited impact in the calculation of Epitope's alternative minimum tax
liability, because of certain limitations on the use of net operating losses to
offset alternative minimum taxable income.
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.
RISK FACTORS
Epitope shareholders who will receive Agritope Stock 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. Agritope does not have
an operating history as an independent company and has operated as a wholly
owned subsidiary of Epitope since commencing operations. After the Distribution
Date, Epitope will not provide any additional operating capital to Agritope and
will provide only the limited administrative and other support provided for in
the Transition Services Agreement. See "Relationship Between Agritope and
Epitope After the Distribution." There can be no assurance that Agritope will be
able to develop successfully the financial, administrative, and managerial
structure necessary to operate as an independent public company.
History of Losses; Uncertainty of Future Profitability. Agritope has
experienced significant operating losses since inception and, as of June 30,
1997, had an accumulated deficit of $37.5 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. 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 will not occur unless the
Epitope Board determines that immediately following the Distribution Agritope
will have funds 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. Epitope will not provide any financial support following the
Distribution. 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 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 shareholders, and debt financing,
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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 could have a material
adverse effect on its business, financial condition and results of operations.
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.
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. There
can be no assurance that Agritope will be able to maintain its current strategic
relationships or establish such relationships or that such relationships will be
on terms sufficiently favorable to permit Agritope to operate profitably. Also,
Agritope's commercial success will be dependent in part upon the performance of
its strategic partners.
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.
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.
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
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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.
Technological Change and Competition. A number of companies are engaged
in research related to plant biotechnology, including companies that rely on the
use of recombinant DNA as a principal scientific strategy and companies that
rely on other technologies. 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 and results of operations.
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 injuries 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 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 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.
No Assurance as to Market Performance of Agritope Stock. There can be
no assurance that the combined market values of the Epitope Stock and the
Agritope Stock 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 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
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market price of Agritope Stock. In addition, the stock market has experienced
extreme price and volume fluctuations which have affected the market price of
many technology companies in particular and which have at times been unrelated
to the operating performance of the specific companies whose stock is traded.
Broad market fluctuations and general economic conditions may adversely affect
the market price of Agritope Stock. Prior to the Distribution, there has been no
public market for Agritope Stock. 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.
Agritope has applied to include Agritope Stock for quotation on The
Nasdaq SmallCap Market. Assuming that Agritope's application to Nasdaq is
accepted, in order to maintain such listing, Agritope will be required to comply
with certain Nasdaq SmallCap Market 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 Stock. Any sales of
substantial amounts of Agritope Stock 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 Stock.
See "The Distribution--Trading of Agritope Stock" and "Shares Eligible for
Future Sale."
Agreements with Epitope; Lack of Arm's-length Negotiations. In
contemplation of the Distribution, Agritope will enter 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.
Anti-takeover Considerations. Agritope's Articles 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 Articles and
Bylaws provide for a classified board, prohibit the removal of directors except
for "cause," limit the ability of the shareholders and directors to change the
size of the board, and require advance notice before shareholders are permitted
to nominate directors or submit other proposals at shareholder meetings. The
Agritope Board has also adopted the Rights Agreement. In addition, 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 40 million shares of Agritope Common, all without
any vote or action by Agritope's shareholders. Agritope is also subject to
Oregon statutory provisions governing business combinations with persons deemed
to be "interested shareholders" or who acquire more than certain specified
percentages of outstanding Agritope Stock. See "Description of Agritope Capital
Stock." Finally, awards made under the 1997 Stock Award Plan will 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 Stock, and may adversely affect the market price of, and the
voting and other rights of the holders of, Agritope Stock.
RELATED TRANSACTIONS
The Distribution is contingent upon, among other things, Agritope
having received binding commitments for financing in an amount the Epitope Board
deems sufficient to support the operations of Agritope as a separate business
for a period of not less than two years. Immediately following the Distribution,
Agritope will sell ____ shares of Agritope Stock at a price of $______ per
share, for an aggregate price of $___ million 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.
- 17 -
<PAGE>
Prior to the Distribution, Agritope plans to offer to exchange shares
of Vinifera Stock held by minority holders of Vinifera for an aggregate of
_______________ shares of Agritope Stock. For the purposes of the exchange,
Vinifera Stock would be valued at $2.25 per share and Agritope Stock would be
valued at $______ per share. Both share values are based on fair market value.
The Vinifera Exchange would be completed following the Distribution, and is not
a condition to the Distribution. It is anticipated that all Vinifera
shareholders will exchange their shares, so that Vinifera will be a wholly owned
subsidiary of Agritope following the Distribution. The Vinifera Exchange would
be effected pursuant to the exemption from registration provided by Regulation D
under the Securities Act.
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 an orderly transition of Agritope to
operation as an independent public company, Epitope and Agritope have entered
into or will enter 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.
SEPARATION AGREEMENT
Epitope and Agritope have entered into a Separation Agreement, which
generally provides for, among other things, certain pre-Distribution actions of
the parties, the manner of effecting the Distribution, indemnification rights
and procedures, insurance matters, access to books and records, and
confidentiality. The Separation Agreement also provides for the cancellation of
approximately $___ million of Agritope's intercompany balances to Epitope, which
have been treated as a capital 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
support 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 Distribution 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 adopted Articles
increasing its authorized capital stock to 10 million shares of Agritope Common
and 40 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.
- 18 -
<PAGE>
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 Plan"), and the 1993 Employee Stock Purchase Plan (the
"1993 Purchase Plan"). Pursuant to the Employee Benefits Agreement, Agritope has
agreed to amend the Agritope, Inc. 1992 Stock Award Plan (the "1992 Plan") and
adopt other benefit plans to replace the employee benefits provided by Epitope.
Agritope employees will be eligible for the new Agritope plans upon 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"), which will
provide benefits under the Agritope 401(k) Plan to all Agritope
employees who immediately prior to the Distribution Date 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. As soon as practicable after the
Distribution Date, the Employee Benefits Agreement requires Epitope to
cause the trustees of the Epitope 401(k) Plan to transfer to the
trustee or other funding agent of the Agritope 401(k) Plan the amounts
in cash, securities, other property, plan loans, or a combination
thereof acceptable to the trustee or funding agent of the Agritope
401(k) Plan representing the account balances of all Agritope
employees, former employees or their beneficiaries.
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 to reflect the
Distribution. Existing Epitope Options held by employees of Agritope
will cease to vest after the Distribution Date, but will remain
exercisable in accordance with their original terms to the extent
vested, except that employment by Agritope or its subsidiaries will be
treated as employment by Epitope.
The exercise price of Existing Epitope Options will be adjusted on the
Distribution Date to reflect the relative value of Epitope Stock and
Agritope Stock. The exercise price will be determined according to a
formula provided in the Employee Benefits Agreement that is based on
the relative fair market trading values of Epitope Stock and Agritope
Stock during the five 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.
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
- 19 -
<PAGE>
with 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 pursuant
to which future awards will be made to Agritope employees following the
Distribution. See "1997 Stock Award Plan."
Agritope Options Held by Epitope Employees. Agritope has granted
options to certain employees of Epitope and Agritope under the Agritope
1992 Plan. The options are denominated in shares of Agritope stock, but
require conversion of any Agritope Stock purchased upon exercise to
Epitope Stock so long as Agritope is a wholly owned subsidiary of
Epitope. Agritope will amend the 1992 Plan prior to the Distribution.
Outstanding options will be treated as options to purchase Epitope
Stock, and will be subject to adjustment as provided above for Existing
Epitope Options. No further options will be granted under the plan.
1993 Purchase Plan. The 1993 Purchase Plan enables participating
Epitope employees to purchase, on the last day of each Offering Period
(as defined in the 1993 Purchase Plan), Epitope Stock at the lesser of
(i) 85 percent of the fair market value on the first day of the
applicable Offering Period or (ii) 100 percent of the fair market value
on the last day of such Offering Period or on any earlier date of
purchase provided for in the 1993 Purchase Plan. The purchase price is
collected by means of employee salary and wage withholding and
deferrals. 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, 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 1993 Purchase Plan
will continue in full force and effect in accordance with its terms.
The Employee Benefits Agreement provides that participants under the
1993 Purchase Plan will be eligible to participate in the Distribution
and receive shares of Agritope Stock only to the extent that, by
operation of the 1993 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 Stock under the 1993 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 Offering Price (defined in the 1993 Purchase Plan) during the
Offering Period in which the Distribution occurs in order to reflect
the effect of the Distribution, and provides that Agritope will
establish an Employee Stock Purchase Plan for Agritope employees with
offerings commencing in ______________ 1998. 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
- 20 -
<PAGE>
(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.
TRANSITION SERVICES AGREEMENT
Epitope and Agritope have entered into a Transition Services Agreement
under which Epitope will make certain services, administrative personnel and
facilities available to Agritope for a limited time following the Distribution.
- 21 -
<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, 1996 and 1995 and the operating results data for the years
ended September 30, 1996, 1995, and 1994 have been derived from audited
consolidated financial statements and notes thereto included in this Information
Statement/Prospectus. Balance sheet data at June 30, 1997 and operating results
data for the nine months ended June 30, 1997 and 1996 have been derived from
unaudited interim condensed consolidated financial statements and notes thereto
included in this Information Statement/Prospectus and, in the opinion of
management, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the financial position and
results of operations for the interim periods. Results for the nine months ended
June 30, 1997, may not be indicative of full-year results. The balance sheet
data at September 30, 1994, 1993 and 1992 and operating results data for the
years ended September 30, 1993 and 1992 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>
NINE MONTHS ENDED
JUNE 30 YEAR ENDED SEPTEMBER 30
1997 1996 1996 1995(1) 1994(1) 1993 1992
(UNAUDITED)
CONSOLIDATED OPERATING RESULTS
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues.......................................... $ 668 $ 514 $ 585 $2,110 $2,213 $ 524 $ 58
Operating costs and expenses...................... 4,063 2,055 2,821 9,920 11,703 7,331 2,790
Other income (expense), net ......................(2,862)(2) 81 97 166 (94) (29) 72
Net loss.......................................... (6,257) (1,460) (2,139) (7,645) (9,584) (6,836) (2,660)
Pro forma net loss per share (3).................. (3.13) (.73) (1.07) (3.82) (4.79) (3.42) (1.33)
Pro forma shares used in per
share calculations (3).......................... 2,000 2,000 2,000 2,000 2,000 2,000 2,000
SEPTEMBER 30
CONSOLIDATED BALANCE SHEET DATA JUNE 30, 1997 1996 1995 1994 1993 1992
(UNAUDITED)
Working capital................................. $3,209 $1,264 $5,082 $3,710 $ 1,673 $ 4,368
Total assets.................................... 8,524 10,097 8,303 7,372 3,764 6,177
Long-term debt.................................. 16 - 22 38 57 -
Convertible notes, due 1997..................... - 3,620 3,620 4,070 4,630 5,495
Accumulated deficit............................. (37,538) (31,280) (29,141) (21,497) (11,912) (5,076)
Shareholder's equity (deficit) ................. 6,509 5,435 4,312 2,810 (1,310) 482
</TABLE>
(1) Data for 1995 and 1994 include revenues of $2.0 million and $2.2
million, and operating losses of $3.8 million and $6.4 million,
respectively, attributable to business units which were divested. See
Note 3 to consolidated financial statements.
(2) Includes non-cash charges of $1.9 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 Note 11 to
consolidated financial statements.
(3) Net income (loss) per share is presented on a pro forma basis assuming
that the Distribution of Agritope Stock pursuant to the Agritope
spin-off had occurred on October 1, 1991.
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<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 its 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.
The results of operations for the year ended September 30, 1994 and the
first three quarters of 1995 include the activity of Vinifera, then a wholly
owned subsidiary of Agritope. Vinifera was divested in the third quarter of
1995, and was reacquired in the fourth quarter of 1996. 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. During 1994 and
1995, Vinifera was in the development stage and generated minimal product sales.
Vinifera commenced commercial stage operations in 1996.
Agritope's results of operations for 1994 and 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 divested in 1995. There are no
operations of Agrimax included in 1996 or 1997 operating results.
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.
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.
Interest earned on investments has been allocated to Agritope in direct
proportion to the allocation of Shared Services. For historical financial
reporting purposes, 20 percent of cash, cash equivalents, and marketable
securities have been allocated to Agritope. Such allocations have been reflected
as contributed capital.
The accompanying consolidated financial statements do not include the
operations of Andrew and Williamson Sales, Co. ("A&W"). A&W, a producer and
distributor of fruits and vegetables, was acquired by, and became a direct
wholly owned subsidiary of, Epitope in December 1996. Epitope rescinded the
acquisition in May 1997. The effects of Epitope's ownership of A&W are reflected
solely in Epitope's financial statements and have no impact on Agritope.
- 23 -
<PAGE>
RESULTS OF OPERATIONS
Nine months ended June 30, 1997 and 1996
Revenues. Total revenues increased by $154,000 or 30 percent in the nine months
ended June 30, 1997, as compared to the nine months ended June 30, 1996. In
1997, Vinifera accounted for product sales of $566,000. Such sales are highly
seasonal and generally occur in the spring and summer planting seasons. Vinifera
was reacquired by Agritope in August 1996 and therefore its results are not
included in the comparable period of 1996. As of June 30, 1997, Vinifera had
firm orders totaling $820,000 for delivery in the fourth quarter of 1997.
Grant and contract revenues decreased by $413,000 or 80 percent in the
nine months ended June 30, 1997, as compared to the nine months ended June 30,
1996. Grant and contract revenues in 1996 included $408,000 received from three
strategic partners for research projects. These research projects are directed
at developing superior new plants through genetic engineering. Revenue from such
projects can vary significantly from quarter to quarter 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.
Gross margin. Gross margin on product sales was 3 percent of sales for the first
nine months of 1997. There were no comparable product sales for the prior year
period. Gross margin in 1997 was adversely affected by production start-up costs
incurred during the expansion of production capacity at Vinifera.
Research and development expenses. Research and development expenses increased
by $260,000 or 26 percent in the nine months ended June 30, 1997, as compared to
the nine months ended June 30, 1996. The higher research and development costs
in 1997 reflect increased efforts to develop and propagate crops containing
Agritope's patented ethylene control technology as well as research and
development efforts to improve grape plant propagation conducted by Vinifera.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased by $1.2 million or 113 percent in the nine
months ended June 30, 1997, as compared to the nine months ended June 30, 1996.
The increase is primarily attributable to $691,000 of expenses incurred by
Vinifera, which was not part of Agritope in the comparable period of 1996, and
to expenses of $424,000 related to the withdrawn proposal to create two classes
of common stock of Epitope. These expenses also include allocation of Shared
Services of $953,000 and $778,000 for the 1997 and 1996 nine month periods,
respectively.
Other income (expense), net. Other income (expense), net was impacted by two
significant non-recurring charges totaling $3.1 million in the first quarter of
1997. Agritope recorded a non-cash charge to results of operations of $1.9
million, reflecting the permanent impairment in the value of its investment in
affiliated companies. Additionally, conversion of $3.4 million principal amount
of Agritope convertible notes into Epitope common stock at a reduced price
resulted in a non-cash charge to results of operations of $1.2 million.
Interest income decreased by $76,000 or 28 percent in the nine months
ended June 30, 1997, as compared to the nine months ended June 30, 1996,
primarily due to lower levels of invested principal. Interest expense decreased
by $167,000 or 87 percent in the comparable nine month periods due to the
conversion of $3.4 million principal amount of Agritope notes in the first
quarter of 1997.
Years Ended September 30, 1996, 1995, and 1994
Revenues. Total revenues declined to $585,000 in 1996 from $2.1 million in 1995
and $2.2 million in 1994. Product sales of $2.0 million in 1995 and $2.2 million
in 1994 consisted primarily of sales in Agrimax's unprofitable wholesale fresh
flower packaging and distribution operations, which were divested in the third
quarter of 1995.
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<PAGE>
A grant from the U.S. Department of Agriculture and grants from
strategic partners accounted for the increase in grant and contract revenues to
$585,000 in 1996 from $94,000 in 1995. These research projects were directed at
developing superior new plants through genetic engineering. Revenues 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.
Research and development expenses. Research and development expenses in 1996,
1995 and 1994 totaled $1.3 million, $2.2 million and $2.4 million, respectively.
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 1996, 1995, and 1994 were $1.5 million, $4.5 million
and $4.8 million, respectively. Costs in 1995 and 1994 included $2.8 million and
$4.1 million, respectively, of costs incurred in Agrimax and Vinifera. Selling,
general and administrative expenses include $1.1 million, $1.9 million and $1.7
million for the allocation of Shared Services in 1996, 1995 and 1994,
respectively. The amount of allocated Shared Services decreased in 1996 as a
result of the dispositions of the Agrimax and Vinifera businesses.
Other income (expense), net. Interest income increased by $191,000 or 88 percent
from 1994 to 1995 due to an increase in invested principal.
LIQUIDITY AND CAPITAL RESOURCES
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
1997 1996
<S> <C> <C>
Cash and cash equivalents.............................................. $ 453,000 $ 4,903,000
Marketable securities.................................................. 1,785,000 --
Working capital........................................................ 3,209,000 1,264,000
</TABLE>
Cash, cash equivalents and marketable securities allocated to Agritope
totaled $2.2 million as of June 30, 1997 and $4.9 million as of September 30,
1996. At June 30, 1997, Agritope had working capital of $3.2 million, as
compared to $1.3 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. Concurrent with the note
conversion, Epitope made a $4.4 million capital contribution to Agritope.
Working capital also increased due to a $1.5 million buildup in inventories at
Vinifera in anticipation of sales in the fourth quarter of 1997 and for the
following year.
Expenditures for property and equipment were $1.5 million during the
nine months ended June 30, 1997, largely as a result of expansion of greenhouse
capacity at Vinifera. During the first quarter of 1997, Agritope made a one-time
cash payment of $590,000 to a co-inventor of Agritope's ethylene control
technology who is an officer of Agritope in exchange for all rights to future
payments. Agritope has also acquired certain rights to five proprietary genes
from the Salk Institute for Biological Studies and made payments of $171,000 in
the period under the related agreement. 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 $1.9 million in the
first quarter of 1997 reflecting the permanent impairment in the value of these
investments.
Cash flows from operating activities improved significantly in 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 decreased in 1995 primarily due
to the divestiture of Agrimax and Vinifera and increased in 1996 as a result of
expansion of greenhouse capacity at Vinifera, which
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was reacquired in August 1996. Expenditures for patents and proprietary
technology increased in 1996 primarily due to a payment for Agritope's ethylene
control technology.
Historically, the primary sources of funds for meeting Agritope's
requirements for operations, working capital and business expansion have been
cash from Epitope, $5.4 million principal amount of convertible notes,
investments in Vinifera by minority shareholders, and 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 receive additional funds from the sale of
equity securities.
Immediately following the spin-off and related financing, Agritope will
have $___ million in cash, cash equivalents, or marketable securities on hand to
finance its continued operations. Agritope anticipates that these funds will be
sufficient to finance operations as a separate business for at least two years,
based on currently projected revenues and expenses. Agritope cannot be certain
that this projection will be accurate, and to the extent that Agritope's
operations do not progress as anticipated, additional capital may be required.
There can be no assurance that additional capital will be available on
acceptable terms, and the failure to raise such capital would have a material
adverse effect on Agritope. See "Risk Factors--Need for Additional Funds."
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 five
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 an exclusive worldwide license to
use the Salk Genes in a variety of plants and in nearly all fruit and vegetable
crops.
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 plant mechanisms. 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
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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 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.
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 packers/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 enzyme
produced by the SAMase gene degrades SAM into 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
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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.
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
Brassica Transformation
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 at $282 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 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
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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 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.
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 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.
Brassica. Agritope has an agreement with Sakata Seed America ("Sakata") to
develop new varieties of certain Brassica species (broccoli and cauliflower).
Sakata is the leading hybrid broccoli and cauliflower seed supplier in the U.S.
Sakata provided Agritope with germplasm from selected breeding lines and funds
to develop broccoli and cauliflower plants integrating Agritope ripening control
technology. Agritope received payment from Sakata upon the transfer of
genetically engineered plants to be used for the production of hybrid seeds. If
the seeds are commercialized, Agritope will receive a royalty on sales made by
Sakata.
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, lettuce, 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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The Salk Genes. In addition to its ethylene control technology, Agritope also
recently acquired certain rights to five new proprietary genes discovered by
scientists at the Salk Institute for Biological Studies. 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
collaboration, in exchange for access fees and royalties, Agritope has an option
to obtain an exclusive worldwide license to use the Salk Genes in a variety of
plant species and nearly all fruit and vegetable crops.
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.
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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, 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 gemini virus resistance strategy and
to incorporate the approach into commercial tomato varieties. Gemini viruses are
a class of plant viruses that cause widespread damage in several crops including
tomato, pepper, melon and squash.
COMMERCIALIZATION STRATEGY
Agritope is currently evaluating a number of commercialization strategies in
order to realize the value of its technology platform. 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.
GRANTS AND CONTRACTS
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 gemini virus
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"). 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.
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. 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.
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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. The first vines
produced are expected to be sold in 1997. 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.
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 allows the growing and shipping
of its 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
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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 its 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.
The FDA has also issued a food additive regulation permitting the use
of the kanr selectable marker gene, which encodes for the enzyme APH(3')II in
genetically engineering tomatoes, cotton and canola. Agritope tomato products
will fall under this regulation. It is uncertain whether additional food
additive regulations will need to be issued to cover additional fruit and
vegetable products which use the kanr selectable marker gene.
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
marketing of products derived using the tools and techniques of genetic
engineering.
The FDA is currently considering modifying its policy on foods
developed through genetic engineering to include a Premarket Notification
("PMN") procedure. This policy modification could require companies that develop
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.
To date, Agritope to the best of its knowledge has successfully
functioned within the scope of applicable laws and regulations, including rules
administered by the USDA, the FDA and the Mexican Ministry of Agriculture.
Agritope believes it is in 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
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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.
PERSONNEL
At September 30, 1997, Agritope and its subsidiaries had _____
full-time employees, including ____ in research and development and ____ 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.
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
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.
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 pays a monthly fee of $16,000 to Epitope for use of the facilities. As
soon as practicable after the spin-
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<PAGE>
off, Agritope intends to relocate its office and research and development
operations to other leased facilities, but no leasing arrangements have been
concluded.
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 1997 and 1998
production requirements.
Agritope believes that its present 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."
TRANSFER AGENT
The transfer agent and registrar for the Agritope Stock is ChaseMellon
Shareholder Services, L.L.C.
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<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
As of the Distribution Date, the Agritope Board will consist of nine
directors, including the four current directors and five director nominees to be
named. The director nominees will be elected to the Agritope Board immediately
prior to the Distribution. Because the Agritope Board is a staggered board, the
directors and director nominees have been designated as Class 1, Class 2 and
Class 3 directors. Directors and director nominees of each class will serve for
a term expiring at the annual meeting of Agritope shareholders 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.
NAME AGE POSITION
- ---- --- --------
Adolph J. Ferro, Ph.D. 55 President, Chief Executive
Officer, Class __ Director,
and Chairman of the Board
Gilbert N. Miller 56 Executive Vice President,
Chief Financial Officer,
Secretary and Class __ Director
Richard K. Bestwick, Ph.D. 43 Senior Vice President and Chief
Operating Officer -- 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 __ Director
Roger L. Pringle 56 Class __ Director
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 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 continue to serve as Executive Vice President
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<PAGE>
and Chief Financial Officer of Epitope on an interim basis for a limited time
following 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. 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 _______________ 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.
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.
COMMITTEES OF THE BOARD
Shortly before the Distribution Date, it is expected that the Agritope
Board will establish an Executive Committee, an Audit Committee, a Compensation
Committee and a Nominating Committee. Pursuant to the Agritope bylaws, the
Agritope Board may also establish other committees from time to time in its
discretion.
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<PAGE>
The Executive Committee will consist of at least two directors and may
exercise all the authority and powers of the board in the management of the
business and affairs of Agritope, except those reserved to the Agritope Board by
the Oregon Business Corporation Act.
The Audit Committee will consist of at least two outside directors and
will, among other things, recommend the appointment of independent public
accountants, review the scope of the annual audit and the engagement letter,
review the independence of the independent accountants and review the findings
and recommendations of the independent accountants and management's response.
The Audit Committee will also review the internal audit and control functions of
Agritope and make recommendations for changes in accounting systems, if
warranted.
The Compensation Committee will also consist of at least two outside
directors and will determine compensation for the officers of Agritope,
administer stock-based compensation plans and other performance-based
compensation plans adopted by Agritope, and consider matters of director
compensation and benefits.
The Nominating Committee will consist of at least two directors and
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.
COMPENSATION OF DIRECTORS
Nonemployee directors of Agritope are expected to receive compensation
of $_____ for each board meeting attended. In addition, all directors are
expected to be reimbursed for out of pocket expenses in connection with
attending board meetings. 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.
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<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 $ $ $
President and Chief Executive 1996 214,183 50,000 - 4,237
Officer 1995 200,769 113,245 5,390
Gilbert N. Miller 1997
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
Senior Vice President and 1996 91,385 20,160 - 2,280
Chief Operating Officer--
Research and Development (3)
Joseph A. Bouckaert 1997
President and Chief Executive 1996 160,000 33,600 - -
Officer--Vinifera, Inc.(4) 1995 115,592 40,000 - -
</TABLE>
(1) Represents the number of shares of Agritope Stock for which options
were awarded. Excludes options for Epitope Stock received under the
Epitope Stock 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) Dr. Bestwick was not an executive officer of Agritope during fiscal
1995.
(4) 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 STOCK
No options to purchase Agritope Stock were granted to officers named in
the "Summary Compensation Table" during the fiscal year ended September 30,
1997. Options outstanding under the Agritope 1992 Plan are not exercisable for
Agritope Stock.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
None of the officers named in the "Summary Compensation Table"
exercised options to purchase Agritope Stock during the fiscal year ended
September 30, 1997.
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<PAGE>
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) or two years of salary (three years in the case of Dr.
Ferro) 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 (of Vinifera in the case of Mr. Bouckaert). The
agreements in each case prohibit the officer from competing with Agritope
(Vinifera in the case of Mr. Bouckaert) for one year unless the officer elects
to waive the right to amounts otherwise payable. The agreements do not expire by
their terms and are terminable by Agritope on 90 days' notice with cause or,
subject to payment of the salary amounts described above, without cause.
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<PAGE>
1997 STOCK AWARD PLAN
GENERAL
The Agritope, Inc. 1997 Stock Award Plan (the "Award Plan") was adopted
by the Agritope Board and by Epitope as Agritope's sole shareholder in
______________ 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 Board. The Award Plan provides for
the issuance of a total of up to ____________ shares of Agritope Stock, 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.
PURPOSE
The purpose of the Award Plan is to promote and advance the interests
of Agritope and its shareholders 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 shareholders 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 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 Committee may delegate to
one or more officers of Agritope the authority to grant Awards to recipients who
are not executive officers or directors of Agritope and to determine the nature
of the Awards to be granted. The Committee is authorized to grant Awards to
non-employee directors from time to time in its discretion in accordance with
its fiduciary obligations to Agritope and its shareholders.
At the Distribution Date, ___ persons are expected to be eligible to
receive Awards under the Award Plan, including each of Agritope's seven
nonemployee directors and five executive officers, ___ other employees, and ___
Advisors. No options, stock appreciation rights ("SARs"), restricted awards,
performance awards, or other stock-based awards have been granted under the
Award Plan.
NEW OPTIONS
It is currently anticipated that options ("New Options") to purchase a
total of approximately _______ shares of Agritope Stock will be granted to
officers, employees and nonemployee directors of Agritope under the Award Plan
shortly after the Distribution Date. Each New Option will: (i) have an exercise
price equal to the fair market value of Agritope Stock on the date of grant,
(ii) become exercisable as to 25 percent of the shares covered by such option on
each of the first four anniversaries of the Distribution Date, and (iii) have a
term of ten years.
As described above under "Relationship Between Agritope and Epitope
After the Distribution--Employee Benefits Agreement," Epitope and Agritope have
agreed that each unexercised option to purchase Epitope Stock outstanding as of
the Distribution Date will be adjusted to reflect the Distribution. Existing
Epitope Options held by employees of Agritope will cease to vest after the
Distribution Date, but will remain exercisable in accordance with their original
terms to the extent vested, except that employment by Agritope or its
subsidiaries will be treated as employment by Epitope.
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<PAGE>
The following table shows the New Options that are expected to be
granted under the Award Plan as of the Distribution Date.
NEW PLAN BENEFITS
AGRITOPE, INC. 1997 STOCK AWARD PLAN
Number of
New
Name and Position Options
- ----------------- -------
Adolph J. Ferro, Ph.D.
President and Chief Executive Officer
Gilbert N. Miller
Executive Vice President
and Chief Financial Officer
Richard K. Bestwick, Ph.D.
Senior Vice President and
Chief Operating Officer--
Research and Development
Joseph A. Bouckaert
President and Chief Executive
Officer-Vinifera
All executive officers as a group
All nonemployee directors as a group
All employees as a group, excluding
executive officers
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 treatments. 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 Stock on the date the option is granted. The Award Plan authorizes the
Committee to issue nonqualified deferred compensation options with an option
price substantially less than the fair market value of a share of Agritope Stock
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, 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
Stock, the option holder shall automatically be granted a replacement ("reload")
option for a number of shares of such class of Agritope Stock equal to the
number of shares delivered upon exercise with an option price equal to the fair
market value of a share of Agritope Stock on the date of exercise and subject to
such other terms as the Committee 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 _________ shares
during any fiscal year period.
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<PAGE>
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
Stock between the date of grant and the date of exercise. Payment may be in
cash, in shares of Agritope Stock, in the form of a deferred compensation option
or in any other form approved by the Committee. SARs may be granted in
connection with options or other Awards granted under the Award Plan or may be
granted as independent Awards.
Restricted Awards. Restricted Awards may take the form of restricted
shares or restricted units. Restricted shares are shares of Agritope Stock that
may be subject to forfeiture if the recipient terminates employment or service
as an 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 shareholder 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 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 Stock, which similarly may be subject to forfeiture if the recipient
terminates employment or service as an 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 Stock covered by the restricted units. Payment may be in cash,
unrestricted shares of Agritope Stock, or any other form approved by the
Committee.
Performance Awards. Performance Awards are designated in units
equivalent in value to a share of Agritope Stock. 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 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 Stock, or any other form
approved by the Committee.
Other Stock-Based Awards. The Committee may grant other Awards that
involve payments or grants of shares of Agritope Stock or are measured by or in
relation to shares of Agritope Stock. 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 shareholder
approval, other than amendments that would materially increase the aggregate
number of shares of Agritope Stock that may be issued under the Award Plan
(except for adjustments for changes in capitalization).
The foregoing is a summary description of certain terms and provisions
of the Award Plan and is subject to its terms and provisions.
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 long-term capital gain and any loss
sustained will be a long-term capital loss, and (b) no deduction is allowed
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<PAGE>
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 Stock acquired upon the exercise of an ISO are
disposed of prior to the expiration of the two-year and one-year holding periods
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 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 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 Stock. 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 Stock 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 Stock or other property delivered to the
participant. However, a participant may elect to recognize compensation income
upon the grant of restricted shares, based on the fair market value of the
shares of Agritope Stock 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." Among other requirements contained in Section 162(m), the
material terms of a compensation plan must be approved by shareholders. Agritope
may in the future consider structuring 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 "Purchase
Plan") was approved by the Agritope Board and by Epitope as sole shareholder of
Agritope prior to the Distribution Date and will become effective upon the
consummation of the Distribution. The Purchase Plan provides for the issuance of
up to ____________ shares of Agritope Stock. The following summary of the
Purchase Plan is subject to the detailed terms and provisions of the Plan.
PURPOSE
The purpose of the Purchase Plan is to give employees of Agritope the
opportunity to subscribe for shares of Agritope Stock on an installment basis
through payroll deductions.
SUBSCRIPTIONS
The Purchase Plan provides for offering and purchase periods to be set
by the Agritope Board, 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 Agritope Board.
The 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 Agritope Board.
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 Stock on the stock exchange or automated securities
interdealer quotation system on which the stock was traded on the day before the
offering period commenced (the "initial subscription price") and (ii) 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
Purchase Plan.
The total value of shares that may be subscribed for in one or more
regular offering periods within any calendar year is limited to $21,250. Subject
to this limitation, the Agritope Board 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 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 Stock 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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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 Board may amend or terminate the Purchase Plan without shareholder
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).
At the Distribution Date, approximately ___ employees are expected to
be eligible to participate in the Purchase Plan. No Agritope Stock is subject to
outstanding subscriptions under the plan, and no shares have been purchased
pursuant to the plan. Numbers of shares that may be subject to future individual
subscriptions under the Purchase Plan are not now determinable.
FEDERAL INCOME TAX CONSEQUENCES
The 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
Purchase Plan.
If no disposition of shares purchased under the 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 long-term capital gain and any loss sustained treated as a long-term
capital loss to the participant, and (b) no deduction is allowed to Agritope for
federal income tax purposes.
If shares purchased under the 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 or long-term capital
gain to the participant and will not result in any deduction to Agritope.
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
will be included in Agritope's consolidated balance sheet under the caption
"Patents and proprietary technology" 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
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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.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the anticipated
beneficial ownership of Agritope Stock as of the Distribution Date after giving
effect to the Private Placement and the Vinifera Exchange by (a) each person who
is known to Agritope to be the beneficial owner of more than 5 percent of
Epitope Stock outstanding, (b) each director, and (c) each executive officer of
Agritope named in the Summary Compensation table above. This information is
based on the Epitope Stock beneficially owned by such persons as of September
30, 1997.
<TABLE>
<CAPTION>
Amount and Nature Percent
of Beneficial of
Name Ownership(1) Class
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Groupe des Assurances Nationales - -
61 Rue Monceau
Paris 75008 France
W. Charles Armstrong - *
Richard K. Bestwick, Ph.D. - *
Joseph A. Bouckaert - *
Adolph J. Ferro, Ph.D. - -
Gilbert N. Miller - -
Roger L. Pringle - *
All directors and executive
officers as a group
(__ persons)
</TABLE>
- ---------
*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) Does not include 17,035 shares of Epitope Stock held in the Epitope
401(k) Plan, as to which Messrs. Ferro and Miller share voting power as
trustees of the Epitope 401(k) Plan. Messrs. Ferro and Miller disclaim
any economic beneficial interest in such shares other than the _____
and _____ shares, respectively, allocated to their individual accounts
under the Epitope 401(k) Plan, which are included in the table above.
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Distribution, there has not been any public market for
Agritope Stock and there can be no assurance that a significant public market
for Agritope Stock will be developed or be sustained after the Distribution.
Sales of substantial amounts of Agritope Stock in the public market after the
Distribution, or the possibility of such sales occurring, could adversely affect
prevailing market prices for Agritope Stock or the future ability of Agritope to
raise capital through an offering of equity securities.
After the Distribution, Agritope will have outstanding ______ shares of
Agritope Stock. Except as described under "The Distribution--Trading of Agritope
Stock," all these shares 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.
As of the Distribution Date, options to purchase a total of ______
shares of Agritope Stock were outstanding under the Company's stock option
plans. As of the Distribution Date, _____ shares were available for future
option grants under Agritope's Award Plan, and ___ shares were available for
future issuance under Agritope's Purchase Plan.
The Company intends to file after the Distribution Date a Registration
Statement on Form S-8 to register an aggregate of _________ shares of Agritope
Stock reserved for issuance under its Award Plan and Purchase Plan. The
Registration Statement will become effective automatically upon filing. Shares
issued under the foregoing plans, after the filing of the Registration Statement
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 the Company.
Epitope has retained Vector Securities International, Inc. ("Vector
Securities") as Epitope's exclusive financial advisor. Vector Securities will
receive warrants to purchase Agritope Stock in partial consideration for
services rendered in connection with the Distribution. Epitope expects to grant
Vector Securities certain registration rights with respect to the warrants.
DESCRIPTION OF AGRITOPE CAPITAL STOCK
Agritope's Articles authorize the issuance of up to 40 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 Articles.
AGRITOPE COMMON
The holders of Agritope Common are entitled to one vote per share on
all matters on which shareholders 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
The Articles authorize the Agritope Board, without further shareholder
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
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<PAGE>
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 adopted a Shareholder 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 "--Shareholder
Rights Plan," below. No Agritope Preferred is currently outstanding, and
Agritope has no present plans to issue any shares of Agritope Preferred.
AGRITOPE WARRANTS
Vector Securities has provided advisory services to Epitope with
respect to the Distribution. As partial payment of Vector Securities' fee,
Agritope has agreed to issue to Vector Securities warrants to purchase an
aggregate of _______ shares of Agritope Stock, exercisable for three years at a
price equal to 110 percent of the average closing price on the five trading days
beginning on the Distribution Date.
PREEMPTIVE RIGHTS
The Articles provide that no holder of any of Agritope's shares is
entitled to any preferential or preemptive rights, except as such rights may be
provided for by contract or pursuant to the terms of any series of Agritope
Preferred.
SHAREHOLDER RIGHTS PLAN
Agritope has 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 Cumulative
Preferred Stock at an exercise price of $_____. 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 a person: (i) acquires 15 percent
or more of the Agritope Common; or (ii) commences a tender offer which would
result in the ownership of 15 percent or more of the Agritope Common (the
"Rights Distribution Date"). In the event any person becomes the beneficial
owner of 15 percent or more of the Agritope Common, 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.
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 $0.01
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 October ___, 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
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<PAGE>
be redeemed by Agritope until the tenth business day following the first public
announcement that a person or group has become an Acquiring Person.
OTHER ANTI-TAKEOVER MEASURES
Agritope's Articles 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 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;
and (iv) no less than 60 days' advance notice with respect to nominations of
directors or other matters to be voted on by shareholders other than by or at
the direction of the Agritope Board.
Classified Board of Directors. The Articles provide that the Agritope
Board 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.
Agritope's Chairman has made the initial designation of directors to each of the
three classes. At each annual meeting of Agritope shareholders, 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 shareholders.
Removal of Directors. Directors of Agritope may be removed only for
cause.
Changes in the Number of Directors. The Articles specify 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 Shareholders. The
Bylaws require that, generally, in addition to other applicable requirements, in
order for an Agritope shareholder to: (i) nominate a person for election to the
Agritope Board at an annual meeting of shareholders; or (ii) properly bring a
matter before an annual meeting of shareholders, such shareholder must notify
Agritope of his or her intentions not less than 60 days prior to such meeting
(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 Articles. The Articles require the approval of at least
two-thirds of the holders of Agritope Common to amend certain provisions of the
Articles including certain of the anti-takeover measures described above.
OREGON ANTI-TAKEOVER STATUTES
Agritope is subject to certain provisions of the Oregon Business
Corporation Act that govern business combinations between corporations and
interested shareholders (the "Business Combination Act"). The Business
Combination Act generally provides that, if a person or entity acquires 15
percent or more of the voting stock of an Oregon corporation (an "Interested
Shareholder"), the corporation and the Interested Shareholder, or any affiliated
entity of the Interested Shareholder, may not engage in certain business
combination transactions for three years following the date the person became an
Interested Shareholder. Business combination transactions for this purpose
include: (a) a merger or plan of share exchange; (b) any sale, lease, mortgage
or other disposition of 10 percent or more of the assets of the corporation; and
(c) certain transactions that result in the issuance of capital stock to the
Interested Shareholder. These restrictions do not apply if: (i) the Interested
Shareholder, as a result
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of the transaction in which such person became an Interested Shareholder, 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 benefit plans); (ii) the board of directors approves the
share acquisition or business combination before the Interested Shareholder
acquires 15 percent or more of the corporation's outstanding voting stock; or
(iii) the board of directors and the holders of at least two-thirds of the
outstanding voting stock of the corporation (disregarding shares owned by the
Interested Shareholder) approve the transaction after the Interested Shareholder
acquires 15 percent or more of the corporation's voting stock.
Agritope is also subject to the Oregon Control Share Act (the "Control
Share Act"). The Control Share Act generally provides that a person (the
"Acquiror") who acquires voting stock of an Oregon corporation in a transaction
which results in the Acquiror holding more than 20 percent, 33-1/3 percent or 50
percent of the total voting power of the corporation (a "Control Share
Acquisition") cannot vote the shares it acquires in the Control Share
Acquisition ("Control Shares") unless voting rights are accorded to the Control
Shares by: (a) a majority of each voting group entitled to vote; and (b) the
holders of a majority of the outstanding voting shares, excluding the Control
Shares held by the Acquiror and shares held by the corporation's officers and
inside directors. The term "Acquiror" is broadly defined to include persons
acting as a group.
The Acquiror may, but is not required to, submit to the corporation an
"Acquiring Person Statement" setting forth certain information about the
Acquiror and its plans with respect to the corporation. The Acquiror may also
request that the corporation call a special meeting of shareholders to determine
whether the voting rights will be restored to the Control Shares. If the
Acquiror does not request a special meeting of shareholders, the issue of voting
rights of Control Shares will be considered at the next annual or special
meeting of shareholders that is held more than 60 days after the date of the
Control Share Acquisition. If the Acquiror's Control Shares are accorded voting
rights and represent a majority or more of all voting power, shareholders who do
not vote in favor of the restoration of such voting rights will have the right
to receive the appraised "fair value" of their shares, which may not be less
than the highest price paid per share by the Acquiror for the Control Shares.
INDEMNIFICATION OF DIRECTORS AND OFFICERS; LIMITATION OF LIABILITY; INSURANCE
As permitted by Oregon law, Agritope's Articles permit, 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 Oregon law, the Bylaws and indemnity agreements
Agritope intends to enter into with its directors and officers generally,
Agritope 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
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<PAGE>
of any state statutory law or common law. Agritope may also provide
indemnification to persons other than its directors or officers under certain
circumstances.
As permitted by Oregon law, the Articles also provide that no director
will be liable to Agritope or its shareholders for monetary damages for his or
her conduct as a director, except that personal liability may exist for any: (i)
breach of the director's duty of loyalty to Agritope or its shareholders; (ii)
act or omission not in good faith or that involves intentional misconduct or a
knowing violation of the law; (iii) unlawful distribution to shareholders; (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 intends to enter into agreements to indemnify
its directors and officers. The agreements are intended to provide the maximum
indemnification permitted by Oregon 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 will also limit the
liability of Agritope's directors and officers in respect of their conduct in
serving Agritope to the extent permitted by Oregon 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 Stock will be passed upon by Tonkon, Torp,
Galen, Marmaduke & Booth, Portland, Oregon.
EXPERTS
The financial statements as of September 30, 1996 and 1995 and for each
of the three years in the period ended September 30, 1996 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.
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<PAGE>
<TABLE>
<CAPTION>
AGRITOPE, INC. AND SUBSIDIARIES
FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS PAGE
FULL YEAR FINANCIAL STATEMENTS
<S> <C>
Report of Independent Accountants.....................................................................................F-1
Consolidated Balance Sheets
at September 30, 1996 and September 30, 1995..................................................................F-2
Consolidated Statements of Operations
for the years ended September 30, 1996, 1995, and 1994 .......................................................F-3
Consolidated Statements of Changes in Shareholder's Equity
for the years ended September 30, 1996, 1995, and 1994 .......................................................F-4
Consolidated Statements of Cash Flows
for the years ended September 30, 1996, 1995, and 1994 .......................................................F-5
Notes to Consolidated Financial Statements............................................................................F-6
INTERIM FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets
at June 30, 1997 and September 30, 1996......................................................................F-14
Condensed Consolidated Statements of Operations
for the nine months ended June 30, 1997 and 1996.............................................................F-15
Condensed Consolidated Statements of Changes in Shareholder's Equity
for the nine months ended June 30, 1997......................................................................F-16
Condensed Consolidated Statements of Cash Flows
for the nine months ended June 30, 1997 and 1996.............................................................F-17
Notes to Condensed Consolidated Financial Statements.................................................................F-18
</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, 1996 and 1995, and the results of their operations
and their cash flows for each of the three years in the period ended September
30, 1996, 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.
/s/ PRICE WATERHOUSE LLP
Portland, Oregon
October 28, 1996, except for Note 11 as to which the date is December 26, 1996
and the second paragraph of Note 1 as to which the date is July 26, 1997.
F-1
<PAGE>
AGRITOPE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30 1996 1995
ASSETS
<S> <C> <C>
Current assets
Cash and cash equivalents (Note 2) ........................... $ 4,903,476 $ 4,246,687
Trade accounts receivable, net (Note 2) ...................... 264,986 135,866
Other accounts receivable .................................... 32,337 993,790
Inventories (Note 2) ......................................... 509,745 -
Prepaid expenses ............................................. 812 56,064
------------- -------------
Total current assets ......................................... 5,711,356 5,432,407
Property and equipment, net (Notes 2 and 4) .................. 1,286,196 555,003
Patents and proprietary technology, net (Note 2) ............. 510,244 140,757
Investment in affiliated companies (Note 3) .................. 2,448,623 1,974,833
Other assets and deposits (Note 5) ........................... 140,513 200,430
------------- -------------
$ 10,096,932 $ 8,303,430
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities
Current portion of installment notes payable ................. $ - $ 17,758
Convertible notes (Notes 5 and 11)............................ 3,620,003 -
Accounts payable.............................................. 91,474 125,971
Salaries, benefits and other accrued liabilities.............. 735,478 206,349
------------- ------------
Total current liabilities..................................... 4,446,955 350,078
Long-term portion of installment notes payable................ - 21,749
Convertible notes (Notes 5 and 11)............................ - 3,620,003
Minority interest (Note 3).................................... 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..................... 36,714,932 33,452,632
Accumulated deficit .......................................... (31,280,362) (29,141,032)
------------- -------------
5,434,570 4,311,600
$ 10,096,932 $ 8,303,430
</TABLE>
The accompanying notes are an integral part of these statements.
F-2
<PAGE>
AGRITOPE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30 1996 1995 1994
Revenues
<S> <C> <C> <C>
Product sales.............................................. $ - $ 2,015,318 $ 2,179,742
Grants and contracts (Note 8).............................. 585,485 94,370 33,642
------------- ------------ --------------
585,485 2,109,688 2,213,384
Costs and expenses
Product costs............................................. - 3,235,675 4,575,149
Research and development costs (Note 8)................... 1,338,703 2,204,993 2,368,880
Selling, general and administrative expenses
(Note 2)................................................ 1,482,694 4,479,498 4,759,219
------------- ------------ --------------
2,821,397 9,920,166 11,703,248
Loss from operations...................................... (2,235,912) (7,810,478) (9,489,864)
Other income (expense), net
Interest income........................................... 361,938 408,097 216,934
Interest expense.......................................... (265,356) (241,775) (236,121)
Other, net................................................ - (500) (75,280)
------------- ------------- ---------------
96,582 165,822 (94,467)
Net loss................................................... $ (2,139,330) $ (7,644,656) $ (9,584,331)
Pro forma net loss per share ............................. $ (1.07) $ (3.82) $ (4.79)
Pro forma 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>
<CAPTION>
COMMON ACCUMULATED
STOCK DEFICIT TOTAL
<S> <C> <C> <C>
Balances at September 30, 1993 ....................... $ 11,259,717 $(11,912,045) $ (652,328)
Compensation expense for stock awards (Note 6) ....... 50,392 - 50,392
Compensation expense for stock option grants (Note 6) 343,922 - 343,922
Capital contributed by Epitope, Inc., upon exchange of
convertible notes (Note 5) ......................... 559,964 - 559,964
Equity issuance costs ................................ (40,267) - (40,267)
Cash from Epitope, Inc. .............................. 12,132,173 - 12,132,173
Net loss for the year ................................ - (9,584,331) (9,584,331)
------------ ------------ ------------
Balances at September 30, 1994 ....................... 24,305,901 (21,496,376) 2,809,525
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 ................................ (22,487) - (22,487)
Cash from Epitope, Inc. .............................. 8,330,854 - 8,330,854
Net loss for the year ................................ - (7,644,656) (7,644,656)
------------ ------------ ------------
Balances at September 30, 1995 ....................... 33,452,632 (29,141,032) 4,311,600
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. .............................. 3,018,636 - 3,018,636
Net loss for the year ................................ - (2,139,330) (2,139,330)
------------ ------------ ------------
Balances at September 30, 1996 ....................... $ 36,714,932 $(31,280,362) $ 5,434,570
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
AGRITOPE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30 1996 1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net loss................................................... $ (2,139,330) $ (7,644,656) $ (9,584,331)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization.............................. 294,045 663,380 505,135
Compensation expense for stock awards...................... 14,500 69,998 50,392
Compensation expense for stock option grants .............. 229,164 318,375 343,922
Loss on disposition of property............................ - 500 74,130
Decrease (increase) in receivables......................... 832,333 (945,501) (140,268)
Decrease (increase) in inventories......................... (509,745) 88,737 (385,928)
Decrease (increase) in prepaid expenses.................... 55,252 (55,639) 36,965
Decrease (increase) in other assets and deposits........... (36,219) 9,137 6,562
Increase (decrease) in accounts payable and
accrued liabilities...................................... 494,632 (104,680) 67,457
-------------- -------------- --------------
Net cash used in operating activities...................... (765,368) (7,600,349) (9,025,964)
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment........................ (886,646) (238,558) (2,128,835)
Proceeds from sale of property............................. - 13,258 -
Expenditures for patents and proprietary
technology............................................... (411,943) (178,208) 135
Investment in affiliated companies......................... (473,790) 610,146 -
Minority Interest in affiliated companies.................. 215,407 - -
-------------- -------------- --------------
Net cash (used in) provided by investing activities........ (1,556,972) 206,638 (2,128,700)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments under installment purchase notes
and capital lease obligations ............................ (39,507) (16,137) (20,726)
Cash from Epitope, Inc..................................... 3,018,636 8,330,854 12,132,173
-------------- -------------- --------------
Net cash provided by financing activities.................. 2,979,129 8,314,717 12,111,447
Net increase in cash and cash equivalents.................. 656,789 921,006 956,783
Cash and cash equivalents at beginning of year............. 4,246,687 3,325,681 2,368,898
-------------- -------------- --------------
Cash and cash equivalents at end of year................... $ 4,903,476 $ 4,246,687 $ 3,325,681
</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.
Agritope is a wholly owned subsidiary of Epitope, Inc. ("Epitope"), an Oregon
corporation engaged in the development and marketing of medical diagnostic
products. Through its 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 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 intends to
sell additional shares of Agritope common stock in a private placement to
certain investors immediately after the spin-off. In addition, minority holders
of Vinifera common and preferred stock are expected to be permitted to exchange
their Vinifera stock for Agritope common stock immediately after the spin-off.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation. The accompanying consolidated financial statements
include the accounts of Agritope and its majority owned subsidiaries. All
significant intercompany balances and transactions 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. Cash and cash equivalents
equal to 20 percent of Epitope's consolidated balance have been allocated to
Agritope in the accompanying consolidated financial statements. Intercompany
balances with Epitope, including the amount representing allocated cash and cash
equivalents, have been reflected as common stock in the accompanying
consolidated financial statements.
Certain corporate overhead services such as accounting, finance, general
management, human resources, investor relations, information systems and payroll
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 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. The accompanying
financial statements also include an adjustment to allocate interest income from
Epitope to Agritope in the same proportion as the allocation of Shared Services.
Allocated Shared Services of $1,069,249, $1,892,370 and $1,735,688,
respectively, for 1996, 1995 and 1994 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 are recorded at the lower of standard cost (which
approximates actual cost on a first-in, first-out basis) or market. Inventory at
September 30, 1996, consisted principally of growing grapevine plants at
Vinifera. The components of inventory are summarized as follows:
SEPTEMBER 30 1996
Work-in-process .............................................. $471,208
Finished goods ............................................... 38,537
---------
$509,745
F-6
<PAGE>
Agritope, Inc. and Subsidiaries
Notes to Consolidated Financial Statements, Continued
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, 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 ("SFAS") No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of. See Note 11, Subsequent Events.
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 an agreement pursuant to which it acquired
its patented ethylene control technology in 1987. A co-inventor of the
technology relinquished all rights to future compensation under the agreement in
exchange for a one-time cash payment, a research grant and a limited
non-exclusive license to use the technology for one crop. The total
consideration paid of $365,000 is included under the caption "Patents and
proprietary technology" and is being amortized over 15 years, the remaining life
of the related patent. See Note 11, Subsequent Events.
Amortization and accumulated amortization are summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Amortization for the year ended September 30,........ 42,456 23,964 13,487
Accumulated Amortization ............................ 79,907 37,451 13,487
</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 long-term debt 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 $19,571 as of September 30,
1996, and $65,172 as of September 30, 1995.
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
F-7
<PAGE>
Agritope, Inc. and Subsidiaries
Notes to Consolidated Financial Statements, Continued
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 SFAS No. 123, Accounting for Stock-Based Compensation. 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, but with additional financial statement disclosure. The Company plans
to elect the disclosure-only alternative commencing in fiscal 1997 and therefore
does not anticipate that SFAS 123 will have a material impact on its financial
position or results of operations.
Supplemental Cash Flow Information. Non-cash financing and investing activities
not included in the consolidated statements of cash flows are summarized as
follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30 1996 1995 1994
<S> <C> <C> <C>
Conversion of notes to equity (Note 5).................... $ - $ 472,478 $ 600,231
Investment in affiliated companies........................ - 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.
NOTE 3 INVESTMENT IN AFFILIATED COMPANIES
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. UAF, Limited Partnership ("UAF"), in which Agrimax
obtained an 18 percent interest, was formed to combine the Agrimax operations in
Charlotte, North Carolina, with those of Universal American Flowers, Inc. in
Tampa, Florida and Hammond, Louisiana. In connection with the UAF transaction,
Agrimax contributed inventory, operating assets and the right to use its
proprietary floral preservative and certain trademarks. In May 1996, the equity
interest of Agrimax in UAF was reduced to 9 percent as the result of a
recapitalization of UAF. See Note 11, Subsequent Events.
The St. Paul, Minnesota, facility of Agrimax ceased operations in June 1995. In
June 1996, Agrimax contributed inventory and operating assets to Petals USA,
Inc. ("Petals"), a newly formed affiliate of a Canadian fresh flower wholesaler,
in return for a 19.5 percent equity interest in Petals. See Note 11, Subsequent
Events.
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 all 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 majority interest to Agritope in
August 1996. Additional minority investors in Vinifera reduced Agritope's
ownership to 76 percent as of September 30, 1996.
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
F-8
<PAGE>
Agritope, Inc. and Subsidiaries
Notes to Consolidated Financial Statements, Continued
statements of operations in 1994 and through May of 1995, and for the month of
September 1996. 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.
<TABLE>
<CAPTION>
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............... (2,139,330) (1,464,002) (3,603,332) (7,644,656) (460,296) (8,104,952)
Pro forma net
loss per share........ (1.07) (.73) (1.80) (3.82) (.23) (4.05)
</TABLE>
For the years ended September 30, 1995, and 1994, respectively, the accompanying
financial statements include revenues of $1,914,000 and $2,148,000, and
operating losses of $3,299,000 and $5,601,000, 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 primarily
attributable to the disposition of Agrimax's business.
NOTE 4 PROPERTY AND EQUIPMENT
Property and equipment are summarized as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30 1996 1995
<S> <C> <C>
Land ......................................................... $ 30,020 $ 30,020
Grapevine propagation blocks ................................. 351,538 -
Buildings and improvements ................................... 717,508 717,508
Research and development laboratory equipment ................ 220,919 196,255
Office furniture and equipment ............................... 140,452 95,338
Leasehold improvements........................................ 23,962 23,962
Construction in progress ..................................... 499,980 34,650
----------- -----------
1,984,379 1,097,733
Less accumulated depreciation and amortization ............... (698,183) (542,730)
----------- -----------
$ 1,286,196 $ 555,003
</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 are unsecured, mature on June 30, 1997 and bear interest at
the rate of 4 percent per annum which is payable on each June 30 and December
31. The notes are convertible into common stock of Epitope at a conversion price
of $19.53 per share.
F-9
<PAGE>
Agritope, Inc. and Subsidiaries
Notes to Consolidated Financial Statements, Continued
During the years ended September 30, 1995 and 1994, respectively, investors
exchanged $449,991 and $559,964 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 exchanges, unamortized debt
issuance costs of $22,487 and $40,267 related to such notes were recognized as
equity issuance costs during 1995 and 1994, respectively. Debt issuance costs
are included in other assets and are being amortized over the five-year life of
the notes. Amortization expense of debt issuance costs for the years ended
September 30, 1996, 1995 and 1994, respectively, totaled $108,257, $96,136 and
$91,715, leaving an unamortized balance of $88,821 and $197,077 at September 30,
1996 and 1995, respectively. See Note 11, Subsequent Events.
NOTE 6 SHAREHOLDER'S EQUITY
Authorized Capital Stock. Agritope's current amended articles of incorporation
authorize 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, cash equivalents, and marketable securities provided and
allocated 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 has been recognized as common
stock of Agritope.
NOTE 7 INCOME TAXES
As of September 30, 1996, Agritope had net operating loss carryforwards of
approximately $29.8 million and $16.9 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>
<CAPTION>
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
-------------- --------------
$ 29,775,000 $ 16,948,000
</TABLE>
F-10
<PAGE>
Agritope, Inc. and Subsidiaries
Notes to Consolidated Financial Statements, Continued
Significant components of Agritope's deferred tax asset were as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30 1996 1995
<S> <C> <C>
Net operating loss carryforwards.......................... $ 11,588,000 $ 10,725,000
Deferred compensation..................................... 558,000 468,000
Research and experimentation credit carryforwards......... 339,000 331,000
Accrued expenses.......................................... 15,000 14,000
Other..................................................... 59,000 35,000
-------------- -------------
Gross deferred tax assets................................. 12,559,000 11,573,000
Valuation allowance....................................... (12,559,000) (11,573,000)
-------------- -------------
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 $986,000 in
1996. 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 common 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 $850,000 for the year ended
September 30, 1996 is increased by approximately $109,000 for the effect of
state and local taxes (net of federal impact), and decreased by approximately
$986,000 for the effect of the increase in valuation allowance.
NOTE 8 RESEARCH AND DEVELOPMENT ARRANGEMENTS
Agritope performed research work in 1996 and 1995 with respect to raspberries
which was partially funded by Sweetbriar Development, Inc. under a License
Agreement dated October 18, 1994 and with respect to grapevine disease
diagnostics funded by a grant from the U.S. Department of Agriculture under the
Small Business Innovation Research Program. 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>
<CAPTION>
YEAR ENDED SEPTEMBER 30 1996 1995 1994
<S> <C> <C> <C>
Government research grants................................ $ 144,987 $ 16,358 $ 33,642
Research projects with strategic partners................. 326,462 40,000 -
Other..................................................... 114,036 38,012 -
------------ ----------- ---------
585,485 94,370 33,642
Project related expenses.................................. $ 461,460 $ 318,401 $ 35,728
</TABLE>
F-11
<PAGE>
Agritope, Inc. and Subsidiaries
Notes to Consolidated Financial Statements, Continued
NOTE 9 COMMITMENTS AND CONTINGENCIES
Agritope leases office and greenhouse facilities under operating lease
agreements which require minimum annual payments as follows:
YEAR ENDING SEPTEMBER 30
<TABLE>
<CAPTION>
<S> <C>
1997...................................................... $ 189,551
1998 ..................................................... 185,394
1999 ..................................................... 150,000
2000 ..................................................... 150,000
2001 ..................................................... 50,000
----------
$ 724,945
</TABLE>
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
$238,790, $374,862, and $311,623 for the years ended September 30, 1996, 1995
and 1994, 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>
<CAPTION>
<S> <C>
1997...................................................... $ 328,953
1998...................................................... 341,304
1999...................................................... 347,184
------------
$ 1,017,441
</TABLE>
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 1996, 1995 and 1994,
respectively, Agritope was charged $14,500, $29,877, and $25,506 by Epitope for
its share of the matching contribution under the plan.
NOTE 11 SUBSEQUENT EVENTS
On October 25, 1996, Epitope received an offer from a representative of the
holders of the $3.6 million convertible notes due June 30, 1997, whereby the
holders proposed to convert such notes into common stock of Epitope at a reduced
exchange price. On November 14, 1996, Epitope agreed to exchange $3.4 million
principal amount of Agritope notes for 250,367 shares of Epitope common stock at
an exchange price of $13.50 per share. Accordingly, Agritope recognized a charge
to results of operations of $1.2 million in the first quarter of fiscal 1997
representing the conversion expense. Concurrent with the note conversion,
Epitope made a $4.4 million capital contribution to Agritope.
F-12
<PAGE>
Agritope, Inc. and Subsidiaries
Notes to Consolidated Financial Statements, Continued
On November 11, 1996, the Company amended an agreement pursuant to which it
acquired its patented ethylene control technology in 1987. A co-inventor 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 will be included in Agritope's consolidated balance sheet
under the caption "Patents and proprietary technology" and will be amortized
over 15 years, the remaining life of the related patent.
Based on information available on December 26, 1996, and due 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 believes that the value of its
investment in affiliated companies has more than temporarily declined as both
companies are now expected to show operating losses in fiscal 1997. Accordingly,
Agritope recorded a non-cash charge to results of operations of $1.9 million
during the first quarter of fiscal 1997, reflecting the permanent impairment in
the value of its investment in affiliated companies.
F-13
<PAGE>
INTERIM FINANCIAL STATEMENTS
AGRITOPE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
6/30/97 9/30/96
(Unaudited)
ASSETS
Current assets
<S> <C> <C>
Cash and cash equivalents (Note 2)..................................... $ 453,389 $ 4,903,476
Marketable securities (Note 2)......................................... 1,785,338 -
Trade accounts receivable, net......................................... 185,447 264,986
Other receivables...................................................... 2,817 32,337
Inventories (Note 2)................................................... 1,987,506 509,745
Prepaid expenses....................................................... 23,913 812
------------ --------------
4,438,410 5,711,356
Property and equipment, net............................................ 2,443,498 1,286,196
Patents and proprietary technology, net................................ 1,293,369 510,244
Investment in affiliated companies (Note 3)............................ 318,490 2,448,623
Other assets and deposits.............................................. 29,950 140,513
------------ --------------
$ 8,523,717 $ 10,096,932
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities
Accounts payable $ 237,079 $ 91,474
Current portion of installment notes payable 4,186 -
Convertible notes (Note 4) - 3,620,003
Salaries, benefits and other accrued liabilities....................... 987,776 735,478
------------ --------------
1,229,041 4,446,955
Long-term portion of installment notes payable......................... 15,682 -
Minority interest in consolidated subsidiaries (Note 5)................ 769,799 215,407
Commitments and contingencies.......................................... - -
Shareholder's equity (Note 2)
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.............................. 44,046,853 36,714,932
Accumulated deficit.................................................... (37,537,658) (31,280,362)
------------ --------------
6,509,195 5,434,570
$ 8,523,717 $ 10,096,932
</TABLE>
F-14
<PAGE>
INTERIM FINANCIAL STATEMENTS
AGRITOPE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
6/30/97 6/30/96
Revenues
<S> <C> <C>
Product sales.......................................................... $ 566,239 $ -
Grants and contracts................................................... 101,507 514,030
-------------- --------------
667,746 514,030
Costs and expenses
Product costs.......................................................... 548,343 -
Research and development costs......................................... 1,250,390 990,673
Selling, general and administrative expenses........................... 2,264,043 1,064,398
-------------- --------------
4,062,776 2,055,071
Loss from operations................................................... (3,395,030) (1,541,041)
Other income (expense), net
Interest income........................................................ 197,804 273,313
Interest expense....................................................... (25,010) (192,103)
Valuation loss (Note 3)................................................ (1,900,000) -
Cost of debt conversion (Note 4)....................................... (1,216,654) -
Other, net............................................................. 81,594 -
-------------- --------------
(2,862,266) 81,210
Net loss............................................................... $ (6,257,296) $ (1,459,831)
Pro forma net loss per share .......................................... $ (3.13) $ (.73)
Pro forma weighted average number of shares
outstanding ........................................................ 2,000,000 2,000,000
</TABLE>
F-15
<PAGE>
INTERIM FINANCIAL STATEMENTS
AGRITOPE, INC. AND SUBSIDIARIES
CONDENSED COMBINED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY (UNAUDITED)
<TABLE>
<CAPTION>
COMMON ACCUMULATED
STOCK DEFICIT TOTAL
<S> <C> <C> <C>
Balances at September 30, 1996............................... $ 36,714,932 $ (31,280,362) $ 5,434,570
Compensation expense for stock awards........................ 23,437 - 23,437
Compensation expense for stock option grants................. 20,832 - 20,832
Capital contributed by Epitope, Inc. upon exchange of
convertible notes (Note 4)................................ 4,442,875 - 4,442,875
Minority interest investment
in subsidiary (Note 5).................................... 742,752 - 742,752
Cash from Epitope, Inc....................................... 2,102,025 - 2,102,025
Net loss for the period...................................... - (6,257,296) (6,257,296)
------------- ------------- --------------
Balances at June 30, 1997.................................... $ 44,046,853 $ (37,537,658) $ 6,509,195
</TABLE>
F-16
<PAGE>
INTERIM FINANCIAL STATEMENTS
AGRITOPE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
6/30/97 6/30/96
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net loss............................................................... $ (6,257,296) $ (1,459,831)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization.......................................... 383,302 188,885
Common stock issued as compensation for services....................... 23,437 4,029
Compensation expense for stock option grants........................... 20,832 171,873
Minority interest in subsidiary operating results...................... (208,310) -
Valuation loss......................................................... 1,900,000 -
Non-cash portion of cost of debt conversion............................ 1,149,054 -
Decrease (increase) in receivables..................................... 109,059 (82,338)
Increase in inventories................................................ (1,477,761) -
Decrease (increase) in prepaid expenses................................ (23,101) 55,284
Increase (decrease) in accounts payable and accrued liabilities........ 397,903 (203,821)
Other, net............................................................. 121,233 4,972
------------- -------------
Net cash used in operating activities.................................. (3,861,648) (1,320,947)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in marketable securities.................................... (1,785,338) -
Additions to property and equipment.................................... (1,471,276) (40,114)
Expenditures for patents and proprietary technology.................... (853,718) (459)
Investment in affiliated companies..................................... - (327,550)
------------- -------------
Net cash used in investing activities.................................. (4,110,332) (368,123)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of long-term debt............................................. 20,887 -
Principal payments on long-term debt................................... (241,019) (39,507)
Minority interest investment in subsidiary............................. 1,640,000 -
Cash from Epitope, Inc................................................. 2,102,025 2,527,809
------------- -------------
Net cash provided by financing activities.............................. 3,521,893 2,488,302
Net increase (decrease) in cash and cash equivalents................... (4,450,087) 799,232
Cash and cash equivalents at beginning of period....................... 4,903,476 4,246,687
------------- -------------
Cash and cash equivalents at end of period............................. $ 453,389 $ 5,045,919
</TABLE>
F-17
<PAGE>
INTERIM FINANCIAL STATEMENTS
AGRITOPE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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. Agritope is a wholly owned subsidiary of Epitope, Inc.
("Epitope"), an Oregon corporation engaged in the development and marketing of
medical diagnostic products.
The interim condensed financial statements included herein are unaudited;
however, in the opinion of management, the interim data include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial position and results of operations for the interim
periods. These condensed financial statements should be read in conjunction with
the full year financial statements and notes thereto included elsewhere in this
Information Statement/Prospectus. Results of operations for the nine-month
period ended June 30, 1997 are not necessarily indicative of the results of
operations expected for the full fiscal year.
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 ______ shares of Agritope common stock in a private placement to certain
investors for an aggregate price of $______ million, immediately after the
spin-off. In addition, minority holders of Vinifera common and preferred stock
are expected to be permitted to exchange their Vinifera stock for Agritope
common stock immediately after the spin-off in a ratio of one share of Agritope
common stock for every ______ shares of Vinifera stock.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation. The accompanying consolidated financial statements of
Agritope include the assets, liabilities, revenues and expenses of Agritope and
its majority owned subsidiaries. All significant intercompany transactions and
balances have been eliminated. Cash, cash equivalents and marketable securities
allocated by Epitope to Agritope have been reflected as common stock in the
consolidated financial statements.
Inventories. Inventories consisted principally of growing grapevine plants at
Vinifera. The components of inventory are summarized as follows:
<TABLE>
<CAPTION>
6/30/97 9/30/96
(Unaudited)
<S> <C> <C>
Work-in-process.............................................. $ 1,321,299 $ 471,208
Finished goods............................................... 666,207 38,537
------------ -----------
$ 1,987,506 $ 509,745
</TABLE>
Pro Forma 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 EPS is similar to fully diluted EPS. Since
common stock equivalents were excluded as anti-dilutive in the computation of
EPS for all periods presented, basic EPS would have been the same as primary
EPS.
F-18
<PAGE>
Interim Financial Statements
Agritope, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited), Continued
NOTE 3 INVESTMENT IN AFFILIATED COMPANIES
Agritope's investment in affiliated companies includes its 9 percent interest in
UAF, Limited Partnership, a fresh flower distribution operation in Charlotte,
North Carolina, and its 19.5 percent interest in Petals USA, Inc., an affiliate
of a Canadian fresh flower wholesaler. During the first quarter of fiscal 1997,
Agritope determined that the value of its investment in these affiliated
companies had more than temporarily declined and, accordingly, recorded a
non-cash charge to results of operations of $1.9 million reflecting the
permanent impairment in the value of its investment in these companies.
NOTE 4 CONVERTIBLE NOTES
In November 1996, Epitope exchanged $3.4 million 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 non-cash charge to
results of operations of $1.2 million in the first quarter of 1997 representing
the conversion expense. Concurrent with the note conversion, Epitope made a $4.4
million capital contribution to Agritope. On June 30, 1997, Agritope paid in
full the remaining $240,000 principal amount outstanding.
NOTE 5 SHAREHOLDER'S EQUITY
In the first quarter of 1997, a minority shareholder in Vinifera contributed
$100,000 to Vinifera in satisfaction of a stock subscription agreement.
In the third quarter of 1997, Agritope sold 770,000 shares of common stock of
Vinifera to outside parties for $1.5 million 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 the percentage ownership by
Agritope in Vinifera voting stock from 76 percent to 61 percent.
F-19
<PAGE>
PART II
INFORMATION NOT REQUIRED IN INFORMATION STATEMENT/PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
- -------- --------------------------------------------
Amount
------
SEC Registration Fee............................... $ 100
Accounting Fees and Expenses*...................... $ 25,000
Legal Fees and Expenses*........................... $ 30,000
Blue Sky Fees and Expenses*........................ $ 4,900
Printing, including Registration Statement,
Information Statement/Prospectus, etc.*.......... $ 50,000
Miscellaneous Expenses*............................ $ 35,000
--------
TOTAL EXPENSES*.................. $145,000
- ------------
*Estimated
Item 14. Indemnification of Directors and Officers.
- -------- ------------------------------------------
Indemnification. Generally, the Oregon Business Corporation Act (the
"Oregon Act") requires the indemnification of an individual made a party to a
proceeding because the individual is or was a director or officer of the
corporation against reasonable expenses incurred by the director or officer in
the proceeding if the individual is wholly successful on the merits or
otherwise. In addition, the Oregon Act 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;
(d) In the case of any proceeding by or in the right of the
corporation, the individual was not adjudged liable to the corporation;
and
(e) In connection with any proceeding (other than a proceeding
by or in the right of the corporation) charging improper personal
benefit to the individual, the individual was not adjudged liable on
the basis that he or she improperly received personal benefit.
Generally, when appropriate, the Oregon Act also authorizes a court to
order indemnification, whether or not the above standards of conduct have been
met, if the court determines that the officer or director is entitled to
mandatory indemnification under the Oregon Act or is fairly and reasonably
entitled to indemnification in view of
II-1
<PAGE>
all the relevant circumstances. In addition, the Oregon Act 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
articles of incorporation or bylaws, or under any agreement, action of its board
of directors, vote of shareholders, or otherwise.
Article 6 of the restated articles 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 restated bylaws
of the Registrant requires such indemnification for 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 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 Oregon Act, restated articles of incorporation, bylaws,
agreement, action of the shareholders 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 has
entered into indemnification agreements with all of its officers and directors,
the forms of which are filed as Exhibits 10.10 and 10.11 hereto. Each
indemnification agreement makes provisions of the Oregon Act 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 restated bylaws also set forth procedures for the defense of
claims by the Registrant.
Section 60.367 of the Oregon Revised Statutes (a part of the Oregon
Act) 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 shareholders who
accepted the dividend or distribution, knowing the dividend or distribution was
made in violation of the Oregon Act or the articles of incorporation. The
section also provides that any such director shall be entitled to contribution
from the other directors who voted for or assented to the dividend or
distribution without complying with the applicable standards of conduct
prescribed by the Oregon Act.
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 effects 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 carries 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 has not engaged in sales of unregistered securities in the
last three years except as described under "Related Transactions."
II-2
<PAGE>
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.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the city of Beaverton,
state of Oregon, on August 28, 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
Registration Statement has been signed on August 28, 1997, by the following
persons in the capacities indicated.
Signature Title
- --------- -----
* ADOLPH J. FERRO, PH.D. President, Chief Executive Officer
Adolph J. Ferro, Ph.D. 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
By /s/ GILBERT N. MILLER
Gilbert N. Miller
(Attorney-in-Fact)
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Number Description
- ------ -----------
<S> <C>
2 Form of Separation Agreement between Epitope, Inc. ("Epitope"), and Agritope, Inc.
("Agritope")
3.1 Current Restated Articles of Incorporation of Agritope
3.2 Proposed form of Restated Articles of Incorporation of Agritope
3.3 Current Restated Bylaws of Agritope
3.4 Proposed form of Restated Bylaws of Agritope
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 A Participating Cumulative Preferred Stock and as Exhibit B the
form of Rights Certificate
5. Form of Opinion of Tonkon, Torp, Galen, Marmaduke & Booth
8.* Form of Opinion of Miller, Nash, Wiener, Hager & Carlsen LLP
10.1* Form of Transition Services and Facilities Agreement between Epitope and Agritope
10.2* Form of Tax Allocation Agreement between Epitope and Agritope
10.3* Form of Employee Benefits Agreement between Epitope and Agritope
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 Joseph A. Bouckaert
10.10 Form of Indemnification Agreement for directors
10.11 Form of Indemnification Agreement for officers
II-5
<PAGE>
10.12* Lease of Land and Certain Improvements located at 4288 Bodega Avenue entered into
by and between Gianai Neve and Maria Meve, Landord, and Vinifera, Inc., Tenant,
dated as of February 1, 1996
10.13* Option to License and Research Support Agreement between the Salk Institute for
Biological Studies and Epitope dated February 25, 1997, and form of Assignment
between Agritope and Epitope
10.14 Superior Tomato Associates, L.L.C. Operating Agreement dated February 19, 1996
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, Galen, Marmaduke & Booth (included in Exhibit 5)
23.3* Consent of Miller, Nash, Wiener, Hager & Carlsen LLP (included in Exhibit 8)
24. Powers of attorney
27. Financial Data Schedule
- ----------------------
</TABLE>
Other exhibits listed in Item 601 of Regulation S-K are not applicable.
* To be filed by amendment
II-6
SEPARATION AGREEMENT
between
Epitope, Inc.
and
Agritope, Inc.
Dated ________________, 1997
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
PAGE
ARTICLE 1
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................................................................. 8
---------------------------
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..................................... 11
-------------------------------------------------------
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...................................................................... 12
----------------------
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
------------------------------
6.2 Access to Information....................................................................... 12
---------------------
6.3 Production of Witnesses and Individuals..................................................... 13
---------------------------------------
6.4 Retention of Records........................................................................ 13
--------------------
- i -
<PAGE>
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.................................................................................... 19
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9.12 Severability................................................................................ 20
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9.13 No Waiver................................................................................... 20
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9.14 Survival.................................................................................... 20
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9.15 Counterparts................................................................................ 20
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</TABLE>
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SEPARATION AGREEMENT
THIS SEPARATION AGREEMENT (this "Agreement") is entered into
by and between Epitope, Inc., an Oregon corporation ("Epitope"), and Agritope,
Inc., an Oregon corporation ("Agritope"), as of _________, 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, no par value, 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 Unit: each Core Company and Related Company.
Core Company: each of Agritope, Vinifera, and Agrimax Floral
Products, Inc., a Minnesota corporation.
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, 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.
Code: the Internal Revenue Code of 1986, as amended.
Commission: the Securities and Exchange Commission.
Distribution Date: the effective date of the Distribution, as
determined by the Epitope Board.
Distribution Prospectus: the prospectus to be distributed to
holders of Epitope Stock in connection with the Distribution.
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.
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<PAGE>
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.
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 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.
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<PAGE>
Private Placement: the sale of Agritope Stock 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.
Vinifera Share Exchange: the exchange of shares of Vinifera
common stock or Vinifera preferred stock held by shareholders of Vinifera other
than Agritope, for shares of Agritope Stock.
Warrant Transaction: any sale of Epitope Stock upon the
exercise of outstanding warrants to purchase Epitope Stock.
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 interested in investing in Agritope in a Private Placement to
occur immediately following the
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<PAGE>
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 shareholder 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 Distribution 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, the
Distribution 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.
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 Distribution 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 ______ shares of
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<PAGE>
Epitope Stock 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 ______ 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 Distribution 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 any information provided
in connection with the Warrant Transaction, other than information listed in
Section 4.2(iii), 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, or that the Warrant Transaction otherwise
violated the applicable law of any country; (iii) any claim that the information
included in the Distribution Prospectus or the Form S-1 under (A) the captions
"Summary -- Distributing Corporation and Business," "-- Conditions to the
Distribution," "-- 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 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; (iv) 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 (v) breaches of this Agreement or any
Related Agreement by Epitope.
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<PAGE>
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 or Vinifera Share Exchange, other than the information
listed in Section 4.1(iii), 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, or that the Private Placement or
Vinifera Share Exchange 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(iii) 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 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 (v) 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.
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<PAGE>
(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 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,
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<PAGE>
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.
(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.
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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 Prospectus or the related Form S-1 or used in
connection with the Warrant Transaction, Private Placement, or Vinifera Stock
Exchange, 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, 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
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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 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 only one common officer.
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. 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.
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<PAGE>
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 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
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<PAGE>
(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.
(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 five 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
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<PAGE>
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 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
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<PAGE>
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 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.
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<PAGE>
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 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
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<PAGE>
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 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.
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 certified mail, postage prepaid, properly
addressed and return-receipt requested, to the party as follows:
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<PAGE>
If to Epitope: Epitope, Inc.
8505 S.W. Creekside Place
Beaverton, Oregon 97009
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 Distribution 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.
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.
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<PAGE>
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.
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 ---------------------------------------
Title ------------------------------------
AGRITOPE, INC.
By ---------------------------------------
Title ------------------------------------
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<PAGE>
The undersigned consent to and agree to be bound by the terms
of this agreement.
VINIFERA, INC.
By
Title
AGRIMAX FLORAL PRODUCTS, INC.
By
Title
[Exhibits omitted.]
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RESTATED ARTICLES OF INCORPORATION
OF
AGRITOPE, INC.
ARTICLE I
The name of this corporation (the Corporation) is Agritope, Inc.
ARTICLE II
A. The aggregate number of shares of authorized capital stock which
the Corporation shall have authority to issue shall be in such amounts and
divided into classes as follows:
Title of Class No. of Shares
-------------- -------------
Preferred Stock, no 1,000,000
par value
Common Stock, no 20,000,000
par value
Each share of Common Stock outstanding immediately prior to the time these
restated articles become effective shall be changed into 2,000 shares of Common
Stock, and certificates evidencing the additional shares shall be issued thereby
effecting a 2,000-for-1 split of the issued Common Stock.
B. The preferences, limitations, and relative rights of the shares
of each class shall be as follows:
1. Preferred Stock.
a. Division into Series. The board of directors shall have
authority to divide the Preferred Stock into as many series as the
board of directors shall from time to time determine, and to issue
the Preferred Stock in such series. The board of directors shall
determine the number of shares comprising each series, which number
may, unless otherwise provided by the board of directors in creating
such series, be increased or decreased from time to time by action
of the board of directors. Each series shall be so designated as to
distinguish the shares thereof from the shares of all other series.
- 1 -
<PAGE>
b. Authority of Board of Directors to Determine Preferences,
Limitations, and Relative Rights. The board of directors shall have
authority to determine, except as otherwise prescribed in this
Article II or by law, the preferences, limitations, and relative
rights, including voting rights, of the shares of Preferred Stock
before the issuance of any shares of such class or the preferences,
limitations, and relative rights, including voting rights, of the
shares of any series of Preferred Stock before the issuance of any
shares of such series. All shares of any such series shall have
preferences, limitations, and relative rights, including voting
rights, identical with those of other shares of the same series and,
except to the extent otherwise provided in the description of such
series, of those of other series of the Preferred Stock.
2. Common Stock.
Subject to the preferences, limitations, and relative rights
of the Preferred Stock, or any series thereof, the holders of Common
Stock shall have all rights of shareholders, including, without
limitation, (i) unlimited voting rights on all corporate matters on
the basis of one vote per share, except as such voting rights may be
limited or required to be shared together with another class or
series as provided by law, and (ii) the right to receive the net
assets of the Corporation upon dissolution.
3. Denial of Preemptive Rights.
No shareholder of the Corporation shall, by reason of his
holding shares of any class, have any preemptive or preferential
rights to purchase or subscribe to any shares of the Corporation now
or hereafter to be authorized, or any notes, debentures, bonds, or
other securities convertible into or carrying options or warrants to
purchase shares of any class now or hereafter to be authorized
(whether or not the issuance of any such shares or such notes,
debentures, bonds, or other securities would adversely affect the
dividend or voting rights of such shareholder) other than such
rights, if any,
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<PAGE>
as the board of directors in its discretion from time to time may
grant and at such price as the board of directors may fix; and the
board of directors may issue shares of the Corporation or any notes,
debentures, bonds, or other securities, convertible into or carrying
options or warrants to purchase shares without offering any such
shares, either in whole or in part, to the existing shareholders.
ARTICLE III
The Corporation shall indemnify each of its directors to the fullest
extent permissible under the Oregon Business Corporation Act, as the same exists
or may hereafter be amended, against all expense, liability, and loss
(including, without limitation, attorney fees) incurred or suffered by such
person by reason of or arising from the fact that such person 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 foreign or domestic corporation, partnership, joint venture, trust,
employee benefit plan, or other enterprise, and such indemnification shall
continue as to a person who has ceased to be a director, officer, partner,
trustee, employee, or agent and shall inure to the benefit of his or her heirs,
executors, and administrators. The Corporation may, by action of the board of
directors, provide indemnification to officers, employees, and agents of the
Corporation who are not directors, with the same scope and effect as the
indemnification provided in this Article III to directors. The indemnification
provided in this Article III shall not be exclusive of any other rights to which
any person may be entitled under any statute, bylaw, agreement, resolution of
shareholders or directors, contract, or otherwise.
ARTICLE IV
Directors of the Corporation shall not be liable to the Corporation
or its shareholders for monetary damages for conduct as directors except to the
extent that the Oregon Business Corporation Act, as it now exists or may
hereafter be amended, prohibits elimination or limitation of director liability.
No repeal or amendment of this Article IV or of the Oregon Business Corporation
Act shall adversely affect any right or protection of a director for actions or
omissions prior to the repeal or amendment.
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AGRITOPE, INC.
RESTATED ARTICLES OF INCORPORATION
Pursuant to Section 60.451 of the Oregon Business Corporation Act
(the "Act"), Agritope, Inc. adopts the following Restated Articles of
Incorporation which shall supersede the existing Restated Articles of
Incorporation and all amendments thereto:
ARTICLE 1
NAME
The name of the corporation is Agritope, Inc.
ARTICLE 2
PURPOSE
The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the Act.
ARTICLE 3
CAPITAL STOCK
SECTION 1. AUTHORIZED CAPITAL STOCK. The corporation is
authorized to issue an aggregate of 50,000,000 shares of its capital stock,
no par value, which shall be divided into classes as follows:
Class Number of Shares
----- ----------------
Common Stock 40,000,000 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 shareholders. 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 expressly granted to
the Preferred Stock, are reserved to and vested in the Common Stock.
Page 1 - Restated Articles of Incorporation
<PAGE>
SECTION 3. PREFERRED STOCK. Subject to limitations prescribed by the
Act, 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
(g) such other powers, rights, designations, preferences,
qualifications, limitations and restrictions as the Board of Directors may
desire to so fix.
Page 2 - Restated Articles of Incorporation
<PAGE>
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 4
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 shareholders:
(a) Number; Eligibility for Service. Except as otherwise provided in
these Restated Articles 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 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
Page 3 - Restated Articles of Incorporation
<PAGE>
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 shareholders 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
shareholders, 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
shareholders.
(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 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 shareholders, the election, term
of office, filling of vacancies and other features of such
directorships shall be governed
Page 4 - Restated Articles of Incorporation
<PAGE>
by the terms of these Restated Articles 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 4 unless
expressly provided by such terms.
(c) Removal of Directors. Except as otherwise provided in these
Restated Articles 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 5
LIMITATION OF LIABILITY
To the fullest extent permitted by the Act, 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 shareholders for monetary damages for conduct
as a director occurring on or after the date of adoption of this provision. Any
amendment to or repeal of this provision or the Act 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 Act 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 provision, however, shall not
eliminate or limit the liability of a director for:
(a) Any breach of the director's duty of loyalty
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<PAGE>
to the corporation or its shareholders;
(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 60.367 of the Act;
(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 Act is amended, after this Article 5 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 Act, as so amended.
ARTICLE 6
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 Act, 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 indemnification provided in this Article 6 shall be in addition to any rights
to which any such person may otherwise be entitled under any future amendment to
these Restated Articles of Incorporation or under
Page 6 - Restated Articles of Incorporation
<PAGE>
any bylaw, agreement, statute, policy of insurance, vote of shareholders 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 7
RIGHT TO AMEND ARTICLES
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 Oregon 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
shareholders, directors or any other persons whomsoever by or pursuant to these
Restated Articles of Incorporation in their present form or as hereafter amended
are granted subject to the rights reserved in this Article 7.
ARTICLE 8
LIMITATION ON AMENDMENT OF ARTICLES
Notwithstanding any other provision of these Restated Articles 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 4, 5, 6, 7 and 8 of these Restated Articles of
Incorporation.
ARTICLE 9
AMENDMENT OF BYLAWS
In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to adopt, repeal, alter,
amend or rescind the bylaws of the corporation. In addition, the bylaws of the
corporation may be adopted, repealed, altered, amended, or rescinded by the
affirmative vote of the holders of not less than a majority of the outstanding
shares of the capital stock of the corporation entitled to vote thereon, voting
together as a single class.
Page 7 - Restated Articles of Incorporation
BYLAWS
OF
AGRITOPE, INC.
ARTICLE I
Shareholders
------------
Section 1. Annual Meeting. The annual meeting of the shareholders of
the corporation shall be held on the fourth Monday of February of each year for
the purpose of electing directors and for the transaction of such other business
as may come before the meeting. In case of incomplete financial or other
information, unavailability of shareholders, officers, directors or other
persons whose attendance at the annual meeting would be desirable, or other
similar circumstances, the president in his discretion may postpone the annual
meeting. If the annual meeting is postponed, or if the election of directors
shall not be held on the day designated herein for any annual meeting of the
shareholders, or at any adjournment thereof, a special meeting shall be held as
soon as may be convenient as determined by the president, either in lieu of the
annual meeting if the annual meeting was postponed or for the election of
directors if the election was not held at the annual meeting or at any
adjournment thereof. Written or printed notice, stating the place, day, hour and
purpose of the special meeting shall be delivered not less than ten nor more
than sixty days before the date of the special meeting, either personally or by
mail, by the president or, at the direction of the president, by the secretary
to each shareholder of record entitled to vote at the meeting. If mailed, such
notice shall be deemed to be delivered when deposited in the United States mails
addressed to the shareholder at his address as it appears on the stock transfer
books of the corporation, with postage thereon prepaid. The first annual meeting
shall be held beginning with the year 1989.
Section 2. Special Meetings. Special meetings of the shareholders
may be called for any purpose or purposes by the president, or as provided in
the Oregon Business Corporation Act. Notice of special meetings shall be given
by the president or, at the direction of the president, by the secretary or
assistant secretary to each shareholder of record entitled to vote at such
meetings in the same manner as hereinabove provided in Section 1 of this
Article.
Section 3. Place of Meeting. Meetings, annual or special, of the
shareholders shall be held at such place either within or without the state of
Oregon as shall be designated by
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<PAGE>
the Board of Directors, or in the absence of such a designation, at the main
office of the corporation.
Section 4. Quorum; Waiver of Notice. A majority of the issued and
outstanding shares entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of shareholders. The affirmative vote of the
majority of the outstanding shares represented at a meeting and entitled to vote
on the subject matter shall be the act of the shareholders except as otherwise
provided under the Oregon Business Corporation Act or the articles of
incorporation. If a quorum be not present at any annual or special meeting, a
majority of the shareholders present, either in person or by proxy, may adjourn
to such time and place as may be decided upon by the holders of the majority of
the shares present, and notice of such adjournment shall be given in accordance
with Section 1 of this Article; but if a quorum be present, adjournment may be
taken from day to day or to such time and place as may be decided by the holders
of the majority of the shares present, and no notice of such adjournment need be
given. No business shall be transacted at an adjourned meeting that could not
have been transacted at the meeting from which the adjournment was taken.
Whenever any notice is required to be given pursuant to statute, to the articles
of incorporation or to these bylaws a waiver thereof signed by the shareholder
entitled to notice, whether before or after the time stated therein, shall be
deemed equivalent thereto. Any shareholder attending a meeting without objection
thereto shall be deemed to have waived notice of such meeting. Notice otherwise
complying with the terms hereof may be given by prepaid telegram as the
equivalent of notice by mail.
Section 5. Proxies. At all meetings of shareholders, a shareholder
may vote by proxy executed in writing by the shareholder or by his duly
authorized attorney in fact. Such proxy shall be filed with the secretary of the
corporation before or at the time of the meeting. No proxy shall be valid after
11 months from the date of its execution, unless otherwise provided in the
proxy.
ARTICLE II
Board of Directors
------------------
Section 1. Board of Directors. The business and affairs of the
corporation shall be managed by a Board of Directors.
Section 2. Number, Election and Term of Office. The number of
directors shall be not less than one or more than five. The initial Board of
Directors shall be those named in the articles of incorporation, and succeeding
directors shall thereafter be elected by a vote of the shareholders at the
annual
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<PAGE>
meeting of the shareholders or at a special meeting called for that purpose. The
number of directors shall be as set forth in these bylaws and as the same may be
amended from time to time as provided in Article VIII. In the event of failure
to hold or postponement of the annual meeting of shareholders as herein
provided, succeeding directors may be elected at any time thereafter at a
special meeting of shareholders called for that purpose. Each director shall be
elected to serve for a term of one year and until his successor shall have been
elected, unless removed as hereinafter provided. A director may resign at any
time by giving written notice, and the resignation shall become effective at the
time stated in such notice.
Section 3. Meetings. A regular annual meeting of the Board of
Directors shall be held immediately after, and at the same place as, the annual
meeting of shareholders. No notice of the annual meeting other than this bylaw
need be given unless the meeting is to be held at a place other than the main
office of the corporation, in which case the notice shall be given in the manner
provided in Section 1 of Article I of these bylaws. The Board of Directors may
provide, by resolution, the time and place for the holding of additional regular
meetings without other notice than such resolution. Special meetings of the
Board of Directors may be called by or at the request of the president or any
director. Notice of any special meeting shall be given at least two (2) days
prior thereto by written notice delivered personally or mailed to each director
at his residential or business address or by telegram. Directors may waive
notice of meetings of the Board of Directors, and a waiver thereof signed by the
director entitled to notice, whether before or after the time stated therein,
shall be deemed equivalent thereto. Attendance of a director at a meeting shall
constitute a waiver of notice of such meeting, except where the director attends
the meeting for the express purpose of objecting to the transaction of any
business because the meeting is not lawfully called or convened.
Section 4. Removal. The entire Board of Directors or any individual
director, at a special meeting of the shareholders called for that purpose, may
be removed from office by a vote of shareholders holding a majority of the
outstanding shares entitled to a vote at an election of directors. The vacancies
resulting from their removal shall be filled in the manner provided in Article
II, Section 6.
Section 5. Quorum and Voting. A majority of the elected and acting
directors shall constitute a quorum for the transaction of business. If at any
meeting of the Board there shall be less than a quorum present, a majority of
the directors present may adjourn to such time and place as may be decided upon
by the majority of the directors present, and notice of such adjournment shall
be given in accordance with Section 3 of this
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<PAGE>
Article; but if a quorum be present, adjournment may be taken from day to day or
to such time and place as may be decided by the majority of the directors
present, and no notice of such adjournment need be given. When a quorum exists,
action may be taken by a majority vote of the directors present.
Section 6. Vacancies. Vacancies in the Board of Directors shall be
filled by a majority vote of the remaining directors though less than a quorum.
In the event there are no remaining directors, the shareholders shall fill the
vacancies in the Board of Directors at the next annual meeting of shareholders
or at a special meeting of shareholders called for that purpose. A director
selected to fill a vacancy shall hold office until his successor shall have been
duly elected. During the existence of any vacancy the remaining directors shall
possess and may exercise all powers vested in the Board of Directors. Any
directorship to be filled by reason of an increase in the number of directors
shall be filled by election at an annual meeting or special meeting of
shareholders called for that purpose.
ARTICLE III
Executive Committee
-------------------
The majority of the Board of Directors may designate two or more
directors to constitute an executive committee, which committee between meetings
of the Board of Directors shall have and may exercise all of the authority and
powers of the Board of Directors in the management of the business and affairs
of the corporation, except as prohibited pursuant to the Oregon Business
Corporation Act.
ARTICLE IV
Officers and Agents
-------------------
Section 1. Executive Officers.
(a) Number: The officers of the corporation shall consist of a
president, that number of vice presidents which the Board of Directors may from
time to time determine and with such designations and seniority as the board may
assign and a secretary. Any two or more offices may be held by one person.
(b) Election and Tenure: The officers of the corporation shall be
elected at the organizational meeting and thereafter at each regular annual
meeting. In the event of a failure to hold the annual meeting as herein
provided, officers may be elected at any time thereafter at a special meeting of
directors called for that purpose. Each officer shall hold office for the term
of one year and until his successor shall be elected except where expressly
provided to the contrary in a
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<PAGE>
contract authorized by the Board of Directors. All officers and agents shall be
subject to removal at any time by the vote of a majority of the entire Board of
Directors whenever in the judgment of the Board the best interests of the
corporation will be served by such removal, without prejudice, however, to any
contract rights of the person so removed.
(c) Vacancies: A vacancy in any office shall be filled by the Board
of Directors at any regular meeting, or at any special meeting called for that
purpose.
(d) Additional Officers and Agents: The Board of Directors may also
elect that number of vice presidents which the Board of Directors may from time
to time determine and with such designations and seniority as the Board of
Directors may assign, a treasurer, one or more assistant secretaries, one or
more assistant treasurers, and such other officers or agents as it may deem
necessary, with such authority and duties as from time to time may be prescribed
by the Board of Directors.
Section 2. President. The president shall exercise such powers and
perform such duties as may be prescribed by the Board of Directors or by the
chief executive officer. In the absence or incapacity of the chief executive
officer, and at the direction of the Board of Directors, he is authorized to
sign all certificates of stock, and all deeds, leases, notes, mortgages and
contracts, including those in any way affecting real property or interests
therein, as the same may be required in the regular course of the corporation's
business.
Section 3. Vice Presidents. The vice presidents, in the order of
seniority as designated by the Board of Directors, shall in the absence or
disability of the president exercise the powers and perform the duties of the
president. Each vice president shall also exercise such other powers and perform
such other duties as shall be prescribed by the directors, and such powers and
duties of the president as may be designated by the president.
Section 4. Secretary. The secretary shall give such notices of
meetings of the shareholders and of the Board of Directors as required by these
bylaws, and shall keep a record of the proceedings of all such meetings. Such
record shall be kept at the principal or registered office of the corporation.
He shall have custody of all books and records and papers of the company except
those which are in the care of the treasurer or some other person authorized to
have custody and possession thereof by resolution of the Board of Directors. He
shall, with the president, sign all certificates of stock of the corporation and
shall affix the seal of the corporation to such certificates of stock. He is
authorized to sign with the president or vice president in the name of the
corporation all deeds, notes,
Page 5 - BYLAWS
<PAGE>
mortgages and contracts including those in any way affecting real property or
interests therein and shall affix the seal of the corporation thereto when
required in the regular course of business. He shall submit such reports to the
Board of Directors as may be requested by them from time to time.
Section 5. Assistant Secretary. The assistant secretary shall, in
the absence or disability of the secretary, exercise the powers and perform the
duties of the secretary. He shall also exercise such other powers and perform
such other duties as may be prescribed by the Board of Directors and such powers
and duties of the secretary as may be designated by the president or secretary.
Section 6. Treasurer. The treasurer shall from time to time make
such reports to the officers, Board of Directors and shareholders as may be
required, and shall perform such other duties as the Board of Directors shall
from time to time delegate to him.
Section 7. Assistant Treasurer. The assistant treasurer shall, in
the absence or disability of the treasurer, exercise the powers and perform the
duties of the treasurer. He shall also exercise such other powers and perform
such other duties as may be prescribed by the Board of Directors and such powers
and duties of the treasurer as may be designated by the president or treasurer.
Section 8. Chairman of the Board. The chairman of the board, if one
is elected by the Board of Directors, shall preside at and conduct all meetings
of the shareholders and directors. The Chairman shall exercise such other powers
and perform such other duties as shall be prescribed by the directors from time
to time.
Section 9. Chief Executive Officer. The chief executive officer
shall have general and active charge of the business and management of the
corporation, subject to control by the Board of Directors. When present, he
shall preside at all meetings of the shareholders and directors. He is
authorized to sign all certificates of stock, and all deeds, leases, notes,
mortgages and contracts, including those in any way affecting real property or
interests therein, as the same may be required in the regular course of the
corporation's business. He shall have the power to appoint and discharge agents
and employees, subject to approval of the Board of Directors.
Section 10. Chief Operating Officer. The chief operating officer, if
one is elected by the Board of Directors, shall be subject to control by the
Board of Directors. He shall in the absence of the chief executive officer
exercise the powers and perform the duties of the chief executive officer. He
shall
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<PAGE>
also exercise such other powers and perform such other duties as shall be
prescribed by the Board of Directors, and such powers and duties of the chief
executive officer as may be designated by the chief executive officer.
ARTICLE V
Indemnification
---------------
Section 1. Right to Indemnification. The corporation shall indemnify
any director or former director of the corporation or any person who may have
served at its request as a director of another corporation in which it owns
shares of capital stock or of which it is a creditor against expenses and
liability actually and necessarily incurred by such director in connection with
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative and whether formal or informal, in
which such director is a party by reason of being or having been such director,
except in relation to matters as to which indemnification is prohibited by the
Oregon Business Corporation Act as it shall be amended from time-to-time (the
"Act"); but such indemnification shall not be deemed exclusive of any other
rights to which such director may be entitled, under any bylaw, agreement,
general or specific action of the board of directors, vote of shareholders or
otherwise. As used herein, "expenses" shall include without limitation expenses
of investigations, judicial or administrative proceedings or appeals, attorney
fees and disbursements and any expenses of establishing a right to
indemnification. "Liability" shall include the obligation to pay a judgment,
settlement, penalty, fine, including an excise tax assessed with respect to an
employee benefit plan, or reasonable expenses incurred with respect to an
action, suit or proceeding in which a director is entitled to indemnification
hereunder.
Section 2. Procedure for Indemnification. After the final
disposition of any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative and whether formal or
informal, in which a director may be entitled to indemnification, such director
may send to the corporation a written request for indemnification. The
corporation shall, in accordance with the provisions of the Act regarding the
determination and authorization of indemnification, make a finding whether the
indemnification requested is permitted by the laws of the state of Oregon no
later than 60 days following receipt by the corporation of such request. The
corporation shall cause the indemnification requested to be authorized and paid
unless the corporation finds that the indemnification requested is not so
permitted. The director shall be given an opportunity to be heard and to present
evidence in connection with the consideration of the party or parties
determining the right to indemnification under the Act. If the
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<PAGE>
corporation does not authorize indemnification hereunder, the director shall
have the right to seek court-ordered indemnification in accordance with the
provisions of the Act. In any such action, neither the making of, nor the
failure to make, any finding by the Company that indemnification of the director
is proper or not proper in the circumstances shall be a defense to such action
or create a presumption that the director has not met the standard of conduct
required by the Act. In making its determination and in any court proceeding,
the corporation shall have the burden of proving that the director has not met
the standards of conduct required by the Act to authorize indemnification.
Section 3. Procedure for Advancement of Expenses. The corporation
shall pay for or reimburse the reasonable expenses incurred by a director as a
result of being party to a threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative and whether
formal or informal, in advance of final disposition of such action, suit or
proceeding promptly upon receipt of a written request for payment of such
expenses that is in accordance with requirements of the Act for such written
statement. Such written statement shall also include or be accompanied by
documentation of the expenses incurred and, when available, such documentation
of expenses shall include copies of bills or statements evidencing the expenses
incurred. If the requirements of this provision are met, the corporation shall
pay the amount requested promptly notwithstanding the absence of a final
disposition of the action, claim or proceeding.
Section 4. Indemnification of Officers, Employees and Agents. The
corporation may, by action of its board of directors from time to time, provide
indemnification and pay expenses in advance of the final disposition of a
proceeding to officers, employees and agents of the corporation to the same
extent and effect as provided in this Article with respect to the
indemnification and advancement of expenses of directors of the corporation or
pursuant to rights granted pursuant to, or provided by, the Act or otherwise.
Section 5. Insurance. The corporation may, but shall not be required
to, purchase and keep in force a policy or policies of liability insurance on
behalf of its officers and directors against liability and expenses incurred in
any action, suit or proceeding, whether civil, criminal, administrative or
investigative and whether formal or informal.
Section 6. Nonexclusivity; Nature of Rights. The indemnification
provided herein shall not be deemed exclusive of any other rights consistent
with the laws of the state of Oregon to which a director may be entitled under
the corporation's articles of incorporation, bylaws or any other agreement, vote
of
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<PAGE>
shareholders, or otherwise, both as to action in the director's official
capacity and as to action in another capacity while holding office, and shall
continue notwithstanding that the director may have ceased to be connected with
the corporation. The right of indemnification provided for herein shall be
deemed to create contractual rights in favor of directors entitled to
indemnification hereunder and shall be applicable to claims commenced after the
adoption hereof, whether arising from acts or omissions occurring before or
after the adoption hereof. The right of indemnification provided for herein may
not be amended or repealed so as to limit in any way the indemnification
provided for herein with respect to any acts or omissions occurring prior to any
such amendment or repeal.
ARTICLE VI
Action Without a Meeting
------------------------
Section 1. Written Consent. Any action required to be taken or which
may be taken at a meeting of the shareholders or directors may be taken without
a meeting if a consent in writing setting forth the action so taken shall be
signed by all of the shareholders or directors entitled to vote; and such
consent shall have the same force and effect as a unanimous vote of such
shareholders or directors.
Section 2. Electronic Communications. The Board of Directors, or any
committee designated by the Board, may hold any meeting of the Board, or
committee, by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can
simultaneously hear each other. Participation in such a meeting shall constitute
presence in person at the meeting.
ARTICLE VII
Shares
------
Section 1. Certificates. Shares of stock of the corporation shall be
represented by stock certificates which shall be in a form adopted by the Board
of Directors, provided all such stock certificates shall be consecutively
numbered, and shall express upon their face the number thereof, the date of
issuance, the number of shares for which and the person to whom issued and the
class thereof, and all such stock certificates shall be signed by the president
or a vice president and by the secretary or assistant secretary and may be
sealed with the corporate seal, if any. In addition, each certificate shall
express upon its face that the corporation is organized under the laws of the
state of Oregon and shall also express the par value of the shares represented
by the certificate, or shall state that the shares are without par value, as may
be appropriate. Each
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certificate shall state upon the face or back thereof, in full or in summary,
all of the designations, preferences, limitations, restrictions on transfer and
relative rights of the shares of each class authorized to be issued.
Section 2. Subscriptions. Subscriptions for shares of stock of the
corporation shall be paid in full at such time, or in such installments and at
such times, as the Board of Directors may determine. In case of default in the
payment of any installment or call when such payment is due, the Board of
Directors may declare the shares and all previous payments thereon forfeited for
the use of the corporation, in the manner prescribed by the Oregon Business
Corporation Act.
Section 3. Transfer of Shares. Transfer of shares of the corporation
shall be made only on the stock transfer books of the corporation by the holder
of record thereof or by his legal representative, who shall furnish proper
evidence of authority to transfer, or by his attorney thereunto authorized by
power of attorney duly executed and filed with the secretary of the corporation,
and on surrender for cancellation of the certificate for such shares. The person
in whose name shares stand on the books of the corporation shall be deemed by
the corporation to be owner thereof for all purposes. All certificates
surrendered to the corporation for transfer shall be canceled and no new
certificate shall be issued until the former certificate for a like number of
shares shall have been surrendered and canceled, except that in case of a lost,
destroyed or mutilated certificate a new one may be issued therefor upon such
terms and indemnity to the corporation as the Board of Directors may prescribe.
The record of shareholder and stock transfer books shall be kept at the
principal or registered office of the corporation or at the office of its
transfer agent or registrar, if any.
ARTICLE VIII
Amendments
Bylaws may be adopted, altered, amended or repealed, in whole or in
part, at any regular or special meeting of the Board of Directors.
Page 10 - BYLAWS
AGRITOPE, INC.
RESTATED BYLAWS
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TABLE OF CONTENTS
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ARTICLE 1 SHAREHOLDERS: MEETINGS AND VOTING................................1
Section 1. PLACE OF MEETINGS............................................1
Section 2. ANNUAL MEETINGS..............................................1
Section 3. SPECIAL MEETINGS.............................................2
Section 4. NOTICE OF MEETINGS...........................................3
Section 5. QUORUM AND VOTING REQUIREMENTS FOR VOTING GROUPS.............4
Section 6. VOTING RIGHTS................................................4
Section 7. VOTING OF SHARES BY CERTAIN HOLDERS..........................4
Section 8. PROXIES......................................................6
Section 9. SHAREHOLDER LISTS............................................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......................................9
Section 7. MEETINGS....................................................10
Section 8. NOTICE OF SPECIAL MEETINGS..................................10
Section 9. QUORUM AND VOTE.............................................11
Section 10. COMPENSATION................................................11
Section 11. ORGANIZATION................................................12
ARTICLE 3 COMMITTEES OF THE BOARD OF DIRECTORS.............................12
Section 1. GENERALLY...................................................12
Section 2. EXECUTIVE COMMITTEE.........................................12
Section 3. AUDIT COMMITTEE.............................................13
Section 4. COMPENSATION COMMITTEE......................................14
Section 5. NOMINATING COMMITTEE........................................14
Section 6. TERM........................................................15
ARTICLE 4 OFFICERS.........................................................15
Section 1. DESIGNATION; ELECTION.......................................15
Section 2. COMPENSATION AND TERM OF OFFICE.............................16
Section 3. CHAIRMAN OF THE BOARD.......................................16
Section 4. CHIEF EXECUTIVE OFFICER.....................................16
Section 5. PRESIDENT...................................................17
Section 6. VICE PRESIDENTS.............................................17
Section 7. SECRETARY...................................................17
Section 8. CHIEF FINANCIAL OFFICER.....................................18
Section 9. ASSISTANTS..................................................18
Section 10. OTHER OFFICERS..............................................18
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ARTICLE 5 CORPORATE RECORDS AND REPORTS - INSPECTION.......................19
Section 1. RECORDS.....................................................19
Section 2. INSPECTION OF RECORDS.......................................19
Section 3. CHECKS, DRAFTS, ETC.........................................19
Section 4. EXECUTION OF DOCUMENTS......................................19
ARTICLE 6 CERTIFICATES AND TRANSFER OF SHARES..............................19
Section 1. CERTIFICATES FOR SHARES.....................................19
Section 2. TRANSFER ON THE BOOKS.......................................20
Section 3. LOST, STOLEN OR DESTROYED CERTIFICATES......................20
Section 4. TRANSFER AGENTS AND REGISTRARS..............................20
Section 5. RECORD DATE.................................................20
ARTICLE 7 GENERAL PROVISIONS...............................................21
Section 1. SEAL........................................................21
Section 2. AMENDMENT OF BYLAWS.........................................21
Section 3. WAIVER OF NOTICE............................................21
Section 4. ACTION WITHOUT A MEETING....................................22
Section 5. PARTICIPATION AT MEETING....................................23
Section 6. FISCAL YEAR.................................................23
ARTICLE 8 INDEMNIFICATION..................................................23
Section 1. DIRECTORS AND OFFICERS......................................23
Section 2. EMPLOYEES AND OTHER AGENTS..................................25
Section 3. GOOD FAITH..................................................25
Section 4. ADVANCES OF EXPENSES........................................26
Section 5. ENFORCEMENT.................................................26
Section 6. NON-EXCLUSIVITY OF RIGHTS...................................27
Section 7. SURVIVAL OF RIGHTS..........................................27
Section 8. INSURANCE...................................................27
Section 9. AMENDMENTS..................................................28
Section 10. SAVINGS CLAUSE..............................................28
Section 11. CERTAIN DEFINITIONS.........................................28
Section 12. NOTIFICATION AND DEFENSE OF CLAIM...........................29
Section 13. EXCLUSIONS..................................................31
Section 14. SUBROGATION.................................................31
ARTICLE 9 TRANSACTIONS WITH INTERESTED DIRECTORS...........................31
Section 1. VALIDITY OF TRANSACTION.....................................31
Section 2. APPROVAL BY BOARD...........................................32
Section 3. APPROVAL BY SHAREHOLDERS....................................32
ARTICLE 10 LIMITATION OF DIRECTOR LIABILITY................................33
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AGRITOPE, INC.
RESTATED BYLAWS
ARTICLE 1
SHAREHOLDERS: MEETINGS AND VOTING
Section 1. PLACE OF MEETINGS
Meetings of the shareholders 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 Oregon, selected by the Board of
Directors.
Section 2. ANNUAL MEETINGS
(a) The annual meeting of the shareholders 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
shareholders shall elect by vote a Board of 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 within the earlier of six
months after the end of the Corporation's fiscal year or 15 months after its
last annual meeting, the circuit court of the county where the Corporation's
principal office is located, or, if the principal office is not in Oregon, where
the registered office of the Corporation is or was last located, may summarily
order a meeting to be held upon the application of any shareholder of the
Corporation entitled to participate in an annual meeting.
(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
shareholders of the Corporation or their proxies) who may attend the meeting, by
ascertaining whether any shareholder or his or her proxy may be excluded from
the meeting based upon any determination by the presiding officer, in his or her
discretion, that any such person has disrupted or is likely to disrupt the
proceedings thereat,
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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 shareholders, 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 shareholder. 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 shareholder, the shareholder 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 shareholders (or, with
respect to the 1998 annual meeting of shareholders, not later than December 15,
1997). A shareholder's notice to the Secretary in order to be valid must set
forth as to each matter the shareholder 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 shareholder; (iii) the
class or series and number of shares of capital stock of the Corporation which
are owned beneficially or of record by such shareholder; and (iv) any material
interest of the shareholder in the matter. Information that is required to be
provided in connection with shareholder nominations for election of directors is
specified in Section 6 of Article 2 of these Restated Bylaws (the "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.
Section 3. SPECIAL MEETINGS
(a) The Corporation shall hold a special meeting of shareholders
upon the call of the Corporation's Chairman, Chief Executive Officer or the
Board of Directors, or if the holders of at least 10 percent of all votes
entitled to be cast on any issue
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proposed to be considered at the proposed special meeting sign, date and deliver
to the Secretary of the Corporation one or more written demands for the meeting
describing the purpose or purposes for which it is to be held.
(b) The circuit court of the county where the Corporation's
principal office is located, or, if the principal office is not in Oregon, where
the registered office of the Corporation is or was last located, may summarily
order a special meeting to be held upon the application of a shareholder of the
Corporation who signed a valid demand for a special meeting if notice of the
special meeting was not given within 30 days after the date the demand was
delivered to the Corporation's Secretary or if the special meeting was not held
in accordance with the notice.
Section 4. NOTICE OF MEETINGS
(a) The Corporation shall notify shareholders in writing of the
date, time and place of each annual and special shareholders meeting not earlier
than 60 days nor less than 10 days before the meeting date. Unless Oregon law or
the Corporation's Restated Articles of Incorporation, as they may be amended
from time to time (the "Articles") require otherwise, the Corporation is
required to give notice only to shareholders entitled to vote at the meeting.
Such notice is effective when mailed if it is mailed postage prepaid and is
correctly addressed to the shareholder's address shown in the Corporation's
current record of shareholders. Unless required by law or by the Articles,
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 shareholder 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 a new record date for the adjourned meeting is fixed, or is
required by law to be fixed, notice of the adjourned meeting shall be given to
persons who are shareholders as of the new record date. A determination of
shareholders entitled to notice of or to vote at a shareholder meeting is
effective for any adjournment of the meeting unless the Board of Directors fixes
a new record date, which it must do if the meeting is adjourned to a date more
than 120 days after the date fixed for the original meeting.
(c) A shareholder's attendance at a meeting waives objection to: (i)
lack of notice or defective notice of the meeting, unless the shareholder at the
beginning of the meeting objects to holding the meeting or transacting business
at the
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meeting; and (ii) consideration of a particular matter at the meeting that is
not within the purpose or purposes described in the meeting notice, unless the
shareholder objects to considering the matter when it is presented.
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 those shares exists with
respect to that matter. Unless otherwise required by law or the Articles, 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 and for any adjournment of that
meeting unless a new record date is or must be set for that adjourned 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
shareholders 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 70 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 Articles 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 shareholder, 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 shareholder. If the name signed
on a vote, consent, waiver or proxy appointment does not correspond to the name
of its shareholder, the Corporation, if acting in good faith, is nevertheless
entitled to accept the vote, consent,
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waiver or proxy appointment and give it effect as the act of the shareholder if:
(i) The shareholder 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 shareholder and,
if the Corporation 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 shareholder 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 shareholder and, if the
Corporation requests, evidence acceptable to the Corporation of the
signatory's authority to sign for the shareholder has been presented
with respect to the vote, consent, waiver or proxy appointment; or
(v) Two or more persons are the shareholder 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.
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Section 8. PROXIES
A shareholder may vote shares either in person or by proxy. A
shareholder may appoint a proxy to vote or otherwise act for the shareholder by
signing an appointment form, either personally or by the shareholder'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 11 months unless a longer period is expressly
provided in the appointment form. An appointment of a proxy is revocable by the
shareholder unless the appointment form conspicuously states that it is
irrevocable and the appointment is coupled with an interest.
Section 9. SHAREHOLDER LISTS
(a) After fixing a record date for a meeting, the Corporation shall
prepare an alphabetical list of the names of all of its shareholders who are
entitled to notice of the meeting. The list must be arranged by voting group,
and within each voting group, by class or series of shares and show the address
of and the number of shares held by each shareholder.
(b) The shareholder list shall be available for inspection by any
shareholder, beginning two business days after notice of the meeting for which
the list was prepared is given and continuing through the meeting. Such list
shall be kept on file at the Corporation's principal office or at a place
identified in the meeting notice in the city where the meeting will be held. A
shareholder, or the shareholder'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 and at the shareholder's expense during the
period it is available for inspection.
(c) The Corporation shall make the shareholder list available at the
meeting, and any shareholder, or the shareholder's agent or attorney, is
entitled to inspect the list at any time during the meeting or any adjournment.
(d) Refusal or failure to prepare or make available the shareholder
list does not affect the validity of any action taken at the meeting.
ARTICLE 2
DIRECTORS: MANAGEMENT
Section 1. NUMBER AND TERM OF OFFICE
Subject to amendment of the Articles, the Board of Directors shall
consist of not less than six nor more than
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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
Articles. 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 shareholders in each year. Directors so elected shall hold
office until the 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 Articles 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 shareholders fail at any meeting of shareholders at which
directors are to be elected to elect the number of directors then constituting
the whole Board of Directors.
(b) Unless the Articles provide 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 shareholder meeting at which directors 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.
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(d) If the vacancy has not been filled by action of the Board of
Directors prior to the next meeting of the shareholders occurring after the
vacancy was created, the shareholders may fill the vacancy.
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 Articles 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 shareholders 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.
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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 shareholders 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
shareholders: (i) by or at the direction of the Board of Directors; or (ii) by
any shareholder of the Corporation (A) who is a shareholder 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 shareholders 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 shareholder,
such shareholder must have given timely notice thereof in proper written form to
the Secretary.
(b) To be timely, a shareholder'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
shareholders (or, with respect to the 1998 annual meeting of shareholders, not
later than December 15, 1997).
(c) To be in proper written form, a shareholder's notice to the
Secretary must: (i) set forth as to each person whom the shareholder 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 shareholder giving the notice (A) the
name and record address of such shareholder, (B) the class or series and number
of shares of capital stock of the Corporation which are owned beneficially or of
record by such shareholder, (C) a description of all arrangements or
understandings between such shareholder and each proposed nominee and any other
person or persons (including their names) pursuant to which the nomination or
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nominations are to be made by such shareholder, (D) a representation that such
shareholder 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 shareholder 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 Oregon.
(b) Annual meetings of the Board of Directors will be held without
notice immediately following the adjournment of the annual meetings of the
shareholders.
(c) Unless the Articles provide 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
Articles. 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.
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(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 Articles provide otherwise, a majority of the
directors in office shall constitute a quorum for the transaction of business. A
majority of the directors 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 Articles require 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
incentives 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
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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.
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)-(h) 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 Oregon Business
Corporation Act (the "Act"), the Executive Committee shall not have the power or
authority to:
(a) authorize distributions in respect of the capital stock of the
Corporation;
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(b) approve or propose to shareholders actions that the Act requires
to be approved by shareholders;
(c) fill vacancies on the Board of Directors or on any of its
committees;
(d) amend the Articles (except that the Executive Committee may, to
the extent authorized in the resolution or resolutions providing for the
issuance of shares of Preferred Stock adopted by the Board of Directors, fix the
designations and any of the relative rights, preferences and limitations of such
shares relating to dividends, redemption, dissolution, any distribution of
assets of the Corporation or the conversion into, or the exchange of such shares
for, shares of any other class or classes or any other series of the same or any
other class or classes of stock of the Corporation);
(e) adopt, amend or repeal these Bylaws;
(f) approve a plan of merger not requiring shareholder approval;
(g) authorize or approve reacquisition of shares, except within
limits prescribed by the Board of Directors; or
(h) authorize or approve the issuance or sale or contract for sale
of shares or determine the designation and relative rights, preferences and
limitations of a class or series of shares except as provided in Section 2(d)
above.
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 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;
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(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 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.
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
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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 member of the Board
of Directors to act at the meeting in the place of any such absent or
disqualified member.
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
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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.
Section 3. CHAIRMAN OF THE BOARD
The Chairman of the Board shall preside at all meetings of the Board
of Directors and shareholders, 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
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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.
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 shareholders 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
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number of shares present or represented at shareholder 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 shareholders 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 shareholders 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.
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.
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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
shareholders or the shareholders' agents or attorneys 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 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
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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 shareholders 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.
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 shareholders
entitled to notice of or to vote at any meeting of
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shareholders 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 70 nor less than 10 days
before the date of such meeting, nor more than 70 days prior to any other
action. If no record date is fixed by the Board of Directors, the record date
for determining shareholders entitled to notice of or to vote at a meeting of
shareholders 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 Articles, the
Board of Directors may amend or repeal these Bylaws unless:
(i) The Articles or the Act reserve this power exclusively to
the shareholders in whole or in part; or
(ii) The shareholders 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 shareholders may amend or repeal these Bylaws
in accordance with the provisions of the Articles 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 shareholder may at any time waive any notice required by law,
the Articles or these Bylaws. Except as
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otherwise provided in paragraph (c) of Section 4 of Article 1 of these Bylaws,
the waiver shall be in writing, shall be signed by the shareholder 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
Articles or these Bylaws. Except as otherwise provided in paragraph (b) of
Section 8 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 shareholder
meeting may be taken without a meeting if the action is taken by all the
shareholders entitled to vote on the action. The action shall be evidenced by
one or more written consents describing the action taken, signed by all the
shareholders entitled to vote on the action and delivered to the Corporation for
inclusion in the minutes or filing with the corporate records. Action taken
under this Section 4(a) is effective when the last shareholder signs the
consent, unless the consent specifies an earlier or later effective date. If not
otherwise determined by law, the record date for determining shareholders
entitled to take action without a meeting is the date the first shareholder
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.
(b) Unless the Articles 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.
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Section 5. PARTICIPATION AT MEETING
(a) Unless the Articles provide otherwise, the Board of Directors or
any committee of the Board may permit any or all shareholders 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
shareholders or directors participating may simultaneously hear each other
during the meeting. Permission for shareholder 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 shareholder 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 shareholders at
which participation in the manner referred to in subsection (a) above is
permitted shall state that fact and shall describe how any shareholder desiring
to participate may notify the Corporation of the shareholder'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
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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, (C) the director or officer
initiated the proceeding to enforce his or her right to indemnification or
advances and the director or officer is successful in whole or in part in such
proceeding, or (D) such indemnification is provided by the Corporation, in its
sole discretion, pursuant to the powers vested in the Corporation under the Act.
(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, (C) the director or officer initiated the proceeding to enforce
his or her right to indemnification or advances and the director or officer is
successful in whole or in part in such proceeding, or (D) such indemnification
is provided
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by the Corporation, in its sole discretion, pursuant to the powers vested in the
Corporation under the Act.
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 and statements,
including financial statements and other financial data, in each case prepared
or presented by:
(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
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in which a person may be deemed to have met the applicable standard of conduct
set forth by the Act.
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 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
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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.
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 Articles, Bylaws, agreement, vote of
shareholders 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 Act.
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.
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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.
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
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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 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 Act 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 the provision of the Act that authorizes or contemplates additional
indemnification by agreement, or the corresponding provision of any amendment to
or replacement of the Act.
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:
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(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
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.
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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 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
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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 shareholders entitled to vote and a
majority of those shareholders 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.
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 SHAREHOLDERS
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 shareholders to determine whether to
authorize, approve or ratify a transaction by vote of the shareholders 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
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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 Act, 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 shareholders for monetary damages for conduct
as a director occurring on or after the date of adoption of this provision. Any
amendment to or repeal of this provision or the Act 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 Act 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 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 shareholders;
(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 60.367 of the Act;
(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 Act 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 Act, as so amended.
33
TONKON, TORP, GALEN, MARMAUKE & BOOTH
ATTORNEYS AT LAW
1600 PIONEER TOWER
888 S.W. FIFTH AVENUE
PORTLAND, OREGON 97204-2099
(503) 221-1440
FAX (503) 274-8779
______________, 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., an Oregon 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-_______) (the "Registration Statement"). The Registration
Statement relates to the distribution as a dividend of up to 5,000,000 shares of
Agritope's common stock, no par value, 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 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.
We are members of the bar of the State of Oregon and are expressing
our opinion only as to matters of Oregon 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,
AGRITOPE, INC.
AGREEMENT CONCERNING INDEMNIFICATION AND RELATED MATTERS
(DIRECTORS)
This Agreement is made as of October , 1997, by and between
AGRITOPE, INC., an Oregon 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 Restated Articles of Incorporation of the Corporation
permit, and the Restated 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 Oregon Business Corporation Act (the "Act"),
and the Act 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 director,
officer, employee or agent which imposes duties on, or
2
<PAGE>
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 Act 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 Act that authorizes or contemplates additional indemnification
by agreement, or the corresponding provision of any amendment to or
replacement of the Act.
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
shareholders 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 convincing evidence to have involved:
3
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(i) any breach of the Director's duty of loyalty to such
corporations, shareholders 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 under Section 60.367 of
the Act (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 shareholders 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, 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
4
<PAGE>
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 Proceeding by or in the right of the
Corporation to procure a judgment in its favor), against all Expenses,
judgments, fines and
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<PAGE>
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, 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:
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<PAGE>
(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, articles
of incorporation, bylaws, vote of shareholders or directors, the Act, 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:
(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 shareholders of the Corporation.
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
8
<PAGE>
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.
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
9
<PAGE>
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 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.
10
<PAGE>
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.
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 97005
Attention: Chairman of the Board
With a copy to:
Brian G. Booth
Tonkon, Torp, Galen, Marmaduke & Booth
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.
19. Counterparts.
This Agreement may be executed in any number of counterparts, each
of which shall constitute the original.
11
<PAGE>
20. Applicable Law.
This Agreement shall be governed by and construed in accordance with
the internal laws of the state of Oregon 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
--------------------------------
12
AGRITOPE, INC.
AGREEMENT CONCERNING INDEMNIFICATION AND RELATED MATTERS
(OFFICERS)
This Agreement is made as of October , 1997, by and between
AGRITOPE, INC., an Oregon 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 Restated Articles of Incorporation of the Corporation
permit, and the Restated 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 Oregon Business Corporation Act (the "Act"),
and the Act 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 elected 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 director,
officer, employee or agent which imposes duties on, or
2
<PAGE>
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 Act 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 Act that authorizes or contemplates additional indemnification
by agreement, or the corresponding provision of any amendment to or
replacement of the Act.
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
shareholders 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 convincing evidence to have involved:
3
<PAGE>
(i) any breach of the Officer's duty of loyalty to such
corporations, shareholders 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 under Section 60.367 of
the Act (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 shareholders 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 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
4
<PAGE>
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 judgment in its favor), against all Expenses,
judgments, fines and amounts paid in settlement, actually and reasonably
incurred by
5
<PAGE>
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
advance of the final disposition of the Proceeding at the written request of the
Officer, if the Officer:
(a) furnishes the Corporation a written
6
<PAGE>
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, articles
of incorporation, bylaws, vote of shareholders or directors, the Act, 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;
(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
7
<PAGE>
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 shareholders of the Corporation.
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.
8
<PAGE>
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.
<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.
9
<PAGE>
(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 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.
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 97005
Attention: Chairman of the Board
With a copy to:
Brian G. Booth
Tonkon, Torp, Galen, Marmaduke & Booth
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.
<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 Oregon 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
--------------------------------
SUPERIOR TOMATO ASSOCIATES, L.L.C.
OPERATING AGREEMENT
February 19, 1996
<PAGE>
TABLE OF CONTENTS
Page
Article I Certain Definitions. . . . . . . . . . . . . . . . . . . . . . 2
1.1 Certain Definitions. . . . . . . . . . . . . . . . . . . . . . 2
(a) Accounting Period. . . . . . . . . . . . . . . . . . . . 2
(b) Additional Member. . . . . . . . . . . . . . . . . . . . 2
(c) Adjusted Asset Value . . . . . . . . . . . . . . . . . . 2
(d) Affiliate. . . . . . . . . . . . . . . . . . . . . . . . 2
(e) Capital Account. . . . . . . . . . . . . . . . . . . . . 2
(f) Capital Commitment . . . . . . . . . . . . . . . . . . . 3
(g) Code . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(h) Company Income Or Loss . . . . . . . . . . . . . . . . . 3
(i) Company Percentage . . . . . . . . . . . . . . . . . . . 3
(j) Depreciation . . . . . . . . . . . . . . . . . . . . . . 3
(k) Development And Marketing Agreement. . . . . . . . . . . 3
(l) Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . 3
(m) in interest; Majority In Interest. . . . . . . . . . . . 3
(n) Manager. . . . . . . . . . . . . . . . . . . . . . . . . 3
(o) Member . . . . . . . . . . . . . . . . . . . . . . . . . 3
(p) Members' Council . . . . . . . . . . . . . . . . . . . . 4
(q) Officers . . . . . . . . . . . . . . . . . . . . . . . . 4
(r) Treasury Regulations . . . . . . . . . . . . . . . . . . 4
Article II Name, Purposes And Place Of Business Of Company. . . . . . . . 4
2.1 Company Name . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.2 Company Purposes . . . . . . . . . . . . . . . . . . . . . . . 4
2.3 Principal Place Of Business. . . . . . . . . . . . . . . . . . 4
2.4 Registered Agent And Office. . . . . . . . . . . . . . . . . . 4
Article III Period Of Duration . . . . . . . . . . . . . . . . . . . . . . 5
3.1 Period Of Duration . . . . . . . . . . . . . . . . . . . . . . 5
Article IV Names, Admission, Rights And Obligations . . . . . . . . . . . 5
4.1 Names And Addresses. . . . . . . . . . . . . . . . . . . . . . 5
4.2 Admission Of Members . . . . . . . . . . . . . . . . . . . . . 5
4.3 Limitation Of Liability. . . . . . . . . . . . . . . . . . . . 5
4.4 Company Debt Liability . . . . . . . . . . . . . . . . . . . . 5
4.5 Restrictions On Transfers Of Company Interests . . . . . . . . 5
4.6 Withdrawal Of Member . . . . . . . . . . . . . . . . . . . . . 6
i
<PAGE>
TABLE OF CONTENTS
(continued)
Article V Management, Duties And Restrictions. . . . . . . . . . . . . . 6
5.1 Management . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.2 Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.3 The Members' Council . . . . . . . . . . . . . . . . . . . . . 6
5.4 Resignation Of Manager, Officers And Members Of Members'
Council; Removal of Manager. . . . . . . . . . . . . . . . . . 6
5.5 Determination By The Manager. . . . . . . . . . . . . . . . . 6
5.6 Restrictions On The Members. . . . . . . . . . . . . . . . . . 7
5.7 Manager's And Officers' Standard Of Care . . . . . . . . . . . 7
5.8 No Exclusive Duty To Company . . . . . . . . . . . . . . . . . 7
5.9 Indemnity Of The Manager And Officers. . . . . . . . . . . . . 7
Article VI Capital Accounts; Capital Commitment . . . . . . . . . . . . . 8
6.1 Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . 8
6.2 Initial Capital Contributions. . . . . . . . . . . . . . . . . 8
6.3 Additional Capital Commitments . . . . . . . . . . . . . . . . 8
6.4 Noncontributing Members. . . . . . . . . . . . . . . . . . . . 9
6.5 Additional Capital Contributions; Right Of First Refusal . . . 9
6.6 Allocations To New Members . . . . . . . . . . . . . . . . . . 10
Article VII Allocations. . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.1 Allocation Of Company Income Or Loss . . . . . . . . . . . . . 10
7.2 Income Tax Allocations . . . . . . . . . . . . . . . . . . . . 10
Article VIII Fees And Expenses. . . . . . . . . . . . . . . . . . . . 10
8.1 Management Compensation. . . . . . . . . . . . . . . . . . . . 10
Article IX Distributions To And Withdrawals By Members. . . . . . . . . . 10
9.1 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.2 Withdrawals By Members . . . . . . . . . . . . . . . . . . . . 10
9.3 Distributions. . . . . . . . . . . . . . . . . . . . . . . . . 11
9.4 Members' Obligation To Repay Or Restore. . . . . . . . . . . . 11
ii
<PAGE>
TABLE OF CONTENTS
(continued)
Article X Protective Rights. . . . . . . . . . . . . . . . . . . . . . . 11
10.1 Approval By Members. . . . . . . . . . . . . . . . . . . . . . 11
10.2 Approval By Other Members. . . . . . . . . . . . . . . . . . . 12
Article XI Dissolution Of Company . . . . . . . . . . . . . . . . . . . . 12
11.1 Early Termination Of The Company . . . . . . . . . . . . . . . 12
11.2 Dissolution Procedures . . . . . . . . . . . . . . . . . . . . 12
Article XII Reports And Financial Accounting . . . . . . . . . . . . . . . 13
12.1 Financial Records. . . . . . . . . . . . . . . . . . . . . . . 13
12.2 Annual Reports . . . . . . . . . . . . . . . . . . . . . . . . 13
12.3 Tax Matters Member . . . . . . . . . . . . . . . . . . . . . . 13
12.4 Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . 14
12.5 Audit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Article XIII Amendment. . . . . . . . . . . . . . . . . . . . . . . . 14
13.1 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Article XIV Other Provisions . . . . . . . . . . . . . . . . . . . . . . . 14
14.1 Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
14.2 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
14.3 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 14
14.4 Binding Agreement. . . . . . . . . . . . . . . . . . . . . . . 14
14.5 Entire Agreement; Captions . . . . . . . . . . . . . . . . . . 15
14.6 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . 15
14.7 Waiver Of Action For Partition . . . . . . . . . . . . . . . . 15
14.8 Execution Of Additional Instruments. . . . . . . . . . . . . . 15
14.9 Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
14.10 Rights And Remedies Cumulative . . . . . . . . . . . . . . . . 15
14.11 Severability . . . . . . . . . . . . . . . . . . . . . . . . . 15
14.12 Heirs, Successors And Assigns. . . . . . . . . . . . . . . . . 15
14.13 Creditors. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
iii
<PAGE>
INDEX OF DEFINITIONS
Defined Term Page
Accounting Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Additional Member. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Adjusted Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Affiliate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Capital Account. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Capital Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Company Income Or Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Company Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Delaware Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Development And Marketing Agreement. . . . . . . . . . . . . . . . . . . . . 3
Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
In Interest; Majority In Interest. . . . . . . . . . . . . . . . . . . . . . 3
Indemnitee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Initial Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Internal Revenue Code. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Manager. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Members' Council . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Tax Matters Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Treasury Regulations . . . . . . . . . . . . . . . . . . . . . . . .. . . . .4
iv
<PAGE>
SUPERIOR TOMATO ASSOCIATES, L.L.C.
OPERATING AGREEMENT
This Operating Agreement (the "Agreement") is made as of the 19th day of
February, 1996, by and among Agritope, Inc., a Delaware corporation
("Agritope"), Sunseeds Company, a --------------- corporation ("Sunseeds"), and
Andrew and Williamson Sales Company, Inc., a --------------- corporation ("A&W")
with respect to the operation of Superior Tomato Associates, L.L.C., a Delaware
limited liability company (the "Company").
Whereas, Superior Tomato Associates is being formed, pursuant to the
provisions of the Delaware Limited Liability Company Act (the "Delaware Act"),
upon the filing of a Certificate of Formation with the Secretary of State of the
State of Delaware;
Whereas, the purpose of the Company is to combine Sunseeds' tomato seed
genetics and know-how with Agritope's SAMase technology and know-how and A&W's
growing, packing and distribution know-how to produce and commercialize in North
America economically superior tomatoes for the fresh market; the product (the
"Product") shall be fresh market cherry, roma and vine ripened large fruited
tomato varieties using seed developed by the Company;
Whereas, the Members have entered into this Agreement, setting forth their
respective ownership interests in the Company and the principles by which it
will be operated and governed;
Whereas, concurrently with the execution and delivery of this Agreement,
the parties are entering into a Development and Marketing Agreement, under
which:
Agritope will grant to the Company a non-exclusive license to Agritope's
proprietary technology of regulating ethylene production in tomato
(hereinafter "SAMase");
Sunseeds will grant to the Company a non-exclusive license to Sunseeds'
proprietary tomato germplasm and associated know-how;
Agritope and Sunseeds will collaborate to develop seed for the Product;
and
A&W will supply the production acreage and distribution infrastructure for
the development and testing of the Product, will arrange for the growing
of the Product and will pack and distribute the Product.
Whereas, the parties recognize that there exist significant risks
associated with the business to be carried on by the Company, including without
limitation: the risk that the
<PAGE>
Product might not be successfully developed, or if successfully developed, might
not receive regulatory approval, the risk that the Product might not generate
savings, the risk that the Product might not achieve market acceptance, the risk
of crop failure, the risk associated with the highly volatile tomato market, the
credit risk that growers may not make the payments due from the growers with
respect to the Product, the risk created by the existence of numerous patents
held by different parties in the field of plant genetics and the possibility
that development or marketing of the Product might be impinged by the existence
of any of such patents.
Now, Therefore, in consideration of mutual covenants and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.1 Certain Definitions. For purposes of this Agreement, certain terms
used in this Agreement shall be defined as follows:
(a) Accounting Period. An Accounting Period shall be (i) the Fiscal
Year, if there are no changes in the Members' respective interests in Company
income, gain, loss or deductions during such Fiscal Year except on the first day
thereof, or (ii) any other period beginning on the first day of a Fiscal Year,
or any other day during the Fiscal Year upon which occurs a change in such
respective interests, and ending on the last day of a Fiscal Year, or on the day
preceding an earlier day upon which any change in such respective interest shall
occur.
(b) Additional Member. Additional Member shall mean any person or
entity, other than Agritope, Sunseeds or A&W, who or which is admitted to the
Company as a Member pursuant to the terms of this Agreement.
(c) Adjusted Asset Value. Adjusted Asset Value is defined in Exhibit
B to this Agreement.
(d) Affiliate. An Affiliate of a Member is a person or entity
controlling, controlled by, or under common control with, a Member.
(e) Capital Account. The Capital Account of each Member shall
consist of such Member's original capital contribution (i) increased by any
additional capital contribution, such Member's share of Company Income that is
allocated to it pursuant to this Agreement, and the amount of any Company
liabilities that are assumed by such Member or that are secured by any Company
property distributed to such Member, and (ii) decreased by the amount of any
distributions to, or withdrawals by, such Member, such Member's share of any
Company Loss that is allocated pursuant to this Agreement, and the amount of any
liabilities of such Member that are assumed by the Company or that are secured
by any property contributed by such Member to the Company. The foregoing
provision relating to the maintenance of Capital
2.
<PAGE>
Accounts is intended to comply with Treasury Regulation Section
1.704-1(b)(2)(iv) and shall be interpreted and applied in a manner consistent
with such Regulations. Capital contributions may be made in cash or, to the
extent agreed to by a Majority in Interest of the Members, by an in kind
contribution of property or services at the value agreed to by such Members.
(f) Capital Commitment. A Member's Capital Commitment, if any, shall
mean the amount that such Member has agreed to contribute to the capital of the
Company upon such Member's admission to the Company and from time to time
thereafter, as set forth opposite such Member's name on Exhibit A hereto.
(g) Code. The Code, or the Internal Revenue Code, is the Internal
Revenue Code of 1986, as amended from time to time (or any corresponding
provisions of succeeding law).
(h) Company Income Or Loss. Company Income or Loss is defined on
Exhibit B to this Agreement.
(i) Company Percentage. The Company Percentage for each Member shall
be as set forth on Exhibit A hereto, as amended from time to time in accordance
with the terms of this Agreement.
(j) Depreciation. Depreciation is defined on Exhibit B to this
Agreement.
(k) Development And Marketing Agreement. Development and Marketing
Agreement means the agreement referred to in the fourth Whereas clause of the
Agreement.
(l) Fiscal Year. The Company's Fiscal Year for the period between
the date hereof and March 1, 1996 shall be such period, and for all years
thereafter shall commence on March 1 of each year and end on February 28 or
February 29, as the case may be, of the following year except for the final
Fiscal Year of the Company, which shall begin on March 1 of such final Fiscal
Year and end on the date of termination of the Company.
(m) in interest; Majority In Interest. The term "in interest" shall
mean a specified fraction or percentage of the Company Percentages of all
Members (including the Manager) or of designated Members (including the Manager
if within the class of designated Members). A Majority in Interest shall mean
more than 50% in interest.
(n) Manager. Manager shall mean a Member designated or elected by
the Members as Manager pursuant to the terms of this Agreement. As of the
effective date of this Agreement, Agritope is hereby designated as the Manager
pursuant to Section 18-101(10) of the Delaware Act.
(o) Member. Member shall mean each of the Initial Members and
Additional Members as of a given time.
3.
<PAGE>
(p) Members' Council. Members' Council shall mean a council
comprised of three individuals, one of whom is appointed by each Initial Member,
for the purpose of providing advice and counsel on the management of the Company
to the Manager. As of the effective date of this Agreement, the three members of
the Members' Council are Adolph Ferro, who is appointed by Agritope, David
Atkinson, who is appointed by Sunseeds, and Fred Williamson, Sr., who is
appointed by A&W, or their respective designees. Each member of the Members'
Council may be removed and replaced at any time by the Member that appointed
such individual.
(q) Officers. Officer shall mean one or more individuals designated
as such by the Manager pursuant to this Agreement.
(r) Treasury Regulations. Treasury Regulations shall mean the Income
Tax Regulations promulgated under the Code, as such Regulations may be amended
from time to time (including corresponding provisions of succeeding
Regulations).
ARTICLE II
NAME, PURPOSES AND PLACE OF BUSINESS OF COMPANY
2.1 Company Name. The Company shall conduct its activities under the name
Superior Tomato Associates, L.L.C. or such other name as the Manager may
designate.
2.2 Company Purposes. The purpose of the Company is to (i) combine
Sunseeds' tomato seed genetics and know-how with Agritope's SAMase technology
and know-how and A&W's growing, packing and distribution know-how to produce and
commercialize in North American economically superior tomatoes for the fresh
market; the Product shall be fresh market cherry, roma and vine ripened large
fruited tomato varieties using seed developed by the Company, (ii) engage in any
lawful act or activity for which a limited liability company may be organized
under the laws of the State of Delaware and (iii) engage in all activities
necessary, customary, convenient or incident to any of the foregoing. The
Company shall have the power to make and perform all contracts and to engage in
all actions and transactions necessary or advisable to carry out the purposes of
the Company and shall possess all other powers available to it as a limited
liability company under the laws of the State of Delaware.
2.3 Principal Place Of Business. The principal place of business of the
Company shall be at 8505 SW Creekside Drive, Beaverton, Oregon 97008, or at such
other place or places as the Manager may from time to time determine.
2.4 Registered Agent And Office. The name of the registered agent for
service of process of the Company and the address of the Company's registered
office in the State of Delaware shall be The Prentice-Hall Corporation Services,
1013 Centre Road, Wilmington, Delaware 19805, or such other agent or office in
the State of Delaware as a Majority in Interest of the Members may from time to
time designate.
4.
<PAGE>
ARTICLE III
PERIOD OF DURATION
3.1 Period Of Duration. The Company's existence commences upon of the
filing with the Secretary of State of the State of Delaware of the Company's
Certificate of Formation and shall continue for a period of thirty (30) years,
unless sooner dissolved as provided in Section 11.1 below.
ARTICLE IV
NAMES, ADMISSION, RIGHTS AND OBLIGATIONS
4.1 Names And Addresses. The names and addresses of the Members, the
amount of their respective Capital Commitments to the Company, if any, and their
respective Company Percentages are set forth on Exhibit A hereto. The Manager
shall cause Exhibit A to be amended from time to time to reflect the admission
of any Additional Member, the withdrawal of any Member, receipt by the Company
of notice of any change of address of a Member, the change in any Member's
Capital Commitment, the change in any Member's Company Percentage, or the
occurrence of any other event requiring amendment of Exhibit A.
4.2 Admission Of Members. Additional Members may be admitted to the
Company upon the written consent of the Manager and with the approval of a
Majority in Interest of the Members.
4.3 Limitation Of Liability. Each Member's liability shall be limited as
set forth in the Delaware Act and other applicable law.
4.4 Company Debt Liability. No Member shall personally be liable for any
debts or losses of the Company beyond such Member's respective Capital
Commitment.
4.5 Restrictions On Transfers Of Company Interests.
(a) Without the written consent of a Majority in Interest of the
non-transferring Members, no Member shall sell, assign, transfer, or otherwise
dispose of such Member's share in the Company.
(b) In the event of any voluntary or involuntary transfer of a
Member's interest in the Company, or any part thereof, the transferee shall
receive only the transferor's economic interest in the Company, and the
transferee shall not be admitted as a Member or have any right as a result of
such transfer to participate in the affairs of the Company, except as provided
by written consent of a Majority in Interest of the non-transferring Members
which consent may be withheld for any reason or for no reason.
5.
<PAGE>
4.6 Withdrawal Of Member. A Member may not withdraw or resign without the
consent of a Majority in Interest of the non-resigning or non-withdrawing
Members to such withdrawal and the terms thereof.
ARTICLE V
MANAGEMENT, DUTIES AND RESTRICTIONS
5.1 Management. Except as otherwise set forth herein, the Manager shall
have the sole right to manage, control, and conduct the affairs of the Company
and to do any and all acts on behalf of the Company, subject to the provisions
of this Agreement which may require the consent of the Members.
5.2 Officers. Subsequent to the date of this Agreement, one or more
Officers may be designated and appointed by the Manager, in consultation with
the members of the Members' Council. The Manager may delegate a portion of its
day-to-day management responsibilities to any such Officers, and such Officers
shall have the authority to execute documents for, contract for, negotiate on
behalf of and otherwise represent, the interests of the Company as authorized by
the Manager in any job description created by the Manager.
Any number of offices may be held by the same person.
5.3 The Members' Council.
(a) The purpose of The Member's Council is to review and advise
concerning the direction and progress of the Company.
(b) Meetings of the Members' Council may be held at any time and
place within or without the State of Delaware whenever called by the Manager or
any Member.
(c) Written notice of the time and place of all meetings of the
Members' Council shall be given by the Manager (or any Member) upon ten (10)
day's notice, unless the Manager, in its sole discretion, determines that a
lesser period of notice is appropriate.
(d) Any member of the Members' Council may participate in a meeting
thereof by means of conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other.
5.4 Resignation Of Manager, Officers And Members Of Members' Council;
Removal of Manager. Any Manager, Officer or member of the Members' Council may
resign at any time by giving written notice to each of the Members. The Manager
may be removed, with or without cause, upon the written direction of a Majority
in Interest of the Members.
5.5 Determination By The Manager. All matters concerning allocations,
distributions and tax elections (except as may otherwise be required by the
income tax laws) and accounting procedures not expressly and specifically
provided for by the terms of this Agreement
6.
<PAGE>
shall be determined in good faith by the Manager. Such determination shall be
final and conclusive as to all of the Members.
5.6 Restrictions On The Members. Members other than the Manager shall not
have any power or authority to act for or on behalf of the Company.
5.7 Manager's And Officers' Standard Of Care. In discharging duties, the
Manager or an Officer shall be fully protected in relying in good faith upon any
such records and upon such information, opinions, reports or statements by any
other person, as to matters the Manager or any Officer reasonably believes are
within such other person's professional or expert competence and who has been
selected with reasonable care by or on behalf of the Company, including
information, opinions, reports or statements as to the value and amount of the
assets, liabilities, profits or losses of the Company or any other facts
pertinent to the existence and amount of assets from which distributions to
Members might properly be paid. Unless fraud, deceit or a wrongful taking shall
be proved by a nonappealable court order, judgment, decree or decision, neither
the Manager nor an Officer shall be liable or obligated to the Members for any
mistake of fact or judgment or for the doing of any act or the failure to do any
act by the Manager or any Officer in conducting the business, operations and
affairs of the Company, which may cause or result in any loss or damage to the
Company or its Members. The Manager or an Officer does not, in any way,
guarantee the return of the Member's Capital Commitment or a profit for the
Members from the operations of the Company. Neither the Manager nor an Officer
shall be responsible to any Member because of a loss of investments or a loss in
operations, unless the loss shall have been the result of fraud, deceit or a
wrongful taking by the Manager or an Officer proved as set forth in this Section
5.7. Neither the Manager nor an Officer shall incur liability to the Company or
to any of the Members as a result of engaging in any other business or venture.
5.8 No Exclusive Duty To Company. Neither the Manager nor an Officer shall
be required to manage the Company as such party's sole and exclusive function,
and such party and any Member may have other business interests and may engage
in other activities (including, without limitation, activities in development,
production and marketing of tomatoes) in addition to those relating to the
Company. Neither the Company nor any Member shall have any right, by virtue of
this Agreement, to share or participate in such other investments or activities
of the Manager or other Member or to the income or proceeds derived therefrom.
5.9 Indemnity Of The Manager And Officers.
(a) The Manager (and the directors, officers, employees and agents
of such Manager) or an Officer of the Company (and the heirs, executors,
personal representatives or administrators of such Manager or Officer) who was
or is made a party to, or is involved in any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such person is or was a Manager (or a
person acting on behalf of such Manager) or an Officer of the Company
("Indemnitee"), shall be indemnified and held harmless by the Company to the
fullest extent permitted under Section 18-108 of the Delaware Act, as the same
exists or may hereafter be amended. In addition to the
7.
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indemnification conferred in this Article, the Indemnitee shall also be entitled
to have paid directly by the Company the expenses reasonably incurred in
defending any such proceeding against such Indemnitee in advance of its final
disposition, to the fullest extent authorized by applicable law, as the same
exists or may hereafter be amended. The right to indemnification conferred in
this Article shall be a contract right.
(b) The rights and authority conferred in this Article shall not be
exclusive of any other right which any person may have or hereafter acquire
under any statute, provision of the articles of organization or operating
agreement of the Company, agreement, vote of Members, or otherwise.
(c) Any repeal or amendment of this Article by the Members of the
Company shall not adversely affect any right or protection of a Manager or
Officer existing at the time of such repeal or amendment.
ARTICLE VI
CAPITAL ACCOUNTS; CAPITAL COMMITMENT
6.1 Capital Accounts. An individual Capital Account shall be maintained on
the Company's books for each Member.
6.2 Initial Capital Contributions.
(a) Agritope and Sunseeds will each make capital contributions to
the Company up to $100,000. Said contributions shall be made in the form of
invoices submitted to the Company by Agritope and Sunseeds with Agritope and
Sunseeds receiving capital account credits for the amount of such invoices up to
$100,000 each. Each invoice shall represent the cost of Agritope or Sunseeds, as
applicable, of performing its assigned work under the Development and Marketing
Agreement as determined based on generally accepted cost accounting principles,
to include: (i) direct labor, payroll and related costs, including taxes and
benefits, (ii) direct material costs, and (iii) an additional amount, not to
exceed 30% of direct labor costs, for indirect costs (i.e., overhead). Invoices
submitted in excess of $100,000 by either Agritope or Sunseeds shall be paid out
of contributions made by A&W to the extent provided for in subsection (b).
(b) A&W will contribute capital to the Company at the level of
$8,000 per month, with the first contribution due on the signing of this
Agreement, and each subsequent contribution due on the fifteenth day of each
month thereafter (the final contribution being $4,000) up to a total of
$100,000. Invoices submitted in excess of $100,000 by either Agritope or
Sunseeds shall be reimbursed out of cash contributions made by A&W as per the
budget approved by the Members' Council.
6.3 Additional Capital Commitments. Within ten (10) days of a written
notice of the Manager, each Member shall contribute to the Company by wire
transfer or check the
8.
<PAGE>
amount set forth opposite such Member's name under the heading "Additional
Capital Commitment" on Exhibit A hereto, which amount shall be credited to each
Member's Capital Account. The Manager may give the notice for the first $100,000
of each Members's Additional Capital Commitment at any time after January 1,
1997 and may give the notice for the second $100,000 of each Member's Additional
Capital Commitment at any time after January 1, 1998.
6.4 Noncontributing Members. The Company will be entitled to enforce the
obligations of each Member to make the contributions to capital specified in
Sections 6.2 and 6.3 above, including the obligations of Agritope and Sunseeds
to perform their assigned work under the Development and Marketing Agreement and
submit invoices therefor, and the Company will have all remedies available at
law or in equity in the event any such contribution is not so made. If any legal
proceedings relating to the failure of a Member to make such a contribution are
commenced, such Member shall pay all costs and expenses incurred by the Company,
including attorneys' fees, in connection with such proceedings, but the payment
of such costs and expenses shall not be treated as a capital contribution to the
Company. Without limiting the foregoing remedies, if a Member fails to make a
Capital Contribution within the time period set forth in Sections 6.2 above,
then, at the election of a Majority in Interest of the other Members, the
Company Percentage of the defaulting Member shall be reduced to zero (0) and the
Company Percentages of the non-defaulting Members shall be increased by an equal
amount and in proportion to their Company Percentages prior to the default. In
addition, a defaulting Member whose Company Percentage has been so reduced to
zero (0) shall no longer be entitled to receive distribution pursuant to this
Agreement, except distribution as provided in Article XI upon dissolution of the
Company.
6.5 Additional Capital Contributions; Right Of First Refusal.
(a) Each Member shall have a right of first refusal to make its pro
rata share of all capital contributions that the Company may, from time to time,
propose to accept after the date of this Agreement from any other Member, or
from a proposed new Member. Each Member's pro rata share of capital
contributions is the Member's Company Percentage immediately prior to such new
capital contribution.
(b) If the Company proposes to accept additional capital
contributions, it shall give each Member written notice of its intention, the
amount of the capital contribution and the Company Percentage that will be
allocated to the contributor(s) in consideration of such capital contribution.
Each other Member shall have twenty (20) days from the giving of such notice to
agree to contribute its pro rata share of such capital contribution upon the
terms and conditions specified in the notice by giving written notice to the
Company and stating therein the amount to be contributed.
(c) If any Member fails to exercise in full the rights of first
refusal within such twenty (20) day period, (i) the Company shall have sixty
(60) days thereafter to accept the capital contributions in respect of which
such Member's rights were not exercised upon terms and conditions no more
favorable to the contributors thereof than specified in the Company's notice to
the Members pursuant to this Section 6.5. If the Company has not accepted the
capital
9.
<PAGE>
contributions within such sixty (60) days, the Company shall not thereafter
accept any additional capital contributions, without first offering such
interests to the Member in the manner provided above.
6.6 Allocations To New Members. No Additional Member shall be entitled to
any retroactive allocation of losses, income or expense deductions incurred by
the Company. The Manager may, at its option, at the time an Additional Member is
admitted, close the Company books (as though the Company's tax year had ended)
or make pro rata allocations of loss, income and expense deductions to an
Additional Member for that portion of the Company's tax year in which an
Additional Member was admitted, in accordance with the provisions of Section
706(d) of the Code and the Treasury Regulations promulgated thereunder.
ARTICLE VII
ALLOCATIONS
7.1 Allocation Of Company Income Or Loss. Subject to the "Qualified Income
Offset" provisions set forth in Exhibit B, Company Income or Loss for each
Accounting Period shall be allocated one hundred percent (100%) to the Capital
Accounts of the Members in proportion to their respective Company Percentages.
7.2 Income Tax Allocations. Except as otherwise required by the Code and
the rules and Treasury Regulations promulgated thereunder, a Member's
distributive share of Company income, gain, loss, deduction, or credit for
income tax purposes shall be the same as is entered in the Member's Capital
Account pursuant to this Agreement.
ARTICLE VIII
FEES AND EXPENSES
8.1 Management Compensation. The Manager shall be entitled to compensation
on the basis of its reasonable costs for all management services it provides to
the Company as Manager, as approved by a Majority in Interest of the Members.
ARTICLE IX
DISTRIBUTIONS TO AND WITHDRAWALS BY MEMBERS
9.1 Interest. No interest shall be paid to any Member on account of its
interest in, or Capital Commitment to, the Company.
9.2 Withdrawals By Members. Except as provided herein, no Member may
withdraw any amount from the Company without the consent of all of the other
Members, except upon dissolution of the Company.
10.
<PAGE>
9.3 Distributions. At the end of each Fiscal Year, each Member shall
promptly (and in no event later than ninety (90) days after the end of each
Fiscal Year) be paid in cash, fifty percent (50%) of the Company's taxable
income allocable to such Member for the Fiscal Year then ended; provided,
however, the foregoing percentage can be changed by the Manager with the consent
of a Majority in Interest of the Members. In addition to the foregoing
distributions, the Company may ratably distribute cash, securities and other
assets to each of the Members at such times and on such terms and conditions as
the Manager shall deem appropriate if the Manager determines that such assets
are not needed for use (or retained for reasonable reserves) in the business of
the Company. Any such distributions shall be distributed to the Members pro rata
in accordance with Company Percentages, but in no event shall exceed the
cumulative undistributed net income from operations. A Member's right to
participate in distributions under this Section 9.3 shall be restricted to the
extent provided for in Sections 6.4 and 6.5(c).
9.4 Members' Obligation To Repay Or Restore. Except as required by law, no
Member shall be obligated at any time to repay or restore to the Company all or
any part of any distribution made to it from the Company in accordance with the
terms of this Article IX.
ARTICLE X
PROTECTIVE RIGHTS
10.1 Approval By Members. The following will require approval by two-
thirds in interest of the Members.
(a) Any amendment of the Certificate of Formation of the Company or
this Agreement;
(b) The filling of a vacancy in the position of the Manager;
(c) Admission of a new Member;
(d) Approval of the budget on an annual basis, and any modification
to the budget;
(e) Any agreement committing the Company to an obligation in excess
of $10,000;
(f) Any single expenditure or related expenditures in excess of
$5,000;
(g) Creation of any lien or encumbrance on the assets of the
Company;
(h) An alteration of the primary purpose of the Company;
(i) A vote to dissolve the Company;
11.
<PAGE>
(j) The sale, exchange or other disposition of all, or substantially
all, of the Company's assets as part of a single transaction or plan;
(k) The merger of the Company with another limited liability
company, a limited partnership, a general partnership or other entity;
(l) Determination of transfer prices or royalties to be paid to the
Company; and
(m) Approval of growers.
10.2 Approval By Other Members.
(a) A transaction between the Company and any Member, or any party
related to that Member, will require approval of a Majority in Interest of other
Members; and
(b) A decision to compromise the obligation of a Member to return
money or property paid or distributed unlawfully will require approval of a
Majority in Interest of other Members.
ARTICLE XI
DISSOLUTION OF COMPANY
11.1 Early Termination Of The Company. The Company shall dissolve and the
affairs of the Company shall be wound up prior to the term provided in Section
3.1
(a) one hundred eighty (180) days following the death, dissolution,
insanity, retirement, resignation, bankruptcy or expulsion of any Member or the
occurrence of any other event which terminates the continued membership of a
Member, unless two-thirds in interest of the remaining Members, within ninety
(90) days of such event, agree to continue the Company;
(b) upon the vote or written consent of all the Members; or
(c) upon the entry of a decree of judicial dissolution under Section
18-802 of the Delaware Act;
11.2 Dissolution Procedures. Upon dissolution of the Company at the
expiration of the Company term or as set forth in Section 11.1:
(a) The affairs of the Company shall be wound up and terminated
under the direction of the Manager or the remaining Members in event of the
withdrawal of the Manager. All matters relating to the dissolution and
liquidation of the Company shall be determined by the Manager, or the remaining
Members, as the case may be.
12.
<PAGE>
(b) The proceeds of liquidation shall be distributed by the Company
in payment of its liabilities in the following order:
(i) to creditors, other than Members, in the order of priority
established by law;
(ii) to Members in repayment of loans made to the Company; and
(iii) to all the Members in accordance with the positive balances in their
Capital Accounts and if any Member's Capital Account has a deficit balance such
Member shall not be required to contribute capital to the Company with respect
to such deficit balance.
ARTICLE XII
REPORTS AND FINANCIAL ACCOUNTING
12.1 Financial Records. The books of the Company shall be kept in
accordance with the terms of this Agreement and otherwise in accordance with
generally accepted accounting principles. The records and books of account of
the Company shall be kept at the principal place of business of the Company.
12.2 Annual Reports.
(a) The Company shall transmit to each Member and to each person (or
such Member's or person's legal representative) who was a Member during any part
of the Fiscal Year in question within ninety (90) days after the end of each
Fiscal Year of the Company the following: (1) a balance sheet for the Company as
of the close of the Fiscal Year and a profit and loss statement for the Fiscal
Year then ended, all in reasonable detail; and (2) a report setting forth the
Capital Accounts of each Member and a description of the manner of their
calculation.
(b) The Company shall also transmit within such ninety (90) day
period to each Member then a member of the Company and to each person (or such
Member's or person's legal representative) who was a Member during any part of
the Fiscal Year in question a Schedule K-1 showing such Member's taxable income
from the Company for such Fiscal Year.
(c) The Manager will be responsible to prepare such reports, at the
expense of the Company.
12.3 Tax Matters Member. The Manager shall be the Company's tax matters
member under the Code and under any comparable provision of state law (the "Tax
Matters Member"). A Majority in Interest of the Members may remove, with or
without cause, the Tax Matters Member, and may appoint a new Tax Matters Member.
The Tax Matters Member shall have the same rights and obligations as the Manager
pursuant to Sections 5.7, 5.8 and 5.9 hereof.
13.
<PAGE>
12.4 Inspection. Each Member will have the right, at its own expense, to
inspect the books and records of the Company during reasonable business hours at
any time, provided that inspections in excess of once per fiscal year will be at
the inspecting Member's expense.
12.5 Audit. The Manager will arrange, at the Company's expense, for an
audit of the books of the Company as a Majority in Interest of the Members shall
instruct the Manager in writing, and with such accounting firm as a Majority in
Interest of the Members shall approve in writing.
ARTICLE XIII
AMENDMENT
13.1 Amendment. This Agreement may be amended by two-thirds in interest of
the Members, provided that, except as provided in Section 6.3 (1) any reduction
of a Member's Company Percentage, except in connection with the contribution of
additional capital by one or more Members or addition of a new Member, (2) any
increase in the Capital Commitment of any Member or other increase in the
liabilities, duties, obligations or responsibility of any member, (3) any
modification to the allocation provisions of this Agreement or (4) any reduction
of a Member's Capital Account may only be made with the consent of such Member.
ARTICLE XIV
OTHER PROVISIONS
14.1 Loans. Subject to Section 10.2 of this Agreement, Members may make
loans to the Company upon such terms and conditions as the Manager may
prescribe.
14.2 Notice. All notices given hereunder shall be in writing. Any notice
herein required to be given to the Company by any of the Members shall be deemed
to have been given when delivered by hand or upon transmission by telefax or
receipt by U.S. Mail or upon confirmed delivery by commercial air courier at the
address set forth in Section 2.3. Any written notice herein required to be given
to a Member shall be deemed to have been given when delivered by hand or upon
transmission by telefax or receipt by U.S. mail or upon confirmed delivery by
commercial air courier at such Member's address set forth on the signature page
hereof, or such other address as may subsequently be recorded in the records of
the Company.
14.3 Counterparts. This Agreement may be executed in more than one
counterpart with the same effect as if the Members executing the several
counterparts had all executed one counterpart.
14.4 Binding Agreement. This Agreement shall be binding on the assignees
and legal successors of the Members.
14.
<PAGE>
14.5 Entire Agreement; Captions. This Agreement constitutes the entire
agreement of the parties and supersedes all prior written and verbal agreements
among the Members with respect to the Company. Descriptive titles are used
herein for convenience only and shall not be considered in the interpretation of
this Agreement.
14.6 Governing Law. This Agreement, and the application and interpretation
hereof, shall be governed exclusively by the terms of the Delaware Limited
Liability Company Act.
14.7 Waiver Of Action For Partition. Each Member irrevocably waives during
the term of the Company any right that it may have to maintain any action for
partition with respect to the property of the Company.
14.8 Execution Of Additional Instruments. Each Member hereby agrees to
execute such other and further statements of interest and holdings,
designations, powers of attorney and other instruments necessary to comply with
any laws, rules or regulations.
14.9 Waivers. The failure of any party to seek redress for violation of or
to insist upon the strict performance of any covenant or condition of this
Agreement shall not prevent a subsequent act, which would have originally
constituted a violation, from having the effect of an original violation.
14.10 Rights And Remedies Cumulative. The rights and remedies provided by
this Agreement are cumulative, and the use of any one right or remedy by any
party shall not preclude or waive the right to use any or all other remedies.
Such rights and remedies are given in addition to any other rights the parties
may have by law, statute, ordinance or otherwise.
14.11 Severability. If any provision of this Agreement or the application
thereof to any person or circumstance shall be invalid, illegal or unenforceable
to any extent, the remainder of this Agreement and the application thereof shall
not be affected and shall be enforceable to the fullest extent permitted by law.
14.12 Heirs, Successors And Assigns. Each and all of the covenants, terms,
provisions and agreements herein contained shall be binding upon and inure to
the benefit of the parties hereto and, to the extent permitted by the Agreement,
their respective heirs, legal representatives, successors and assigns.
15.
<PAGE>
14.13 Creditors. None of the provisions of this Agreement shall be for the
benefit of or enforceable by any creditor of the Company.
In Witness Whereof, the parties hereto have executed this Agreement as of
the date first above written.
MEMBERS:
AGRITOPE, INC.
By: /s/ Adolph J. Ferro
Title: President/CEO
Address: 8505 SW Creekside Place
Beaverton, OR 97008
Attn: Chief Executive Officer
SUNSEEDS COMPANY
By: /s/ David Atkinson
Title: President/CEO
Address: 18640 Sutter Blvd.
Morgan Hill, CA 95038
Attn: Chief Executive Officer
ANDREW AND WILLIAMSON SALES COMPANY, INC.
By: Fred Williamson
Title: President/CEO
Address: 9940 Marconi Drive
San Diego, CA 92173
Attn: Chief Executive Officer
<PAGE>
Exhibit A
SCHEDULE OF MEMBERS
Name Initial Additional
and Capital Capital Company
Address Contribution Commitment* Percentage
Agritope, Inc. $100,000 $200,000 33 1/3%
Sunseeds Company $100,000 $200,000 33 1/3%
Andrew and Williamson $100,000 $200,000 33 1/3%
-------- -------- -------
Total $300,000 $600,000 100%
* Exclusive of initial capital contribution
<PAGE>
Exhibit B
CERTAIN DEFINITIONS AND ALLOCATION PROVISIONS
Adjusted Asset Value. The Adjusted Asset Value with respect to any Company
asset shall be the asset's adjusted basis for federal income tax purposes,
except as follows:
(i) The initial Adjusted Asset Value of any asset contributed by a Member
to the Company shall be the gross fair market value of such asset at the time of
contribution, as determined by the contributing Member and the Company.
(ii) In the discretion of the Manager, the Adjusted Asset Values of all
Company assets may be adjusted to equal their respective gross fair market
values and the resulting unrecognized Company Income or Loss allocated to the
Capital Accounts of the Members, as of the following times: (i) the acquisition
of an additional interest in the Company by any new or existing Member in
exchange for more than a de minimis capital contribution; and (ii) the
distribution by the Company to a Member of more than a de minimis amount of
Company assets, unless all Members receive simultaneous distributions of either
undivided interests in the distributed property or identical Company assets in
proportion to their interests in Company distributions as provided in Sections
9.3 and 11.2.
(iii) The Adjusted Asset Values of all Company assets shall be adjusted to
equal their respective gross fair market values and the resulting unrecognized
Company Income or Loss allocated to the Capital Accounts of the Members, as of
the following times: (i) the termination of the Company for federal income tax
purposes pursuant to Code Section 708(b)(1)(B); and (ii) the termination of the
Company, either by expiration of the Company's term or in accordance with
Section 10.1.
Company Income or Loss. Company Income or Loss shall be an amount computed
for each Accounting Period as of the last day thereof that is equal to the
Company's taxable income or loss for such Accounting Period, determined in
accordance with Section 703(a) of the Code (for this purpose, all items of
income, gain, loss, or deduction required to be stated separately pursuant to
Code Section 703(a)(1) of the Code shall be included in taxable income or loss),
with the following adjustments:
(i) Any income of the Company that is exempt from federal income tax and
not otherwise taken into account in computing Company Income or Loss pursuant to
this paragraph shall be added to such taxable income or loss;
(ii) Any expenditures of the Company described in Section 705(a)(2)(B) of
the Code or treated as Section 705(a)(2)(B) of the Code expenditures pursuant to
Treasury Regulation Section 1.704-1(b)(2)(iv)(i) and not otherwise taken into
account in computing Company Income or Loss pursuant to this paragraph shall be
subtracted from such taxable income or loss.
B-1.
<PAGE>
(iii) In the event the Adjusted Asset Value of any Company asset is
adjusted to clause (ii) or (iii) of this definition of Adjusted Asset Value, the
amount of such adjustment shall be taken into account as gain or loss from the
disposition of such asset for purposes of computing Company Income or Loss.
(iv) Gain or loss resulting from any disposition property with respect to
which gain or loss is recognized for federal income tax purposes shall be
computed by reference to the Adjusted Asset Value of the property disposed of;
and
(v) In lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing such taxable income or loss, there
shall be taken into account Depreciation for such Accounting Period.
Depreciation. Depreciation means, for each Accounting Period, an amount
equal to the depreciation, amortization, or other cost recovery deduction
allowable with respect to an asset for such Accounting Period, except that if
the Adjusted Asset Value of an asset differs from its adjusted basis for federal
income tax purposes at the beginning of such Accounting Period, Depreciation
shall be an amount which bears the same ratio to such beginning Adjusted Asset
Value as the federal income tax depreciation, amortization, or other cost
recovery deduction for such Accounting Period bears to such beginning adjusted
tax basis; provided, however, that if the adjusted basis for federal income tax
purposes of an asset at the beginning of such Accounting Period is zero,
Depreciation shall be determined with reference to such beginning Adjusted Asset
Value using any reasonable method selected by the Manager.
Qualified Income Offset. The allocations provided for in Article VII shall
be subject to the following exceptions:
(i) Any loss or expense otherwise allocable to a Member that exceeds the
balance in such Member's Capital Account shall instead be allocated first to all
Members who have positive balances in their Capital Accounts in proportion to
such positive balances, and when all Members' Capital Accounts have been reduced
to zero (0), then to all Members in proportion to Company Percentages.
(ii) In the event any Member unexpectedly receives any adjustments,
allocations, or distributions described in Treasury Regulation Section 1.704-
1(b)(2)(ii)(d)(4) through (d)(6), that causes the balance in such Member's
Capital Account to be reduced below zero (0), items of Company income and gain
shall be specially allocated to such Member in an amount and manner sufficient
to eliminate the deficit balance in its Capital Account created by such
adjustments, allocations, or distributions as quickly as possible.
(iii) For purposes of the foregoing, the balance in a Member's Capital
Account shall take into account the adjustments provided in Treasury Regulation
Section 1.704-1(b)(2)(ii)(d)(4) through (d)(6).
B-2.
<PAGE>
(iv) Any special allocations of items of profit, income, gain, loss or
expense pursuant to subparagraphs (i) and (ii) shall be taken into account in
computing subsequent allocations, so that the net amount of any items so
allocated and the profit, gain, loss, income, expense, and all other items
allocated to each Member shall, to the extent possible, be equal to the net
amount that would have been allocated to each such Member if such special
allocations pursuant to subparagraphs (i) and (ii) had not occurred.
B-3.
<PAGE>
DEVELOPMENT AND MARKETING AGREEMENT
THIS AGREEMENT ("Agreement") between SUPERIOR TOMATO ASSOCIATES, L.L.C., a
Delaware limited liability company ("STA"), AGRITOPE, INC., a Delaware
corporation ("Agritope"), SUNSEEDS COMPANY, a _______________ corporation
("Sunseeds"), and ANDREW AND WILLIAMSON SALES COMPANY, INC., a _______________
corporation ("A&W") is effective as of the 19th day of February, 1996
("Effective Date").
1. BACKGROUND.
1.1 Concurrently with this Agreement, Agritope, Sunseeds and A&W are
entering into an Operating Agreement of even date (the "Operating Agreement")
for Superior Tomato Associates, L.L.C.
1.2 The parties desire to combine Sunseeds' tomato seed genetics and
know-how with Agritope's SAMase technology and know-how and A&W's growing,
packing and distribution know-how to produce and commercialize in North America
economically superior tomatoes for the fresh market; the product shall be fresh
market cherry, roma and vine-ripened large fruited tomato varieties using seed
developed by STA.
2. DEFINITION OF TERMS.
The words appearing in capitalized form throughout this Agreement shall have
the meanings assigned to them in this Section 2.
Affiliate means, for the company, an entity controlling, controlled by, or
under common control with such company. "Control" for the purposes of this
definition shall mean ownership of fifty percent (50%) or more of voting
securities.
Agritope Know-How means unpatented inventions, data, processes,
compositions, techniques and other technical information proprietary to
Agritope, which is solely owned by Agritope or which Agritope has the right to
control the use of, relating to methods for ethylene regulation in the Field.
Agritope Licensed Know-How means all Agritope Know-How in existence as of
the Effective Date or created or acquired during the term of the Cooperative
Development Work.
Agritope Licensed Patents means all Agritope Patents in existence as of the
Effective Date of this Agreement, or claiming an invention conceived or
discovery made, or which are acquired, during the term of the Cooperative
Development Work.
Agritope Patents means all those United States and foreign patent
applications and patents (a) listed on Schedule B to this Agreement to the
extent of claims reading on methods for regulation of ethylene production, (b)
all United States and foreign patent applications and
1.
<PAGE>
patents, including continuations and divisions, claiming an invention conceived
or discovery made (including any discovery or breeding of a Novel Variety)
solely by employees and/or agents of Agritope pursuant to the Cooperative
Development Work, that is necessary or useful to apply inventions in clause (a)
to the Field, and (c) any reissues, re-examinations and foreign counterparts of
the foregoing. As used in this definition, the word "patent" includes a
certificate issued under the U.S. Plant Protection Act (and foreign counterparts
thereof) and the words "patent application" includes an application for such
certificate.
Applicable Royalty Percentage for a particular variety of Product means
the royalty percentage established pursuant to Section 6.1 of this Agreement as
a function of the Savings Per Box for such variety of Product that is determined
pursuant to Section 3.2 of this Agreement.
Approved Grower means a grower approved pursuant to Section 10.1 of the
Operating Agreement.
Box means, for any variety of tomatoes, a box of a size in which such
variety of tomatoes is most customarily packed.
Comparison Tomato has the meaning set forth in Section 3.2.
Cooperative Development Work means the Cooperative Development Work
described in Section 3 of this Agreement.
Cost of Goods for a product means the full cost of producing or acquiring
the product, as determined by generally accepted cost accounting procedures.
Cost of Goods shall not include general corporate allocations or other
allocations which are not directly related to production of the item and shall
not include amortization of development expenditures. In the event any item is
acquired by a party from an Affiliate of such party, "cost of manufacturing or
acquiring" shall be deemed to mean such Affiliate's cost of manufacturing or
acquiring.
The Field means seeds and fruit for fresh market cherry, roma and
vine-ripened large fruited tomato varieties, which seeds and fruit contain
recombinant genetic material that regulates production of ethylene.
Joint Patents means all United States and foreign patent applications and
patents, including continuations and divisions, claiming an invention conceived
or discovery made (including any discovery or breeding of a Novel Variety)
jointly by employees and/or agents of both Agritope and Sunseeds, including any
reissues, re-examinations and all foreign counterparts thereof. Ownership of an
invention shall conclusively be considered "joint" when one or more employees or
agents from Agritope and one or more employees or agents from Sunseeds must be
indicated as co-inventors or joint breeders under United States laws on the
patent application. As used in this definition, the word "patent" includes a
certificate issued under the U.S. Plant Protection Act (and foreign counterparts
thereof) and the words "patent application" includes an application for such
certificate.
2.
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Net Sales means the gross invoice price of each variety of Product sold by
A&W or its agents, on A&W's own behalf or on behalf of any growers, less the
following items, but only insofar as such items are separately invoiced and
included in the gross selling prices: (i) customs duties, import, export,
excise, and sales taxes directly imposed with reference to particular sales;
(ii) costs of transportation; and (iii) credit for returns of defective
Products. In the event of any transfer of Product in other than a bona fide
arm's-length transaction exclusively for money, or any transfer of Product which
otherwise does not result in customary sales revenue, such transfer shall be
(unless the parties agree otherwise) deemed to constitute a sale at the then
current average selling price for the Product.
Novel Variety shall mean "novel variety", as such term is defined in the
U.S. Plant Protection Act (7 U.S.C. Section 2541), as the same may be amended
from time to time.
Product means any product in the Field developed through the Cooperative
Development Work under this Agreement.
Project means the Cooperative Development Work performed by the Parties to
develop, obtain regulatory approval and market a particular variety within the
Field.
Regulatory Approval means (1) in the United States, deregulation from the
U.S.D.A. (or successor agency) and completion of food safety consultations with
the FDA (or successor agency) for production and sales of the Product, or (2)
outside of the United States, analogous order(s) by non-U.S. governmental
agencies which require regulatory approval prior to production and sales of a
Product in such non-U.S. country.
Savings Per Box has the meaning set forth in Section 3.2.
Sharing Payment means any payment provided for in Section 6 hereof.
Sunseeds Know-How means unpatented inventions, data, processes,
compositions, techniques and other technical information proprietary to
Sunseeds, and biological material, which is solely owned by Sunseeds or which
Sunseeds has the right to control the use of, relating to use of tomato
varieties potentially applicable to the Field, including without limitation
proprietary germplasm.
Sunseeds Licensed Know-How means all Sunseeds Know-How in existence as of
the Effective Date or created or acquired during the term of the Cooperative
Development Work.
Sunseeds Licensed Patents means all Sunseeds Patents in existence as of
the effective date of this Agreement, or claiming an invention created, or
discovery made, or which are acquired, during the term of the Cooperative
Development Work.
Sunseeds Patents means all those United States and foreign patent
applications and patents (a) listed on Schedule C to this Agreement, (b) all
United States and foreign patent applications and patents, including
continuations and divisions, claiming an invention conceived
3.
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or discovery made (including any discovery or breeding of a Novel Variety)
solely by employees and/or agents of Sunseeds pursuant to the Cooperative
Development Work that is necessary or useful to apply the inventions in clause
(a), and any other matter included within the definition of Sunseeds Patents, to
the Field, and (c) any reissues, re-examinations and foreign counterparts of the
foregoing. Sunseeds Patents also includes Sunseeds' biological material,
including proprietary germplasm, to the extent it is covered by a patent or
patent application. Without limiting the foregoing, Sunseeds Patents shall
include all patent applications and patents on those varieties of tomatoes that
may become the subject of Projects under this Agreement. As used in this
definition, the word "patent" includes a certificate issued under the U.S. Plant
Protection Act (and foreign counterparts thereof) and the words "patent
application" includes an application for such certificate.
Territory means the United States and Canada.
3. COOPERATIVE DEVELOPMENT WORK.
3.1 Period; Objective. From the Effective Date, Agritope, Sunseeds and A&W
shall work together to develop and obtain any required Regulatory Approval for
Products for STA. STA shall from time-to-time approve specific Projects for
different varieties of Product within the Field. In connection with such
efforts, Sunseeds will furnish to Agritope tomato germplasm for the particular
varieties to be developed in the Projects. Agritope will implant its genetic
material into such germplasm. Sunseeds will make the foundation seed and hybrid
seed. Sunseeds will conduct the breeding activities. Agritope and A&W will
participate in the breeding activities, including selection of hybrid seed from
foundation seed. A&W will supply the production acreage and distribution
infrastructure for the development and testing of the Product.
3.2 Production Testing; Agreement On Cost Savings. At such time as Agritope
and Sunseeds conclude that a particular variety of Product is ready for
production testing, they will so notify A&W. Using seeds provided by Sunseeds,
A&W will then provide approximately 3-5 acres for production testing of such
variety (covering as broad a range of growers and as many locations as possible)
and will grow, or cause Approved Growers to grow, fruit under conditions
resembling as nearly as possible the conditions of large scale commercial
growing. STA will keep detailed records of the cost of growing, picking and
packing such fruit, of the quantity produced, and of shrinkage, and will furnish
such records to Agritope and Sunseeds. A&W will cooperate, and will obtain the
cooperation of each Approved Grower, to furnish to STA information that STA may
reasonably require for such record keeping. A&W will also grow, or cause
Approved Growers to grow, and furnish to STA the same information concerning the
cost of growing, picking and packing, and shrinkage of, an equivalent quantity
of fruit of similar variety using seeds of the type A&W is then using most
commonly in its commercial operations (the "Comparison Tomato"). Based upon such
information (and other industry information as is available concerning growing,
picking and packing of such tomato varieties) STA will determine in good faith
the dollar amount per Box that may be reasonably expected to be saved by use of
such Product, instead of the Comparison Tomato, in large scale commercial
growing, picking and packing. Such dollar amount per Box, will be referred to in
this Agreement as the
4.
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"Savings Per Box." STA will inform Agritope, Sunseeds and A&W of such
determination and provide them with the data supporting such determination.
3.3 Exchange Of Information. During the term of the Cooperative
Development Work, Agritope and Sunseeds will exchange with each other and share
with STA all material information developed pursuant to the Cooperative
Development Work, excluding the exchange of Agritope Know-How and information
concerning Agritope Patents and Sunseeds Know-How and information concerning
Sunseeds Patents, relating to the Field. Agritope and Sunseeds will also furnish
to A&W all information concerning the Product that is pertinent to its
production testing. A&W will share with STA and the other parties all material
information concerning the Product developed by A&W in the course of growing,
picking and packing the Product, including quantity and cost.
3.4 Funding.
(a) STA shall fund the Cooperative Development Work for each Project
on a full cost-reimbursement basis in accordance with budgets pre-approved by
STA. STA will have no obligations to fund any expenditures that are not within
such approved budgets. STA will not reimburse parties for any costs incurred
prior to the date of this Agreement.
(b) Each party shall maintain detailed records which accurately
identify costs and expenses incurred and paid in connection with the Cooperative
Development Work for each specific Project. Each party shall submit this
information to STA as of the last day of each month (or such alternative dates
as STA may establish) for the preceding month and shall submit to STA on January
15 and July 15 of each year an estimate of expenses to be incurred during the
current six months.
4. PRODUCTION AND SUPPLY OF SEEDS.
4.1 Sunseeds Responsibilities. Sunseeds will produce and store seeds for
Product and ship such seeds on behalf of and at the direction of STA. STA will
remit to Sunseeds Sunseeds' Cost of Goods for such seeds from STA's proceeds of
sale of such seeds. Sunseeds shall at all times use its best efforts to supply
STA's demand for seeds for Product.
4.2 Seed Allocations.
(a) A&W will have the first right each season to obtain its
requirements of seeds for Product. A&W will provide to STA A&W's forecasts for
seed six months prior to anticipated shipment, and firm orders for seed (which
will not deviate from forecast by more than twenty percent (20%)) 60 days prior
to shipment, which orders must be placed by June 1 and December 1 of each year.
To the extent firm orders are not received by such dates, STA may allocate
available seeds to third parties. A&W will pay to STA, no later than thirty (30)
days after invoice, STA's Cost of Goods for such seeds, plus fifteen percent
(15%) of such Cost of Goods.
5.
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(b) If seeds remain in excess of A&W's requirements, STA may supply
such seeds to third party Approved Growers on the such terms as STA deems
advisable.
4.3 Seed Specifications. Sunseeds shall supply seed for Product that shall
meet the specifications for such seed as approved in writing by STA.
4.4 Failure Of Sunseeds To Meet STA Requirements. To the extent that
Sunseeds cannot meet STA's requirements for seed for Product, STA shall be free
to obtain such seeds from a third party or parties. Sunseeds agrees to provide
the third party that STA selects with the necessary information and Sunseeds
Know-How to allow the third party to produce the seeds. As a condition to the
disclosure to the third party, the third party will execute a non-disclosure
agreement substantially in the form of Exhibit A of this Agreement.
4.5 Restricted Rights; Labels. A&W will have the right to use the seed
furnished under this Agreement solely to produce fruit in accordance with the
terms of this Agreement and shall require Approved Growers not to propagate the
seed or use it for other purposes. Sunseeds and A&W shall insure that all seeds
provided under Section 4 and under Section 3.2 shall be provided under a label
containing either the words "Unauthorized Propagation Prohibited" or
"Unauthorized Seed Multiplication Prohibited" and, after a certificate issues
under the U.S. Plant Protection Act, words such as "U.S. Protected Variety".
Seeds transferred outside the United States will be transferred under comparable
labels appropriate in the country to which the seeds are transferred.
5. MARKETING AND DISTRIBUTION RIGHTS.
5.1 Commercialization. A&W shall use best efforts to arrange for Approved
Growers to grow fresh tomato Product, and to market and sell fresh tomato
Product in the Territory. STA will not fund or reimburse any growing, picking,
packing or distribution costs for production or sale of Product (including those
expenses incurred pursuant to Section 3.2). A&W will market and sell all tomato
Product under a trade name and mark to be determined by STA, which trade name
and mark will be owned solely by STA.
5.2 Reserved Right To Compete. Each party expressly reserves the right to
research, develop and market products (expressly including tomato products)
which compete indirectly or directly with the Products developed and marketed
under this Agreement.
6. SHARING OF SAVINGS AND PREMIUM.
6.1 Applicable Royalty Percentage. STA, in consultation with the other
parties to this Agreement, and with the concurrence of at least two of the three
other parties, will establish an Applicable Royalty Percentage for each variety
of Product based on the Savings Per Box established pursuant to Section 3.2. In
conjunction with its commercialization efforts, A&W will require each Approved
Grower to agree in writing to pay to STA, the Applicable Royalty Percentage. Any
exceptions to the standard Applicable Royalty Percentage must be approved in
writing by STA. In the event that A&W desires to act as an Approved Grower, the
6.
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Applicable Royalty Percentage for A&W will be the Applicable Royalty Percentage
established by STA or such other Applicable Royalty Percentage as STA and A&W
shall negotiate. Notwithstanding any other provision hereof, no Approved Grower
(including A&W) will receive any seed for Product, until such Approved Grower
has entered into an agreement in form and substance satisfactory to STA
committing to pay the Applicable Royalty Percentage.
6.2 Sharing Payments. In consideration of the Cooperative Development Work
to be undertaken and other obligations set forth herein, A&W agrees to pay STA
as follows: No later than thirty (30) days after the first and all subsequent
calendar months following the first sale of Product, A&W shall pay to STA for
each variety of Product an amount equal to the Applicable Royalty Percentage
multiplied by Net Sales of such variety of Product shipped in such month by A&W
and by Approved Growers arranged by A&W. The Sharing Payments due and payable
hereunder shall be computed for each calendar month in the currency in which the
sale was made, but shall be definitively discharged by payment to STA in U.S.
dollars converted from such currency using the closing spot exchange rate
between the two currencies quoted in the Wall Street Journal (or, if not
available, such other mutually agreeable financial publication of international
circulation) in effect on the last business day of the calendar quarter to which
the payment relates.
7. PATENTS, KNOW-HOW, LICENSE GRANTS.
7.1 Agritope Sole Ownership. Agritope shall own all Agritope Patents and
Agritope Know-How.
7.2 Sunseeds Sole Ownership. Sunseeds shall own all Sunseeds Patents and
Sunseeds Know-How.
7.3 A&W Sole Ownership. A&W shall own all A&W patents, trademarks and
labels.
7.4 Joint Patents; Rights In Product.
(a) STA shall own, and is hereby assigned, all Joint Patents on
inventions created or discoveries made in the Cooperative Development Work.
(b) Within the Field STA shall use any Joint Patents solely for the
development and sale of Products pursuant to this Agreement.
(c) Whether or not any Product qualifies as a Joint Patent, the
Product shall be owned by STA, and each party hereby assigns all rights in the
Product to STA.
7.5 Agritope License To STA. Subject to the terms and conditions of this
Agreement, for Product whose production or sale is covered by a claim of an
Agritope Licensed Patent, or which use Agritope Licensed Know-How, Agritope
hereby grants STA a non-exclusive, paid-up, royalty free (except as provided
herein), license, with the right to
7.
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sublicense with the prior written approval of Agritope (not to be unreasonably
withheld), under Agritope Licensed Patents and Agritope Licensed Know-How to
produce or have produced and use, sell or have sold such Products, in the
Territory.
7.6 Sunseeds License To STA. Subject to the terms and conditions of this
Agreement, for Product whose production or sale is covered by a claim of a
Sunseeds Licensed Patent, or which use Sunseeds Licensed Know-How, Sunseeds
hereby grants STA a non-exclusive, paid-up, royalty free (except as provided
herein), license, with the right to sublicense with the prior written approval
of Sunseeds (not to be unreasonably withheld), under Sunseeds Licensed Patents
and Sunseeds Licensed Know-How to produce or have produced and use, sell or have
sold such Products, in the Territory.
7.7 Notice Of Sole Rights. After the Effective Date of this Agreement, a
party asserting sole ownership of any patent rights or know-how in the Field
developed pursuant to the Cooperative Development Work shall provide reasonable
notice to STA of its intention to seek patent protection or to assert
proprietary interest in such Know-How. STA shall have the right to a reasonable
opportunity to review and comment on such assertions prior to patent
applications being filed. Any dispute among the parties to this Agreement
concerning such assertion shall be resolved by arbitration pursuant to Section
17.8 hereof.
7.8 Regulatory Files. STA, Agritope and Sunseeds shall each have full
access to all materials filed and correspondence with the U.S.D.A., FDA and
other regulatory agencies in connection with the Cooperative Development Work
and each Product, and shall be entitled to use and rely on such materials with
respect to any regulatory approvals for a product sought by either, whether or
not such product relates to this Agreement.
7.9 Cooperation In Filings, Prosecution and Enforcement. Each party agrees
to take such action and execute such documents as shall be necessary or
appropriate for the filing of notices, certificates and acknowledgments of the
licenses granted and assignments made hereunder, for the prosecution of all
Joint Patents, and for the enforcement against third parties of all intellectual
property rights of STA arising under this Agreement. Each party hereby grants to
STA an irrevocable power-of-attorney coupled with an interest to undertake such
activities and to execute and file all instruments necessary or appropriate in
connection with such activities.
8. PROSECUTION OF PATENT RIGHTS.
8.1 Agritope Patents. Agritope shall have the right, but no obligation, to
timely prepare, file, prosecute and maintain, under its exclusive control and at
its expense, Agritope Patents.
8.2 Sunseeds Patents. Sunseeds shall have the right, but no obligation, to
timely prepare, file, prosecute and maintain, under its exclusive control and at
its expense, Sunseeds patents.
8.
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8.3 Joint Patents. STA shall employ counsel acceptable to Agritope and
Sunseeds for the purpose of timely preparing, filing, prosecuting and
maintaining Joint Patents. The reasonable expenses of preparing, filing,
prosecuting and maintaining corresponding Joint Patents shall be borne by STA.
8.4 Prior Art; Review And Comment. Agritope and Sunseeds shall each
cooperate with the other to ensure that all prior art that is pertinent to the
examination of a Joint Patent is brought to the attention of the other party.
Each of the parties shall have the right to review and comment on substantive
documents prepared in connection with the preparation, filing, prosecution and
maintenance of the Joint Patents prior to the filing of such papers; however,
such review and comment shall be performed expeditiously so as not to negatively
affect patent rights.
9. TRADEMARKS.
No party to this Agreement shall have the right to use any trademark of
any other party without such party's prior written consent.
10. CONFIDENTIAL INFORMATION.
10.1 Confidentiality Agreement. The use and disclosure of proprietary
information shall be governed by the attached Schedule A Non-Disclosure
Agreement. The Schedule A Non-Disclosure Agreement shall survive termination of
this Agreement.
10.2 Use Of Consultants. The parties contemplate that from time to time
during the term of this Agreement third party technical consultants may be
employed by either party in connection with the development of Products. The
parties agree that information designated as confidential may be disclosed to
such consultants provided that the other party is given reasonable notice of the
circumstances and nature of the intended disclosure and that the disclosure is
limited to information necessary to enable the technical consultant to provide
technical consulting services. The consultant will be required to sign an
agreement committing the consultant to protect such confidential information.
11. REPORTS.
11.1 Quarterly Sales Reports. Each monthly payment made to STA under
Section 6 shall be accompanied by a full and accurate accounting by A&W. Each
such report shall include at least the following information for each type of
Product as to each country during the month:
(a) The gross invoice price of each variety of Product shipped;
(b) The applicable deductions from such invoice price to yield Net
Sales for each variety of Product shipped; and
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(c) Computation of the sharing payment due to STA pursuant to
Section 6.1 of this Agreement.
11.2 Cost Of Goods. Sunseeds will furnish to STA, and STA will furnish
A&W, reports on such party's Cost of Goods for seed Product shipped to such
party.
12. BOOKS AND RECORDS.
12.1 Records. Each party shall keep full and accurate books of account
containing all particulars that may be necessary for the purpose of calculating
all amounts owing to the other parties. Books of account maintained by the
parties shall be kept at their principal place of business. All such reports and
data shall be open for inspection on a confidential basis at all reasonable
times and either Party may conduct at its own expense, once every year during
normal business hours through an independent certified public accountant, an
examination of the accounts contemplated above. If any audit shall show that the
selling party underpaid the amounts due under this Agreement herein as to the
period subject of the audit, then the party which underpaid shall immediately
pay such deficiency with interest thereon in accordance with Section 12.3. If
the underpayment shall exceed five percent (5%) of the amount owed for any
calendar year, the party underpaying shall also reimburse the other for costs
related to such audit.
12.2 Retention. Books and records required to be maintained by the Parties
hereunder shall be retained for at least three (3) years from the date of the
payment to which they pertain.
12.3 Interest. All payments due hereunder that are not paid when due and
payable hereunder shall bear interest at an annual rate equal to 4% (four
percent) above the U.S. dollar reference rate ("prime rate") charged from time
to time by Bank of America N.T. & S.A. from the date due until paid or at such
lower rate as shall be the maximum rate permitted by law.
13. TERM.
This Agreement shall continue so long as any Product is being developed or
marketed under this Agreement, unless terminated earlier pursuant to Section 14.
14. BREACH.
14.1 Material Breach. STA may terminate this Agreement as to any party for
any material breach by such party of this Agreement or the Operating Agreement
thirty (30) days after providing the other party with written details of the
breach if the breach remains uncured at the end of the thirty (30) day notice
period. Any party may terminate its obligations under this Agreement for any
material breach by STA thirty (30) days after providing STA with written details
of the breach if the breach remains uncured at the end of such thirty (30) day
notice period. In the event of any such termination as to a party, except
arising from a material breach by STA, such party shall immediately deliver to
STA all information and work in process developed under the Cooperative
Development Work.
10.
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15. REPRESENTATIONS AND INDEMNITIES.
15.1 Agritope Representations. Agritope represents and warrants that as of
the Effective Date:
(a) It has granted no prior license or assignment of rights under
the Agritope Patents in the Field.
(b) There are no foreign or United States administrative, judicial
or Patent and Trademark Office proceedings contesting the inventorship or
ownership of any Agritope Patent that is likely to be embodied or used in a
Product;
(c) Neither the execution and delivery of this Agreement, nor the
performance of the obligations of Agritope hereunder shall result in a
violation, breach or event of default (or any event or condition which with
notice or the passage of time or both would constitute an event of default) of
or with respect to any agreement, mortgage, indenture or order of any court of
competent jurisdiction binding upon Agritope or upon the property of Agritope;
(d) It is party to no contract materially adverse to the obligations
undertaken and rights granted in this Agreement;
(e) It holds a patent to the SAMase gene and has obtained a license
to the binary vector system to be used in developing the Product; it has
consulted with patent counsel concerning the patent rights of third parties and,
to the best of its knowledge, it is free to operate using its technology as
contemplated in this Agreement without infringement of the rights of third
parties. There is no assurance, however, that rights of third parties will not
impinge on such freedom to operate.
EXCEPT AS SET FORTH IN THIS SECTION 15.1, AGRITOPE MAKES NO
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION
ANY WARRANTY OF NON-INFRINGEMENT.
15.2 Agritope Indemnification -- Representations And Warranties. Agritope
shall indemnify STA for any losses sustained or expenses incurred by STA as a
result of a breach by Agritope of any of the foregoing representations and
warranties.
15.3 Sunseeds Representations. Sunseeds represents and warrants to STA
that as of the Effective Date:
(a) It has granted no prior license or assignment of rights under
the Sunseeds Patents that would materially impair its ability to develop,
manufacture or sell Products.
(b) There are no foreign or United States administrative, judicial
or Patent and Trademark Office proceedings contesting the inventorship or
ownership of any Sunseeds Patent that is likely to be embodied or used in a
Product.
11.
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(c) Neither the execution and delivery of this Agreement, nor the
performance of the obligations of Sunseeds hereunder shall result in a
violation, breach or event of default (or any event or condition which with
notice or the passage of time or both would constitute an event of default) of
or with respect to any agreement, mortgage, indenture, or order of any court of
competent jurisdiction binding upon Sunseeds or upon the property of Sunseeds.
(d) It is party to no contract materially adverse to the obligations
undertaken in this Agreement.
(e) It owns all rights in the tomato varieties and germplasm to be
used in developing the Product; it has consulted with patent counsel concerning
the patent rights of third parties and, to the best of its knowledge, it is free
to operate using its technology as contemplated in this Agreement without
infringement of the rights of third parties. There is no assurance, however,
that rights of third parties will not impinge on such freedom to operate.
EXCEPT AS SET FORTH IN THIS SECTION 15.3, SUNSEEDS MAKES NO
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION
ANY WARRANTY OF NON-INFRINGEMENT OF THE RIGHTS OF THIRD PARTIES.
15.4 Sunseeds Indemnification -- Representations And Warranties. Sunseeds
shall indemnify STA for losses sustained or expenses incurred by STA as a result
of a breach by Sunseeds of the foregoing representations and warranties.
15.5 A&W Representations. A&W represents and warrants to STA that as of
the Effective Date:
(a) Neither the execution and delivery of this Agreement, nor the
performance of the obligations of A&W hereunder shall result in a violation,
breach or event of default (or any event or condition which with notice or the
passage of time or both would constitute an event of default) of or with respect
to any agreement, mortgage, indenture, or order of any court of competent
jurisdiction binding upon A&W or upon the property of A&W.
(b) It is party to no contract materially adverse to the obligations
undertaken in this Agreement.
EXCEPT AS SET FORTH IN THIS SECTION 15.5, A&W MAKES NO REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
15.6 A&W Indemnification -- Representations And Warranties. A&W shall
indemnify STA for losses sustained or expenses incurred by STA as a result of a
breach by A&W of the foregoing representations and warranties.
12.
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15.7 STA Warranty Disclaimer. STA MAKES NO REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF NON-INFRINGEMENT OR
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
16. INFRINGEMENT; THIRD PARTY LICENSES.
16.1 Defense Of Third Party Infringement Suits. In the event that a third
party shall make any claim or sue any party alleging that the production or sale
of a Product (including, without limitation, seeds), infringes a patent of such
third party, then STA shall have the option to control the defense of such suit.
The parties shall provide reasonable cooperation in the defense of such suit and
furnish all evidence in their control. All attorneys' fees as well as any
judgments, settlements, or damages payable with respect to such claim or suit
shall be the responsibility of STA. Notwithstanding the foregoing, if the claim
or suit alleges that the third party's rights are infringed solely by technology
licensed to STA by one of the three other parties to this Agreement, such party
will indemnify, hold harmless and defend the other two of such parties from and
against any judgments, settlements or damages they may be required to pay with
respect to such suit. The indemnifying party will have the sole right to control
the defense of such claim or suit. No party shall enter into any settlement that
materially affects the other party's rights or interests without such other
party's prior written consent, which consent shall not be unreasonably withheld.
16.2 Suits For Infringement By Others. In the event any party becomes
aware of any actual or threatened infringement in the Field of the Agritope
Licensed Patents or the Agritope Licensed Know-How, or the Sunseeds Licensed
Patents or Sunseeds Licensed Know-How, that party shall promptly notify STA and
STA shall determine the most appropriate action to take. In the event STA does
not take action against such alleged infringer within a reasonable period, not
to exceed one hundred eighty (180) days, the owner of such patent rights or
know-how shall be entitled to take action against the alleged infringer.
16.3 Third Party Licenses. In the event that STA determines that it is
necessary or advisable to obtain a license from a third party with respect to
development, production or sale of Products, Agritope, Sunseeds and A&W will
make equal contributions to the capital of STA to pay the amount of any lump sum
license fee payable to such third party and the Applicable Royalty Percentage
will be increased by the amount of royalty payable to such third party on the
sale of Products.
17. GENERAL.
17.1 Entire Agreement. This Agreement, the Operating Agreement and the
Schedules hereto and thereto contain the entire agreement between the parties
relating to the subject matter hereof and all prior understandings,
representations and warranties between the parties are superseded; provided,
however, that this Agreement does not limit any agreement restricting disclosure
or use of confidential or proprietary information previously entered into
between the parties. None of the terms of this Agreement shall be deemed to be
waived or amended by any
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party unless such a waiver or amendment specifically references this Agreement
and is in writing signed by the party to be bound.
17.2 Relationship Of Parties. Each party acknowledges that it is not an
agent of any other party to this Agreement and has no authority to speak for,
represent, or obligate such other party in any way (except in the case of
Agritope, acting in its capacity as Manager of STA). This Agreement does not and
shall not be deemed to create any relationship of a joint venture or a
partnership.
17.3 Severability. The parties do not intend to violate any public policy
or statutory or common law. However, if any sentence, paragraph, clause or
combination of this Agreement is in violation of any law or is found to be
otherwise unenforceable by a court from which there is no appeal, or no appeal
is taken, such sentence, paragraph, clause, or combination of the same shall be
deleted and the remainder of this Agreement shall remain binding, provided that
such deletion does not alter the basic structure of this Agreement. In such
event, the parties shall renegotiate this Agreement in good faith, but should
such negotiations not result in a new agreement with ninety (90) days of the
initiation of such negotiations, then this Agreement may be terminated by any
party by thirty (30) days notice to the other.
17.4 Force Majeure. Any party shall be excused from the performance of its
obligations under this Agreement and shall not be liable for damages to the
other if such performance is prevented by circumstances beyond its effective
control. Such excuse from performance shall continue so long as the condition
responsible for such excuse continues and for a thirty (30) day period
thereafter. For the purposes of this Agreement, circumstances beyond the control
of a party which excuse that party from performance shall include, but shall not
be limited to, acts of God, acts, regulations or laws of any government
including currency controls, war, civil commotion, commandeer, destruction of
facility or materials by fire, earthquake, storm or other casualty, labor
disturbances, judgment or injunction of any court, epidemic, and failure of
public utilities or common carrier.
17.5 Notices. All notices and demands required or permitted to be given or
made pursuant to this Agreement shall be in writing and shall be effective when
personally given or made or when placed in an envelope and deposited in the
United States certified mail postage prepaid, return receipt requested,
addressed as follows:
If to STA: If to Agritope, in care of:
c/o Agritope, Inc. Agritope, Inc.
8505 SW Creekside Pl. 8505 SW Creekside Pl.
Beaverton, OR 97008 Beaverton, OR 97008
Attention: Chief Executive Officer Attention: Chief Executive Officer
with a copy to: with a copy to:
Howard G. Ervin Howard G. Ervin
Cooley Godward Castro Huddleson Cooley Godward Castro Huddleson
14.
<PAGE>
& Tatum & Tatum
One Maritime Plaza, 20th Floor One Maritime Plaza, 20th Floor
San Francisco, CA 94111-3580 San Francisco, CA 94111-3580
If to Sunseeds: If to A&W:
Sunseeds Company Andrew and Williamson Sales Company,
18640 Sutter Blvd. Inc.
Morgan Hill, CA 95038 9940 Marconi Drive
Attention: Chief Executive Officer San Diego, CA 92173
Attention: Chief Executive Officer
or to such other address as to which either party may notify the other.
17.6 Binding. This Agreement shall be binding upon and inure to the
benefit of the parties, their successors and assigns. This Agreement shall be
assignable: (1) by either party without the consent of the other to any
Affiliate of the party or more of the voting securities); (2) by either party
with the written consent of the other; or (3) by either party without the
consent of the other in connection with the purchase of substantially all the
assets of its business to which this Agreement relates. Any attempted assignment
which does not comply with the terms of this Section shall be void.
17.7 Governing Law. This Agreement is deemed to have been executed in and
shall be governed by and construed according to the laws of the State of
California.
17.8 Arbitration. Any disputes under this Agreement will be resolved by
binding arbitration in San Francisco, California, in accordance with the
commercial arbitration rules of the American Arbitration Association. Full
discovery will be accorded in accordance with the California Code of Civil
Procedure. The parties shall bear equally the costs and fees of the arbitration;
however, the arbitrator shall be authorized to determine whether a party is the
prevailing party, and if so, to award to that prevailing party reimbursement for
its reasonable
15.
<PAGE>
attorneys' fees, disbursements (including, for example, expert witness fees and
expenses, photocopy charges, travel expenses, etc.), and costs arising from the
arbitration.
IN WITNESS WHEREOF, this Agreement is signed by duly authorized
representatives of each party as of the Effective Date.
SUPERIOR TOMATO ASSOCIATES, L.L.C. AGRITOPE, INC.
By: Agritope, Inc.
Its Manager
By: /s/ Adolph J. Ferro By: /s/ Adolph J. Ferro
President/CEO President/CEO
Date: February 19, 1996 Date: February 19, 1996
ANDREW AND WILLIAMSON SALES COMPANY,
SUNSEEDS COMPANY INC.
By: /s/ David Atkinson By: /s/ Fred L. Williamson
President/CEO Pres.
Date: February 21, 1996 Date: February 29, 1996
16.
<PAGE>
Exhibit A
NON-DISCLOSURE AGREEMENT
(MUTUAL DISCLOSURE)
This Agreement is incorporated by reference in the Development and
Marketing Agreement by and among, Superior Tomatoes Association, L.L.C. ("STA"),
Agritope, Inc., Sunseeds, Inc. and Andrew and Williamson Sales Company, Inc. to
assure the protection and preservation of the confidential and or proprietary
nature of information to be disclosed or made available to each other in
connection with the activities under such Development and Marketing Agreement
and the business of STA.
Whereas, the parties desire to assure the confidential status of the
information which may be disclosed to each other;
Now Therefore, in reliance upon and in consideration of the following
undertakings, the parties agree as follows:
1. Subject to the limitations set forth in Paragraph 2, all information
disclosed to another party to this Agreement shall be deemed to be "Proprietary
Information." The term "Proprietary Information" shall include trade secrets,
confidential knowledge, data or any other proprietary information. By way of
illustration but not limitation, "Proprietary Information" includes (a)
inventions, trade secrets, ideas, processes, formulas, source and object codes,
data, programs, other works of authorship, compounds, cell lines, know-how,
improvements, discoveries, developments, test results, designs and techniques;
and (b) information regarding plans for research, development, new products,
marketing and selling, business plans, budgets and unpublished financial
statements, licenses, prices and costs, suppliers and customers; and information
regarding the skills and compensation of employees of a party.
2. The term "Proprietary Information" shall not be deemed to include
information which the receiving party can demonstrate by competent written
proof: (i) is now, or hereafter becomes, through no act or failure to act on the
part of the receiving party, generally known or available; (ii) is known by the
receiving party at the time of receiving such information as evidenced by its
records; (iii) is hereafter furnished to the receiving party by a third party,
as a matter of right and without restriction on disclosure; or (iv) is
independently developed by the receiving party without any breach of this
Agreement.
3. Each party shall maintain in trust and confidence and not disclose to
any third party, or use for any purpose other than activities under such
Development and Marketing Agreement and the business of STA, any Proprietary
Information received from the other party. Proprietary Information shall not be
used for any purpose or in any manner that would constitute a violation of any
laws or regulations, including without limitation the export control laws of the
1.
<PAGE>
United States. No other rights or licenses to trademarks, inventions,
copyrights, or patents are implied or granted under this Non-Disclosure
Agreement.
4. Proprietary Information supplied shall not be reproduced in any form
except as required to accomplish the intent of this Agreement.
5. The responsibilities of the parties are limited to using their
reasonable and best efforts to protect the Proprietary Information received with
the same degree of care used to protect their own Proprietary Information from
unauthorized use or disclosure. Each party shall advise its employees or agents
who might have access to such Proprietary Information of the confidential nature
thereof. No Proprietary Information shall be disclosed to any officer, employee
or agent of either party who does not have a need for such information.
6. All Proprietary Information (including all copies thereof) shall remain
the property of the disclosing party, and shall be returned to the disclosing
party after the receiving party's need for it has expired, or upon request of
the disclosing party, and in any event, upon completion or termination of this
Agreement.
7. Notwithstanding any other provision of this Agreement, disclosure of
Proprietary Information shall not be precluded to the extent such disclosure is
required to be disclosed by the Receiving Party by judicial action provided that
the receiving party shall immediately notify the disclosing party of any such
action and the disclosing party shall have the opportunity to pursue all
reasonable legal remedies to maintain such information in secret.
8. This Agreement shall continue in full force and effect for so long as
the parties continue to exchange Proprietary Information. The termination of
this Agreement shall not relieve either party of the obligations imposed by this
Agreement with respect to Proprietary Information disclosed prior to the
effective date of such termination, and the provisions of these paragraphs shall
survive the termination of this Agreement.
9. This Agreement shall be governed by the laws of the State of California
as those laws are applied to contracts entered into and to be performed entirely
in California by California residents.
10. This Agreement contains the entire agreement of the parties concerning
use and protection of Proprietary Information and may not be changed, modified,
amended or supplemented except by a written instrument signed by each party.
11. Each party hereby acknowledges and agrees that in the event of any
breach of this Agreement by another party, including, without limitation, the
actual or threatened disclosure of a disclosing party's Proprietary Information
without the prior express written consent of the disclosing party, the
disclosing party will suffer an irreparable injury, such that no remedy at law
will afford it adequate protection against, or appropriate compensation for,
such injury. Accordingly, each party hereby agrees that such other party shall
be entitled to specific
2.
<PAGE>
performance of a receiving party's obligations under this Agreement, as well as
such further injunctive relief as may be granted by a court of competent
jurisdiction.
3.
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Information Statement/Prospectus
constituting part of this Registration Statement on Form S-1 of our report dated
October 28, 1996, except for Note 11 as to which the date is December 26, 1996
and the second paragraph of Note 1 as to which the date is July 26, 1997,
relating to the consolidated financial statements of Agritope, Inc., which
appears in such Information Statement/Prospectus. We also consent to the
reference to us under the heading "Experts" in such Information
Statement/Prospectus.
/s/ PRICE WATERHOUSE LLP
Portland, Oregon
August 27, 1997
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose
signature appears below constitutes and appoints ADOLPH J. FERRO, Ph.D., GILBERT
N. MILLER, and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution for him and in his name,
place, and stead, in any and all capacities, to sign a registration statement on
Form S-1 of Agritope, Inc., relating to a distribution of shares of common
stock, no par value per share, and related preferred stock purchase rights, and
any and all amendments (including post-effective amendments) to the registration
statement and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or each of them, or their or his substitute or substitutes may lawfully
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, this power of attorney has been signed by
the following persons in the capacity indicated effective August 25, 1997.
Name Title
---- -----
/s/ Adolph J. Ferr, Ph.D. President, Chief Executive
Adolph J. Ferro, Ph.D. 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)
/s/ W. Charles Armstrong Director
W. Charles Armstrong
/s/ Roger L. Pringle Director
Roger L. Pringle
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed consolidated financial statemetns included herein and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 453,389
<SECURITIES> 1,785,338
<RECEIVABLES> 185,504
<ALLOWANCES> (57)
<INVENTORY> 1,987,506
<CURRENT-ASSETS> 4,438,410
<PP&E> 2,943,060
<DEPRECIATION> (837,598)
<TOTAL-ASSETS> 8,523,717
<CURRENT-LIABILITIES> 1,229,041
<BONDS> 0
0
0
<COMMON> 44,046,853
<OTHER-SE> (37,537,658)
<TOTAL-LIABILITY-AND-EQUITY> 8,523,717
<SALES> 566,239
<TOTAL-REVENUES> 667,746
<CGS> 548,343
<TOTAL-COSTS> 4,062,776
<OTHER-EXPENSES> (937,256)
<LOSS-PROVISION> (1,900,000)
<INTEREST-EXPENSE> (25,010)
<INCOME-PRETAX> (6,257,296)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,257,296)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,257,296)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>