SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File No. 000-23531
AGRITOPE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 93-0820945
(State or other jurisdiction) (I.R.S. Employer
incorporation or organization) Identification No.)
16160 SW Upper Boones Ferry Road
Portland, Oregon 97224-7744
(Address of principal executive offices) (Zip Code)
(503) 670-7702
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock (including preferred stock purchase rights), $.01 par value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
The aggregate market value of the registrant's common stock held by
non-affiliates of the registrant, as of November 30, 1999, was approximately
$3,750,000.
The number of shares outstanding of the registrant's common stock, par value
$.01 per share, on November 30, 1999 was 4,070,612.
DOCUMENTS INCORPORATED BY REFERENCE
Parts of registrant's Proxy Statement dated January 17, 2000 prepared in
connection with the Annual Meeting of Stockholders to be held on February 29,
2000 are incorporated by reference into Part III of this Report.
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T A B L E O F C O N T E N T S
PART I
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ITEM 1. BUSINESS..................................................................... 3
ITEM 2. PROPERTIES................................................................... 12
ITEM 3. LEGAL PROCEEDINGS............................................................ 13
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.......................... 13
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS.................................................... 13
ITEM 6. SELECTED FINANCIAL DATA...................................................... 14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.................................... 15
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK...................................................... 19
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.................................. 19
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE................................. 19
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.......................... 20
ITEM 11. EXECUTIVE COMPENSATION...................................................... 20
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT.................................................. 20
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............................. 20
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K.................................................... 20
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PART I
CERTAIN STATEMENTS IN THIS REPORT CONSTITUTE "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995. STATEMENTS THAT EXPRESSLY OR BY IMPLICATION
PREDICT FUTURE RESULTS, PERFORMANCE OR EVENTS ARE FORWARD-LOOKING. THE
WORDS "BELIEVES," "INTENDS," "EXPECTS," "ANTICIPATES," "ESTIMATES,"
AND SIMILAR EXPRESSIONS ALSO IDENTIFY FORWARD LOOKING-STATEMENTS. THE
FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS,
UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE THE ACTUAL RESULTS,
PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY OR INDUSTRY RESULTS TO BE
MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR
ACHIEVEMENTS EXPRESSED OR IMPLIED BY THE FORWARD-LOOKING STATEMENTS.
WITH RESPECT TO THE COMPANY, THESE FACTORS INCLUDE ITS LIMITED
INDEPENDENT OPERATING HISTORY; UNCERTAINTY OF ADDITIONAL FUNDING; LOSS
OR IMPAIRMENT OF SOURCES OF CAPITAL; DEPENDENCE ON STRATEGIC PARTNERS;
UNCERTAINTIES RELATING TO PATENTS AND PROPRIETARY INFORMATION;
DEPENDENCE ON KEY PERSONNEL; TECHNOLOGICAL CHANGE AND COMPETITION;
UNCERTAINTIES AS TO CONSUMER ACCEPTANCE OF GENETICALLY ENGINEERED
PRODUCTS; CHANGES IN LAWS OR REGULATIONS; AS WELL AS THE OTHER FACTORS
DISCUSSED IN EXHIBIT 99 HERETO WHICH IS HEREBY INCORPORATED BY
REFERENCE. GIVEN THESE UNCERTAINTIES, READERS ARE CAUTIONED NOT TO
PLACE UNDUE RELIANCE ON THE FORWARD-LOOKING STATEMENTS. AGRITOPE DOES
NOT INTEND TO UPDATE ANY FORWARD-LOOKING STATEMENTS.
ITEM 1. BUSINESS
Agritope, Inc. ("Agritope" or the "Company") is an Oregon-based agricultural
biotechnology company that develops improved plant products and provides
technology to the agricultural industry. Agrinomics LLC, its joint venture with
Aventis CropScience, S.A. ("Aventis CropScience"), conducts a gene discovery
program, which is directed at finding and determining the function of plant
genes. Aventis CropScience was formed in December 1999, combining the businesses
formerly known as Rhone-Poulenc Agro and AgrEvo. The technology developed or
acquired by the Company includes a variety of genes, promoters and enabling
technologies.
Agritope utilizes 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 has also acquired certain rights to certain proprietary
genes (the "Salk Genes") from the Salk Institute for Biological Studies (the
"Salk Institute"). Agritope believes that the Salk Genes may have the potential
to confer disease resistance, enhance crop yield, control flowering, regulate
cell division and enhance gene expression in plants. Agritope has an option to
obtain a worldwide license to use the Salk Genes in a wide range of fruit and
vegetable species.
The Company consists of two segments: Agritope Research and Development, as
described above, and a majority-owned subsidiary, Vinifera, Inc. ("Vinifera").
See Note 11 of Notes to Consolidated Financial Statements for selected financial
information regarding both segments. Vinifera propagates and markets grapevines
to the U.S. premium wine grape production industry. Agritope believes that
Vinifera offers one of the most technically advanced grapevine plant propagation
and disease screening and elimination programs available to the grape production
industry.
B I O T E C H N O L O G Y P R O G R A M
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. Ethylene is a gaseous plant hormone, which in
higher plant species is responsible for fruit and vegetable ripening and
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 recent years,
the Company has expanded its research to genetically regulating other
physiological processes in plants. Agritope is also 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.
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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 (aging),
as evidenced by rapid changes in color, texture, flavor, nutrient content, and
other quality attributes. Product losses during harvesting, processing, packing,
shipping and distribution can reach substantial proportions of overall crop
yield. Growers frequently incur losses resulting from abandoning 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 Marketing Research
Report of the U.S. Department of Agriculture ("USDA") have estimated
post-harvest losses of 30% and 40%, respectively, for strawberries shipped from
Florida to the Chicago and New York markets. In the U.S. fruit and vegetable
markets, post-harvest losses are estimated to amount to several billion dollars
annually.
Post-harvest losses are largely attributable to the effects of ethylene. Because
ethylene is a gas, it not only affects the plant producing it, but also
surrounding plants as well. The physiological effects of ethylene include
initiation and enhancement of ripening, senescence, leaf abscission and
drooping, and flower fading and wilting. Common examples include the ripening
and subsequent rotting of tomatoes and apples, discoloration in lettuce and
broccoli, and the short bloom life of cut flowers.
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 of overripe
product in the field and may lower labor costs by decreasing frequency of
harvest. For packer/shippers, better control of product marketability may result
in improved inventory flexibility and control, and more uniform product quality.
ETHYLENE CONTROL TECHNOLOGY. Agritope's ethylene control technology is focused
on the use of a patented gene known as SAMase. The expression of SAMase in
plants produces an enzyme that acts to degrade one of the important precursor
compounds (S-adenosylmethionine or "SAM") necessary for the production of
ethylene. Agritope has genetically engineered plants to express the SAMase gene
only when certain levels of rising ethylene concentrations are reached in the
tissues of the fruit or plant. This feature causes the production of greater
levels of the enzyme that degrades SAM in response to a correspondingly higher
level of ethylene. Agritope believes that this technology thus offers a major
advantage over other approaches to ripening control in that the production of
ethylene may be specifically reduced to levels that allow for the initiation of
ripening but that delay the spoiling effects of excess ethylene. Therefore, the
fruit can be maintained at an optimal level of ripeness for an extended period
of time. An additional benefit of Agritope's technology is that the reaction
catalyzed by the SAMase gene produces 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
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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.
In 1999, Agritope licensed its ethylene control technology to Ball Horticultural
Company ("Ball"), a global leader in the development, production and marketing
of floricultural crops. Under the terms of the license, Ball was granted a
license to utilize Agritope's proprietary ethylene control technology, including
rights to genes and gene promoters, to develop and produce novel floricultural
crops. In return, Agritope will receive royalties on the sale of products and
derivatives that incorporate the licensed technology.
A U.S. patent covering the use of any gene that encodes S-adenosylmethionine
hydrolase (the enzyme expressed in any plant species by the SAMase gene)
protects Agritope's ripening control technology. In addition to the patent on
the SAMase gene, utility claims have been allowed on the promoter/gene
combination used by Agritope in applications currently under development as well
as potential applications in all other fruit-bearing plants. In the area of
regulated gene expression and ripening control, Agritope has seven additional
U.S. patents issued and two U.S. patents allowed but not yet issued. Agritope
also has three pending U.S. patents in this area. Agritope also holds five
foreign patents as well as 26 pending foreign applications, also primarily
related to ripening control technology.
THE SALK GENES. In 1997, Agritope acquired certain rights to certain proprietary
genes discovered by scientists at the Salk Institute. The Company believes that
the Salk Genes may have the potential to confer disease resistance, enhance
yield, control flowering, regulate cell division 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
foreign patent filings have been made with respect to each of the Salk Genes. A
U.S. patent covering one gene, LEAFY, has been issued to the Salk Institute.
Under the terms of the Salk agreement, Agritope has an option to obtain an
exclusive or nonexclusive worldwide license to use the Salk Genes in a wide
range of fruit and vegetable crops. The agreement permits Agritope to use each
Salk Gene for research and evaluation purposes, for which Agritope will pay an
annual access fee until it elects to license the gene for commercial purposes.
Agritope will pay a license issue fee and royalty for each Salk Gene it elects
to license. Agritope has also agreed to reimburse a percentage of applicable
Salk Institute patent costs. Salk Institute retains ownership of the Salk Genes,
subject to applicable U.S. government rights. Agritope will own any modified
plant species and fruit and vegetable crops it develops using the Salk Genes,
and will therefore have control of the marketing and distribution rights to such
products.
Agritope's work with the Salk Genes to produce desirable fruit and vegetable
crops is at an early stage. There are difficult scientific objectives to be
achieved before the technological or commercial feasibility of the products can
be demonstrated. There can be no assurance that any of Agritope's products under
development using the Salk Genes, if and when fully developed and tested, will
perform in accordance with Agritope's expectations, that necessary regulatory
approvals will be obtained in a timely manner, if at all, or that these products
can be successfully and profitably produced, distributed and sold.
Agritope is currently conducting research regarding the following specific Salk
Genes:
CDR1 is a gene that may confer systemic acquired resistance ("SAR") to plants.
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. Scientists at the Salk Institute, in
collaboration with those at the Samuel Roberts Nobel Foundation, have discovered
a gene, CDR1, which appears to play a key role in the maintenance of SAR.
Agritope intends to utilize CDR1 in the development of plant varieties that have
increased disease resistance to a broad range of plant pathogens.
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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 a key enzymatic step that
limits brassinosteroid synthesis in plants and cloned the gene, DET2, which
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.
BRI1 is a gene that encodes the plant receptor for brassinosteroids. The BRI1
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 BRI1. In theory, it is possible to
generate BRI1 derivatives that have been activated as if brassinosteroid were
bound to the gene. 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 plant growth, which is especially noticeable in
the roots. Furthermore, transgenic crop plants containing the CYCLIN gene are
also expected to have enhanced vegetative growth properties.
LEAFY is a gene that is responsible for the initiation of flower development in
plants. Scientists at the Salk Institute have demonstrated accelerated flowering
in several species as a result of LEAFY expression. 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 in tree fruits, vegetables and grapevines. Inhibiting LEAFY
expression in selected crop species may also retard or prevent flowering, which
could be of value in vegetable crops such as lettuce and celery.
BOOSTER ELEMENT ("BE") is a genetic element (a small piece of DNA) that can be
combined with 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 Salk Genes. For example,
certain crops may need a higher level of SAMase expression to produce a specific
level of ripening control. BE may up-regulate the promoters controlling SAMase
expression and thus improve the utility of the SAMase technology.
FUNCTIONAL GENOMICS. In July 1999, Agritope and Aventis CropScience formed
Agrinomics LLC ("Agrinomics") which has begun a research, development and
commercialization program in the field of agricultural functional genomics.
Agritope owns a 50% interest in Agrinomics and Aventis CropScience owns the
remaining 50% interest.
Agrinomics will identify, develop and commercialize novel genes expected to be
discovered under a gene discovery program called the ACTTAG(TM) Gene Discovery
Program. The ACTTAG program utilizes activation tagging, a technique that
enables researchers to rapidly discover genes and the traits they confer.
Agrinomics and its academic collaborators at The Salk Institute of San Diego,
California will generate genetically modified seeds that will be screened by
Agrinomics for a wide variety of traits such as disease resistance, insect
resistance, new morphologies, abiotic stress tolerance, improved flowering
characteristics, herbicide targets, herbicide tolerance and improved nutritional
qualities. Agrinomics has an option to collaborate with scientists at the
University of Edinburgh, Scotland in the ACTTAG program who would also generate
genetically modified seeds for screening in the ACTTAG program, but it has not
yet exercised the option.
Aventis CropScience is expected to make capital contributions to Agrinomics, in
cash, totaling $20 million over a five-year period. A $5 million contribution to
support the first year of operations was made in 1999. Agritope contributed the
ACTTAG technology, a collection of seeds generated using the ACTTAG techniques
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and expertise in molecular and cell biology. In addition, Agritope will perform
research work at its Oregon research facility, greenhouses and farm. Aventis
CropScience will also provide high-throughput screening, robotics, microarray
and bioinformatics technologies and support, and perform research work at its
Research Triangle Park research facility and at other locations.
Agrinomics intends to develop a network of research and commercial alliances
with a broad range of interests including food and beverages, feed grains, fiber
crops and forestry. Alliance participants would provide funding for specific
projects. Participants would receive rights to technology in their field of
interest as well as access to technology developed within the Agrinomics
network.
In December 1999, a joint venture owned by Vilmorin Clause & Cie ("Vilmorin") of
France and Biotech Plant Genomic Fund of Israel, entered into a research
agreement with Agrinomics. Under the terms of the research agreement, the joint
venture will sponsor a $7.5 million five-year research program to discover genes
that confer desirable traits in certain vegetables. Agrinomics will use $2.5
million of the funding to reimburse the joint venture for conducting screening
activities in the program.
ADDITIONAL TECHNOLOGIES. Agritope conducts 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 completed a Phase I Small Business Innovation Research ("SBIR")
grant to develop a novel geminivirus resistance strategy and to incorporate the
approach into commercial tomato varieties. A second Phase I grant to continue
the project is pending. Geminiviruses are a class of plant viruses that cause
widespread damage in several crops including tomato, pepper, beans, melon,
squash and cotton. Agritope has entered into an option agreement with The Ohio
State University to use the geminivirus resistance strategy in a wide range of
crop species susceptible to whitefly transmitted geminiviruses. The Company also
entered into a collaboration agreement in 1999 with a specialist in the field of
synthetic organic chemistry at the University of Calgary, Canada, Dr. Thomas G.
Back, who has discovered a unique technology for the synthesis of novel
brassinosteroids with exceptionally high biological activity. Under terms of the
collaboration, Dr. Back will synthesize compounds in his laboratory and deliver
them to Agritope for evaluation and commercial development.
Agritope also maintains a leading position in promoter discovery, allowing the
targeted expression of introduced genes to certain tissues or to specific
developmental stages in plants. Company scientists have isolated or synthesized
a number of fruit-specific promoters for a wide variety of fruits and
vegetables, including apple, banana, peach, melon, tomato, and raspberry. In
conjunction with work targeted at developing seedless plant varieties, two
different seed-specific plant promoters have been identified and isolated. Other
plant promoters identified include those that will target gene expression in a
root-specific, senescence or wounding-associated manner. These promoters may be
useful for the directed expression of our ethylene control genes as well as the
Salk Genes and others.
E X I S T I N G D E V E L O P M E N T P R O G R A M S
Agritope's research and development programs are currently directed toward
several highly perishable fruit and vegetable crops described below.
MELON. The U.S. wholesale fresh melon market was estimated at $1.3 billion for
1998. 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 Vilmorin, 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. Additional field trials will
be conducted in the
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2000 planting season, including trials designed to demonstrate the performance
of the improved varieties in the wholesale distribution channel.
TOMATO. Annual U.S. wholesale fresh market tomato revenues were estimated at
$1.1 billion for 1998. In order to facilitate the commercialization of its
ethylene control technology for this market, Agritope formed Superior Tomato
Associates, L.L.C. ("Superior Tomato") in 1996. Superior Tomato is a joint
venture with Sunseeds Company ("Sunseeds"), a 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 has a two -thirds equity
ownership interest in Superior Tomato. Sunseeds provides elite tomato germplasm
and breeding expertise in the development of transgenic varieties. Superior
Tomato owns rights to any fresh market cherry, roma and vine-ripened large
fruited tomato varieties developed for the joint venture using Agritope ethylene
control technology and Sunseeds germplasm. Superior Tomato also owns any
technology jointly developed by Agritope and Sunseeds. The parties otherwise
retain all rights to their respective technologies. Superior Tomato is currently
in the process of developing and testing transgenic cherry, roma, and large
fruited vine-ripe tomato varieties. Agritope has developed transgenic inbred
lines of elite tomato germplasm provided by Sunseeds.
Prior to the formation of Superior Tomato, 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 announced that
Agritope had completed the food safety consultation process with respect to its
prototype transgenic tomato line and that the variety did not raise issues that
would require pre-market review or approval by that agency. 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 in 1998 at $50 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.
Agritope is pursuing active research involving raspberry in three different
areas: (1) enhancement of post-harvest shelf life using Agritope's ethylene
control technology; (2) possible control of gray mold and (3) control of
raspberry bushy dwarf virus using a pathogen derived resistance gene.
RASPBERRY: POST-HARVEST SHELF LIFE. In 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. Over the past several years,
Sweetbriar has obtained promising results from a series of field evaluations of
certain of its proprietary raspberry varieties containing the SAMase gene. In
1999, the field trials included evaluating the impact of simulated shipping
conditions. Based on the successful completion of such trials, field trials
scheduled for 2000 will include review of actual transportation to market under
normal shipping conditions.
Successful development of a commercial transgenic raspberry, which would be
owned by Sweetbriar, will require successful completion of the scheduled field
trials and filings to obtain the appropriate regulatory clearances. If these
conditions are met, Sweetbriar will produce the new raspberries for distribution
and marketing by Driscoll Strawberry Associates, 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.
RASPBERRY: FUNGAL CONTROL. BOTRYTIS CINEREA is a fungal pathogen that causes
both pre-harvest and post-harvest fruit rot of red raspberry, resulting in loss
estimated to be greater than 25%. Agritope researchers have
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transformed plants with a gene that may confer resistance against fungal
infection. Transgenic plants are currently undergoing field evaluations in
cooperation with Sweetbriar and the USDA.
RASPBERRY: PATHOGEN RESISTANCE. Raspberry bushy dwarf virus ("RBDV") is the most
common virus disease of raspberry, affecting yield and fruit quality. The virus
occurs throughout the raspberry growing areas of the world and has become an
increasingly important problem over the past 10 years. Major effects of RBDV
infection are crumbly fruit and reduced yield. Transmission of RBDV is
associated with flowering and, therefore, control is very difficult or
impossible by chemical means.
Agritope has developed a genetic engineering approach to develop RBDV resistance
in red raspberry. Transgenic plants have been evaluated in greenhouse trials in
cooperation with a USDA/ARS Horticultural Crops Research facility. Based on
early results, Agritope was awarded a Phase I SBIR grant in 1999 to continue the
research project.
VEGETABLE AND FLOWER CROPS. Agritope and Vilmorin, entered into a research and
development agreement (the "Vilmorin Research Agreement") in December 1997
covering certain vegetable and flower crops. Under the terms of the Vilmorin
Research Agreement, Vilmorin will provide proprietary seed varieties and
germplasm to Agritope for use in research projects funded by Vilmorin, in which
Agritope technology, and possibly Vilmorin technology, may be applied to the
various covered crops. A project advisory committee, consisting of two
scientists each from Agritope and Vilmorin, recommends projects for approval by
Vilmorin and Agritope. Unless otherwise agreed, Vilmorin will pay, on a
quarterly basis, all Agritope's out-of-pocket expenses, including employee
salaries and overhead, for each selected research project.
Agritope and Vilmorin have agreed to negotiate in good faith the terms of future
commercialization agreements applicable to any commercial-stage products that
arise out of such research and development projects. It is the intent of the
parties that Agritope will receive royalties on revenues generated through sales
of modified crops or modified seeds resulting from the research projects, or
that Agritope will receive revenues through participation in programs providing
royalties to Agritope and Vilmorin based on savings realized by growers and
distributors growing or handling the modified products. If the parties are
unable to agree on the terms on which a modified crop or seed is to be
commercialized, the terms of commercialization will be determined by "baseball"
style arbitration, in which the arbitrator chooses all of the terms proposed by
one party or the other without modification or compromise.
Each of Agritope and Vilmorin will continue to own its existing proprietary
technology. The parties will jointly own any new technology developed in the
course of the research, other than modified crops or seeds. Each will have a
right to commercialize the new technology in designated fields of use, subject
to an obligation to pay royalties for such use to the other party.
During the term of the agreement, Vilmorin will have a right of first refusal to
fund and participate in research projects proposed by Agritope involving the
genetic alteration of a covered crop. The agreement provides that Agritope will
deal with Vilmorin as a most favored customer in connection with research and
commercialization agreements. Unless terminated for default, the agreement will
remain in effect until the earlier of (i) expiration of all patents (and absence
of trade secrets) for technology used in modified crops and seeds for which the
parties have entered into commercialization agreements, and (ii) the date on
which Vilmorin ceases to own at least 214,285 shares of Agritope capital stock.
In connection with the Vilmorin Research Agreement, Vilmorin purchased 214,285
shares of Agritope Series A Preferred Stock ("Series A Preferred") at a price of
$7 per share. Vilmorin has agreed to provide additional funding totaling $1
million either by exercising its option to purchase Series A Preferred or
through the financing of research and development projects. Through September
30, 1999, Vilmorin has funded or agreed to fund projects totaling $796,000.
9
<PAGE>
In September 1999 Vilmorin purchased 500,000 shares of Agritope's Series A
Convertible Preferred Stock for $2.5 million. For every four shares of Series A
Stock purchased in the private placement, Vilmorin also received a warrant to
purchase one additional share of Series A Stock at a price of $7 per share at
any time over the next five years. Vilmorin subsequently sold 150,000 shares of
Series A Stock together with the related warrants to an Israeli seed company,
Hazera Quality Seeds Ltd.("Hazera"), for $750,000. After completion of the sale,
Vilmorin owned 564,285 shares of Series A Stock, or 11.8% of the outstanding
capital stock of Agritope. Hazera's holdings amounted to 3.1% of Agritope's
outstanding capital stock.
A majority equity interest in Vilmorin is owned by Groupe Limagrain, S.A..,
which is, in turn, owned by Societe Cooperative Agricole Limagrain
("Cooperative"), a French agricultural cooperative and one of the largest seed
companies in the world. Cooperative's principal business is the production of
seeds for grains, corn, garden vegetables, and oil-producing plants.
ORNAMENTAL PLANTS. In 1999 Agritope licensed its SAMase ethylene technology to
Ball Horticultural Company ("Ball"), a global leader in the development,
production and marketing of ornamental species. Ball was granted a license to
the technology for use in ornamental plants, including rights to both genes and
gene promoters. In return, Agritope will receive royalties on the sale, if any,
of plants and derivatives that incorporate the licensed technology.
OTHER CROPS. Agritope is also pursuing research and development programs to
incorporate its SAMase technology into other crops where perishability causes
significant losses in the production and distribution process. These include
strawberries, bananas, peaches, pears and apples. Agritope is working with
leading proprietary tree fruit germplasm of peach, apple and pear and maintains
thousands of shoots through routine micropropagation techniques. Agritope has
developed rapid and efficient shoot regeneration methods in apple and pear.
Transformation experiments to incorporate SAMase, the ripening control gene,
into apple and pear cultivars are in progress. A patent application has been
filed with respect to a novel method of apple transformation discovered during
the course of the experimental work.
One component of introducing Agritope's ethylene control technology into tree
fruit is to target the expression of ethylene control genes to the ripening
fruit. Toward this goal, Agritope has several proprietary promoters that have
already been proven in tomato and melon. In addition, Agritope has been actively
identifying and testing fruit-specific promoters from apple, banana, peach, and
pear. Once appropriate promoters are isolated and tested, they are used to
direct expression of ethylene control genes in ripening fruit of genetically
modified plants.
The estimated U.S. wholesale markets in 1998 ranged from approximately $275
million for pears, to $1.3 billion for apples and $2.4 billion for bananas.
COMMERCIALIZATION STRATEGY. Agritope is currently evaluating a number of
commercialization strategies in order to realize the value of its technology.
The Company intends to generate revenues by licensing rights to its technology
in exchange for license fees, royalties and other payments. Agritope intends to
focus its development and licensing efforts primarily toward growers and
distributors of fruits and vegetables who are likely to derive the most benefit
from the reduced costs and spoilage losses that could potentially result from
using the Company's technologies.
As part of the Vilmorin Research Agreement, Agritope and Vilmorin have agreed to
negotiate in good faith the terms of future commercialization agreements
covering any products that reach commercial-stage development. Agritope
anticipates that it will receive royalties on the sale of any products,
including modified crops or seeds that arise out of research and development
projects conducted by Agritope and funded by Vilmorin.
G R A N T S A N D C O N T R A C T S
U.S. DEPARTMENT OF COMMERCE GRANT. In October 1997, Agritope was awarded a U.S.
Department of Commerce, National Institute of Standards and Technology ("NIST"),
Advanced Technology Program
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("ATP") grant. The award covers a three-year project and totals $990,000.
Agritope was awarded the grant for use in the application of its proprietary
ripening-control technology to certain tree fruits and bananas.
The NIST/ATP grant provides cost-shared funding for research and development
projects with potential for important broad-based economic benefits to the U.S.
Agritope will bear $1.8 million of the total costs of the program, which are
estimated at $2.8 million. The awards are made on the basis of a rigorous
competitive review that considers both scientific and technical merit.
SBIR PROGRAMS. Agritope actively participates in the SBIR programs sponsored by
the USDA. The SBIR programs have two phases. Phase I covers a six-month project
period and a total award not to exceed $100,000. Phase II covers a two-year
project period and a total award not to exceed $750,000. In 1999, Agritope was
awarded a Phase I grant for $65,000 for the study of pathogen derived resistance
to raspberry bushy dwarf virus in red raspberry. In 1997, Agritope received a
$55,000 Phase I grant for work on geminivirus resistance strategies in tomatoes.
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.
COOPERATIVE RESEARCH AND DEVELOPMENT AGREEMENTS. Agritope has entered into two
Cooperative Research and Development Agreements ("CRADA's") with the U.S.
Department of Agriculture/Agricultural Research Services ("USDA/ARS"). Under the
CRADA's, Agritope will collaborate with USDA/ARS laboratories by providing
research services or partial funding for research projects. In return, Agritope
has been granted a right of first refusal to obtain a license for any resulting
inventions. The objective of the first CRADA is to create raspberries that are
resistant to RBDV. This research is a collaborative effort with the Northwest
Center for Small Fruit Research in Oregon. The research under this program in
1999 was partially funded by a Phase I SBIR grant (See "SBIR Programs"
above). The second CRADA is funded jointly by Agritope and Harris Moran Seed
Company. It is aimed at furthering the understanding of the ethylene associated
physiological processes in ripening cantaloupe using SAMase-transformed
cantaloupe. This research is being carried out in collaboration with a USDA/ARS
research station in Texas.
OTHER GRANTS AND CONTRACTS. Agritope has also received 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, including
Vilmorin (See "Agritope Existing Development Programs-Vegetable and Flower
Crops"). Agritope intends to continue to participate in the SBIR program,
similar grant programs and projects with strategic partners. Agritope regularly
makes application for new grants, but there is no assurance that grant support
will be continued.
T E C H N O L O G I C A L C H A N G E A N D C O M P E T I T I O N
A number of companies are engaged in research related to plant biotechnology,
including other companies that rely on the use of recombinant DNA as a primary
scientific strategy. Many of these companies are larger and have more resources
than Agritope. Technological advances by others could render Agritope's
technologies less competitive or obsolete. Competition in the fresh produce
market is intense and is expected to increase as additional companies introduce
products with longer shelf life and improved quality. There can be no assurance
that such competition will not have an adverse effect on Agritope's business and
results of operations.
V I N I F E R A , I N C.
Vinifera was incorporated in 1993 to participate in the grapevine nursery
business. Industry sources have estimated that 30 million grafted wine grapevine
plants were delivered to customers in California for the 1998 planting season.
Through proprietary processes, Vinifera propagates and grafts grapevine plants
for sale to vineyards and to growers of table grapes. All of Agritope's current
product sales are attributable to Vinifera.
11
<PAGE>
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. Its library of grapevine
plants includes 30 different phylloxera-resistant types of rootstock, 100
different wine varietal clones, and two different table grape varietal clones.
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 275
vineyards in California, Washington and Oregon.
Several well-established family-owned nurseries that are significantly larger
than Vinifera provide competition in the grapevine nursery business. Like
Vinifera, these companies are based in California to service the major
concentration of grape growers in the United States. Vinifera believes that
growers tend to purchase plants from more than one nursery on the basis of
availability and price of desired plant varieties and on the perceived quality
of the product as measured by the health, survival and disease status of the
plants. Vinifera believes that it is the only nursery in the industry that
performs herbaceous grafting and, through its disease testing and elimination
program, the only nursery whose primary focus is on distinctive, premium quality
products and service.
P E R S O N N E L
At September 30, 1999, Agritope and its subsidiaries had 61 full-time employees,
including 31 in research and development, nine in administration and 21 at the
Vinifera grapevine 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 seven persons holding Ph.D. degrees with specialties in the
following disciplines: applied botany, bacteriology and public health,
biological sciences, genetics, plant pathology and plant sciences. From time to
time, Agritope also engages the services of scientists as consultants to augment
the skills of its scientific staff.
S C I E N T I F I C A D V I S O R Y B O A R D
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; Antoine de Courcel, Scientific Director, Vilmorin
Clause & Cie. and Joseph R. Ecker, Ph.D., Professor, Department of Biology
University of Pennsylvania. Dr. Nester is a member of the National Academy of
Sciences.
ITEM 2. PROPERTIES
Agritope leases approximately 17,000 square feet of office and laboratory space
in Portland, Oregon. Agritope relocated its office and research and development
operations to leased facilities on March 15, 1998. The lease agreement, as
amended in September 1999 to add additional adjacent space, requires monthly
rental payments on a triple net lease basis of $16,610 through May 1, 2001, and
thereafter of $18,104 until expiration of the lease on February 28, 2003.
Agritope also owns a 15-acre farm in Woodburn, Oregon,
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<PAGE>
which it uses for propagation of experimental crops and for the ACTTAG gene
discovery program. Greenhouse capacity at the farm currently totals 50,000
square feet.
Vinifera leases 380,000 square feet of greenhouse space at two locations in
Petaluma, California. A 250,000 square-foot greenhouse is leased under a lease
that expires January 31, 2003 with the right to extend for two successive
five-year terms at stipulated rental rates. The lease provides an option to
purchase the leased premises for $1.3 million after February 1, 2001. A second
lease covering 130,000 square feet of greenhouse space expires in March 2004
with the right to extend for two successive five-year terms at stipulated rental
rates and a one-year option, which expires on March 31, 2005, to purchase, for
$2.5 million, the 130,000 square feet space, an adjacent greenhouse of 70,000
square feet and nine acres of land.
Agritope believes that its present facilities are adequate to meet current
requirements.
ITEM 3. LEGAL PROCEEDINGS
As of the date of this filing, Agritope is not a party to any material pending
legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
Agritope common stock (the "Common Stock") is traded on The Nasdaq Stock Market
under the symbol "AGTO." Trading commenced on December 29, 1997. As reported by
Nasdaq, the following table sets forth the range of high and low sales prices
for the Common Stock since commencement of trading:
YEAR ENDED SEPTEMBER 30, 1999
--------------------------------------------------------
Sales price per share High Low
First Quarter .................... 2.125 0.875
Second Quarter ................... 3.375 1.250
Third Quarter .................... 3.625 1.250
Fourth Quarter ................... 4.125 1.875
YEAR ENDED SEPTEMBER 30, 1998
--------------------------------------------------------
Sales price per share High Low
First Quarter .................... 7.500 6.000
(from December 29, 1997)
Second Quarter ................... 8.000 4.375
Third Quarter .................... 5.000 3.125
Fourth Quarter ................... 4.250 1.375
At November 30, 1999, the Company had 4,070,612 shares of Common Stock
outstanding, held by 823 stockholders of record.
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<PAGE>
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.
On September 28, 1999, the Company completed a $2.5 million private placement of
500,000 shares of Series A Preferred Stock at a price of $5 per share. Vilmorin
purchased the shares. For every four shares of Series A Stock purchased in the
private placement, Vilmorin also received a warrant to purchase one additional
share of Series A Stock at a price of $7 per share at any time over the next
five years. Vilmorin subsequently sold 150,000 shares and related warrants to
Hazera Quality Seeds Ltd. of Israel. See Note 6 to Consolidated Financial
Statements. The shares and warrants were sold in reliance upon the Regulation S
exemption under the Securities Act of 1933, in off-shore transactions to non-US
persons. The purchasers made representations regarding their status and actions
necessary to comply with Regulation S.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected historical consolidated income and
balance sheet data of Agritope and its subsidiaries. The consolidated balance
sheet data at September 30, 1999 and 1998 and the consolidated operating results
data for the years ended September 30, 1999, 1998, and 1997 have been derived
from audited consolidated financial statements and notes thereto included in
this Annual Report. The balance sheet data at September 30, 1997, 1996 and 1995
and operating results data for the years ended September 30, 1996 and 1995 are
derived from audited consolidated financial statements and notes thereto not
included in this Annual Report. 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>
(In thousands, except per share data) YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED OPERATING RESULTS 1999 1998 1997 1996 1995(1)
Revenues................................ $ 3,551 $ 2,800 $ 1,551 $ 585 $ 2,110
Operating costs and expenses............ 9,124 9,024 6,089 2,821 9,920
Other income (expense), net ............ 537 98 (4,427)(2) (265) (235)
Minority interest in subsidiary net loss 360 882 274 - -
Net loss................................ (4,675) (5,244) (8,691) (2,501) (8,045)
Net loss per share (basic and diluted) (3) (1.15) (1.42) (3.23) (.93) (2.99)
Shares used in per share calculations (3) 4,061 3,705 2,691 2,691 2,691
SEPTEMBER 30,
--------------------------------------------------------------
CONSOLIDATED BALANCE SHEET 1999 1998 1997 1996 1995
Working capital (deficiency)............ $ 5,786 $ 6,884 $ 1,659 $ (3,163) $ 846
Total assets............................ 15,471 14,390 7,285 5,670 4,067
Revolving line of credit................ 1,463 - - - -
Long-term debt.......................... 5 10 15 - 22
Convertible notes....................... - - - 3,620 3,620
Accumulated deficit..................... (51,094) (46,419) (41,175) (32,478) (29,976)
Stockholder's equity ................... 9,323 11,010 4,763 1,008 75
</TABLE>
(1) Data for 1995 includes revenues of $2.0 million and operating losses of
$3.8 million attributable to business units, which were divested.
(2) Includes non-cash charges of $2.3 million, reflecting the permanent
impairment in the value of Agritope's investment in affiliated companies, and
$1.2 million for the conversion of Agritope convertible notes into Epitope, Inc.
common stock, no par value ("Epitope Stock") at a reduced price.
(3) Net loss per share (basic and diluted) is presented on a pro forma
basis assuming that the distribution of Agritope common stock pursuant to the
spin-off had occurred on October 1, 1994. Potentially dilutive securities are
excluded from net loss per share calculations as their effect would have been
antidulutive.
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<PAGE>
ITEM 7. 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 Annual Report.
O V E R V I E W
Agritope is organized into two segments: The Research and Development segment
develops improved plant products and provides technology to the agricultural
industry. The Grapevine Propagation segment, operated by Agritope's
majority-owned subsidiary, Vinifera, Inc. ("Vinifera"), propagates, grows and
distributes grapevine plants to the premium wine industry. It also provides
disease testing and elimination services.
To date, the Research and Development segment has not completed
commercialization of its technology. A portion of the research and development
efforts conducted by the segment has been performed under various research
grants and contracts.
In July 1997, the board of directors of Epitope, Inc. ("Epitope") approved a
management proposal to spin off Agritope, subject to obtaining financing for
Agritope and the satisfaction of certain other conditions. The spin-off was
completed on December 30, 1997. To finance its operations as an independent
entity, Agritope sold 1,343,704 shares of Agritope common stock, including
associated preferred stock purchase rights, to certain foreign investors
pursuant to the Regulation S exemptions under the Securities Act of 1933, as
amended. The shares were sold at a price of $7 per share, for net aggregate
proceeds of $9.4 million. Proceeds were received immediately after the spin-off.
In connection with a research and development collaboration, Agritope also sold
214,285 shares of its newly designated Series A Preferred Stock to Vilmorin at a
price of $7 per share, for an aggregate price of $1.5 million. The proceeds of
the preferred stock sale were received approximately one week after the
completion of the spin-off. Epitope no longer owns or controls any shares of
Agritope stock following the spin-off.
The accompanying consolidated financial statements have been prepared to reflect
the historical operating results and financial condition of Agritope and its
subsidiaries. The operating statements include the cost of certain corporate
overhead services which were 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 were 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. Epitope provided
such services through December 1, 1997 and, pursuant to a Transition Services
and Facilities Agreement, continued to provide office and laboratory space and
certain other services after that date until March 15, 1998 when the Company
moved to a separate facility.
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<PAGE>
R E S U L T S O F O P E R A T I O N S
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
REVENUES. Total revenues increased by $752,000 million or 27% from 1998 to 1999,
and increased by $1.2 million or 80% from 1997 to 1998. Revenues by component
are shown below:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30 (IN THOUSANDS) 1999 1998 1997
<S> <C> <C> <C>
Product sales
Grapevine plant sales....................... $ 2,503 $ 2,575 $ 1,436
Grants and contracts
Government research grants.................. 314 207 30
Research projects with strategic partners... 498 - 53
Revenues from affiliates.................... 236 - -
Other....................................... - 18 32
--------- ---- ----
1,048 225 115
Total revenue........................... $ 3,551 $ 2,800 $ 1,551
</TABLE>
Grapevine plant sales pertain to Vinifera, Agritope's majority-owned subsidiary.
Grapevine plant sales decreased slightly in 1999 compared to 1998, but Vinifera
continued to expand its customer base. Sales were made to approximately 275
customers in 1999 as compared to 175 customers in 1998 and 60 customers in 1997.
Vinifera sales to new customers in 1999 replaced sales to one customer that
accounted for 32.2% and 23.4% of net sales in 1998 and 1997, respectively. No
single customer accounted for more than 5% of net sales during the year ended
September 30, 1999. Vinifera commenced commercial stage operations in 1996.
Vinifera currently has confirmed orders of approximately $2.6 million for
delivery in the spring and summer of 2000 as compared to confirmed orders of
$1.6 million at the beginning of fiscal 1999. Proposed sales contracts are also
pending for an additional $1.4 million orders planned for delivery in the 2000
planting season.
Grant and contract revenues pertain to research projects directed at developing
superior new plants through genetic engineering. Revenue from such projects can
vary significantly from year to year as new projects are started while other
projects may be extended, completed or terminated. In addition, not all research
projects conducted by Agritope receive grant or contract funding. Grant and
contract revenues in 1999 included revenues from its strategic partner, Vilmorin
and from its newly formed joint venture, Agrinomics LLC.
In October 1997, the Company was awarded a three-year matching grant totaling
$990,000 under the Advanced Technology Program of the U.S. Department of
Commerce National Institute of Standards and Technology ("NIST") to study the
application of Agritope's ripening technology to certain tree fruits and
bananas. The NIST grant funds 49% of the Company's direct costs incurred for the
study. Grant and contract revenues include $262,000 and $129,000, in 1999 and
1998, respectively, applicable to the study. In addition, the Company received
matching funds in 1998 totaling $100,000 for the purchase of equipment used in
conducting the research program.
Revenues from grants under the Small Business Innovation Research program
totaled $52,000, $78,000, and $30,000 in 1999, 1998 and 1997, respectively.
GROSS MARGIN. Vinifera recorded a gross margin of 6.8% in 1999. Production
yields improved significantly from those achieved in 1998, resulting in lower
unit costs of production. Vinifera recorded a negative gross margin in 1998.
Grafted plants were lost in 1998 due to abnormal weather conditions which caused
grafting yield in 1998 to be significantly lower than planned, especially in the
fourth quarter of 1998, and resulted in
16
<PAGE>
a charge of $974,000 to reduce inventory to net realizable value. Gross margin
on product sales was 7.7% of sales for 1997.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses in 1999,
1998 and 1997 totaled $3.1 million, $2.5 million and $1.7 million, respectively.
Increased expenses of $634,000 in 1999 were as the result of the addition of
projects funded by Vilmorin and Agrinomics, together with a higher level of
activity on the NIST grant. Research project expenses increased $790,000 in 1998
compared to 1997 as the Company initiated work on banana and tree fruit under
the NIST grant and also conducted extensive field trials of its extended
shelf-life cantaloupes
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses in 1999, 1998 and 1997 were $3.69 million, $3.14 million
and $3.08 million, respectively. The increase of $546,854 in 1999 was
attributable to several factors, primarily increased compensation expense
related to amortization of expense for stock options granted in December 1997,
increased sales expenses at Vinifera due to expanded sales activity and
increased legal fees related to the Company's proposed gene discovery program.
Rent, depreciation and other costs of occupancy also increased in 1999 as a
result of the Company's move to expanded quarters in March 1998. The increases
were partially offset by decreases in other professional fees and travel
expenses due to the fact that expenses in the first quarter of the 1998 fiscal
year included non-recurring fees and expenses incurred in connection with the
transition from operating as a wholly owned subsidiary to operating as an
independent public company. In 1998, expenses included non-cash charges of
$309,000 for amortization of the excess of fair value of stock options at date
of grant over the exercise price and $81,000 representing the fair value of
stock options issued to consultants. Expenses in 1997 included $913,000 of costs
incurred by Vinifera, which was not part of Agritope during the first eleven
months of 1996. During 1997, Vinifera expanded greenhouse capacity and continued
to establish marketing and administrative functions at its new headquarters
location in Petaluma, California. Such activities contributed to relatively high
selling, general and administrative expenses in comparison to product sales
levels.
Selling, general and administrative expenses included $228,000 and $1.4 million
for the allocation of Shared Services in 1998 and 1997, respectively. Epitope
provided such services through December 1, 1997 and, pursuant to a Transition
Services and Facilities Agreement, continued to provide office and laboratory
space and certain other services after that date until March 15, 1998 when the
Company moved to a separate facility.
OTHER INCOME (EXPENSE), NET. In 1999, Agritope sold a portion of its equity
interest in Vinifera to certain minority shareholders thereby reducing its
majority interest from 64% to 57%. The gain on the sale amounted to $290,000 and
is included in other income. Also in 1999, Vinifera received, and recorded as
other income, a payment of $170,000 representing reimbursement for certain
expenses incurred in prior years to explore establishment of a grapevine nursery
business in Spain in cooperation with a minority shareholder of Vinifera.
Vinifera ultimately decided to discontinue its participation in the project and
was reimbursed for expenses it incurred for the benefit of the venture.
In 1998, Vinifera sold its minority interest in Vinifera Sudamericana, SA for
$70,000 and recognized a loss of $130,000 in other expense.
During 1997, Agritope recorded a non-cash charge to results of operations of
$2.3 million, reflecting the permanent impairment in the value of its investment
in two wholesale fresh-flower distribution businesses. Agritope also incurred a
charge of $1.2 million for conversion of $3.4 million principal amount of
Agritope convertible notes into Epitope common stock at a reduced conversion
price. Also in 1997, a charge of $744,000 was recorded as other expense in
recognition of the Company's contingent liability as primary lessee on two
leases pertaining to the fresh flower businesses. See Note 9 to Consolidated
Financial Statements.
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Interest income of $103,000 and $224,000 was earned in 1999 and 1998,
respectively, from investment of proceeds of private placements of capital stock
in the last three quarters of 1998.
L I Q U I D I T Y A N D C A P I T A L R E S O U R C E S
SEPTEMBER 30, 1999 1998
(in thousands)
Cash and cash equivalents................ $ 4,204 $ 3,904
Working capital ......................... 5,786 6,884
At September 30, 1999, Agritope had working capital of $5.8 million as compared
to working capital of $6.9 million at September 30, 1998. Vinifera's inventory
increased $1.8 million due to increased order activity and improved yield. The
plants can be maintained in greenhouses or stored outside for several years
during which time they continue to grow. Inventory on hand at September 30, 1999
represents grapevine plants expected to be sold in the spring and summer of 2000
and 2001.
During 1999, expenditures for property and equipment were $447,000, principally
for greenhouse improvements and expansion of grapevine propagation blocks at
Vinifera. The Company also expended $485,000 for proprietary technology related
to its patent portfolio. For the first nine months of 1999, Vinifera used
expanded credit from vendors on open account and internally generated cash from
collection of accounts receivable and deposits on future orders to fund
operations and capital expenditures. In June 1999 Vinifera replaced a $1.5
million working capital line from Agritope with a $1.5 million commercial bank
line. Advances of $363,000 under the line were used to support Vinifera's fourth
quarter operating requirements. Agritope's cash requirements for the first nine
months of 1999 were supplied primarily from cash reserves supplemented by
research funding from government agencies and Vilmorin Clause & Cie
("Vilmorin"), a strategic partner, and, in the fourth quarter, from its newly
formed joint venture, Agrinomics LLC. In addition, Agritope received $1 million
from Vinifera in connection with refinancing the Vinifera line of credit.
Agritope expended $1.3 million in 1998 to furnish and equip its newly occupied
facilities and $638,000 for patents and licenses of proprietary technology.
Vinifera expended $861,000 to expand production capacity. Agritope has also
acquired certain rights to certain proprietary genes for which it made payments
of $300,000 in 1999 and 1998. Such amounts are included in "patents and
proprietary technology, net."
In June 1999, Agritope entered into stock purchase agreements with certain
minority shareholders of Vinifera pursuant to which minority ownership of
Vinifera will increase from 36% to approximately 50% over a three-year period.
Agritope received proceeds totaling $874,000 and its ownership interest in
Vinifera was reduced from 64% to 57%.
In September 1999, the Company completed a $2.5 million private placement of
500,000 shares of Series A Preferred Stock at a price of $5 per share. Vilmorin
purchased the shares. For every four shares of Series A Stock purchased in the
private placement, Vilmorin also received a warrant to purchase one additional
share of Series A Stock at a price of $7 per share at any time over the next
five years. Vilmorin subsequently sold 150,000 shares and related warrants to a
strategic partner, Hazera Quality Seeds Ltd. of Israel.
Historically, the primary sources of funds for meeting Agritope's requirements
for operations, working capital and business expansion have been cash from its
former parent company, Epitope, sale of convertible notes, investments in
Vinifera by minority shareholders, and funding from strategic partners and other
research grants. In 1999 Agritope received proceeds of $2.5 million from a
private placement of 500,000 shares of Series A stock and $874,000 from the sale
of a portion of its majority interest in Vinifera to certain minority
shareholders. In 1998, Agritope realized $1.2 million in cash from Epitope prior
to the spin-off. Proceeds from private placements in 1998 yielded $9.8 million
for Agritope and minority shareholders of Vinifera invested another $1.8 million
in Vinifera. Agritope expects to continue to require significant funds to
support its operations and research activities. Agritope intends to utilize cash
reserves, cash generated from sales of products, and research funding from
strategic partners and other research grants to provide the necessary funds.
Agritope may also rely on the sale of equity securities to generate additional
funds.
18
<PAGE>
Agritope presently anticipates that funds on hand as of September 30, 1999, will
be sufficient to finance operations for the upcoming year, based on currently
estimated revenues and expenses. Because this estimate is based on a number of
factors, many of which are beyond the Company's control, there can be no
assurance that this estimate will prove to be accurate, and to the extent that
Agritope's operations do not progress as anticipated, additional capital may be
required. Additional capital may not be available on acceptable terms, if at
all, and the failure to raise such capital would have a material adverse effect
on Agritope's business, financial condition, and results of operations.
Agritope has completed a Year 2000 compliance review of its systems and
procedures to determine the costs and risks related to the Year 2000 date
conversion. As a result of this review, the Company believes that it will not
incur material Year 2000 remedial costs and that its operations will not be
materially affected by the Year 2000 conversion, and as a consequence it has not
established a contingency plan.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of September 30, 1999, Vinifera, Inc. a majority-owned subsidiary of the
Company had borrowings under a $1.5 million revolving line of credit, which is
subject to interest rate risk. Due to the short-term nature of the borrowings
under this credit facility, an immediate 10% increase in interest rates would
not have a material effect on the Company's financial condition or the results
of operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information with respect to this Item is contained in the Company's consolidated
financial statements included in response to Item 14 of this Annual Report on
Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
(a) Effective February 23, 1998, Agritope dismissed its prior independent
accountant, PricewaterhouseCoopers LLP. The decision to change accountants
was recommended by Agritope's Audit Committee and was approved by its Board
of Directors.
PricewaterhouseCoopers LLP reports on Agritope's financial statements for
fiscal years 1997 and 1996 did not contain an adverse opinion or disclaimer
of opinion, nor were they qualified or modified as to uncertainty, audit
scope or accounting principles, except that the PricewaterhouseCoopers LLP
report on the financial statements for the year ended September 30, 1997
included an explanatory paragraph regarding a change in the basis of
presentation of such financial statements from those previously issued.
During the audits for the years 1997 and 1996 and through the date hereof,
there were no disagreement between Agritope and PricewaterhouseCoopers LLP
on any matters of auditing scope or procedures, which disagreements, if not
resolved to the satisfaction of PricewaterhouseCoopers LLP, would have
caused it to make a reference to the subject matter of the disagreements in
connection with its reports.
Agritope requested that PricewaterhouseCoopers LLP furnish it with a letter
addressed to the Securities and Exchange Commission stating whether or not
it agrees with the above statements. A copy of such letter, dated February
27, 1998, was filed as Exhibit 16 to a report on Form 8-K dated February
23, 1998 and is incorporated herein by reference.
(b) Effective February 23, 1998, Agritope engaged Arthur Andersen LLP ("Arthur
Andersen") as its principal accountant. During fiscal years 1997 and 1996
and through February 23, 1998, Agritope did not consult Arthur Andersen
regarding any of the matters or events set forth in Item 304 (a) (2) (i)
and (ii) of Regulation S-K.
19
<PAGE>
PART III
The Company has omitted from Part III the information that will appear in the
Company's definitive proxy statement for its 2000 annual meeting of stockholders
(the "Proxy Statement"), which will be filed within 120 days after the end of
the Company's fiscal year pursuant to Regulation 14A.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item is incorporated by reference to the
information under the caption "Election of Directors" and
"Executive Officers" in the Proxy Statement
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to the
information under the caption "Executive Compensation" in the Proxy Statement
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference to the
information under the caption "Principal Shareholders" in the Proxy Statement
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference to the
information under the caption "Certain Transactions" in the Proxy Statement
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
(a) (1) and (a) (2) Financial Statements and Schedules
PAGE
<S> <C>
Agritope, Inc. and Subsidiaries
Reports of Independent Accountants...................................................... 21
Consolidated Balance Sheets as of September 30, 1999 and 1998........................... 23
Consolidated Statements of Operations
for the years ended September 30, 1999, 1998 and 1997................................. 24
Consolidated Statements of Changes in Stockholders' Equity
for the years ended September 30, 1999, 1998 and 1997................................. 25
Consolidated Statements of Cash Flows
for the years ended September 30, 1999, 1998 and 1997................................. 26
Notes to Consolidated Financial Statements.............................................. 27
</TABLE>
No schedules are included in the foregoing financial statements because the
required information is inapplicable or is presented in the financial statements
or related notes thereto.
(a) (3) Exhibits
See Index to Exhibits following the signature page of this report.
(b) Reports on Form 8-K
No reports on Form 8-K were filed in the fourth quarter of the fiscal year
covered by this report.
20
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A G R I T O P E , I N C . A N D S U B S I D I A R I E S
R E P O R T OF I N D E P E N D E N T A C C O U N T A N T S
To the Board of Directors and Stockholders of Agritope, Inc.
We have audited the accompanying consolidated balance sheets of Agritope, Inc.
(a Delaware corporation) and subsidiaries as of September 30, 1999 and 1998, and
the related consolidated statements of operations, changes in stockholders'
equity and cash flows for each of the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Agritope, Inc. and subsidiaries as of September 30, 1999 and 1998, and the
consolidated results of its operations and its cash flows for each of the two
years then ended in conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
Portland, Oregon,
October 29, 1999
21
<PAGE>
A G R I T O P E , I N C . A N D S U B S I D I A R I E S
R E P O R T O F I N D E P E N D E N T A C C O U N T A N T S
To the Board of Directors and Stockholders of Agritope, Inc.
In our opinion, the consolidated statements of operations, stockholders' equity
and cash flows for the year ended September 30, 1997 present fairly, in all
material respects, the results of operations and cash flows of Agritope, Inc.and
its subsidiaries for the year ended September 30, 1997, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
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 audit provides a
reasonable basis for the opinion expressed above. We have not audited the
consolidated financial statements of Agritope, Inc. for any period subsequent to
September 30, 1997.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Portland, Oregon
October 31, 1997
22
<PAGE>
<TABLE>
<CAPTION>
A G R I T O P E , I N C . A N D S U B S I D I A R I E S
C O N S O L I D A T E D B A L A N C E S H E E T S
SEPTEMBER 30 1999 1998
ASSETS
<S> <C> <C>
Current assets
Cash and cash equivalents............................ $ 4,203,937 $ 3,904,087
Trade accounts receivable, net....................... 355,187 1,033,860
Other accounts receivable............................ 165,480 124,690
Due from affiliate................................... 119,088 -
Inventories.......................................... 5,053,888 3,289,172
Prepaid expenses..................................... 73,440 172,196
------------ ------------
Total current assets................................. 9,971,020 8,524,005
Property and equipment, net.......................... 3,511,824 4,100,804
Patents and proprietary technology, net.............. 1,945,586 1,736,998
Other assets and deposits ........................... 42,752 28,519
------------ ------------
$15,471,182 $14,390,326
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable..................................... $642,178 $ 178,171
Revolving line of credit............................. 1,463,000 -
Advances from minority shareholders of subsidiary.... 180,616 -
Current portion of installment notes payable......... 4,576 4,255
Current portion of lease liability................... 140,935 358,404
Deposits on customer orders.......................... 1,173,303 599,944
Salaries, benefits and other accrued liabilities..... 580,028 499,313
------------ ------------
Total current liabilities............................ 4,184,636 1,640,087
Long-term portion of installment notes payable....... 5,465 10,238
Long-term portion of lease liability................. - 115,785
Minority interest.................................... 1,958,538 1,613,977
Commitments and contingencies
Stockholders' equity
Preferred stock, par value $.01
10,000,000 shares authorized; 714,285 shares
and 214,285 shares issued and outstanding, respectively 7,143 2,143
Common stock, par value $ .01
30,000,000 shares authorized; 4,070,612 shares
and 4,050,150 shares issued and outstanding,
respectively....................................... 40,706 40,502
Additional paid-in capital........................... 60,369,181 57,386,675
Accumulated deficit.................................. (51,094,487) (46,419,081)
------------- -------------
9,322,543 11,010,239
$15,471,182 $ 14,390,326
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
A G R I T O P E , I N C . A N D S U B S I D I A R I E S
C O N S O L I D A T E D S T A T E M E N T S O F O P E R A T I O N S
FOR THE YEAR ENDED SEPTEMBER 30 1999 1998 1997
<S> <C> <C> <C>
Revenues
Product sales........................... $ 2,503,377 $ 2,574,976 $ 1,436,498
Grants and contract revenues............ 811,676 224,688 114,692
Revenue from affiliates................. 236,416 - -
------------ ------------ ------------
3,551,469 2,799,664 1,551,190
Costs and expenses
Product costs........................... 2,333,673 3,414,293 1,326,163
Research and development costs.......... 3,105,183 2,471,374 1,681,646
Selling, general and
administrative expenses................ 3,685,291 3,138,437 3,081,074
------------ ------------ ------------
9,124,147 9,024,104 6,088,883
Loss from operations.................... (5,572,678) (6,224,440) (4,537,693)
------------- ------------- -------------
Other income (expense), net
Interest income......................... 102,742 224,350 -
Interest expense........................ (21,446) (1,248) (25,307)
Gain on sale of stock of subsidiary..... 289,603 - -
Valuation loss.......................... - - (2,258,080)
Debt conversion......................... - - (1,216,654)
Other, net.............................. 166,365 (125,052) (927,234)
------------ ------------ -------------
537,264 98,050 (4,427,275)
Minority interest in subsidiary net loss 360,008 882,423 274,369
------------ ----------- -------------
Net loss................................ $ (4,675,406) $ (5,243,967) $ (8,690,599)
Net loss per share (basic and diluted).. $ (1.15) $ (1.42) $ (3.23)
Weighted average number
of shares outstanding................. 4,061,474 3,705,490 2,690,770
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
A G R I T O P E , I N C . A N D S U B S I D I A R I E S
C O N S O L I D A T E D S T A T E M E N T S O F C H A N G E S
I N S T O C K H O L D E R S ' E Q U I T Y
PREFERRED COMMON ADDITIONAL ACCUMULATED
STOCK STOCK PAID-IN CAPITAL DEFICIT
<S> <C> <C> <C> <C>
Balances at September 30, 1996............ $ - $ 26,908 $33,465,214 $(32,484,515)
Compensation expense for stock awards.... - - 33,063 -
Compensation expense for
stock option grants..................... - - 20,832 -
Capital contributed by Epitope, Inc., upon
exchange of convertible notes........... - - 4,529,009 -
Equity issuance costs..................... - - (86,134) -
Minority interest investment in subsidiary - - 742,752 -
Cash contribution from Epitope, Inc....... - - 7,206,196 -
Net loss for the year .................... - - - (8,690,599)
--------- ------------ ----------------- -------------
Balances at September 30, 1997............ - 26,908 45,910,932 (41,175,114)
Compensation expense for
stock option grants...................... - - 390,420 -
Common stock issued as compensation-
15,670 shares........................... - 157 40,345 -
Common stock issued in private placement-
1,343,704 shares........................ - 13,437 10,322,333 -
Preferred stock issued in private placement-
214,285 shares.......................... 2,143 - 1,497,852 -
Equity issuance costs .................... - - (2,023,347) -
Cash contribution from Epitope, Inc....... - - 1,248,140 -
Net loss for the year .................... - - - (5,243,967)
--------- ------------ ----------------- -------------
Balances at September 30, 1998 ........... 2,143 40,502 57,386,675 (46,419,081)
Compensation expense for
stock option grants...................... - - 457,861 -
Common stock issued as compensation-
20,462 shares............................ - 204 40,953 -
Preferred stock issued in private placement-
500,000 shares........................... 5,000 - 2,615,000 -
Equity issuance costs .................... - - (131,308) -
Net loss for the year .................... - - - (4,675,406)
--------- ------------ ----------------- -------------
Balances at September 30, 1999 ........... $ 7,143 $ 40,706 $60,369,181 $(51,094,487)
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
A G R I T O P E , I N C . A N D S U B S I D I A R I E S
C O N S O L I D A T E D S T A T E M E N T S O F C A S H F L O W S
FOR THE YEAR ENDED SEPTEMBER 30 1999 1998 1997
<S> <C> <C> <C> >
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss............................................. $(4,675,406) $ (5,243,967) $ (8,690,599)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization........................ 1,307,937 951,209 566,813
Loss on sale of property............................. 3,637 54 -
Gain on sale of common stock of subsidiary........... (289,603) - -
Compensation expense for stock awards................ 41,157 40,502 33,063
Compensation expense for stock option grants......... 457,861 390,420 20,832
Minority interest in subsidiary net loss............. (360,008) (882,423) (274,369)
Valuation loss....................................... - `- 2,258,080
Non-cash portion of cost of debt conversion.......... - - 1,149,054
Decrease (increase) in receivables................... 637,883 (535,637) (325,590)
(Increase) in receivable from affiliate.............. (119,088) - -
(Increase) in inventories............................ (1,764,716) (1,207,877) (1,571,550)
Decrease (increase) in prepaid expenses.............. 98,756 104,028 (275,412)
Decrease (increase) in other assets and deposits..... (14,233) (1,722) 21,462
Increase in accounts payable and accrued liabilities. 665,058 86,966 1,022,592
Increase (decrease) in deposits on customer orders... 573,359 210,013 (76,986)
Other................................................ - 162,647 -
---------- ---------- ----------
Net cash used in operating activities................ (3,437,406) (5,925,787) (6,142,610)
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment.................. (446,730) (2,126,906) (1,927,209)
Proceeds from sale of property....................... 900 11,033 -
Proceeds from sale of common stock of subsidiary..... 873,836 - -
Expenditures for patents and proprietary
technology......................................... (485,352) (646,712) (870,910)
Investment in affiliated companies................... - 70,000 (56,419)
---------- ---------- ----------
Net cash used in investing activities................ (57,346) (2,692,585) (2,854,538)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of long-term debt........................... - - 20,887
Principal payments on long-term debt ................ (4,452) (4,331) (242,063)
Payments on long-term lease obligation............... (333,254) (317,920) -
Proceeds from revolving line of credit............... 1,463,000 - -
Advances from minority shareholders of subsidiary.... 180,616 - -
Proceeds from issuance of stock, net................. 2,488,692 9,812,418 -
Minority interest investment in subsidiary........... - 1,779,768 1,540,000
Cash from Epitope, Inc............................... - 1,248,140 7,206,196
------------ ------------ ----------
Net cash provided by financing activities............ 3,794,602 12,518,075 8,525,020
Net increase (decrease) in cash and cash equivalents. 299,850 3,899,703 (472,128)
Cash and cash equivalents at beginning of year....... 3,904,087 4,384 476,512
------------ ------------ -----------
Cash and cash equivalents at end of year............. $ 4,203,937 $ 3,904,087 $ 4,384
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
</TABLE>
26
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A G R I T O P E , I N C . A N D S U B S I D I A R I E S
N O T E S TO C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
N O T E 1 T H E C O M P A N Y
Agritope, Inc. (the "Company" or "Agritope") is an Oregon-based agricultural
biotechnology company that develops improved plant products and provides
technology to the agricultural industry. Its 57% owned subsidiary, Vinifera,
Inc. ("Vinifera"), offers superior grapevine plants to the premium wine industry
together with disease testing and elimination services. Agrinomics LLC
("Agrinomics") is a 50% owned subsidiary that conducts a gene discovery program.
Superior Tomato Associates, LLC ("Superior Tomato") is a 66-2/3% owned
subsidiary formed to develop and market longer-lasting tomatoes. Agrimax Floral
Products, Inc. ("Agrimax") is an inactive subsidiary that holds a 9% interest in
UAF, Limited Partnership ("UAF"), a fresh flower distribution operation based in
Tampa, Florida. Prior to December 30, 1997, Agritope was a wholly owned
subsidiary of Epitope, Inc. ("Epitope"), an Oregon corporation engaged in the
development and marketing of medical diagnostic products.
AGRITOPE SPIN-OFF. In July 1997, the Epitope board of directors approved a
management proposal to spin off Agritope, subject to obtaining financing for
Agritope and the satisfaction of certain other conditions. In December 1997,
Agritope sold 1,343,704 shares of Agritope common stock in a private placement
to certain investors for aggregate net proceeds of $9,406,000, immediately after
the spin-off. The spin-off was accomplished by a distribution of 2,690,776
shares of Agritope common stock to Epitope shareholders, representing 100% of
Epitope's holdings of Agritope common stock.
Agritope and Epitope entered into certain agreements governing the ongoing
relationship between the companies after the spin-off, including a Separation
Agreement, a Tax Allocation Agreement, a Transition Services and Facilities
Agreement and an Employee Benefits Agreement. Pursuant to the Employee Benefits
Agreement, Agritope established replacement plans that effectively continue to
provide benefits available under current Epitope benefit plans.
DELAWARE REINCORPORATION; RECAPITALIZATION. In November 1997, in connection with
the spin-off of Agritope by Epitope, Agritope agreed to merge with Agritope,
Inc., a newly formed Delaware corporation. The purpose of the merger was to
change the Company's domicile from Oregon to Delaware and increase the Company's
authorized capital stock to 30 million shares of common stock, par value $.01
per share, and 10 million shares of preferred stock, par value $.01 per share.
The merger occurred on December 3, 1997.
On November 25, 1997, the Agritope board of directors declared a stock dividend
of 690,866 shares of Agritope common stock to the sole Agritope stockholder.
Subsequently, 2,690,766 shares of Agritope common stock were distributed to the
shareholders of Epitope in the spin-off and the remaining shares, representing
fractional interest, were redeemed for cash. All of the shares of Agritope
common stock that were distributed to Epitope shareholders have been reflected
as outstanding for all periods presented in the accompanying financial
statements.
BASIS OF PRESENTATION. The accompanying consolidated financial statements
include the assets, liabilities, revenues and expenses of Agritope and its
majority owned subsidiaries. All significant intercompany transactions and
balances have been eliminated in consolidation. Minority-owned investments and
joint ventures are accounted for using the equity method. Investments of less
than 20% are carried at cost or estimated net realizable value, whichever is
lower. Intercompany balances with Epitope have been reflected as capital
contributions (common stock and additional paid-in capital) in the accompanying
consolidated financial statements because they were converted into a permanent
capital contribution in conjunction with the spin-off.
27
<PAGE>
A G R I T O P E , I N C . A N D S U B S I D I A R I E S
N O T E S TO C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
N O T E 2 S U M M A R Y O F S I G N I F I C A N T A C C O U N T I N G
P O L I C I E S
Certain corporate overhead services such as accounting, annual meeting costs,
annual report preparation, audit, executive management, facilities, finance,
general management, human resources, information systems, investor relations,
legal services, payroll and SEC filings were 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 were reviewed periodically and adjusted to reflect changes in
utilization, include number of employees, number of computers, and level of
expenditures. Management believes that the amount allocated for these Shared
Services is not materially different from the amount that would be incurred by
Agritope for such services provided on a stand-alone basis. Allocated Shared
Services of $227,990 and $1,402,895, respectively, for 1998 and 1997 are
included under the caption "Selling, general and administrative expenses" in the
accompanying consolidated statements of operations. Epitope discontinued
provision of Shared Services in March 1998 when Agritope moved to separate
physical facilities.
CASH AND CASH EQUIVALENTS. For purposes of the consolidated balance sheets and
statements of cash flows, all highly liquid investments with maturities at time
of purchase of three months or less are considered to be cash equivalents.
INVENTORIES. Inventories, consisting principally of growing grapevine plants at
Vinifera, are recorded at the lower of average cost or market. Average cost
includes all direct and indirect costs attributable to the growing grapevine
plants. Inventory is summarized as follows:
SEPTEMBER 30 1999 1998
Operating supplies ........................ $ 143,757 $ 142,900
Work-in-process ........................... 1,437,617 128,374
Finished goods ............................ 3,472,514 3,017,898
--------- ---------
$5,053,888 $ 3,289,172
Loss of grafted plants due to abnormal weather conditions in 1998 caused
grafting yield to be significantly lower than planned, especially in the fourth
quarter, resulting in a charge of $974,000 to product costs in order to reduce
inventory to net realizable value.
DEPRECIATION AND CAPITALIZATION POLICIES. Property and equipment are stated at
cost less accumulated depreciation. Expenditures for repairs and maintenance are
charged to operating expense as incurred. Expenditures for renewals and
betterments are capitalized. Depreciation and amortization of property and
equipment are calculated primarily under the straight-line method over the
estimated useful lives of the related assets (three to seven years). Leasehold
improvements are amortized over the shorter of estimated useful lives or the
terms of the related leases. When assets are sold or otherwise disposed of, cost
and related accumulated depreciation or amortization are removed from the
accounts and any resulting gain or loss is included in results of operations.
28
<PAGE>
A G R I T O P E , I N C . A N D S U B S I D I A R I E S
N O T E S TO C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
N O T E 2 S U M M A R Y O F S I G N I F I C A N T A C C O U N T I N G
P O L I C I E S, C O N T I N U E D
ACCOUNTING FOR LONG-LIVED ASSETS. The Company reviews its long-lived assets for
impairment periodically or as events or circumstances indicate that the carrying
amount of long-lived assets may not be recoverable. If the estimated net cash
flows are less than the carrying amount of the long-lived assets, the Company
recognizes an impairment loss in an amount necessary to write down long-lived
assets to fair value as determined from expected discounted future cash flows.
This accounting policy is consistent with Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of."
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. Amortization and
accumulated amortization are summarized as follows:
1999 1998 1997
Amortization for the year........... $276,764 $ 186,406 $ 104,461
Accumulated amortization............ 696,192 419,428 233,022
FAIR VALUE OF FINANCIAL INSTRUMENTS. The carrying amounts for cash equivalents,
accounts receivable, accounts payable and revolving line of credit approximate
fair value because of the immediate or short-term maturity of these financial
instruments. The carrying amount for installment notes payable approximates fair
value because the related interest rates are comparable to rates currently
available to the Company for debt with similar terms and maturities. The Company
does not have any derivative financial instruments.
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 $24,054 as of September 30,
1999 and $25,057 as of September 30, 1998.
MAJOR CUSTOMER. For the years ended September 30, 1998 and 1997, respectively,
one customer purchased $829,578 and $337,374 of grapevine plants from Vinifera,
representing 32.2% and 23.4% of Vinifera's net sales. No single customer
accounted for more than 5% of net sales during the year ended September 30,
1999.
RESEARCH AND DEVELOPMENT. Research and development expenditures are comprised of
those costs associated with Agritope's ongoing research and development
activities to develop superior new plants. Expenditures for research and
development also include costs incurred under contracts to develop certain
products, including those contracts resulting in grant and contract revenues.
All research and development costs are expensed as incurred.
INCOME TAXES. The Company accounts for certain revenue and expense items
differently for income tax purposes than for financial reporting purposes. These
differences arise principally from methods used in accounting for stock options
and depreciation rates. Deferred tax assets and liabilities are recognized based
on temporary differences between the financial statement and the tax bases of
assets and liabilities using enacted tax rates in effect for the year in which
the temporary differences are expected to reverse.
29
<PAGE>
A G R I T O P E , I N C . A N D S U B S I D I A R I E S
N O T E S TO C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
N O T E 2 S U M M A R Y O F S I G N I F I C A N T A C C O U N T I N G
P O L I C I E S, C O N T I N U E D
STOCK-BASED COMPENSATION. In October 1995, the Financial Accounting Standards
Board ("FASB") issued Statement of Financial Accounting No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"). SFAS 123 allows companies which have
stock-based compensation arrangements with employees to adopt a fair-value basis
of accounting for stock options and other equity instruments or to continue to
apply the existing accounting rules under Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), but with
additional financial statement disclosure. The Company has elected to apply the
existing accounting rules under APB 25 to its stock-based compensation plans.
See Note 6.
NET LOSS PER SHARE. Basic earnings per share ("EPS") and diluted EPS are
computed using the methods prescribed by Statement of Financial Accounting
Standards No. 128, "Earnings Per Share" ("SFAS 128"). Basic EPS is calculated
using the weighted-average number of common shares outstanding for the period
and diluted EPS is computed using the weighted-average number of common shares
and dilutive common equivalent shares outstanding. Basic and diluted EPS are the
same for all periods presented since the Company was in a loss position in all
periods. The following potentially dilutive securities are excluded from net
loss per share calculations as their effect would have been antidilutive:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30 1999 1998 1997
<S> <C> <C> <C>
Options to purchase common stock........ 1,708,103 1,255,264 -
Warrants to purchase common stock....... 708,333 583,333 -
Preferred stock......................... 714,285 214,285 -
---------- ----------- --------
3,130,721 2,052,882 -
</TABLE>
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 1999 1998 1997
<S> <C> <C> <C>
Cash paid for interest.................. $ 21,446 $ 1,248 $ 25,307
Fair value of warrants issued in connection
with private placements............... 120,000 929,842 -
Minority interest contribution
of capital (Note 6)................... - - 742,752
Conversion of notes
to equity (Notes 5 and 6)............. - - 3,380,000
</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.
30
<PAGE>
A G R I T O P E , I N C . A N D S U B S I D I A R I E S
N O T E S TO C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
N O T E 3 I N V E S T M E N T I N A F F I L I A T E D C O M P A N I E S
In June 1998, Vinifera accepted an offer to sell its minority interest in
Vinifera Sudamericana, S.A. to the majority shareholder for $70,000. The
resultant non-cash loss on disposition of $130,000 is included in "Other, net"
under the caption "Other income (expense), net" in the accompanying consolidated
statements of operations for 1998.
In 1997, the Company recorded a charge of $2,258,080 to recognize the permanent
impairment of its investment in a fresh flower distribution business.
The Company's capital contributions to support the research activities of
Superior Tomato are expensed as incurred.
N O T E 4 P R O P E R T Y A N D E Q U I P M E N T
<TABLE>
<CAPTION>
Property and equipment are summarized as follows:
SEPTEMBER 30 1999 1998
<S> <C> <C>
Land........................................................ $ 30,020 $ 30,020
Grapevine propagation blocks................................ 1,723,317 1,602,617
Production equipment........................................ 120,031 127,736
Buildings and improvements.................................. 2,483,556 2,418,182
Research and development laboratory equipment............... 840,259 812,734
Office furniture and equipment.............................. 795,553 711,416
Leasehold improvements...................................... 317,016 306,146
Construction in progress.................................... 136,589 -
------------- ------------
6,446,341 6,008,851
Less accumulated depreciation and amortization.............. (2,934,517) (1,908,047)
------------- -------------
$ 3,511,824 $ 4,100,804
</TABLE>
N O T E 5 B O R R O W I N G A R R A N G E M E N T S
ADVANCES TO VINIFERA FROM MINORITY SHAREHOLDERS. In September 1999, certain
minority shareholders of Vinifera agreed to advance $519,000, interest-free, to
Vinifera. The amounts to be advanced are equal to the second installment payable
by the shareholders to Agritope under certain stock purchase agreements and they
are to be repaid to the shareholders on or before July 15, 2000. As of September
30, 1999, $180,616 of the total had been advanced to Vinifera and is included as
a current liability in the accompanying financial statements. The remaining
advances were made in October. See Note 6 for further details with respect to
the stock purchase agreements.
REVOLVING LINE OF CREDIT. In June 1999, Vinifera borrowed $1.1 million from a
commercial bank under a revolving line of credit. The proceeds were used to
finance inventory production and repay a $1 million line of credit advanced by
Agritope. The line provides for borrowings of up to $1.5 million, of which
$1,463,000 was outstanding as of September 30, 1999. It is secured by Vinifera's
inventories and accounts receivable and is guaranteed by one of Vinifera's
minority shareholders. The line bears interest at the prime rate (8.5% as of
September 30, 1999). It expires on May 1, 2000.
ACCOUNTS RECEIVABLE LINE OF CREDIT. In May 1999, Agritope entered into an
agreement with a commercial bank pursuant to which the bank will advance up to
$500,000 based on 80% of qualified and approved accounts receivable. The line of
credit bears interest at the rate of 2% per month and each advance carries an
administration fee of 0.65%. It expires on May 20, 2000. The Company has not
made any borrowings under the line.
31
<PAGE>
A G R I T O P E , I N C . A N D S U B S I D I A R I E S
N O T E S TO C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
N O T E 5 B O R R O W I N G A R R A N G E M E N T S, C O N T I N U E D
CONVERTIBLE NOTES. In November 1996, Epitope exchanged $3,380,000 principal
amount of Agritope convertible notes for 250,367 shares of common stock of
Epitope at a reduced exchange price of $13.50 per share. The exchange price had
previously been fixed at $19.53 per share. Accordingly, Agritope recognized a
charge to results of operations of $1,216,654 in the first quarter of fiscal
1997 representing the conversion expense. In conjunction with the exchange,
unamortized debt issuance costs of $86,134 related to such notes were recognized
as equity issuance costs during 1997. Concurrent with the note conversion,
Epitope made a $4,529,009 capital contribution to Agritope. On June 30, 1997,
Agritope paid in full the remaining $240,000 principal amount outstanding. Debt
issuance costs incurred in connection with the notes were included in other
assets and were being amortized over the five-year life of the notes.
Amortization expense of debt issuance costs for the year ended September 30,
1997 totaled $2,687. Debt issuance costs were fully amortized as of September
30, 1997.
N O T E 6 S T O C K H O L D E R S' E Q U I T Y
STOCKHOLDER RIGHTS PLAN. In November 1997, Agritope adopted a Stockholders'
Rights Plan, which enables holders of Common Stock, under certain circumstances,
to purchase fractional shares of a series of preferred stock.
Each share of Common Stock includes the right to purchase (the "Right"), if and
when the Rights are exercisable, 1/1,000 of a share of Series B Junior
Participating Preferred Stock at an exercise price of $25. The exercise price
and the number of shares issuable upon exercise of the Rights are subject to
adjustment in certain cases to prevent dilution. The Rights are evidenced by the
Agritope Common certificates and are not exercisable, or transferable apart from
the Agritope Common, until 10 business days after (i) a person acquires 15% or
more of the Agritope Common; (ii) a person commences a tender offer which would
result in the ownership of 15% or more of the Agritope Common; or (iii) the
Agritope Board declares a person beneficially owning at least 10% of the
Agritope Common to be an Adverse Person (the "Rights Distribution Date"). In the
event any person becomes the beneficial owner of 15% or more of the Agritope
Common or the Agritope Board determines that a person is an Adverse Person, each
of the Rights (other than Rights held by the party triggering the Rights and
certain of their transferees, all of which will be voided) becomes a discount
right entitling the holder to acquire Agritope Common having a value equal to
twice the Right's exercise price. Vilmorin, Clause and Cie ("Vilmorin") will not
trigger the Stockholder Rights Plan if it acquires other Agritope securities
directly from Agritope or with the prior approval of the Agritope Board.
In the event Agritope is acquired in a merger or other business combination
transaction (including one in which Agritope is the surviving corporation), each
Right will entitle its holder to purchase, at the then current exercise price of
the Right, that number of shares of common stock of the surviving company which
at the time of such transaction would have a market value of two times the
exercise price of the Right. The Rights do not have any voting rights and are
redeemable, at the option of Agritope, at a price of $.01 per Right at any time
until 10 business days after a person acquires beneficial ownership of at least
15% of the Agritope Common. The Rights expire on November 14, 2007. So long as
the Rights are not separately transferable, Agritope will issue one Right with
each new share of Agritope Common issued.
COMMON STOCK. Cash and cash equivalents provided to Agritope by Epitope have
been reflected in additional paid-in capital. Also reflected in additional
paid-in capital 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 additional
paid-in capital.
32
<PAGE>
A G R I T O P E , I N C . A N D S U B S I D I A R I E S
N O T E S TO C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
N O T E 6 S T O C K H O L D E R S' E Q U I T Y, C O N T I N U E D
EPITOPE STOCK PLAN GRANTS. As employees of a wholly owned subsidiary of Epitope,
the employees of Agritope and its subsidiaries participated in stock award,
employee stock purchase and other benefit plans of Epitope. Compensation expense
recognized for Epitope stock grants and awards to Agritope employees totaling
$53,895 in 1997 has been recognized as operating expenses and additional paid-in
capital of Agritope.
VINIFERA COMMON STOCK. In June 1999, Agritope entered into stock purchase
agreements with certain minority shareholders of Vinifera pursuant to which
minority ownership of Vinifera will increase from 36% to approximately 50% over
a three-year period. In a related transaction, also in June, Vinifera repaid the
$1 million balance on its working capital line of credit to Agritope and
replaced the line with a $1.5 million revolving bank line of credit that is
guaranteed by a minority shareholder. In July 1999, the minority shareholders
made the first purchases under the stock purchase agreements. Agritope received
proceeds totaling $873,836 and its ownership interest in Vinifera was reduced
from 64% to 57%. The gain on the first purchases amounted to $290,000 and is
included in other income.
In September 1999, the minority shareholders agreed to advance $519,000,
interest-free, to Vinifera, representing the second installment under the
agreements. The advances are to be repaid to the shareholders on or before July
15, 2000. As of September 30, 1999, $180,616 of the total had been advanced to
Vinifera and is included as a current liability in the accompanying financial
statements.
In June 1998, Vinifera sold 898,269 shares of common stock to certain minority
shareholders for $1.8 million. In connection with the terms of the related stock
purchase agreements, Agritope canceled $4 million of working capital loans to
Vinifera in exchange for 2 million shares of common stock of Vinifera. The
transactions increased Agritope's percentage ownership from 61% to 64%.
In January 1997, a minority shareholder in Vinifera contributed $100,000 to
Vinifera in satisfaction of a stock subscription agreement. In June 1997,
Agritope sold 770,000 shares of common stock of Vinifera to outside parties for
$1,540,000 in cash. In accordance with the terms of the related stock purchase
agreements, Agritope contributed the proceeds of these stock sales to Vinifera's
capital. These sales of previously issued shares of Vinifera common stock
reduced Agritope's percentage ownership of Vinifera voting stock from 76% to
61%.
WARRANTS TO PURCHASE COMMON STOCK. As of September 30, 1999, the following
warrants to purchase common stock were outstanding:
DATE OF ISSUANCE SHARES EXERCISE PRICE EXPIRATION DATE
September 24, 1999...... 125,000 $ 7.00 September 30, 2004
April 30, 1998.......... 83,333 $ 7.34 December 30, 2000
December 30, 1997....... 500,000 $ 7.00 December 30, 2000
-------
708,333
33
<PAGE>
A G R I T O P E , I N C . A N D S U B S I D I A R I E S
N O T E S TO C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
N O T E 6 S T O C K H O L D E R S' E Q U I T Y, C O N T I N U E D
SERIES A PREFERRED STOCK. Agritope's board of directors has designated 1 million
shares of Agritope preferred stock, par value $.01 per share, as Series A
Preferred Stock ("Series A Preferred"). The Series A Preferred has preemptive
rights and the right to elect a director, but otherwise has rights substantially
equivalent to Agritope common stock and is convertible at any time into shares
of Agritope common stock on a share-for-share basis, subject to adjustment upon
the occurrence of certain events. In connection with a research agreement,
Vilmorin purchased 214,285 shares of Series A Preferred in 1998 at a price of $7
per share. See Note 8.
In September 1999, the Company completed a $2.5 million private placement of
500,000 shares of Series A Preferred Stock at a price of $5 per share. Vilmorin
purchased the shares. For every four shares of Series A Stock purchased in the
private placement, Vilmorin also received a warrant to purchase one additional
share of Series A Stock at a price of $7 per share at any time over the next
five years. The fair value of such warrants, $120,000, is included in "Preferred
stock issued in private placement" with a corresponding charge to "Equity
issuance costs" in the accompanying statement of stockholders equity. Each share
of Series A Stock is convertible into one share of Agritope Common Stock.
Vilmorin subsequently sold 150,000 shares of Series A Stock together with the
related warrants to an Israeli seed company, Hazera Quality Seeds
Ltd.("Hazera"), for $750,000. After completion of the sales, Vilmorin owned
564,285 shares of Series A Stock, or 11.8% of the outstanding capital stock of
Agritope. Hazera's holdings amounted to 3.1% of Agritope's outstanding capital
stock.
STOCK AWARD PLAN. In November 1997, the Agritope, Inc. 1997 Stock Award Plan
(the "Award Plan") was adopted by Agritope's board of directors and approved by
Epitope as Agritope's sole stockholder. The Award Plan provides for stock-based
awards to employees, outside directors, members of scientific advisory boards
and consultants. Awards that may be granted under the Award Plan include
incentive stock options, nonqualified stock options, stock appreciation rights,
restricted awards, performance awards and other stock-based awards. The Award
Plan provides for the issuance of a total of up to 2,000,000 shares of Agritope
common stock, subject to adjustment for changes in capitalization. Options for
291,897 shares were available for future grants under the Award Plan as of
September 30, 1999.
The following tables summarizes Award Plan activity (shares and weighted average
prices):
<TABLE>
<CAPTION>
1999 1998
SHARES PRICE SHARES PRICE
<S> <C> <C> <C> <C>
Outstanding, beginning of period ... 1,255,264 $ 5.54 - $ -
Granted ............................ 509,439 2.80 1,422,664 5.51
Exercised .......................... - - - -
Canceled ........................... (56,600) 5.91 (167,400) 5.31
-------- ---------
Outstanding, end of period ......... 1,708,103 4.70 1,255,264 5.54
Exercisable......................... 369,445 5.38 65,000 5.07
Weighted average fair value of options granted .. .90 3.68
</TABLE>
The amounts granted above include options granted to consultants in 1999 and
1998 covering 10,000 and 65,000 shares, respectively, at average exercise prices
of $2.00 and $5.07, respectively. In accordance with SFAS 123, Agritope
recognized compensation expense for these awards in 1999 and
34
<PAGE>
A G R I T O P E , I N C . A N D S U B S I D I A R I E S
N O T E S TO C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
N O T E 6 S T O C K H O L D E R S' E Q U I T Y, C O N T I N U E D
1998 totaling $7,500 and $81,000, respectively, based on the fair value of the
options as determined using the Black-Scholes method of valuation. With respect
to options granted in 1999 and 1998 to participants other than consultants,
Agritope will recognize compensation expense of $22,500 and $1,902,065,
respectively, representing discounts from market prices on date of grant, which
will be amortized over the vesting period of the options, in accordance with APB
25. Amortization in 1999 and 1998 amounted to $450,361 and $309,420,
respectively.
The following table summarizes information about stock options outstanding as of
September 30, 1999:
<TABLE>
<CAPTION>
REMAINING WEIGHTED WEIGHTED
SHARES CONTRACT LIFE AVERAGE SHARES AVERAGE
EXERCISE PRICE OUTSTANDING (YEARS) EXERCISE PRICE EXERCISABLE EXERCISE PRICE
<S> <C> <C> <C> <C> <C>
$2.00 to $3.00.... 381,939 9.02 $ 2.05 10,000 $ 2.00
$5.00 to $5.31.... 1,155,164 7.99 5.24 307,693 5.24
$7.00............. 171,000 8.17 7.00 51,752 7.00
--------- --------
1,708,103 8.24 4.70 369,445 5.38
</TABLE>
EMPLOYEE STOCK PURCHASE PLAN. Also in November 1997, Agritope's board of
directors and Epitope, as Agritope's sole stockholder, approved the Agritope,
Inc. 1997 Employee Stock Purchase Plan (the "Purchase Plan"), covering up to
250,000 shares of Agritope common stock which Agritope employees may subscribe
to purchase during offering periods to be established from time to time. The
Compensation Committee of Agritope's board of directors was granted authority to
determine the number of offering periods, the number of shares offered, and the
length of each period. No more than three offering periods (other than Special
Offering Subscriptions as defined in the Purchase Plan) may be set during each
fiscal year. The purchase price for stock purchased under the Purchase Plan is
the lesser of 85% of the fair market value of a share on the last trading day
before the offering date established for the offering period and 85% of the fair
market value of a share on the date the purchase period ends (or any earlier
purchase date provided for in the Purchase Plan). No offerings were made in the
year ended September 30, 1998. As of September 30, 1999, employees had
subscribed to purchase 43,053 shares over a 24-month period at an initial price
of $0.93 per share. During the year ended September 30, 1999, 754 shares, with a
weighted-average fair market value of $2.93 per share, were issued at a price of
$0.93 per share.
VINIFERA STOCK AWARD PLAN. In 1993, Vinifera adopted a stock award plan, which
was approved by Agritope as the sole shareholder of Vinifera. The plan provided
for issuance of options to purchase up to 2,000,000 shares of Vinifera common
stock. In 1993, Vinifera granted options to purchase 100,000 shares for $1.00
per share, a price equal to the market value as determined by Vinifera's board
of directors. No options were granted from 1994 until 1999. In 1999, Vinifera
granted options to purchase 525,000 shares for $1.50 per share, representing a
discount of $0.50 from the market price as determined by the board of directors.
As of September 30, 1999, options were outstanding to purchase 625,000 shares,
at a weighted-average price of $1.42, of which options on 231,250 shares were
exercisable, at a weighted-average price of $1.28. In accordance with APB 25,
Vinifera will recognize compensation expense of $262,500 over a three-year
vesting period. Amortization of such expense in 1999 amounted to $119,103.
35
<PAGE>
A G R I T O P E , I N C . A N D S U B S I D I A R I E S
N O T E S TO C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
N O T E 6 S T O C K H O L D E R S' E Q U I T Y, C O N T I N U E D
As required by SFAS 123, the Company has computed, for pro forma disclosure
purposes, the value of options granted and amortized over the vesting periods
using the Black-Scholes option pricing model. The assumptions used for stock
option grants were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30 1999 1998 1997
<S> <C> <C> <C>
Risk-free interest rate................. 5% 5% -
Expected dividend yield................. - - -
Expected life (years)................... 4 4 -
Expected volatility..................... 80% 55% -
</TABLE>
The assumptions used for rights granted under the Employee Stock Purchase Plan
in 1999 were a risk-free interest rate of 5%, an expected dividend yield of
zero, an expected volatility of 80% and an expected life of 2 years.
If the Company had accounted for its stock-based compensation plans in
accordance with SFAS 123, the Company's net loss and net loss per share would
have increased as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30 1999 1998 1997
<S> <C> <C> <C>
Net loss:
As reported............................. $ (4,675,406) $ (5,243,967) $ (8,690,599)
Pro forma............................... $ (5,937,886) $ (6,165,274) $ (8,690,599)
Net loss per share:
As reported............................. $ (1.15) $ (1.42) $ ( 3.23)
Pro forma............................... $ (1.46) $ (1.66) $ ( 3.23)
</TABLE>
36
<PAGE>
A G R I T O P E , I N C . A N D S U B S I D I A R I E S
N O T E S TO C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
N O T E 7 I N C O M E T A X E S
As of September 30, 1999, Agritope had net operating loss carryforwards of
approximately $41.8 million and $28.9 million to offset federal and Oregon state
taxable income, respectively. These net operating loss carryforwards will expire
if not used by Agritope, as follows:
YEAR OF EXPIRATION FEDERAL OREGON
2004.......................................... $ 111,000 $ 111,000
2005.......................................... 317,000 317,000
2006.......................................... 941,000 941,000
2007.......................................... 2,620,000 2,620,000
2008.......................................... 6,733,000 4,847,000
2009.......................................... 8,327,000 2,179,000
2010.......................................... 8,477,000 3,765,000
2011.......................................... 2,249,000 2,168,000
2012.......................................... 4,284,000 4,284,000
2018.......................................... 3,856,000 3,856,000
2019.......................................... 3,840,000 3,840,000
----------- -----------
Total......................................... $41,755,000 $28,928,000
Significant components of Agritope's deferred tax asset were as follows:
SEPTEMBER 30 1999 1998
Net operating loss carryforwards................... $ 16,158,000 $ 14,636,000
Deferred compensation.............................. 784,000 631,000
Research and experimentation credit carryforwards.. 542,000 522,000
Accrued expenses................................... 162,000 233,000
Other.............................................. 667,000 630,000
------------ ------------
Gross deferred tax assets.......................... 18,313,000 16,652,000
Valuation allowance................................ (18,313,000) (16,652,000)
------------ -------------
Net deferred tax asset............................. $ - $ -
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 $1.7
million in 1999. The research and experimentation tax credit carryforwards will
generally expire from 2004 through 2019 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) continued as carryforwards
of Agritope after the date of distribution. The issuance of voting stock
following the spin-off 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 $1.5 million for the year ended
September 30, 1999 increased by approximately $177,000 for the effect of state
and local taxes (net of federal impact), and decreased by approximately $1.7
million for the effect of the increase in valuation allowance, and by $6,000 for
permanent differences consisting primarily of meals and entertainment.
The consolidated financial statements include the financial results of Vinifera,
a 57% owned subsidiary (see Note 1). However, the tax disclosures above do not
include the deferred tax assets and related valuation allowance for Vinifera's
carryforwards since Vinifera is not included in the consolidated group for tax
purposes. Vinifera files its tax return separately on a stand-alone basis.
37
<PAGE>
A G R I T O P E , I N C . A N D S U B S I D I A R I E S
N O T E S TO C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
N O T E 8 R E S E A R C H A N D D E V E L O P M E N T
A R R A N G E M E N T S
REVENUES. Revenues from research and development arrangements are included in
the accompanying consolidated statements of operations under the caption "Grants
and contracts." Expenses related to projects conducted under 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 1999 1998 1997
<S> <C> <C> <C>
Government research grants................ $ 313,876 $ 206,974 $ 30,228
Research projects with strategic partners. 734,216 - 52,770
Other..................................... - 17,714 31,694
------------- ------------ ----------
$1,048,092 $ 224,688 $ 114,692
Project related expenses.................. $1,331,356 $ 371,184 $ 272,309
</TABLE>
NATIONAL INSTITUTES OF STANDARDS AND TECHNOLOGY. In October 1997, Agritope was
awarded a U.S. Department of Commerce matching grant totaling $990,022 through
the Advanced Technology Program of the National Institute of Standards and
Technology (NIST) and covering a three-year period. Agritope was awarded the
grant for use in the application of its proprietary ripening control technology
to certain tree fruits and bananas. Under terms of the grant, the NIST
reimburses Agritope for 49% of direct costs incurred for the projects. As of
September 30, 1999, $ 245,558 was available for future reimbursement under the
grant.
VILMORIN. On December 5, 1997, Agritope and Vilmorin entered into a research and
development agreement covering certain vegetable and flower crops. Under the
terms of the research agreement, Vilmorin will provide certain proprietary seed
varieties and germplasm for use by Agritope in research and development projects
to be funded by Vilmorin, in which Agritope technology, and possibly Vilmorin
technology, will be applied to the various covered crops. The specific research
projects to be conducted will be determined by agreement of the parties. Unless
otherwise agreed, Vilmorin will pay, on a quarterly basis, all of Agritope's
out-of-pocket expenses, including employee salaries and overhead, for each
selected research project.
Agritope and Vilmorin have agreed to negotiate in good faith the terms of future
commercialization agreements applicable to any commercial-stage products that
arise out of Vilmorin-funded research. If the parties are unable to agree,
commercialization terms will be determined by binding arbitration.
Vilmorin also agreed to provide additional funding totaling $1 million through
the financing of research and development projects over a three-year period. As
of September 30, 1999, Vilmorin had committed $298,607 to fund specified
projects which are planned to be completed by June 2000. Agritope earned
revenues of $497,800 for work completed for the Vilmorin projects in 1999. No
revenues were earned in 1998 with respect to such projects.
38
<PAGE>
A G R I T O P E , I N C . A N D S U B S I D I A R I E S
N O T E S TO C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
N O T E 8 R E S E A R C H A N D D E V E L O P M E N T
A R R A N G E M E N T S, C O N T I N U E D
AGRINOMICS LLC. In July 1999, Agritope and Aventis CropScience S.A. ("Aventis
CropScience") formed Agrinomics LLC ("Agrinomics") to conduct a research,
development and commercialization program in the field of agricultural
functional genomics. Agritope owns a 50% interest in Agrinomics and Aventis
CropScience owns the remaining 50% interest. Aventis CropScience has agreed to
make capital contributions in cash totaling $20 million over a five-year period,
of which $5 million was contributed in 1999. Agritope contributed certain
technology and a collection of seed generated using such technology. Agritope
and Aventis CropScience will also perform research work at their respective
facilities. In 1999, Agritope earned revenues of $236,416 for work performed for
Agrinomics. The technology contributed to Agrinomics by Agritope had a zero
basis for financial reporting purposes. Accordingly, Agritope has recorded its
investment in Agrinomics as zero and will not include in its consolidated
financial statements its proportionate share of the results of operations of
Agrinomics until such time that Agritope makes capital contributions to
Agrinomics, if ever. Summarized financial information for Agrinomics is as
follows:
FINANCIAL POSITION AS OF SEPTEMBER 30, 1999
Assets
Current Assets
Cash and marketable securities............................ $4,784,798
Other accounts receivable................................. 16,404
-----------
4,801,202
Property, plant and equipment............................. 142,940
----------
Total assets............................................ $ 4,944,142
Liabilities and Members' Equity
Accounts payable, including 119,088 payable to Agritope... $ 180,682
Members' equity........................................... 4,763,460
---------
Total liabilities and members' equity..................... $ 4,944,142
OPERATING RESULTS FOR THE PERIOD FROM INCEPTION, JULY 1, 1999,
THROUGH SEPTEMBER 30, 1999
Operating expenses
Research and development.................................. $ 242,369
Administration............................................ 17,037
--------
259,406
Interest earned........................................... 22,866
--------
Net loss.................................................. $ (236,540)
39
<PAGE>
A G R I T O P E , I N C . A N D S U B S I D I A R I E S
N O T E S TO C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
N O T E 9 C O M M I T M E N T S A N D C O N T I N G E N C I E S
Agritope leases office space and Vinifera leases office and greenhouse
facilities under operating lease agreements, which require minimum annual
payments as follows:
YEAR ENDING SEPTEMBER 30
2000 ................................................... $535,860
2001 ................................................... 544,936
2002 ................................................... 560,048
2003 ................................................... 326,140
2004 ................................................... 90,500
Rent expense was $514,762, $556,717, and $326,388, for 1999, 1998 and 1997,
respectively.
Agritope is also contingently liable for a lease that has been assigned to UAF
which requires payments totaling $55,701 for the year ending September 30, 2000.
During 1997, the Company accrued its contingent obligation under these leases as
both UAF and Petals have defaulted on the related subleases. The corresponding
charge of $744,109 is included in "Other, net" under the caption "Other income
(expense), net" in the accompanying consolidated statements of operations for
1997.
N O T E 10 P R O F I T S H A R I N G A N D S A V I N G S P L A N S
EMPLOYEE STOCK OWNERSHIP PLAN. Agritope's board of directors adopted the
Agritope, Inc. Employee Stock Ownership Plan ("ESOP") in November 1997. After
the spin-off, all employees, except excluded classes, of Agritope and those of
its affiliates that elect to participate, were eligible to participate in the
ESOP. The employers' contribution to the ESOP each year, if any, will be
determined by the Agritope board of directors, and may be made either in
Agritope common stock or in cash. Contributions will be allocated to
participants in proportion to their compensation. Contributions vest based on
years of service over the first six years of employment, or upon the
participant's earlier death, disability, or attainment of age 65.
To date, no contributions have been declared.
401(K) PROFIT SHARING PLAN. Agritope established the Agritope, Inc. 401(k)
Profit Sharing Plan (the "401(k) Plan") in November 1997. All employees
(including officers), other than excluded classes, are eligible to participate.
Participants may contribute up to 17% of their cash compensation on a before-tax
basis, subject to an annual maximum amount that is adjusted for the cost of
living ($10,000 for 1999). The first 5% of a participant's compensation is
eligible for a discretionary, pro-rata employer matching contribution which will
be invested in Agritope common stock. Matching contributions vest based on years
of service over the first six years of employment, or upon the participant's
earlier death, disability, or attainment of age 65. In 1999 and 1998, Agritope
made contributions of $40,456 and $40,502, respectively to the 401(k) Plan. The
401(k) plan holds 38,155 shares of Agritope common stock as of September 30,
1999.
EPITOPE 401(K) PROFIT SHARING PLAN. Epitope established a profit sharing and
deferred salary savings plan in 1986 and restated the plan in 1991. All Agritope
employees were eligible to participate in the plan prior to the date of the spin
off. During 1998 and 1997, respectively, Agritope was charged $8,196 and $33,063
by Epitope for its share of the matching contribution under the plan.
40
<PAGE>
A G R I T O P E , I N C . A N D S U B S I D I A R I E S
N O T E S TO C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
N O T E 11 S E G M E N T I N F O R M A T I O N
In 1999, Agritope adopted Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" ("SFAS
131"). Under SFAS 131, segments are defined as components of an enterprise about
which separate financial information is available that is evaluated regularly by
the chief operating decision maker, or decision-making group, in deciding how to
allocate resources and in assessing performance. Agritope's chief operating
decision-maker is the chief executive officer.
Agritope is organized into two segments: The Research and Development segment
develops improved plant products and provides technology to the agricultural
industry. The Grapevine Propagation segment, operated by Vinifera, propagates,
grows and distributes grapevine plants to the premium wine industry. It also
provides disease testing and elimination services.
The accounting policies of the segments are the same as those described in Note
2, Summary of Significant Accounting Policies. The Company has no revenues
outside the United States. For information as to major customers, see Note 2
"Major Customer". Selected segment information is presented in the tables below:
<TABLE>
<CAPTION>
RESEARCH AND GRAPEVINE
DEVELOPMENT PROPAGATION TOTAL
YEAR ENDED SEPTEMBER 30, 1999
<S> <C> <C> <C>
Revenues from external sources.......... $ 1,048,092 $ 2,503,377 $ 3,551,469
Intersegment revenues................... 180,296 (180,296) -
Operating loss.......................... (4,517,213) (1,055,465) (5,572,678)
Intersegment interest income (expense).. 40,288 (40,288) -
Interest income......................... 102,543 199 102,742
Interest expense........................ ( 27) (21,419) (21,446)
Other income (expense).................. - 166,365 166,365
Segment loss............................ (4,374,409) (950,608) (5,325,017)
Depreciation and amortization........... 669,672 638,265 1,307,937
Expenditures for long-lived assets...... 600,416 331,666 932,082
Segment assets.......................... 7,529,966 7,941,216 15,471,182
YEAR ENDED SEPTEMBER 30, 1998
Revenues from external sources.......... $ 224,688 $ 2,574,976 $ 2,799,664
Intersegment revenues................... 70,869 (70,869) -
Operating loss.......................... (4,271,627) (1,952,813) (6,224,440)
Intersegment interest income (expense).. 271,612 (271,612) -
Interest income......................... 224,350 - 224,350
Interest expense........................ - (1,248) (1,248)
Other income (expense).................. 6,450 (131,502) (125,052)
Segment loss............................ (3,769,215) (2,357,175) (6,126,390)
Depreciation and amortization........... 442,826 508,383 951,209
Expenditures for long-lived assets...... 1,903,973 869,645 2,773,618
Segment assets.......................... 7,395,950 6,994,376 14,390,326
</TABLE>
41
<PAGE>
A G R I T O P E , I N C . A N D S U B S I D I A R I E S
N O T E S TO C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
N O T E 11 S E G M E N T I N F O R M A T I O N, C O N T I N U E D
<TABLE>
<CAPTION>
RESEARCH AND GRAPEVINE
DEVELOPMENT PROPAGATION TOTAL
YEAR ENDED SEPTEMBER 30, 1997
<S> <C> <C> <C>
Revenues from external sources.......... $ 114,692 $ 1,436,498 $1,551,190
Intersegment revenues................... 52,217 (52,217) -
Operating loss.......................... (3,590,916) (946,777) (4,537,693)
Intersegment interest income (expense).. 231,757 (231,757) -
Interest income......................... - - -
Interest expense........................ ( 24,457) (850) (25,307)
Other income (expense).................. - (1,716) (1,716)
Segment loss............................ (3,383,616) (1,181,100) (4,564,716)
Depreciation and amortization........... 280,487 286,326 566,813
Expenditures for long-lived assets...... 1,042,102 1,756,017 2,798,119
Segment assets.......................... 2,069,629 5,215,426 7,285,055
RECONCILIATION OF LOSSES. The following table reconciles segment losses to
consolidated net loss:
YEAR ENDED SEPTEMBER 30................. 1999 1998 1997
Segment losses.......................... $ (5,325,017) $ (6,126,390) $ (4,564,716)
Gain on sale of stock of Vinifera....... 289,603 - -
Minority interest in Vinifera losses.... 360,008 882,423 274,369
Valuation loss.......................... - - (2,258,080)
Debt conversion......................... - - (1,216,654)
Other, net.............................. - - (925,518)
---------------- ------------ --------------
Net loss................................ $ (4,675,406) $ (5,243,967) $ (8,690,599)
</TABLE>
42
<PAGE>
SIGNATURES
....Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereto duly authorized.
AGRITOPE, INC.
By /s/ GILBERT N. MILLER
--------------------------------------
Gilbert N. Miller
Executive Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
December 29, 1999 /s/ ADOLPH J. FERRO
- ----------------- ---------------------------------------
Date Adolph J. Ferro
Chairman, President, Chief Executive
Officer
(PRINCIPAL EXECUTIVE OFFICER)
December 29, 1999 /s/ GILBERT N. MILLER
- ----------------- ---------------------------------------
Date Gilbert N. Miller
Executive Vice President, Chief
Financial Officer and Director
(PRINCIPAL FINANCIAL AND ACCOUNTING
OFFICER)
December 29, 1999 /s/ W. CHARLES. ARMSTRONG *
- ----------------- ---------------------------------------
Date W. Charles Armstrong
Director
December 29, 1999 /s/ MICHEL de BEAUMONT *
- ----------------- ---------------------------------------
Date Michel de Beaumont
Director
December 29, 1999 /s/ NANCY L. BUC *
- ----------------- ---------------------------------------
Date Nancy L. Buc
Director
December 29, 1999 /s/ JAMES T. KING*
- ----------------- ---------------------------------------
Date James T. King
Director
December 29, 1999 /s/ PIERRE LEFEBVRE*
- ----------------- ---------------------------------------
Date Pierre Lefebvre
Director
December 29, 1999 /s/ ROGER L. PRINGLE *
- ----------------- ---------------------------------------
Date Roger L. Pringle
Director
*By /s/ GILBERT N. MILLER
---------------------------------------
Gilbert N. Miller
(Attorney-in-Fact)
43
<PAGE>
EXHIBIT INDEX
NUMBER DESCRIPTION
2.* Separation Agreement between Epitope, Inc. ("Epitope"), and Agritope,
Inc. ("Agritope"), dated as of December 1, 1997.
3.1* Certificate of Incorporation of Agritope.
3.2* Bylaws of Agritope.
3.3* Certificate of Designation, Preferences and Rights of the Series
A Preferred Stock.
4.1* Form of Common Stock Certificate.
4.2* Form of Rights Agreement between Agritope and ChaseMellon Shareholder
Services, L.L.C., as Rights Agent, which includes as Exhibit A the
Designation of Terms of the Series B Junior Participating Preferred
Stock and as Exhibit B the form of Rights Certificate, as amended.
4.3* Form of stock purchase agreement in connection with the Regulation S
Sale.
4.4* Preferred Stock Purchase Agreement between Agritope and Vilmorin
dated December 5, 1997.
10.1* Transition Services and Facilities Agreement between Epitope and
Agritope, dated as of December 1, 1997.
10.2* Tax Allocation Agreement between Epitope and Agritope, dated as of
December 1, 1997.
10.3* Amended and Restated Employee Benefits Agreement between Epitope and
Agritope, dated as of December 19, 1997.****
10.4* Agritope, Inc. 1997 Stock Award Plan.****
10.5* Agritope, Inc. 1997 Employee Stock Purchase Plan.****
10.6* Form of Employment Agreement between Agritope and Adolph J. Ferro,
Ph.D.****
10.7* Form of Employment Agreement between Agritope and Gilbert N.
Miller.****
10.8** Form of Employment Agreement between Agritope and D. Ry
Wagner.****
10.9* Form of Employment Agreement between Agritope and Matthew G.
Kramer.****
10.10* Employment Agreement between Vinifera, Inc. and Joseph A.
Bouckaert.****
10.11* Form of Indemnification Agreement for directors.
10.12* Form of Indemnification Agreement for officers.
10.13* Lease of Land and Certain Improvements located at 4288 Bodega Avenue
entered into by and between Gianni Neve and Maria Neve, Landlord, and
Vinifera, Inc., Tenant, dated as of February 1, 1996.
10.14* Option to License and Research Support Agreement between the Salk
Institute for Biological Studies and Epitope dated February 25, 1997,
including Amendment dated July 25, 1997, and Assignment between
Agritope and Epitope.
10.15* Superior Tomato Associates, L.L.C. Operating Agreement dated February
19, 1996, including Assignment and Assumption Agreement between the
Company and Andrew and Williamson Sales, Co.
10.16* Form of Restated Placement Agent Agreement between American Equities
Overseas Inc., and Agritope.
10.17** Form of Warrant Agreement to be issued to Vector Securities in partial
consideration for services in connection with the Distribution.
10.18* Form of Warrant Agreement issued in connection with the Regulation S
Sale.
<PAGE>
10.19* Research and Development Agreement between Agritope and Vilmorin & Cie,
dated as of December 5, 1997.
10.20* Assignment and Modification of Lease dated November 7, 1997 among
Pacific Realty Associates, L.P. ("Pacific"), American Show Management,
Inc. ("ASM"), and Agritope, Lease Amendment dated June 3, 1996, between
Pacific and ASM, and Lease dated October 4, 1995, between Pacific and
ASM.
10.21*** Limited Liability Company Agreement of Agrinomics LLC, dated as of July
1, 1999, among Agritope, ACTTAG, Inc., a Delaware corporation
("ACTTAG"), and RP Ag.
10.22*** Research and Management Contract, dated as of July 1, 1999, between
Agritope and Agrinomics.
10.23*** Assignment and Assumption Agreement and Bill of Sale, dated as of July
15, 1999, between ACTTAG and Agrinomics.
10.24*** Research Contract and License Agreement, dated as of July 1, 1999,
between RP Ag and Agrinomics.
10.25*** Research, License and Option Agreement, dated as of October 23, 1998,
as amended and restated as of July 14, 1999, between The Salk Institute
for Biological Studies, a California nonprofit public benefit
corporation, and Agritope.
10.26*** Assignment and Assumption Agreement and Bill of Sale, dated as of July
5, 1999, between ACTTAG and Agritope.
10.27*** Research and Option to License Agreement, dated as of January 21, 1999,
between the University Court of the University of Edinburgh, and
Agritope.
10.28 Commercial Lease with Option to Purchase dated March 25, 1999 between
Louis Neve, Lessor, and Vinifera, Inc. Lessee.
10.29 Lease Amendment dated September 8, 1999 between Pacific Realty
Associates, L.P., Landlord, and Agritope, Tenant.
10.30 Amended and Restated Unit Purchase Agreement dated September 16, 1999,
between Vilmorin Clause & Cie, Purchaser, and Agritope.
10.31 Form of Stock Purchase Agreement among, Agritope, Vinifera and
Purchasers dated June 1, 1999.
10.32 First Amendment to Lease of Land and Improvements Located at 4288
Bodega Avenue Dated April 27, 1999 by and between Gianni Neve and Maria
Neve, collectively, Landlord and Vinifera, Tenant.
10.33 Vinifera, Inc. 1993 Stock Award Plan dated March 9, 1993.****
10.34 Revolving Line of Credit Note dated May 15, 1999 to Wells Fargo Bank
National Association by Henry Wendt and Vinifera, Inc.
10.35 Addendum to Promissory Note dated May 15, 1999 to Wells Fargo Bank
National Association by Henry Wendt and Vinifera, Inc.
10.36 Continuing Security Agreement Rights to Payment and Inventory dated
May 15, 1999 to Wells Fargo Bank National Association by Vinifera, Inc.
10.37 Accounts Receivable Purchase Agreement dated May 20, 1999 between
Silicon Valley Bank and Agritope, Inc.
21.1 List of Subsidiaries.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of PricewaterhouseCoopers LLP.
24.1 Power of Attorney for W. Charles Armstrong, Michel de Beaumont, James
T. King, and Roger L. Pringle.
24.4 Power of Attorney for Nancy L. Buc.
24.5 Power of Attorney for Pierre LeFebvre.
27 Financial Data Schedule.
<PAGE>
99 Certain Factors to Consider in Connection with Forward-Looking
Statements.
- - -----------------
Other exhibits listed in Item 601 of Regulation S-K are not applicable.
* Incorporated by reference to Registrant's Registration Statement on Form
S-1 (No. 333-34597).
** Incorporated by reference to Registrant's Annual Report on Form 10-K
dated September 30, 1998.
*** Incorporated by reference to Registrant's Current Report on Form 8-K/A
dated July 20, 1999. Confidential Treatment Requested; the omitted
material has been separately filed with the Securities and Exchange
Commission.
**** Compensatory plans or agreements.
COMMERCIAL LEASE WITH OPTION TO PURCHASE
AGENCY RELATIONSHIP CONFIRMATION. The following agency relationship is hereby
confirmed for this transaction and supersedes any prior agency election:
LISTING AGENT: ____________________________ is the agent of (check one):
/ / THE SELLER EXCLUSIVELY; OR / / BOTH THE BUYER AND THE SELLER.
SELLING AGENT: ______________________________ (if not the same as the
Listing Agent) is the agent of (check one):
/ / THE BUYER EXCLUSIVELY, OR / / THE SELLER EXCLUSIVELY; OR / / BOTH THE
BUYER AND THE SELLER. NOTE: THIS CONFIRMATION DOES NOT TAKE THE PLACE OF THE
AGENCY DISCLOSURE FORM WHICH MAYBE REQUIRED BY LAW.
RECEIVED FROM Vinifera. Inc hereinafter referred to as LESSEE.
--------------------------------
the sum of $ ( dollars).
----------- -----------------------------------------------
evidenced by as a deposit which will belong to
-----------------------------------
Lessor and will be applied as follows:
<TABLE>
<CAPTION>
TOTAL RECEIVED BALANCE DUE PRIOR TO OCCUPANCY
<S> <C> <C> <C>
Rent for the period from March 15 to March 31 .................$ 6500.00 $ 0 $ ____________
-------- --------
Security deposit (not applicable toward last months rent) ....$ 1300.00 $ 0 $ ____________
Other .........................................................$ $ $ ____________
TOTAL .........................................................$ 19,500.00 $ 0 $ ____________
</TABLE>
In the event this Lease is not accepted by the Lessor WITHIN N/A DAYS, the
total deposit received will be refunded. Lessee offers to lease from
Lessor the premises situated in the City of PETALUMA County of SONOMA,
State of CALIFORNIA, 2645 BODEGA AVE , commonly known as "A PORTION OF
"SEE ADDENDUM 1, 1 & EXHIBIT A, B, C, D, consisting of approximately
130,000 square feet, upon the following terms and conditions:
1. TERM. The term will commence on APRIL 1, 1999 , and end on MARCH 31 , 2004.
2. RENT. The total rent will be $ 780,000.00 , payable at $ 13, 000.00 per
month (based on first year's rates) payable on the 1ST day of each month.
All rents will be paid to Lessor or his or her authorized agent, at the
following address 2647 BODEGA AVE--LOUIS NEVE--NEVE BROTHERS ROSES. or at
such other places as may be designated by Lessor from time to time. In the
event rent is not paid within 5 days after due date, Lessee agrees to pay a
late charge of $ 650.00 plus interest at 8 % per annum on the delinquent
amount. Lessee further agrees to pay $ 150.00 for each dishonored bank
check. The late charge period is not a grace period, and Lessor is entitled
to make written demand for any rent if not paid when due.
3. USE. The premises are to be used for the operation of GRAPE VINE PRODUCTION
AND GRAFTING , and for no other purpose, without prior written consent of
Lessor. Lessee will not commit any waste upon the premises, or any nuisance
or act, which may disturb the quiet enjoyment of any tenant in the
building.
4. USES PROHIBITED. Lessee will not use any portion of the premises for
purposes other than those specified. No use will be made or permitted to be
made upon the premises, nor acts done, which will increase the existing
rate of insurance upon the property, or cause cancellation of insurance
policies covering the property. Lessee will not conduct or permit any sale
by auction on the premises.
5. ASSIGNMENT AND SUBLETTING. Lessee will not assign this Lease or sublet any
portion of the premises without prior written consent of the Lessor, which
will not be unreasonably withheld. Any such assignment or subletting
without consent will void and, at the option of the Lessor, will terminate
this Lease.
6. ORDINANCES AND STATUTES. Lessee will comply with all statutes, ordinances,
and requirements of all municipal, state and federal authorities now in
force or which may later be in force, regarding the use of the premises.
The commencement or pendency of any state or federal court abatement
proceeding affecting the use of the premises will, at the option of the
Lessor, be deemed a breach of this Lease.
7. MAINTENANCE, REPAIRS, ALTERATIONS. Unless otherwise indicated, Lessee
acknowledges that the premises are in good order and repair. Lessee will at
his or her own expense, maintain the premises in a good and safe condition,
including plate glass electrical wiring, plumbing and heating and air
conditioning installations, and any other system or equipment. The premises
will be surrendered at termination of the Lease, in as good condition as
received, normal wear and tear excepted. Lessee will be responsible for all
repairs required, except the following which will be maintained by Lessor:
roof, exterior walls, structural foundations (including any retrofitting
required by governmental authorities) and: BOILER AND HEATING SYSTEMS
Lessee /x/ will, / / will not maintain the property adjacent to the
premises, such as sidewalks, driveways, lawns, and shrubbery, which would
otherwise be maintained by Lessor.
No improvement or alteration of the premises will be made without the prior
written consent of the Lessor. Prior to the commencement of any substantial
repair, improvement, or alteration, Lessee will give Lessor at least two
(2) DAYS WRITTEN NOTICE in order that Lessor may post appropriate notices
to avoid any liability for liens.
LESSEE [ JB ] [ ] AND LESSOR [ LN ] [ ] HAVE READ THIS PAGE.
<PAGE>
Property Address 2645 BODEGA AVE. - "A PORTION OF"
-----------------------------------------------------------
8. ENTRY AND INSPECTION. Lessee will permit Lessor or Lessor's agents to enter
the premises at reasonable times and upon reasonable notice for the purpose
of inspecting the premises, and will permit Lessor, at any time within
sixty (60)days prior to the expiration of this Lease, to place upon the
premises any usual "For Lease" signs, and permit persons desiring to lease
the premises at reasonable times.
9. INTENTIONALLY OMITTED.
10. POSSESSION. If Lessor is unable to deliver possession of the premises at
the commencement date set forth above, Lessor will not be liable for any
damage caused by the delay, nor will this Lease be void or voidable, but
Lessee will not be liable for any rent until possession is delivered.
Lessee may terminate this Lease if possession is not delivered within
_______ days of the commencement term in Item 1.
11. LESSEE'S INSURANCE. Lessee, at his or her expense, will maintain plate
glass, public liability, and property damage insurance insuring Lessee and
Lessor with minimum coverage as follows: $500,000.00 - $1,000,000.00.
Lessee will provide Lessor with a Certificate of Insurance showing Lessor
as additional insured. The policy will require ten (10) days written notice
to Lessor prior to cancellation or material change of coverage.
12. LESSOR'S INSURANCE. Lessor will maintain hazard insurance covering one
hundred percent (100%) actual cash value of the improvements throughout the
Lease term. Lessor's insurance will not insure Lessee's personal property,
leasehold improvements, or trade fixtures.
13. SUBROGATION. To the maximum extent permitted by insurance policies which
may be owned by the parties, Lessor and Lessee waive any and all rights of
subrogation which might otherwise exist.
14. UTILITIES. Lessee agrees that he or she will be responsible for the payment
of all utilities, including electricity, heat and other services delivered
to the premises, except: His prorated share of gas for Boiler.
15. SIGNS. Lessee will not place, maintain, nor permit any sign or awning on
any exterior door, wall, or window of the premises without the express
written consent of Lessor, which will not be unreasonably withheld, and of
appropriate governmental authorities.
16. ABANDONMENT OF PREMISES. Lessee will not vacate or abandon the premises at
any time during the term of this Lease. If Lessee does abandon or vacate
the premises, or is dispossessed by process of law, or otherwise, any
personal property belonging to Lessee left on the premises will be deemed
to be abandoned, at the option of Lessor.
17. CONDEMNATION. If any part of the premises is condemned for public use, and
a part remains which is susceptible of occupation by Lessee, this Lease
will, as to the part taken, terminate as of the date of condemnor acquires
possession. Lessee will be required to pay such proportion of the rent of
the remaining term as the value of the premises remaining bears to the
total value of the premises the date of condemnation; provided, however,
that either party may, at his or her option, terminate this Lease as of the
date of condemnor acquires possession. In the event to that the premises
are condemned in whole, or the remainder is not susceptible for use by the
Lessee, this Lease will terminate upon the date which the condemnor
acquires possession. All sums which may be payable on account of any
condemnation will belong solely to the Lessor; except that Lessee will be
entitled to retain any amount awarded to him or her for his or her trade
fixtures and moving expenses.
18. TRADE FIXTURES. Any and all improvements made to the premises during the
term will belong to the Lessor, except trade fixtures of the Lessee. Lessee
may, upon termination, remove all his or her trade fixtures, but will pay
for all costs necessary to repair any damage to the premises occasioned by
the removal.
19. DESTRUCTION OF PREMISES. In the event of a partial destruction of the
premises during the term, from any cause except acts or omission of Lessee,
Lessor will promptly repair the premises, provided that such repairs can be
reasonably made WITHIN SIXTY (60) DAYS. Such partial destruction will not
terminate this Lease, except that Lessee will be entitled to a
proportionate reduction of rent while such repairs are being made, based
upon the extent to which making of such repairs interferes with the
business of Lessee on the premises. If the repairs cannot be made WITHIN
SIXTY (60) DAYS, this Lease may be terminated at the option of either party
by giving written notice to the other party WITHIN THE SIXTY (60) DAY
PERIOD.
20. HAZARDOUS MATERIALS. Lessee will not use, store, or dispose of any
hazardous substances upon the premises, except the use and storage of such
substances that are customarily used in Lessee's business, and are in
compliance with all environmental laws. Hazardous substances means any
hazardous waste, substance or toxic materials regulated under any
environmental laws or regulations applicable to the property. Lessee will
be responsible for the cost of removal of any toxic contamination caused by
lessee's use of the premises.
21. INSOLVENCY. The appointment of a receiver, an assignment for the benefits
of creditors, or the filing of a petition in bankruptcy by or against
Lessee, will constitute a breach of this Lease by Lessee.
22. DEFAULT. In the event of any breach of this Lease by Lessee, Lessor may, at
his or her option, terminate the Lease and recover from Lessee: (a) the
wroth at the time of award of the unpaid rent which had been earned at the
time of termination; (b) the worth a the time of award of the amount by
which the unpaid rent which would have been earned after termination until
the time of the award exceeds the amount of such rental loss that the
Lessee proves could have been reasonably avoided; (c) the worth at the time
of award of the amount by which the unpaid rent for the balance of the term
after the
LESSEE [ JB ] [ ] AND LESSOR [ LN ] [ ] HAVE READ THIS PAGE.
<PAGE>
Property Address 2645 BODEGA AVE. - "A PORTION OF"
-------------------------------------------------------------
time of award exceeds the amount of such rental loss that the Lessee proves
could be reasonably avoided; and (d) any other amount necessary to
compensate Lessor for all the detriment proximately caused by the Lessee's
failure to perform his or her obligations under the Lease or which in the
ordinary course of things would be likely to result therefrom.
Lessor may, in the alternative, continue this Lease in effect, as long
as Lessor does not terminate Lessees' right to possession, and Lessor may
enforce all of Lessor's rights and remedies under the Lease, including the
right to re over the rent as it becomes due under the Lease. If said breach
of Lease continues, Lessor may, at any time thereafter, elect to terminate
the Lease.
These provisions will not limit any other rights or remedies which
Lessor may have.
23. SECURITY. The security deposit will secure the performance of the Lessee's
obligations. Lessor may, but will not be obligated to, apply all or
portions of the deposit on account of Lessee's obligations. Any balance
remaining upon termination will be returned to Lessee. Lessee will not have
the right to apply the security deposit In payment of the last month's
rent.
24. DEPOSIT REFUNDS. The balance of all deposits will be refunded WITHIN THREE
(3) WEEKS (or as otherwise required by law), from date possession is
delivered to Lessor or his or her authorized agent, together with a
statement showing any charges made against the deposits by Lessor.
25. ATTORNEY FEES. In any action or proceeding involving a dispute between
Lessor and Lessee arising out of this Lease, the prevailing party will be
entitled to reasonable attorney fees.
26. WAIVER. No failure of Lessor to enforce any term of this Lease will be
deemed to be a waiver.
27. NOTICES. Any notice which either party may or is required to give, will be
given by mailing the notice, postage prepaid, to Lessee at the premises, or
to Lessor at the address shown in Item 2, or at such other places as may be
designated in writing by the parties from time to time. Notice will be
effective FIVE (5) DAYS AFTER MAILING, or on personal delivery, or when
receipt is acknowledged in writing.
28. HOLDING OVER. Any holding over after the expiration of this Lease, with the
consent of Owner, will be a month-to-month tenancy at a monthly rent of $
14,950.00 , payable in advance and otherwise subject to the terms of this
Lease, as applicable, until either party will terminate the tenancy by
giving the other party THIRTY (30) DAYS WRITTEN NOTICE.
29. TIME. Time is of the essence of this Lease.
30. HEIRS, ASSIGNS, SUCCESSORS. This Lease is binding upon and inures to the
benefit of the heirs, assigns, and successors of the parties.
31. INTENTIONALLY OMITTED.
32. INTENTIONALLY OMITTED.
33. OPTION. So long as Lessee is not in default in the performance of any term
of this Agreement, Lessee will have the option to purchase the real
property for a purchase price of $2,450,000.00 (Two mill. four hund
fifty the dollars), upon the following terms and conditions.
a. DISCLAIMER. The parties acknowledge that availability of financing and
other purchase costs cannot be ascertained with certainty. Therefore,
the parties agree that these items will not be conditions of
performance of this Agreement. The parties acknowledge that they have
not relied upon any representations or warranties by the Broker or
Lessor in this regard.
b. FIXTURES. All improvements, fixtures, attached floor coverings,
draperies including hardware, shades, blinds, window and door screens,
storm sash, combination doors, awnings, outdoor plants potted or
otherwise, trees, and items permanently attached to the real property
are included in the sale, free of liens, unless specifically excluded.
c. PERSONAL PROPERTY. The following personal property, on the premises
when inspected by Lessee, are included in the purchase price and will
be transferred by a Warranty Bill of Sale at close of escrow:
----------------------------------------------------------------------.
d. ENCUMBRANCES. In addition to any encumbrances assumed by Lessee, Lessee
will take title to the property subject to: [1] real estate taxes not
yet due; and [2] covenants, conditions, restrictions, reservations,
rights, rights of way and easements of record, if any, which do not
materially affect the value or intended use of the property. The amount
of any bond or assessment which is a lien will be assumed by Lessee
without credit toward the purchase price, except:
----------------------------------------------------------------------.
e. EXAMINATION OF TITLE. WITHIN FIFTEEN (15) DAYS AFTER THE EXERCISE OF
THIS OPTION, Lessee will examine the title to the property and report
in writing any valid objections. Any exceptions to the title which
would be disclosed by
LESSEE [ JB ] [ LN ] AND LESSOR [ LN ] [ ] HAVE READ THIS PAGE.
<PAGE>
Property Address 2645 BODEGA AVE. - "A PORTION OF"
-------------------------------------------------------------
examination of the records will be deemed to have been accepted unless
reported in writing WITHIN THE FIFTEEN (15) DAYS. If Lessee objects to
any exceptions to the title, Lessor will use due diligence to remove
such exceptions at his or her own expense WITHIN SIXTY (60) DAYS. If
such exceptions cannot in good faith be removed WITHIN SIXTY (60) DAYS,
Lessee may terminate the Agreement unless he or she elects to purchase
the property subject to the exceptions.
f. EVIDENCE OF TITLE. Evidence of title will be in the form of /X/ a
policy of title insurance, / / other to be paid for by BUYER.
g. CLOSING COSTS. Escrow fees and other closing costs will be paid in
accordance with local custom, except as otherwise provided in this
Agreement.
h. CLOSE OF ESCROW. WITHIN 90 DAYS AFTER EXERCISE OF THE OPTION, or upon
removal of any exceptions to the title by the Lessor, as provided
above, whichever is later, both parties will deposit with an authorized
escrow holder, to be selected by the Lessee, all funds and instruments
necessary to complete the sale in accordance with the terms and
conditions of this Agreement. The representations and warranties
contained in this Agreement will survive close of escrow.
i. PRORATIONS. Rents and taxes will be prorated as of recordation of deed.
Security deposits, advance rentals, or considerations involving future
lease credits will be credited to Lessee.
j. EXPIRATION OF OPTION. This Option may be exercised at any time after
MARCH 31, 2004, 19 ___, and will expire at midnight MARCH 31,
2005, 19___. Upon expiration Lessor will be released from any
obligation to sell the property to Lessee. If requested, Lessee will
execute a quit claim deed to evidence the termination of the Option.
k. EXERCISE OF OPTION. The Option will be exercised by mailing or
delivering written notice to the Lessor and by an additional payment,
on account of the purchase price, in the amount of $ 25,000.00
(Twenty Five THOUSAND AND 00/100 ----------------- DOLLARS) for account
of Lessor to the authorized escrow holder referred to above, prior to
the expiration date of the Option.
Notice. If mailed, the exercise option will be by certified mail,
postage prepaid, to the Lessor at the address set forth in Item 2, and
will be deemed to have been given on the day following deposit in the
U.S. Mail.
In the event the Option is exercised, the consideration paid for
the Option and 0 % of the rent paid by Lessee prior to the exercise of
the Option will be credited toward the purchase price.
THE UNDERSIGNED LESSEE HEREBY ACKNOWLEDGES THAT HE OR SHE HAS THOROUGHLY READ
AND APPROVED EACH OF THE PROVISIONS CONTAINED IN THIS OFFER, AND AGREES TO THE
TERMS AND CONDITIONS SPECIFIED.
Lessee /s/ J. Bouchaert Date 3/25/99 Lessee Date
----------------------------- ------------- ------ ---
Joseph Bouckaert, President
Receipt for deposit acknowledged by Date
---------------------------------- ---
ACCEPTANCE
THE UNDERSIGNED LESSOR ACCEPTS THE FOREGOING OFFER AND GRANTS THE OPTION TO
PURCHASE SET FORTH ABOVE.
NOTICE: THE AMOUNT OR RATE OF REAL ESTATE COMMISSIONS IS NOT FIXED BY LAW. THEY
ARE SET BY EACH BROKER INDIVIDUALLY AND MAY BE NEGOTIABLE BETWEEN THE SELLER AND
BROKER.
34. COMMISSION. Upon execution, the Lessor agrees to pay to __________________,
the Broker in this transaction, ______% of the option consideration for
securing the Option plus the sum of $ ___________
(________________________________________________ dollars) for leasing
services rendered and authorizes Broker to deduct this sum from the deposit
received from Lessee. In the event the Option is exercised, the Lessor
agrees to pay Broker the additional sum of $ _____________________
(_____________________________________________ dollars) from sale proceeds
at close of escrow. This Agreement will not limit the rights of Broker
provided for in any listing or other agreement which may be in effect
between Lessor and Broker. In any action for commission the prevailing
party will be entitled to reasonable attorney fees, whether or not the
action proceeds to trial or final judgment.
Lessor acknowledges that he or she has read and understands the provisions of
this Agreement, agrees to the terms and conditions specified, and acknowledges
receipt of a copy.
Lessor /s/ Louis Neve Date 3/25/99
------------------------------------------- ---------------------
Louis Neve
Lessor ___________________________________________ Date _____________________
THE LESSEE HEREBY ACKNOWLEDGES RECEIPT OF A COPY OF THE ACCEPTED AGREEMENT ON
(DATE) ___________. [____][____] (INITIALS).
<PAGE>
ADDENDUM NO. 1
To Agreement dated MARCH 18, 1999 between Vinifera, And LOUIS NEVE, concerning
property located at 2645 BODEGA AVENUE
"A PORTION OF" PETALUMA, CA 94952
The parties agree as follows:
1.) April 1, 2004 - The lessee shall have the right to extend his lease to March
31, 2009, for $14,950.00 per month with all other Terms and Conditions remaining
the same.
2.) April 1, 2009 - The lessee shall have the right to extend his lease to March
31, 2014, for $17,190.000 per month with all other Terms and Conditions
remaining the same.
3.) $45,000 .00 shall be due and payable not later than May 31, 1999. These
monies are the Aggregate funds payable in Rent and Deposits for the period March
15, 1999 - May 31, 1999.
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
This Addendum, upon its execution by both parties, is made a part of the above
Agreement.
Lessor /s/ Louis Neve Date 3/25/99
------------------------------------------- ----------------------
Louis Neve
Seller/Lessor Date
------------------------------------ ----------------------
Buyer/Lessee /s/ J. Bouckaert Date 3/25/99
------------------------------------ -----------------------
J. Bouckaert, President
Buyer/Lessee Date
------------------------------------- ----------------------
<PAGE>
DESCRIPTION
FIRST TRACT:
BEGINNING IN THE CENTER OF A CREEK, AT A POINT IN THE DIVIDING LINE BETWEEN THE
LANDS OF HENRY HASPER AND THE LANDS NOW OR FORMERLY OF ALKIRE, WHICH POINT OF
BEGINNING IS NORTH 89o 30' EAST, 10.79 CHAINS FROM THE SOUTHWESTERLY CORNER OF
THE LANDS OF HASPER, WHICH SAID CORNER IS THE DIVIDING LINE BETWEEN THE LANDS OF
HASPER AND ALBERTS; RUNNING THENCE FROM SAID POINT OF BEGINNING, SOUTH 89o 30'
WEST, 10.79 CHAINS TO THE DIVIDING LINE BETWEEN THE LANDS OF ALBERTS AND THE
LANDS OF HASPER; THENCE NORTH 30o WEST, 4.10 CHAINS; THENCE NORTH 89o 45' WEST,
0.33 CHAINS; THENCE NORTH 9o 15; WEST, 1.82 CHAINS; THENCE NORTH 62o 30' EAST,
11.47 CHAINS TO THE CENTER OF A CREEK; THENCE SOUTHERLY FOLLOWING THE
MEANDERINGS OF SAID CREEK, TO THE POINT OF BEGINNING.
APN 021-010-001
SECOND TRACT:
FIRST PARCEL:
BEGINNING AT THE SOUTHEAST CORNER OF THE PROPERTY SITUATED ON THE SOUTH SIDE OF
THE PETALUMA AND BLOOMFIELD ROAD, KNOWN AS THE LIBERTY RACE TRACT PROPERTY; AND
FROM THENCE NORTH 44o 40' WEST, 32.10 CHAINS; THENCE NORTH 46o 40' WEST, 10.21
CHAINS; THENCE NORTH 57o WEST, 1.88 CHAINS; THENCE SOUTH 1o 00' WEST, 7.85
CHAINS; THENCE SOUTH 37o 30' WEST, 1.68 CHAINS; THENCE SOUTH 19o WEST, 1.38
CHAINS; THENCE SOUTH 3o 30' WEST, 1.43 CHAINS; THENCE SOUTH 6o 30' EAST, 2
CHAINS; THENCE SOUTH 8o 30' EAST, 6.79 CHAINS; THENCE SOUTH 88o 30' EAST, 0.32
CHAINS; THENCE SOUTH 11.30 CHAINS; THENCE EAST, 29.32 CHAINS; FROM THENCE NORTH
1o 15' EAST, 1.33 CHAINS TO THE PLACE OF BEGINNING. BEING THE SAME LANDS AS WERE
CONVEYED TO JAMES LOUGHNANE BY VINCENT LIBERTY BY DEED DATED SEPTEMBER 12, 1871
AND RECORDED IN BOOK 35 OF DEEDS, PAGE 154, SONOMA COUNTY RECORDS.
APN 021-010-002
EXCEPTING THEREFROM THE LAND HERETOFORE CONVEYED BY SAID JAMES LOUGHNANE TO JOHN
R. DAVIS, BY DEED DATED SEPTEMBER 20, 1871, AND RECORDED IN BOOK 35 OF DEEDS,
PAGE 177, SONOMA COUNTY RECORDS.
ALSO EXCEPTING THEREFROM THE LAND DESCRIBED IN A DEED FROM SAID JAMES LOUGHNANE
AND WIFE, TO WILLIAM SEXTON, DATED MAY 17, 1873 AND RECORDED IN BOOK 41 OF
DEEDS, PAGE 342, SONOMA COUNTY RECORDS. EACH TRACT OF LAND COVERED BY SAID TWO
EXCEPTIONS CONSISTING OF 12 ACRES EACH, MORE OR LESS, AND BEING EACH ON THE
SOUTHERLY SIDE OF SAID PETALUMA AND BLOOMFIELD ROAD AND BEING THE SOUTHERLY PART
OF THE FIRST PARCEL HEREIN DESCRIBED.
ALSO EXCEPTING THEREFROM THE FOLLOWING DESCRIBED PORTION THEREOF:
BEGINNING IN THE CENTER OF A CREEK AT A POINT IN THE DIVIDING LINE BETWEEN THE
LANDS OF HENRY HASPER AND THE LANDS NOW OR FORMERLY OF ALKIRE, WHICH POINT OF
BEGINNING IS NORTH 89o 30' EAST, 10.79 CHAINS FROM THE SOUTHWESTERLY CORNER OF
THE LANDS OF HASPER, WHICH SAID CORNER IS IN THE DIVIDING LINE BETWEEN THE LANDS
OF HASPER AND ALBERTS; RUNNING THENCE FROM SAID POINT OF BEGINNING, SOUTH 89o
30'
/s/JB /s/LN
<PAGE>
WEST, 10.79 CHAINS TO THE DIVIDING LINE BETWEEN THE LANDS OF ALBERTS AND THE
LANDS OF HASPER; THENCE NORTH 30o WEST, 4.10 CHAINS; THENCE NORTH 89o 45' WEST,
0.33 CHAINS; THENCE NORTH 9o 15' WEST, 1.82 CHAINS; THENCE NORTH 62o 30' EAST,
11.47 CHAINS TO THE CENTER OF A CREEK; THENCE SOUTHERLY FOLLOWING THE
MEANDERINGS OF SAID CREEK TO THE POINT OF BEGINNING.
SECOND PARCEL:
A RIGHT OF WAY OF A UNIFORM WIDTH OF 10 FEET DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT ON THE NORTHERLY LINE OF THE ABOVE DESCRIBED LAND, WHICH
POINT OF BEGINNING IS 53 FEET SOUTHWESTERLY FROM TAE WESTERLY END OF A BRIDGE
ACROSS THE CREEK ABOVE MENTIONED; THENCE NORTHEASTERLY 53 FEET TO SAID BRIDGE;
THENCE NORTHEASTERLY 311 FEET TO THE COUNTY ROAD LEADING FROM PETALUMA TO
BLOOMFIELD,
ALSO EXCEPTING THEREFROM THE FOLLOWING DESCRIBED PORTION THEREOF:
BEING A PORTION OF THE HENRY HASPER RANCH, SO-CALLED, AND WHICH SAID PORTION
HEREBY CONVEYED IS DESCRIBED AS FOLLOWS:
COMMENCING AT A 6 INCH BY 6 INCH POST IN A GATEWAY ON THE SOUTH SIDE OF THE
PETALUMA AND BLOOMFIELD ROAD, WHICH POST IS 35.10 CHAINS NORTHWESTERLY FROM THE
SOUTHEAST CORNER OF THE PROPERTY KNOWN AS THE LIBERTY RACE TRACT; THENCE ALONG A
FENCE SOUTH 59o 45' WEST, 9.17 CHAINS TO A STAKE; THENCE ALONG A FENCE AND THE
LANDS OF THE HEIRS OF LEWIS VESTAL, DECEASED, NORTH 18o 45' EAST, 1.06 CHAINS;
NORTH 33o 45' EAST, 0.92 CHAINS; NORTH 41o 30' EAST, 0.61 CHAINS; AND NORTH 0o
15' EAST, 8.42 CHAINS TO THE CENTERLINE OF THE 46o 45' EAST, 7.21 CHAINS TO A
POINT IN LINE WHICH WITH THE POST AND FENCE FIRST MENTIONED; THENCE SOUTH 59o
45' WEST, 0.49 CHAINS TO THE POINT OF BEGINNING. BEARINGS TRUE. BEING THE
NORTHWESTERLY CORNER OF THE TRIANGULAR PIECE OF LAND CONVEYED TO JAMES LOUGHNANE
BY VINCENT LIBERTY BY DEED DATED SEPTEMBER 12, 1871, AND RECORDED IN BOOK 35 OF
DEEDS, PAGE 154, SONOMA COUNTY RECORDS. BEING THE SAME PROPERTY CONVEYED BY DEED
DATED OCTOBER 21, 1913, BY HENRY HASPER TO EDWARD LAWRENCE AND MARY LAWRENCE,
HIS WIFE, AND RECORDED OCTOBER 22, 1913, IN BOOK 316 OF DEEDS, PAGE 166, SONOMA
COUNTY RECORDS, WHICH DEED IS HEREBY REFERRED TO AND MADE A PART HEREOF.
ALSO EXCEPTING THEREFROM THE FOLLOWING DESCRIBED PORTION THEREOF. BEING A
PORTION OF THE PROPERTY SITUATED ON THE SOUTH SIDE OF THE PETALUMA AND
BLOOMFIELD ROAD, KNOWN AS THE LIBERTY RACE TRACT PROPERTY, DEEDED TO WILLIAM
HASPER AND HENRY HASPER, BY DEED DATED DECEMBER 1, 1903 AND RECORDED IN BOOK 208
OF DEEDS, PAGE 210, SONOMA COUNTY RECORDS, BEING MORE PARTICULARLY DESCRIBED AS
FOLLOWS:
BEGINNING AT THE SOUTHEAST CORNER OF THE ABOVE MENTIONED TRACT; THENCE ALONG THE
NORTHERLY LINE OF THE A.B. SILVA TRACT, SOUTH 20o 38' WEST, 467.30 FEET; THENCE
SOUTH 89o 13 WEST, 174.45 FEET; THENCE NORTH 20o 38' EAST, 605.00 FEET TO A
POINT IN THE CENTER OF THE PETALUMA AND BLOOMFIELD ROAD; THENCE SOUTH 44o 52'
EAST, 178.47 FEET TO THE POINT OF BEGINNING.
/s/JB /s/LN
<PAGE>
RECORDING REQUESTED BY AND
WHEN RECORDED RETURN TO:
HAAS & NAJARIAN
58 Maiden Lane, Second Floor
San Francisco, CA 94108
Attention: Robert C. Nicholas
MAIL TAX STATENMENTS TO:
Vinifera, Inc.
4288 Bodega Avenue
Petaluma, CA 94952
- --------------------------------------------------------------------------------
SPACE ABOVE THIS LINE RESERVED FOR RECORDER'S USE
MEMORANDUM OF OPTION TO PURCHASE
This Memorandum of Option ("Memorandum') is made as of March 25,
1999, by and between Louis Neve ("Optionor") and Vinifera, Inc., a
California corporation ("Optionee').
1. Optionor hereby grants to Optionee an option to purchase
(the "Option) all of that certain real property commonly known as 2645
Bodega Avenue, Petaluma, California 94952 (the "Property"), as depicted
in EXHIBIT "A" attached hereto and incorporated herein. Said Property
consists of approximately two hundred thousand (200,000) square feet of
greenhouse space plus approximately nine (9) acres of land.
2. The specific terms and conditions of Optionee's Option are
set forth in the Commercial Lease With Option to Purchase (the
"Agreement") dated March 25, 1999. All of the terms and conditions of
The Agreement are incorporated herein by this reference.
3. The term of the Option expires at midnight on March 31,
2005.
4. Any party who is interested in acquiring an interest in
the Property should contact the Optionor and Optionee. Optionor's
address is:
For Louis Neve: 410 Petaluma Blvd. So.
c/o Aldo Baccala Suite D
P.O. Box 259
Petaluma, CA 94953
1
<PAGE>
Optionee's address is:
Vinifera, Inc., 4288 Bodega Avenue, Petaluma, CA
94952.
IN WITNESS WHEREOF, the parties hereto have executed this Memorandum as
of the date first above written.
OPTIONOR: OPTIONEE:
VINIFERA, INC., A CALIFORNIA CORPORATION
/s/ Louis Neve
------------------------
LOUIS NEVE
By: /s/ J. Bouckaert
-------------------------------------
Joseph Bouckaert, President
Its:
-------------------------------------
By: /s/ J. Bouckaert
-------------------------------------
Joseph Bouckaert, Secretary
Its:
------------------------------------
/s/JB /s/LN
2
<PAGE>
STATE OF CALIFORNIA )
) ss
COUNTY OF SONOMA )
On this 28TH day of APRIL, 1999, before me, a Notary Public, State of
California, duly commissioned and sworn, personally appeared: JOSEPH A.
BOUCKAERT known to me (or proved to me on the basis of satisfactory evidence) to
be the person whose name is subscribed to the within instrument, and
acknowledged that he/she executed the same.
Official Seal: /s/ Dee A. J. Hernlund
---------------------------------------------
Notary Public
My Commission Expires: March 28, 2003
-----------------------
DEE A. J. HERNLUND
Comm. # 1214328
NOTARY PUBLIC -CALIFORNIA
Sonoma County
My Comm. Expires Mar. 28,2003
3
/s/JB /s/LN
<PAGE>
ADDENDUM NO. 2
TO COMMERCIAL LEASE WITH OPTION TO PURCHACE
-------------------------------------------
This Addendum No. 2 to Commercial Lease with Potion to Purchase (this
"Addendurn") is made and entered into as of March 25, 1999, by and between LOUIS
NEVE ("Lessor) and VINIFERA, INC., a California corporation ("Lessee").
1. The following language is added following the word "Lessor" in the
second line of Paragraph 3 of the Commercial Lease with Option to
Purchase ("'Lease"): "which consent shall not be unreasonably withheld".
2. ORDINANCES AND STATUTES. Lessor warrants and represents that the
premises currently comply with all statutes, ordinances and requirements
of all municipal, state and federal authorities now in force. Lessor
agrees to defend, indemnify and hold Lessee harmless from and against
all claims, demands, causes of action, liabilities, damages, costs and
expenses (including reasonable attorneys' fees, court costs, and expert
witness and consultant fees) relating to or arising from Lessor's breach
of this warranty and representation. Lessee shall comply with all
statutes, ordinances and requirements of all. municipal, state and
federal authorities which may later apply to the premises following the
date of the Lease relating to or arising from Lessee's particular use of
the premises. If such law compliance, however, does not relate to or
apply because of Lessee's particular us of the premises but generally
applies to all such buildings without regard to Lessee's particular use,
Lessor, at Lessor's sole cost and expense, shall comply with such
requirements."
3. The term "and Acts of God" is inserted following the words "normal wear
and tear" in the fourth line of Paragraph 7 of the Lease.
Notwithstanding the language contained in Paragraph 7 of the Lease,
Lessee shall have no obligation to maintain, repair of alter any part of
the premises damaged by an act or omission on the part of Lessor or
Lessor's employees, agents, contractors, agents and invitees. The
obligation of Lessee to maintain and repair the electrical wiring,
plumbing and heating and air-conditioning installations is limited to
the equipment and wiring actually situated in the premised leased by
Lessor to Lessee. Such obligation of Lessee shall not extend to nor
include any electrical wiring, plumbing and heating and air-conditioning
installations located outside of the premises but which service the
premises.
4. INDEMNIFICATION OF LESSOR. Lessor will not be liable for any damage or
injury to Lessee, or to any other person, or to any property, occurring
on the premises, except for any such damage or injury relating to or
arising from Lessor's acts or omissions. Lessee agrees to hold Lessor
harmless from any claims for damages arising out of Lessee's use of the
premises, and to indemnify Lessor for any expense incurred by Lessee in
defending any such claims, except for those claims resulting from the
acts or omissions of the Lessor or of Lessor's employees, agents,
contractors, agents and invitees.
5. Not withstanding anything to the contrary in Paragraph 18, only those
improvements listed in Exhibit "B" attached hereto shall belong to
Lessor upon the expiration or earlier termination of the Lease.
6. Lessor agrees to defend, indemnify, and hold Lessee harmless from and
against any and all claims, demands, causes of action, liabilities,
damages, costs and expenses (including reasonable attorneys' fees, court
costs and expert witness and consultant fees), relating to or, arising
from any breach by Lessor or failure to comply with any and all city,
county, state and federal environmental laws or other laws relating to
the storage, control or handling of hazardous materials.
/s/JB /s/LN
<PAGE>
7. The Option to Purchase, contained in Paragraph 3 relates to the entire
property described in Exhibit "C" attached hereto. In the event Lessee
exercises the Option, said property shall be sold unencumbered by any
leases now or hereafter entered into by Lessor and third parties.
Notwithstanding anything to the contrary contained in Paragraph 33j,
Lessee may exercise the Option to Purchase at any time after March 31,
2002, but said Option to Purchase shall expire March 31, 2005. Landlord
and Tenant agree to execute the Memorandum of Option attached hereto as
Exhibit "D" and to record same in the Official Records of the County of
Sonoma.
IN WITNESS WHEREOF, this Addendum No. 2 has been executed as of the day
and year first written above.
LESSOR: LESSEE:
By: /s/ Louis Neve VINIFERA, INC., a California corporation
----------------------------
LOUIS NEVE
By: /s/ Joseph Bouckaert
-----------------------------------
Its: President
-----------------------------------
By: /s/ Joseph Bouckaert
-----------------------------------
Its: J. Bouckaert, Secretary
-----------------------------------
/s/JB /s/LN
<PAGE>
EXHIBIT A
"A PORTION OF" PARCEL
APN 021-010-001
County Assessor's Parcel Map
<PAGE>
EXHIBIT B
IMPROVEMENTS
------------
1. All heating systems, and ventilation systems.
2. 12 Green Houses
3. Well and Pumping system
<PAGE>
EXHIBIT "C"
OPTION PROPERTY ENTIRE PARCEL
APN 021-010-001
County Assessor's Parcel Map
LEASE AMENDMENT
DATED: September 8, 1999
BETWEEN: PACIFIC REALTY ASSOCIATES, L.P., LANDLORD
a Delaware limited partnership
AND: AGRITOPE, INC.,
an Oregon corporation TENANT
Pacific Realty Associates, L.P., a Delaware limited partnership,
as Landlord, and American Show Management, Inc. ("Original Tenant"), entered
into a written lease dated October 4, 1995, consisting of approximately 11,059
square feet of office and warehouse space located in Building C, PacTrust
Business Center, 16160 S.W. Upper Boones Ferry Road, Portland, Oregon 97224
(hereinafter referred to as "the Premises"). By Lease Amendment dated June 3,
1996, the Lease was amended. By Assignment and Modification of Lease, dated
November 7, 1997, Original Tenant assigned the Lease to Agritope, Inc.. Such
documents are hereinafter jointly referred to as "the Lease." The Lease expires
February 28, 2003.
Tenant now wishes to lease an additional approximately 6,801
square feet of office and warehouse space adjacent to and immediately north of
the Premises (hereinafter referred to as the "First Additional Space") and as
further described on the attached Exhibits A, B-1, B-2, B-3 and C.
NOW, THEREFORE, the parties agree as follows:
1. The First Additional Space shall become subject to the terms of
the Lease upon occupancy by Tenant, which is estimated to be October 1, 1999.
Tenant's total leased area shall increase from approximately 11,059 to 17,860
total square feet of office and warehouse space.
2. Base rent shall be according to the following schedule:
<TABLE>
<CAPTION>
First Base Rent
Period Premises Additional Per Month
Space
<S> <C> <C> <C>
October 1, 1999 through May 31, 2001 $10,285.00 $6,325.00 $16,610.00
June 1, 2001 through February 28, 2003 $11,210.00 $6,894.00 $18,104.00
</TABLE>
3. Landlord shall construct improvements generally as shown on
attached Exhibit B and as further described in a work letter attached as Exhibit
C. Upon execution of this Lease Amendment, the attached floor plan (Exhibit B)
and work letter (Exhibit C) shall be deemed approved by Landlord and Tenant.
4. Upon completion of Tenant Improvements, Tenant shall reimburse
Landlord $29,413.00 for its share of construction costs. The total cost of the
work is $63,418.00.
5. Should the cost of such tenant improvements, adjusted by any
increases in cost initiated by Landlord and Tenant approved change orders,
exceed the Allowance, Tenant shall pay Landlord the amount by which this cost
exceeds the Allowance upon occupancy of the First Additional Space.
6. If not then in default, Tenant and only Tenant, shall have the
first option to renew this Lease for an additional sixty (60) months immediately
following expiration of the extended lease term by giving Landlord 180 days'
advance written notice of its intent to extend. All provisions of this Lease
shall apply during the extended term, except that rent for the renewal period
shall be an amount determined on a fair market value basis and agreed upon by
parties at least 90 days prior to commencement of the renewal period, but in no
case less than that of the preceding term. In no event shall Landlord grant any
third party the option to extend the term of this Lease.
N-AGRITOPE, INC..DOC / SKB PBC-C
9/8/99 193-04
Page 2 of 2 Portland, OR
<PAGE>
7. Except as expressly modified hereby, all terms of the Lease shall
remain in full force and effect and shall continue through the extended term.
IN WITNESS WHEREOF, the parties have executed this agreement as of the day and
year first written above.
LANDLORD:
PACIFIC REALTY ASSOCIATES, L.P.,
a Delaware limited partnership
By: PacTrust Realty, Inc.,
a Delaware corporation,
its General Partner
Date: September 9, 1999 By: /s/ Sam K. Briggs
--------------------------------------------
Sam K. Briggs
Vice President
TENANT:
AGRITOPE, INC.,
an Oregon corporation
Date: September 8, 1999 By: /s/ Gilbert N. Miller
--------------------------------------------
Name: Gilbert N. Miller
Title: Executive Vice President, CFO
Address for Legal Notices/Invoices to Assignee:
-----------------------------------------------
-----------------------------------------------
-----------------------------------------------
(Note: Unless a different address is indicated
above, notices to Assignee will be addressed to
the Premises.)
Assignee Employer Identification Number:
-----------------------------------------------
N-AGRITOPE, INC..DOC / SKB PBC-C
9/8/99 193-04
Page 2 of 2 Portland, OR
AMENDED AND RESTATED UNIT PURCHASE AGREEMENT
Between
AGRITOPE, INC. ("Agritope") VILMORIN CLAUSE & CIE ("Purchaser")
16160 SW Upper Boones Ferry Rd. Rue Limagrain
Portland, Oregon 97224 B.P. 1
Fax: (503) 670-7703 63720 Chappes
France
Fax (33) 473 63 40 04
Purchaser agrees to purchase, and Agritope agrees to sell, units (the
"Units"), each Unit consisting of four (4) shares of Series A Preferred Stock,
$.01 par value per share, of Agritope and one five-year warrant to purchase one
(1) share of such Series A Preferred Stock at an exercise price of U.S. $7.00
per share, on the terms and conditions stated in this Unit Purchase Agreement:
1. NUMBER OF UNITS: 125,000
2. TOTAL PURCHASE PRICE AT U.S.$20.00 PER UNIT: U.S. $2,500,000
3. DOMICILE OF PURCHASER: France
(Country of organization, if a corporation or other entity; country of
residence, if an individual.)
4. WAIVER OF PREEMPTIVE RIGHTS: Subsequent to its purchase of Units
hereunder, Purchaser intends to sell 37,500 of such Units to Hazera
Quality Seeds Ltd., an Israeli corporation ("Hazera"). Purchaser, as
the current holder of all issued shares of Series A Preferred Stock,
hereby waives any and all preemptive rights to the extent the same may
be applicable (including those described in Section 7 of the
Certificate of Designation, Preferences and Rights of the Series A
Preferred Stock of Agritope, Inc.) with respect to such sales to
Hazera, and hereby consents to such sale.
[29020-0401/10K_99 Ex 10.30 VCC Unit Purch.doc]
<PAGE>
5. EXHIBITS. The following exhibits are part of this Unit Purchase
Agreement:
Exhibit A: General Terms
Exhibit B: Certain Definitions under Regulation S
Exhibit C: Rights to Acquire Shares
Exhibit D: Certificate of Designation
Exhibit E: Form of Warrant
6. THIRD PARTY BENEFICIARY: Agritope and Purchaser specifically intend
that Hazera shall benefit from and have the right to enforce the
registration rights provided in Article V of Exhibit A to this Unit
Purchase Agreement.
Dated: September 16, 1999
AGRITOPE, INC. VILMORIN CLAUSE & CIE
(Agritope) (Purchaser)
By /s/ Adolph J. Ferro By /s/ Pierre Lefebvre
----------------------------- -----------------------------------
Adolph J. Ferro Pierre Lefebvre
Chief Executive Officer President and Chief Executive
Officer
[29020-0401/10K_99 Ex 10.30 VCC Unit Purch.doc]
<PAGE>
EXHIBIT A
UNIT PURCHASE AGREEMENT
GENERAL TERMS
NEITHER THE SHARES OF SERIES A PREFERRED STOCK NOR THE WARRANTS BEING SOLD
PURSUANT TO THIS AGREEMENT NOR THE UNITS THEREOF, NOR THE SHARES OF SERIES A
PREFERRED STOCK OR COMMON STOCK ISSUABLE UPON EXERCISE OF SUCH WARRANTS OR UPON
CONVERSION OF THE SERIES A PREFERRED STOCK HAVE BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED ("1933 ACT"). SUCH SHARES, WARRANTS,
AND UNITS MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, OR OTHERWISE DISPOSED
OF, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES OR TO A
U.S. PERSON, AS SUCH TERMS ARE DEFINED IN REGULATION S UNDER THE 1933 ACT
("REGULATION S"), UNLESS (i) THE TRANSACTION IS REGISTERED UNDER THE 1933 ACT
AND ANY APPLICABLE SECURITIES LAWS OF ANY STATE, TERRITORY OR POSSESSION OF THE
UNITED STATES OR THE DISTRICT OF COLUMBIA ("STATE ACT"), OR (ii) AN EXEMPTION
FROM REGISTRATION UNDER THE 1933 ACT AND ANY APPLICABLE STATE ACT IS AVAILABLE
AND THE ISSUER HAS RECEIVED AN OPINION OF COUNSEL TO SUCH EFFECT REASONABLY
SATISFACTORY TO IT.
[29020-0401/10K_99 Ex 10.30 VCC Unit Purch.doc]
<PAGE>
TABLE OF CONTENTS
ARTICLE I. PURCHASE AND SALE OF UNITS ........................... 1
1.1 Sale of Units ........................................ 1
1.2 Payment and Delivery ................................. 1
ARTICLE II. CLOSING .............................................. 2
2.1. Closing .............................................. 2
2.2 Actions at Closing ................................... 2
ARTICLE III. RESTRICTIONS ON TRANSFER ............................. 2
3.1 General .............................................. 2
3.2 Certificate Legends .................................. 3
ARTICLE IV. INVESTMENT MATTERS ................................... 3
4.1 Investment Representations ........................... 3
4.2 Certain Restrictions ................................. 4
4.3 Disclosure Documents ................................. 4
ARTICLE V. REGISTRATION RIGHTS .................................. 5
5.1 Definitions .......................................... 5
5.2 Requested Registration ............................... 5
5.3 Registration Procedure ............................... 5
5.4 Deferral for Material Events ......................... 6
5.5 Furnish Information; Expenses ........................ 6
5.6 Expenses of Registration ............................. 6
5.7 Indemnification ...................................... 7
ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF AGRITOPE ........... 9
6.1 Organization, Etc. ................................... 9
6.2 Authority ............................................ 9
6.3 Capitalization ....................................... 9
6.4 Valid Issuance; Title ................................ 9
6.5 Disclosure Documents ................................. 10
6.6 Tax Matters .......................................... 10
6.7 Assets Needed for Business ........................... 10
6.8 Litigation and Other Contingent Liabilities .......... 10
6.9 Absence of Certain Adverse Effects ................... 10
6.10 No Brokers ........................................... 10
6.11 Disclosure ........................................... 10
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<PAGE>
ARTICLE VII. REPRESENTATIONS AND WARRANTIES OF PURCHASER .......... 11
7.1 Corporate Existence; Execution and Performance of
Agreement ............................................ 11
7.2 Binding Obligations; Due Authorization ............... 11
7.3 No Brokers ........................................... 11
7.4 Litigation ........................................... 11
7.5 Disclosure ........................................... 11
7.6 Access ............................................... 11
ARTICLE VIII. CONDITIONS ........................................... 12
8.1 Conditions Precedent to Obligations of Purchaser ..... 12
8.2 Conditions Precedent to Obligations of Agritope ...... 13
ARTICLE IX. OTHER MATTERS ........................................ 13
9.1 Notices .............................................. 13
9.2 Amendments and Waiver ................................ 14
9.3 Expenses ............................................. 14
9.4 Headings ............................................. 14
9.5 Counterparts ......................................... 14
9.6 Parties in Interest; Assignment ...................... 14
9.7 Entire Agreement ..................................... 14
9.8 Severability ......................................... 14
9.9 Attorney Fees ........................................ 15
9.10 Survival ............................................. 15
9.11 Form of Public Disclosures ........................... 15
9.12 Cumulative Rights and Remedies ....................... 15
9.13 No Third-Party Beneficiaries ......................... 15
9.14 Dispute Resolution ................................... 15
9.15 Governing Law ........................................ 16
[29020-0401/10K_99 Ex 10.30 VCC Unit Purch.doc] -ii-
<PAGE>
UNIT PURCHASE AGREEMENT
GENERAL TERMS
RECITALS
A. Agritope is a publicly-traded corporation with authorized
capital of 30,000,000 shares of common stock ("Common Stock") and 10,000,000
shares of preferred stock subject to designation by Agritope's Board of
Directors pursuant to Agritope's certificate of incorporation. The Board of
Directors has designated a series of preferred stock having 1,000,000 authorized
shares pursuant to the Certificate of Designation in the form set forth in
Exhibit D to this Unit Purchase Agreement (the "Series A Preferred Stock").
B. Purchaser wishes to invest in Agritope (or, if Purchaser
already owns shares in Agritope, to increase such investment) by purchasing
Units (the "Unit(s)"), each consisting of four (4) shares of Series A Preferred
Stock (the "Purchased Shares") and a Warrant to purchase one (1) share of Series
A Preferred Stock (the "Warrant(s)"). The number of Units to be purchased
hereunder is provided in the cover page of the Unit Purchase Agreement of which
these General Terms are a part. Purchaser intends to hold the Series A Preferred
Stock purchased hereunder or issuable upon exercise of the Warrants (the
"Warrant Shares") (collectively the Purchased Shares and the Warrant Shares are
referred to herein as the "Preferred Shares"), and the shares of Common Stock
issuable upon conversion of the Preferred Shares, for investment.
AGREEMENT
The parties agree as follows:
ARTICLE I.
PURCHASE AND SALE OF UNITS
1.1 SALE OF UNITS
Upon the terms and conditions of this Agreement, Agritope shall issue
and sell the Units to Purchaser and Purchaser shall purchase the Units from
Agritope for the total purchase price listed on the cover page (the "Purchase
Price").
1.2 PAYMENT AND DELIVERY
On the Closing date, Purchaser shall pay the Purchase Price by wire
transfer in United States dollars to Agritope. At Closing, Agritope shall
deliver to the Purchaser stock certificates representing the Purchased Shares
and a Warrant in the form of Exhibit E to this Unit Purchase Agreement, covering
a number of Warrant Shares equal to the number of Units purchased hereunder by
the Purchaser and providing for an Expiration Date (as defined therein) on the
fifth anniversary of the Closing date (the "Purchaser's Warrant").
[29020-0401/10K_99 Ex 10.30 VCC Unit Purch.doc] -1-
<PAGE>
ARTICLE II.
CLOSING
2.1. CLOSING
The sale of the Units shall be consummated at a closing (the "Closing")
on or before the third business day after Agritope notifies Purchaser that
Agritope is prepared to close such sale, subject to the satisfaction of the
conditions stated in Article VIII below which are to be satisfied at or before
Closing.
2.2 ACTIONS AT CLOSING
At the Closing:
(a) The Purchaser shall pay Agritope the Purchase Price by
wire transfer in United States dollars.
(b) Agritope shall deliver to Purchaser stoc certificates
representing the Purchased Shares.
(c) Agritope shall deliver to Purchaser the Purchaser's
Warrant.
(d) Agritope shall deliver to Purchaser an opinion of
Agritope's counsel as described in Section 8.1(e) below.
(e) The parties shall take all other actions that they
deem necessary or desirable to consummate the purchase and sale of the
Units hereunder.
ARTICLE III.
RESTRICTIONS ON TRANSFER
3.1 GENERAL
(a) PURCHASER SHALL NOT SELL, OFFER TO SELL, PLEDGE, OR
OTHERWISE TRANSFER ANY PREFERRED SHARES OR ANY SHARES OF AGRITOPE
COMMON STOCK ISSUED UPON CONVERSION OF THE PREFERRED SHARES (THE
"CONVERSION SHARES") TO ANY OTHER PERSON EXCEPT IN ACCORDANCE WITH THE
PROVISIONS OF REGULATION S AS IN EFFECT ON THE DATE OF TRANSFER,
PURSUANT TO REGISTRATION UNDER THE 1933 ACT, OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM REGISTRATION. AGRITOPE SHALL REFUSE TO
REGISTER ON ITS BOOKS ANY PURPORTED TRANSFER MADE IN VIOLATION OF THIS
SECTION 3.1, AND ANY SUCH PURPORTED TRANSFER SHALL BE VOID.
(b) PURCHASER SHALL NOT ENGAGE IN ANY HEDGING TRANSACTIONS
INVOLVING THE PREFERRED SHARES OR THE CONVERSION SHARES UNLESS IN
COMPLIANCE WITH THE 1933 ACT.
(c) NEITHER THE PREFERRED SHARES, THE CONVERSION SHARES,
NOR PURCHASER'S WARRANT HAVE BEEN REGISTERED UNDER
[29020-0401/10K_99 Ex 10.30 VCC Unit Purch.doc] -2-
<PAGE>
THE 1933 ACT. THE PREFERRED SHARES, CONVERSION SHARES AND PURCHASER'S
WARRANT MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE
DISPOSED OF, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN THE UNITED
STATES OR TO A U.S. PERSON (AS SUCH TERMS ARE DEFINED IN REGULATION S
UNDER THE 1933 ACT), UNLESS (i) THE TRANSACTION IS REGISTERED UNDER THE
1933 ACT AND ANY APPLICABLE STATE ACT, OR (ii) AN EXEMPTION FROM
REGISTRATION UNDER THE 1933 ACT AND ANY APPLICABLE STATE ACT IS
AVAILABLE AND THE ISSUER HAS RECEIVED AN OPINION OF COUNSEL TO SUCH
EFFECT REASONABLY SATISFACTORY TO IT.
(d) Purchaser agrees to be bound by and comply with all
restrictions provided for in this Agreement on transfer of the
Preferred Shares, the Conversion Shares, and Purchaser's Warrant and
further agrees that it shall not offer, sell, transfer, pledge or
otherwise dispose of the Preferred Shares, the Conversion Shares or
Purchaser's Warrant in violation of any applicable securities or other
laws and regulations of a governmental authority having jurisdiction
over such disposition.
3.2 CERTIFICATE LEGENDS
Certificates for the Preferred Shares and the Conversion Shares shall
bear substantially the following legends:
"THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED ("1933 ACT"), AND MAY NOT BE
OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF, IN WHOLE
OR IN PART, DIRECTLY OR INDIRECTLY, UNLESS (i) THE TRANSACTION IS
EFFECTED IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S UNDER THE
1933 ACT, (ii) THE TRANSACTION IS REGISTERED UNDER THE 1933 ACT AND ANY
APPLICABLE SECURITIES LAWS OF ANY STATE, TERRITORY OR POSSESSION OF THE
UNITED STATES OR THE DISTRICT OF COLUMBIA ("STATE ACT"), OR (iii) AN
EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT AND ANY APPLICABLE STATE
ACT IS AVAILABLE AND THE ISSUER HAS RECEIVED AN OPINION OF COUNSEL TO
SUCH EFFECT REASONABLY SATISFACTORY TO IT."
"HEDGING TRANSACTIONS INVOLVING THESE SHARES MAY NOT BE
CONDUCTED UNLESS IN COMPLIANCE WITH THE 1933 ACT."
ARTICLE IV.
INVESTMENT MATTERS
4.1 INVESTMENT REPRESENTATIONS
Purchaser represents and warrants to Agritope as follows:
(a) DOMICILE. PURCHASER IS NOT A U.S. PERSON, AS THAT TERM
IS DEFINED ON EXHIBIT B.
[29020-0401/10K_99 Ex 10.30 VCC Unit Purch.doc] -3-
<PAGE>
(b) ACCESS TO INFORMATION. Purchaser has been given, a
reasonable time before execution of this Agreement, the opportunity to
ask questions and receive answers concerning Agritope and the terms and
conditions of the offering of the Preferred Shares and the Conversion
Shares, and to obtain any additional information that Agritope
possesses or can acquire without unreasonable effort or expense that is
necessary to verify the accuracy of information furnished to Purchaser.
Purchaser has received any such additional information that Purchaser
has requested.
(c) EXPERIENCE. Purchaser has sufficient knowledge and
experience in financial and business matters to be capable of
evaluating the merits and risks of an investment in the Preferred
Shares and the Conversion Shares, and has the ability to bear the
economic risk of that investment.
(d) INVESTMENT INTENT. Purchaser is acquiring the
Preferred Shares and the Conversion Shares for Purchaser's own account
and not on behalf of any other person. Purchaser is not acquiring the
Preferred Shares or the Conversion Shares with a view to distribution
or with the intent to divide Purchaser's participation with others by
reselling or otherwise distributing the Preferred Shares or the
Conversion Shares, either directly or indirectly through a sale of its
own capital stock.
4.2 CERTAIN RESTRICTIONS
Purchaser acknowledges the following restrictions:
(a) FRANCE. If this Agreement and any related documents
are issued, circulated, or distributed to Purchaser in France,
Purchaser hereby acknowledges that this Agreement has been supplied in
the context of a private placing and that the placing of the Units, the
Preferred Shares and the Conversion Shares has not been effected
through "demarchage" (solicitation) within the meaning of the Law No.
72-6 of 3 January 1972. Purchaser hereby undertakes not to transfer or
assign directly or indirectly the Units, the Preferred Shares or the
Conversion Shares in France subsequent to their subscription. This
Agreement and any related documents (together with any further
information) are made available to Purchaser on the condition that they
are for use only by Purchaser in connection with the proposed
investment and shall neither be passed on by Purchaser to any further
person nor reproduced in whole or in part. Purchaser has been notified
by Agritope to ensure that the terms of this undertaking are strictly
adhered to.
(b) ISRAEL. If this Agreement and any related documents
are issued, circulated, or distributed to Purchaser in Israel,
Purchaser hereby acknowledges that this Agreement has been supplied in
the context of a private placing for a designated oferee and not for
solicitation to the public. Purchaser hereby undertakes not to transfer
or assign directly or indirectly the Preferred Shares or the Conversion
Shares in Israel subsequent to their subscription, unless it is
permitted by Israeli law. This Agreement and any related documents
(together with any further information) are made available to Purchaser
on the condition that they are for use only by Purchaser in connection
with the proposed investment and shall neither be passed on by
Purchaser to any further person nor reproduced in whole or in part.
Purchaser has been notified by Agritope to ensure that the terms of
this undertaking are strictly adhered to.
[29020-0401/10K_99 Ex 10.30 VCC Unit Purch.doc] -4-
<PAGE>
4.3 DISCLOSURE DOCUMENTS
Agritope has furnished or made available to Purchaser (whether in
tangible form or electronically, such as through EDGAR) complete copies of all
reports or registration statements filed by Agritope in the last 18 months with
the U.S. Securities and Exchange Commission under the United States Securities
Exchange Act of 1934, as amended (the "1934 Act"). Such reports and statements
are referred to herein as the "Disclosure Documents."
ARTICLE V.
REGISTRATION RIGHTS
5.1 DEFINITIONS
(a) "Eligible Shares" refers to shares of Common Stock
issuable upon conversion of Series A Preferred Stock, other than shares
that are not "restricted securities" for purposes of Rule 144
promulgated under the 1933 Act.
(b) The terms "register," "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the 1933 Act and the
declaration or ordering of effectiveness of such registration statement
or document.
5.2 REQUESTED REGISTRATION
If Agritope shall be requested by Purchaser or an affiliated holder of
Series A Preferred Stock or Eligible Shares to effect a registration under the
1933 Act covering the Eligible Shares, Agritope shall promptly give written
notice of such proposed registration to all persons who purchased Series A
Preferred Stock from Agritope. Any holders of Series A Preferred Stock who wish
to participate in the offering must respond within 10 days after receipt of such
notice. Upon such a request, Agritope shall as expeditiously as possible use its
best efforts to file a registration statement (the "Registration Statement")
under the 1933 Act with respect to the resale of Eligible Shares. If the request
is made at a time when Agritope is not eligible to use Form S-3, Agritope shall
use its best efforts to file the Registration Statement with respect to the
Eligible Shares which Agritope has been requested to register (a) in such
request and (b) in any response to such notice received by Agritope, within 60
days after the date by which holders must respond to Agritope's notice. If the
request is made at a time when Agritope is eligible to use Form S-3, the
Registration Statement shall be filed with respect to all Eligible Shares as
expeditiously as is practicable. Agritope shall have an obligation to file a
Registration Statement under this Section 5.2 only once, except that if the
Registration Statement filed is not on Form S-3, and is not filed with respect
to all Eligible Shares, Agritope shall have an obligation to file a Registration
Statement on Form S-3 with respect to the remaining Eligible Shares if a later
request is made under this section at a time when Agritope is entitled to use
Form S-3.
5.3 REGISTRATION PROCEDURE
If obligated to file a Registration Statement under Section 5.2,
Agritope shall follow the registration procedures set forth in this Section 5.3.
Agritope shall use its best efforts to cause the Registration Statement to
become effective under the 1933 Act and to maintain the effectiveness of the
Registration Statement for a period of 90 days or, if the Registration Statement
is on Form S-3, two years. If required to permit resale of the Eligible Shares
in the state of New York, Agritope shall use its best efforts to register or
qualify the Eligible Shares covered by the Registration Statement under
[29020-0401/10K_99 Ex 10.30 VCC Unit Purch.doc] -5-
<PAGE>
the blue sky laws of the state of New York, provided that Agritope shall not be
required in connection therewith or as a condition precedent thereto to qualify
to do business or to file a general consent to service of process in the state
of New York. If required by applicable law, Agritope shall furnish to the
holders of the registered Eligible Shares such reasonable number of copies of a
prospectus, in conformity with the requirements of the 1933 Act, and any
amendments or supplements thereto and such other documents as the holders of the
registered Eligible Shares may reasonably request in order to facilitate the
disposition of the registered Eligible Shares after the Registration Statement
has been declared effective. Agritope shall use reasonable efforts to notify the
holders of the registered Eligible Shares when a prospectus relating to the
Eligible Shares is required to be delivered under the 1933 Act, to notify the
holders of the registered Eligible Shares of the happening of any event as a
result of which the prospectus included in the Registration Statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing, to file as
promptly as may be practicable under the circumstances such amendments and
supplements as may be required on account of such event, and to use its best
efforts to cause each such amendment to become effective. The holders of the
registered Eligible Shares shall not effect sales of Eligible Shares after
receipt of notice from Agritope that any such amendment or supplement is
required on account of any such event, until the amendment becomes effective or
the supplement has been filed. Agritope's obligations under this Section 5.3
shall expire at such time as Agritope is no longer required to maintain the
effectiveness of the Registration Statement as provided for above.
5.4 DEFERRAL FOR MATERIAL EVENTS
If, because of a proposed material acquisition or any other material
event, the Agritope board of directors reasonably determines that the filing or
effectiveness of a Registration Statement or of a supplement or amendment to the
prospectus pursuant to this Article V would be detrimental to Agritope, Agritope
may defer such filing or effectiveness for a period of up to 90 days after such
filing or effectiveness would otherwise ordinarily have occurred. For the
purposes of the preceding sentence, it shall be presumed that a Registration
Statement would ordinarily be filed 45 days after request under Section 5.2,
that a supplement or amendment to the prospectus would ordinarily be filed 10
days after notice referred to in Section 5.3 and that the Registration Statement
or any amendment to the prospectus would ordinarily become effective five
business days after filing an acceleration request.
5.5 FURNISH INFORMATION; EXPENSES
It shall be a condition precedent to the obligations of Agritope in
regard to the Eligible Shares to be registered pursuant to Section 5.2 for any
holder of such shares that the holder shall furnish to Agritope such information
regarding itself, the Eligible Shares held by it, and the intended method of
disposition of its Eligible Shares as shall be required to effect the
registration of its Eligible Shares, and shall agree to be bound by the terms of
this Article V if such holder is not already a party to this Agreement.
5.6 EXPENSES OF REGISTRATION
All expenses relating to registration of the Eligible Shares (other
than underwriting discounts and commissions, transfer taxes, if any, and fees
and disbursements of counsel to the holders of the Eligible Shares) incurred in
connection with the registrations, filings or qualifications pursuant to Section
5.3 above, including without limitation all registration, filing and
qualification fees, printing and accounting fees, and fees and disbursements of
counsel for Agritope, shall be borne by Agritope.
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5.7 INDEMNIFICATION
(a) INDEMNIFICATION BY AGRITOPE. To the extent permitted
by law, Agritope shall indemnify and hold harmless the Purchaser, each
other holder of Eligible Shares being registered, and the officers,
directors, partners, agents, and employees of each holder or any
underwriter (as defined in the 1933 Act) of such Eligible shares, and
each person, if any, who controls the Purchaser, each other such holder
or such underwriter within the meaning of the 1933 Act or the 1934 Act,
against any losses, claims, damages, or liabilities (joint or several)
to which they may become subject under the 1933 Act, the 1934 Act, or
other federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based
upon any of the following statements, omissions or violations (a
"Violation"):
(i) any untrue statement or alleged untrue
statement of a material fact contained in the
Registration Statement, including any preliminary
prospectus or final prospectus contained therein or
any amendments or supplements thereto,
(ii) the omission or alleged omission to
state therein a material fact required to be stated
therein or necessary to make the statements therein
not misleading, or
(iii) any violationor alleged violation by
Agritope of the 1933 Act, the 1934 Act, any state
securities law, or any rule or regulation
promulgated under the 1933 Act, the 1934 Act, or any
state securities law.
Agritope shall reimburse the Purchaser and each such holder, officer,
director, partner, agent, employee, underwriter or controlling person
for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim,
damage, liability, or action. The indemnity agreement contained in this
subsection 5.7(a) shall not apply to amounts paid in settlement of any
loss, claim, damage, liability, or action if such settlement is
effected without the consent of Agritope (which consent shall not be
unreasonably withheld), nor shall Agritope be liable to the Purchaser
or such other holder in any such case for any such loss, claim, damage,
liability, or action (A) to the extent that it arises out of or is
based upon a Violation which occurs in reliance upon and in conformity
with written information furnished expressly for use in connection with
such registration by or on behalf of the Purchaser, such other holder,
or such underwriter or controlling person or (B) in the case of a sale
directly by the Purchaser or such other holder of the Eligible Shares
(including a sale of such Eligible Shares through any underwriter
retained by the Purchaser or such other holder to engage in a
distribution solely on behalf of the Purchaser or such other holder),
if such untrue statement or alleged untrue statement or omission or
alleged omission was contained in a preliminary prospectus and
corrected in a final or amended prospectus, and the Purchaser or such
other holder failed to deliver a copy of the final or amended
prospectus at or prior to the confirmation of the sale of the Eligible
Shares to the person asserting any such loss, claim, damage or
liability in any case where such delivery is required by the 1933 Act.
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(b) INDEMNIFICATION BY HOLDERS OF THE SHARES. To the
extent permitted by law, the Purchaser and each other holder of
Eligible Shares being registered shall indemnify and hold harmless
Agritope, each of its directors, each of its officers who have signed
the Registration Statement, each person, if any, who controls Agritope
within the meaning of the 1933 Act, each agent and underwriter for
Agritope, each other holder of shares selling securities covered by the
Registration Statement, each director, officer, partner, agent, and
employee of such other holder or underwriter, and each person, if any,
who controls such other holder or underwriter, against any losses,
claims, damages, or liabilities (joint or several) to which Agritope or
any such director, officer, partner, agent, employee, controlling
person, underwriter, or other holder may become subject, under the 1933
Act, the 1934 Act, or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereto)
arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance
upon and in conformity with written information furnished by or on
behalf of the Purchaser or such other holder expressly for use in
connection with such registration; and the Purchaser or such other
holder shall reimburse any legal or other expenses reasonably incurred
by Agritope or any such director, officer, partner, agent, employee,
controlling person, underwriter, or other holder, in connection with
investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the indemnity agreement contained in
this subsection 5.7(b) shall not apply to amounts paid in settlement of
any such loss, claim, damage, liability, or action if such settlement
is effected without the consent of such holder, which consent shall not
be unreasonably withheld; and provided, further, that the
indemnification obligation of the Purchaser or such other holder shall
be limited to the aggregate public offering price of the Eligible
Shares sold by the Purchaser or such other holder pursuant to such
registration.
(c) NOTICE, DEFENSE AND COUNSEL. Promptly after receipt by
an indemnified party under this Section 5.7 of notice of the
commencement of any action (including any governmental action), such
indemnified party shall, if a claim in respect thereof is to be made
against any indemnifying party under this Section 5.7, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume and control the defense
thereof with counsel mutually satisfactory to the parties; provided,
however, that an indemnified party shall have the right to retain its
own counsel, with the fees and expenses to be paid by the indemnifying
party, if representation of such indemnified party by the counsel
retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any
other party represented by such counsel in such proceeding. The failure
to deliver written notice to the indemnifying party within a reasonable
time of the commencement of any such action, if prejudicial to its
ability to defend such action, shall relieve such indemnifying party of
any liability to the indemnified party under this Section 5.7 to the
extent of such prejudice, but the omission so to deliver written notice
to the indemnifying party shall not relieve it of any liability that it
may have to any indemnified party otherwise than under this Section
5.7.
(d) SURVIVAL OF RIGHTS AND OBLIGATIONS. The obligations of
Agritope, the Purchaser, and any other holders of Eligible Shares under
this Section 5.7 shall
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survive the completion of any offering of the Eligible Shares covered
by the Registration Statement.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES OF AGRITOPE
To induce Purchaser to purchase the Shares, Agritope represents and
warrants to Purchaser as follows:
6.1 ORGANIZATION, ETC.
Agritope is a corporation duly organized and validly existing under the
laws of the state of Delaware. Agritope has all requisite corporate power and
authority to own its properties and carry on its business as now conducted.
6.2 AUTHORITY
Agritope has all requisite corporate power and authority to execute,
deliver, and perform this Agreement. This Agreement has been duly executed and
delivered by Agritope and is the valid, legal, and binding agreement of
Agritope, enforceable against Agritope in accordance with its terms. No consent
of, approval by, filing with, or notice to any governmental authority or any
other person or entity is required for Agritope to execute, deliver, and perform
this Agreement, other than those that have been obtained, made, or given.
6.3 CAPITALIZATION
The authorized capital stock of Agritope as of the Closing Date will
consist of 30,000,000 shares of common stock and 10,000,000 shares of preferred
stock. Immediately following the Closing Date, the number of shares of capital
stock outstanding shall not be more than 5,800,000, and shall consist only of
Common Stock and Series A and C Preferred Stock. No right to purchase or acquire
shares of any unissued capital stock of Agritope or shares convertible into or
exchangeable for such capital stock is authorized or outstanding, other than as
set forth on Exhibit C.
6.4 VALID ISSUANCE; TITLE
When issued and paid for in accordance with the terms of this
Agreement, the Preferred Shares will be validly issued, fully paid, and
nonassessable. Upon delivery to Purchaser of the certificates representing the
Preferred Shares pursuant to this Agreement or pursuant to an exercise of
Purchaser's Warrant by Purchaser, Purchaser will have valid, marketable title to
the Preferred Shares, free and clear of all encumbrances, other than
restrictions on transfer described in this Agreement.
6.5 DISCLOSURE DOCUMENTS
The financial statements contained in the Disclosure Documents (except
as otherwise noted therein) were prepared in conformity with U.S. generally
accepted accounting principles, consistently applied, and fairly present the
financial position and the results of operations at the date and for the year or
period indicated.
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6.6 TAX MATTERS
Agritope has filed all required federal, state, and other tax returns
in a timely fashion and is not delinquent with respect to the payment of any
federal, state, or other taxes.
6.7 ASSETS NEEDED FOR BUSINESS
Agritope owns, leases, or otherwise has the right to use all assets
necessary for its present business.
6.8 LITIGATION AND OTHER CONTINGENT LIABILITIES
There are no actions or proceedings pending or to the best of
Agritope's knowledge threatened against Agritope or any of its properties or
assets or outstanding judgments or orders to which Agritope is subject, which
adversely affect Agritope's business, operations, or financial condition. There
is no action or proceeding pending or to the best of Agritope's knowledge
threatened against Agritope to restrain or prohibit the sale of the Preferred
Shares to Purchaser.
6.9 ABSENCE OF CERTAIN ADVERSE EFFECTS
Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (a) conflict with,
result in any violation of, constitute a default under, or give rise to a right
of acceleration or termination under, any provision of the certificate of
incorporation or bylaws of Agritope or any agreement, mortgage, bond, indenture,
agreement, franchise, or other instrument or obligation to which Agritope is a
party or by which it is bound, (b) result in the creation of any encumbrance
upon any of the assets or properties of Agritope, (c) violate any judgment or
order against, or binding upon, Agritope or upon the Preferred Shares, assets,
properties, or business of Agritope, or (d) constitute a violation by Agritope
of any law.
6.10 NO BROKERS
Agritope has not hired any broker or finder or incurred any liability
for fees or commissions to any such person in connection with this Agreement.
6.11 DISCLOSURE
Except as disclosed herein and in the Disclosure Documents, no
representation or warranty by Agritope contained in this Agreement or in the
Disclosure Documents contains any untrue statement of a material fact, or omits
to state any material fact required to make the statements herein or therein
contained not misleading.
ARTICLE VII.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Agritope as follows:
7.1 CORPORATE EXISTENCE; EXECUTION AND PERFORMANCE OF AGREEMENT
If Purchaser is a corporation, Purchaser is duly organized and validly
existing under the laws of the country listed on the cover page and has all
requisite corporate power and authority to execute, deliver, and perform this
Agreement. The execution, delivery, and performance of this Agreement by
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Purchaser will not conflict with any provision of its articles of incorporation
or bylaws or similar charter documents (if Purchaser is a corporation) or with
any undertaking, agreement, indenture, decree, order, or judgment by which it is
bound and will not violate any law applicable to Purchaser.
7.2 BINDING OBLIGATIONS; DUE AUTHORIZATION
This Agreement constitutes the valid, legal, and binding obligation of
Purchaser, enforceable against Purchaser in accordance with its terms. If
Purchaser is a corporation, the execution, delivery, and performance of this
Agreement by Purchaser has been duly and validly authorized by its board of
directors and no other corporate proceedings on the part of Purchaser are
necessary to authorize its execution, delivery, and performance of this
Agreement. Purchaser is not required to obtain any consent of or approval by, to
make any filing with, or to give any notice to, any governmental authority or
any other person or entity for Purchaser to execute, deliver, and perform this
Agreement.
7.3 NO BROKERS
Purchaser has not hired any broker or agent or incurred any liability
for fees or commissions to any such person in connection with this Agreement.
7.4 LITIGATION
There is no action or proceeding pending or threatened against
Purchaser before any court, other governmental body or arbitrator to restrain or
prohibit the purchase of the Units or the Preferred Shares.
7.5 DISCLOSURE
No representation or warranty by Purchaser contained in this Agreement
contains any untrue statement of a material fact, or omits to state any material
fact required to make the statements herein not misleading.
7.6 ACCESS
As of the Closing, Agritope has afforded to Purchaser and its
representatives, including its counsel and accountants, such access to all of
Agritope's properties, documents, contracts, books and records and such other
information with respect to Agritope's business affairs and properties as
Purchaser has requested.
ARTICLE VIII.
CONDITIONS
8.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligation of Purchaser to effect the Closing is subject to the
satisfaction, or waiver by Purchaser, of each of the following conditions on or
prior to the Closing:
(a) Agritope shall have delivered certificates representing
the Purchased Shares to the Purchaser.
(b) Agritope shall have delivered Purchaser's Warrant to
the Purchaser.
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(c) All representations and warranties of Agritope
contained in this Agreement shall be true and correct in all respects
as of the Closing with the same effect as if such representations and
warranties had been made or given at and as of the Closing, and all
agreements, covenants and conditions to be performed or met by Agritope
on or prior to the Closing shall have been so performed or met in all
respects, and there shall have been no material adverse change in the
financial or business condition of Agritope. There shall have been no
modification of any material disclosure contained in the Disclosure
Document since the date of this Agreement.
(d) No action or proceeding shall have been instituted or
threatened before any court, other governmental body or arbitrator (i)
to restrain or prohibit the transactions contemplated by this
Agreement, (ii) that might restrict the operation of Agritope's
business in any material respect if the purchase and sale of the
Preferred Shares hereunder is consummated, (iii) that might restrict
the ownership of the Preferred Shares or the exercise of any rights
with respect thereto by Purchaser, or (iv) that might subject any of
the parties hereto, to any liability, fine, forfeiture or penalty on
the ground that any of the parties hereto has violated or will violate
any applicable law in connection with the transactions contemplated
hereby.
(e) Purchaser shall have received an opinion of Agritope's
counsel to the effect that when issued and paid for in accordance with
the terms of this Agreement, the Preferred Shares will be validly
issued, fully paid, and nonassessable.
(f) The Rights Agreement approved by Agritope's board of
directors shall permit Purchaser and other holders of Series A
Preferred Stock to convert such shares to Common Stock without being
deemed "Acquiring Persons" for purposes of the Rights Agreement and
Agritope's board of directors shall have adopted resolutions to the
effect that such holders are not "Adverse Persons" (as defined in the
Rights Agreement), subject to execution of a standstill agreement in
form and substance satisfactory to Agritope.
(g) Agritope shall have delivered to Purchaser an officer's
certificate confirming the correctness of Agritope's representations
and warranties and satisfaction of the foregoing closing conditions.
8.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF AGRITOPE
The obligation of Agritope to effect the Closing is subject to the
satisfaction, or waiver by Agritope, of each of the following conditions on or
prior to the Closing:
(a) Purchaser shall have paid the Purchase Price in
immediately available funds to Agritope.
(b) Agritope shall simultaneously close the sale of a total
of 125,000 Units to Vilmorin Clause & Cie. and Hazera Quality Seeds
Ltd., inclusive of the Units to be sold to Purchaser under this
Agreement.
(c) All representations and warranties of Purchaser and
Agritope contained in this Agreement shall be true and correct in all
respects as of the Closing with the same effect as if such
representations and warranties had been made or given
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at and as of the Closing, and all agreements, covenants and conditions
to be performed or met by Purchaser on or prior to the Closing have
been so performed or met in all respects.
(d) No action or proceeding shall have been instituted or
threatened before any court, other governmental body or arbitrator to
restrain or prohibit the transactions contemplated in this Agreement or
that might subject any of the parties hereto to any liability, fine,
forfeiture or penalty on the ground that any of the parties hereto has
violated or will violate any applicable law in connection with the
transactions contemplated hereby.
(e) The issuance and sale of the Units and the Preferred
Shares shall not violate any applicable state, federal, or foreign
securities laws.
ARTICLE IX.
OTHER MATTERS
9.1 NOTICES
Any notice, request, or demand under this Agreement shall be in writing
and shall be deemed to have been duly given and received (i) upon personal
delivery, (ii) upon fax transmission to the recipient at the fax number listed
below, provided that a copy of the fax is promptly deposited for delivery by one
of the methods listed in (iii) or (iv) below, (iii) ten days after deposit in
the mails, if sent certified or comparable form of mail with return receipt
requested, addressed to the recipient at the address listed below, or (iv) five
days after deposit if deposited for delivery with a reputable courier or express
service, addressed to the recipient at the address listed below:
If to Agritope: Agritope, Inc.
16160 SW Upper Boones Ferry Rd.
Portland, Oregon 97224
U.S.A.
Attention: President
Fax: (503) 670-7703
If to Purchaser: Purchaser's address listed on the
cover page
A party may change its address or fax number for purposes of this Section 9.1 by
giving the other parties notice of the change.
9.2 AMENDMENTS AND WAIVER
This Agreement may be amended or modified by, and only by, a written
instrument executed by each of the parties hereto. The terms of this Agreement
may be waived by, and only by, a written instrument executed by the party or
parties against whom such waiver is sought to be enforced.
9.3 EXPENSES
Each party to this Agreement shall pay its own expenses (including,
without limitation, the fees and expenses of such party's counsel incidental to
the preparation of and consummation of this Agreement).
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9.4 HEADINGS
The headings contained in this Agreement are for convenience of
reference only and shall not in any way affect the meaning or interpretation of
this Agreement.
9.5 COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original and all of which shall constitute one and the
same instrument. A facsimile transmission of a signed original shall have the
same effect as delivery of the signed original.
9.6 PARTIES IN INTEREST; ASSIGNMENT
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns. This
Agreement shall not be assigned by any party hereto without the prior written
consent of the other party.
9.7 ENTIRE AGREEMENT
This Agreement, together with all exhibits hereto, constitutes the
entire agreement and understanding between the parties hereto relating to the
subject matter hereof and supersedes any prior agreements and understandings
relating to such subject matter.
9.8 SEVERABILITY
If any restriction in this Agreement exceeds that permitted under
applicable law, it shall be deemed modified to include the maximum permissible
restriction. If any provision is nonetheless held unenforceable in any
jurisdiction, the enforceability of this Agreement in any other jurisdiction and
the enforceability of the remaining provisions in that jurisdiction shall not be
affected.
9.9 ATTORNEY FEES
In the event any party shall seek enforcement of any covenant,
warranty, indemnity, or other term or provision of this Agreement, the party
that prevails in such enforcement proceeding shall be entitled to recover such
reasonable costs and attorney fees which shall be determined by the arbitrator
or court (including any appellate court).
9.10 SURVIVAL
All the respective representations, warranties, covenants, and other
agreements of the parties hereunder or contained in any schedule or certificate
given in connection herewith or contemplated hereby shall survive the Closing
Date, except as they may be fully performed prior to or at the Closing Date.
9.11 FORM OF PUBLIC DISCLOSURES
Except as required by applicable law, Purchaser shall not make any
public disclosure concerning this Agreement and the transactions contemplated
herein unless Agritope has approved in advance the form and substance thereof.
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9.12 CUMULATIVE RIGHTS AND REMEDIES
All the rights and remedies provided to the parties under this
Agreement are cumulative, and none is exclusive of any other right or remedy a
party may have hereunder or under applicable law.
9.13 NO THIRD-PARTY BENEFICIARIES
Each party hereto intends that this Agreement shall not benefit or
create any right or cause of action in or on behalf of any person or entity
other than the parties hereto and their respective successors and permitted
assigns.
9.14 DISPUTE RESOLUTION
(a) CONDUCT. Any dispute arising in connection with this
Agreement shall be finally settled by arbitration referred to and
conducted in accordance with the International Arbitration Rules of the
American Arbitration Association, except as such rules may conflict
with the provisions of this section in which event the provisions of
this section shall control. Any party may be represented by counsel
therein. Any such arbitration shall be conducted by a panel of one or
more arbitrators selected in accordance with the International
Arbitration Rules of the American Arbitration Association. The
arbitration shall be conducted in English in Portland, Oregon, U.S.A.
(b) DECISION. Any decision or award of the arbitral
tribunal shall be final and binding upon the parties to the arbitration
proceeding. The arbitral tribunal's decision shall include a reasonably
detailed statement of the basis for the decision and computation of the
award, if any. The parties further agree to exclude any right of
application or appeal to any court in connection with any question of
law arising in the course of the arbitration. The award may be enforced
against the parties to the arbitration proceeding or their assets
wherever they may be found. Judgment upon the award may be entered in
any court having jurisdiction thereof or an application may be made to
such court for judicial acceptance of the award and an order of
enforcement, as the case may be.
(c) COSTS. Except as the arbitral tribunal may otherwise
determine in its discretion, a party substantially prevailing in the
arbitration shall be entitled to recover its attorney fees and costs,
including the costs and expenses of its witnesses, and the other
parties shall pay the fees, costs and expenses of the arbitral tribunal
and the administering and appointing authority.
9.15 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the substantive law (but not the conflict of law rules) of the state of Oregon.
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EXHIBIT B
CERTAIN DEFINITIONS UNDER REGULATION S
Set forth below is the text of Rule 902(o) promulgated under the 1933 Act which
defines "U.S. person" as follows:
(o) U.S. Person.
(1) "U.S. person" means:
(i) Any natural person resident in the
United States;
(ii) Any partnership or corporation
organized or incorporated under the laws of the
United States;
(iii) Any estate of which any executor
or administrator is a U.S. person;
(iv) Any trust of which any trustee is a
U.S. person;
(v) Any agency or branch of a foreign
entity located in the United States;
(vi) Any non-discretionary account or
similar account (other than an estate or trust)
held by a dealer or other fiduciary for the benefit
or account of a U.S. person;
(vii) Any discretionary account or similar
account (other than an estate or trust) held by
a dealer or other fiduciary organized, incorporated,
or (if an individual) resident in the United
States; and
(viii) Any partnership or corporation if:
(A) Organized or incorporated under the laws of any
foreign jurisdiction; and (B) Formed by a U.S.
person principally for the purpose of investing in
securities not registered under the 1933 Act,
unless it is organized or incorporated, and owned,
by accredited investors (as defined in Rule 501(a)
under the Act (ss.230.501(a) of this chapter)) who
are not natural persons, estates or trusts.
(2) Notwithstanding paragraph (o)(1) of this section, any
discretionary account or similar account (other than an estate or
trust) held for the benefit or account of a non-U.S. person by a dealer
or other professional fiduciary organized, incorporated, or (if an
individual) resident in the United States shall not be deemed a "U.S.
person."
(3) Notwithstanding paragraph (o)(1) of this section, any
estate of which any professional fiduciary acting as executor or
administrator is a U.S. person shall not be deemed a U.S. person if:
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(i) An executor or administrator of the
estate who is not a U.S. person has sole or shared
investment discretion with respect to the assets of
the estate; and
(ii) The estate is governed by foreign law.
(4) Notwithstanding paragraph (o)(1) of this section, any
trust of which any professional fiduciary acting as trustee is a U.S.
person shall not be deemed a U.S. person if a trustee who is not a U.S.
person has sole or shared investment discretion with respect to the
trust assets, and no beneficiary of the trust (and no settlor if the
trust is revocable) is a U.S. person.
(5) Notwithstanding paragraph (o)(1) of this section, an
employee benefit plan established and administered in accordance with
the law of a country other than the United States and customary
practices and documentation of such country shall not be deemed a U.S.
person.
(6) Notwithstanding paragraph (o)(1) of this section, any
agency or branch of a U.S. person located outside the United States
shall not be deemed a "U.S. person" if:
(i) The agency or branch operates for
valid business reasons; and
(ii) The agency or branch is engaged in the
business of insurance or banking and is subject
to substantive insurance or banking regulation,
respectively, in the jurisdiction where located.
(7) The International Monetary Fund, the International Bank
for Reconstruction and Development, the Inter-American Development
Bank, the Asian Development Bank, the African Development Bank, the
United Nations, and their agencies, affiliates and pension plans, and
any other similar international organizations, their agencies,
affiliates and pension plans shall not be deemed "U.S. persons."
Set forth below is the text of Rule 9.02(p) promulgated under the 1933 Act which
defines "United States" as follows:
(p) "United States" means the United States of America, its
territories and possessions, any State of the United States, and the District
of Columbia.
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<PAGE>
EXHIBIT C
RIGHTS TO ACQUIRE SHARES
See the Disclosure Documents for more detailed descriptions of rights.
Preferred Stock Purchase Rights, as described in the Information
Statement/Prospectus included in the Registration Statement on Form S-1 filed
with the Securities and Exchange Commission (File No. 333-34597) ( the "Form
S-1").
Options to purchase Common Stock issued or issuable under the 1997 Stock Award
Plan, which provides for issuance of options to purchase up to 2,000,000 shares
of Common Stock.
Rights to purchase Common Stock under the 1997 Employee Stock Purchase Plan,
which provides for the issuance of up to 250,000 shares of Common Stock.
38,722 shares of Common Stock reserved for issuance as matching contributions
under Agritope's 401(k) plan.
Warrants issued to Vector Securities International, Inc. in connection with the
spin-off of Agritope by Epitope, Inc. on December 30, 1997, to purchase up to
83,333 shares of Common Stock at a price of $7.343 per share, as described in
the Form S-1.
Warrants issued to American Equities Overseas, Inc. and eight of its
unaffiliated European designees, to purchase up to a total of 500,000 shares of
Common Stock at a price of $7.00 per share.
Warrants granted or to be granted to Purchaser and other purchasers of Units,
representing in the aggregate, rights to purchase 125,000 shares of Series A
Preferred Stock at a price of $7.00 per share.
Warrants granted to or to be granted to Rhone-Poulenc, S.A. to purchase up to a
total of 250,00 shares of Series C Preferred Stock at a price of $7.00 per
share.
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<PAGE>
EXHIBIT D
CERTIFICATE OF DESIGNATION,
PREFERENCES AND RIGHTS OF
THE SERIES A PREFERRED STOCK
OF
AGRITOPE, INC.
(Pursuant to Section 151 of the General Corporation Law of the state of
Delaware)
--------------------
The undersigned officers of Agritope, Inc., a corporation organized and existing
under the General Corporation Law of the state of Delaware (the "Corporation"),
in accordance with the provisions of Section 103 thereof, do hereby certify:
That, pursuant to authority conferred upon the Board of Directors of the
Corporation by its Certificate of Incorporation, and pursuant to Section 151 of
the Delaware General Corporation Law , the Board of Directors adopted the
following resolution creating a series of 1,000,000 shares of Preferred Stock,
par value $.01 per share, designated as Series A Preferred Stock:
RESOLVED, that, pursuant to the authority vested in the Board of Directors of
the Corporation in accordance with the provisions of its Certificate of
Incorporation, a new series of Preferred Stock of the Corporation be, and it
hereby is, created, and that the designation and amount thereof and the voting
powers, preferences and relative, participating, optional and other special
rights of the shares of such series, and the qualifications, limitations or
restrictions thereof are as follows:
SERIES A PREFERRED STOCK
1. Designation and Amount. The shares of such series of Preferred
Stock shall be designated as "Series A Preferred Stock," and the number of
shares constituting such series be 1,000,000.
2. Par Value. The par value of the Series A Preferred Stock
shall be $.01 per share.
3. Dividends and Distributions
(a) The Corporation shall not declare, set aside or pay any
dividends or other distributions (as defined below) on shares of Common Stock
unless and until the Corporation shall have declared, set aside or paid a
dividend or other distribution with respect to each share of Series A Preferred
Stock then outstanding in an amount at least equal to the product of (i) the per
share amount, if any, of the dividends or other distributions to be declared,
paid or set aside for the Common Stock, multiplied by (ii) the number of whole
shares of Common Stock into which the shares of Series A Preferred Stock are
then convertible.
(b) For purposes of this Section 3, unless the context
requires otherwise, "distribution" shall mean the transfer of cash or property
without consideration, whether by way of dividend or otherwise, payable other
than in Common Stock, or the purchase or redemption of shares of the Corporation
(other than repurchases of Common Stock held by employees or directors of, or
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consultants to, the Corporation upon termination of their employment or
services and other than redemptions in liquidation or dissolution of the
Corporation) for cash or property, including any such transfer, purchase or
redemption by a subsidiary of this Corporation. All payments due under this
Section 3 shall be made to the nearest cent.
(c) Anything in this Section 3 to the contrary
notwithstanding, stock dividends on Series A Preferred Stock shall be made in
shares of Series A Preferred Stock only.
4. Liquidation, Dissolution or Winding Up
(a) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, the holders of shares
of Series A Preferred Stock then outstanding shall be entitled to be paid out of
the assets of the Corporation available for distribution to its stockholders,
pari passu with the payment of all amounts required to be distributed to the
holders of Common Stock, but before any payment shall be made to the holders of
any other class or series of stock ranking on liquidation junior to the Series A
Preferred Stock.
5. Voting
(a) In addition to voting rights provided by the General
Corporation Law of the state of Delaware, the holders of the Series A Preferred
Stock voting as one class shall have the right to elect one director to the
Corporation's Board of Directors annually, so long as not less than 214,285 of
the shares of Series A Preferred Stock originally issued are outstanding. The
holders of the Series A Preferred Stock also shall have voting rights for any
other purpose pari passu with holders of Common Stock as one class, provided
that each share of Series A Preferred Stock shall entitle the holder to such
number of votes equal to the number of shares of Common Stock (rounded to the
nearest whole number) into which the Series A Preferred Stock is then
convertible under the terms provided below.
(b) The Corporation shall not amend, alter or repeal the
preferences, special rights or other powers of the Series A Preferred Stock so
as to affect adversely the Series A Preferred Stock, without the written consent
or affirmative vote of the holders of a majority of the then outstanding shares
of Series A Preferred Stock, given in writing or by vote at a meeting. The
number of authorized shares of Series A Preferred Stock may be decreased (but
not below the number of shares then outstanding) by the directors of the
Corporation pursuant to the General Corporation Law of Delaware, but may be
increased (other than increases necessary to issue stock dividends of Series A
Preferred Stock on the outstanding shares of Series A Preferred Stock) only by
the affirmative vote of the holders of a majority of the then outstanding shares
of Series A Preferred Stock, voting as a single class.
6. Optional Conversion. The holders of the Series A Preferred
Stock shall have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Series A Preferred
Stock shall be convertible, at the option of the holder thereof, at any time and
from time to time, and without the payment of additional consideration by the
holder thereof, into such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing (i) $7.00 by (ii) the Series A
Conversion Price, in each instance as such Conversion Price is in effect at the
time of conversion. The "Series A Conversion Price" initially shall be $7.00.
The rate at which shares of Series A Preferred Stock may be converted into
shares of Common Stock shall be subject to adjustment as provided below; such
adjusted Conversion Price and rate of conversion thereafter shall be applicable
to the
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<PAGE>
outstanding shares of Series A Preferred Stock and any newly issued shares of
such series (as, for example, the result of a stock dividend).
In the event of a liquidation, dissolution or winding up of
the Corporation, the Conversion Rights shall terminate at the close of business
on the fifth business day preceding the date fixed for the payment of any
amounts distributable on liquidation to the holders of Series A Preferred Stock.
(b) Fractional Shares. No fractional shares of Common
Stock shall be issued upon conversion of Series A Preferred Stock. In lieu of
any fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the then
effective Conversion Price.
(c) Mechanics of Conversion
(i) In order for a holder of Series A Preferred Stock
to convert shares of Series A Preferred Stock into shares of Common Stock, such
holder shall surrender the certificate or certificates for such shares of Series
A Preferred Stock, at the office of the Corporation's transfer agent (or at the
principal office of the Corporation if the Corporation serves as its own
transfer agent), together with written notice that such holder elects to convert
all or any number of the shares of the Series A Preferred Stock represented by
such certificate or certificates. Such notice shall state such holder's name or
the names of the nominees in which such holder wishes the certificate or
certificates for shares of Common Stock to be issued. If required by the
Corporation, certificates surrendered for conversion shall be endorsed or
accompanied by a written instrument or instruments of transfer, in form
satisfactory to the Corporation, duly executed by the registered holder or the
holder's attorney duly authorized in writing. The date of receipt of such
certificates and notice to the transfer agent (or to the Corporation if the
Corporation serves as its own transfer agent) shall be the conversion date (the
"Conversion Date"). The Corporation shall, as soon as practicable after the
Conversion Date, issue and deliver at such office to such holder of Series A
Preferred Stock, or to the holder's nominees, a certificate or certificates for
the number of shares of Common Stock to which such holder shall be entitled,
together with cash in lieu of any fraction of a share.
(ii) The Corporation shall at all times when any
Series A Preferred Stock shall be outstanding, reserve and keep available out of
its authorized but unissued stock, for the purpose of effecting the conversion
of such Series A Preferred Stock, such number of its duly authorized shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding shares of such Series A Preferred Stock.
(iii) Upon any such conversion, no adjustment to the
Conversion Price shall be made for any declared or accrued but unpaid dividends
on any Series A Preferred Stock surrendered for conversion or on the Common
Stock delivered upon conversion.
(iv) All shares of Series A Preferred Stock which
shall have been surrendered for conversion as herein provided shall no longer be
deemed to be outstanding and all rights with respect to such shares, including
the rights, if any, to receive notices and to vote, shall immediately cease and
terminate on the Conversion Date, except only the right of the holders thereof
to receive shares of Common Stock (and cash in lieu of any fractional share) in
exchange therefor and payment of any dividends declared but unpaid thereon. Any
shares of Series A Preferred Stock so converted shall be retired and canceled
and shall not be reissued, and the Corporation (without the
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<PAGE>
need for stockholder action) may from time to time take such appropriate action
as may be necessary to reduce the authorized Series A Preferred Stock
accordingly.
(v) The Corporation shall pay any and all issue
and other taxes that may be payable in respect of any issuance or delivery of
shares of Common Stock upon conversion of shares of Series A Preferred Stock
pursuant to this Section 6. The Corporation shall not, however, be required to
pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of shares of Common Stock in a name other than that in
which the shares of the Series A Preferred Stock so converted were registered,
and no such issuance or delivery shall be made unless and until the person or
entity requesting such issuance has paid to the Corporation the amount of any
such tax or has established, to the satisfaction of the Corporation, that such
tax has been paid.
(d) Adjustment for Stock Splits and Combinations. If the
Corporation shall, at any time or from time to time after the date on which a
share of Series A Preferred Stock was first issued (the "Original Issue Date"),
effect a subdivision of the outstanding Common Stock, the Conversion Price then
in effect immediately before that subdivision shall be proportionately
decreased. If the Corporation shall at any time or from time to time after the
Original Issue Date combine the outstanding shares of Common Stock, the
Conversion Price then in effect immediately before the combination shall be
proportionately increased. Any adjustment under this paragraph shall become
effective at the close of business on the date the subdivision or combination
becomes effective.
(e) Adjustment for Certain Dividends and Distributions.
In the event the Corporation, at any time or from time to time after the
Original Issue Date, shall make or issue, or fix a record date for the
determination of holders of Common Stock entitled to receive, a dividend or
other distribution payable in additional shares of Common Stock, then and in
each such event the Conversion Price for Series A Preferred Stock then in effect
shall be decreased as of the time of such issuance or, in the event such a
record date shall have been fixed, as of the close of business on such record
date, by multiplying the Conversion Price then in effect by a fraction:
(1) the numerator of which shall be the total number
of shares of Common Stock issued and outstanding immediately prior to
the time of such issuance or the close of business on such record date,
and
(2) the denominator of which shall be the total
number of shares of Common Stock issued and outstanding immediately
prior to the time of such issuance or the close of business on such
record date plus the number of shares of Common Stock issuable in
payment of such dividend or distribution;
provided, however, if such record date shall have been fixed and such dividend
is not fully paid or if such distribution is not fully made on the date fixed
therefor, the Conversion Price for Series A Preferred Stock shall be recomputed
accordingly as of the close of business on such record date and thereafter the
Conversion Price for Series A Preferred Stock shall be adjusted pursuant to this
paragraph as of the time of actual payment of such dividends or distributions.
Notwithstanding the foregoing, the shares of Common Stock issuable upon
conversion of the Series A Preferred Stock shall be deemed outstanding for all
calculations under this Subsection 6(e).
(f) Adjustments for Other Dividends and Distributions. In
the event the Corporation, at any time or from time to time after the Original
Issue Date for Series A Preferred Stock, shall make or issue, or fix a record
date for the determination of holders of Common Stock
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<PAGE>
entitled to receive, a dividend or other distribution payable in securities of
the Corporation other than shares of Common Stock, then and in each such event
provision shall be made so that the holders of Series A Preferred Stock shall
receive upon conversion thereof, in addition to the number of shares of Common
Stock receivable thereupon, the amount of securities of the Corporation that
they would have received had such Series A Preferred Stock been converted into
Common Stock on the date of such event and had thereafter, during the period
from the date of such event to and including the conversion date, retained such
securities receivable by them as aforesaid during such period, giving
application to all adjustments called for during such period under this
paragraph with respect to the rights of the holders of Series A Preferred Stock.
(g) Adjustment for Reclassification, Exchange or
Substitution. If the Common Stock issuable upon the conversion of Series A
Preferred Stock shall be changed into the same or a different number of shares
of any class or classes of stock, whether by capital reorganization,
reclassification or otherwise (other than a subdivision or combination of shares
or stock dividend provided for above, or a reorganization, merger, consolidation
or sale of assets provided for below), then and in each such event the holder of
each such share of Series A Preferred Stock shall have the right thereafter to
convert such share into the kind and amount of shares of stock and other
securities and property receivable upon such reorganization, reclassification or
other change, by holders of the number of shares of Common Stock into which such
shares of Series A Preferred Stock might have been converted immediately prior
to such reorganization, reclassification or change, all subject to further
adjustment as provided herein.
(h) Adjustment for Merger or Reorganization, etc. In case
of any consolidation or merger of the Corporation with or into another
corporation, or the sale of all or substantially all of the assets of the
Corporation to another corporation each share of Series A Preferred Stock shall
thereafter be convertible (or shall be converted into a security which shall be
convertible) into the kind and amount of shares of stock or other securities or
property to which a holder of the number of shares of Common Stock of the
Corporation deliverable upon conversion of Series A Preferred Stock would have
been entitled upon such consolidation, merger or sale; and, in such case,
appropriate adjustment (as determined in good faith by the Board of Directors)
shall be made in the application of the provisions in this Section 6 set forth
with respect to the rights and interest thereafter of the holders of Series A
Preferred Stock, to the end that the provisions set forth in this Section 6
(including provisions with respect to changes in and other adjustments of the
Conversion Price) shall thereafter be applicable, as nearly as reasonably may
be, in relation to any shares of stock or other property thereafter deliverable
upon the conversion of Series A Preferred Stock.
(i) No Impairment. The Corporation will not, by
amendment of its Certificate of Incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Corporation, but will at all times in good faith assist in the carrying out of
all the provisions of this Section 6 and in the taking of all such action as may
be necessary or appropriate in order to protect the Conversion Rights of the
holders of Series A Preferred Stock against impairment.
(j) Certificate as to Adjustments. Upon the occurrence
of each adjustment or readjustment of the Conversion Price pursuant to this
Section 6, the Corporation at its expense shall promptly compute such adjustment
or readjustment in accordance with the terms hereof and furnish to each holder
of Series A Preferred Stock a certificate, signed by the Corporation's chief
financial officer, setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based. The
Corporation shall, upon the written request at any time of any
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<PAGE>
holder of Series A Preferred Stock, furnish or cause to be furnished to such
holder a similar certificate setting forth (i) such adjustments and
readjustments, (ii) the Conversion Price then in effect, and (iii) the number of
shares of Common Stock and the amount, if any, of other property which then
would be received upon the conversion of Series A Preferred Stock.
(k) Notice of Record Date. In the event:
(i) that the Corporation declares a
dividend (or any other distribution) on its Common Stock
payable in Common Stock or other securities of the
Corporation;
(ii) that the Corporation subdivides or
combines its outstanding shares of Common Stock
(iii) of any reclassification of the Common
Stock of the Corporation (other than a subdivision or
combination of its outstanding shares of Common Stock or a
stock dividend or stock distribution thereon), or of any
consolidation or merger of the Corporation into or with
another corporation, or of the sale of all or substantially
all of the assets of the Corporation; or
(iv) of the involuntary or voluntary
dissolution, liquidation or winding up of the Corporation;
then the Corporation shall cause to be filed at its principal office and shall
cause to be mailed to the holders of Series A Preferred Stock at their last
addresses as shown on the records of the Corporation or its transfer agent, at
least 10 days prior to the date specified in (A) below or 20 days before the
date specified in (B) below, a notice stating
(A) the record date of such dividend, distribution,
subdivision or combination, or, if a record is not to be taken, the
date as of which the holders of Common Stock of record to be entitled
to such dividend, distribution, subdivision or combination are to be
determined, or
(B) the date on which such reclassification,
consolidation, merger sale, dissolution, liquidation or winding up is
expected to become effective, and the date as of which it is expected
that holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities or other property
deliverable upon such reclassification, consolidation, merger, sale,
dissolution or winding up.
7. Preemptive Rights.
(a) Subject to the provisions of Section 7(f), in case of
the proposed issuance or granting by the Corporation of shares of any class of
capital stock (whether heretofore or hereafter authorized) or notes, bonds,
debentures or other securities convertible into, or carrying options or warrants
to purchase shares of any class of capital stock (all of which are collectively
referred to herein as "equity securities"), the Corporation shall afford to each
holder of Series A Preferred Stock the preemptive right to subscribe for,
purchase or receive such securities, in such proportion as would, as nearly as
practicable, preserve such holder's relative equity position on a Common Stock
equivalent basis arising from such holder's ownership of shares of Series A
Preferred
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<PAGE>
Stock then held by such stockholder), on the terms and conditions provided in
Sections 7(b) through 7(f), inclusive.
(b) Notice. Written notice of the proposed issuance or
granting of securities within the scope of Section 7(a) shall be given to each
holder of Series A Preferred Stock not less than 30 days prior to the proposed
date of issuance or granting, setting forth the principal terms and conditions
of the proposed issuance or granting, including the aggregate number of
securities to be issued or granted, the price therefor, and, if a security other
than shares or authorized capital stock, the significant terms thereof, the
proportionate amount of such securities which such holder shall have the right
to purchase pursuant to Section 7(a) and the price to be paid by and other terms
offered to the holder therefor, which price and principal terms shall be not
less favorable than the price and terms at which such securities are proposed to
be offered for sale to others.
(c) Subscription. A shareholder of Series A Preferred
Stock by written notice given to the Corporation not less than 15 days prior to
the proposed date of issuance or granting, may subscribe for or agree to
purchase up to the entire amount of securities covered by the holder's
proportionate right at the price and upon the terms set forth in said notice.
(d) Enforceability. Upon giving notice to the Company in
accordance with Section 7(c), such holder of Series A Preferred Stock shall be
obligated as if the holder had executed a subscription agreement containing the
price and terms stated in the notice given pursuant to Section 7(a) and the
Corporation thereafter may enforce such agreement pursuant to the provisions of
Delaware law; provided, however, that a stockholder's obligation to purchase any
securities hereunder shall be conditioned upon the issuance or granting by the
Corporation of the securities at the price and on the terms and conditions set
forth in the Corporation's notice given to the stockholder in accordance with
Section 7(b).
(e) Free Period. If a holder of Series A Preferred Stock
shall not exercise such holder's preemptive rights in the manner and time set
forth in Section 7(c), then the Corporation may thereafter for a period not
exceeding 120 days following the expiration of said time period issue, grant,
sell or subject to rights or options (upon the terms and conditions and at the
price or prices set forth in the Corporation's notice) the securities described
in the notice given to such stockholder by the Corporation in accordance with
Section 7(b), which such stockholder would have been entitled to purchase, free
of the stockholder's preemptive rights herein provided; any such securities not
so issued, granted, sold or subjected to rights or options of others during such
120-day period shall thereafter again be subject to the preemptive rights
provided in Section 7(a).
(f) Exempt Transactions. Shares of capital stock or
other securities proposed to be issued or granted by the Corporation shall not
be subject to preemptive rights under Section 7(a) if they (a) are securities
issued by the Corporation to effect a merger, consolidation or acquisition of a
business or company on a stock-for-stock or stock-for-assets basis or are
offered or subject to rights or options for consideration other than cash as
part of such acquisition; (b) are to be issued to satisfy conversion, option or
contingent Common Stock issuances or warrant rights heretofore authorized or
granted by the Corporation; (c) are sold, issued or granted to employees,
directors or consultants pursuant to a plan or agreement approved by vote of the
Corporation's stockholders; (d) are treasury shares; (e) are to be issued under
a plan of reorganization approved in a proceeding under any applicable act of
Congress relating to reorganization of corporations; (f) are issued in
connection with a registered public offering of the Corporation's securities on
behalf of the Corporation pursuant to an effective Registration Statement
pursuant to the Securities Act of 1933, as amended; (g) are granted in
transactions not to exceed, in each case, an amount equal to 5 percent of the
total of outstanding shares
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<PAGE>
of Common Stock as at the date of such transaction with (i) underwriters in
connection with the public offering of the Corporation's securities on behalf of
the Corporation pursuant to an effective Registration Statement pursuant to the
Securities Act of 1933, as amended; (ii) finders or brokers in connection with a
private placement or public offering of the Corporation's securities on behalf
of the Corporation; or (iii) financial institutions (including, but not limited
to, banks, trust companies, investment companies, insurance companies or pension
or profit-sharing trusts) in connection with financing furnished to the
Corporation, if such financing is in the form of loans or non-convertible debt
or is approved by the Corporation's stockholders; or (h) are issuable in
connection with the exercise of rights under the Corporation's stockholder
rights plan.
IN WITNESS WHEREOF, we have executed and attested this Certificate of
Designation on behalf of the Corporation this 1st day of December, 1997. We
further declare under penalty of perjury under the laws of the state of Delaware
that the matters set forth herein are, to our knowledge, true and correct.
AGRITOPE, INC.
By /s/ Adolph J. Ferro
----------------------------------------
Adolph J. Ferro
Chairman, President and Chief Executive Officer
Attest:
/s/ Gilbert N. Miller
- --------------------------------
Gilbert N. Miller, Secretary
================================================================================
- --------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
AMONG
AGRITOPE, INC.,
VINIFERA, INC.,
AND
[PURCHASER]
================================================================================
JUNE 1, 1999
135741-0014/062599/PDXDOCS:1092296.2
<PAGE>
Article I DEFINITIONS..............................................1
1.1 Definitions..................................................1
Article II PURCHASE AND SALE OF SHARES..............................2
2.1 Sale of Shares...............................................2
2.2 Timing of Sale...............................................2
2.3 Option to Retain Shares......................................2
Article III CLOSING..................................................2
3.1 Closing......................................................2
3.2 Actions at Closings..........................................2
Article IV RESTRICTIONS ON TRANSFER.................................3
4.1 General......................................................3
4.2 Securities Law Compliance....................................3
4.3 Voluntary Transfers..........................................3
4.4 Involuntary Transfers........................................3
(a) Death...............................................3
(b) Involuntary Lifetime Transfer.......................3
4.5 Acceptance of Option to Purchase.............................4
(a) Option Period.......................................4
(b) Election............................................4
4.6 Payment and Transfer of Shares...............................4
4.7 Power of Attorney............................................4
4.8 Rejection of Offer by Company................................4
4.9 Lock-Up Agreement............................................5
4.10 Certificate Legend...........................................5
4.11 Purchaser's Right of First Refusal...........................5
(a) Duration of Right...................................5
(b) Restriction on Sale of Shares.......................5
(c) Acceptance of Offer.................................5
(d) Sale to Third Party.................................6
Article V REPRESENTATIONS AND WARRANTIES OF VINIFERA...............6
5.1 Organization, Etc............................................6
5.2 Authority....................................................6
5.3 Capitalization...............................................6
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5.4 Valid Issuance; Title........................................6
5.5 Financial Statements.........................................6
5.6 Tax Matters..................................................7
5.7 Assets Needed for Business...................................7
5.8 Litigation and Other Contingent Liabilities..................7
5.9 Absence of Certain Adverse Effects...........................7
5.10 No Brokers...................................................7
5.11 Disclosure...................................................7
Article VI REPRESENTATIONS AND WARRANTIES OF AGRITOPE...............7
6.1 Corporate Existence..........................................7
6.2 Authority....................................................8
Article VII REPRESENTATIONS AND WARRANTIES OF PURCHASER..............8
7.1 Execution and Performance of Agreement.......................8
7.2 Binding Obligations; Due Authorization.......................8
7.3 No Brokers...................................................8
7.4 Investment Representations...................................8
(a) Accredited Investor Status..........................8
(b) Access to Information...............................8
(c) Experience..........................................8
(d) Investment Intent...................................9
7.5 Nature of Shares.............................................9
(a) No SEC or State Registration........................9
7.6 Litigation...................................................9
7.7 Disclosure...................................................9
Article VIII COVENANTS................................................9
8.1 Best Efforts.................................................9
8.2 Right of Access..............................................9
8.3 Preservation of Business; Notice of Change..................10
Article IX CONDITIONS..............................................10
9.1 Conditions Precedent to Obligations of Purchaser............10
9.2 Conditions Precedent to Obligations of Agritope.............10
Article X OTHER MATTERS...........................................11
10.1 Notices.....................................................11
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10.2 Amendments and Waiver.......................................12
10.3 Expenses....................................................12
10.4 Headings....................................................12
10.5 Counterparts................................................12
10.6 Parties in Interest; Assignment.............................12
10.7 Entire Agreement............................................12
10.8 Severability................................................12
10.9 Attorney Fees...............................................12
10.10 Survival....................................................12
10.11 Form of Public Disclosures..................................12
10.12 Cumulative Rights and Remedies..............................13
10.13 No Third-Party Beneficiaries................................13
10.14 Dispute Resolution..........................................13
(a) Conduct............................................13
(b) Decision...........................................13
(c) Costs..............................................13
10.15 Governing Law...............................................13
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THIS STOCK PURCHASE AGREEMENT (this "Agreement") is entered into as of
June 1, 1999, among AGRITOPE, INC., an Oregon corporation ("Agritope"),
VINIFERA, INC., an Oregon corporation ("Vinifera"), and the purchaser listed on
SCHEDULE 1 ("Purchaser").
RECITALS
A. Purchaser wishes to purchase from Agritope [ ] shares of Vinifera Common
Stock (the "Shares") according to the schedule and at the prices per share
specified in Exhibit A. Agritope wishes to sell the Shares to Purchaser on the
terms and conditions set forth below.
B. Capitalized terms not otherwise defined have the meanings given in
Article I.
AGREEMENT
The parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. As used in this Agreement, the following terms have the
meanings set forth below:
(a) "Closing" means a closing of the purchase and sale of a portion
of the Shares according to the schedule set forth in EXHIBIT A.
(b) "Common Stock" means the Common Stock of Vinifera, no par
value.
(c) "Financial Statements" means Vinifera's Balance Sheet dated as
of May 31, 1999, Statement of Operations for the eight-month period
ending May 31, 1999, Statement of Shareholders' Equity for the
eight-month period ending May 31, 1999, and the Statement of Cash
Flows for the eight-month period ending May 31, 1999, each of which
have been prepared for Vinifera's internal use, copies of which are
attached as EXHIBIT B and which shall be updated as provided in this
Agreement.
(d) "First Anniversary Closing Date" means the date of Closing in
year 2000 for the portion of the Shares specified in EXHIBIT A.
(e) "Initial Closing Date" means the date of Closing in year 1999
for the portion of the Shares specified in EXHIBIT A.
(f) "Preferred Stock" means the Preferred Stock of Vinifera.
(g) "Second Anniversary Closing Date" means the date of Closing in
year 2001 for the portion of the Shares specified in EXHIBIT A.
(h) "Securities Act" means the Securities Act of 1933, as amended.
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(i) "Third Anniversary Closing Date" means the date of Closing in
year 2002 for the portion of the Shares specified in EXHIBIT A.
(j) "Voting Stock" means the outstanding shares of Common Stock,
Preferred Stock entitled to vote in an election of directors, and
Preferred Stock convertible into Common Stock.
ARTICLE II
PURCHASE AND SALE OF SHARES
2.1 SALE OF SHARES. Upon the terms and conditions of this Agreement,
Agritope shall sell and transfer the Shares to Purchaser and Purchaser shall
purchase the Shares from Agritope for a total purchase price of [ ].
2.2 TIMING OF SALE. The Shares shall be purchased and sold in four annual
installments according to the schedule and at the prices per share specified in
Exhibit A.
2.3 OPTION TO RETAIN SHARES. Notwithstanding anything to the contrary
contained herein, Agritope shall have no obligation to sell to Purchaser the
portion of the Shares that would otherwise be transferred to Purchaser on any
Closing Date if (i) prior to the transfer of such shares, Agritope owns less
than a majority of the Voting Stock of Vinifera or (ii) as a result of the
transfer of such shares, together with all shares that Agritope has agreed to
transfer to other purchasers on such date, Agritope will own less than a
majority and more than 19 percent of the outstanding Voting Stock of Vinifera.
ARTICLE III
CLOSING
3.1 CLOSING. The sale of the Shares shall be consummated at a series of
Closings on a date and on successive anniversaries of that date as agreed by the
parties. The closing date for consummating the sale of the portion of the Shares
to be purchased in 1999 (the "Initial Closing Date") shall occur not later than
July 15, 1999. Successive closing dates as contemplated by the schedule in
Exhibit A shall occur on the first, second and third anniversaries of the
Initial Closing Date ("First Anniversary Closing Date," "Second Anniversary
Closing Date," and "Third Anniversary Closing Date"). If the anniversary of the
Initial Closing Date falls on a Saturday, Sunday, or holiday, the Closing shall
be continued to the next business day following the anniversary.
3.2 ACTIONS AT CLOSINGS. At each Closing:
(a) Purchaser shall pay Agritope the portion of the purchase price
for the portion of the Shares specified in EXHIBIT A. Purchaser shall
pay the portion of the purchase price by wire transfer in United
States dollars.
(b) Agritope shall deliver to Purchaser stock certificates
representing the portion of the Shares specified in EXHIBIT A.
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(c) The parties shall take all other actions that they deem necessary or
desirable to consummate the purchase and sale of the portion of the Shares
hereunder.
ARTICLE IV
RESTRICTIONS ON TRANSFER
4.1 GENERAL. Voting Stock may not be transferred by Purchaser or any
subsequent transferee, except to a transferee who agrees to comply with all
restrictions on transfer of Voting Stock provided for in this Agreement and the
certificates for Voting Stock and all other restrictions of this Agreement
applicable by their terms to transferees. Any purported transfer in violation of
the preceding sentence shall be void.
4.2 SECURITIES LAW COMPLIANCE. The holder of Voting Stock shall not offer,
sell, transfer, pledge, or otherwise dispose of Voting Stock in violation of any
applicable securities or other laws of a governmental authority having
jurisdiction over such disposition.
4.3 VOLUNTARY TRANSFERS. If Purchaser wishes to transfer any Voting Stock,
Purchaser must first offer to transfer the Voting Stock to Vinifera. The offer
shall be made by giving Vinifera written notice of the proposed transfer (the
"Proposed Transfer Notice"). The Proposed Transfer Notice must state (i) that
Purchaser intends to transfer the Voting Stock; (ii) the number of shares of
Voting Stock involved in the proposed transfer; (iii) the terms of the proposed
transfer, including the name and address of the proposed transferee; and (iv)
the price per share and the terms of payment. The Proposed Transfer Notice shall
constitute an offer to transfer the Voting Stock to Vinifera at the price and on
the terms of the proposed transfer.
4.4 INVOLUNTARY TRANSFERS.
(a) DEATH. If Purchaser is an individual, upon Purchaser's death,
Purchaser (or Purchaser's personal representative, whether or not
properly qualified) shall be deemed to have made an offer to sell to
Vinifera all of Purchaser's Voting Stock for its fair market value as
determined by Vinifera's board of directors; provided, however, that
no such offer shall be deemed made if Purchaser's Voting Stock will be
transferred solely to Purchaser's spouse or children as a result of
Purchaser's death and such persons make the agreement required of
transferees under Section 4.1.
(b) INVOLUNTARY LIFETIME TRANSFER. If Purchaser (a) becomes a
debtor under the United States Bankruptcy Code (voluntarily or
involuntarily) or any similar foreign law; or (b) makes a general
assignment for the benefit of creditors or permits any of Purchaser's
Voting Stock to be attached or levied upon or to become subject to
judicial sale or execution of judgment; or (c) would, but for this
Agreement, be required to involuntarily transfer Voting Stock as a
result of any other event; Purchaser shall be deemed, immediately
before such event occurs, to have made an offer to sell to Vinifera
all of the Voting Stock then owned by Purchaser for its fair market
value as determined by Vinifera's board of directors.
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4.5 ACCEPTANCE OF OPTION TO PURCHASE.
(a) OPTION PERIOD. For 30 days after Vinifera receives a Proposed
Transfer Notice or learns of an event giving rise to an option to
purchase Voting Stock under Section 4.4 (the "Option Period"),
Vinifera shall have the option to purchase some or all of the offered
Voting Stock. The decision whether to exercise the option shall be
made by Vinifera's board of directors or, if a disinterested quorum of
the board of directors cannot be convened, at a special shareholders'
meeting. If the decision is made at a special shareholders' meeting,
Purchaser hereby grants an irrevocable proxy to the remaining
shareholders to vote Purchaser's Voting Stock in accordance with the
majority of the other votes cast, excluding Purchaser's Voting Stock.
(b) ELECTION. Vinifera may elect to purchase any of the offered
Voting Stock by giving written notice to Purchaser within the Option
Period specifying the number of shares of Voting Stock that Vinifera
is electing to purchase and the total purchase price of the shares.
4.6 PAYMENT AND TRANSFER OF SHARES. Vinifera shall designate a transfer
date, which shall be within 30 days after the Option Period (the "Transfer
Date"). On the Transfer Date, the Purchaser or Purchaser's legal representative
must transfer and deliver the certificates for the Voting Stock, duly endorsed
for transfer, to Vinifera. On the Transfer Date, Vinifera must pay the purchase
price for the Voting Stock to Purchaser.
4.7 POWER OF ATTORNEY. Purchaser irrevocably appoints each vice-president
of Vinifera as Purchaser's agent and attorney-in-fact, with full power of
substitution, for the limited purpose of effecting the transfer of Voting Stock
purchased by Vinifera under this Agreement. If, after tender to Purchaser on or
before the Transfer Date of the purchase price for the Voting Stock, Purchaser
does not deliver to Vinifera the Voting Stock to be transferred, any
vice-president, as Purchaser's agent and attorney-in-fact, may take all actions
and may execute all documents necessary to effect the transfer of the Voting
Stock to Vinifera. Upon the taking of such action and execution of such
documents, Purchaser shall have no further interest in the Voting Stock
transferred. Purchaser acknowledges and agrees that the granting of this power
of attorney is coupled with an interest and shall survive Purchaser's death or
disability, if Purchaser is an individual, and Purchaser's assignment of any
interest in the Voting Stock.
4.8 REJECTION OF OFFER BY COMPANY. If Vinifera does not purchase Voting
Stock offered in a Proposed Transfer Notice, the Voting Stock may be transferred
to the proposed transferee within three months after the Option Period subject
to the following conditions: (i) the transferee must become a party to this
Agreement; (ii) the transferee and the transferor must certify to Vinifera the
terms of the transfer; and (iii) the transfer must be made at a price and on
terms and conditions no more favorable to Purchaser than those specified in the
Proposed Transfer Notice. If Vinifera does not purchase Voting Stock offered
pursuant to Section 4.4, the Voting Stock may be transferred within six months
after the Option Period in connection with the event giving rise to Vinifera's
purchase option, subject to the condition that the transferee must become a
party to this Agreement. If a transfer is not made within the applicable
three-
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month or six-month period, no transfer shall be made without again offering the
Voting Stock as provided above.
4.9 LOCK-UP AGREEMENT. In the event of an underwritten public offering of
the capital stock of Vinifera, Purchaser shall not transfer any Shares except
pursuant to the registration statement filed with the Securities and Exchange
Commission for the offering for a period of 15 days prior to and 180 days after
the effective date of such registration statement without the underwriters'
consent, provided that Agritope and any Vinifera directors and executive
officers holding Voting Stock agree to similar transfer restrictions in
connection with the offering.
4.10 CERTIFICATE LEGEND. Certificates for Purchaser's Voting Stock shall
bear substantially the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO TRANSFER
RESTRICTIONS SET FORTH IN A STOCK PURCHASE AGREEMENT AMONG AGRITOPE,
INC., VINIFERA, INC., AND PURCHASER, DATED JUNE 1, 1999.
4.11 PURCHASER'S RIGHT OF FIRST REFUSAL.
(a) DURATION OF RIGHT. Agritope shall provide Purchaser with the
rights set forth in this Section 4.11 for the period beginning on the
day after the Initial Closing Date and ending on the earliest to occur
of (i) the Third Anniversary Closing Date, (ii) the date on which
shares of capital stock of Vinifera are publicly traded, and (iii) the
date on which Agritope owns less than a majority of the Voting Stock
of Vinifera.
(b) RESTRICTION ON SALE OF SHARES. During the period described in
Section 4.11(a), Agritope shall not sell any shares of Voting Stock
for less than $2.50 per share to any party other than a current holder
of Voting Stock, if as a result of such sale Agritope would own less
than a majority of the Voting Stock, unless Agriope shall have first
communicated to Purchaser, by written notice, a written offer
("Agritope's Offer") to sell an amount of such shares to Purchaser in
proportion to the percentage of votes Purchaser is entitled to cast.
The notice shall specify the consideration and general terms and
conditions upon which Agritope is willing to sell such shares.
(c) ACCEPTANCE OF OFFER. Purchaser shall have a period (the
"Acceptance Period") of 30 days from the effective date of the notice
of Agritope's Offer to give Agritope written notice of acceptance. If
Agritope's Offer is accepted, the parties shall use their best efforts
in good faith to negotiate and execute definitive agreements in
accordance with the terms of Agritope's Offer by the date occurring 30
days following acceptance or by such later date as may be specified in
Agritope's Offer (the "Expiration Date").
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(d) SALE TO THIRD PARTY. If Purchaser does not accept Agritope's
Offer within the Acceptance Period, or if mutually acceptable
definitive agreements have not been negotiated and executed by
Purchaser by the Expiration Date, Agritope may sell the shares offered
to Purchaser to any other party pursuant to an agreement executed
within 180 days following the earlier of the expiration of the
Acceptance Period or the effective date of any written notice of
rejection of Agritope's Offer by Purchaser. The agreement shall
contain the same price, terms, and conditions as those specified in
Agritope's Offer (or terms and conditions more favorable to Agritope).
Nothing in this Section 4.11 shall restrict the issuance and sale to a
third party of shares not required to be offered to Purchaser pursuant
to Section 4.11(b).
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF VINIFERA
To induce Purchaser to purchase the Shares, Vinifera represents and
warrants to Purchaser as follows:
5.1 ORGANIZATION, ETC. Vinifera is a corporation duly organized and validly
existing under the laws of the state of Oregon. Vinifera has all requisite
corporate power and authority to own its properties and carry on its business as
now conducted.
5.2 AUTHORITY. Vinifera has all requisite corporate power and authority to
execute, deliver, and perform this Agreement. This Agreement has been duly
executed and delivered by Vinifera and is the valid, legal, and binding
agreement of Vinifera, enforceable against Vinifera in accordance with its
terms. No corporate proceedings on the part of Vinifera are necessary to
authorize the execution, delivery, and performance of this Agreement by it. No
consent of, approval by, filing with, or notice to any governmental authority or
any other person or entity is required for Vinifera to execute, deliver, and
perform this Agreement, other than those that have been obtained, made, or
given.
5.3 CAPITALIZATION. The authorized capital stock of Vinifera consists of
10,000,000 shares of Common Stock and 10,000,000 shares of Preferred Stock, of
which 5,000,000 shares have been authorized to be issued as Series A Preferred
Stock. 6,458,269 shares of Common Stock and 1,440,000 shares of Preferred Stock
are currently issued and outstanding. No right to purchase or acquire shares of
any unissued capital stock of Vinifera or securities convertible into or
exchangeable for such capital stock is authorized or outstanding, other than as
set forth in Exhibit C.
5.4 VALID ISSUANCE; TITLE. The Shares are validly issued, fully paid, and
nonassessable. Upon delivery to Purchaser of the certificates representing a
portion of the Shares pursuant to this Agreement and the schedule in Exhibit A,
Purchaser will have valid, marketable title to such portion of the Shares, free
and clear of all encumbrances, other than restrictions on transfer described in
this Agreement.
5.5 FINANCIAL STATEMENTS. The Financial Statements have been prepared in
conformity with generally accepted accounting principles consistently applied,
except for the
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omission of footnotes, and fairly present the financial position and the results
of operations at the date and for the year or period indicated. Since the date
of the Financial Statements, there have been no material adverse changes in the
condition of Vinifera, except that Vinifera continues to incur operating losses.
5.6 TAX MATTERS. Vinifera has filed all required federal, state, and other
tax returns in a timely fashion and is not delinquent with respect to the
payment of any federal, state, or other taxes.
5.7 ASSETS NEEDED FOR BUSINESS. Vinifera owns, leases, or otherwise has the
right to use all assets necessary for its present business.
5.8 LITIGATION AND OTHER CONTINGENT LIABILITIES. There are no actions or
proceedings pending or to the best of Vinifera's knowledge threatened against
Vinifera or any of its properties or assets or outstanding judgments or orders
to which Vinifera is subject, which adversely affect Vinifera's business,
operations, or financial condition. There is no action or proceeding pending or
to the best of Vinifera's knowledge threatened against Vinifera to restrain or
prohibit the sale of the Shares to Purchaser.
5.9 ABSENCE OF CERTAIN ADVERSE EFFECTS. Neither the execution and delivery
of this Agreement nor the consummation of the transactions contemplated hereby
will (a) conflict with, result in any violation of, constitute a default under,
or give rise to a right of acceleration or termination under, any provision of
the articles of incorporation or bylaws of Vinifera or any agreement, mortgage,
bond, indenture, agreement, franchise, or other instrument or obligation to
which Vinifera is a party or by which it is bound, (b) result in the creation of
any encumbrance upon any of the assets or properties of Vinifera, (c) violate
any judgment or order against, or binding upon, Vinifera or upon the securities,
assets, properties, or business of Vinifera, or (d) constitute a violation by
Vinifera of any law.
5.10 NO BROKERS. Vinifera has not hired any broker or finder or incurred
any liability for fees or commissions to any such person in connection with this
Agreement.
5.11 DISCLOSURE. Except as disclosed herein, no representation or warranty
by Vinifera contained in this Agreement contains any untrue statement of a
material fact, or omits to state any material fact required to make the
statements herein contained not misleading. All documents furnished to Purchaser
or made available to Purchaser by or on behalf of Vinifera in connection with
the acquisition of the Shares pursuant to this Agreement are true and complete
originals or copies thereof and include all amendments, supplements, and
modifications thereof and all material waivers thereunder.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF AGRITOPE
Agritope represents and warrants to Purchaser as follows:
6.1 CORPORATE EXISTENCE. Agritope is a corporation duly organized and
validly existing under the laws of the state of Delaware.
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6.2 AUTHORITY. Agritope has all requisite corporate power and authority to
execute, deliver, and perform this Agreement. This Agreement has been duly
executed and delivered by Agritope and is the valid, legal, and binding
agreement of Agritope, enforceable against Agritope in accordance with its
terms. No corporate proceedings on the part of Agritope are necessary to
authorize the execution, delivery, and performance of this Agreement by it. No
consent of, approval by, filing with, or notice to any governmental authority or
any other person or entity is required for Agritope to execute, deliver, and
perform this Agreement, other than those that have been obtained, made, or
given.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Agritope and Vinifera as follows:
7.1 EXECUTION AND PERFORMANCE OF AGREEMENT. If Purchaser is a corporation
or other entity, Purchaser is duly organized and validly existing under the laws
of the jurisdiction of its organization and has all requisite corporate power
and authority to execute, deliver, and perform this Agreement. The execution,
delivery, and performance of this Agreement by Purchaser will not conflict with
any provision of its articles of incorporation or by-laws or similar charter
documents (if Purchaser is a corporation or other entity) or with any
undertaking, agreement, indenture, decree, order, or judgment by which Purchaser
is bound and will not violate any law applicable to Purchaser.
7.2 BINDING OBLIGATIONS; DUE AUTHORIZATION. This Agreement constitutes the
valid, legal, and binding obligation of Purchaser, enforceable against Purchaser
in accordance with its terms. Purchaser is not required to obtain any consent of
or approval by, to make any filing with, or to give any notice to, any
governmental authority or any other person or entity for Purchaser to execute,
deliver, and perform this Agreement.
7.3 NO BROKERS. Purchaser has not hired any broker or agent or incurred any
liability for fees or commissions to any such person in connection with this
Agreement.
7.4 INVESTMENT REPRESENTATIONS.
(a) ACCREDITED INVESTOR STATUS. Purchaser is an "accredited
investor" for purposes of the Securities Act as described on EXHIBIT
D.
(b) ACCESS TO INFORMATION. Purchaser has been given, a reasonable
time before execution of this Agreement, the opportunity to ask
questions and receive answers concerning Agritope and Vinifera, and
the terms and conditions of the offering of the Shares and to obtain
any additional information that Agritope or Vinifera possesses or can
acquire without unreasonable effort or expense that is necessary to
verify the accuracy of information furnished to Purchaser. Purchaser
has received any such additional information that Purchaser has
requested.
(c) EXPERIENCE. Purchaser has sufficient knowledge and experience in
financial and business matters to be capable of evaluating the merits and
risks of
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an investment in the Shares and has the ability to bear the economic risk
of that investment.
(d) INVESTMENT INTENT. Purchaser is acquiring the Shares for Purchaser's
own account and not on behalf of any other person. Purchaser is not
acquiring the Shares with a view to distribution or with the intent to
divide Purchaser's participation with others by reselling or otherwise
distributing the Shares, either directly or indirectly, other than in a
registered offering.
7.5 NATURE OF SHARES. Purchaser is aware that:
(a) NO SEC OR STATE REGISTRATION. The Shares will not be registered
under federal or state securities laws when issued to Purchaser, must
be held indefinitely unless they are registered or unless an exemption
from registration is available, and will bear substantially the
following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER UNITED STATES FEDERAL OR STATE SECURITIES LAWS. THEY MAY NOT
BE OFFERED FOR SALE, SOLD, PLEDGED, OR OTHERWISE TRANSFERRED UNLESS
THE TRANSACTION IS REGISTERED OR UNLESS THE ISSUER IS FURNISHED A
SATISFACTORY OPINION OF COUNSEL THAT REGISTRATION IS NOT REQUIRED.
(b) NO OBLIGATION. Agritope and Vinifera have no obligation to
register the Shares, comply with any exemptions from registration, or
repurchase the Shares at any time.
7.6 LITIGATION. There is no action or proceeding pending or threatened
against Purchaser before any court, other governmental body or arbitrator to
restrain or prohibit the purchase of the Shares.
7.7 DISCLOSURE. No representation or warranty by Purchaser contained in
this Agreement contains any untrue statement of a material fact, or omits to
state any material fact required to make the statements herein not misleading.
ARTICLE VIII
COVENANTS
8.1 BEST EFFORTS. Each party shall use such party's good faith efforts to
cause the transactions contemplated hereby to be consummated as soon as
practicable.
8.2 RIGHT OF ACCESS. Throughout the period from the date hereof through the
Initial Closing Date, Vinifera shall give Purchaser and Purchaser's
representatives, including Purchaser's counsel and accountants, on reasonable
notice, full access during normal business hours to all of Vinifera's
properties, documents, contracts, books and records and such other information
with respect to Vinifera's business affairs and properties as Purchaser may
reasonably request.
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8.3 PRESERVATION OF BUSINESS; NOTICE OF CHANGE. From the date hereof
through the Initial Closing Date, (a) Vinifera shall use its best efforts to
conduct its business in the usual and ordinary course consistent with past
practice and all applicable laws and in a manner that will not breach any of
Vinifera's representations, warranties, and covenants in this Agreement and (b)
Vinifera shall preserve its business organization intact.
ARTICLE IX
CONDITIONS
9.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER. The obligation of
Purchaser to effect the Closing of each portion of the Shares specified in
Exhibit A is subject to the satisfaction, or waiver by Purchaser, of each of the
following conditions on or prior to the Closing relating to such portion:
(a) All representations and warranties of Agritope and Vinifera
contained in this Agreement shall be true and correct in all respects
as of the Closing with the same effect as if such representations and
warranties had been made or given at and as of the Closing, and all
agreements, covenants and conditions to be performed or met by
Agritope and Vinifera on or prior to the Closing shall have been so
performed or met in all respects.
(b) No action or proceeding shall have been instituted or
threatened before any court, other governmental body or arbitrator (i)
to restrain or prohibit the transactions contemplated by this
Agreement, (ii) that might restrict the operation of Vinifera's
business in any material respect if the purchase and sale of the
Shares hereunder is consummated, (iii) that might restrict the
ownership of the Shares or the exercise of any rights with respect
thereto by Purchaser, or (iv) that might subject any of the parties
hereto, to any liability, fine, forfeiture or penalty on the ground
that any of the parties hereto has violated or will violate any
applicable law in connection with the transactions contemplated
hereby.
(c) One month prior to the First Anniversary Closing Date, the
Second Anniversary Closing Date, and the Third Anniversary Closing
Date respectively, Vinifera shall deliver to Purchaser updated
Financial Statements representing available financial information for
the most-recent three-month period.
9.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF AGRITOPE. The obligation of
Agritope to effect the Closing of each portion of the Shares specified in
Exhibit A is subject to the satisfaction, or waiver by Agritope, of each of the
following conditions on or prior to the Closing:
(a) All representations and warranties of Purchaser, Agritope, and
Vinifera contained in this Agreement shall be true and correct in all
respects as of the Closing with the same effect as if such
representations and warranties had been made or given at and as of the
Closing, and all agreements, covenants and conditions to be performed
or met by Purchaser on or prior to the Closing have been so performed
or met in all respects.
BOUCKAERT - 10 - 135741-0014/062599/PDXDOCS:1092296.2
<PAGE>
(b) No action or proceeding shall have been instituted or
threatened before any court, other governmental body or arbitrator to
restrain or prohibit the transactions contemplated in this Agreement
or that might subject any of the parties hereto to any liability,
fine, forfeiture or penalty on the ground that any of the parties
hereto has violated or will violate any applicable law in connection
with the transactions contemplated hereby.
(c) The issuance and sale of the Shares shall not violate any
applicable state, federal, or foreign securities laws.
ARTICLE X
OTHER MATTERS
10.1 NOTICES. Any notice, request, or demand under this Agreement shall be
in writing and shall be deemed to have been duly given (i) upon personal
delivery, (ii) upon fax transmission to the recipient at the fax number listed
below, provided that a copy of the fax is promptly deposited for delivery by one
of the methods listed in (iii) or (iv) below, (iii) ten days after deposit in
the mails, if sent certified or comparable form of mail with return receipt
requested, addressed to the recipient at the address listed below, or (iv) five
days after deposit if deposited for delivery with a reputable courier or express
service, addressed to the recipient at the address listed below:
If to Vinifera: Vinifera, Inc.
4288 Bodega Road
Petaluma, California 94952
Attention: President
Fax: 707.773.0665
If to Agritope: Agritope, Inc.
16160 S.W. Upper Boones Ferry Road
Portland, Oregon 97224-7744
Attention: President
Fax: 503.670.7703
If to Purchaser: Purchaser's address listed on Schedule 1
A party may change its address or fax number for purposes of this
Section 10.1 by giving the other parties notice of the change.
BOUCKAERT - 11 - 135741-0014/062599/PDXDOCS:1092296.2
<PAGE>
10.2 AMENDMENTS AND WAIVER. This Agreement may be amended or modified by,
and only by, a written instrument executed by each of the parties hereto. The
terms of this Agreement may be waived by, and only by, a written instrument
executed by the party or parties against whom such waiver is sought to be
enforced.
10.3 EXPENSES. Each party to this Agreement shall pay its own expenses
(including, without limitation, the fees and expenses of such party's counsel
incidental to the preparation of and consummation of this Agreement).
10.4 HEADINGS. The headings contained in this Agreement are for convenience
of reference only and shall not in any way affect the meaning or interpretation
of this Agreement.
10.5 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which shall
constitute one and the same instrument. A facsimile transmission of a signed
original shall have the same effect as delivery of the signed original.
10.6 PARTIES IN INTEREST; ASSIGNMENT. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. This Agreement shall not be assigned by any
party hereto without the prior written consent of the other parties.
10.7 ENTIRE AGREEMENT. This Agreement, together with all exhibits hereto,
constitutes the entire agreement and understanding between the parties hereto
relating to the subject matter hereof and supersedes any prior agreements and
understandings relating to such subject matter.
10.8 SEVERABILITY. If any restriction in this Agreement exceeds that
permitted under applicable law, it shall be deemed modified to include the
maximum permissible restriction. If any provision is nonetheless held
unenforceable in any jurisdiction, the enforceability of this Agreement in any
other jurisdiction and the enforceability of the remaining provisions in that
jurisdiction shall not be affected.
10.9 ATTORNEY FEES. In the event any party shall seek enforcement of any
covenant, warranty, indemnity, or other term or provision of this Agreement, the
party that prevails in such enforcement proceeding shall be entitled to recover
such reasonable costs and attorney fees which shall be determined by the
arbitrator or court (including any appellate court).
10.10 SURVIVAL. All the respective representations, warranties, covenants,
and other agreements of the parties hereunder or contained in any schedule or
certificate given in connection herewith or contemplated hereby shall survive
the Initial Closing Date and shall continue for the period ending on the Third
Anniversary Closing Date, except as they may be fully performed prior to such
time.
10.11 FORM OF PUBLIC DISCLOSURES. Purchaser shall not make any public
disclosure concerning this Agreement and the transactions contemplated herein
unless Vinifera and Agritope have approved in advance the form and substance
thereof.
BOUCKAERT - 12 - 135741-0014/062599/PDXDOCS:1092296.2
<PAGE>
10.12 CUMULATIVE RIGHTS AND REMEDIES. All the rights and remedies provided
to the parties under this Agreement are cumulative, and none is exclusive of any
other right or remedy a party may have hereunder or under applicable law.
10.13 NO THIRD-PARTY BENEFICIARIES. Each party hereto intends that this
Agreement shall not benefit or create any right or cause of action in or on
behalf of any person or entity other than the parties hereto and their
respective successors and permitted assigns.
10.14 DISPUTE RESOLUTION.
(a) CONDUCT. Any dispute arising in connection with this Agreement
shall be finally settled by arbitration referred to and conducted in
accordance with the International Arbitration Rules of the American
Arbitration Association, except as such rules may conflict with the
provisions of this section in which event the provisions of this
section shall control. Any party may be represented by counsel
therein. Any such arbitration shall be conducted by a panel of one or
more arbitrators selected in accordance with the International
Arbitration Rules of the American Arbitration Association. The
arbitration shall be conducted in English in Portland, Oregon, U.S.A.
(b) DECISION. Any decision or award of the arbitral tribunal shall
be final and binding upon the parties to the arbitration proceeding.
The arbitral tribunal's decision shall include a reasonably detailed
statement of the basis for the decision and computation of the award,
if any. The parties waive any rights to appeal such award to or have
it reviewed by any court or tribunal. The parties further agree to
exclude any right of application or appeal to any court in connection
with any question of law arising in the course of the arbitration. The
award may be enforced against the parties to the arbitration
proceeding or their assets wherever they may be found. Judgment upon
the award may be entered in any court having jurisdiction thereof or
an application may be made to such court for judicial acceptance of
the award and an order of enforcement, as the case may be.
(c) COSTS. Except as the arbitral tribunal may otherwise determine
in its discretion, a party substantially prevailing in the arbitration
shall be entitled to recover its attorney fees and costs, including
the costs and expenses of its witnesses, and the other parties shall
pay the fees, costs and expenses of the arbitral tribunal and the
administering and appointing authority.
10.15 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the substantive law (but not the conflict of law rules) of the
state of Oregon.
BOUCKAERT - 13 - 135741-0014/062599/PDXDOCS:1092296.2
<PAGE>
The parties have executed this Agreement as of the date set forth
above.
AGRITOPE, INC. VINIFERA, INC.
By By
-------------------------------- ---------------------------------
(Signature) (Signature)
Gilbert N. Miller Gilbert N. Miller
- ---------------------------------- -----------------------------------
(Print or type name) (Print or type name)
Executive Vice President and Executive Vice President and
Chief Financial Officer Chief Financial Officer
- --------------------------------------------------------------------------------
(Title) (Title)
- --------------------------------
(PURCHASER)
By By
-------------------------------- ---------------------------------
(Signature) (Signature)
- ---------------------------------- -----------------------------------
(Print or type name) (Print or type name)
- ---------------------------------- -----------------------------------
(Title) (Title)
BOUCKAERT - 14 - 135741-0014/062599/PDXDOCS:1092296.2
<PAGE>
SCHEDULE 1
----------
PURCHASER INFORMATION
Name of Purchaser:
Authorized Signator: _______________________________
_______________________________
Address for Notices:
BOUCKAERT 135741-0014/062599/PDXDOCS:1092296.2
<PAGE>
EXHIBIT A
PURCHASE SCHEDULE
<TABLE>
<CAPTION>
YEAR NUMBER OF SHARES PRICE PER SHARE TOTAL PRICE
---- ---------------- --------------- -----------
<S> <C> <C> <C> <C>
1999 [ ] $1.65 $[ ]
2000 [ ] $2.00 $[ ]
2001 [ ] $2.50 $[ ]
2002 [ ] $2.50 $[ ]
Total [ ] $[ ]
</TABLE>
BOUCKAERT 135741-0014/062599/PDXDOCS:1092296.2
<PAGE>
EXHIBIT B
FINANCIAL STATEMENTS
(See attached)
BOUCKAERT 135741-0014/062599/PDXDOCS:1092296.2
<PAGE>
EXHIBIT C
RIGHTS TO ACQUIRE SHARES
(1) Vinifera has adopted a stock award plan pursuant to which 2,000,000
shares of Common Stock are reserved for issuance pursuant to options and other
rights that may be granted to officers, directors, employees, and agents of
Vinifera. Options to purchase 625,000 shares of stock have been granted to
certain employees and non-employee directors at prices ranging from $1.00 to
$1.50, of which 228,750 shares are exercisable.
(2) Vinifera has entered into a five-year employment agreement with its
president pursuant to which the president has the right to receive incentive
stock options to purchase 400,000 shares of Common Stock at a price per share
equal to the fair market value of one share of common stock at the time the
option is granted. To date, 200,000 options have been granted and are included
in the amounts in item 1 above. The remaining options, if granted, would vest
annually in two equal amounts in May 1999 and May 2000, dependent on the
president's continued employment.
(3) Holders of Vinifera Series A Preferred Stock have been granted rights
of first refusal to purchase additional shares of capital stock that Vinifera
issues in the future.
BOUCKAERT 135741-0014/062599/PDXDOCS:1092296.2
<PAGE>
EXHIBIT D
Set forth below is a partial listing of persons who are "accredited
investors" for purposes of the Securities Act:
(1) Any organization described in Section 501(c)(3) of the Internal Revenue
Code, corporation, Massachusetts or similar business trust, or partnership, not
formed for the specific purpose of acquiring the securities offered, with total
assets in excess of $5,000,000;
(2) Any natural person whose individual net worth, or joint net worth with
that person's spouse, at the time of his or her purchase exceeds $1,000,000;
(3) Any natural person who had an individual income in excess of $200,000
in each of the two most recent years or joint income with that person's spouse
in excess of $300,000 in each of those years and has a reasonable expectation of
reaching the same income level in the current year;
(4) Any bank as defined in Section 3(a)(2) of the Securities Act or any
savings and loan association or other institution as defined in Section
3(a)(5)(A) of the Securities Act;
(5) Any broker-dealer registered pursuant to Section 15 of the Securities
Exchange Act of 1934;
(6) Any insurance company as defined in Section 2(13) of the Securities
Act;
(7) Any investment company registered under the Investment Company Act of
1940 or a business development company as defined in Section 2(a)(48) of that
act;
(8) Any Small Business Investment Company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958;
(9) Any private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940; and
(10) Any entity in which all of the equity owners are accredited investors.
BOUCKAERT 135741-0014/062599/PDXDOCS:1092296.2
FIRST AMENDMENT TO LEASE OF LAND AND
------------------------------------
IMPROVEMENTS LOCATED AT 4288 BODEGA AVENUE
------------------------------------------
This First Amendment to Lease of Land and Improvements Located at 4288
Bodega Avenue (this "First Amendment") is made and entered into as of April 27,
1999, by and between GIANNI NEVE and MARIA NEVE (COLLECTIVELY, "Landlord"
without regard to number or gender) and VINIFERA, INC. ("Tenant").
RECITALS
--------
A. Landlord is the owner of all of that certain real property commonly
known as 4288 Bodega Avenue, Petaluma, California 94952 (the "Property").
B. Landlord and Tenant entered into a written lease dated as of
February 1, 1996 (the "Lease"), whereby Landlord leased the Property to Tenant
for a five (5) year term, commencing on February 1, 1996 and expiring on January
31, 2001, at a rental of Twelve Thousand Five Hundred Dollars ($12,500.00) per
month.
C. Pursuant to Article 22 of the Lease, Landlord granted an option to
purchase to Tenant (the "Original Option") exercisable by Tenant during the
period February 1, 1996 through January 31, 1999. The Lease referred to and
incorporated an option agreement dated as of February 1, 1996 (the "Original
Option Agreement") and a purchase and sale agreement and escrow instructions
dated as of February 1, 1996 (the "Purchase and Sale Agreement"). Pursuant to
the Original Option Agreement, Landlord and Tenant recorded a Memorandum of
Option to Purchase on May 7, 1996, in the Official Records of Sonoma County,
Document No. 1996 0040886 (the "Original Memorandum of Option").
D. Tenant duly exercised the Original Option on January 30, 1999.
Subsequent to the exercise of the Original Option, Landlord requested Tenant to
delay the purchase of the Property until February 1, 2001 for personal and
financial reasons.
E. Landlord and Tenant now wish to amend the Lease to extend the
initial term, increase the Rent and grant Tenant a new Option to Purchase in
accordance with the Option Agreement and Purchase and Sale Agreement attached
hereto as EXHIBITS "A" AND "B", respectively.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the foregoing Recitals and the
mutual covenants contained herein, and for other good and valuable
consideration, the receipt and
1
<PAGE>
sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree
to and do hereby amend the Lease in the following respects:
1. DEFINED TERMS. All undefined terms used herein shall have the same
respective meanings as are given to them in the Lease, unless expressly provided
otherwise by the terms of this First Amendment.
2. LEASE TERM. The initial term of the Lease is hereby extended to and
including January 31, 2003.
3. OPTIONS TO EXTEND. Landlord and Tenant hereby acknowledge that the
two (2) five (5) year Options to Extend contained in Article 20 of the Lease
shall remain in full force and effect. The first Option to Extend, if exercised
by Tenant, will commence on February 1, 2003. The Base Rent for each year of the
first five (5) year extension shall be one hundred five percent (105%) of the
Base Rent for the last year of the original term of the Lease. The Base Rent for
each year of the second five (5) year extension shall be one hundred five
percent (105%) of the Base Rent for the last year of the first five (5) year
extension.
4. OPTION TO PURCHASE. Article 22 of the Lease is hereby deleted in
its entirety and replaced with the following: Landlord grants to Tenant the
Option to Purchase the Property in accordance with the provisions of the Option
Agreement and the Purchase and Sale Agreement attached hereto as EXHIBITS "A"
AND "B", respectively, which now replace EXHIBITS "C" AND "D" attached to the
Lease. The Option to Purchase shall be exercisable by Tenant during the period
February 1, 2001 to and including February 2, 2003 (the "Option Period").
5. BASE RENT. The Base Rent payable by Tenant pursuant to the Lease
shall be increased two percent (2%) per year commencing on February 1, 1999, as
follows:
PERIOD MONTHLY BASE RENT
------ -----------------
May 1, 1999 through January 31, 2000 $12,750.00
February 1, 2000 through January 31, 2001 $13,005.00
February 1, 2001 through January 31, 2002 $13,265.00
February 1, 2002 through January 31, 2003 $13,530.00
6. ADDITIONAL SPACE. Landlord agrees to rent two units (the "Two
Units") of the house structure located on the Property not occupied by Landlord
to Tenant free of all tenants. Landlord shall be allowed to occupy the area in
the house structure currently being occupied by Landlord during the term of this
Lease. Landlord shall remove the tenants from the Two Units at Landlord's sole
cost. Tenant shall pay rent to Landlord for the Two Units in the amount of Five
Hundred Dollars ($500.00) per unit with the rent obligation to begin on delivery
of possession. The lease for the Two Units shall provide in part that the units
are leased "As-Is" and Tenant shall bear sole responsibility to maintain the
premises.
2
<PAGE>
7. MISCELLANEOUS.
a. Except as modified herein, the Lease shall remain unmodified and
in full force and effect.
b. The provisions of this First Amendment shall bind and inure to
the benefit of the heirs, representatives, successors and permitted assigns of
the Parties hereto.
c. This First Amendment may be executed in several counterparts,
each of which shall be deemed an original, but all of which taken together shall
constitute one and same Agreement.
d. The Parties agree to cooperate with one another and to execute
any additional documents necessary to reflect the agreements contained herein.
IN WITNESS WHEREOF, this First Amendment has been executed as of the
day and year first written above.
LANDLORD: TENANT:
/s/ Gianni Neve VINIFERA, INC.
- ---------------------------
GIANNI NEVE
By: /s/ J. Bouckaert
------------------------------
/s/ Maria Neve Joseph Bouckaert
- ---------------------------
MARIA NEVE Its: J. Bouckaert, President _
------------------------------
By: /s/ J. Bouckaert
------------------------------
Joseph Bouckaert
Its: J. Bouckaert, Secretary
------------------------------
3
<PAGE>
EXHIBIT "A"
-----------
LEGAL DESCRIPTION OF PROPERTY
-----------------------------
<PAGE>
LEGAL DESCRIPTION OF PROPERTY
-----------------------------
PARCEL ONE:
COMMENCING AT A POINT ON THE COUNTY HIGHWAY LEADING FROM PETALUMA TO BLOOMFIELD,
SAID POINT BEING THE MOST SOUTHEASTERLY CORNER OF THE LANDS DESCRIBED IN VOLUME
232 OF DEEDS AT PAGE 56, SONOMA COUNTY RECORDS; RUNNING THENCE DUE NORTH 800.43
FEET TO THE POINT OF COMMENCEMENT; THENCE RUNNING FROM SAID POINT OF
COMMENCEMENT DUE NORTH 452 FEET; THENCE RUNNING NORTH 89o 26' 10" WEST 385 FEET;
THENCE RUNNING SOUTH 0o 3' 30" EAST 452 FEET; THENCE RUNNING SOUTH 89o 26' 10"
EAST 384 FEET TO THE POINT OF COMMENCEMENT.
PARCEL TWO:
COMMENCING AT THE SOUTHEAST CORNER OF THE LANDS DESCRIBED IN VOLUME 232 OF DEEDS
AT PAGE 56, SONOMA COUNTY RECORDS. RUNNING THENCE FROM SAID POINT OF BEGINNING
ALONG THE EASTERLY BOUNDARY OF SAID LANDS NORTH 800.43 FEET; THENCE NORTH 89o
26' 10" WEST 192.13 FEET; THENCE SOUTH 690.21 FEET AND THENCE SOUTH 59o 42' 20 "
EAST 222.25 FEET TO THE POINT OF BEGINNING.
EXCEPTING THEREFROM THE FOLLOWING DESCRIBED PARCEL:
BEGINNING AT THE SOUTHEAST CORNER OF THE LANDS DESCRIBED IN VOLUME 232 OF DEEDS
AT PAGE 56, SONOMA COUNTY RECORDS. FROM SAID POINT OF BEGINNING RUNNING NORTH
326.23 FEET; THENCE NORTH 89o 26' 10" WEST 192.13 FEET; THENCE SOUTH 216. 01
FEET; THENCE SOUTH 59o 42' 20" EAST 222.25 FEET TO THE POINT OF BEGINNING.
PARCEL THREE:
COMMENCING AT THE SOUTHWEST CORNER OF THE LANDS DESCRIBED IN VOLUME 232 OF DEEDS
AT PAGE 56, SONOMA COUNTY RECORDS; RUNNING THENCE FROM SAID POINT OF BEGINNING
ALONG THE WEST BOUNDARY OF SAID LANDS NORTH 0o 03' 30" WEST 580 FEET; THENCE
SOUTH 89o 26' 10" EAST 192.13 FEET; THENCE SOUTH 690.21 FEET; THENCE NORTH 59o
42' 20" WEST 222.25 FEET TO THE POINT OF BEGINNING.
<PAGE>
EXHIBIT "B"
-----------
PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS
---------------------------------------------------
<PAGE>
PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS
---------------------------------------------------
THIS PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS (the
"Agreement") is made as of April ___, 1999, by and between Gianni Neve and Maria
Neve (COLLECTIVELY, "Seller" without regard to number or gender) and Vinifera,
Inc., a California corporation "Buyer").
ARTICLE I
RECITALS
--------
This Agreement is entered into with reference to facts as follows:
A. Buyer agrees to purchase from Seller and Seller agrees to sell to
Buyer that certain real property commonly known as 4288 Bodega Avenue, Petaluma,
California 94952, as described in EXHIBIT "A" attached hereto and incorporated
herein, including all tangible and intangible personal property now or hereafter
located on or about the property or used in connection with the property,
including, without limitation, all governmental permits, approvals,
authorizations, declarations and applications therefor obtained or filed in
connection with the property, all agreements, understandings, reports, plans,
maps, bonds, deposits, fees, studies, notices and other materials prepared,
given, filed, or used, or to be used in connection with the property and all
contracts, if any, entered into by Seller and approved by Buyer, which shall
affect directly or indirectly the property (the "Property").
B. This Agreement is entered into as a result of the exercise by Buyer
of an option to purchase the Property as provided in the Option Agreement dated
February 1, 1999, between Seller and Buyer ("the Option").
NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL COVENANTS AND PROMISES
OF THE PARTIES HERETO, AND OTHER GOOD AND VALUABLE CONSIDERATION, THE RECEIPT
AND SUFFICIENCY OF WHICH IS HEREBY ACKNOWLEDGED, THE PARTIES HERETO AGREE AS
FOLLOWS:
1.1 PURCHASE PRICE. The purchase price (the "Price") for the
Property is One Million, Three Hundred Thousand and No/100 Dollars
($1,300,000.00) payable BY Buyer at THE close of escrow.
1.2 ESCROW. Within five (5) business days after the exercise of the
Option, an escrow (the "Escrow") shall be opened with Chicago Title Company,
1101 College Avenue,
1
<PAGE>
Santa Rosa, CA 95404 ("Chicago Title") (the "Escrow Holder"), or at such other
title company acceptable to Seller and Buyer. This Agreement shall constitute
escrow instructions to the Escrow Holder. Seller and Buyer shall execute such
additional escrow instructions as may be reasonably required by Escrow Holder.
1.3 TERM OF ESCROW. Escrow shall close within ninety (90) days
following the exercise of the Option. The close of Escrow ("Close of Escrow")
shall mean the date upon which the grant deed from Seller to Buyer is recorded
in the Sonoma County Recorder's Office.
ARTICLE II
CONDITIONS TO BUYER'S OBLIGATION
--------------------------------
Buyer's obligations hereunder shall be contingent upon satisfaction of
all of the matters listed as follows:
2.1 TITLE. Chicago Title's issuance of an ALTA Extended Owner's
Coverage Form Policy of Title Insurance with endorsements selected by Buyer (the
"ALTA Policy"), with liability in the amount of the Price, showing title to the
Property vested in Buyer, subject only to those exceptions approved by Buyer
within thirty (30) days after the delivery to Buyer through Escrow of the
Preliminary Report and legible copies of the exceptions of record; and also
subject to those exceptions approved by Buyer within ten (10) days after Buyer's
receipt of any ALTA supplemental title report. Escrow Holder is instructed to
order immediately the Preliminary Report together with legible copies of all
documents referred to therein. Seller agrees to convey title to the Property to
the Buyer at close of Escrow free and clear of all monetary liens and
encumbrances, excluding those items approved by Buyer. If Seller does not remove
one or more such monetary encumbrances, liens or claims, in addition to all
other remedies Buyer may have at law or in equity, Buyer may close Escrow on the
scheduled closing date and offset dollar for dollar against the Price an amount
equal to such monetary encumbrances, liens or claims. Seller shall convey title
to the Property subject only to: 1) real estate taxes not yet due, and 2)
covenants, conditions, restrictions, rights of way, and easements of record, if
any, which do not materially affect the value or intended use of the Property.
2.2. HAZARDOUS AND/OR TOXIC WASTES. Buyer shall have the right, but
not the obligation, to determine, at its sole cost, whether hazardous or toxic
wastes, underground storage tanks, substances, chemicals, solvents, asbestos,
PCB's or any environmental conditions exist on or under the Property of any
type, quantity or nature whatsoever which violate or may violate in any way any
local, state or federal law, ordinance, rule or regulation for the protection of
the environment or otherwise, or which would require further environmental
testing or remediation by Seller. These provisions shall be liberally construed
for the benefit of Buyer, and Buyer may rely on advice of its environmental
consultants and counsel to determine whether or not it can
2
<PAGE>
satisfy this environmental contingency and condition to the Close of Escrow. If
Buyer determines that the foregoing environmental contingency and condition to
the Close of Escrow require remediation, Buyer shall provide written notice
thereof to Seller and Seller shall, at its sole cost up to and including the sum
of One Hundred Thousand and No/100 Dollars ($100,000), so remediate. If the cost
of said remediation exceeds One Hundred Thousand and No/ 100 Dollars ($100,000),
then Seller has no obligation to so remediate, and Buyer may, at Buyer's sole
election: (1) continue with the purchase of the Property and receive a credit
from Seller against the Purchase Price in the amount of One Hundred Thousand and
No/100 Dollars ($100,000); or (2) terminate this Agreement without any further
liability on the part of Buyer. If any remediation is undertaken pursuant to
this Paragraph 2.2, Close of Escrow shall be delayed until certificates of
compliance regarding such remediation have been issued from all appropriate
government agency(ies).
2.3 SELLER'S REPRESENTATIONS AND WARRANTIES. Seller's
representations and warranties as set forth in Article 5 herein shall be true
and correct as of the Close of Escrow. All conditions to the Close of Escrow, or
to Buyer's obligations hereunder, are for Buyer's benefit only, and Buyer may
waive all or any part of such rights by written notice to Seller and Escrow
Holder.
ARTICLE III
CLOSING
-------
3.1 DOCUMENTS TO BE DELIVERED. At the Close of Escrow, Seller shall
deliver to Buyer through Escrow original documents, which shall be in a form
satisfactory to Buyer's counsel, as follows:
(A) A grant deed (the "Grant Deed") conveying the Property to
Buyer;
(B) An assignment of all guaranties and warranties relating to
the Property, and a bill of sale (the "Bill of Sale") of
the equipment and fixtures therein, if any; and
(C) All contracts affecting the Property, if any.
At the Close of Escrow, the Escrow Holder shall cause the Grant
Deed to be recorded in the Official Records of the Sonoma County Recorder's
Office, and shall cause the Bill of Sale and the ALTA Policy to be delivered to
Buyer.
3
<PAGE>
3.2 CLOSING COSTS AND PRORATIONS. Buyer shall be credited and
Seller charged with security deposits or advance rentals made by Buyer under the
Lease between Buyer and Seller dated as of February 1, 1996, as amended (the
"Lease"). Escrow holder shall prorate the following between the parties as of
the Close of Escrow: (a) real estate takes and personal property taxes for the
year in which the sale closes; (b) rent payments under the Lease; (c) charges
and fees paid or payable under service contracts which are assigned to Buyer;
(d) premiums payable under insurance assigned to Buyer at Buyer's request.; (e)
and all other items which are customarily prorated. All prorations shall be
based on a thirty (30) day month. Escrow Holder is to assume that all rents have
been collected unless otherwise advised by Seller.
3.3 UTILITIES. Seller shall have all meters read and final bills
rendered for all utilities servicing the Property, including, without
limitation, water, sewer, gas and electricity, for the period to and including
the day preceding the Close of Escrow, and Seller shall pay such bills. Buyer
shall arrange for utility service to the Property after the Close of Escrow.
3.4 POSSESSION. Possession of the Property shall be given to Buyer
at Close of Escrow.
ARTICLE IV
EXPENSES
--------
4.1 EXPENSES OF SELLER. Seller shall pay: (a) the documentary
transfer tax applicable to this transaction; (b) the premium for a CLTA owner's
title insurance policy; (c) one-half the Escrow fees; (d) expenses of clearing
title; and (e) other costs or expenses not expressly provided for herein which
a-re customarily paid by the seller in similar transactions.
4.2 EXPENSES OF BUYER. Buyer shall pay: (a) all recording charges
on any document recorded pursuant to this Agreement; (b) the difference between
the premium for the ALTA Policy and the premium for a CLTA owner's title
insurance policy; (c) the cost of any title endorsements requested by Buyer; (d)
any costs associated with obtaining the consent of the holder of the existing
loan to the transfer of the Property without accelerating or modifying the loan
or the costs of obtaining a new loan and (e) one-half the Escrow fees.
4
<PAGE>
ARTICLE V
SELLER' S REPRESENTATIONS AND WARRANTIES
----------------------------------------
Seller represents, warrants and covenants, each of which shall be true
in all respects as of the date of this Agreement and as of the date of Close of
Escrow and shall survive the Close of Escrow and shall not merge with any deed,
as follows:
5.1 FIXTURES AND PERSONAL PROPERTY. Seller shall not remove any
fixtures or personal property from the Property.
5.2 ENVIRONMENTAL REPRESENTATION AND WARRANTIES. To the best of
Seller's knowledge:
(A) Throughout the period of ownership of the Property by
Seller and prior to February 1, 1996, there have been no notices, directives,
violation reports or actions by any local, state or federal department or agency
concerning environmental law or regulations;
(B) All underground storage tanks (the "USTs") will be removed
from the Property prior to Close of Escrow by Seller at Seller's sole cost and
expense and certificates of compliance as to removal of all the USTs from the
appropriate governmental agency(ies) will be issued to Buyer;
(C) There are no soil or geological conditions which might
impair or adversely affect the current use or future plans for use of the
Property;
(D) None of the Property is located in an area identified by an
agency or department of federal, state or local governments, or identified by
Seller, as having special flood or mudslide hazards or wetlands;
(E) The business and operations of Seller have at all times
been conducted in compliance in all material respects with all applicable local,
state, federal and/or foreign laws, ordinances, regulations, orders and other
requirements of governmental authorities in matters relating to the environment;
(F) There has been no spill, discharge, release, cleanup or
contamination of or by any hazardous or toxic waste or substance used,
generated, treated, stored, disposed of or handled by the Seller at the
Property;
(G) No hazardous or toxic substances or wastes are located at,
or have been removed from the Property; and
5
<PAGE>
(H) There are no writs, injunctions, decrees, orders or
judgments outstanding, or any actions, suits, claims, proceedings or
investigations pending or, to Seller's
knowledge, threatened, relating to compliance with or liability under any
Environmental Law affecting the Property.
5.3 DOCUMENTS. Seller shall deliver true, accurate and complete
copies of contracts, surveys, drawings, plans and specifications describing the
Property and known by Seller to exist. No documents supplied to Buyer by Seller
contains any untrue statement of material fact or fails to state any fact, which
would be necessary, considering the circumstances, to make the documents
supplied not misleading.
5.4 EXPENSES. At Close of Escrow, there will be no outstanding
expenses not fully paid, except those expenses previously approved by Buyer in
writing.
5.5 CLAIM AGAINST THE PROPERTY. Seller has no knowledge of any
pending or threatened claim or litigation against the Property and Seller has
not received any notice from any governmental authority of defects in the
Property or noncompliance with any applicable law, code or regulation.
5.6 AUTHORIZATION FOR EXECUTION OF THE AGREEMENT. The persons
executing this Agreement are authorized by the Seller to enter into the
transaction described herein.
5.7 EXECUTION OF FURTHER CONTRACTS. During the Escrow period,
Seller shall not enter into any new lease, option to lease or extension of an
existing lease or any other contract or agreement pertaining to the Property
unless Seller shall first send to Buyer for approval a copy of the document it
proposes to sign. Buyer shall have three (3) business days after receipt of the
document to object in writing to Seller's signing of the document. Any such
objection shall, in the case of any lease, lease option or lease extension, not
be unreasonable. Buyer's failure to respond shall be deemed approval.
ARTICLE VI
INDEMNIFICATION
---------------
6.1 INDEMNIFICATION. Seller and Seller's officers and directors
agree to protect, indemnify, hold harmless and defend Buyer and any mortgagee,
and each of their respective partners, directors, officers, agents and
employees, successors and assigns, from and against:
(A) Any and all loss, cost, damage, liability or expense as
incurred (including but not limited to attorneys' fees and legal costs) arising
out of or related to any
6
<PAGE>
claim, suit or judgment brought by or in favor of any person or persons for
damage, loss or expense due to, but not limited to, bodily injury, including
death, or property damage sustained by such person or persons which arises out
of, is occasioned by or is in any way attributable to the use or occupancy of
the Property by Seller or the acts or omissions of Seller or its agents,
employees, contractors, clients, invitees or subtenants except that caused by
the sole active negligence of Buyer or its agents or employees. Such loss or
damage shall include, but not be limited to, any injury or damage to, or death
of, Buyer's employees or agents or damage to the Property.
(B) Any and all environmental damages which arise from: (i) the
handling of any hazardous and/or toxic wastes by Seller, as referred to in
Paragraph 2.2 herein, or (ii) the breach of any of the provisions in this
Agreement. For the purpose of this Agreement, "environmental damages" shall mean
(a) all claims, judgments, damages, penalties, fines, costs, liabilities, and
losses (including without limitation, diminution in the value of the Property,
damages for the loss of or restriction on use of rentable or usable space or of
any amenity of the Property; (b) all reasonable sums paid for settlement of
claims, attorneys' fees, consultants' fees and experts' fees; and (c) all costs
incurred by Buyer in connection with investigation or remediation relating to
the handling of any hazardous and/or toxic wastes by Seller, as referred to in
Paragraph 2.2 herein, whether or not required by any environmental laws,
necessary for Buyer to make full economic use of the Property, or otherwise
required under this Agreement. To the extent that Buyer is strictly liable under
any environmental laws, Seller's obligation to Buyer and the other indemnities
under the foregoing indemnification shall likewise be without regard to fault on
Seller's part with respect to the violation of any environmental law which
results in liability to the indemnitee. Seller's obligations and liabilities
pursuant to this Section 6.1 shall survive the expiration or earlier termination
of this Agreement and the Close of Escrow.
ARTICLE VII
MISCELLANEOUS
-------------
7.1 BROKER'S COMMISSION. Buyer and Seller acknowledge that, except
as set forth herein, no broker's commission or finder's fee is payable in
connection with this transaction; and each ("Indemnitor") agrees to indemnify
and hold the other harmless from and against all liability, claims, demands,
damages or costs of any kind whatsoever arising from or connected with any
broker's or finder's fee, commission or charge claimed to be due any person
arising from the Indemnitor's conduct with respect to this transaction.
7
<PAGE>
7.2 CONDEMNATION AND CASUALTY.
(A) If, before the Closing (as defined in the Purchase and Sale
Agreement), Seller receives notice that the Property is to be wholly condemned,
or to be condemned in such substantial part as would materially and adversely
effect the Buyer's ability to operate its business on the Property, or if the
Property is wholly destroyed by fire or other casualty, or if so much of the
Property is damaged by fire or other casualty to the extent that the cost of
repairing such damage shall amount to at least twenty-five percent (25%) of the
Purchase Price as determined by the casualty insurer insuring the Property,
then, in any such event, Buyer, in the event it has already exercised the
Option, shall have the right to terminate this Agreement by delivering notice of
such termination in writing to Seller within (30) days after receipt of notice
of such condemnation or casualty, and Seller and Buyer shall each be released
and discharged from any obligation to each other hereunder; provided, however,
that if Buyer elects not to terminate this Agreement after it has exercised the
Option, the purchase contemplated herein shall be consummated without reduction
to the Purchase Price, but Buyer shall be entitled to all proceeds of fire or
other casualty insurance or condemnation, and Seller shall have no
responsibility for the restoration and repair of the Property.
(B) If, prior to the Closing (assuming Buyer has exercised its
Option), the Property is damaged by fire or other casualty to the extent that
the cost of repairing or restoring the same shall be less than an amount equal
to twenty-five percent (25%) of the Purchase Price or if Seller receives notice
that the Property is to be partially condemned but without materially and
adversely effecting Buyer's ability to operate its business on the remaining
portion of the Property, then, in any such event, the Closing shall proceed as
scheduled and Seller shall assign to Buyer the proceeds of any casualty
insurance or any condemnation award, as the case may be, and Seller shall have
no responsibility for restoration or repair of the Property. In the event all or
a part of the Property is appropriated during the Option Period and Buyer elects
not to proceed with the Closing, Buyer will have a compensable interest and a
right to share in the condemnation award to the extent that the excess, if any,
of the total award is above the Purchase Price.
7.3 ASSIGNMENT. Buyer may assign its rights under this Agreement,
to any other person, firm or entity.
7.4 NOTICES. All notices, demands and requests which may be given
by either party to the other, or to Escrow Holder, shall be in writing and shall
be deemed served upon personal delivery or, alternatively, by mailing the same
by registered or certified mail, postage prepaid, addressed to the party to be
notified at the address as set forth in Paragraphs 7.25 and 7.26 herein, or
addressed to such other address or addresses as either party may from time to
time designate to the other in writing or, if addressed to Escrow Holder, at the
address in Paragraph
8
<PAGE>
1.2 herein. All notices to Escrow Holder shall make specific reference to the
escrow number of the Escrow. Any notice shall be deemed to have been served at
the time the same was posted.
7.5 INTENTIONALLY OMITTED.
7.6 ARHITRATION OF DISPUTES. ANY CONTROVERSY ARISING FROM THIS
AGREEMENT OR ITS BREACH SHALL BE DETERMINED BY ONE (1) ARBITRATOR APPOINTED AS
SET FORTH AS FOLLOWS:
WITHIN TEN (10) DAYS AFTER A NOTICE BY EITHER PARTY TO THE OTHER
REQUESTING ARBITRATION AND STATING THE BASIS OF THE PARTY'S CLAIM, THE
REQUESTING PARTY SHALL COMMENCE AN ARBITRATION PROCEEDING EITHER UNDER THE
AUSPICES OF THE AMERICAN ARBITRATION ASSOCIATION (AAA) OR JUDICIAL ARBITRATION &
MEDIATION SERVICES, INC. (JAMS). THE ARBITRATION SHALL BE CONDUCTED UNDER THE
RULES OF THE ORGANIZATION SELECTED AND CODE OF CIVIL PROCEDURE SECTIONS 1280
THROUGH 1294.2, INCLUDING THE RIGHT TO DISCOVERY. ALL NOTICES, INCLUDING NOTICES
UNDER CODE OF CIVIL PROCEDURE SECTION 1290.4, SHALL BE GIVEN AS PROVIDED IN
PARAGRAPH 6.4 HEREIN.
NOTICE: BY INITIALING IN THE SPACE BELOW, YOU ARE AGREEING TO HAVE ANY
DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES"
PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA LAW, AND YOU
ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A
COURT OR JURY TRIAL BY INITIALING IN THE SPACE BELOW, YOU ARE GIVING UP YOUR
JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS SUCH RIGHTS ARE SPECIFICALLY
INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION. IF YOU REFUSE TO SUBMIT TO
ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE
UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO
THIS ARBITRATION PROVISION IS VOLUNTARY.
WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES
ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION
TO NEUTRAL ARBITRATION.
SELLER'S INITIALS BUYER'S INITIALS
/s/ MN /s/JB
---------- -----------
/S/ GN
9
<PAGE>
7.7 FEDERAL REPORTING REQIREMENTS. Buyer and Seller acknowledge
that IRC Section 6045(e) requires that the amount of gross proceeds from a real
estate transaction be reported to the IRS. Buyer and Seller hereby instruct
Escrow Holder to comply with IRC Section 6045(e) and make said report. Seller
hereby instructs Escrow Holder to report the gross proceeds of this sale to the
IRS on Form 1099-B or W-9 or any subsequently approved IRS form.
7.8 FEDERAL WITHHOLDING. So that Buyer may comply with the Foreign
Investment in Real Property Tax Act ("FIRPTA"), Seller hereby declares under
penalty of perjury that he/she is not a foreign person or non-resident alien as
defined in FIRPTA. Seller shall provide Buyer with such additional information
and affidavits as may be necessary for Buyer to comply with FIRPTA.
7.9 STATE WITHHOLDING. California Revenue and Taxation Code
Sections 18805 and 26131 require a buyer of real property to withhold California
income taxes from escrow funds if all of the following conditions are met:
(a) The buyer has received a standard notification of the
withholding requirements established by the Act;
(b) The selling price is greater than One Hundred Thousand and
No/100 Dollars ($100,000.00);
(c) The seller has not received a California Homeowner's
Property Tax Exemption during the year of the sale; and
(d) The funds from the transaction are to be disbursed to
either:
(i) A seller with a last known street address outside of
California, or
(ii) A financial intermediary of the seller if the seller is
a nonresident of California.
The withholding rate is three and one-half percent (31/2%) of the
selling price. Seller may request a waiver by contacting:
Franchise Tax Board
Withholding at Source Unit
P.0. Box 651
Sacramento, CA 95812-0651
(916) 369-4900
10
<PAGE>
7.10 PRELIMINARY CHANGE OF OWNERSHIP REPORT. Buyer is aware that
any person acquiring an interest in real property must file a Preliminary Change
of Ownership Report with the County Recorder or Tax Assessor upon recording any
documents effecting a change of ownership unless the document is accompanied by
an affidavit that the transferee is not a resident of California. Failure to
file may result in an additional recording fee for the Buyer.
7.11 REASSESSMENT. Property will be reassessed upon a change of
ownership. This will affect the taxes to be paid. A supplemental tax bill may be
issued, which shall be paid as follows: (a) for periods after the Close of
Escrow, by Buyer, and (b) for periods before the Close of Escrow by Seller. Tax
bills issued after the Close of Escrow shall be handled directly between Buyer
and Seller.
7.12 WAIVER. The waiver of any provision of this Agreement shall be
invalid unless evidenced by a writing signed by the party to be charged
therewith. The waiver of, or failure to enforce, any provision of this Agreement
shall not be a waiver of any further breach of such provision or of any other
provision hereof. The waiver by either or both parties of the time for
performing an act shall not be a waiver of the time for performing any other act
or acts required hereunder.
7.13. MODIFICATIONS. No change or addition to this Agreement or any
part hereof shall be valid unless in writing and signed by each of the parties
hereto.
7.14 SUCCESSORS AND ASSIGNS. Except as expressly provided herein,
this Agreement and the obligations of Seller and Buyer contained herein shall
bind and benefit the successors and assigns of the parties hereto.
7.15 GOVERNING LAW. This Agreement shall be governed by California
law.
7.16 HEADINGS. The headings in this Agreement are for convenience
only and shall not be used to interpret this Agreement.
7.17 FURTHER ACTS. Each party agrees to take such further action
and to execute and deliver such further documents as may be necessary to carry
out the purposes of this Agreement.
7.18 ATTORNEYS' FEES AND COSTS. If either party incurs attorneys'
fees and/or costs to enforce this Agreement or because of a breach of this
Agreement by the other party, the prevailing party shall be entitled to recover
from the losing party, in addition to any other relief, its actual attorneys'
fees and costs irrespective of whether or not the action or other proceeding is
prosecuted to judgment and irrespective of any court schedule of reasonable
attorneys' fees.
11
<PAGE>
7.19 TIME. Time is of the essence of this Agreement.
7.20 EXCHANGE TRANSACTION. Buyer Agrees upon the request of Seller
to cooperate with Seller enclosing this transaction as an exchange pursuant to
IRC Section 1031, provided Buyer shall incur no additional expense or liability
in connection therewith and is not required to take title to any property in
connection with such exchange.
7.21 ENTIRE AGREEMENT. This Agreement contains all of the agreement
and understandings relating to the purchase of the Property and the obligations
of Seller and Buyer in connection therewith. Seller has not made, and Buyer is
not relying upon, any warranties, representations, promises or statements made
by Seller, or any agent of Seller, except as expressly set forth herein. This
Agreement supersedes any and all prior agreements and understandings between
Seller and Buyer and alone expresses the agreement of the parties.
7.22 FORCE MAJEURE. The parties shall incur no liability to the
other with respect to, and shall not be responsible for, any failure to perform
any of the obligations hereunder if such failure is caused by reason of strike,
other labor trouble, governmental rule, regulations, ordinance, statute or
interpretation, or by fire, earthquake, civil commotion, or failure or
disruption of utility services, or any and all other causes reasonably beyond
control of the parties. The amount of time for the parties to perform any of the
obligations hereunder shall be extended by the amount of time the party is
delayed in performing such obligation by reason of such force majeure
occurrence.
7.23 INTERPRETATION. Seller and Buyer acknowledge that they have
read and reviewed this Agreement and that they have had the opportunity to
confer with counsel in negotiation of this Agreement. Accordingly, this
Agreement shall be construed neither for nor against Seller or Buyer, but shall
be given a fair and reasonable interpretation in accordance with the meaning of
its terms and intent of the parties.
7.24 NUMBER AND GENDER. All terms and words used in this Agreement,
regardless of the number and gender in which they are used, shall be deemed to
include the appropriate number and gender, as the contacts may require.
7.25 SELLER'S ADDRESS FOR NOTICES. The term "Seller's Address for
Notice" shall mean:
(a) For Gianni Neve: 4288 Bodega Avenue
Petaluma, CA 94952
(b) For Maria Neve: 1109 Lohrman Lane
Petaluma, CA 94952
12
<PAGE>
7.26 BUYER'S ADDRESS FOR NOTICES. The term "Buyer's Address for
Notices" shall mean:
7.27 EXHIBITS. Exhibit "A" (Property Description) are incorporated
in this Agreement by reference and made a part hereof
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
SELLER: BUYER:
VINIFERA INC., A CALIFORNIA
CORPORATION
/s/ Gianni Neve
- -------------------------------
GIANNI NEVE
By: /s/ J. Bouckaert
-------------------------------------
/s/ Maria Neve Joseph Bouckaert
- ------------------------------- Its: J. Bouckaert; Presiden
MARIA NEVE -------------------------------------
By: /s/ J. Bouckeart
-------------------------------------
Joseph Bouckeart
Its: J. Bouckaert; Secretary
-------------------------------------
13
<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION OF PROPERTY
-----------------------------
PARCEL ONE:
COMMENCING AT A POINT ON THE COUNTY HIGHWAY LEADING FROM PETALUMA TO BLOOMFIELD,
SAID POINT BEING THE MOST SOUTHEASTERLY CORNER OF THE LANDS DESCRIBED IN VOLUME
232 OF DEEDS AT PAGE 56, SONOMA COUNTY RECORDS; RUNNING THENCE DUE NORTH 800.43
FEET TO THE POINT OF COMMENCEMENT; THENCE RUNNING FROM SAID POINT OF
COMMENCEMENT DUE NORTH 452 FEET; THENCE RUNNING NORTH 89o 26' 10" WEST 385 FEET;
THENCE RUNNING SOUTH 0o 3' 30" EAST 452 FEET; THENCE RUNNING SOUTH 89o 26' 10"
EAST 384 FEET TO THE POINT OF COMMENCEMENT.
PARCEL TWO:
COMMENCING AT THE SOUTHEAST CORNER OF THE LANDS DESCRIBED IN VOLUME 232 OF DEEDS
AT PAGE 56, SONOMA COUNTY RECORDS. RUNNING THENCE FROM SAID POINT OF BEGINNING
ALONG THE EASTERLY BOUNDARY OF SAID LANDS NORTH 800.43 FEET; THENCE NORTH 89o
26' 10" WEST 192.13 FEET; THENCE SOUTH 690.21 FEET AND THENCE SOUTH 59o 42' 20"
EAST 222.25 FEET TO THE POINT OF BEGINNING.
EXCEPTING THEREFROM THE FOLLOWING DESCRIBED PARCEL:
BEGINNING AT THE SOUTHEAST CORNER OF THE LANDS DESCRIBED IN VOLUME 232 OF DEEDS
AT PAGE 56, SONOMA COUNTY RECORDS. FROM SAID POINT OF BEGINNING RUNNING NORTH
326.23 FEET; THENCE NORTH 89o 26' 10" WEST 192.13 FEET; THENCE SOUTH 216.01
FEET; THENCE SOUTH 59o 42' 20" EAST 222.25 FEET TO THE POINT OF BEGINNING.
PARCEL THREE:
COMMENCING AT THE SOUTHWEST CORNER OF THE LANDS DESCRIBED IN VOLUME 232 OF DEEDS
AT PAGE 56, SONOMA COUNTY RECORDS; RUNNING THENCE FROM SAID POINT OF BEGINNING
ALONG THE WEST BOUNDARY OF SAID LANDS NORTH 0o 03' 30" WEST 580 FEET; THENCE
SOUTH 89o 26'10" EAST 192.13 FEET; THENCE SOUTH 690.21 FEET; THENCE NORTH 59o
42' 20" WEST 222.25 FEET TO THE POINT OF BEGINNING.
<PAGE>
RECORDING REQUESTED BY AND
WHEN RECORDED RETURN TO:
HAAS & NAJARIAN
58 MAIDEN LANE, SECOND FLOOR
SAN FRANCISCO, CA 94108
ATTENTION: ROBERT C. NICHOLAS
MAIL TAX STATEMENTS TO:
VINIFERA INC.
775 BAYWOOD DRIVE, SUITE 213
PETALUMA, CA 94954
- --------------------------------------------------------------------------------
SPACE ABOVE THIS LJNE RESERVED FOR RECORDER'S USE
NOTICE OF EXERCISE OF OPTION
----------------------------
THIS NOTICE OF EXERCISE OF OPTION (the "Notice") serves to notify
Gianni Neve and Maria Neve (collectively, "Optionor" without regard to number or
gender) of Vinifera, Inc.'s ("Optionee") exercise of the option to purchase (the
"Option") all that certain real property commonly known as 4288 Bodega Avenue,
Petaluma, California (94952) (the "Property"), as depicted in EXHIBIT "A"
attached hereto and incorporated herein.
1. The specific terms and conditions of Optionee's Option are set
forth in the Option Agreement (the "Agreement") dated February 1, 1999. All of
the terms and conditions of the Agreement are incorporated herein by this
reference.
2. This Notice may be served by Optionee as set forth in Paragraph 20
of the Agreement.
DATED:
--------------------------------
VINIFERA INC., A CALIFORNIA CORPORATION
By:
-----------------------------------
Its:
----------------------------------
By:
-----------------------------------
Its:
----------------------------------
<PAGE>
PARCEL ONE:
COMMENCING AT A POINT ON THE COUNTY HIGHWAY LEADING FROM PETALUMA TO
BLOOMFIELD, SAID POINT BEING THE MOST SOUTHEASTERLY CORNER OF THE LANDS
DESCRIBED IN VOLUME 232 OF DEEDS AT PAGE 56, SONOMA COUNTY RECORDS; RUNNING
THENCE DUE NORTH 800.43 FEET TO THE POINT OF COMMENCEMENT; THENCE RUNNING FROM
SAID POINT OF COMMENCEMENT DUE NORTH 452 FEET; THENCE RUNNING NORTH 89o 26'
10", WEST 385 FEET; THENCE RUNNING SOUTH 0o 3' 30" EAST 452 FEET; THENCE
RUNNING SOUTH 89o 26' 10" EAST 384 FEET TO THE POINT OF COMMENCEMENT.
PARCEL TWO:
COMMENCING AT THE SOUTHEAST CORNER OF THE LANDS DESCRIBED IN VOLUME 232 OF
DEEDS AT PAGE 56, SONOMA COUNTY RECORDS. RUNNING THENCE FROM SAID POINT OF
BEGINNING ALONG THE EASTERLY BOUNDARY OF SAID LANDS NORTH 800.43 FEET; THENCE
NORTH 89o 26' 10" WEST 192.13 FEET; THENCE SOUTH 690.21 FEET AND THENCE SOUTH
59o 42' 20" EAST 222.25 FEET TO THE POINT OF BEGINNING.
EXCEPTING THEREFROM THE FOLLOWING DESCRIBED PARCEL:
BEGINNING AT THE SOUTHEAST CORNER OF THE LANDS DESCRIBED IN VOLUME 232 OF
DEEDS AT PAGE 56, SONOMA COUNTY RECORDS. FROM SAID POINT OF BEGINNING RUNNING
NORTH 326.23 FEET; THENCE NORTH 89o 26' 10" WEST 192.13 FEET; THENCE SOUTH
216. 01 FEET; THENCE SOUTH 59o 42' 20" EAST 222.25 FEET TO THE POINT OF
BEGINNING.
PARCEL THREE:
COMMENCING AT THE SOUTHWEST CORNER OF THE LANDS DESCRIBED IN VOLUME 232 OF
DEEDS AT PAGE 56, SONOMA COUNTY RECORDS; RUNNING THENCE FROM SAID POINT OF
BEGINNING ALONG THE WEST BOUNDARY OF SAID LANDS NORTH 0o 03' 30" WEST 580
FEET; THENCE SOUTH 89o 26' 10" EAST 192.13 FEET; THENCE SOUTH 690.21 FEET;
THENCE NORTH 59o 42' 20 " WEST 222.25 FEET TO THE POINT OF BEGINNING.
EXHIBIT "A"
<PAGE>
EXHIBIT "B"
-----------
MEMORANDUM OF OPTION TO PURCHASE
--------------------------------
<PAGE>
RECORDING REQUESTED BY AND
WHEN RECORDED RETURN TO:
HAAS & NAJARIAN
58 MAIDEN LANE, SECOND FLOOR
SAN FRANCISCO, CA 94108
ATTENTION: ROBERT C. NICHOLAS
MAIL TAX STATEMENTS TO:
VINIFERA INC.
775 BAYWOOD DRIVE, SUITE 213
PETALUMA, CA 94954
- --------------------------------------------------------------------------------
SPACE ABOVE THIS LJNE RESERVED FOR RECORDER'S USE
MEMORANDUM OF OPTION TO PURCHASE
--------------------------------
This Memorandum of Option ("Memorandum") is made as of February 1,
1999, by and between Gianni Neve and Maria Neve (collectively, "Optionor"
without regard to number or gender) and Vinifera, Inc., a California corporation
("Optionee").
1. Optionor hereby grants to Optionee an option to purchase (the
"Option") all of that certain real property commonly known as 4288 Bodega
Avenue, Petaluma, California 94952 (the "Property"), as depicted in EXHIBIT "A"
attached hereto and incorporated herein.
2. The specific terms and conditions of Optionee's Option are set
forth in the Option Agreement (the "Agreement") dated February 1, 1999. All of
the terms and conditions of the Agreement are incorporated herein by this
reference.
3. The term of the Option expires at midnight on February 2, 2003.
4. Any party who is interested in acquiring an interest in the
Property should contact the Optionor and Optionee. Optionor's address is:
a. For Gianni Neve: 4288 Bodega Avenue
Petaluma, CA 94952
b. For Maria Neve: 1109 Lohrman Lane
Petaluma, CA 94952
1
Optionee's address is:
<PAGE>
Vinifera, Inc., 775 Baywood Drive, Suite 213, Petaluma, CA 94954.
IN WITNESS WHEREOF, the parties hereto have executed this Memorandum as
of the date first above written.
OPTIONOR: OPTIONEE:
VINIFERA INC., A CALIFORNIA
CORPORATION
/s/ Gianni Neve
- -------------------------------
GIANNI NEVE
By: /s/ J. Bouckaert
-------------------------------------
/s/ Maria Neve Joseph Bouckaert
- ------------------------------- Its: J. Bouckaert; President
MARIA NEVE -------------------------------------
By: /s/ J. Bouckeart
-------------------------------------
Joseph Bouckeart
Its: J. Bouckaert; Secretary
-------------------------------------
2
<PAGE>
STATE OF CALIFORNIA )
) SS
COUNTY OF SONOMA )
On this 28th day of April, 1999, before me, a Notary Public, State
of California, duly commissioned and sworn, personally appeared: Maria Neve
known to me (or proved to me on the basis of satisfactory evidence) to be the
person whose name is subscribed to the within instrument, and acknowledged that
he/she executed the same.
Official Seal: /S/ Dee A. J. Hernlund
----------------------------------------
Notary Public
My Commission Expires: March 28, 2003
------------------
Dee A. J. Hernlund
Comm. #1214328
NOTARY PUBLIC - CALIFORNIA
Sonoma County
My Comm. Expires Mar. 28, 2003
3
<PAGE>
STATE OF CALIFORNIA )
) SS
COUNTY OF SONOMA )
On this 28th day of April, 1999, before me, a Notary Public, State
of California, duly commissioned and sworn, personally appeared: Gianni Neve
known to me (or proved to me on the basis of satisfactory evidence) to be the
person whose name is subscribed to the within instrument, and acknowledged that
he/she executed the same.
Official Seal: /S/ Dee A. J. Hernlund
----------------------------------------
Notary Public
My Commission Expires: March 28, 2003
-------------------
Dee A. J. Hernlund
Comm. #1214328
NOTARY PUBLIC - CALIFORNIA
Sonoma County
My Comm. Expires Mar. 28, 2003
4
<PAGE>
STATE OF CALIFORNIA )
) SS
COUNTY OF SONOMA )
On this 28th day of April, 1999, before me, a Notary Public, State
of California, duly commissioned and sworn, personally appeared: Joseph A.
Bouckaert known to me (or proved to me on the basis of satisfactory evidence) to
be the person whose name is subscribed to the within instrument, and
acknowledged that he/she executed the same.
Official Seal: /S/ Dee A. J. Hernlund
----------------------------------------
Notary Public
My Commission Expires: March 28, 2003
-------------------
Dee A. J. Hernlund
Comm. #1214328
NOTARY PUBLIC - CALIFORNIA
Sonoma County
My Comm. Expires Mar. 28, 2003
5
<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION OF PROPERTY
-----------------------------
PARCEL ONE:
COMMENCING AT A POINT ON THE COUNTY HIGHWAY LEADING FROM PETALUMA TO BLOOMFIELD,
SAID POINT BEING THE MOST SOUTHEASTERLY CORNER OF THE LANDS DESCRIBED IN VOLUME
232 OF DEEDS AT PAGE 56, SONOMA COUNTY RECORDS; RUNNING THENCE DUE NORTH 800.43
FEET TO THE POINT OF COMMENCEMENT; THENCE RUNNING FROM SAID POINT OF
COMMENCEMENT DUE NORTH 452 FEET; THENCE RUNNING NORTH 89o 26' 10" WEST 385 FEET;
THENCE RUNNING SOUTH 0o 3' 30" EAST 452 FEET; THENCE RUNNING SOUTH 89o 26' 10"
EAST 384 FEET TO THE POINT OF COMMENCEMENT.
PARCEL TWO:
COMMENCING AT THE SOUTHEAST CORNER OF THE LANDS DESCRIBED IN VOLUME 232 OF DEEDS
AT PAGE 56, SONOMA COUNTY RECORDS. RUNNING THENCE FROM SAID POINT OF BEGINNING
ALONG THE EASTERLY BOUNDARY OF SAID LANDS NORTH 800.43 FEET; THENCE NORTH 89o
26' 10" WEST 192.13 FEET; THENCE SOUTH 690.21 FEET AND THENCE SOUTH 59o 42' 20"
EAST 222.25 FEET TO THE POINT OF BEGINNING.
EXCEPTING THEREFROM THE FOLLOWING DESCRIBED PARCEL:
BEGINNING AT THE SOUTHEAST CORNER OF THE LANDS DESCRIBED IN VOLUME 232 OF DEEDS
AT PAGE 56, SONOMA COUNTY RECORDS. FROM SAID POINT OF BEGINNING RUNNING NORTH
326.23 FEET; THENCE NORTH 89o 26' 10" WEST 192.13 FEET; THENCE SOUTH 216.01
FEET; THENCE SOUTH 59o 42' 20" EAST 222.25 FEET TO THE POINT OF BEGINNING.
PARCEL THREE:
COMMENCING AT THE SOUTHWEST CORNER OF THE LANDS DESCRIBED IN VOLUME 232 OF DEEDS
AT PAGE 56, SONOMA COUNTY RECORDS; RUNNING THENCE FROM SAID POINT OF BEGINNING
ALONG THE WEST BOUNDARY OF SAID LANDS NORTH 0o 03' 30" WEST 580 FEET; THENCE
SOUTH 89o 26' 10" EAST 192.13 FEET; THENCE SOUTH 690.21 FEET; THENCE NORTH 59o
42' 20" WEST 222.25 FEET TO THE POINT OF BEGINNING.
<PAGE>
EXHIBIT "A"
-----------
OPTION AGREEMENT
----------------
THIS OPTION AGREEMENT (the "Agreement") is made as of April 1999, by
and between GIANNI NEVE and MARIA NEVE (COLLECTIVELY, "Optionor", without regard
to number or gender) and VINIFERA, INC., a California corporation ("Optionee").
RECITALS
--------
This Agreement is entered into with reference to the following facts:
A. Optionor is the owner of all of that certain real property commonly
known as 4288 Bodega Avenue, Petaluma, California 94952 (the "Property"), as
more particularly described in EXHIBIT "A", incorporated herein by this
reference.
B. Optionor, as landlord, and Optionee, as tenant, entered into a
written lease dated as of February 1, 1996 (the "Lease"), whereby Optionor
leased the Property to Optionee for a five (5) year term, commencing on February
1, 1996 and expiring on January 31, 2001, at a rental of Twelve Thousand Five
Hundred Dollars ($12,500.00) per month.
C. Pursuant to Article 22 of the Lease, Optionor granted an option to
purchase to Optionee (the "Original Option") exercisable by Optionee during the
period February 1, 1996 through January 31, 1999. The Lease referred to and
incorporated an option agreement dated as of February 1, 1996 (the "Original
Option Agreement") and a purchase and sale agreement and escrow instructions
dated as of February 1, 1996 (the "Purchase and Sale Agreement"). Pursuant to
the Original Option Agreement, Optionor and Optionee recorded a Memorandum of
Option to Purchase on May 7, 1996, in the Official Records of Sonoma County,
Document No. 1996 0040886 (the "Original Memorandum of Option").
D. Optionee duty exercised the Original Option on January 30, 1999.
Subsequent to the exercise of the Original Option, Optionor requested Optionee
to delay the purchase of the Property until February 1, 2001 for personal and
financial reasons.
E. Optionee now rescinds its exercise of the Original Option and
Optionor and Optionee desire to terminate the Original Option and create a new
one pursuant to the terms, promises and covenants contained in this Agreement.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the foregoing Recitals and the
mutual covenants contained herein, and for other good and valuable
consideration, the receipt and
1
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sufficiency of which are hereby acknowledged, Optionor and Optionee agree as
follows:
1. DEFINED TERMS. All undefined terms used herein shall have the
same meanings as are given to them in the Lease, as amended by the First
Amendment, unless expressly provided otherwise by the terms of this Agreement.
2. RECITALS. The Recitals set forth above are incorporated into
this Agreement and are true and correct.
3. RESCISSION. Optionee rescinds its Notice of Exercise of Option
dated January 30, 1999 effective upon the execution of this Agreement by
Optionor or Optionee.
4. TERMINATION OF ORIGINAL OPTION AGREEMENT. Optionor and Optionee
agree to terminate the Original Option Agreement upon the mutual execution of
this Agreement. Optionee agrees to execute a release, quitclaim deed, or any
other document required by Optionor or a title insurance company to verify the
termination of the Original Option Agreement and the Original Memorandum of
Option.
5. GRANT OF 0PTION TO PURCHASE. Optionor hereby grants to Optionee
a new Option to Purchase the Property (the "Option") upon all of the terms,
covenants and conditions hereinafter set forth.
6. OPTION CONSIDERATION. As consideration for the Option, Optionee
has agreed to rescind the Original Option, postpone the purchase of the Property
under the Original Option, extend the initial term of the Lease to January 31,
2003 and pay the increased Rent pursuant to the First Amendment to Lease to
which this Agreement is attached. In further consideration of the Option,
Optionce must obtain and deliver to Optionor, at Optionee's expense, a
Preliminary Title Report issued by a title company acceptable to both Optionor
and Optionee covering the Property. In further consideration of the granting of
this Option, Optionee must provide to Optionor, at Optionee's expense, all
inspection and environmental reports, studies, drawings and other documents
prepared by or on behalf of Optionee in connection with its investigation of the
Property.
7. MEMORANDUM OF OPTION OF PURCHASE. Optionor has duly executed,
acknowledged and delivered to Optionee a Memorandum of Option to Purchase in the
form attached hereto as EXHIBIT "B" and agrees that Optionee may cause such
Memorandum of Option to Purchase to be recorded. Optionee agrees to execute,
acknowledge and deliver to Optionor a Quitclaim Deed to the Property promptly at
the request of Optionor if Optionee does not exercise the Option to clear
Optionor's title. Optionor shall bear any expenses of recording of such
instrument.
8. TERM OF OPTION AND EXERCISE. The term of this Option shall
commence on February 1, 1999, and shall expire at midnight on January 31, 2003
(the "Option Period"). If not
2
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exercised during the Option Period, the Option shall automatically and without
further notice, act or documentation by any party expire on the aforementioned
date. Optionee may exercise this Option at any time AFTER February 1, 2001 by
giving Optionor written notice, as set forth in Paragraph 20 below of its
intention to exercise the Option. As soon as reasonably practicable after
exercise of the Option, Optionor and Optionee shall execute and cause to be
recorded in the Sonoma County Recorder's Office a Notice of Exercise of Option
in the form attached hereto as EXHIBIT "C".
9. PURCHASE PRICE. The Purchase Price (the "Price") which Optionee
agrees to pay Optionor for the Property following the exercise of the Option is
the sum of One Million Three Hundred Thousand Dollars ($1,300,000.00). The Price
shall be payable as follows: The Price will be paid pursuant to the Purchase and
Sale Agreement.
10. ESCROW. See the Purchase and Sale Agreement, Paragraphs 1.2 and
1.3.
11. CONDITION OF TITLE UPON CLOSING. See the Purchase and Sale
Agreement, Paragraphs 2.2 and 2.3.
12. CONDEMNATION AND CASUALTY.
(a) If, before the Closing (as defined in the Purchase and Sale
Agreement), Optionor receives notice that the Property is to be wholly
condemned, or to be condemned in such substantial part as would materially and
adversely effect the Optionee's ability to operate its business on the Property,
or if the Property is wholly destroyed by fire or other casualty, or if so much
of the Property is damaged by fire or other casualty to the extent that the cost
of repairing such damage shall amount to at least twenty-five percent (25%) of
the Purchase Price as determined by the casualty insurer insuring the Property,
then, in any such event, Optionee, in the event it has already exercised the
Option, shall have the right to terminate this Agreement by delivering notice of
such termination in writing to Optionor within thirty (30) days after receipt of
notice of such condemnation or casualty, and Optionor and Optionee shall each be
released and discharged from any obligation to each other hereunder; provided,
however, that if Optionee elects not to terminate this Agreement after it has
exercised the Option, the purchase contemplated herein shall be consummated
without reduction to the Purchase Price, but Optionee shall be entitled to all
proceeds of fire or other casualty insurance or condemnation, and Optionor shall
have no responsibility for the restoration and repair of the Property.
(b) If, prior to the Closing (assuming Optionee has exercised
its Option), the Property is damaged by fire or other casualty to the extent
that the cost of repairing or restoring the same shall be less than an amount
equal to twenty-five percent (25%) of the Purchase Price or if Optionor receives
notice that the Property is to be partially condemned but without materially and
adversely effecting Optionee's ability to operate its business on the remaining
portion of the Property, then, in any such event, the Closing shall proceed as
scheduled and Optionor shall assign to Optionee the proceeds of any casualty
insurance or any
3
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condemnation award, as the case may be, and Optionor shall have no
responsibility for restoration or repair of the Property. In the event all or a
part of the Property is appropriated during the Option Period and Optionee
elects not to proceed with the Closing, Optionee will have a compensable
interest and a right to share in the condemnation award to the extent that the
excess, if any, of the total award is above the Purchase Price.
13. TIME OF THE ESSENCE; FAILURE TO EXERCISE OPTION. Time is of the
essence with regard to this Agreement. If the Option is not exercised in the
manner as set forth in Paragraph 8 above, Optionee shall have no interest
whatsoever in the Property, subject to Paragraph 14 below, and the Option may
not be revived by any subsequent payment or any further action by Optionee.
14. REINSTATEMENT OF LEASE. In the event Optionee exercises the
Option and then fails to Close, the Lease shall be reinstated and shall remain
in full force and effect just as though Optionee had never exercised the Option.
The Optionee's obligation to pay rent shall continue until close of escrow on
the exercise of the Option.
15. OPTIONOR'S ADDRESS FOR NOTICE. The term "Optionor's Address for
Notice" shall mean:
(a) For Gianni Neve: 4288 Bodega Avenue
Petaluma, CA 94952
(b) For Maria Neve: 1109 Lohrman Lane
Petaluma, CA 94952
16. RETENTION OF CONSIDERATION. In the event the Option or an
extension thereof is not exercised, all sums paid and services rendered to
Optionor by Optionee will be retained by Optionor in consideration of the
granting of the Option.
17. ASSIGNMENT OF OPTION. Optionee may at any time during the
Option Period assign this Agreement; provided, however, that an assignment will
be effective only on tile giving of ten (10) days written notice of the
assignment by Optionee to Optionor.
18. ATTORNEYS' FEES. If either Optionor or Optionee shall commence
any action or other proceeding against the other arising out of, or relating to,
this Agreement, the prevailing party shall be entitled to recover from the
losing party, in addition to any other relief, its actual Attorneys' Fees
irrespective of whether or not the action or other proceeding is prosecuted to
judgment and irrespective of any court schedule of reasonable attorneys' fees.
19. INDEMNIFICATION. Should Optionor be made a party to any
litigation instituted by Optionee against a party other than Optionor, or by a
third party against Optionee,
4
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Optionee shall indemnify, hold harmless and defend Optionor against any and all
loss, cost, liability, damage or expense incurred by Optionor, including
attorneys' fees, in connection with the litigation.
20. NOTICE OF EXERCISE OF OPTION. Notice to Optionor of exercise of
Option by Optionee may be served, as an alternative to personal service, by
mailing the same by registered or certified mail, postage prepaid, addressed to
Optionor at the address for Optionor as set forth in Paragraph 15 above, or
addressed to such other address or addresses as Optionor may from time to time
designate to Optionee in writing. Any notice shall be deemed to have been served
at the time the same was posted.
21. Miscellaneous.
(a) ENTIRE AGREEMENT. This Agreement contains all of the
agreements and understandings relating to the exercise of the Option and the
obligations of the Optionor and Optionee in connection with such exercise.
Optionor has not made, and Optionee is not relying upon, any warranties, or
representations, promises or statements made by Optionor or any agent of
Optionor, except as expressly set forth in the Agreement. This Agreement
supersedes any and all prior agreements and understandings between Optionor and
Optionee and alone expresses the agreement of the parties.
(b) AMENDMENTS. This Agreement shall not be amended, changed or
modified in any way unless in writing executed by Optionor and Optionee.
Optionor shall not have waived or released any of its rights hereunder unless in
writing and executed by Optionor.
(c) SUCCESSORS. Except as expressly provided herein, this
Agreement and the obligations of Optionor and Optionce contained herein shall
bind and benefit the successors and assigns of the parties hereto.
(d) FORCE MAJEURE. Optionor shall incur no liability to
Optionee with respect to, and shall not be responsible for any failure to
perform, any of Optionor's obligations hereunder if such failure is caused by
reason of strike, other labor trouble, detrimental rule, regulations, ordinance,
statute, or interpretation, or by fire, earthquake, civil commotion, or failure
or disruption of utility services, or any and all other causes reasonably beyond
control of Optionor. The amount of time for Optionor to perform any of
Optionor's obligations shall be extended by the amount of time Optionor is
delayed in performing such obligation by reason of such force majeure
occurrence.
(e) GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California.
(f) CAPTIONS. All captions, headings, titles, numerical
references and computer highlighting are for convenience only and shall have no
effect on the interpretation of
5
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this Agreement.
(g) INTERPRETATION. Optionor and Optionee acknowledge that they
have read and reviewed this Agreement and that they have had the opportunity to
confer with counsel in negotiation of this Agreement. Accordingly, this
Agreement shall be construed neither for nor against Optionor or Optionee, but
shall be given a fair and reasonable interpretation in accordance with the
meaning of its terms and intent of the parties.
(h) NUMBER AND GENDER. All terms and words used in this
Agreement, regardless of the number and gender in which they are used, shall be
deemed to include the appropriate number and gender, as the context may require.
(i) EXHIBITS: Exhibit "A" - Property Description
Exhibit "B" - Memorandum of Option
Exhibit "C" - Notice of Exercise
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
OPTIONOR: OPTIONEE:
VINIFERA INC.
/s/ Gianni Neve
- -------------------------------
GIANNI NEVE
By: /s/ J. Bouckaert
-------------------------------------
/s/ Maria Neve Joseph Bouckaert
- ------------------------------- Its: J. Bouckaert, President
MARIA NEVE -------------------------------------
[Exhibits Attached]
[Acknowledgments Attached]
6
<PAGE>
STATE OF CALIFORNIA )
) SS
COUNTY OF SONOMA )
On this 28th day of April, 1999, before me, a Notary Public, State of
California, duly commissioned and sworn, personally appeared: Maria Neve known
to me (or proved to me on the basis of satisfactory evidence) to be the person
whose name is subscribed to the within instrument, and acknowledged that he/she
executed the same.
Official Seal: /S/ Dee A. J. Hernlund
----------------------------------------
Notary Public
My Commission Expires: March 28, 2003
-------------------
Dee A. J. Hernlund
Comm. #1214328
NOTARY PUBLIC - CALIFORNIA
Sonoma County
My Comm. Expires Mar. 28, 2003
7
<PAGE>
STATE OF CALIFORNIA )
) SS
COUNTY OF SONOMA )
On this 28th day of April, 1999, before me, a Notary Public, State of
California, duly commissioned and sworn, personally appeared: Gianni Neve known
to me (or proved to me on the basis of satisfactory evidence) to be the person
whose name is subscribed to the within instrument, and acknowledged that he/she
executed the same.
Official Seal: /S/ Dee A. J. Hernlund
----------------------------------------
Notary Public
My Commission Expires: March 28, 2003
-------------------
Dee A. J. Hernlund
Comm. #1214328
NOTARY PUBLIC - CALIFORNIA
Sonoma County
My Comm. Expires Mar. 28, 2003
8
<PAGE>
STATE OF CALIFORNIA )
) SS
COUNTY OF SONOMA )
On this 28t day of April, 1999, before me, a Notary Public, State of
California, duly commissioned and sworn, personally appeared: Joseph A.
Bouckaert known to me (or proved to me on the basis of satisfactory evidence) to
be the person whose name is subscribed to the within instrument, and
acknowledged that he/she executed the same.
Official Seal: /S/ Dee A. J. Hernlund
----------------------------------------
Notary Public
My Commission Expires: March 28, 2003
-------------------
Dee A. J. Hernlund
Comm. #1214328
NOTARY PUBLIC - CALIFORNIA
Sonoma County
My Comm. Expires Mar. 28, 2003
9
<PAGE>
FIRST AMENDMENT TO LEASE OF LAND AND
------------------------------------
IMPROVEMENTS LOCATED AT 4288 BODEGA AVENUE
------------------------------------------
This First Amendment to Lease of Land and Improvements Located at 4288 Bodega
Avenue (this "First Amendment") is made and entered into as of April 27, 1999,
by and between GIANNI NEVE and MARIA NEVE COLLECTIVELY, "Landlord" without
regard to number or gender) and VINIFERA, INC. ("Tenant").
RECITALS
--------
A. Landlord is the owner of all of that certain real property commonly
known as 4288 Bodega Avenue, Petaluma, California 94952 (the "Property").
B. Landlord and Tenant entered into a written lease dated as of
February 1, 1996 (the "Lease"), whereby Landlord leased the Property to Tenant
for a five (5) year term, commencing on February 1, 1996 and expiring on January
31, 2001, at a rental of Twelve Thousand Five Hundred Dollars ($12,500.00) per
month.
C. Pursuant to Article 22 of the Lease, Landlord granted an option to
purchase to Tenant (the "Original Option") exercisable by Tenant during the
period February 1, 1996 through January 31, 1999. The Lease referred to and
incorporated an option agreement dated as of February 1, 1996 (the "Original
Option Agreement") and a purchase and sale agreement and escrow instructions
dated as of February 1, 1996 (the "Purchase and Sale Agreement"). Pursuant to
the Original Option Agreement, Landlord and Tenant recorded a Memorandum of
Option to Purchase on May 7, 1996, in the Official Records of Sonoma County,
Document No. 1996 0040886 (the "Original Memorandum of Option").
D. Tenant duly exercised the Original Option on January 30, 1999.
Subsequent to the exercise of the Original Option, Landlord requested Tenant to
delay the purchase of the Property until February 1, 2001 for personal and
financial reasons.
E. Landlord and Tenant now wish to amend the Lease to extend the
initial term, increase the Rent and grant Tenant a new Option to Purchase in
accordance with the Option Agreement and Purchase and Sale Agreement attached
hereto as EXHIBITS "A" and "B", respectively.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the foregoing Recitals and the
mutual covenants contained herein, and for other good and valuable
consideration, the receipt and
1
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sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree
to and do hereby amend the Lease in the following respects:
1. DEFINED TERMS. All undefined terms used herein shall have the same
respective meanings as are given to them in the Lease, unless expressly provided
otherwise by the terms of this First Amendment.
2. LEASE TERM. The initial term of the Lease is hereby extended to and
including January 31, 2003.
3. OPTIONS TO EXTEND. Landlord and Tenant hereby acknowledge that the
two (2) five (5) year Options to Extend contained in Article 20 of the Lease
shall remain in full force and effect. The first Option to Extend, if exercised
by Tenant, will commence on February 1, 2003. The Base Rent for each year of the
first five (5) year extension shall be one hundred five percent (105%) of the
Base Rent for the last year of the original term of the Lease. The Base Rent for
each year of the second five (5) year extension shall be one hundred five
percent (105%) of the Base Rent for the last year of the first five (5) year
extension.
4. OPTION TO PURCHASE. Article 22 of the Lease is hereby deleted in
its entirety and replaced with the following: Landlord grants to Tenant the
Option to Purchase the Property in accordance with the provisions of the Option
Agreement and the Purchase and Sale Agreement attached hereto as Exhibits "A"
and "B", respectively, which now replace Exhibits "C" and "D" attached to the
Lease. The Option to Purchase shall be exercisable by Tenant during the period
February 1, 2001 to and including February 2, 2003 (the "Option Period").
5. BASE RENT. The Base Rent payable by Tenant pursuant to the Lease
shall be increased two percent (2%) per year commencing on February 1, 1999, as
follows:
PERIOD MONTHLY BASE RENT
------ -----------------
May 1, 1999 through January 31, 2000 $12,750.00
February 1, 2000 through January 31, 2001 $13,005.00
February 1, 2001 through January 31, 2002 $13,265.00
February 1, 2002 through January 31, 2003 $13,530.00
6. ADDITIONAL SPACE. Landlord agrees to rent two units (the "Two
Units") of the house structure located on the Property not occupied by Landlord
to Tenant free of all tenants. Landlord shall be allowed to occupy the area in
the house structure currently being occupied by Landlord during the term of this
Lease. Landlord shall remove the tenants from the Two Units at Landlord's sole
cost. Tenant shall pay rent to Landlord for the Two Units in the amount of Five
Hundred Dollars ($500.00) per unit with the rent obligation to begin on delivery
of possession. The lease for the Two Units shall provide in part that the units
are leased "As-Is" and Tenant shall bear sole responsibility to maintain the
premises.
2
<PAGE>
7. MISCELLANEOUS.
a. Except as modified herein, the Lease shall remain unmodified
and in full force and effect.
b. The provisions of this First Amendment shall bind and inure
to the benefit of the heirs, representatives, successors and permitted assigns
of the Parties hereto.
c. This First Amendment may be executed in several
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and same Agreement.
d. The Parties agree to cooperate with one another and to
execute any additional documents necessary to reflect the agreements contained
herein.
IN WITNESS WHEREOF, this First Amendment has been executed as of the
day and year first written above.
LANDLORD: TENANT:
VINIFERA, INC.
/s/ Gianni Neve
- -------------------------------
GIANNI NEVE
By: /s/ J. Bouckaert
-------------------------------
/s/ Maria Neve Joseph Bouckaert
- ------------------------------- Its: J. Bouckaert; President
MARIA NEVE -------------------------------
By: /s/ J. Bouckaert
-------------------------------
Joseph Bouckeart
Its: J. Bouckaert; Secretary
-------------------------------
3
Exhibit 10.33
VINIFERA, INC.
1993 STOCK AWARD PLAN
March 9, 1993
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1 ETABLISHMENT AND PURPOSE ............................... 1
1.1 Establishment; Amendment and Restatement ............... 1
1.2 Purpose ................................................ 1
ARTICLE 2 DEFINITIONS ............................................ 1
2.1 Defined Terms........................................... 1
2.2 Gender and Number....................................... 4
ARTICLE 3 ADMINISTRATION.......................................... 4
3.1 General................................................. 4
3.2 Composition of the Committee............................ 4
3.3 Authority of the Committee.............................. 4
3.4 Action by the Committee................................. 5
3.5 Delegation.............................................. 5
3.6 Liability of Committee Members.......................... 5
3.7 Awards to Non-Employee Directors........................ 5
3.8 Costs of Plan........................................... 5
ARTICLE 4 DURATION OF THE PLAN AND SHARES SUBJECT TO
THE PLAN................................................ 5
4.1 Duration of the Plan.................................... 5
4.2 Shares Subject to the Plan.............................. 5
ARTICLE 5 ELIGIBILITY ............................................ 5
5.1 Employees and Advisors ................................. 5
5.2 Non-Employee Directors ................................. 5
ARTICLE 6 AWARDS ................................................. 5
6.1 Types of Awards ........................................ 5
6.2 General ................................................ 6
6.3 Nonuniform Determinations .............................. 6
6.4 Award Agreements ....................................... 6
6.5 Provisions Governing All Awards ........................ 6
ARTICLE 7 OPTIONS ................................................ 8
i
<PAGE>
7.1 Types of Options ....................................... 8
7.2 General ................................................ 8
7.3 Option Price ........................................... 8
7.4 Option Term ............................................ 8
7.5 Time of Exercise ....................................... 8
7.6 Method of Exercise ..................................... 8
7.7 Special Rules for Incentive Stock Options ............. 9
7.8 Restricted Shares ...................................... 9
7.9 Deferred Compensation Options .......................... 9
7.10 Reload Options ......................................... 9
Page
----
ARTICLE 8 STOCK APPRECIATION RIGHTS .............................. 10
8.1 General................................................. 10
8.2 Nature of Stock Appreciation Right...................... 10
8.3 Exercise................................................ 10
8.4 Form of Payment......................................... 10
ARTICLE 9 RESTRICTED AWARDS....................................... 10
9.1 Types of Restricted Awards.............................. 10
9.2 General................................................. 11
9.3 Restriction Period...................................... 11
9.4 Forfeiture.............................................. 11
9.5 Settlement of Restricted Awards......................... 11
9.6 Rights as a Shareholder................................. 11
ARTICLE 10 PERFORMANCE AWARDS...................................... 12
10.1 General ................................................ 12
10.2 Nature of Performance Awards............................ 12
10.3 Performance Cycles...................................... 12
10.4 Performance Goals ...................................... 12
10.5 Determination of Awards................................. 12
10.6 Timing and Form of Payment ............................. 12
ARTICLE 11 OTHER STOCK BASED AND COMBINATION AWARDS................ 12
11.1 Other Stock-Based Awards ............................... 12
11.2 Combination Awards...................................... 12
ii
<PAGE>
ARTICLE 12 DEFERRAL ELECTIONS...................................... 13
ARTICLE 13 DIVIDEND EQUIVALENTS ................................... 13
ARTICLE 14 NON-EMPLOYEE DIRECTORS.................................. 13
14.1 General................................................. 13
14.2 Eligibility............................................. 13
14.3 Director Options........................................ 13
14.4 Award Agreements........................................ 13
ARTICLE 15 ADJUSTMENTS UPON CHANGES IN
CAPITALIZATION, ETC .................................... 14
15.1 Plan Does Not Restrict Corporation ..................... 14
15.2 Adjustments by the Committee............................ 14
ARTICLE 16 AMENDMENT AND TERMINATION .............................. 14
ARTICLE 17 MISCELLANEOUS .......................................... 14
17.1 Tax Withholding ........................................ 14
17.2 Unfunded Plan........................................... 15
17.3 Payments to Trust ...................................... 15
17.4 Annulment of Awards..................................... 15
17.5 Engaging in Competition With the Corporation ........... 15
17.6 Other Corporation Benefit and Compensation Programs .... 15
Page
----
17.7 Securities Law Restrictions ............................ 15
17.8 Governing Law .......................................... 16
ARTICLE 18 SHAREHOLDER APPROVAL ................................... 16
EXHIBITS
Exhibit A -- Non-Employee Director Award Agreement
iii
<PAGE>
VINIFERA, INC.
1993 STOCK AWARD PLAN
ARTICLE 1
ESTABLISHMENT AND PURPOSE
1.1 ESTABLISHMENT: AMENDMENT AND RESTATEMENT. Vinifera, Inc.
("Corporation"), hereby establishes the Vinifera, Inc., 1993 Stock Award Plan
(the "Plan"), effective as March 9, 1993, subject to shareholder approval as
provided in Article 18.
1.2 PURPOSE. The purpose of the Plan is to promote and advance
the interests of Corporation and its shareholders by enabling Corporation to
attract, retain, and reward key employees, outside advisors, and directors of
Corporation and its subsidiaries. It is also intended to strengthen the
mutuality of interests between such employees, advisors, and directors and
Corporation's shareholders. The Plan is designed to meet this intent by offering
stock options and other equity-based incentive awards, thereby providing a
proprietary interest in pursuing the long-term growth, profitability, and
financial success of Corporation.
ARTICLE 2
DEFINITIONS
2.1 DEFINED TERMS. For purposes of the Plan, the following
terms shall have the meanings set forth below:
"ADVISOR" means a member of an Advisory Committee of
Corporation or a Subsidiary, or any other consultant selected by the Committee,
who is neither an employee of Corporation or a Subsidiary nor a Non-Employee
Director.
"ADVISORY COMMITTEE" means a scientific advisory committee to
Corporation or a Subsidiary.
"AWARD" means an award or grant made to a Participant of
Options, Stock Appreciation Rights, Restricted Awards, Performance Awards, or
Other Stock-Based Awards pursuant to the Plan.
"AWARD AGREEMENT" means an agreement as described in Section
6.4. "BOARD" means the Board of Directors of Corporation.
"CODE" means the Internal Revenue Code of 1986, as amended and
in effect from time to time, or any successor thereto, together with rules,
regulations, and interpretations promulgated thereunder. Where the context so
requires, any reference to a particular Code section shall be construed to refer
to the successor provision to such Code section.
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"COMMITTEE" means the committee appointed by the Board to
administer the Plan as provided in Article 3 of the Plan.
"COMMON STOCK" means the Common Stock, of Corporation or any
security of Corporation issued in substitution, exchange, or lieu thereof.
"CONTINUING RESTRICTION" means a Restriction contained in
Sections 6.5.(g), 17.4, 17.5, and 17.7 of the Plan and any other Restrictions
expressly designated by the Committee in an Award Agreement as a Continuing
Restriction.
"CORPORATION" means Vinifera, Inc., an Oregon corporation, or
any successor corporation.
"DEFERRED COMPENSATION OPTION" means a Nonqualified Option
granted with an option price less than Fair Market Value on the date of grant
pursuant to Section 7.9 of the Plan.
"DISABILITY" means the condition of being "disabled" within
the meaning of Section 422(c)(7) of the Code. However, the Committee may change
the foregoing definition of "Disability" or may adopt a different definition for
purposes of specific Awards.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended and in effect from time to time, or any successor statute. Where the
context so requires, any reference to a particular section of the Exchange Act,
or to any rule promulgated under the Exchange Act, shall be .construed to refer
to successor provisions to such section or rule.
"FAIR MARKET VALUE" means on any given date, (i) until the
Registration Date, the fair market value of the Common Stock as determined by
the Board and (ii) from and after the Registration Date, the daily closing price
on the day preceding the date an Award is granted. For purposes of the foregoing
clause (ii), the closing price for each day shall be the last reported sales
price or, in case no such reported sales take place on such day, the last
reported bid price, in either case on the principal national securities exchange
on which the Common Stock is listed or admitted to trading or the last reported
sales price on the National Market System ("NMS") of the National Association of
Securities Dealers Automated Quotation System ("NASDAQ"), or if the Common Stock
is not included in the NMS, the average of the reported last closing bid and
asked prices on NASDAQ, or if not listed or admitted to trading on any national
securities exchange or NASDAQ, the average reported bid price as furnished by
The National Quotation Bureau, Incorporated (or the equivalent recognized source
of quotations), all as adjusted.
"INCENTIVE STOCK OPTION" or "ISO" means any Option granted
pursuant to the Plan that is intended to be and is specifically designated in
its Award Agreement as an "incentive stock option" within the meaning of Section
422 of the Code.
"NON-EMPLOYEE DIRECTOR" means a member of the Board who is not
an employee of Corporation or any Subsidiary.
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"NONQUALIFIED OPTION" or "NQO" means any Option, including a
Deferred Compensation Option, granted pursuant to the Plan that is not an
Incentive Stock Option.
"OPTION" means an ISO, an NQO, or a Deferred Compensation
Option. "OTHER STOCK-BASED AWARD" means an Award as defined in Section 11.1.
"PARTICIPANT" means an employee of Corporation or a
Subsidiary, an Advisor, or a Non-Employee Director who is granted an Award under
the Plan.
"PERFORMANCE AWARD" means an Award granted pursuant to the
provisions of Article 10 of the Plan, the Vesting of which is contingent on
performance agent.
"PERFORMANCE CYCLE" means a designated performance period
pursuant to the provisions of Section 10.3 of the Plan.
"PERFORMANCE GOAL" means a designated performance objective
pursuant to the provisions of Section 10.4 of the Plan.
"PLAN" means this Vinifera, Inc., 1993 Stock Award Plan, as
set forth herein and as it may be hereafter amended and from time to time.
"REGISTRATION DATE" shall mean the effective date upon which
the Common Stock is registered under the Exchange Act.
"REPORTING PERSON" means a Participant who is subject to the
reporting requirements of Section 16(a) of the Exchange Act.
"RESTRICTED AWARD" means a Restricted Share or a Restricted
Unit granted pursuant to Article 9 of the Plan.
"RESTRICTED SHARE" means an Award described in Section 9.1.(a)
of the Plan.
"RESTRICTED UNIT" means an Award of units representing Shares
described in Section 9. 1.(b) of the Plan.
"RESTRICTION" means a provision in the Plan or in an Award
Agreement which limits the exercisability or transferability, or which governs
the forfeiture, of an Award or the Shares, cash, or other property payable
pursuant to an Award.
"RETIREMENT" means:
(a) For Participants who are employees, retirement from active
employment with Corporation and its Subsidiaries on or after age 65, or
such earlier retirement date as approved by the Committee for purposes of
the Plan;
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(b) For Participants who are Non-Employee Directors,
termination of membership on the Board after attaining age 70, or such
earlier retirement date as approved by the Committee for purposes of the
Plan; and
(c) For Participants who are Advisors, termination of service
as an Advisor after attaining age 70, or such earlier retirement date as
approved by the Committee for purposes of the Plan.
However, the Committee may change the foregoing definition of "Retirement' or
may adopt a different definition for purposes of specific Awards.
"SHARE" means a share of Common Stock.
"STOCK APPRECIATION RIGHT" or "SAR' means an Award to benefit
from the appreciation of Common Stock granted pursuant to the provisions of
Article 8 of the Plan.
"SUBSIDIARY" means a 'subsidiary corporation" of Corporation,
within the meaning of Section 425 of the Code, namely any corporation in which
Corporation directly or indirectly controls 50 percent or more of the total
combined voting power of all classes of stock having voting power.
"VEST" or 'Vested" means:
(a) In the case of an Award that requires exercise, to be or
to become immediately and fully exercisable and free of all Restrictions
(other than Continuing Restrictions);
(b) In the case of an Award that is subject to forfeiture, to
be or to become nonforfeitable, freely transferable, and free of all
Restrictions (other than Continuing Restrictions);
(c) In the case of an Award that is required to be earned by
attaining specified Performance Goals, to be or to become earned and
nonforfeitable, freely transferable, and free of all Restrictions (other
than Continuing Restrictions); or
(d) In the case of any other Award as to which payment is not
dependent solely upon the exercise of a right, election, exercise, or
option, to be or to become immediately payable and free of all
Restrictions (except Continuing Restrictions).
2.2 GENDER AND NUMBER. Except where otherwise indicated by the
context, any masculine or feminine terminology used in the Plan shall also
include the opposite gender; and the definition of any term in Section 2.1
in the singular shall also include the plural, and vice versa.
ARTICLE 3
ADMINISTRATION
3.1 GENERAL. The Plan shall be administered by the Board until
the Registration Date; until such time the Board shall have all of the powers
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of the Committee as set forth in this Article 3. Thereafter, the Plan shall be
administered by a Committee composed as described in Section 3.2.
3.2 COMPOSITION OF THE COMMITTEE. The Committee shall be
appointed by the Board and shall consist of not less than a sufficient number of
disinterested members of the Board so as to qualify the Committee to administer
the Plan as contemplated by Rule 16b-3 under the Exchange Act. The Board may
from time to time remove members from, or add members to, the Committee.
Vacancies on the Committee, however caused, shall be filled by the Board. The
initial members of the Committee shall be the members of Corporation's existing
Executive Compensation Committee. The Board may at any time replace the
Executive Compensation Committee with another Committee. In the event that the
Executive Compensation Committee shall cease to satisfy the requirements of Rule
16b-3, the Board shall appoint another Committee satisfying such requirements.
3.3 AUTHORITY OF THE COMMITTEE. The Committee shall have full
power and authority (subject to such orders or resolutions as may be issued or
adopted from time to time by the Board) to administer the Plan in its sole
discretion, including the authority to:
(a) Construe and interpret the Plan and any Award Agreement;
(b) Promulgate, amend, and rescind rules and procedures
relating to the implementation of the Plan;
(c) With respect to employees and Advisors:
(i) Select the employees and Advisors who shall
be granted Awards;
(ii) Determine the number and types of Awards to be
granted to each such Participant;
(iii) Determine the number of Shares, or Share
equivalents, to be subject to each Award;
(iv) Determine the option price, purchase price, base
price, or similar feature for any Award; and
(v) Determine all the terms and conditions of all
Award Agreements, consistent with the requirements of the
Plan.
Decisions of the Committee, or any delegate as permitted by the Plan, shall be
final, conclusive, and binding on all Participants.
3.4 ACTION BY THE COMMITTEE. A majority of the members of the
Committee shall constitute a quorum for the transaction of business. Action
approved by a majority of the members present at any meeting at which a quorum
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is present, or action in writing by a majority of the members of the Committee,
shall be the valid acts of the Committee.
3.5 DELEGATION. Notwithstanding the foregoing, the Committee
may delegate to one or more officers of Corporation the authority to determine
the recipients, types, amounts, and terms of Awards granted to Participants who
are not Reporting Persons.
3.6 LIABILITY OF COMMITTEE Members. No member of the Committee
shall be liable for any action or determination made in good faith with respect
to the Plan, any Award, or any Participant.
3.7 Awards to Non-Employee Directors. From and after the
Registration Date, the Committee shall have no discretion as to any aspects of
Awards to Non-Employee Directors, which Awards shall be governed by Article 14.
3.8 Costs of Plan. The costs and expenses of administering the
Plan shall be home by Corporation.
ARTICLE 4
DURATION OF THE PLAN AND SUBJECT TO THE PLAN
4.1 DURATION OF THE PLAN. The Plan is effective March 9, 1993,
subject to approval by Corporation's shareholders as provided in Article 18. The
Plan shall remain in effect until Awards have been granted covering all the
available Shares or the Plan is otherwise terminated by the Board. Termination
of the Plan shall not affect outstanding Awards.
4.2 SHARES SUBJECT TO THE PLAN. The shares which may be made
subject to Awards under the Plan shall be Shares of Common Stock, which may be
either authorized and unissued Shares or reacquired Shares. No fractional Shares
shall be issued under the Plan. The maximum number of Shares for which Awards
may be granted under the Plan shall be 2,000,000 Shares, subject to adjustment
pursuant to Article 15. If an Award under the Plan is canceled or expires for
any reason prior to having been fully Vested or exercised by a Participant or is
settled in cash in lieu of Shares or is exchanged for other Awards, all Shares
covered by such Awards shall be made available for future Awards under the Plan.
ARTICLE 5
ELIGIBILITY
5.1 EMPLOYEES AND ADVISORS. Officers and other key employees
of Corporation and its Subsidiaries (who may also be directors of Corporation or
a Subsidiary), Advisors, and, until the Registration Date, Non-Employee
Directors, who, in the Committee's judgment, are or will be contributors to the
long-term success of Corporation shall be eligible to receive Awards under the
Plan.
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5.2 NON-EMPLOYEE DIRECTORS. From and after the Registration
Date, all Non-Employee Directors shall be eligible to receive Awards only
pursuant to Article 14 of the Plan.
ARTICLE 6
AWARDS
6.1 TYPES OF AWARDS. The types of Awards that may be granted
under the Plan are:
(a) Options governed by Article 7 of the Plan;
(b) Stock Appreciation Rights governed by Article 8 of the
Plan;
(c) Restricted Awards governed by Article 9 of the Plan;
(d) Performance Awards governed by Article 10 of the Plan; and
(e) Other Stock-Based Awards or combination awards governed by
Article 11 of the Plan.
In the discretion of the Committee, any Award may be granted alone, in addition
to, or in tandem with other Awards under the Plan.
6.2 GENERAL. Subject to the limitations of the Plan, the
Committee may cause Corporation to grant Awards to such Participants, at such
times, of such types, in such amounts, for such periods, with such option
prices, purchase prices, or base prices, and subject to such terms, conditions,
limitations, and restrictions as the Committee, in its discretion, shall deem
appropriate. Awards may be granted as additional compensation to a Participant
or in lieu of other compensation to such Participant. A Participant may receive
more than one Award and more than one type of Award under the Plan.
6.3 NONUNIFORM DETERMINATIONS. The Committee's determinations
under the Plan or under one or more Award Agreements, including without
limitation, (a) the selection of Participants to receive Awards, (b) the type,
form, amount, and timing of Awards, (c) the terms of specific Award Agreements,
and (d) elections and determinations made by the Committee with respect to
exercise or payments of Awards, need not be uniform and may be made by the
Committee selectively among Participants and Awards, whether or not Participants
are similarly situated.
6.4 AWARD AGREEMENTS. Each Award shall be evidenced by a
written Award Agreement between Corporation and the Participant. Award
Agreements may, subject to the provisions of the Plan, contain any provision
approved by the Committee.
6.5 PROVISIONS GOVERNING ALL AWARDS. All Awards shall be
subject to the following provisions:
(a) ALTERNATIVE AWARDS. If any Awards are designated in their
Award Agreements as alternative to each other, the exercise of all or part
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of one Award automatically shall cause an immediate equal (or pro rata)
corresponding termination of the other alternative Award or Awards.
(b) RIGHTS AS SHAREHOLDERS. Except as provided under Section
9.6 with respect to grants of Restricted Shares, no Participant shall have
any rights of a shareholder with respect to Shares subject to an Award
until such Shares are issued in the name of the Participant.
(c) EMPLOYMENT RIGHTS. Neither the adoption of the Plan nor
the granting of any Award shall (i) confer on any person the right to
continued employment with Corporation or any Subsidiary or the right to
remain as a director of Corporation or a member of any Advisory Committee,
as the case may be, (ii) interfere in any way with the right of
Corporation or a Subsidiary to terminate such person's employment or to
decrease such employee's compensation or benefits or to remove such person
as an Advisor or as a director at any time for any reason, with or without
cause, or (iii) confer on any person engaged by Corporation any right to
be retained or employed by Corporation or to the continuation, extension,
renewal, or modification of any compensation, contract, or arrangement
with or by Corporation.
(d) NONTRANSFERABLE. Each Award (other than Restricted Shares
after they Vest) shall not be transferable otherwise than by will or the
laws of descent and distribution of the state or country of the
Participant's domicile at the time of death or pursuant to a qualified
domestic relations order as defined under the Code or Title I of the
Employee Retirement Income Security Act, and each Award shall be
exercisable (if exercise is required) during the lifetime of the
Participant, only by the Participant or, in the event the Participant
becomes legally incompetent, by the Participant's guardian or legal
representative.
(e) TERMINATION OF EMPLOYMENT. The terms and conditions under
which an Award may be exercised, if at all, after a Participant's
termination of employment or service as an Advisor or as a Non-Employee
Director shall be determined by the Committee and specified in the
applicable Award Agreement. The Committee, at the time of grant or at any
time thereafter, may extend the period of time, if any, not later than the
original expiration date of the Award, during which an Award may be
exercised following termination of employment, and may increase the
portion of an Award that is exercisable, subject to terms and conditions
specified by the Committee.
(f) CHANGE IN CONTROL. The Committee, in its discretion, may
provide in any Award Agreement that in the event of a change in control of
Corporation (as the Committee may define such term in the Award
Agreement), as of the date of such change in control:
(i) All, or a specified portion of, Awards requiring
exercise shall become fully and immediately exercisable,
notwithstanding any other limitations on exercise;
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(ii) All, or a specified portion of, Awards subject
to Restrictions shall become fully Vested; and
(iii) All, or a specified portion of, Awards subject
to Performance Goals shall be deemed to have been fully
earned.
The Committee, in its discretion, may include change in control provisions
in some Award Agreements and not in others, may include different change
in control provisions in different Award Agreements, and may include
change in control provisions for some Awards or some Participants and not
for others.
(g) REPORTING PERSONS. With respect to all Awards granted to
Reporting Persons, the Award Agreement shall provide that, except as may
be otherwise determined by the Committee:
(i) For Awards requiring exercise, if the Reporting
Person exercises the Award within six months after the date
the Award was granted, any Shares acquired upon exercise of
the Award may not be sold until at least six months after the
date the Award was granted, except in the case of the death or
Disability of the Participant; and
(ii) Shares issued pursuant to any other Award may
not be sold by the Participant for at least six months after
acquisition, except in the case of the death or Disability of
the Participant;
provided, however, that (unless an Award Agreement provides otherwise) the
limitation of this Section 6.5.(g) shall apply only if or to the extent
required by Rule 16b-3 under the Exchange Act. Award Agreements for Awards
to Reporting Persons shall also comply with any future restrictions
imposed by such Rule 16b-3.
(h) SERVICE PERIODS . At the time of granting Awards, the
Committee may specify, by resolution or in the Award Agreement, the period
or periods of service performed or to be performed by the Participant in
connection with the grant of the Award.
ARTICLE 7
OPTIONS
7.1 TYPES OF OPTIONS. Options granted under the Plan may be in
the form of Incentive Stock Options or Nonqualified Options (including Deferred
Compensation Options). The grant of each Option and the Award Agreement
governing each Option shall identify the Option as an ISO or an NQO. In the
event the Code is amended to provide for tax-favored forms of stock options
other than or in addition to Incentive Stock Options, the Committee may grant
Options under the Plan meeting the requirements of such forms of options.
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7.2 GENERAL. Options shall be subject to the terms and
conditions set forth in Article 6 and this Article 7 and shall contain such
additional terms and conditions, not inconsistent with the express provisions of
the Plan, as the Committee shall deem desirable.
7.3 OPTION PRICE. Each Award Agreement for Options shall state
the option exercise price per Share of Common Stock purchasable under the
Option, which shall not be less than:
(a) $1 per share in the case of a Deferred Compensation
Option;
(b) 75 percent of the Fair Market Value of a Share on the date
of grant for all other Nonqualified Options; or
(c) 100 percent of the Fair Market Value of a Share on the
date of grant for all Incentive Stock Options; provided that if an
Incentive Stock Option is granted under the Plan to an employee possessing
more than 10 percent of the total combined voting power of all classes of
stock of Corporation or of any parent or Subsidiary of Corporation, the
option price must be at least 1 10 percent of the Fair Market Value of a
Share on the date the Option is granted.
7.4 OPTION TERM. The Award Agreement for each Option shall
specify the term of each Option, have a specified period during which the Option
may be exercised, as determined by the Committee; provided that if an Incentive
Stock Option is granted to an employee possessing more than 10 percent of the
total combined voting power of all classes of stock of Corporation, the term of
the Option shall not exceed five years, and the term of all Incentive Stock
Options shall not exceed 10 years.
7.5 TIME OF EXERCISE. The Award Agreement for each Option
shall specify, as determined by the Committee:
(a) The time or times when the Option shall become exercisable
and whether the Option shall become exercisable in full or in graduated
amounts over a period specified in the Award Agreement;
(b) Such other terms, conditions, and restrictions as to when
the Option may be exercised as shall be determined by the Committee; and
(c) The extent, if any, that the Option shall remain
exercisable after the Participant ceases to be an employee, Advisor, or
director of Corporation or a Subsidiary.
An Award Agreement for an Option may, in the discretion of the Committee,
provide whether, and to what extent, the Option will become immediately and
fully exercisable (i) in the event of the death, Disability, or Retirement of
the Participant, or (ii) upon the occurrence of a change in control of
Corporation.
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7.6 METHOD OF EXERCISE. The Award Agreement for each Option
shall specify the method or methods of payment acceptable upon exercise of an
Option. An Award Agreement may provide that the option price is payable in full
in cash or, at the discretion of the Committee:
(a) In installments on such terms and over such period as the
COMMITTEE shall determine;
(b) In previously acquired Shares (including Restricted
Shares);
(c) By surrendering outstanding Awards under the Plan
denominated in Shares or in Share equivalent units;
(d) By delivery (in a form approved by the Committee) of an
irrevocable direction to a securities broker acceptable to the Committee:
(i) To sell Shares subject to the Option and to deliver
all or a part of the sales proceeds to Corporation in payment
of all or a part of the option price and withholding taxes
due; or
(ii) To pledge Shares subject to the Option to the broker
as security for a loan and to deliver all or a part of the
loan proceeds to Corporation in payment of all or a part of
the option price and withholding taxes due; or
(e) In any combination of the foregoing or in any other form
approved by the Committee.
If Restricted Shares are surrendered in full or partial payment of an Option
price, a corresponding number of the Shares issued upon exercise of the Option
shall be Restricted Shares subject to the same Restrictions as the surrendered
Restricted Shares.
7.7 SPECIAL RULES FOR INCENTIVE STOCK OPTIONS. In the case of
an Option designated as an Incentive Stock Option, the terms of the Option and
the Award Agreement shall be in conformance with the statutory and regulatory
requirements specified in Section 422 of the Code, as in effect on the date such
ISO is granted. ISOs may be granted only to employees of Corporation or a
Subsidiary. No employee may be granted Incentive Stock Options under the Plan if
the aggregate fair market value, on the date of grant, of the Shares with
respect to which Incentive Stock Options are exercisable for the first time by
that employee during any calendar year under the Plan and under any other
incentive stock option plan (within the meaning of Section 422 of the Code) of
Corporation or any parent or Subsidiary of Corporation exceeds $100,000. ISOs
may not be granted under the Plan after March 9, 2003, unless the ten-year
limitation of Section 422(b)(2) of the Code is removed or extended.
7.8 RESTRICTED SHARES. In the discretion of the Committee, the
Shares issuable upon exercise of an Option may be Restricted Shares if so
provided in the Award Agreement.
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7.9 DEFERRED COMPENSATION OPTIONS. The Committee may, in its
discretion, grant Deferred Compensation Options with an option price less than
Fair Market Value to provide a means for deferral of compensation to future
dates. The option price shall be determined by the Committee subject to Section
7.3(a) of the Plan. The number of Shares subject to a Deferred Compensation
Option shall be determined by the Committee, in its discretion, by dividing the
amount of compensation to be deferred by the difference between the Fair Market
Value of a Share on the date of grant and the option price of the Deferred
Compensation Option. Amounts of compensation deferred with Deferred Compensation
Options may include amounts earned under Awards granted under the Plan or under
any other compensation program or arrangement of Corporation as permitted by the
Committee. The Committee shall grant Deferred Compensation Options only if it
reasonably determines that the recipient of such an Option is not likely to be
deemed to be in constructive receipt for income tax purposes of the income being
deferred.
7.10 RELOAD OPTIONS. The Committee, in its discretion, may
provide in an Award Agreement for an Option that in the event all or a, portion
of the Option is exercised by the Participant using previously acquired Shares,
the Participant shall automatically be granted a replacement Option (with an
option price equal to the Fair Market Value of a Share on the date of such
exercise) for a number of Shares equal to (or equal to a portion of) the number
of shares surrendered upon exercise of the Option. Such reload Option features
may be subject to such terms and conditions as the Committee shall determine,
including without limitation, a condition that the Participant retain the Shares
issued upon exercise of the Option for a specified period of time.
ARTICLE 8
STOCK APPRECIATION RIGHTS
8.1 GENERAL. Stock Appreciation Rights shall be subject to the
terms and conditions set forth in Article 6 and this Article 8 and shall contain
such additional terms and conditions, not inconsistent with the express terms of
the Plan, as the Committee shall deem desirable.
8.2 NATURE OF STOCK APPRECIATION RIGHT. A Stock Appreciation
Right is an Award entitling a Participant to receive an amount equal to the
excess (or if the Committee shall determine at the time of grant, a portion of
the excess) of the Fair Market Value of a Share of Common Stock on the date of
exercise of the SAR over the base price, as described below, on the date of
grant of the SAR, multiplied by the number of Shares with respect to which the
SAR shall have been exercised. The base price shall be designated by the
Committee in the Award Agreement for the SAR and may be the Fair Market Value of
a Share on the grant date of the SAR or such other higher or lower price as the
Committee shall determine.
8.3 EXERCISE. A Stock Appreciation Right may be exercised by a
Participant in accordance with procedures established by the Committee. The
Committee may also provide that a SAR shall be automatically exercised on one or
more specified dates or upon the satisfaction of one or more specified
conditions. In the case of SARs granted to Reporting Persons, exercise of the
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SAR shall be limited by the Committee to the extent required to comply with the
applicable requirements of Rule 16b-3 under the Exchange Act.
8.4 FORM OF PAYMENT. Payment upon exercise of a Stock
Appreciation Right may be made in cash, in installments, in Shares, by issuance
of a Deferred Compensation Option, or in any combination of the foregoing, or in
any other form as the Committee shall determine.
ARTICLE 9
RESTRICTED AWARDS
9.1 TYPES OF RESTRICTED AWARDS. Restricted Awards granted
under the Plan may be in the form of either Restricted Shares or Restricted
Units.
(a) RESTRICTED SHARES. A Restricted Share is an Award of
Shares transferred to a Participant subject to such terms and conditions
as the Committee deems appropriate, including, without limitation,
restrictions on the sale, assignment, transfer, or other disposition of
such Restricted Shares and may include a requirement that the Participant
forfeit such Restricted Shares back to Corporation upon termination of
Participant's employment (or service as an Advisor) for specified reasons
within a specified period of time or upon other conditions, as set forth
in the Award Agreement for such Restricted Shares. Each Participant
receiving a Restricted Share shall be issued a stock certificate in
respect of such Shares, registered in the name of such Participant, and
shall execute a stock power in blank with respect to the Shares evidenced
by such certificate. The certificate evidencing such Restricted Shares and
the stock power shall be held in custody by Corporation until the
Restrictions thereon shall have lapsed.
(b) RESTRICTED UNITS. A Restricted Unit is an Award of units
(with each unit having a value equivalent to one Share) granted to a
Participant subject to such terms and conditions as the Committee deems
appropriate, and may include a requirement that the Participant forfeit
such Restricted Units upon termination of Participant's employment (or
service as an Advisor) for specified reasons within a specified period of
time or upon other conditions, as set forth in the Award Agreement for
such Restricted Units.
9.2 GENERAL. Restricted Awards shall be subject to the terms
and conditions of Article 6 and this Article 9 and shall contain such additional
terms and conditions, not inconsistent with the express provisions of the Plan,
as the Committee shall deem desirable.
9.3 RESTRICTION PERIOD. Restricted Awards shall provide that
such Awards, and the Shares subject to such Awards, may not be transferred, and
may provide that, in order for a Participant to Vest in such Awards, the
Participant must remain in the employment (or remain as an Advisor) of
Corporation or its Subsidiaries, subject to relief for reasons specified in the
Award Agreement, for a period commencing on the date of the Award and ending on
such later date or dates as the Committee may designate at the time of the Award
(the "Restriction Period"). During the Restriction Period, a
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Participant may not sell, assign, transfer, pledge, encumber, or otherwise
dispose of Shares received under or governed by a Restricted Award grant. The
Committee, in its sole discretion, may provide for the lapse of restrictions in
installments during the Restriction Period. Upon expiration of the applicable
Restriction Period (or lapse of Restrictions during the Restriction Period where
the Restrictions lapse in installments) the Participant shall be entitled to
settlement of the Restricted Award or portion thereof, as the case may be.
Although Restricted Awards shall usually Vest based on continued employment (or
service as an Advisor) and Performance Awards under Article 10 shall usually
Vest based on attainment of Performance Goals, the Committee, in its discretion,
may condition Vesting of Restricted Awards on attainment of Performance Goals as
well as continued employment (or service as an Advisor). In such case, the
Restriction Period for such a Restricted Award shall include the period prior to
satisfaction of the Performance Goals.
9.4 FORFEITURE. If a Participant ceases to be an employee or
Advisor of Corporation or a Subsidiary during the Restriction Period for any
reason other than reasons which may be specified in an Award Agreement (such as
death, Disability, or Retirement) the Award Agreement may require that all
non-Vested Restricted Awards previously granted to the Participant be forfeited
and returned to Corporation.
9.5 SETTLEMENT OF RESTRICTED AWARDS.
(a) RESTRICTED SHARES. Upon Vesting of a Restricted Share
Award, the legend on such Shares will be removed and the Participant's stock
power will be returned and the Shares will no longer be Restricted Shares. The
Committee may also, in its discretion, permit a Participant to receive, in lieu
of unrestricted Shares at the conclusion of the Restriction Period, payment in
cash, installments, or by issuance of a Deferred Compensation Option equal to
the Fair Market Value of the Restricted Shares as of the date the Restrictions
lapse.
(b) RESTRICTED UNITS. Upon Vesting of a Restricted Unit Award,
a Participant shall be entitled to receive payment for Restricted Units in
an-amount equal to the aggregate Fair Market Value of the Shares covered by such
Restricted Units at the expiration of the Applicable Restriction Period. Payment
in settlement of a Restricted Unit shall be made as soon as practicable
following the conclusion of the applicable Restriction Period in cash, in
installments, in Shares equal to the number of Restricted Units, by issuance of
a Deferred. Compensation Option, or in any other manner or combination of such
methods as the Committee, in its sole discretion, shall determine.
. 9.61 RIGHTS AS A SHAREHOLDER. A Participant shall have, with
respect to unforfeited Shares received under a grant of Restricted Shares, all
the rights of a shareholder of Corporation, including the right to vote the
shares, and the right to receive any cash dividends. Stock dividends issued with
respect to Restricted Shares shall be treated as additional Shares covered by
the grant of Restricted Shares and shall be subject to the same Restrictions.
ARTICLE 10
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PERFORMANCE AWARDS
10.1 GENERAL. Performance Awards shall be subject to the terms
and conditions set forth in Article 6 and this Article 10 and shall contain such
other terms and conditions not inconsistent with the express provisions of the
Plan, as the Committee shall deem desirable.
10.2 NATURE OF PERFORMANCE AWARDS. A Performance Award is an
Award of units with each unit having a value equivalent to one Share) granted to
a Participant subject to such terms and conditions as the Committee deems
appropriate, including, without limitation, the requirement that the Participant
forfeit such Performance Award or a portion thereof in the event specified
performance criteria are not met within a designated period of time.
10.3 PERFORMANCE CYCLES. For each Performance Award, the
Committee shall designate a performance period (the "Performance Cycle") with a
duration to be determined by the Committee in its discretion within which
specified Performance Goals are to be attained. There may be several Performance
Cycles in existence at any one time and the duration of Performance Cycles may
differ from each other.
10.4 PERFORMANCE GOALS. The Committee shall establish
Performance Goals for each Performance Cycle on-the basis of such criteria and
to accomplish such objectives as the Committee may from time to time select.
Performance Goals may be based on performance criteria for Corporation, a
Subsidiary, or an operating group, or based on a Participant's individual
performance. Performance Goals may include objective and subjective criteria.
During any Performance Cycle, the Committee may adjust the Performance Goals for
such Performance Cycle as it deems equitable in recognition of unusual or
nonrecurring events affecting Corporation, changes in applicable tax laws or
accounting principles, or such other factors as the Committee may determine.
10.5 DETERMINATION OF AWARDS. As soon as practicable after the
end of a Performance Cycle, the Committee shall determine the extent to which
Performance Awards have been earned on the basis of performance in relation to
the established Performance Goals.
15.2 TIMING AND FORM OF PAYMENT. Settlement of earned Performance Awards shall
be made to the Participant as soon as practicable after the expiration of the
Performance Cycle and the Committee's determination under Section 10.5, in the
form of cash, installments, Shares, Deferred Compensation Options, or any
combination of the foregoing or in any other form as the Committee shall
determine.
ARTICLE 11
OTHER STOCK BASED AND COMBINATION AWARDS
11.1 OTHER STOCK-BASED AWARDS. The Committee may grant other
Awards under the Plan pursuant to which Shares are or may in the future be
acquired, or Awards denominated in or measured by Share equivalent units,
including Awards valued using measures other than the market value of Shares.
Such Other Stock-Based
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Awards may be granted either alone, in addition to, or in tandem with, any other
type of Award granted under the Plan.
11.2 COMBINATION AWARDS. The Committee may also grant Awards
under the Plan in tandem or combination with other Awards or in exchange of
Awards, or in tandem or combination with, or as alternatives to, grants or
rights under any other employee plan of Corporation, including the plan of any
acquired entity. No action authorized by this section shall reduce the amount of
any existing benefits or change the terms and conditions thereof without the
Participant's consent.
ARTICLE 12
DEFERRAL ELECTIONS
The Committee may permit a Participant to elect to defer receipt
of the payment of cash or the delivery of Shares that would otherwise be due to
such Participant by virtue of the exercise, earn out, or Vesting of an Award
made under-the Plan. If any such election is permitted, the Committee shall
establish rules and procedures for such payment deferrals, including, but not
limited to: (a) payment or crediting of reasonable interest on such deferred
amounts credited in cash, (b) the payment or crediting of dividend equivalents
in respect of deferrals credited in Share equivalent units, or (c) granting of
Deferred Compensation Options.
ARTICLE 13
DIVIDEND EQUIVALENTS
Any Awards may, at the discretion of the Committee, earn dividend
equivalents. In respect of any such Award which is outstanding on a dividend
record date for Common Stock, the Participant may be credited with an amount
equal to the amount of cash or stock dividends that would have been paid on the
Shares covered by such Award, had such covered Shares been issued and
outstanding on such dividend record date. The Committee shall establish such
rules and procedures governing the crediting of dividend equivalents, including
the timing, form of payment, and payment contingencies of such dividend
equivalents, as it deems are appropriate or necessary.
ARTICLE 14
NON-EMEPLOYEE DIRECTORS
14.1 GENERAL. From and after the Registration Date, Awards shall
be made to Non-Employee Directors only under this Article 14. No person,
including the members of the Board or the Committee, shall have any discretion
as to the selection of eligible recipients or the determination of the type,
amount, or terms of Awards pursuant to this Article 14.
14.2 ELIGIBILITY. The persons eligible to receive Awards
pursuant to this Article 14 are all Non-Employee Directors.
14.3 DIRECTOR OPTIONS. Effective as of the Registration Date,
the Chairman of the Board of Directors shall be granted a Nonqualified Option (a
'Non-Employee Director Option') to purchase 75,000 Shares, and each other
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person who is then a Non-Employee Director shall be granted a Non-Employee
Director Option to purchase 50,000 Shares, with an Option price equal to 75
percent of the Fair Market Value of a Share on the Registration Date. Each
person who becomes a Non-Employee Director after the Registration Date shall be
granted, on the date such person becomes a Non-Employee Director, a Non-Employee
Director Option to purchase 50,000 Shares with an Option price equal to 75
percent of the Fair Market Value of a Share on such date. A Non-Employee
Director elected as Chairman of the Board of Directors after the Registration
Date shall be granted, as of the date of such election, a Non-Employee Director
Option to purchase 75,000 Shares (or, if such person has previously received a
Non-Employee Director Option, a Non-Employee Director Option to purchase an
additional 25,000 shares) with an Option price equal to 75 percent of the Fair
Market Value of a Share on such date.
14.4 AWARD AGREEMENTS. Each Award of Non-Employee Director
Options made pursuant to this Article 14 shall be governed by and shall be
subject to the terms and conditions set forth in an Non-Employee Director Award
Agreement in the form attached to this Plan as EXHIBIT A. Except to the extent
otherwise provided in this Article 14 or in such Non-Employee Director Award
Agreement, each such Award shall be governed by Article 7 of the Plan. With
respect to persons who become Non-Employee Directors after the Registration
Date, the Non-Employee Director Award Agreement for the Director Option shall be
in substantially the same form as Exhibit A, but with the dates of annual
meetings specified in such Non-Employee Director Award Agreement adjusted to
refer to dates subsequent to such person becoming a Non-Employee Director.
ARTICLE 15
ADJUSTMENTS UPON CHANGES IN CAPITALIZATTON, ETC.
15.1 PLAN DOES NOT RESTRICT CORPORATION. The existence of the
Plan and the Awards granted hereunder shall not affect or restrict in any way
the right or power of the Board or the shareholders of Corporation to make or
authorize any adjustment, recapitalization, reorganization, or other change in
Corporation's capital structure or its business, any merger or consolidation of
Corporation, any issue of bonds, debentures, preferred or prior preference
stocks ahead of or affecting Corporation's capital stock or the rights thereof,
the dissolution or liquidation of Corporation or any sale or transfer of all or
any part of its assets or business, or any other corporate act or proceeding.
15.2 ADJUSTMENTS BY THE COMMITTEE. In the event of any change in capitalization
affecting the Common Stock of Corporation, such as a stock dividend, stock
split, recapitalization, merger, consolidation, split-up, combination or
exchange of shares or other form of reorganization, or any other change
affecting the Common Stock, such proportionate adjustments, if any, as the
Committee, in its sole discretion, may deem appropriate to reflect such change,
shall be made with respect to the aggregate number of Shares for which Awards in
respect thereof may be granted under the Plan, the maximum number of Shares
which may be sold or awarded to any Participant, the number of Shares covered by
each outstanding Award, and the price per Share in respect of outstanding
Awards. The Committee may also make such adjustments in the number of Shares
covered by, and price or other value of any
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outstanding Awards in the event of a spin-off or other distribution (other than
normal cash dividends), of Corporation assets to shareholders.
ARTICLE 16
AMENDMENT AND TERMINATION
The Board may at any time terminate the Plan, or may amend it
from time to time in such respects as the Board may deem advisable because of
changes in the law while the Plan is in effect or for any other reason, except
that the provisions of Article 14 of the Plan shall not be amended more than
once every six months, other than to comport with changes in the Code or in Rule
16b-3 under the Exchange Act.
ARTICLE 17
MISCELLANEOUS
17.1 TAX WITHHOLDING.
(a) GENERAL. Corporation shall have the right to deduct from
any settlement, including the delivery or vesting of Shares, made under the Plan
any federal, state, or local taxes of any kind required by law to be withheld
with respect to such payments or to take such other action as may be necessary
in the opinion of the Committee to satisfy all obligations for the payment of
such taxes. 'Me recipient of any payment or distribution under the Plan shall
make arrangements satisfactory to Corporation for the satisfaction of any such
withholding tax obligations. Corporation shall not be required to make any such
settlement under the Plan until such obligations are satisfied.
(b) STOCK WITHHOLDING. The Committee, in its sole discretion,
may permit a Participant to satisfy all or a part of the withholding tax
obligations incident to the settlement of an Award involving payment or delivery
of Shares to the Participant by having Corporation withhold a portion of the
Shares that would otherwise be issuable to the Participant. Such Shares shall be
valued based on their Fair Market Value on the date the tax withholding is
required to be made. Any stock withholding with respect to a Reporting Person
shall be subject to such limitations as the Committee may impose to comply with
the requirements of the Exchange Act.
17.2 UNFUNDED PLAN. The Plan shall be unfunded and Corporation
shall not be required to segregate any assets that may at any time be
represented by Awards under the Plan. Any liability of Corporation to any person
with respect to any Award under the Plan shall be based solely upon any
contractual obligations that may be effected pursuant to the Plan. No such
obligation of Corporation shall be deemed to be secured by any pledge of, or
other encumbrance on, any property of Corporation.
17.3 PAYMENTS TO TRUST. The Committee is authorized to cause
to be established a trust agreement or several trust agreements whereunder the
Committee may make payments of amounts due or to become due to Participants in
the Plan.
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17.4 ANNULMENT OF AWARDS. Any Award Agreement may provide that
the grant of an Award payable in cash is provisional until cash is paid in
settlement thereof or that grant of an Award payable in Shares is provisional
until the Participant becomes entitled to the certificate in settlement thereof.
In the event the employment (or service as an Advisor or membership on the
Board) of a Participant is terminated for cause (as defined below), any Award
which is provisional shall be annulled as of the date of such termination for
cause. For the purpose of this Section 17.4, the term "for cause" shall have the
meaning set forth in the Participant's employment agreement, if any, or
otherwise means any discharge (or removal) for material or flagrant violation of
the policies and procedures of Corporation or for other job performance or
conduct which is materially detrimental to the best interests of Corporation, as
determined by the Committee.
17.5 ENGAGING IN COMPETITION WITH THE CORPORATION. Any Award
Agreement may provide that, if a Participant terminates employment with
Corporation or a- Subsidiary for any reason whatsoever, and within 18 months
after the date thereof accepts employment with any competitor of (or otherwise
engages in competition with) Corporation, the Committee, in its sole discretion,
may require such Participant to return to Corporation the economic value of any
Award that is realized or obtained (measured at the date of exercise, Vesting,
or payment) by such Participant at any time during the period beginning on the
date that is six months prior to the date of such Participant's termination of
employment with Corporation.
17.6 OTHER CORPORATION BENEFIT AND COMPENSATION PROGRAMS.
Payments and other benefits received by a Participant under an Award made
pursuant to the Plan shall not be deemed a part of a Participant's regular,
recurring compensation for purposes of the termination indemnity or severance
pay law of any state or country and shall not be included in, nor have any
effect on, the determination of benefits under any other employee benefit plan
or similar arrangement provided by Corporation or a Subsidiary unless expressly
so provided by such other plan or arrangements, or except where the Committee
expressly determines that an Award or portion of an Award should be included to
accurately reflect competitive compensation practices or to recognize that an
Award has been made in lieu of a portion of cash compensation. Awards under the
Plan may be made in combination with or in tandem with, or as alternatives to,
grants, awards, or payments under any other Corporation or Subsidiary plans,
arrangements, or programs. The Plan notwithstanding, Corporation or any
Subsidiary may adopt such other compensation programs and additional
compensation arrangements as it deems necessary to attract, retain, and reward
employees and directors for their service with Corporation and its Subsidiaries.
17.7 SECURITIES LAW RESTRICTIONS. No Shares shall be issued
under the Plan unless counsel for Corporation shall be satisfied that such
issuance will be in compliance with applicable federal and state securities
laws. Certificates for Shares delivered under the Plan may be subject to such
stop-transfer orders and other restrictions as the Committee may deem advisable
under the rules, regulations, and other requirements of the Securities and
Exchange Commission, any stock exchange upon which the Common Stock is then
listed, and any applicable federal or state securities law. The
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Committee may cause a legend or legends to be put on any such certificates to
make appropriate reference to such restrictions.
17.8 GOVERNING LAW. Except with respect to references to the
Code or federal securities laws, the Plan and all actions taken thereunder shall
be governed by and construed in accordance with the laws of the state of Oregon.
ARTICLE 18
SHAREHOLDER APPROVAL
The adoption of the Plan and the grant of Awards under the Plan
are expressly subject to the approval of the Plan by the affirmative vote of the
holders of a majority of the shares of Common Stock outstanding on the date of
shareholder approval acting pursuant to written consent or present at a meeting
of Corporation's shareholders.
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EXHIBIT A
AWARD AGREEMENT
UNDER THE
VINIFERA, INC.,
1993 STOCK AWARD PLAN
NON-EMLOYEE DIRECTOR OPTION
Dated ______________ ___, 199__
Vinifera, Inc.
8505 S.W. Creekside Place
Beaverton, Oregon 97005
("Corporation")
[Name and Address of
Participant]
__________________
__________________
("Participant")
Corporation maintains the Vinifera, Inc., 1993 Stock Award Plan
(the "Plan"). This Agreement governs the Award of a Nonqualified Option to
Participant as a Non-Employee Director pursuant to Article 14 of the Plan.
The parties agree as follows:
1. DEFINED TERMS
When used in this Agreement, the following terms shall have the
meanings specified below:
(a) "ACQUIRING PERSON" shall mean any person or related person
or related persons which constitute a "group" for purposes of Section 13(d) and
Rule 13d-5 under the Exchange Act, as such Section and Rule are in effect as of
the date of this Agreement; provided, however, that the term Acquiring Person
shall not include (i) Corporation or any of its Subsidiaries, (ii) any employee
benefit plan of Corporation or any of its Subsidiaries, (iii) any entity holding
voting capital stock of Corporation for or pursuant to the terms of any such
employee benefit plan, or (iv) any person or group solely because such person or
group has voting power with respect to capital stock of Corporation arising from
a revocable proxy or consent given in response to a public proxy or consent
solicitation made pursuant to the Exchange Act.
(b) "ANNUAL MEETING" means an annual meeting of the Board held
in conjunction with an annual meeting of the shareholders of Corporation.
(c) "APPROVED CHANGE IN CONTROL" shall mean a Change in
Control- which is approved in writing by the Board prior to the Change in
Control Date.
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(d) "CHANGE IN CONTROL" shall mean:
(i) A change in control of Corporation of a nature
that would be required to be reported in response to Item 6(e)
of Schedule 14A of Regulation 14A as in effect on the date of
this Agreement pursuant to the Exchange Act; provided that,
without limitation, such a change in control shall be deemed
to have occurred at such time as any Acquiring Person
hereafter becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of 30
percent or more of the combined voting power of Corporation
Voting Securities; or
(ii) During any period of 12 consecutive calendar
months, individuals who at the beginning of such period
constitute the Board cease for any reason to constitute at
least a majority thereof unless the election, or the
nomination for election, by Corporation's shareholders of each
new director was approved by a vote of at least a majority of
the directors then still in office who were directors at the
beginning of the period; or
(iii) There shall be consummated (1) any
consolidation or merger of Corporation in which Corporation is
not the continuing or surviving corporation or pursuant to
which Voting Securities would be converted into cash,
securities, or other property, other than a merger of
Corporation in which the holders of Voting Securities
immediately prior to the merger have the same, or
substantially the same, proportionate ownership of common
stock of the surviving corporation immediately after the
merger, or (2) any sale, lease, exchange, or other transfer
(in one transaction or a series of related transactions) of
all, or substantially all, of the assets of Corporation,
provided that any such consolidation, merger, sale, lease,
exchange, or other transfer consummated at the insistence of
an appropriate banking regulatory agency shall not constitute
a change in control; or
(iv) Approval by the shareholders of Corporation of
any plan or proposal for the liquidation or dissolution of
Corporation.
(e) "CHANGE IN CONTROL DATE" shall mean the first date
following the date of this Agreement on which a Change in Control has
occurred.
(f) "EFFECTIVE DATE" means the date of this Agreement, which
is the date the Option is granted to Participant.
(g) "OPTION" means the Nonqualifted Option granted to
Participant evidenced by this Agreement.
(h) "VOTING SECURITIES" shall mean Corporation's issued and
outstanding securities ordinarily having the right to vote at elections
for Corporation's Board.
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(i) Capitalized terms not otherwise defined in this Agreement
have the meanings given them in the Plan.
2. GRANT OF OPTION
Subject to the terms and conditions of this Agreement and the
Plan, as of the Effective Date Corporation granted to Participant a Nonqualified
Option (the "Option") to purchase [50,000 or 75,000] Shares.
3. TERMS OF THE QPTION
The Option shall have the following terms and conditions:
(a) PRICE. The Option price per Share of the Option shall be
$[75% of Fair Market Value on Effective Date] per Share.
(b) TERM. The term of the Option shall be unlimited unless
otherwise terminated pursuant to the terms of this Agreement.
(c) TIME OF EXERCISE. Unless the Option is terminated or the
time of its exercisability is accelerated in accordance with the provisions of
this Agreement:
(i) The Option shall not be exercisable prior to the date of
the [first Annual Meeting occurring more than six months after
Effective Date], except as to [10,000 or 15,000 multiplied by whole
number of months of service as a director until anticipated date of
first Annual Meeting occurring more than six months after Effective
Date] Shares, for which the Option shall become exercisable as of [date
occurring six months after Effective date]; and
(ii) As of the dates of each of the 199- through 199 Annual
Meetings, providing Participant is a director of Corporation at such
meeting, the option shall become exercisable as follows:
ANNUAL MEETING DATES NUMBER OF SHARES
-------------------- ----------------
199_ [10,000 or 15,000]
199_ [10,000 or 15,000]
199_ [10,000 or 15,000]
199_
(d) CONTINUATION AS A DIRECTOR. If Participant ceases to be a
member of the Board for any reason, the right to exercise the Option,
to the extent the Option is then exercisable (or becomes exercisable at
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that time pursuant to Subsection 3.(e)) shall expire at the end of the
following periods:
After Termination
On Account Of Period
----------------- ------
Death 1 year
Retirement 5 years
Disability 1 year
Any other reason 1 year
(e) ACCELERATION OF EXERCISABILITY. Notwithstanding the
schedule provided in Subsection 3.(d), the exercisability of the Option
shall be accelerated upon a Change in Control Date (other than in
connection with an Approved Change in Control). Upon such a Change in
Control Date, the Option shall become immediately and fully exercisable
as to all Shares covered by the Option; provided, however, that no
portion of the Option shall become exercisable in any event sooner than
six months after the Effective Date, except in the case of
Participant's death or Disability.
(f) SERVICE PERIODS. The periods of service as a director in
connection with the grant of the Option are as follows:
(i) The portion of the Option becoming exercisable pursuant to
Subsection 3.(c)(i) is in connection with services to be performed in
the [__________] period preceding the [first Annual Meeting occurring
more than six months after Effective Date];
(ii) The portions of the Option becoming exercisable pursuant
to Subsection 3.(c)(ii) are respectively in connection with services to be
performed in the 1-year periods commencing on each Annual Meeting.
4. METHOD OF EXERCISE.
(a) EXERCISE OF OPTIONS. The Option, or a portion thereof, may
be exercised, to the extent it has become exercisable pursuant to Subsections
3.(c) and 3.(e), by delivery of written notice to Corporation stating the
number of Shares, form of payment, and proposed date of closing.
(b) OTHER DOCUMENTS. Participant shall furnish Corporation,
before closing of any exercise of the Option, such other documents or
representations as Corporation may require to assure compliance with
applicable laws and regulations.
(c) PAYMENT. The purchase price for the Shares purchased upon
exercise of the Option shall be paid in full at or before closing by one or a
combination of the following:
(i) Payment in cash;
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(ii) By delivery (in a form approved by the Committee) of an
irrevocable direction to a securities broker acceptable to the
Committee:
(1) To sell Shares subject to the Option and to
deliver all or a part of the sales proceeds to Corporation in
payment of all or a part of the option price and withholding
taxes due; or
(2) To pledge Shares subject to the Option to the
broker as security for a loan and to deliver all or a part of
the loan proceeds to Corporation in payment of all or a part
of the option price and withholding taxes due; or
(iii) Delivery of previously acquired Shares having a Fair
Market Value equal to the purchase price.
(d) PREVIOUSLY ACQUIRED SHARES. Delivery of previously
acquired Shares surrendered in full or partial payment of the exercise price
of the Option, or any portion thereof, shall be subject to the following
conditions:
(i) The Shares tendered shall be in good delivery form;
(ii) The Fair Market Value of the Shares, together with the
amount of cash, if any, tendered shall equal or exceed the exercise
price of the Option;
(iii) Any Shares remaining after satisfying the payment of the
Option shall be reissued in the same manner as the Shares tendered; and
(iv) No fractional Shares will be issued and cash will not be
paid to Participant for any fractional Share value not used to satisfy
the Option exercise price.
(e) RELOAD OPTION. In the event all or a portion of the
Option is exercised by Participant by delivering previously acquired
Shares, Participant shall be granted automatically a replacement Option
-for a number of Shares equal to the number of Shares delivered upon
exercise of the Option. The grant date for such replacement Option
shall be the date of exercise and the option price for such replacement
Option shall be the Fair Market Value of a Share on such grant date.
The replacement Option initially shall not be exercisable and shall
become fully exercisable six months after the grant date. In all other
respects, the replacement Option shall be subject to all the terms and
conditions of this Agreement.
5. SECURITIES LAWS.
Corporation shall not be required to distribute any Shares
upon exercise of the Option, or any portion thereof, until Corporation shall
have
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taken any action required to comply with the provisions of the Securities Act of
1933 or any other then applicable federal or state securities laws.
6. TAX REIMBURSEMENT.
In the event any withholding or similar tax liability is
imposed on Corporation in connection with or with respect to the exercise of the
Option governed by this Agreement, Participant agrees to pay to Corporation an
amount sufficient to provide for such tax liability.
7. CONDITIONS PRECEDENT.
The grant of Awards under the Plan is subject to the approval
of the Plan by Corporation's shareholders as set forth in the Plan. Corporation
will use its best efforts to obtain any required approvals of the Plan and the
Awards of Restricted Shares governed by this Agreement by any state or federal
agency or authority that Corporation determines has jurisdiction. If Corporation
determines that any required approval cannot be obtained, all Awards to
Participant shall terminate on notice to Participant to that effect.
8. SUCCESSORSHIP.
Subject to the restrictions on transferability set forth in this
Agreement and in the Plan, this Agreement shall be binding upon and benefit the
parties, their successors, and assigns.
9. NOTICES.
Any notices under this Agreement shall be in writing and shall be
effective when actually delivered personally or, if mailed, when deposited as
registered or certified, mail directed to the address maintained in
Corporation's records or to such other address as a party may certify by notice
to the other party.
VINIFERA, INC.
By:
--------------------------------------
(Title)
-----------------------------------------
Participant
6
WELLS FARGO BANK REVOLVING LINE OF CREDIT NOTE
- --------------------------------------------------------------------------------
$1,500,000.00 SANTA ROSA, CALIFORNIA
MAY 15, 1999
FOR VALUE RECEIVED, the undersigned HENRY WENDT AND VINIFERA, INC.
("Borrower") promises to pay to the order of WELLS FARGO BANK, NATIONAL
ASSOCIATION ("Bank") at its office at NORTH COAST RCBO, 200 B STREET SUITE 300,
SANTA ROSA, CA 95401, or at such other place as the holder hereof may designate,
in lawful money of the United States of America and in immediately available
funds, the principal sum of $1,500,000.00, or so much thereof as may be advanced
and be outstanding, with interest thereon, to be computed on each advance from
the date of its disbursement as set forth herein.
DEFINITIONS:
As used herein, the following terms shall have the meanings set forth after
each, and any other term defined in this Note shall have the meaning set forth
at the place defined:
(a) "Business Day" means any day except a Saturday, Sunday or any other day
on which commercial banks in California are authorized or required by law to
close.
(b) "Fixed Rate Term" means a period commencing on a Business Day and
continuing for 1,2,3,6, OR 12 MONTHS, as designated by Borrower, during which
all or a portion of the outstanding principal balance of this Note bears
interest determined in relation to LIBOR; provided however, that no Fixed Rate
Term may be selected for a principal amount less than $500,000.00; and provided
further, that no Fixed Rate Term shall extend beyond the scheduled maturity date
hereof. If any Fixed Rate Term would end on a day which is not a Business Day,
then such Fixed Rate Term shall be extended to the next succeeding Business Day.
(c) "LIBOR" means the rate per annum (rounded upward, if necessary, to the
nearest whole 1/8 of 1%) determined by dividing Base LIBOR by a percentage equal
to 100% less any LIBOR Reserve Percentage.
(i) "Base LIBOR" means the rate per annum for United States dollar
deposits quoted by Bank as the Inter-Bank Market Offered Rate, with the
understanding that such rate is quoted by Bank for the purpose of
calculating effective rates of interest for loans making reference
thereto, on the first day of a Fixed Rate Term for delivery of funds on
said date for a period of time approximately equal to the number of
days in such Fixed Rate Term and in an amount approximately equal to
the principal amount to which such Fixed Rate Term applies. Borrower
understands and agrees that Bank may base its quotation of the
Inter-Bank Market Offered Rate upon such offers or other market
indicators of the Inter-Bank Market as Bank in its discretion deems
appropriate including, but not limited to, the rate offered for U.S.
dollar deposits on the London Inter-Bank Market.
(ii) "LIBOR Reserve Percentage" means the reserve percentage prescribed
by the Board of Governors of the Federal Reserve System (or any
successor) for "Eurocurrency Liabilities" (as defined in Regulation D
of the Federal Reserve Board, as amended), adjusted by Bank for
expected changes in such reserve percentage during the applicable Fixed
Rate Term.
(d) "Prime Rate" means at any time the rate of interest most recently
announced within Bank at its principal office as its Prime Rate, with the
understanding that the Prime Rate is one of Bank's base rates and serves as the
basis upon which effective rates of interest are calculated for those loans
making reference thereto, and is evidenced by the recording thereof after its
announcement in such internal publication or publications as Bank may designate.
INTEREST:
(a) INTEREST. The outstanding principal balance of this Note shall bear
interest (computed on the basis of a 360-day year, actual days elapsed) either
(i) at a fluctuating rate per annum EQUAL TO the Prime Rate in effect from time
to time, or (ii) at a fixed rate per annum determined by Bank to be 1.25000%
above LIBOR in effect on the first day of the applicable Fixed Rate Term. When
interest is determined in relation to the Prime Rate, each change in the rate of
interest hereunder shall become effective on the date each Prime Rate change is
announced within Bank. With respect to each LIBOR selection option selected
hereunder, Bank is hereby authorized to note the date, principal amount,
interest rate and Fixed Rate Term applicable thereto and any payments made
thereon on Bank's books and records (either manually or by electronic entry)
and/or on any schedule attached to this Note, which notations shall be prima
facie evidence of the accuracy of the information noted.
(b) SELECTION OF INTEREST RATE OPTIONS. At any time any portion of this Note
bears interest determined in relation to LIBOR, it may be continued by Borrower
at the end of the Fixed Rate Term applicable thereto so that all or a portion
hereof bears interest determined in relation to the Prime Rate or to LIBOR for a
new Fixed Rate Term designated by Borrower. At any time any portion of this Note
bears interest determined in relation to the Prime Rate, Borrower may convert
all or a portion thereof so that it bears interest determined in relation to
LIBOR for a Fixed Rate Term designated by Borrower. At such time as Borrower
requests an advance hereunder or wishes to select a LIBOR option for all or a
portion of the outstanding principal balance hereof, and at the end of each
Fixed Rate Term, Borrower shall give Bank notice specifying: (i) the interest
rate option selected by Borrower; (ii) the principal amount subject thereto; and
(iii) for each LIBOR selection, the length of the applicable Fixed Rate Term.
Any such notice may be given by telephone so long as, with respect to each LIBOR
selection, (A) Bank receives written confirmation from Borrower not later than 3
Business Days after such telephone notice is given, and (B) such notice is given
to Bank prior to 10:00 a.m., California time, on the
1
<PAGE>
first day of the Fixed Rate Term. For each LIBOR option requested hereunder,
Bank will quote the applicable fixed rate to Borrower at approximately 10:00
a.m., California time, on the first day of the Fixed Rate Term. If Borrower does
not immediately accept the rate quoted by Bank, any subsequent acceptance by
Borrower shall be subject to a redetermination by Bank of the applicable fixed
rate; provided however, that if Borrower fails to accept any such rate by 11:00
a.m., California time, on the Business Day such quotation is given, then the
quoted rate shall expire and Bank shall have no obligation to permit a LIBOR
option to be selected on such day. If no specific designation of interest is
made at the time any advance is requested hereunder or at the end of any Fixed
Rate Term, Borrower shall be deemed to have made a Prime Rate interest selection
for such advance or the principal amount to which such Fixed Rate Term applied.
(c) ADDITIONAL LIBOR PROVISIONS.
(i) If Bank at any time shall determine that for any reason adequate
and reasonable means do not exist for ascertaining LIBOR, then Bank
shall promptly give notice thereof to Borrower. If such notice is given
and until such notice has been withdrawn by Bank, then (A) no new LIBOR
option may be selected by Borrower, and (B) any portion of the
outstanding principal balance hereof which bears interest determined in
relation to LIBOR, subsequent to the end of the Fixed Rate Term
applicable thereto, shall bear interest determined in relation to the
Prime Rate.
(ii) If any law, treaty, rule, regulation or determination of a court
or governmental authority or any change therein or in the
interpretation or application thereof (each, a "Change in Law") shall
make it unlawful for Bank (A) to make LIBOR options available
hereunder, or (B) to maintain interest rates based on LIBOR, then in
the former event, any obligation of Bank to make available such
unlawful LIBOR options shall immediately be cancelled, and in the
latter event, any such unlawful LIBOR-based interest rates then
outstanding shall be converted, at Bank's option, so that interest on
the portion of the outstanding principal balance subject thereto is
determined in relation to the Prime Rate; provided however, that if any
such Change in Law shall permit any LIBOR-based interest rates to
remain in effect until the expiration of the Fixed Rate Term applicable
thereto, then such permitted LIBOR-based interest rates shall continue
in effect until the expiration of such Fixed Rate Term. Upon the
occurrence of any of the foregoing events, Borrower shall pay to Bank
immediately upon demand such amounts as may be necessary to compensate
Bank for any fines, fees, charges, penalties or other costs incurred or
payable by Bank as a result thereof and which are attributable to any
LIBOR options made available to Borrower hereunder, and any reasonable
allocation made by Bank among its operations shall be conclusive and
binding upon Borrower.
(iii) If any Change in Law or compliance by Bank with any request or
directive (whether or not having the force of law) from any central
bank or other governmental authority shall:
(A) subject Bank to any tax, duty or other charge with respect to any
LIBOR options, or change the basis of taxation of payments to Bank
of principal, interest, fees or any other amount payable hereunder
(except for changes in the rate of tax on the overall net income
of Bank); or
(B) impose, modify or hold applicable any reserve, special deposit,
compulsory loan or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances
or loans by, or any other acquisition of funds by any office of
Bank; or
(C) impose on Bank any other condition;
and the result of any of the foregoing is to increase the cost to Bank of
making, renewing or maintaining any LIBOR options hereunder and/or to reduce any
amount receivable by Bank in connection therewith, then in any such case,
Borrower shall pay to Bank immediately upon demand such amounts as may be
necessary to compensate Bank for any additional costs incurred by Bank and/or
reductions in amounts received by Bank which are attributable to such LIBOR
options. In determining which costs incurred by Bank and/or reductions in
amounts received by Bank are attributable to any LIBOR options made available to
Borrower hereunder, any reasonable allocation made by Bank among its operations
shall be conclusive and binding upon Borrower.
(d) PAYMENT OF INTEREST. Interest accrued on this Note shall be payable on
the 1ST day of each MONTH, commencing JUNE 1, 1999.
(e) DEFAULT INTEREST. From and after the maturity date of this Note, or such
earlier date as all principal owing hereunder becomes due and payable by
acceleration or otherwise, the outstanding principal balance of this Note shall
bear interest until paid in full at an increased rate per annum (computed on the
basis of a 360-day year, actual days elapsed) equal to 4% above the rate of
interest from time to time applicable to this Note.
BORROWING AND REPAYMENT:
(a) BORROWING AND REPAYMENT. Borrower may from time to time during the term
of this Note borrow, partially or wholly repay its outstanding borrowings, and
reborrow, subject to all of the limitations, terms and conditions of this Note
and of any document executed in connection with or governing this Note; provided
however, that the total outstanding borrowings under this Note shall not at any
time exceed the principal amount stated above. The unpaid principal balance of
this obligation at any time shall be the total amounts advanced hereunder by the
holder hereof less the amount of principal payments made hereon by or for any
Borrower, which balance may be endorsed hereon from time to time by the holder.
The outstanding principal balance of this Note shall be due and payable in full
on MAY 1, 2000.
(b) ADVANCES. Advances hereunder, to the total amount of the principal sum
available hereunder, may be made by the holder at the oral or written request of
(i) _______________________________________________________,I any
2
<PAGE>
one acting alone, who are authorized to request advances and direct the
disposition of any advances until written notice of the revocation of such
authority is received by the holder at the office designated above, or (ii) any
person, with respect to advances deposited to the credit of any account of any
Borrower with the holder, which advances, when so deposited, shall be
conclusively presumed to have been made to or for the benefit of each Borrower
regardless of the fact that persons other than those authorized to request
advances may have authority to draw against such account. The holder shall have
no obligation to determine whether any person requesting an advance is or has
been authorized by any Borrower.
(c) APPLICATION OF PAYMENTS. Each payment made on this Note shall be
credited first, to any interest then due and second, to the outstanding
principal balance hereof. All payments credited to principal shall be applied
first, to the outstanding principal balance of this Note which bears interest
determined in relation to the Prime Rate, if any, and second, to the outstanding
principal balance of this Note which bears interest determined in relation to
LIBOR, with such payments applied to the oldest Fixed Rate Term first.
PREPAYMENT:
(a) PRIME RATE. Borrower may prepay principal on any portion of this Note
which bears interest determined in relation to the Prime Rate at any time, in
any amount and without penalty.
(b) LIBOR. Borrower may prepay principal on any portion of this Note which
bears interest determined in relation to LIBOR at any time and in the minimum
amount of $500,000.00; provided however, that if the outstanding principal
balance of such portion of this Note is less than said amount, the minimum
prepayment amount shall be the entire outstanding principal balance thereof. In
consideration of Bank providing this prepayment option to Borrower, or if any
such portion of this Note shall become due and payable at any time prior to the
last day of the Fixed Rate Term applicable thereto by acceleration or otherwise,
Borrower shall pay to Bank immediately upon demand a fee which is the sum of the
discounted monthly differences for each month from the month of prepayment
through the month in which such Fixed Rate Term matures, calculated as follows
for each such month:
(i) DETERMINE the amount of interest which would have accrued each
month on the amount prepaid at the interest rate applicable to such
amount had it remained outstanding until the last day of the Fixed Rate
Term applicable thereto.
(ii) SUBTRACT from the amount determined in (i) above the amount of
interest which would have accrued for the same month on the amount
prepaid for the remaining term of such Fixed Rate Term at LIBOR in
effect on the date of prepayment for new loans made for such term and
in a principal amount equal to the amount prepaid.
(iii) If the result obtained in (ii) for any month is greater than
zero, discount that difference by LIBOR used in (ii) above.
Each Borrower acknowledges that prepayment of such amount may result in Bank
incurring additional costs, expenses and/or liabilities, and that it is
difficult to ascertain the full extent of such costs, expenses and/or
liabilities. Each Borrower, therefore, agrees to pay the above-described
prepayment fee and agrees that said amount represents a reasonable estimate of
the prepayment costs, expenses and/or liabilities of Bank. If Borrower fails to
pay any prepayment fee when due, the amount of such prepayment fee shall
thereafter bear interest until paid at a rate per annum 2.000% above the Prime
Rate in effect from time to time (computed on the basis of a 360-day year,
actual days elapsed). Each change in the rate of interest on any such past due
prepayment fee shall become effective on the date each Prime Rate change is
announced within Bank.
EVENTS OF DEFAULT:
The occurrence of any of the following shall constitute an "Event of
Default" under this Note:
(a) The failure to pay any principal, interest, fees or other charges when
due hereunder or under any contract, instrument or document executed in
connection with this Note.
(b) The filing of a petition by or against any Borrower, any guarantor of
this Note or any general partner or joint venturer in any Borrower which is a
partnership or a joint venture (with each such guarantor, general partner and/or
joint venturer referred to herein as a "Third Party Obligor") under any
provisions of the Bankruptcy Reform Act, Title 11 of the United States Code, as
amended or recodified from time to time, or under any similar or other law
relating to bankruptcy, insolvency, reorganization or other relief for debtors;
the appointment of a receiver, trustee, custodian or liquidator of or for any
part of the assets or property of any Borrower or Third Party Obligor; any
Borrower or Third Party Obligor becomes insolvent, makes a general assignment
for the benefit of creditors or is generally not paying its debts as they become
due; or any attachment or like levy on any property of any Borrower or Third
Party Obligor.
(c) The death or incapacity of any individual Borrower or Third Party
Obligor, or the dissolution or liquidation of any Borrower or Third Party
Obligor which is a corporation, partnership, joint venture or other type of
entity.
(d) Any default in the payment or performance of any obligation, or any
defined event of default, under any provisions of any contract, instrument or
document pursuant to which any Borrower or Third Party Obligor has incurred any
obligation for borrowed money, any purchase obligations or any other liability
of any kind to any person or entity, including the holder.
3
<PAGE>
(e) Any financial statement provided by any Borrower or Third Party Obligor
to Bank proves to be incorrect, false or misleading in any material respect.
(f) Any sale or Transfer of all or a substantial or material pan of the
assets of any Borrower or Third Party Obligor other than in the ordinary course
of its business.
(g) Any violation or breach of any provision of, or any defined event of
default under, any addendum to this Note or any loan agreement, guaranty,
security agreement, dead of trust, mortgage or other document executed in
connection with or securing this Note.
MISCELLANEOUS:
(a) REMEDIES. Upon the occurrence of any Event of Default, the holder of
this Note, at the holder's option, may declare all sums of principal and
interest outstanding hereunder to be immediately due and payable without
presentment, demand, notice of nonperformance, notice of protest, protest or
notice of dishonor, all of which are expressly waived by each Borrower, and the
obligation, if any,. of the holder to extend any further credit hereunder shall
immediately cease and terminate. Each Borrower shall pay to the holder
immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees and all allocated costs of the holder's in-house counsel), expended
or incurred by the holder in connection with the Enforcement of the holder's
rights and/or the collection of any amounts which become due to the holder under
this Note, and the prosecution or defense of any action in any way related to
this Note, including without limitation, any action for declaratory relief,
whether incurred at the trial or appellate level, in an arbitration proceeding
or otherwise, and Including any of the foregoing incurred in connection with any
bankruptcy proceeding (including without limitation, any adversary proceeding,
contested matter or motion brought by Bank or any other person) relating to any
Borrower or any other person or entity.
(b) OBLIGATIONS JOINT AND SEVERAL. Should more than one person or entity
sign this Note as a Borrower, the obligations of each such Borrower shall be
joint and several.
(c) GOVERNING LAW. This Note shall be governed by and construed in
accordance with the laws of the state of California.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the date
first written above.
/s/ HENRY WENDT
- ------------------------------------------
HENRY WENDT
VINIFERA, INC.
By: /s/ J. Bouckaert
- ------------------------------------------
Joseph Bouckaert
Title: President
- ------------------------------------------
By: /s/ Gillbert N. Miller
- ------------------------------------------
Gilbert N. Miller
Title: Executive VP/CFO
- ------------------------------------------
4
ADDENDUM TO PROMISSORY NOTE
THIS ADDENDUM is attached to and made a part of that certain promissory
note executed by HENRY WENDT AND VINIFERA, INC. (each individually, a
"Borrower") and payable to WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank"), or
order, dated as of May 15, 1999, in the principal amount of One Million Five
Hundred Thousand Dollars ($1,500,000.00) (the "Note"). Each reference herein to
"Borrower" shall mean each and every party, collectively and individually,
defined above as a Borrower.
The following provisions are hereby incorporated into the Note:
1. So long as Bank remains committed to extend credit to Borrower under
this Note and until payment in full of all obligations of Borrower hereunder,
Borrower shall provide to Bank all of the following, in form and detail
satisfactory to Bank:
(a) not later than 90 days after and as of the end of each
calendar year, a financial statement of Henry Wendt, prepared by
Borrower, to include balance sheet and income statement, and within 30
days after filing, but in no event later than each October 31, copies
of Henry Wendt's filed federal income tax returns for such year;
(b) not later than 90 days after and as of the end of each
fiscal year, a financial statement of Vinifera, Inc., prepared by
Borrower, to include balance sheet and income statement; and within 30
days after filing, but in no event later than each October 31, copies
of Vinifera, Inc.'s, corporate filed federal income tax returns for
such year, prepared by a certified public accountant acceptable to
Bank;
(c) from time to time such financial and other information as
Bank may reasonably request.
2. YEAR 2000 COMPLIANCE:
So long as Bank remains committed to extend credit to Borrower
under this Note and until payment in full of all obligations of Borrower
hereunder, Borrower agrees to perform all acts reasonably necessary to
ensure that (a) Borrower and any business in which Borrower holds a
substantial interest, and (b) all customers, suppliers and vendors that are
material to Borrower's business, become Year 2000 Compliant in a timely
manner. Such acts shall include, without limitation, performing a
comprehensive review and assessment of all of
<PAGE>
Borrower's systems and adopting a detailed plan, with itemized budget, for the
remediation, monitoring and testing of such systems. As used herein, "Year 2000
Compliant" shall mean, in regard to any entity, that all software, hardware,
firmware, equipment, goods or systems utilized by or material to the business
operations or financial condition of such entity, will properly perform date
sensitive functions before, during and after the year 2000. Borrower shall,
immediately upon request, provide to Bank such certifications or other evidence
of Borrower's compliance with the terms hereof as Bank may from time to time
require.
3. ARBITRATION:
(a) ARBITRATION. Upon the demand of any party, any Dispute shall be
resolved by binding arbitration (except as set forth in (e) below) in accordance
with the terms of this Note. A "Dispute" shall mean any action, dispute, claim
or controversy of any kind, whether in contract or tort, statutory or common
law, legal or equitable, now existing or hereafter arising under or in
connection with, or in any way pertaining to, this Note and each other document,
contract and instrument required hereby or now or hereafter delivered to Bank in
connection herewith (collectively, the "Documents"), or any past, present or
future extensions of credit and other activities, transactions or obligations of
any kind related directly or indirectly to any of the Documents, including
without limitation, any of the foregoing arising in connection with the exercise
of any self-help, ancillary or other remedies pursuant to any of the Documents.
Any party may by summary proceedings bring an action in court to compel
arbitration of a Dispute. Any party who fails or refuses to submit to
arbitration following a lawful demand by any other party shall bear all costs
and expenses incurred by such other party in compelling arbitration of any
Dispute.
(b) GOVERNING RULES. Arbitration proceedings shall be administered by
the American Arbitration Association ("AAA") or such other administrator as the
parties shall mutually agree upon in accordance with the AAA Commercial
Arbitration Rules. All Disputes submitted to arbitration shall be resolved in
accordance with the Federal Arbitration Act (Title 9 of the United States Code),
notwithstanding any conflicting choice of law provision in any of the Documents.
The arbitration shall be conducted at a location in California selected by the
AAA or other administrator. If there is any inconsistency between the terms
hereof and any such rules, the terms and procedures set forth herein shall
control. All statutes of limitation applicable to any Dispute shall apply to any
arbitration proceeding. All
<PAGE>
discovery activities shall be expressly limited to matters directly relevant to
the Dispute being arbitrated. Judgment upon any award rendered in an arbitration
may be entered in any court having jurisdiction; provided however, that nothing
contained herein shall be deemed to be a waiver by any party that is a bank of
the protections afforded to it under 12 U.S.C. ss.91 or any similar applicable
state law.
(c) NO WAIVER; PROVISIONAL REMEDIES, SELF-HELP AND FORECLOSURE. No
provision hereof shall limit the right of any party to exercise self-help
remedies such as setoff, foreclosure against or sale of any real or personal
property collateral or security, or to obtain provisional or ancillary remedies,
including without limitation injunctive relief, sequestration, attachment,
garnishment or the appointment of a receiver, from a court of competent
jurisdiction before, after or during the pendency of any arbitration or other
proceeding. The exercise of any such remedy shall not waive the right of any
party to compel arbitration or reference hereunder.
(d) ARBITRATOR QUALIFICATIONS AND POWERS; AWARDS. Arbitrators must be
active members of the California State Bar or retired judges of the state or
federal judiciary of California, with expertise in the substantive law
applicable to the subject matter of the Dispute. Arbitrators are empowered to
resolve Disputes by summary rulings in response to motions filed prior to the
final arbitration hearing. Arbitrators (i) shall resolve all Disputes in
accordance with the substantive law of the state of California, (ii) may grant
any remedy or relief that a court of the state of California could order or
grant within the scope hereof and such ancillary relief as is necessary to make
effective any award, and (iii) shall have the power to award recovery of all
costs and fees, to impose sanctions and to take such other actions as they deem
necessary to the same extent a judge could pursuant to the Federal Rules of
Civil Procedure, the California Rules of Civil Procedure or other applicable
law. Any Dispute in which the amount in controversy is $5,000,000 or less shall
be decided by a single arbitrator who shall not render an award of greater than
$5,000,000 (including damages, costs, fees and expenses). By submission to a
single arbitrator, each party expressly waives any right or claim to recover
more than $5,000,000. Any Dispute in which the amount in controversy exceeds
$5,000,000 shall be decided by majority vote of a panel of three arbitrators;
provided however, that all three arbitrators must actively participate in all
hearings and deliberations.
<PAGE>
(e) JUDICIAL REVIEW. Notwithstanding anything herein to the contrary,
in any arbitration in which the amount in controversy exceeds $25,000,000, the
arbitrators shall be required to make specific, written findings of fact and
conclusions of law. In such arbitrations (A) the arbitrators shall not have the
power to make any award which is not supported by substantial evidence or which
is based on legal error, (B) an award shall not be binding upon the parties
unless the findings of fact are supported by substantial evidence and the
conclusions of law are not erroneous under the substantive law of the state of
California, and (C) the parties shall have in addition to the grounds referred
to in the Federal Arbitration Act for vacating, modifying or correcting an award
the right to judicial review of (1) whether the findings of fact rendered by the
arbitrators are supported by substantial evidence, and (2) whether the
conclusions of law are erroneous under the substantive law of the state of
California. Judgment confirming an award in such a proceeding may be entered
only if a court determines the award is supported by substantial evidence and
not based on legal error under the substantive law of the state of California.
(f) REAL PROPERTY COLLATERAL; JUDICIAL REFERENCE. Notwithstanding
anything herein to the contrary, no Dispute shall be submitted to arbitration if
the Dispute concerns indebtedness secured directly or indirectly, in whole or in
part, by any real property unless (i) the holder of the mortgage, lien or
security interest specifically elects in writing to proceed with the
arbitration, or (ii) all parties to the arbitration waive any rights or benefits
that might accrue to them by virtue of the single action rule statute of
California, thereby agreeing that all indebtedness and obligations of the
parties, and all mortgages, liens and security interests securing such
indebtedness and obligations, shall remain fully valid and enforceable. if any
such Dispute is not submitted to arbitration, the Dispute shall be referred to a
referee in accordance with California Code of Civil Procedure Section 638 et
seq., and this general reference agreement is intended to be specifically
enforceable in accordance with said Section 638. A referee with the
qualifications required herein for arbitrators shall be selected pursuant to the
AAA's selection procedures. Judgment upon the decision rendered by a referee
shall be entered in the court in which such proceeding was commenced in
accordance with California Code of Civil Procedure Sections 644 and 645.
(g) MISCELLANEOUS. To the maximum extent practicable, the AAA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding
<PAGE>
within 180 days of the filing of the Dispute With the AAA. No arbitrator or
other party to an arbitration Proceeding may disclose the existence, content or
results thereof, except for disclosures of information by a party required in
the ordinary course of its business, by applicable law or regulation, or to the
extent necessary to exercise any judicial review rights set forth herein. If
more than one agreement for arbitration by or between the partlie3 potentially
applies to a Dispute, the arbitration provision most directly related to the
Documents or the subject matter of the Dispute shall control. This Note may be
amended or modified only in writing signed by Bank and Borrower. If any
provision of this Note shall be held to be prohibited by or invalid under
applicable law, such provision invalidity be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder ok such
provision or any remaining provisions of this Note. This arbitration provision
shall survive termination, amendment or expiration of any of the Documents or
any relationship between the parties.
IN WITNESS WHEREOF, this Addendum has been executed as of the same date
as the Note.
/s/ Henry Wendt
- -------------------------------
Henry Wendt
VINIFERA, INC.
By: /s/ J. Bouckaert
- -------------------------------
Joseph Bouckaert
Title: President
- -------------------------------
By: /s/ Gilbert N. Miller
- -------------------------------
Gilbert N. Miller
Title: Exec. VP/CFO
- -------------------------------
CONTINUING SECURITY GREEMENT
WELLS FARGO BANK RIGHTS TO PAYMENT AND INVENTORY
- --------------------------------------------------------------------------------
1. GRANT OF SECURITY INTEREST. For valuable consideration, the undersigned
VINIFERA, INC., or any of them ("Debtor"), hereby grants and transfers to WELLS
FARGO BANK, NATIONAL ASSOCIATION ("Bank") a security interest in' all accounts,
deposit accounts, chattel paper, instruments, documents and general intangibles
(collectively called "Rights to Payment"), now existing or at any time
hereafter, and prior to the termination hereof, arising (whether they arise from
the sale, lease or other disposition of inventory or from performance of
contracts for service, manufacture, construction, repair or otherwise or from
any other source whatsoever), including all securities, guaranties, warranties,
indemnity agreements, insurance policies and other agreements pertaining to the
same or the property described therein, and in all goods returned by or
repossessed from Debtor's customers, together with a security interest in all
inventory, goods held for sale or lease or to be furnished under contracts for
service, goods so leased or furnished, raw materials, component parts, work in
process or materials used or consumed in Debtor's business and all warehouse
receipts, bills of lading and other documents evidencing goods owned or acquired
by Debtor, and all goods covered thereby, now or at any time hereafter, and
prior to the termination hereof, owned or acquired by Debtor, wherever located,
and all products thereof (collectively called "Inventory"), whether in the
possession of Debtor, warehousemen, bailees or any other person, or in process
of delivery and whether located at Debtor's places of business or elsewhere
(with all Rights to Payment and Inventory referred to herein collectively as the
"Collateral"), together with whatever is receivable or received when any of the
Collateral or proceeds thereof are sold, leased, collected, exchanged or
otherwise disposed of, whether such disposition is voluntary or involuntary,
including without limitation, all Rights to Payment, including returned
premiums, with respect to any insurance relating to any of the foregoing, and
all Rights to Payment with respect to any cause of action affecting or relating
to any of the foregoing (hereinafter called "Proceeds").
2. OBLIGATIONS SECURED. The obligations secured hereby are the payment and
performance of: (a) all present and future Indebtedness of Debtor to Bank; (b)
all obligations of Debtor and rights of Bank under this Agreement; and (c) all
present and future obligations of Debtor to Bank of other kinds. The word
"Indebtedness" is used herein in its most comprehensive sense and includes any
and all advances, debts, obligations and liabilities of Debtor, or any of them,
heretofore, now or hereafter made, incurred or created, whether voluntary or
involuntary and however arising, whether due or not due, absolute or contingent,
liquidated or unliquidated, determined or undetermined, and whether Debtor may
be liable individually or jointly, or whether recovery upon such Indebtedness
may be or hereafter becomes unenforceable.
3. TERMINATION. This Agreement will terminate upon the performance of all
obligations of Debtor to Bank, including without limitation, the payment of all
Indebtedness of Debtor to Bank, and the termination of all commitments of Bank
to extend credit to Debtor, existing at the time Bank receives written notice
from Debtor of the termination of this Agreement.
4. OBLIGATIONS OF BANK. Bank has no obligation to make any loans hereunder.
Any money received by Bank in respect of the Collateral may be deposited, at
Bank's option, into a non-interest bearing account over which Debtor shall have
no control, and the same shall, for all purposes, be deemed Collateral
hereunder.
5. REPRESENTATIONS AND WARRANTIES. Debtor represents and warrants to Bank
that: (a) Debtor is the owner and has possession or control of the Collateral
and Proceeds; (b) Debtor has the right to grant a security interest in the
Collateral and Proceeds; (c) all Collateral and Proceeds are genuine, free from
liens, adverse claims, setoffs, default, prepayment, defenses and conditions
precedent of any kind or character, except the lien created hereby or as
otherwise agreed to by Bank, or heretofore disclosed by Debtor to Bank, in
writing; (d) all statements contained herein and, where applicable, in the
Collateral are true and complete in all material respects; (a) no financing
statement covering any of the Collateral or Proceeds, and naming any secured
party other than Bank, is on file in any public office; (f) all persons
appearing to be obligated on Rights to Payment and Proceeds have authority and
capacity to contract and are bound as they appear to be; (g) all property
subject to chattel paper has been properly registered and filed in compliance
with law and to perfect the interest of Debtor in such property; and (h) all
Rights to Payment and Proceeds comply with all applicable laws concerning form,
content and manner of preparation and execution, including where applicable
Federal Reserve Regulation Z and any State consumer credit laws.
6. COVENANTS OF DEBTOR.
(a) Debtor Agrees in general: (i) to pay Indebtedness secured hereby
when due; (ii) to indemnify Bank against all losses, claims, demands,
liabilities and expenses of every kind caused by property subject hereto; (iii)
to pay all costs and expenses, including reasonable attorneys' fees, incurred by
Bank in the perfection and preservation of the Collateral or Bank's interest
therein and/or the realization, enforcement and exercise of Bank's rights,
powers and remedies hereunder; (iv) to permit Bank to exercise its powers; (v)
to execute and deliver such documents as Bank deems necessary to create, perfect
and continue the security interests contemplated hereby; and (vi) not to change
its chief place of business (or personal residence, if applicable) or the places
where Debtor keeps any of the Collateral or Debtor's records concerning the
Collateral and Proceeds without first giving Bank written notice of the address
to which Debtor is moving same.
(b) Debtor agrees with regard to the Collateral and Proceeds, unless
Bank agrees otherwise in writing: (i) to insure Inventory and, where applicable,
Rights to Payment with Bank as loss payee, in form, substance and amounts, under
agreements, against risks and liabilities, and with insurance companies
satisfactory to Bank; (ii) not to use any Inventory or any unlawful purpose or
in any way that would void any insurance required to be carried in connection
therewith; (iii) not to remove Inventory from Debtor's premises, except for
deliveries to buyers in the ordinary course of Debtor's business and except
Inventory which consists of mobile goods as defined in the California Uniform
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Commercial Code, in which case Debtor agrees not to remove or permit the removal
of the Inventory from its state of domicile for a period in excess of 30
calendar days; (iv) not to permit any security interest in or lien on the
Collateral or Proceeds, including without limitation, liens arising from the
storage of Inventory, except in favor of Bank; (v) not to sell, hypothecate or
otherwise dispose of, nor permit the transfer by operation of law of, any of the
Collateral or Proceeds or any interest therein, except sales of Inventory to
buyers in the ordinary course of Debtor's business; (vi) to furnish reports to
Bank of all acquisitions, returns, sales and other dispositions of the Inventory
in such form and detail and at such times as Bank may require; (vii) to permit
Bank to inspect the Collateral at any time; (viii) to keep, in accordance with
generally accepted accounting principles, complete and accurate records
regarding all Collateral and Proceeds, and to permit Bank to inspect the same
and make copies thereof at any reasonable time; (ix) if requested by Bank, to
receive and use reasonable diligence to collect Rights to Payment and Proceeds,
in trust and as the property of Bank, and to immediately endorse as appropriate
and deliver such Rights to Payment and Proceeds to Bank daily in the exact form
in which they are received together with a collection report in form
satisfactory to Bank; (x) not to commingle Rights to Payment, Proceeds or
collections thereunder with other property; (xi) to give only normal allowances
and credits and to advise Bank thereof immediately in writing if they affect any
Rights to Payment or Proceeds in any material respect; (xii) on demand, to
deliver to Bank returned property resulting from, or payment equal to, such
allowances or credits on any Rights to Payment or Proceeds or to execute such
documents and do such other things as Bank may reasonably request for the
purpose of perfecting, preserving and enforcing its security interest in such
returned property; (xiii) from time to time, when requested by Bank, to prepare
and deliver a schedule of all Collateral and Proceeds subject to this Agreement
and to assign in writing and deliver to Bank all accounts, contracts, leases and
other chattel paper, instruments, documents and other evidences thereof; (xiv)
in the event Bank elects to receive payments of Rights to Payment or Proceeds
hereunder, to pay all expenses incurred by Bank in connection therewith,
including expenses of accounting, correspondence, collection efforts, reporting
to account or contract debtors, filing, recording, record keeping and expenses
incidental thereto; and (xv) to provide any service and do any other acts which
may be necessary to maintain, preserve and protect all Collateral and, as
appropriate and applicable, to keep all Collateral in good and saleable
condition in accordance with the standards and practices adhered to generally by
users and manufacturers of like property, and to keep all Collateral and
Proceeds free and clear of all defenses, rights of offset and counterclaims.
7. POWERS OF BANK. Debtor appoints Bank its true attorney-in-fact to perform
any of the following powers, which are coupled with an interest, are irrevocable
until termination of this Agreement and may be exercised from time to time by
Bank's officers and employees, or any of them, whether or not Debtor is in
default: (a) to perform any obligation of Debtor hereunder in Debtor's name or
otherwise; (b) to give notice to account debtors or others of Bank's rights in
the Collateral and Proceeds, to enforce the same and make extension agreements
with respect thereto; (c) to release persons liable on Proceeds and to give
receipts and acquittances and compromise disputes in connection therewith; (d)
to release security; (e) to resort to security in any order; (f) to prepare,
execute, file, record or deliver notes, assignments, schedules, designation
statements, financing statements, continuation statements, termination
statements, statements of assignment, applications for registration or like
papers to perfect, preserve or release Bank's interest in the Collateral and
Proceeds; (g) to receive, open and read mail addressed to Debtor; (h) to take
cash, instruments for the payment of money and other property to which Bank is
entitled; (i) to verify facts concerning the Collateral and Proceeds by inquiry
of obligors thereon, or otherwise, in its own name or a fictitious name; (j) to
endorse, collect, deliver and receive payment under instruments for the payment
of money constituting or relating to Proceeds; (k) to prepare, adjust, execute,
deliver and receive payment under insurance claims, and to collect and receive
payment of and endorse any instrument in payment of loss or returned premiums or
any other insurance refund or return, and to apply such amounts received by
Bank, at Bank's sole option, toward repayment of the Indebtedness or replacement
of the Collateral; (l) to exercise all rights, powers and remedies which Debtor
would have, but for this Agreement, with respect to all Collateral and Proceeds
subject hereto; (m) to enter onto Debtor's premises in inspecting the
Collateral; (n) to make withdrawals from and to close deposit accounts or other
accounts with any financial institution, wherever located, into which Proceeds
may have been deposited, and to apply funds so withdrawn to payment of the
Indebtedness; (o) to preserve or release the interest evidenced by chattel paper
to which Bank is entitled hereunder and to endorse and deliver evidences of
title incidental thereto; and (p) to do all acts and things and execute all
documents in the name of Debtor or otherwise, deemed by Bank as necessary,
proper and convenient in connection with the preservation, perfection or
enforcement of its rights hereunder.
8. PAYMENT OF PREMIUMS, TAXES, CHARGES, LIENS AND ASSESSMENTS. Debtor agrees
to pay, prior to delinquency, all insurance premiums, taxes, charges, liens and
assessments against the Collateral and Proceeds, and upon the failure of Debtor
to do so, Bank at its option may pay any of them and shall be the sole judge of
the legality or validity thereof and the amount necessary to discharge the same.
Any such payments made by Bank shall be obligations of Debtor to Bank, due and
payable immediately upon demand, together with interest at a rate determined in
accordance with the provisions of Section 15 herein, and shall be secured by the
Collateral and Proceeds, subject to all terms and conditions of this Agreement.
9. EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an "Event of Default" under this Agreement: (a) any default in the
payment or performance of any obligation, or any defined event of default, under
(i) any contract or instrument evidencing any Indebtedness, or (ii) any other
agreement between any Debtor and Bank, including without limitation any loan
agreement, relating to or executed in connection with any Indebtedness; (b) any
representation or warranty made by any Debtor herein shall prove to be incorrect
in any material respect when made; (c) any Default shall fail to observe or
perform any obligation or agreement contained herein; (d) any attachment or like
levy on any property of any Debtor; and (e) Bank, in good faith, believes any or
all of the Collateral and/or Proceeds to be in danger of misuse, dissipation,
commingling, loss, theft, damage or destruction, or otherwise in jeopardy or
unsatisfactory in character or value.
10. REMEDIES. Upon the occurrence of any Event of Default, Bank shall have
the right to declare immediately due and payable all or any Indebtedness secured
hereby and to terminate any commitments to make loans or otherwise extend credit
to Debtor. Bank shall have all other rights, powers, privileges and remedies
granted to a secured party upon
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default under the California Uniform Commercial Code or otherwise provided by
law, including without limitation, the right to contact all persons obligated to
Debtor on any Collateral or Proceeds and to instruct such persons to deliver all
Collateral and/or Proceeds directly to Bank. All rights, powers, privileges and
remedies of Bank shall be cumulative. No delay, failure or discontinuance of
Bank in exercising any right, power, privilege or remedy hereunder shall affect
or operate as a waiver of such right, power, privilege or remedy; nor shall any
single or partial exercise of any such right, power, privilege or remedy
preclude, waive or otherwise affect any other or further exercise thereof or the
exercise of any other right, power, privilege or remedy. Any waiver, permit,
consent or approval of any kind by Bank of any default hereunder, or any such
waiver of any provisions or conditions hereof, must be in writing and shall be
effective only to the extent set forth in writing. It is agreed that public or
private sales, for cash or on credit, to a wholesaler or retailer or investor,
or user of property of the types subject to this Agreement, or public auction,
are all commercially reasonable since differences in the sales prices generally
realized in the different kinds of sales are ordinarily offset by the
differences in the costs and credit risks of such sales.
While an Event of Default exists: (a) Debtor will deliver to Bank from time to
time, as requested by Bank, current lists of all Collateral and Proceeds; (b)
Debtor will not dispose of any of the Collateral or Proceeds except on terms
approved by Bank; (c) at Bank's request, Debtor will assemble and deliver all
Collateral and Proceeds, and books and records pertaining thereto, to Bank at a
reasonably convenient place designated by Bank; and (d) Bank may, without notice
to Debtor, enter onto Debtor's premises and take possession of the Collateral.
With respect to any sale by Bank of any Collateral subject to this Agreement,
Debtor hereby expressly grants to Bank the right to sell such Collateral using
any or all of Debtor's trademarks, trade names, trade name rights and/or
proprietary labels or marks.
11. DISPOSITION OF COLLATERAL AND PROCEEDS. Upon the transfer of all or any
part of the Indebtedness, Bank may transfer all or any part of the Collateral or
Proceeds and shall be fully discharged thereafter from all liability and
responsibility with respect to any of the foregoing so transferred, and the
transferee shall be vested with all rights and powers of Bank hereunder with
respect to any of the foregoing so transferred; but with respect to any
Collateral or Proceeds not so transferred Bank shall retain all rights, powers,
privileges and remedies herein given. Any proceeds of any disposition of any of
the Collateral or Proceeds, or any part thereof, may be applied by Bank to the
payment of expenses incurred by Bank in connection with the foregoing, including
reasonable attorneys' fees, and the balance of such proceeds may be applied by
Bank toward the payment of the Indebtedness in such order of application as Bank
may from time to time elect.
12. STATUTE OF LIMITATIONS. Until all Indebtedness shall have been paid in
full and all commitments by Bank to extend credit to Debtor have been
terminated, the power of sale and all other rights, powers, privileges and
remedies granted to Bank hereunder shall continue to exist and may be exercised
by Bank at any time and from time to time irrespective of the fact that the
Indebtedness or any part thereof may have become barred by any statute of
limitations, or that the personal liability of Debtor may have ceased, unless
such liability shall have ceased due to the payment in full of all Indebtedness
secured hereunder,
13. MISCELLANEOUS. (a) The obligations of Debtor are joint and several; (b)
Debtor hereby waives any right (i) to require Bank to make any presentment or
demand, or give any notice of nonpayment or nonperformance, protest, notice of
protest or notice of dishonor hereunder, (ii) to direct the application of
payments or security for Indebtedness of Debtor or indebtedness of customers of
Debtor, or (iii) to require proceedings against others or to require exhaustion
of security; and (c) Debtor hereby consents to extensions, forbearances or
alterations of the terms of Indebtedness, the release or substitution of
security, and the release of any guarantors; provided however, that in each
instance, Bank believes in good faith that the action in question is
commercially reasonable in that it does not unreasonably increase the risk of
nonpayment of the Indebtedness to which the action applies. Until all
Indebtedness shall have been paid in full, no Debtor shall have any right of
subrogation or contribution, and each Debtor hereby waives any benefit of or
right to participate in any of the Collateral or Proceeds or any other security
now or hereafter held by Bank.
14. NOTICES. All notices, requests and demands required under this Agreement
must be in writing, addressed to Bank at the address specified in any other loan
documents entered into between Debtor and Bank and to Debtor at the address of
its chief executive office (or personal residence, if applicable) specified
below or to such other address as any party may designate by written notice to
each other party, and shall be deemed to have been given or made as follows: (a)
if personally delivered, upon delivery; (b) if sent by mail, upon the earlier of
the date of receipt or 3 days after deposit in the U. S. mail, first class and
postage prepaid; and (c) if sent by telecopy, upon receipt.
15. COSTS, EXPENSES AND ATTORNEYS' FEES. Debtor shall pay to Bank
immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees and all allocated costs of Bank's in-house counsel), expended or
incurred by Bank in exercising any right, power, privilege or remedy conferred
by this Agreement or in the enforcement adversary proceeding, contested matter
or motion brought by Bank or any other person) relating to Debtor or any way
affecting any of the collateral or Bank's ability to exercise any of its rights
or remedies with respect thereto. All of the foregoing shall be paid by Debtor
with interest from the date of demand until paid in full at a rate per annum
equal to the greater of ten percent (10%) or the Prime Rate in effect from time
to time. The "Prime Rate" is a base rate that Bank from time to time establishes
and which serves as the basis upon which effective rates of interest are
calculated for those loans making reference thereto.
16. SUCCESSORS; ASSIGNS; AMENDMENT. This Agreement shall be binding upon and
inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties, and may be amended or
modified only in writing signed BY Bank and Debtor.
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17. OBLIGATIONS OF MARRIED PERSONS. Any married person who signs this
Agreement as Debtor hereby expressly agrees that recourse may be had against his
or her separate property for all his or her Indebtedness to Bank secured by the
Collateral and Proceeds under this Agreement.
18. SEVERABILITY OF PROVISIONS. If any provision of this Agreement Shall be
held to be prohibited by or invalid under applicable law, such provision shall
be ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or any remaining provisions of this
Agreement,
19. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the state of California.
Debtor warrants that its chief executive office (or personal residence, if
applicable) is located at the following address: 4288 BODEGA AVENUE, PETALUMA,
CA 94952
Debtor warrants that the Collateral (except goods in transit) is located
or domiciled at the following additional addresses: 775 BAYWOOD DR., SUITE 213,
PETALUMA, CA 94952
IN WITNESS WHEREOF, this Agreement has been duly executed as of MAY 15,
1999. VINIFERA, INC.
BY /s/ J. Bouckaer
- ---------------------------------------------
Joseph Bouckaert
Title: President
- ---------------------------------------------
By: /s/ Gilbert N. Milller
- ---------------------------------------------
Gilbert N. Miller
Title: Executive VP/CFO
- ---------------------------------------------
SILICON VALLEY BANK
3003 Tasman Drive
Santa Clara, Ca. 95054
(408) 654-1000 - Fax (408) 980-6410
ACCOUNTS RECEIVABLE PURCHASE AGREEMENT
This Accounts Receivable Purchase Agreement (the "Agreement") Is
made on this TWENTIETH day of MAY 1999, by and between Silicon Valley Bank
("Buyer") having a place of business at the address specified above and
AGRITOPE, INC., a DELAWARE corporation, ("Seller") having its principal place of
business and chief executive office at 16160 SW Upper Boones Ferry Road,
Portland, Oregon 97224.
1. DEFINITIONS. When used herein, the following terms shall have the following
meanings.
1.1. "Account Balance" shall mean, on any given day, the gross
amount of all Purchased Receivables unpaid on that day.
1.2. "Account Debtor" shall have the meaning set forth In the
California Uniform Commercial Code and shall Include any person liable on any
Purchased Receivable, Including without limitation, any guarantor of the
Purchased Receivable and any Issuer of a letter of credit or banker's
acceptance.
1.3. "Adjustments" shall mean all discounts, allowances, returns,
disputes, counterclaims, offsets, defenses, rights of recoupment, rights of
return, warranty claims, or short payments, asserted by or on behalf of any
Account Debtor with respect to any Purchased Receivable.
1.4. "Administrative Fee" shall have the meaning as set forth In
Section 3.3 hereof.
1.5. "Advance" shall have the meaning set forth In Section 2.2
hereof.
1.6. "Collateral" shall have the meaning set forth In Section 8
hereof.
1.7. "Collections" shall mean all good funds received by Buyer from
or on behalf of an Account Debtor with respect to Purchased Receivables.
1.8. "Compliance Certificate" shall mean a certificate, In a form
provided by Buyer to Seller, which contains the certification of the chief
financial officer of Seller that, among other things, the representations and
warranties set forth in this Agreement are true and correct as of the date such
certificate is delivered.
1.9. "Event of Default" shall have the meaning set forth in Section
9 hereof.
1.10. "Finance Charges" shall have the meaning set forth In Section
3.2 hereof.
1.11. "Invoice Transmittal" shall mean a writing signed by an
authorized representative of Seller which accurately identifies the Receivables
which Buyer, at its election, may purchase, and Includes for each such
receivable the correct amount owed by the Account Debtor, the name and address
of the Account Debtor, the invoice number, the invoice date and the account
code.
1.12. "Obligations" shall mean all advances, financial
accommodations, liabilities, obligations, covenants and duties owing, arising,
due or payable by Seller to Buyer of any kind or nature, present or future,
arising under or in connection with this Agreement or under any other document,
Instrument or agreement, whether or not evidenced by any note, guarantee or
other instrument, whether arising on account or by overdraft, whether direct or
indirect (including those acquired by assignment) absolute or contingent,
primary or secondary, due or to become due, now owing or hereafter arising, and
however acquired; including, without limitation, all Advances, Finance Charges,
Administrative Fees, interest, Repurchase Amounts, fees, expenses, professional
fees and attorneys' fees and any other sums chargeable to Seller hereunder or
otherwise.
1.13. "Purchased Receivables" shall mean all those accounts,
receivables, chattel paper, Instruments, contract rights, documents, general
Intangibles, letters of credit, drafts, bankers acceptances, and rights to
payment, and all proceeds thereof (all of the foregoing being referred to as
'receivables'), arising out of the invoices and other agreements identified on
or delivered with any Invoice Transmittal delivered by Seller to Buyer which
Buyer elects to purchase and for which Buyer makes an Advance.
1.14. "Refund" shall have the meaning set forth in Section 3.7
hereof.
1.15. "Reserve" shall have the meaning set forth in Section 2.4
hereof.
1.16. "Repurchase Amount" shall have the meaning set forth in
Section 4.2 hereof.
1.17. "Reconciliation Date" shall mean the last calendar day of each
Reconciliation Period.
1.18. "Reconciliation Period" shall mean each calendar month of
every year.
2. PURCHASE AND SALE OF RECEIVABLES.
2.1. OFFER TO SELL RECEIVABLES. During the term hereof, and provided
that there does not then exist any Event of Default or any event that with
notice, lapse of time or otherwise would constitute an Event of Default, Seller
may request that Buyer purchase receivables and Buyer may, in its sole
discretion, elect to purchase receivables. Seller shall deliver to Buyer an
Invoice Transmittal with respect to any receivable for which a request for
purchase is made. An authorized representative of Seller shall sign each Invoice
Transmittal delivered to Buyer. Buyer shall be entitled to rely on all the
Information provided by Seller to Buyer on or with the Invoice Transmittal and
to rely on the signature on any Invoice Transmittal as an authorized signature
of Seller.
2.2. ACCEPTANCE OF RECEIVABLES. Buyer shall have no obligation to
purchase any receivable listed on an Invoice Transmittal. Buyer may exercise its
sole discretion In approving the credit of each Account Debtor before buying any
receivable. Upon acceptance by Buyer of all or any of the receivables described
on any Invoice Transmittal, Buyer shall pay to Seller 80(%) percent of the face
amount of each receivable Buyer desires to purchase. Such payment shall be the
"Advance" with respect to such receivable. Buyer may, from time to time, In its
sole discretion, change the percentage of the Advance. Upon Buyer's acceptance
of the receivable and payment to Seller of the Advance, the receivable shall
become a "Purchased Receivable." It shall be a condition to each Advance that
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(i) all of the representations and warranties set forth In Section 6 of this
Agreement be true and correct on and as of the date of the related Invoice
Transmittal and on and as of the date of such Advance as though made at and as
of each such date, and (ii) no Event of Default or any event or condition that
with notice, lapse of time or otherwise would constitute an Event of Default
shall have occurred and be continuing, or would result from such Advance.
Notwithstanding the foregoing, in no event shall the aggregate amount of all
Purchased Receivables outstanding at any time exceed FIVE HUNDRED THOUSAND AND
NO/100******** Dollars ($500,000.00).
2.3. EFFECTIVENESS OF SALE TO BUYER. Effective upon Buyer's payment
of an Advance, and for and in consideration therefor and in consideration of the
covenants of this Agreement, Seller hereby absolutely sells, transfers and
assigns to Buyer, all of Seller's right, title and interest In and to each
Purchased Receivable and all monies due or which may become due on or with
respect to such Purchased Receivable. Buyer shall be the absolute owner of each
Purchased Receivable. Buyer shall have, with respect to any goods related to the
Purchased Receivable, all the rights and remedies of an unpaid seller under the
California Uniform Commercial Code and other applicable law, including the
rights of replevin, claim and delivery, reclamation and stoppage In transit.
2.4. ESTABLISHMENT OF A RESERVE. Upon the purchase by Buyer of each
Purchased Receivable, Buyer shall establish a reserve. The reserve shall be the
amount by which the face amount of the Purchased Receivable exceeds the Advance
on that Purchased Receivable (the "Reserve"); provided, the Reserve with respect
to all Purchased Receivables outstanding at any one time shall be an amount not
less than 20(%) percent of the Account Balance at that time and may be set at a
higher percentage at Buyer's sole discretion. The reserve shall be a book
balance maintained on the records of Buyer and shall not be a segregated fund.
3. COLLECTIONS, CHARGES AND REMITTANCES.
3.1. COLLECTIONS. Upon receipt by Buyer of Collections, Buyer shall
promptly credit such Collections to Seller's Account Balance on a daily basis;
provided, that if Seller is in default under this Agreement, Buyer shall apply
all Collections to Sellers Obligations hereunder in such order and manner as
Buyer may determine. If an item of collection is not honored or Buyer does not
receive good funds for any reason, the amount shall be included in the Account
Balance as if the Collections had not been received and Finance Charges under
Section 3.2 shall accrue thereon.
3.2. FINANCE CHARGES. On each Reconciliation Date Seller shall pay
to Buyer a finance charge in an amount equal to 2.00 (%) percent per month of
the average daily Account Balance outstanding during the applicable
Reconciliation Period (the "Finance Charges"). Buyer shall deduct the accrued
Finance Charges from the Reserve as set forth In Section 3.7 below.
3.3. ADMINISTRATIVE FEE. On each Reconciliation Date Seller shall
pay to Buyer an Administrative Fee equal to .65 (%) percent of the face amount
of each Purchased Receivable first purchased during that Reconciliation Period
(the "Administrative Fee"). Seller shall pay to Buyer an additional .50 (%)
percent Administrative Fee on Purchased Receivables whose Account Debtors are
Government Agencies. Buyer shall deduct the Administrative Fee from the Reserve
as set forth in Section 3.7 below.
3.4. FACILITY FEE. A fully earned, non-refundable facility fee of
$1,000.00 shall be due upon execution of this Agreement
3.5. PREPAYMENT FEE. A fully earned, non-refundable prepayment fee
of $5,000.00 shall be due upon voluntary or involuntary payment in full of
Seller's Obligations if the Obligations are paid in full within one year of the
date of this Agreement.
3.6. ACCOUNTING. Buyer shall prepare and send to Seller after the
close of business for each Reconciliation Period, an accounting of the
transactions for that Reconciliation Period, including the amount of all
Purchased Receivables, all Collections, adjustments, Finance Charges, and the
Administrative Fee. The accounting shall be deemed correct and conclusive unless
Seller makes written objection to Buyer within thirty (30) days after the Buyer
mails the accounting to Seller.
3.7. REFUND TO SELLER. Provided that there does not then exist an
Event of Default or any event or condition that with notice, lapse of time or
otherwise would constitute an Event of Default, Buyer shall refund to Seller by
check after the Reconciliation Date, the amount, if any, which Buyer owes to
Seller at the end of the Reconciliation Period according to the accounting
prepared by Buyer for that Reconciliation Period (the "Refund"). The Refund
shall be an amount equal to:
(A) (1) The Reserve as of the beginning of that
Reconciliation Period, PLUS
(2) the Reserve created for each Purchased Receivable
purchased during that Reconciliation Period, MINUS
(B) The total for that Reconciliation Period of:
(1) the Administrative Fee;
(2) Finance Charges;
(3) Adjustments;
(4) Repurchase Amounts, to the extent Buyer has agreed
to accept payment thereof by deduction from the Refund;
(5) the Reserve for the Account Balance as of the first
day of the following Reconciliation Period in the
minimum percentage set forth in Section 2.4 hereof; and
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(6) all amounts due, including professional fees and
expenses, as set forth In Section 12 for which oral or
written demand has been made by Buyer to Seller during that Reconciliation
Period to the extent Buyer has agreed to accept payment thereof by deduction
from the Refund. In the event the formula set forth in this Section 3.7 results
in an amount due to Buyer from Seller, Seller shall make such payment in the
same manner as set forth in Section 4.3 hereof for repurchases. If the formula
set forth in this Section 3.7 results in an amount due to Seller from Buyer,
Buyer shall make such payment by check, subject to Buyer's rights under Section
4.3 and Buyer's rights of offset and recoupment.
4. RECOURSE AND REPURCHASE OBLIGATIONS.
4.1. RECOURSE. Buyer's acquisition of Purchased Receivables from
Seller shall be with full recourse against Seller. In the vent the Obligations
exceed the amount of Purchased Receivables and Collateral, Seller shall be
liable for any deficiency.
4.2. SELLER'S AGREEMENT TO REPURCHASE. Seller agrees to pay to Buyer
on demand, the full face amount, or any unpaid portion, of any Purchased
Receivable:
(A) which remains unpaid ninety (90) calendar days after the
Invoice date; or
(B) which is owed by any Account Debtor who has filed, or
has had filed against it, any bankruptcy case, assignment
for the benefit of creditors, receivership, or insolvency
proceeding or who has become insolvent (as defined in the
United States Bankruptcy Code) or who Is generally not
paying its debts as such debts become due; or
(C) with respect to which there has been any breach of
warranty or representation set forth in Section 6 hereof or
any breach of any covenant contained in this Agreement; or
(D) with respect to which the Account Debtor asserts any
discount, allowance, return, dispute, counterclaim, offset,
defense, right of recoupment, right of return, warranty
claim, or short payment;
together with all reasonable attorneys' and professional fees and expenses and
all court costs incurred by Buyer in collecting such Purchased Receivable and/or
enforcing its rights under, or collecting amounts owed by Seller in connection
with, this Agreement (collectively, the "Repurchase Amount").
4.3. SELLER'S PAYMENT OF THE REPURCHASE AMOUNT OR Other AMOUNTS Due
BUYER. When any Repurchase Amount or other amount owing to Buyer becomes due,
Buyer shall Inform Seller of the manner of payment which may be any one or more
of THE following IN Buyer's sole DISCRETION: (a) IN CASH LIYIIIIEDLATELY upon
DEMAND therefor; (b) by dellvety of substitute Invoices and an Invoice
Transmittal acceptable to Buyer which shall thereupon become Purchased
Receivables; (c) by adjustment to the Reserve pursuant to Section 3.7 hereof;
(d) by deduction from or offset against the Refund that would otherwise be due
and payable to Seller-, (e) by deduction from or offset against the amount that
otherwise would be forwarded to Seller In respect of any further Advances that
may be made by Buyer; or (o by any combination of the foregoing as Buyer may
from time to time choose.
4.4. SELLER'S AGREEMENT TO REPURCHASE ALL PURCHASED RECEIVABLES.
Upon and after the occurrence of an Event of Default, Seller shall, upon Buyers
demand (or, in the case of an Event of Default under Section 9(B), immediately
without notice or demand from Buyer) repurchase all the Purchased Receivables
then outstanding, or such portion thereof as Buyer may demand. Such demand may,
at Buyer's option, Include and Seller shall pay to Buyer Immediately upon
demand, cash In an amount equal to the Advance with respect to each Purchased
Receivable then outstanding together with all accrued Finance Charges,
Adjustments, Administrative Fees, attorney's and professional fees, court costs
and expenses as provided for herein, and any other Obligations. Upon receipt of
payment In full of the Obligations, Buyer shall Immediately Instruct Account
Debtors to pay Seller directly, and return to Seller any Refund due to Seller.
For the purpose of calculating any Refund due under this Section only, the
Reconciliation Date shall be deemed to be the date Buyer receives payment In
good funds of all the Obligations as provided in this Section 4.4.
5. POWER OF ATTORNEY. Seller does hereby irrevocably appoint Buyer
and its successors and assigns as Seller's true and lawful attorney in fact, and
hereby authorizes Buyer, regardless of whether there has been an Event of
Default, (a) to sell, assign, transfer, pledge, compromise, or discharge the
whole or any part of the Purchased Receivables; (b) to demand, collect, receive,
sue, and give releases to any Account Debtor for the monies due or which may
become due upon or with respect to the Purchased Receivables and to compromise,
prosecute, or defend any action, claim, case or proceeding relating to the
Purchased Receivables, including the filing of a claim or the voting of such
claims In any bankruptcy case, all in Buyer's name or Sellers name, as Buyer may
choose; (c) to prepare, file and sign Seller's name on any notice, claim,
assignment, demand, draft, or notice of or satisfaction of lien or mechanics'
lien or similar document with respect to Purchased Receivables; (d) to notify
all Account Debtors with respect to the Purchased Receivables to pay Buyer
directly; (e) to receive, open, and dispose of all mail addressed to Seller for
the purpose of collecting the Purchased Receivables; (f) to endorse Seller's
name on any checks or other forms of payment on the Purchased Receivables; (g)
to execute on behalf of Seller any and all instruments, documents, financing
statements and the like to perfect Buyer's interests In the Purchased
Receivables and Collateral; and (h) to do all acts and things necessary or
expedient, in furtherance of any such purposes. If Buyer receives a check or
item which is payment for both a Purchased Receivable and another receivable,
the funds shall first be applied to the Purchased Receivable and, so long as
there does not exist an Event of Default or an event that with notice, lapse of
time or otherwise would constitute an Event of Default, the excess shall be
remitted to Seller. Upon the occurrence and continuation of an
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Event of Default, all of the power of attorney rights granted by Seller to Buyer
hereunder shall be applicable with respect to all Purchased Receivables and all
Collateral.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS.
6.1. RECEIVABLES' WARRANTIES, REPRESENTATIONS AND COVENANTS. To
induce Buyer to buy receivables and to render its services to Seller, and with
full knowledge that the truth and accuracy of the following are being relied
upon by the Buyer in determining whether to accept receivables as Purchased
Receivables, Seller represents, warrants, covenants and agrees, with respect to
each Invoice Transmittal delivered to Buyer and each receivable described
therein, that:
(A) Seller is the absolute owner of each receivable set
forth in the Invoice Transmittal and has full legal right to
sell, transfer and assign such receivables;
(B) The correct amount of each receivable Is as set forth In
the Invoice Transmittal and is not In dispute;
(C) The payment of each receivable is not contingent upon
the fulfillment of any obligation or contract, past or
future and any and all obligations required of the Seller
have been fulfilled as of the date of the Invoice
Transmittal;
(D) Each receivable set forth on the Invoice Transmittal is
based on an actual sale and delivery of goods and/or
services actually rendered, is presently due and owing to
Seller, Is not past due or In default, has not been
previously sold, assigned, transferred, or pledged, and Is
free of any and all liens, security interests and
encumbrances other than liens, security Interests or
encumbrances In favor of Buyer or any other division or
affiliate of Silicon Valley Bank;
(E) There are no defenses, offsets, or counterclaims against
any of the receivables, and no agreement has been made under
which the Account Debtor may claim any deduction or
discount, except as otherwise stated in the Invoice
Transmittal;
(F) Each Purchased Receivable shall be the property of the
Buyer and shall be collected by Buyer, but if for any reason
it should be paid to Seller, Seller shall promptly notify
Buyer of such payment, shall hold any checks, drafts, or
monies so received in trust for the benefit of Buyer, and
shall promptly transfer and deliver the same to the Buyer;
(G) Buyer shall have the right of endorsement, and also the
right to require endorsement by Seller, on all payments
received in connection with each Purchased Receivable and
any proceeds of Collateral;
(H) Seller, and to Seller's best knowledge, each Account
Debtor set forth in the Invoice Transmittal, are and shall
remain solvent as that term is defined In the United States
Bankruptcy Code and the California Uniform Commercial Code,
and no such Account Debtor has filed or had filed against it
a voluntary or involuntary petition for relief under the
United States Bankruptcy Code;
(I) Each Account Debtor named on the Invoice Transmittal
will not object to the payment for, or the quality or the
quantity of the subject matter of, the receivable and is
liable for the amount set forth on the Invoice Transmittal;
(J) Each Account Debtor shall promptly be notified, after
acceptance by Buyer, that the Purchased Receivable has been
transferred to and is payable to Buyer, and Seller shall not
take or permit any action to countermand such notification;
and
(K) All receivables forwarded to and accepted by Buyer after
the date hereof, and thereby becoming Purchased Receivables,
shall comply with each and every one of the foregoing
representations, warranties, covenants and agreements
referred to above in this Section 6.1.
6.2. ADDITIONAL WARRANTIES, REPRESENTATIONS AND COVENANTS. In addition to the
foregoing warranties, representations and covenants, to induce Buyer to buy
receivables and to render its services to Seller, Seller hereby represents,
warrants, covenants and agrees that:
(A) Seller will not assign, transfer, sell, or grant, or
permit any lien or security interest in any Purchased
Receivables or Collateral to or in favor of any other party,
without Buyer's prior written consent;
(B) The Sellers name, form of organization, chief executive
office, and the place where the records concerning all
Purchased Receivables and Collateral are kept is set forth
at the beginning of this Agreement, Collateral is located
only at the location set forth in the beginning of this
Agreement, or, if located at any additional location, as set
forth on a schedule attached to this Agreement, and Seller
will give Buyer at least thirty (30) days prior written
notice if such name, organization, chief executive office or
other locations of Collateral or records concerning
Purchased Receivables or Collateral is changed or added and
shall execute any documents necessary to perfect Buyer's
interest in the Purchased Receivables and the Collateral;
(C) Seller shall (i) pay all of Its normal gross payroll for
employees, and all federal and state taxes, as and when due,
including without limitation all payroll and withholding
taxes and state sales taxes; (ii) deliver at any time and
from time to time at Buyers request, evidence satisfactory
to Buyer that all such amounts have been paid to the proper
taxing authorities; and (iii) If requested by Buyer, pay its
payroll and related taxes through a bank or an Independent
payroll s6rvice acceptable to Buyer.
(D) Seller has not, as of the time Seller delivers to Buyer
an Invoice Transmittal, or as of the time Seller accepts any
Advance from Buyer, filed a voluntary petition for relief
under the United States Bankruptcy Code or had filed against
it an involuntary petition for relief;
(E) If Seller owns, holds or has any interest in, any
copyrights (whether registered, or unregistered), patents or
trademarks, and licenses of any of the foregoing, such
interest has been disclosed to Buyer and is specifically
listed and identified on a schedule to this Agreement, and
Seller shall immediately notify Buyer if Seller hereafter
obtains any Interest In any additional copyrights, patents,
trademarks or licenses that are significant in value or are
material to the conduct of its business; and
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(F) Seller shall provide Buyer with a Compliance Certificate
(i) on a quarterly basis to be received by Buyer no later
than the fifth calendar day following each calendar quarter,
and; (ii) on a more frequent or other basis if and as
requested by Buyer.
7. ADJUSTMENTS. In the event of a breach of any of the
representations, warranties, or covenants set forth in Section 6.1, or In the
event any Adjustment or dispute is asserted by any Account Debtor, Seller shall
promptly advise Buyer and shall, subject to the Buyer's approval, resolve such
disputes and advise Buyer of any adjustments. Unless the disputed Purchased
Receivable is repurchased by Seller and the full Repurchase Amount is paid,
Buyer shall remain the absolute owner of any Purchased Receivable which is
subject to Adjustment or repurchase under Section 4.2 hereof, and any rejected,
returned, or recovered personal property, with the right to take possession
thereof at any time. If such possession is not taken by Buyer, Seller is to
resell it for Buyer's account at Seller's expense with the proceeds made payable
to Buyer. While Seller retains possession of said returned goods, Seller shall
segregate said goods and mark them "property of Silicon Valley Bank."
8. SECURITY INTEREST. To secure the prompt payment and performance
to Buyer of all of the Obligations, Seller hereby grants to Buyer a continuing
lien upon and security interest in all of Settees now existing or hereafter
arising rights and interest in the following, whether now owned or existing or
hereafter created, acquired, or arising, and wherever located (collectively, the
"Collateral"):
(A) All accounts, receivables, contract rights, chattel
paper, instruments, documents, letters of credit, bankers
acceptances, drafts, checks, cash, securities, and general
Intangibles (including, without limitation, all claims,
causes of action, deposit accounts, guaranties, rights in
and claims under insurance policies (including rights to
premium refunds), rights to tax refunds, copyrights,
patents, trademarks, rights in and under license agreements,
and all other intellectual property);
(B) All inventory, Including Seller's rights to any returned
or rejected goods, with respect to which Buyer shall have
all the rights of any unpaid seller, including the rights of
replevin, claim and delivery, reclamation, and stoppage in
transit;
(C) All monies, refunds and other amounts due Seller,
including, without limitation, amounts due Seller under this
Agreement (including Seller's right of offset and
recoupment);
(D) All equipment, machinery, furniture, furnishings,
fixtures, tools, supplies and motor vehicles;
(E) All farm products, crops, timber, minerals and the like
(including oil and gas);
(F) All accessions to, substitutions for, and replacements
of, all of the foregoing;
(G) All books and records pertaining to all of the
foregoing; and
(H) All proceeds of the foregoing, whether due to voluntary
or involuntary disposition, including insurance proceeds.
Seller is not authorized to sell, assign, transfer or
otherwise convey any Collateral without Buyer's prior written consent, except
for the sale of finished Inventory In the Sellers usual course of business.
Seller agrees to sign UCC financing statements, in a form acceptable to Buyer,
and any other Instruments and documents requested by Buyer to evidence, perfect,
or protect the Interests of Buyer In the Collateral. Seller agrees to deliver to
Buyer the originals of all instruments, chattel paper and documents evidencing
or related to Purchased Receivables and Collateral.
9. DEFAULT. The occurrence of any one or more of the following shall constitute
an Event of Default hereunder.
(A) Seller falls to pay any amount owed to Buyer as and when
due;
(B) There shall be commenced by or against Seller any
voluntary or Involuntary case under the United States
Bankruptcy Code, or any assignment for the benefit of
creditors, or appointment of a receiver or custodian for any
of its assets;
(C) Seller shall become insolvent in that its debts are
greater than the fair value of its assets, or Seller is
generally not paying its debts as they become due or is left
with unreasonably small capital;
(D) Any involuntary lien, garnishment, attachment or the
like is issued against or attaches to the Purchased
Receivables or any Collateral;
(E) Seller shall breach any covenant, agreement, warranty,
or representation set forth herein, and the same is not
cured to Buyers satisfaction within ten (10) days after
Buyer has given Seller oral or written notice thereof;
provided, that if such breach is incapable of being cured it
shall constitute an immediate default hereunder;
(F) Seller is not in compliance with, or otherwise is in
default under, any term of any document, instrument or
agreement evidencing a debt, obligation or liability of any
kind or character of Seller, now or hereafter existing, in
favor of Buyer or any division or affiliate of Silicon
Valley Bank, regardless of whether such debt, obligation or
liability is direct or Indirect, primary or secondary,
joint, several or joint and several, or fixed or contingent,
together with any and all renewals and extensions of such
debts, obligations and liabilities, or any part thereof;
(G) An event of default shall occur under any guaranty
executed by any guarantor of the Obligations of Seller to
Buyer under this Agreement, or any material provision of any
such guaranty shall for any reason cease to be valid or
enforceable or any such guaranty shall be repudiated or
terminated, Including by operation of law;
(H) A default or event of default shall occur under any
agreement between Seller and any creditor of Seller that has
entered into a subordination agreement with Buyer; or
(I) Any creditor that has entered into a subordination
agreement with Buyer shall breach any of the terms of or not
comply with such subordination agreement.
10. REMEDIES UPON DEFAULT. Upon the occurrence of an Event of Default, (1)
without implying any obligation to buy receivables, Buyer may cease buying
receivables or extending any financial accommodations to Seller; (2) all or a
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portion of the Obligations shall be, at the option of and upon demand by Buyer,
or with respect to an Event of Default described in Section 9(B), automatically
and without notice or demand, due and payable in full; and (3) Buyer shall have
and may exercise all the rights and remedies under this Agreement and under
applicable law, including the rights and remedies of a secured party under the
California Uniform Commercial Code, all the power of attorney rights described
in Section 5 with respect to all Collateral, and the right to collect, dispose
of, sell, lease, use, and realize upon all Purchased Receivables and all
Collateral in any commercial reasonable manner. Seller and Buyer agree that any
notice of sale required to be given to Seller shall be deemed to be reasonable
if given five (5) days prior to the date on or after which the sale may be held.
In the event that the Obligations are accelerated hereunder, Seller shall
repurchase all of the Purchased Receivables as set forth in Section 4.4.
11. ACCRUAL OF INTEREST. IF any amount owed by Seller hereunder Is not paid when
due, Including, without limitation, amounts due under Section 3.7, Repurchase
Amounts, amounts due under Section 12, and any other Obligations, such amounts
shall bear Interest at a per annum rate equal to the per annum rate of the
Finance Charges until the earlier of (I) payment in good funds or (ii) entry of
a final judgment thereof, at which time the principal amount of any money
judgment remaining unsatisfied shall accrue interest at the highest rate allowed
by applicable law.
12. FEES, COSTS AND EXPENSES; INDEMNIFICATION. The Seller will pay to Buyer
immediately upon demand all fees, costs and expenses (including fees of
attorneys and professionals and their costs and expenses) that Buyer incurs or
may from time to time impose in connection with any of the following: (a)
preparing, negotiating, administering, and enforcing this Agreement or any other
agreement executed in connection herewith, Including any amendments, waivers or
consents In connection with any of the foregoing, (b) any litigation or dispute
(whether instituted by Buyer, Seller or any other person) In any way relating to
the Purchased Receivables, the Collateral, this Agreement or any other agreement
executed In connection herewith or 'Herewith, (d) enforcing any rights against
Seller or any guarantor, or any Account Debtor, (e) protecting or enforcing Its
Interest in the Purchased Receivables or the Collateral, (f) collecting the
Purchased Receivables and the Obligations, and (g) the representation of Buyer
in connection with any bankruptcy case or Insolvency proceeding Involving
Seller, any Purchased Receivable, the Collateral, any Account Debtor, or any
guarantor. Seller shall Indemnify and hold Buyer harmless from and against any
and all claims, actions, damages, costs, expenses, and liabilities of any nature
whatsoever arising in connection with any of the foregoing.
13. SEVERABILITY, WAIVER, AND CHOICE OF LAW. In the event that any provision of
this Agreement is deemed Invalid by reason of law, this Agreement will be
construed as not containing such provision and the remainder of the Agreement
shall remain in full force and effect. Buyer retains all of its rights, even if
it makes an Advance after an Event of Default. If Buyer waives an Event of
Default, it may enforce a later Event of Default. Any consent or waiver under,
or amendment of, this Agreement must be in writing. Nothing contained herein, or
any action taken or not taken by Buyer at any time, shall be construed at any
time to be indicative of any obligation or willingness on the part of Buyer to
amend this Agreement or to grant to Seller any waivers or consents. This
Agreement has been transmitted by Seller to Buyer at Buyers office in the State
of California and has been executed and accepted by Buyer in the State of
California. This Agreement shall be governed by and interpreted in accordance
with the internal laws of the State of California.
14. ACCOUNT COLLECTION SERVICES. Certain Account Debtors may require or prefer
that all of Seller's receivables be paid to the same address and/or party, or
Seller and Buyer may agree that all receivables with respect to certain Account
Debtors be paid to one party. In such event Buyer and Seller may agree that
Buyer shall collect all receivables whether owned by Seller or Buyer and
(provided that there does not then exist an Event of Default or event that with
notice, lapse or time or otherwise would constitute an Event of Default, and
subject to Buyer's rights In the Collateral) Buyer agrees to remit to Seller the
amount of the receivables collections it receives with respect to receivables
other than Purchased Receivables. It is understood and agreed by Seller that
this Section does not Impose any affirmative duty on Buyer to do any act other
than to turn over such amounts. All such receivables and collections are
Collateral and In the event of Seller's default hereunder, Buyer shall have no
duty to remit collections of Collateral and may apply such collections to the
obligations hereunder and Buyer shall have the rights of a secured party under
the California Uniform Commercial Code.
15. NOTICES. All notices shall be given to Buyer and Seller at the addresses or
faxes set forth on the first page of this Agreement and shall be deemed to have
been delivered and received: (a) if mailed, three (3) calendar days after
deposited in the United States mail, first class, postage pre-paid, (b) one (1)
calendar day after deposit with an overnight mail or messenger service; or (c)
on the same date of confirmed transmission if sent by hand delivery, telecopy,
telefax or telex.
16. JURY TRIAL. SELLER AND BUYER EACH HEREBY (a) WAIVE THEIR RESPECTIVE RIGHTS
TO A JURY TRIAL ON ANY CLAIM OR ACTION ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT, ANY RELATED AGREEMENTS, OR ANY OF THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY; (b) RECOGNIZE AND AGREE THAT THE FOREGOING WAIVER CONSTITUTES
A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT; AND (c) REPRESENT AND
WARRANT THAT IT HAS REVIEWED THIS WAIVER, HAS DETERMINED FOR ITSELF THE
NECESSITY TO REVIEW THE SAME WITH ITS LEGAL COUNSEL, AND KNOWINGLY AND
VOLUNTARILY WAIVES ALL RIGHTS TO A JURY TRIAL.
17. TERM AND TERMINATION. The term of this Agreement shall be for one (1) year
from the date hereof, and from year to year thereafter unless terminated in
writing by Buyer or Seller. Seller and Buyer shall each have the right to
terminate this Agreement at any time. Notwithstanding the foregoing, any
termination of this Agreement shall not affect Buyers security interest in the
Collateral and Buyer's ownership of the Purchased Receivables, and this
Agreement shall continue to be effective, and Buyer's rights and remedies
hereunder shall survive such termination,
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until all transactions entered Into and Obligations Incurred hereunder or in
connection herewith have been completed and satisfied in full,
18. TITLES AND SECTION HEADINGS. The titles and section headings used herein are
for convenience only and shall not be used in interpreting this Agreement.
19. OTHER AGREEMENTS. The terms and provisions of this Agreement shall not
adversely affect the rights of Buyer or any other division or affiliate of
Silicon Valley Bank under any other document, instrument or agreement. The
terms of such other documents, instruments and agreements shall remain in
full force and effect notwithstanding the execution of this Agreement. In
the event of a conflict between any provision of this Agreement and any
provision of any other document, Instrument or agreement between Seller on
the one hand, and Buyer or any other division or affiliate of Silicon Valley
Bank on the other hand, Buyer shall determine In Its sole discretion which
provision shall apply. Seller acknowledges specifically that any security
agreements, liens and/or security interests currently securing payment of
any obligations of Seller owing to Buyer or any other division or affiliate
of Silicon Valley Bank also secure Seller's obligations under this
Agreement, and are valid and subsisting and are not adversely affected by
execution of this Agreement. Seller further acknowledges that (a) any
collateral under other outstanding security agreements or other documents
between Seller and Buyer or any other division or affiliate of Silicon
Valley Bank secures the obligations of Seller under this Agreement and (b) a
default by Seller under this Agreement constitutes a default under other
outstanding agreements between Seller and Buyer or any other division or
affiliate of Silicon Valley Bank.
IN WITNESS WHEREOF, Seller and Buyer have executed this Agreement on the
day and year above written.
SELLER: AGRITOPE, INC.
By /s/ Gilbert N. Miller
- ------------------------------------------
Gilbert N. Miller
Title Executive Vice President
- ------------------------------------------
BUYER: SILICON VALLEY BANK
By /s/ Don Chandler
- ------------------------------------------
Don Chandler
Title Vice President
- ------------------------------------------
Vinifera, Inc., an Oregon corporation
(57 percent interest owned)
Agrimax Floral Products, Inc., a Minnesota corporation
ACTTAG, Inc., a Delaware corporation
Superior Tomato Associates, L.L.C., a Delaware limited liability company (66 2/3
percent interest owned)
Agrinomics LLC, a Delaware limited liability company
(50 percent interest owned)
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report dated October 29, 1999, included in this Form 10-K, into the Agritope,
Inc. and subsidiaries previously filed Form S-8 Registration Statement File No.
333-46371.
/s/ ARTHUR ANDERSEN LLP
Portland, Oregon
December 29, 1999
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-46371) of Agritope, Inc. of our report dated
October 31, 1997 relating to the financial statements appearing in this Form
10-K.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Portland, Oregon
December 29, 1999
Exhibit 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned, whose
signatures appear below, constitute and appoint Adolph J. Ferro and Gilbert N.
Miller, or either of them as his true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution for him and in his name,
place and stead, in any and all capacities, to sign Form 10-K for the fiscal
year ended September 30, 1999, and any amendments thereto, pursuant to the
requirements the Securities and Exchange Act of 1934, as amended, and to file
the same with the United States Securities and Exchange Commission and the
Nasdaq Stock Market.
DATED this 5th day of November 1999.
/s/ W. Charles Armstrong
-------------------------------
W. Charles Armstrong
/s/ Michel de Beaumont
-------------------------------
Michel de Beaumont
/s/ James T. King
-------------------------------
James T. King
/s/ Roger L. Pringle
-------------------------------
Roger L. Pringle
Exhibit 24.2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned, whose
signature appears below, constitutes and appoints Adolph J. Ferro and Gilbert N.
Miller, or either of them as his true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution for him and in his name,
place and stead, in any and all capacities, to sign Form 10-K for the fiscal
year ended September 30, 1999, and any amendments thereto, pursuant to the
requirements the Securities and Exchange Act of 1934, as amended, and to file
the same with the United States Securities and Exchange Commission and the
Nasdaq Stock Market.
DATED 8th day of November 1999.
-----
/s/ Nancy L. Buc
---------------------------------
Nancy L. Buc
Exhibit 24.3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned, whose
signature appears below, constitutes and appoints Adolph J. Ferro and Gilbert N.
Miller, or either of them as his true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution for him and in his name,
place and stead, in any and all capacities, to sign Form 10-K for the fiscal
year ended September 30, 1999, and any amendments thereto, pursuant to the
requirements the Securities and Exchange Act of 1934, as amended, and to file
the same with the United States Securities and Exchange Commission and the
Nasdaq Stock Market.
DATED 8th day of November 1999.
-----
/s/ Pierre Lefebvre
------------------------------
Pierre Lefebvre
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed consolidated financial statements included herein and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> SEP-30-1999
<CASH> 4,203,937
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<RECEIVABLES> 663,809
<ALLOWANCES> 24,054
<INVENTORY> 5,053,888
<CURRENT-ASSETS> 9,971,020
<PP&E> 6,446,341
<DEPRECIATION> (2,934,517)
<TOTAL-ASSETS> 15,471,182
<CURRENT-LIABILITIES> 4,184,636
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0
7,143
<COMMON> 40,706
<OTHER-SE> 9,274,694
<TOTAL-LIABILITY-AND-EQUITY> 15,471,182
<SALES> 2,503,377
<TOTAL-REVENUES> 3,551,469
<CGS> 2,333,673
<TOTAL-COSTS> 2,333,673
<OTHER-EXPENSES> 6,790,474
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,446
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</TABLE>
Certain Factors to Consider in Connection
with Forward-Looking Statements
December 1999
From time to time, Agritope, Inc. ("Agritope" or the "Company"), through its
management, may make forward-looking public statements with respect to the
Company regarding, among other things, expected future revenues or earnings,
projections, plans, future performance, product development and
commercialization, and other estimates relating to the Company's future
operations. Forward-looking statements may be included in reports filed under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), in press
releases or in oral statements made with the approval of an authorized executive
officer of Agritope. The words or phrases "will likely result," "are expected
to," "intends," "is anticipated," "estimates," "projects" or similar expressions
are intended to identify "forward-looking statements" within the meaning of
Section 21E of the Exchange Act and Section 27A of the Securities Act of 1933,
as amended, as enacted by the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are subject to a number of risks and uncertainties.
The Company cautions you not to place undue reliance on its forward-looking
statements, which speak only as of the date on which they are made. Agritope's
actual results may differ materially from those described in the forward-looking
statements as a result of various factors, including those listed below. The
Company does not intend to update its forward-looking statements.
Pursuant to the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995, Agritope hereby files the following cautionary statements
identifying certain factors that could cause its actual results to differ
materially from those described in its forward-looking statements.
LIMITED INDEPENDENT OPERATING HISTORY; HISTORY OF LOSSES; UNCERTAINTY OF FUTURE
PROFITABILITY. From 1987 to December 1997, the Company operated as a wholly
owned subsidiary of Epitope, Inc. ("Epitope"). In December 1997, Epitope
distributed all of the outstanding capital stock of the Company to Epitope
shareholders as a dividend (the "Spin Off"). Accordingly, Agritope has a limited
operating history as an independent company. Agritope has experienced
significant operating losses since its incorporation (and since the Spin Off).
As of September 30, 1999, it had an accumulated deficit of $51.1 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. Agritope has not, at this time, achieved
commercialization of any of its products other than grapevines sold by its
majority owned subsidiary, Vinifera, Inc. 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 a result, there can be no assurance that Agritope
will ever achieve profitability.
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING. The Company believes
that its funds on hand will be sufficient to finance its operations for its 2000
fiscal year. However, because the Company's belief is based on a number of
factors, many of which are beyond its control, it cannot be certain that its
belief will prove accurate. The actual future liquidity and capital requirements
of Agritope will depend on numerous factors, including: the costs and success of
its development efforts; the costs and timing of its establishment of sales and
marketing activities; the success of its current strategic collaborations; its
success in securing additional strategic partners; the extent to which its
products gain market acceptance; competing technological and market
developments; its 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 its 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 to the Company on satisfactory terms, if at
all. Any additional equity financing may be dilutive to Agritope's stockholders,
and debt financing, if available, may involve significant interest expense and
restrictive covenants. In addition, subsequent changes in ownership due to
future equity sales could adversely affect Agritope's ability to utilize
existing net operating losses. 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 any required capital likely would cause it to scale back, delay or
eliminate certain of its programs and have a material adverse effect on its
business, financial condition and results of operations.
<PAGE>
COMPETITION AND TECHNOLOGICAL CHANGE. 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, Binova
Holding Corporation 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 its interest in various patents and substantial research and development
lead-time, competition will intensify, particularly from agricultural
biotechnology firms and major agrochemical, seed and food companies with
biotechnology laboratories. There can be no assurance that such competition will
not have an adverse effect on Agritope's business, financial condition and
results of operations.
GOVERNMENT REGULATION. Regulation by U.S. federal, state and local and by
foreign governments will be a significant factor in the future production and
marketing of Agritope's genetically engineered fruit and vegetable products. 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 the products thereof.
The U.S. federal government has implemented a coordinated policy for the
regulation of biotechnology research and products. The U.S. Department of
Agriculture ("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 USDA regulates the growing
and transportation of most genetically engineered plants and plant products. The
U.S Food and Drug Administration ("FDA") has principal jurisdiction over plant
products that are used for human or animal food. The U.S. Environmental
Protection Agency ("EPA") has jurisdiction over the field testing and commercial
application of plants genetically engineered to contain pesticides. Other U.S.
federal agencies have jurisdiction over certain other classes of products or
laboratory research.
In May 1992, the FDA announced its policy on foods developed through genetic
engineering (the "FDA Policy"). The FDA Policy provides that the FDA will apply
the same regulatory standards to foods developed through genetic engineering as
applied to foods developed through traditional plant breeding. Under the FDA
Policy, the FDA will not ordinarily require premarket review of genetically
engineered plant varieties of traditional foods unless their characteristics
raise significant safety questions, such as elevated levels of toxicants or the
presence of allergens or food additives.
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 foreign authorities will not enact labeling requirements, any of
which could have a material adverse effect on the marketing of products derived
using the tools and techniques of genetic engineering.
The FDA is considering modifying its policy on foods developed through genetic
engineering to include a Premarket Notification ("PMN") procedure. This policy
modification could require a company that develops genetically engineered foods
to inform the FDA that its safety evaluation of an engineered food 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 a PMN procedure, if
enacted, should not delay its 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 U.S. 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 U.S. federal water,
air and environmental quality statues and import/export control legislation. At
the present time, most states generally defer 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 federal 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 authorities could require Agritope to conduct further safety
assessments and potentially delay its product development programs or the
commercialization of any resulting products.
<PAGE>
No assurance can be given that Agritope can obtain in a timely manner, if at
all, any required regulatory approvals, exemptions, permits or other clearances
either for its research or commercial activities.
DEPENDENCE ON STRATEGIC PARTNERS. Agritope relies on its 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,
development, production, marketing and distributing of agricultural products.
Agritope's future revenues will be dependent on the success of products
developed pursuant to such collaborative relationships. There can be no
assurance that Agritope will be able to establish additional strategic
relationships or maintain its current strategic relationships, or that such
relationships will be on terms sufficiently favorable to permit Agritope to
operate profitably. Furthermore, conflicts may arise between the Company and its
partners or among these third parties that could discourage them from working
cooperatively with the Company. Agritope's commercial success will be dependent
in part upon the performance of its strategic partners.
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 its future products and technology. There can be no assurance
that Agritope will obtain any patent for which it applies, 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
which compete 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 the enforceable scope of the claims of the patent.
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 it 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 otherwise gain access to the Company's
proprietary information.
DEPENDENCE ON KEY PERSONNEL. Agritope depends to a large extent on the abilities
and continued participation of its principal executive officers and scientific
personnel. The loss of key personnel could have a material adverse effect on
Agritope's business and results of operations. 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 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. 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 its expectations, that it
will obtain necessary regulatory approvals in a timely manner, if at all, or
that its products can be successfully and profitably produced, distributed and
sold.
UNCERTAIN CONSUMER 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 unknown
risks to the environment. Securing consumer confidence in genetically engineered
products poses numerous challenges, both in the United States and in other
countries. The market success of Agritope's products developed through
biotechnology could be delayed or impaired because of such factors.
<PAGE>
VOLATILITY OF SHARE PRICE. The market price of the Company's Common Stock is
volatile. Announcements regarding technical innovations, the development of new
products, the status of corporate collaborations and supply arrangements, public
concern as to the safety or other implications of products, regulatory
approvals, patent or proprietary rights or other developments by the Company or
its competitors could have a significant impact on the market price of the
Common Stock. Further, due to one or more of the foregoing or other factors, the
Company's results of operations in any future quarter may not meet the
expectations of securities analysts or investors. In such event, the market
price of the Company's Common Stock could be materially and adversely affected.
In addition, the stock markets have recently experienced significant price and
volume fluctuations seemingly unrelated to the performance of individual
companies. Broad market fluctuations as well as general economic and political
conditions may also adversely affect the market price of the Common Stock.
NO ASSURANCE AS TO CONTINUED LISTING OF COMMON STOCK ON NASDAQ SMALLCAP MARKET.
In order to maintain the listing of its Common Stock on The Nasdaq SmallCap
Market, Agritope is required to comply with certain Nasdaq listing maintenance
standards including minimum tangible asset value amounts, public float
requirements and minimum stock prices. There can be no assurance that Agritope
will continue to comply with the listing maintenance standards of The Nasdaq
SmallCap Market as in effect from time to time.
PRODUCT LIABILITY AND RECALL RISK. Agritope could be subject to claims for
personal injury or other damages resulting from its products or services or
product recalls. Agritope carries liability insurance against the negligent acts
of certain of its employees and a general liability insurance policy that
includes coverage for product liability, but not for product recall. In
addition, Agritope may require increased product liability coverage as its
products are commercially developed. Such insurance is expensive and, in the
future, may not be available on acceptable terms, if at all. No assurance can be
given that any product liability claim or product recall will not have a
material adverse effect on Agritope's business, financial condition and results
of operations.
POSSIBILITY OF SUBSTANTIAL SALES OF COMMON STOCK. Any sales of substantial
amounts of Common Stock in the public market, or the perception that such sales
might occur, could materially adversely affect the market price of the Common
Stock.
ANTI-TAKEOVER CONSIDERATIONS. Agritope's Certificate of Incorporation and Bylaws
may have the effect of making an acquisition of control of Agritope in a
transaction not approved by the Company's board of directors more difficult. For
example, the Certificate of Incorporation and Bylaws provide for a classified
board, prohibit the removal of directors except for "cause," limit the ability
of the stockholders and directors to change the size of the board, and require
advance notice before stockholders are permitted to nominate directors or submit
other proposals at stockholder meetings. In November 1997, the Company's board
of directors adopted a stockholder rights plan, which may limit the unsolicited
acquisition of the Company's Common Stock. In addition, subject to limitations
prescribed by Delaware law, the board has the authority to issue up to 10
million shares of Agritope Preferred and to fix the rights, preferences,
privileges and restrictions of those shares, and to issue up to a total of 30
million shares of the Company's Common Stock, all without any vote or action by
Agritope's stockholders, except as may be required by law or any stock exchange
or automated securities interdealer quotation system on which the Common Stock
may then be listed or quoted. Agritope is also subject to Delaware statutory
provisions governing business combinations with persons deemed to be "interested
stockholders." Finally, awards made under the Company's 1997 Stock Award Plan
may vest in full immediately in the event of a change in control of Agritope or
similar event. 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 the
Common Stock, and may adversely affect the market price of, and the voting and
other rights of the holders of the Common Stock.
