AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 6, 1998
REGISTRATION NO. ________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FORM SB-2
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
_______________
AGRI BIO-SCIENCES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE S.I.C. 6159 76-0481583
(State or other jurisdiction of (Primary Standard Industrial (IRS
Employer
incorporation or organization) Classification Code Number)
Identification Number)
AGRI BIO-SCIENCES, INC.
7806 OXFORDSHIRE DRIVE
SPRING, TEXAS 77379
TEL: (281) 320-7541
FAX: (281) 251-2643
(Address, including zip code, and telephone number including area code
of Registrant's principal executive offices and place of business)
__________
LESTER H. STEPHENS, PRESIDENT
AGRI BIO-SCIENCES, INC.
7806 OXFORDSHIRE DRIVE
SPRING, TEXAS 77379
TEL: (281) 320-7541
FAX: (281) 251-2643
(Name and address of Agent for Service)
COPIES TO:
ROBERT L. SONFIELD, JR., ESQ.
SONFIELD & SONFIELD
770 SOUTH POST OAK LANE
HOUSTON, TEXAS 77056
TEL: (713) 877-8333
FAX: (713) 877-1547
EMAIL: [email protected]
__________
Approximate date of commencement of proposed sale to the public:
As soon as practicable on or after the Registration Statement becomes
effective.
If any of the Securities registered on this form are to be offered on a
delayed or continuous basis
pursuant to Rule 415 of the Securities Act of 1933, check the following box:
CALCULATION OF REGISTRATION FEE
PROPOSED PROPOSED
TITLE OF SECURITIES AMOUNT TO BE MAXIMUM MAXIMUM AMOUNT OF
TO BE REGISTERED REGISTERED OFFERING PRICE AGGREGATE
REGISTRATION
PER SHARE (1) OFFERING PRICE (1) FEE
Common Stock ($.001 par value per share) 100,000 $.00646 $
========================================= ======== ======== =
646 $ .20
==== ======
(1) Based upon book value solely for purposes of calculating the
registration fee pursuant to Rule 457(f)(2).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(A)
MAY DETERMINE.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MAY ___, 1998
AGRI BIO-SCIENCES, INC.
COMMON STOCK PAR VALUE $.001 PER SHARE
This Prospectus covers 100,000 shares of common stock, par value $.001 per
share ("Agri Bio Common Stock"), of Agri Bio-Sciences, Inc., a Delaware
corporation ("Agri Bio"). This Prospectus is being furnished to the
stockholders of GS Financial Services, Inc., a Delaware corporation ("GS
Financial"), in connection with the proposed distribution (the "Distribution")
to GS Financial's stockholders of shares of Agri Bio Common Stock, pursuant to
the terms of an Consulting and Distribution Agreement, dated as of May ___,
1997, by and between GS Financial and Agri Bio (the "Distribution Agreement").
A copy of the Distribution Agreement is included as an exhibit to the
registration statement of which the Prospectus is a part.
One share of Agri Bio Common Stock will be distributed for each 9/10th of a
share of common stock of GS Financial, par value $.001 per share (the "GS
Financial Common Stock"), issued and outstanding on the date established by
the Board of Directors of GS Financial for determining stockholders of record
entitled to receive Agri Bio Common Stock in the Distribution (the
"Distribution Record Date").
No consideration will be paid by GS Financial's stockholders for the shares of
Agri Bio Common Stock to be received by them in the Distribution. There is
currently no public trading market for the shares of Agri Bio Common Stock and
there can be no assurance that such a market will develop after completion of
the Distribution. Agri Bio intends to apply to a member of the National
Association of Securities Dealers, Inc. to make a market in the Agri Bio
Common Stock and provide a quotation on the NASD inter-dealer Electronic
Bulletin Board under the trading symbol "AGBI."
STOCKHOLDERS OF GS FINANCIAL SHOULD CAREFULLY CONSIDER THE INFORMATION SET
FORTH UNDER THE CAPTION "RISK FACTORS" BEGINNING ON PAGE 4 HEREOF WITH RESPECT
TO THE SECURITIES BEING OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
Underwriting Proceeds to the Company (2)(3)
Price to Recipient(1) Commissions and Discounts(2)
--------------------- ----------------------------
Per Share $ .00646 $ 0 $ -0-
Total $ 646 $ -0- $ -0-
====== ====== ===== =====
(1) Based upon the book value of the Company as of December 31, 1997. See
"Financial Statements."
(2) The shares are owned by GS Financial Services, Inc. ("GS Financial")
and are being distributed pro rata to the shareholders of GS Financial as a
dividend. See "The Distribution."
(3) No consideration will be received by the Company from the GS Financial
shareholders who receive stock in the Distribution. The expenses of the
Distribution are estimated to be $33,000. All of which will be paid by the
Company
The date of this Prospectus is May 6, 1998.
AVAILABLE INFORMATION AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form SB-2 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to the shares of Agri Bio Common Stock described in this
Prospectus. This Prospectus, which is a part of the Registration Statement,
does not contain all of the information set forth in the Registration
Statement or the exhibits and schedules thereto, certain portions having been
omitted pursuant to the rules and regulations of the Commission. Statements
made in this Prospectus as to the contents of any contract or other document
are not necessarily complete with respect to each such contract or other
document filed with the Commission as an exhibit to the Registration
Statement. Reference is made to such exhibits for a more complete description
of the matter involved, and each such statement shall be deemed qualified in
its entirety by such reference.
The Registration Statement and the exhibits and schedules thereto filed
with the Commission may be inspected and copied (at prescribed rates) at the
Public Reference Section of the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549. Such Registration Statement and
the exhibits and schedules thereto have been filed electronically with the
Commission and can be reviewed through the Commission's web site that contains
reports, proxy and information statements and other information of registrants
that file electronically with the Commission. The address of the web site is
http://www.sec.gov.
The Company intends to furnish its shareholders with annual reports
containing audited annual financial statements and quarterly reports for the
first three fiscal quarters of each fiscal year containing unaudited interim
financial information.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY AGRI OR ANY OTHER PERSON. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE ANY SUCH OFFER OR
SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY DISTRIBUTION OF THE SECURITIES MADE UNDER THIS PROSPECTUS SHALL, UNDER
ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF NEW BEVERLY OR BEVERLY SINCE THE DATE OF THIS PROSPECTUS.
iii
TABLE OF CONTENTS
AVAILABLE INFORMATION I
PROSPECTUS SUMMARY 1
The Company 1
Overview 1
Business 2
Product 2
Market Area 2
Tlaxcala 2
University of Tlaxcala 2
Sinola 2
Veracruz 2
Software 3
Product Identity 3
Present Sales 3
The Distribution 3
Certain Tax Considerations 3
Agri Bio Stock Incentive Plan 3
Risk Factors 3
RISK FACTORS 4
Lack of Operations; History of Losses; Working Capital Deficit; Anticipation
of Negative Cash Flow; No Assurance of Future Profitability 4
Mexican Governmental, Political, Economic and Social Factors 4
Peso Devaluation; Exchange Controls 5
Uncertainty of Product Acceptance 5
Need to develop Marketing Channels 6
Risks of Limited Protection for Company's Intellectual Property and
Proprietary Rights and Infringement of Third Parties' Rights 6
Compliance with Government Regulation 6
Capital Requirements 7
Risks Associated with Planned Growth 7
Dependence on Key Personnel 7
Competition 7
Absence of Dividends 7
Trading of Company Common Stock; Restrictions on Resale 7
Control by Existing Stockholders 8
Anti-Takeover Provisions 8
No Assurance of a Public Market and Likelihood of a Volatile Market 8
Risk of Low-Price ('Penny') Stocks 8
USE OF PROCEEDS 9
CAPITALIZATION 9
THE DISTRIBUTION 9
Terms of the Distribution Agreement 9
Manner of Effecting the Distribution 10
Listing of Agri Bio Common Stock; Restrictions on Resale 10
Treatment of Indebtedness 10
Expenses 10
Indemnification and Insurance 11
CERTAIN FEDERAL INCOME TAX CONSEQUENCES 11
General 11
Taxation of Stock as a Dividend 12
Taxpayer Relief Act 12
Backup Withholding 13
Certain State Tax Consequences 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 13
General 13
Operating Results 13
Liquidity and Capital Resources 14
Impact of the Year 2000 Issue 14
BUSINESS 14
Overview 14
The Product 14
Research and Development 15
Overview 15
Test Plots 15
Product Licenses 15
Government Regulations 15
NAFTA 15
Sales and Marketing 16
Overview 16
Mexico 16
Tlaxcala 16
University of Tlaxcala 16
Sinola 17
Veracruz 17
Puebla 17
Mexican Sales Company 18
Sales Forecast 19
Manufacturing Facility 19
Laboratories 20
Data Bank 21
Laboratory Certification 21
Proprietary Rights 21
Competition 22
Employees 22
Legal Proceedings 22
DIVIDEND POLICY 22
MANAGEMENT OF THE COMPANY 22
Executive Officers and Directors 22
Compensation of Directors and Executive Officers 23
Stock Incentive Plan 24
General Provisions of the Stock Incentive Plan 24
Stock Options and Stock Appreciation Rights 24
Restricted Stock 25
Tax Information 25
Limitations of Liability of Directors 26
CERTAIN TRANSACTIONS 26
PRINCIPAL STOCKHOLDERS OF AGRI BIO-SCIENCES, INC. 27
Parents 28
DESCRIPTION OF CAPITAL STOCK 28
Common Stock 29
Defenses Against Hostile Takeovers 30
Introduction 30
Authorized Shares of Capital Stock 30
Stockholder Meetings 30
Classified Board of Directors and Removal of Directors 30
Restriction of Maximum Number of Directors and Filling Vacancies on the Board
of Directors 31
Stockholder Vote required to Approve Business Combinations with Related
Persons 31
Advance Notice Requirements for Nomination of Directors and Proposal of New
Business at Annual Stockholder Meetings 32
Limitations on Acquisitions of Capital Stock 32
Supermajority Voting Requirement for Amendment of Certain Provisions of the
Certificate of Incorporation 32
Preferred Stock 32
Common Stock Options 33
Registrar and Transfer Agent 33
SHARES ELIGIBLE FOR FUTURE SALE 33
LEGAL MATTERS 33
EXPERTS 34
INDEX TO FINANCIAL STATEMENTS 1
2
PROSPECTUS SUMMARY PROSPECTUS SUMMARY
The following is a summary of certain information contained elsewhere in
this Prospectus. Reference is made to, and this summary is qualified in its
entirety by, the more detailed information contained in or incorporated by
reference in this Prospectus and the Appendices hereto. Prospective
shareholders are urged to read carefully this Prospectus in their entirety.
Capitalized terms used herein without definition are, unless otherwise
indicated, defined in the text below and used herein with such meanings.
THE COMPANY The Company
Agri Bio-Sciences, Inc. (the Company) (formerly Agri Environmental
Sciences, Inc.) was formed May 30, 1995 as a Texas corporation. On December
22, 1997, the Company was reincorporated as a Delaware corporation. There was
no activity during 1995. Agri Financial Group, Inc. (AFS), was formed by
seven Company shareholders in March, 1997 for the purpose of financing a joint
venture soil analysis laboratory in Tlaxcala, Mexico with a Mexican
university. This sister corporation was merged with the Company in August,
1997 and is shown as consolidated using the pooling of interests method of
accounting.
OVERVIEW Overview
The management of the Company believes that the shareholders of GS
Financial will benefit from receiving shares in a transaction that has been
registered under the Securities Act as a dividend with possible future value.
Further, the management of the Company believe that the distribution of Shares
to the stockholders of GS Financial in the Distribution will provide the basis
for the creation of a public market for the common stock of the
post-Distribution Company and that the existence of such a public market will
benefit the Company and GS Financial stockholders. No assurance can be given,
however, that a market will develop for the Common Stock or, if it develops,
that it will be sustained. See "Risk Factors - No Assurance of a Public
Market and Likelihood of a Volatile Market."
The management of the Company determined that, after research into other
possible alternatives, the proposed Distribution presented the fastest and
least expensive method of accessing the U.S. public capital markets and
providing the most desirable corporate vehicle for conducting its business
operations. The criteria applied by the board was to obtain trading status
for the shares held by the Company's shareholders and to seek to raise
additional capital in order to expand its business operations while utilizing
its existing infrastructure, management and knowledge of its industry at the
least cost to shareholders measured in terms of capital expended and dilution.
Following the completion of the Distribution, the Company will operate as an
independent, publicly-traded company.
The GS Financial shareholders will not be required to pay any cash or
other consideration for the shares of Common Stock received in the
distribution or will they need to surrender their GS Financial common stock
certificates in order to receive shares of Company Common Stock in the
Distribution. The Distribution Agent will send GS Financial shareholder's
stock certificates following consummation of the Merger.
The Company will attempt to qualify the Common Stock on the NASD inter-dealer
Electronic Bulletin Board. The Company Common Stock received pursuant to the
Distribution will be freely transferable under the Securities Act, except for
shares of Common Stock received by any person who may be deemed to be an
"affiliate" of the Company within the meaning of Rule 144 promulgated under
the Securities Act. Persons who may be deemed to be affiliates of the Company
after the Distribution generally include individuals or entities that control,
are controlled by, or are under common control with the Company, and may
include the directors and executive officers of the Company. Persons who are
affiliates of the Company will be permitted to sell their Common Stock
received pursuant to the Distribution only pursuant to an effective
registration statement under the Securities Act or pursuant to an exemption
from the registration requirements of the Securities Act. The Registration
Statement of which this Prospectus is a part will not cover resales of Company
Common Stock by affiliates of the Company. See "Shares Eligible for Future
Sale."
The business office of the Company is 7806 Oxfordshire Drive, Spring,
Texas 77379. Its telephone number is 281.320.7541 and its fax number is
281.320.9026
BUSINESS Business
ProductProduct. The Company blends a Micro Min formula of micronutrients
with montmorillonite, (an agricultural clay), in order to electrochemically
bond them into a blended fertilizer unique to the world market. These blends
of micronutrients are then safely liberated in the soil at a moment when they
are most required by plants by means of cation exchange (negative and positive
ion attraction), soluble sulfates, and mineralization.
Market AreaMarket Area. Micro Min has the only micronutrient product
license in: Mexico, Colombia, Egypt and Spain. Each of the following Mexican
states have agreed to participate in the program and at least one major
farmer's union has agreed to distribute the product and laboratory services.
TlaxcalaTlaxcala Cesavetlax Comite Estal Sanidad Vegetal is an
--------
organization of the Secretaria of Agriculture, state of Tlaxcala. This is a
-----
governmental office which works under the state's secretary of agriculture for
rural development. The director of rural development, Mr. Dionicio Perianez,
has forwarded a communique to this Company indicating that his office will
assist in providing the state's farmers with the Company's technology and
product.
University of TlaxcalaUniversity of Tlaxcala The University of Tlaxcala
------------------------
is autonomous and is the standard bearer for agricultural research for the
entire state. It is interesting to note that the University of Tlaxcala has
recently received a complete soil, water and plant testing laboratory as a
gift. Soon thereafter, the University appointed Robert A. Kalish, (the
Company Director of Analytical Services), to its faculty as Director of
Laboratories, Asesor Technico, Secretaria de Fornento Agopecurario,
Universidad Autonoma de Tlaxcala, and has requested that he direct their
laboratory operations.
During 1997, there was a joint venture between the University, the
farmer's Produce Federation and this company to each "chip in" $15,000.00 so
that the lab could be a computerized soil, water and plant testing laboratory.
Primarily, the laboratory will do soil, water and plant testing from samples
delivered by the state's farmers. However, it will also be an adjunct of the
agriculture school to train students to become future farmers of the state.
(Also a CADRE of personnel for the Company's laboratories to be installed in
other areas of the state and country).
SinolaSinola (Association of Farmers of the River Culiacan) A.A.R.C
------
SINALOA STATE LIC BENJAMIN ARAMBURO PERAZO, General Manager CULIACAN, SINALOA,
MEXICO. One of the fastest growing agricultural areas of Mexico is the areas
of Sinaloa, Nayarit, Sonora and Baja California Sur. A four (4) state area
that ships ninety (90) percent of their produce to the USA. The Company has
worked with the management of AARC previously and they are now prepared to
represent the product in that four state area.
AARC is a major farmer union organization with warehouse facilities in
the state. They also sell fertilizers and seeds to the other ten (101 farmer
unions of the state of Sinaloa. AARC wishes to be the main Micro Min
distributor for those four (4) areas.
AARC currently has a laboratory facility but it is NOT able to properly
serve its membership because of faulty testing protocols and/or old and
uncalibrated instruments. However, they want the Company to assist in
up-dating their lab so that they can serve their state-wide customers and
eventually be certified by the USDA.
VeracruzVeracruz. Ing. Pedro Ernesto Del Castillo, Secretary of Agriculture,
- --------
Veracruz State, Delagate for SAGAR (Minister of Agriculture, Mexico) JALAPA,
VERA, MEXICO. In a recent meeting with Robert Kalish, Ing. Castillo stated
that wanted to "detonate" the Company's laboratory services within the state.
Upon being asked what he meant, the agriculture secretary stated that
wanted to make the program state-wide immediately and would finance fifty
percent of the initial costs of laboratory tests requested by the state's
farmers.
The state of Veracruz also received a new laboratory facility and they
too have asked us to add the Company's computer software program to their
computer network and train their personnel in laboratory operations. New
testing protocols and instrument calibration are also necessary here.
Veracruz state is now the biggest agriculture state in Mexico. (Just passing
Sinaloa).
SoftwareSoftware. A Company proprietary computer software program that
has the capability of rendering final and definitive reports on soil, water,
and plants from samples submitted; and the further capability to recommend a
total fertilizer application program for the farmer or governmental
agricultural dependency. All data is stored for later retrieval.
Product IdentityProduct Identity. Currently, the product and soil, water
and plant testing techniques and expertise are recognized by the offices of
the Minister of Agriculture in each of those countries.
A laboratory similar to the Company's design has been installed in the
Dominican Republic through the US A.I.D. program; and a second laboratory was
installed in Tlaxcala, Tlax., Mexico, for the University and the Produce
Federation as a joint venture.
Present SalesPresent Sales. As of the date of this Prospectus, there
have been no sales. However, management believes the Micro Min product will
soon be sold to farmers in Mexico.
THE DISTRIBUTION. The Distribution
On the Distribution Date, GS Financial will distribute to its
stockholders as of the Distribution Record Date, 100,000 shares of Company
Common Stock. Each stockholder of GS Financial as of the Distribution Record
Date will receive one share of Company Common Stock for each 9/10th of a share
of GS Financial Common Stock held as of the Distribution Record Date. The
Company's transfer agent, Atlas Stock Transfer Corporation, will act as the
Distribution Agent for the Distribution and will deliver certificates for
Company Common Stock as soon as practicable to holders of record of GS
Financial Common Stock as of the close of business on the Distribution Record
Date. All shares of Company Common Stock will be fully paid and nonassessable
and the holders thereof will not be entitled to preemptive rights.
Immediately following the completion of the Distribution, the Company will be
an independent, publicly-traded company
CERTAIN TAX CONSIDERATIONS Certain Tax Considerations
Dividends paid on common stock are subject to tax as ordinary income to
the extent of the company's current or accumulated earnings and profits as
computed for federal income tax purposes. To the extent that the amount of
the dividend paid on the common stock exceeds the company's current and
accumulated earnings and profits for federal income tax purposes, such
dividend will be treated first as a nontaxable return of capital which will be
applied against and reduce the adjusted tax basis of the common stock of the
holder. Any amount in excess of the holder's adjusted tax basis would then be
taxed as capital gain, and will be long-term capital gain if the holder's
holding period for the common stock exceeds one year. See "Certain Federal
Income Tax Consequences."
AGRI BIO STOCK INCENTIVE PLAN Agri Bio Stock Incentive Plan
The board of directors of the Company has approved and adopted by written
consent, the Agri Bio-Sciences, Inc. Stock Incentive Plan (the "Stock
Incentive Plan"). The purpose of the Stock Incentive Plan is to provide
deferred stock incentives to certain key employees and directors of the
Company who contribute significantly to the long-term performance and growth
of the Company. See "Management - Stock Incentive Plan."
RISK FACTORS Risk Factors
Agri Bio stockholders should carefully consider certain risks in
evaluating the Agri Bio Common Stock to be received in the Distribution. See
"Risk Factors."
34
RISK FACTORSRISK FACTORS
This Prospectus contains statements relating to future results of the Company
(including certain projections and business trends) that are "forward-looking
statements" as defined in the Private Securities Litigation Reform Act of 1995
(the "Litigation Reform Act"). Section 27A(b)(2)(D) of the Securities Act and
Section 21E(b)(2)(D) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as promulgated by the Litigation Reform Act, expressly state
that the safe harbor for forward-looking statements does not apply to
statements made in connection with an initial public offering. Actual results
may differ materially from those projected as a result of certain risks and
uncertainties, including, but not limited to, changes in political and
economic conditions, regulatory conditions, government healthcare spending,
integration of acquisitions and competitive pricing pressures, all as detailed
from time to time in the filings of Agri Bio and GS Financial made with the
Commission.
When used in this Prospectus with respect to the Company the words "estimate,"
"project," "intend," "expect" and similar expressions are intended to identify
forward-looking statements. Such statements are subject to risks and
uncertainties that could cause actual results to differ materially from those
contemplated in such forward-looking statements. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as
of the date hereof. Such risks and uncertainties include those risks,
uncertainties and risk factors identified in this Prospectus under the
headings "Risk Factors," "The Distribution," "Certain Federal Income Tax
Consequences," "Treatment of GS Financial Indebtedness" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Agri Bio does not undertake any obligation to publicly release any revisions
to these forward-looking statements to reflect events or circumstances after
the date hereof or to reflect the occurrence of unanticipated events.
In addition to the other information contained in this Prospectus, the
following factors should be considered carefully in evaluating Agri Bio before
making any investment decisions with respect to the Agri Bio Common Stock to
be received in the Distribution. To the extent it relates to the Mexican
government or Mexican macroeconomic data, the following information has been
extracted from official publications of the Mexican government and has not
been independently verified.
LACK OF OPERATIONS; HISTORY OF LOSSES; WORKING CAPITAL DEFICIT; ANTICIPATION
OF NEGATIVE CASH FLOW; NO ASSURANCE OF FUTURE PROFITABILITY.Lack of
Operations; History of Losses; Working Capital Deficit; Anticipation of
Negative Cash Flow; No Assurance of Future Profitability
The Company is engaged in research and development and has not commenced
business operation. For the fiscal year ended December 31, 1997 the Company
incurred a net loss of $199,266 As of December 31, 1997, the Company had an
accumulated deficit of $378,832 and a working capital deficit of $18,118. The
Company anticipates having a negative cash flow from operating activities in
future quarters and years. The Company expects to incur further operating
losses in future quarters and years and until such time, if ever, as there is
a substantial increase in orders for the Company's products and product sales
generate sufficient revenue to fund its continuing operations. There can be
no assurance that sales of the Company's products will ever generate
significant revenue, that the Company will ever generate positive cash flow
from its operations or that the Company will attain or thereafter sustain
profitability in any future period. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations," and "Business-Sales and
Marketing."
MEXICAN GOVERNMENTAL, POLITICAL, ECONOMIC AND SOCIAL FACTORS Mexican
Governmental, Political, Economic and Social Factors
The Company's initial operations are situated in Mexico, and
approximately 90% of its revenues in 1998 are expected to result from sales
generated within Mexico. Accordingly, the economic environment within Mexico,
which is significantly affected by actions taken by the Mexican government,
can be expected to have a significant impact on the Company's business,
financial condition and results of operations.
Beginning in December 1994, Mexico experienced an economic crisis
characterized by exchange rate instability, high inflation, high domestic
interest rates, negative economic growth and reduced consumer purchasing
power. The Noon Buying Rate rose from Ps. 3.4662 per U.S. $1.00 on December
19, 1994 to Ps. 5.000 per U.S.$1.00 on December 31, 1994, Ps. 7.7400 per
U.S.$1.00 on December 31, 1995, Ps. 7.8810 per U.S.$1.00 on December 31, 1996
and Ps. 7.8870 per U.S.$1.00 on July 15, 1997. See "-Peso Devaluation;
Exchange Controls." Mexican GDP declined by 6.2% in 1995, grew by 5.1% during
1996 and grew at an annualized rate of 5.1% in the first quarter of 1997. The
annual rate of inflation, as measured by changes in the Mexican National
Consumer Price Index (Indice Nacional de Precios al Consumidor or the "INPC"),
was 52.0% and 27.7% in 1995 and 1996, respectively, after having been only
7.1% in 1994. For the first quarter of 1997, the non-annualized inflation rate
was 5.9%. Concerns over the Mexican economy also led to sharply higher
interest rates in 1995 and 1996, both domestically and externally, on Mexican
public and private sector debt and to sharply reduced opportunities for
refinancing or refunding maturing debt issues (including the Company's
indebtedness). Mexican interest rates, which had reached a low of 8.8% per
annum for 28-day Cetes (Mexican treasury bills) in February 1994, rose through
most of 1994 and increased substantially in 1995, when interest rates on
28-day Cetes averaged 48.3%. Interest rates on 28-day Cetes averaged 31.3% in
1996. On September 30, 1997, the interest rate on 28-day Cetes was 16.65%. In
response to the economic situation, the Mexican government entered into an
international economic recovery package and announced a series of measures
which initially limited and may in the future limit the growth of the Mexican
economy.
These economic conditions substantially reduced the purchasing power of the
Mexican population and, as a consequence, may have a material adverse effect
on the Company's 1998 financial condition and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." While the Mexican economy has begun to recover, such recovery
has not yet resulted, and may not result, in a significant improvement in
consumer purchasing power, which may adversely affect the Company. There can
be no assurance that the economic recovery will continue or that the economy
will return to the growth levels existing prior to the crisis. There is a
risk that any political, economic or social responses to the economic
situation, over which the Company has no control (and which could include,
among other things, social unrest and labor disruptions), may impair the
Company's business, financial condition and results of operations and
adversely affect the Company's ability to access credit, refinance its
existing indebtedness and finance its growth.
On July 6, 1997, Mexico held elections for, among other offices, all members
of the Mexican Chamber of Deputies, 32 members of the Mexican Chamber of
Senators and the mayor of Mexico City. As a result of these elections, for
the first time in seven decades, the Partido Revolucionario Institucional will
not hold a majority of the seats in the Mexican Chamber of Deputies or the
office of mayor of Mexico City. Management cannot predict the impact these
elections will have on Mexican economic, regulatory and social policy or the
consequences thereof on the business, financial condition and results of
operations of the Company.
PESO DEVALUATION; EXCHANGE CONTROLSPeso Devaluation; Exchange Controls
While the Company's sales are almost entirely denominated in Pesos, the
vast majority of its obligations are denominated in U.S. dollars, and the
Company is therefore exposed to Peso devaluation risk. The Peso has been
subject to substantial devaluation against the U.S. dollar in the past,
particularly since December 1994, and may be subject to further significant
devaluation in the future. The Company does not currently have in place and
does not intend to enter into hedging transactions with respect to this risk.
Therefore, further declines in the value of the Peso relative to the U.S.
dollar could adversely affect the Company's ability to meet its U.S.
dollar-denominated obligations and finance its growth.
The Mexican economy has experienced balance of payment deficits and shortages
in foreign exchange reserves. While the Mexican government does not currently
restrict the ability of Mexican or foreign persons or entities to convert
Pesos to foreign currencies generally, and U.S. dollars in particular, it has
done so in the past and no assurance can be given that the Mexican government
will not institute a restrictive exchange control policy in the future. Any
such restrictive exchange control policy could prevent or restrict the
Company's access to U.S. dollars to meet its U.S. dollar obligations under the
Notes and could also have a material adverse effect on the Company's business,
financial condition and results of operations. The impact of any such measures
adopted by the Mexican government on the Mexican economy cannot be accurately
predicted. See "Exchange Rates."
UNCERTAINTY OF PRODUCT ACCEPTANCE Uncertainty of Product Acceptance
To date, the Company has received no revenue from the sale of these
products. While the Company believes that its products are commercially
viable, developing products for the agricultural marketplaces is inherently
difficult and uncertain. The Company does not believe its sales to date are
sufficient to determine whether or not there is meaningful demand for its
products. The Company intends to devote a significant portion of its
resources to its sales and marketing efforts and to promote consumer and
business interest in its products. There can be no assurance that such
efforts will be successful or that significant market demand for the Company's
products will ever develop. See "Business-The Products," and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
NEED TO DEVELOP MARKETING CHANNELS Need to develop Marketing Channels
The Company believes its success, if any, will be largely dependent on
its ability to either sell its products to or enter into joint marketing
arrangements with one or more sales companies based in Mexico who will sell
its Micro Min products through Mexican farmer unions or other agencies of the
several states of Mexico. In particular, the Company believes that its Micro
Min product and related laboratory soil testing software can be sold
profitably only if it is sold to or in conjunction with the unions and other
agencies. To date, the Company has agreements to sell its products to several
unions. Qualifying its product and developing the marketing relationships
necessary to make these sales took substantially longer than the Company
originally anticipated. Government agencies and unions tend to be
hierarchical organizations characterized by distributed decision-making
authority and an institutional reluctance to take risks. Selling a product to
or entering into a marketing relationship with a government agency is
generally a lengthy process requiring multiple meetings with numerous people
in the organization. A failure by the Company to develop significantly
enhanced relationships with the unions or other state agencies would have a
materially adverse effect on the Company's business and operating results.
There can be no assurance that the Company will be able to implement such
a marketing and distribution program or that any marketing efforts undertaken
by or on behalf of the Company will be successful. See "Business-Sales and
Marketing."
RISKS OF LIMITED PROTECTION FOR COMPANY'S INTELLECTUAL PROPERTY AND
PROPRIETARY RIGHTS AND INFRINGEMENT OF THIRD PARTIES' RIGHTS Risks of Limited
Protection for Company's Intellectual Property and Proprietary Rights and
Infringement of Third Parties' Rights
The Company regards various features and design aspects of its products
as proprietary and relies primarily on a combination of trademark, copyright
and trade secret laws and employee and third-party nondisclosure agreements to
protect its proprietary rights. The Company has been issued one copyright
covering its soil testing software, has applied for a patent covering the
blended micronutrient fertilizer product and intends to continue to apply for
patents, as appropriate, for its future technologies and products. There are
few barriers to entry into the market for the Company's products, and there
can be no assurance that any patents applied for by the Company will be
granted or that the scope of the Company's patent or any patents granted in
the future will be broad enough to protect against the use of similar
technologies by the Company's competitors. There can be no assurance,
therefore, that any of the Company's competitors, some of whom have far
greater resources than the Company, will not independently develop
technologies that are substantially equivalent or superior to the Company's
technology. Further, the Company intends to distribute its products in a
number of foreign countries. The laws of those countries may not protect the
Company's proprietary rights to the same extent as the laws of the United
States.
The Company may be involved from time to time in litigation to determine
the enforceability, scope and validity of any proprietary rights of the
Company or of third parties asserting infringement claims against the Company.
Any such litigation could result in substantial costs to the Company and
diversion of efforts by the Company's management and technical personnel. See
"Business-Proprietary Rights."
COMPLIANCE WITH GOVERNMENT REGULATION Compliance with Government Regulation
The terms of the license pursuant to which the Company has the right to
import and sell its micronutrient fertilizer are subject to government
regulation. There can be no assurance that additional licenses to import
products similar to or the same as those provided or expected to be provided
by the Company will not be granted to potential competitors, or that the value
of the Company's licenses will not otherwise be affected by government action.
CAPITAL REQUIREMENTS Capital Requirements
In order to implement its operating strategy through 2001, the Company
will be required to make significant expenditures. The Company expects
capital expenditures for 1998, 1999 and 2000 to exceed its present resources.
In addition, significant expenditures may be required under the terms of the
Company's licenses.
The Company believes that it will be able to attract sufficient financing for
its capital expenditures in 1998 and the first half of 1999. As the Company
makes additional investments in its manufacturing capacity and pursues
marketing opportunities in countries other than Mexico, it will need
additional funds in the second half of 1999 and beyond. The terms of the
Company's licenses may also require the Company to make certain other
significant investments in its various networks for which additional funds
would be required during 1997 and 1998. There can be no assurance as to
whether the Company can obtain any such additional funds on acceptable terms
or at all. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations-Liquidity and Capital Resources" and "Certain
Transactions."
RISKS ASSOCIATED WITH PLANNED GROWTH Risks Associated with Planned Growth
The Company plans to expand significantly its operations during fiscal
year 1998, which could place a significant strain on its limited personnel,
financial, management and other resources. In order to manage its planned
growth, the Company will need to significantly expand its product development
and sales and marketing capabilities and personnel. In addition, the Company
will need to adapt its financial planning, accounting systems and management
structure to accommodate such growth if it occurs. A failure by the Company
to properly anticipate or manage its growth, if any, could adversely affect
its business, operating results and financial condition. See "Business."
DEPENDENCE ON KEY PERSONNEL Dependence on Key Personnel
For the foreseeable future, the Company will place substantial reliance
upon the personal efforts and abilities of M. M. Kalish, a founding
shareholder, and his son Robert A. Kalish. The loss of the services of either
Mr. Kalish may have a material adverse effect on the business, operations,
revenue and business prospects of the Company. The Company does not maintain
key man life insurance on either Mr. Kalish and neither devotes full time to
the business of the Company. See "Management of the Company."
COMPETITION Competition
Management believes there is no material competition for the Company's
products and services. See "Business - Competition."
ABSENCE OF DIVIDENDS Absence of Dividends
The Company has not paid any dividends on its Common Stock since its
incorporation and anticipates that, for the foreseeable future, working
capital and earnings, if any, will be retained for use in the Company's
business operations and in the expansion of its business. See "Dividend
Policy" and "Description of Securities."
TRADING OF COMPANY COMMON STOCK; RESTRICTIONS ON RESALE Trading of Company
Common Stock; Restrictions on Resale
The Company will attempt to qualify the Common Stock on the NASD inter-dealer
Electronic Bulletin Board. The Company Common Stock received pursuant to the
Distribution will be freely transferable under the Securities Act, except for
shares of Common Stock received by any person who may be deemed to be an
"affiliate" of the Company within the meaning of Rule 144 promulgated under
the Securities Act. Persons who may be deemed to be affiliates of the Company
after the Distribution generally include individuals or entities that control,
are controlled by, or are under common control with the Company, and may
include the directors and executive officers of the Company. Persons who are
affiliates of the Company will be permitted to sell their Common Stock
received pursuant to the Distribution only pursuant to an effective
registration statement under the Securities Act or pursuant to an exemption
from the registration requirements of the Securities Act. The Registration
Statement of which this Prospectus is a part will not cover resales of Company
Common Stock by affiliates of the Company. See "Shares Eligible for Future
Sale."
CONTROL BY EXISTING STOCKHOLDERS Control by Existing Stockholders
As of the date hereof, the officers and directors of the Company (and their
affiliates) own an aggregate of 8,701,500 shares of Common Stock. Immediately
upon completion of the Distribution, the officers and directors of the Company
will own or control the voting of 83% of the Company's issued and outstanding
voting Common Stock. Moreover, pursuant to the Bylaws, holders of 25% of all
outstanding shares of Common Stock entitled to vote shall constitute a quorum
and the holders of a majority of such quorum may control the vote. The
officers and directors of the Company, as holders of the Company's securities,
will therefore have the ability to significantly influence the election of the
Board of Directors, to potentially control the outcome of any corporate action
requiring less than a majority of the outstanding voting securities entitled
to vote, and consequently, to significantly influence the business and affairs
of the Company. See "Management of the Company," "Certain Transactions" and
"Principal Stockholders."
ANTI-TAKEOVER PROVISIONS ANTI-TAKEOVER PROVISIONS
Certain provisions of Delaware law and the Company's Certificate of
Incorporation and By-Laws may have the effect of delaying or preventing a
change in control or acquisition of the Company. The Company's Certificate of
Incorporation and By-Laws include provisions for a classified Board of
Directors, "blank Check" preferred stock (the terms of which may be fixed by
the Board of Directors without stockholder approval), a prohibition on
stockholder action by written consent in lieu of a meeting, and certain
procedural requirements governing stockholder meetings. See "Description of
Common Stock--Defenses Against Hostile Takeovers."
NO ASSURANCE OF A PUBLIC MARKET AND LIKELIHOOD OF A VOLATILE MARKETNo
Assurance of a Public Market and Likelihood of a Volatile Market.
There is presently no public market for the Common Stock of the Company
and there is no assurance that a public market for such securities will
develop after completion of the offering made hereby, or, if one develops,
that it will be sustained. It is likely that any market that develops for the
Common Stock, should it develop, will be highly volatile and that the trading
volume in such market will be limited.
RISK OF LOW-PRICE ("PENNY") STOCKS Risk of Low-Price ('Penny') Stocks
Under the rules of the National Association of Securities Dealers, Inc.
("NASD"), in order to maintain listing on Nasdaq, a company must have, among
other things, between $1,000,000 and $4,000,000 in net tangible assets
(depending upon whether or not such company has sustained operating losses)
and, alternatively, either: (i) $3,000,000 in market value of public float
and $4,000,000 in net tangible assets; or (ii) a minimum bid price of $1.00
per share. In the event that the Company is unable to satisfy the
requirements for continued quotation on the Nasdaq National Market or on the
Nasdaq SmallCap Market, quotation, if any, of the Common Stock would be in the
over-the-counter market in what are commonly referred to as the "pink sheets"
of the National Quotation Bureau, Inc. or on the NASD OTC Electronic Bulletin
Board. As a result, an investor may find it more difficult to dispose of or
to obtain accurate quotations as to the price of such securities. If the
Company's securities were delisted from Nasdaq they could become subject to
Rule 15g-9 under the Exchange Act, which imposes additional sales practice
requirements on broker-dealers which sell such securities to persons other
than established customers and "accredited investors" (generally, individuals
with net worths in excess of $1,000,000 or annual incomes exceeding $200,000
or $300,000 together with their spouses).
In addition, Commission regulations define a "penny stock" to be any non
- - Nasdaq equity security that has a market price (as therein defined) of less
than $5.00 per share or with an exercise price of less than $5.00 per share,
subject to certain exceptions. The Commission's rules impose additional
requirements on broker-dealers for any transactions involving penny stocks.
In the event that the Company's securities are delisted or become subject
to Rule 15g - 9 or the penny stock rules, the liquidity of the Company's
securities will be adversely affected and investors may find it more difficult
to dispose of or obtain accurate quotations to the prices thereof.
FORWARD-LOOKING INFORMATION IS SUBJECT TO RISK AND UNCERTAINTY
This Prospectus contains forward-looking statements. These
forward-looking statements reflect the Company's views with respect to future
events and financial performance. Actual events and results could differ
materially from those projected in the forward-looking statements as a result
of the risk factors set forth above, as well as factors discussed below. The
words "believe," "expect," "anticipate," "intend" and "plan" and similar
expressions identify forward-looking statements. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as
of their dates. The Company undertakes no obligation to publicly update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise. The risk factors described above, and many other
factors, could cause actual events and results to differ materially from
historical results or those anticipated. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business."
USE OF PROCEEDS USE OF PROCEEDS
Pursuant to the Distribution, GS Financial will provide consulting
services to Agri Bio and receive from Agri Bio 100,000 shares of Agri Bio
Common Stock. Such shares of Agri Bio Common Stock will be distributed to GS
Financial stockholders as of the Distribution Record Date, and no
consideration will be paid by such stockholders in the Distribution.
Therefore, there will be no proceeds from the issuance of the Agri Bio Common
Stock.
CAPITALIZATION CAPITALIZATION
The following table sets forth the capitalization of the Company (i) as of
December 31, 1997, (ii) as adjusted to reflect the distribution of 100,000
shares to the stockholders of GS Financial. This table should be read in
conjunction with the Financial Statements and the Notes thereto included
elsewhere in this Prospectus.
December 31, 1997
-------------------
Actual As Adjusted
------ -----------
Shareholders' equity $ 66,818 $ 66,818
Common Stock, $.001 par value, 20,000,000 shares authorized,
10,350,000 and 10,450,000 shares issued and outstanding
10,350 10,450
before and after distribution
Additional paid-in capital 435,300 435,200
Accumulated deficit (378,832) (378,832)
Total shareholders' equity 66,818 66,818
Total capitalization $ 300,733 $ 300,733
THE DISTRIBUTION THE DISTRIBUTION
The following information describes certain aspects of the proposed
Distribution as well as certain contractual arrangements that will exist
between Agri Bio and GS Financial following the completion of the
Distribution. The description of the Distribution Agreement contained herein
does not purport to be complete and is qualified in their entirety by
reference to the form of such agreement which is filed as an exhibit to the
registration statement of which this Prospectus is a part and is incorporated
herein by reference. All GS Financial Stockholders are urged to read such
agreement in its entirety.
TERMS OF THE DISTRIBUTION AGREEMENT Terms of the Distribution Agreement
The Distribution Agreement provides that the Distribution will be
effected by distributing to each holder of GS Financial Common Stock as of the
close of business on the Distribution Date certificates representing one share
of Agri Bio Common Stock for each 9/10th of a share of GS Financial Common
Stock held by such holder as of such time. See "-- Manner of Effecting the
Distribution."
On the Distribution Date GS Financial's Board of Directors will cause GS
Financial to distribute to GS Financial Stockholders, as of the Distribution
Record Date, shares of Agri Bio Common Stock. Each stockholder of GS
Financial as of the Distribution Record Date will receive one share of Agri
Bio Common Stock for each 9/10th of a share of GS Financial Common Stock held
as of the Distribution Record Date. Immediately following the completion of
the Distribution, Agri Bio will be an independent, publicly-owned company and
it is contemplated that the shares of Agri Bio Common Stock will be quoted on
the Electronic Bulletin Board under the trading symbol "AGBI." See "--
Listing of Agri Bio Common Stock; Restrictions on Resale."
MANNER OF EFFECTING THE DISTRIBUTION Manner of Effecting the Distribution
The GS Financial Board of Directors will determine the Distribution Date and
it is expected that the Distribution will be made on the Distribution Date to
stockholders of record of GS Financial Common Stock as of the Distribution
Record Date. GS Financial's transfer agent, Continental Stock Transfer &
Trust Company, will act as the Distribution Agent for the Distribution and
will deliver certificates for Agri Bio Common Stock as soon as practicable to
holders of record of GS Financial Common Stock as of the close of business on
the Distribution Record Date on the basis of one share of Agri Bio Common
Stock for every 9/10th of a share of GS Financial Common Stock held on the
Distribution Record Date. All shares of Agri Bio Common Stock will be fully
paid and nonassessable and the holders thereof will not be entitled to
preemptive rights. See "Description of Agri Bio Capital Stock." Following the
completion of the Distribution, Agri Bio will continue to operate as an
independent, publicly-traded company.
YOU WILL NOT BE REQUIRED TO PAY ANY CASH OR OTHER CONSIDERATION FOR THE
SHARES OF COMMON STOCK RECEIVED IN THE DISTRIBUTION NOR WILL YOU NEED TO
SURRENDER YOUR GS FINANCIAL COMMON STOCK CERTIFICATES IN ORDER TO RECEIVE
SHARES OF AGRI BIO COMMON STOCK IN THE DISTRIBUTION. THE DISTRIBUTION AGENT
WILL SEND YOU YOUR AGRI STOCK CERTIFICATES FOLLOWING THE CONSUMMATION OF THE
DISTRIBUTION.
LISTING OF AGRI BIO COMMON STOCK; RESTRICTIONS ON RESALE Listing of Agri Bio
Common Stock; Restrictions on Resale
Agri Bio intends to apply to a member of the National Association of
Securities Dealers, Inc. to make a market in the Agri Bio Common Stock and
provide a quotation on the NASD inter-dealer Electronic Bulletin Board under
the trading symbol "AGBI." The Agri Bio Common Stock received pursuant to the
Distribution will be freely transferable under the Securities Act, except for
shares of Agri Bio Common Stock received by any person who may be deemed to be
an "affiliate" of Agri Bio within the meaning of Rule 144 promulgated under
the Securities Act. Persons who may be deemed to be affiliates of Agri Bio
after the Distribution generally include individuals or entities that control,
are controlled by, or are under common control with Agri Bio, and may include
the directors and executive officers of Agri Bio. Persons who are affiliates
of Agri Bio will be permitted to sell their Agri Bio Common Stock only
pursuant to an effective registration statement under the Securities Act or
pursuant to an exemption from the registration requirements of the Securities
Act. The Registration Statement of which this Prospectus is a part will not
cover resales of Agri Bio Common Stock by affiliates of Agri Bio. See "Shares
Eligible for Future Sale."
TREATMENT OF INDEBTEDNESS Treatment of Indebtedness
The Distribution Agreement provides that neither GS Financial nor Agri
Bio will assume or be responsible for any debts or obligations of the other.
EXPENSES Expenses
In accordance with the terms of the Distribution Agreement Agri Bio
shall bear all expenses incurred in connection with the Distribution,
including, without limitation, the preparation, execution and the performance
of the Distribution Agreement and the transactions contemplated thereby, and
all fees and expenses of investment bankers, finders, brokers, agents,
representatives, counsel and accountants. Expenses incurred in printing,
mailing and filing (including without limitation, SEC filing fees, fees
related to any state securities or "blue sky" laws and stock exchange listing
application fees as to this Agri Bio Prospectus and related Registration
Statement shall be paid by Agri Bio. Agri Bio estimates that the transaction
expenses will approximate $ 33,000.
INDEMNIFICATION AND INSURANCE Indemnification and Insurance
The Distribution Agreement provides that from and after the Distribution
Date, GS Financial will indemnify, defend and hold harmless Agri Bio and its
subsidiaries, as well as the directors and officers of Agri Bio and the
various Agri Bio subsidiaries (collectively, the "Agri Bio Indemnitees") from
and against all losses arising out of or relating to (i) any breach, whether
before or after the Distribution Date, by GS Financial of any provision of the
Distribution Agreement, (ii) any claims arising out of this Prospectus or the
Registration Statement pertaining thereto, and (iii) liabilities related to
the operation of GS Financial.
The Distribution Agreement also provides that from and after the
Distribution Date, Agri Bio will indemnify, defend and hold harmless GS
Financial and its subsidiaries, as well as the directors and officers of GS
Financial and the various GS Financial subsidiaries (collectively, the "GS
Financial Indemnitees") from and against all losses arising out of or relating
to (i) any breach, whether before or after the Distribution Date, by Agri Bio
of any provision of the Distribution Agreement, (ii) any claims arising out of
this Prospectus or the Registration Statement pertaining thereto, and (iii)
liabilities related to the operation of Agri Bio.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES CERTAIN FEDERAL INCOME TAX
CONSEQUENCES
GENERALGeneral
The following summary description of the material federal income tax
consequences of the Distribution is based upon the opinion of Sonfield &
Sonfield, federal tax counsel for the Company ("Tax Counsel"). This summary
is for general informational purposes only and is not intended as a complete
description of all of the tax consequences of the Distribution and does not
discuss tax consequences under the laws of state or local governments or of
any other jurisdiction. The Company has not requested a ruling from the
Internal Revenue Service (the "Service") with respect to these matters.
Accordingly, no assurance can be given as to the Service's interpretation with
respect to these matters. Moreover, the tax treatment of a stockholder may
vary depending upon his, her or its particular situation. In this regard,
certain stockholders (including (i) insurance companies, tax-exempt
organizations, financial institutions or broker-dealers, and persons who are
not citizens or residents of the United States or who are foreign
corporations, foreign partnerships or foreign trusts or estates as defined for
United States federal income tax purposes, and (ii) stockholders that hold
shares as part of a position in a "straddle" or as part of a "hedging" or
"conversion" transaction for United States federal income tax purposes and
stockholders with a "functional currency" other than the United States dollar)
may be subject to special rules not discussed below. In addition, this
summary applies only to shares which are held as capital assets. The
following discussion may not be applicable to a stockholder who acquired his
or her shares pursuant to the exercise of stock options or otherwise as
compensation. There can be no assurance that there will not be differences of
opinion as to the interpretation of applicable law.
Tax opinions are not binding on the IRS or any court. Moreover, the tax
opinions are based upon, among other things, certain representations as to
factual matters made by GS Financial, which representations if incorrect or
incomplete in certain material respects, would jeopardize the conclusions
reached in the opinions.
This information is directed to stockholders who acquire shares in the initial
distribution thereof, who are citizens or residents of the United States,
including domestic corporations and partnerships, and who hold the shares as
"capital assets" within the meaning of Section 1221 of the Code. Taxpayers
and preparers of tax returns (including those filed by any partnership or
other company) should be aware that under applicable Treasury regulations a
provider of advice on specific issues of law is not considered an income tax
return preparer unless the advice is (i) given with respect to events that
have occurred at the time the advice is rendered and is not given with respect
to the consequences of contemplated actions, and (ii) is directly relevant to
the determination of an entry on a tax return. Accordingly, taxpayers should
consult their own tax advisors and tax return preparers regarding the
preparation of any item on a tax return, even where the anticipated tax
treatment has been discussed herein.
THE FOLLOWING DISCUSSION IS BASED ON CURRENTLY EXISTING PROVISIONS OF THE
CODE, TREASURY REGULATIONS THEREUNDER AND CURRENT ADMINISTRATIVE RULINGS AND
COURT DECISIONS. ALL OF THE FOREGOING ARE SUBJECT TO CHANGE WHICH MAY OR MAY
NOT BE RETROACTIVE, AND ANY SUCH CHANGES COULD AFFECT THE TAX CONSEQUENCES
DESCRIBED HEREIN. SEE "POSSIBLE FUTURE LEGISLATION" BELOW.
EACH STOCKHOLDER IS URGED TO CONSULT HIS, HER OR ITS OWN TAX ADVISOR AS TO THE
PARTICULAR TAX CONSEQUENCES TO HIM, HER OR IT OF THE TRANSACTION DESCRIBED
HEREIN, INCLUDING, THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN
TAX LAWS, AND THE POSSIBLE EFFECTS OF CHANGES OF APPLICABLE TAX LAWS.
TAXATION OF STOCK AS A DIVIDEND Taxation of Stock as a Dividend
Dividends paid on common stock are subject to tax as ordinary income to
the extent of the company's current or accumulated earnings and profits as
computed for federal income tax purposes. To the extent that the amount of
the dividend paid on the common stock exceeds the company's current and
accumulated earnings and profits for federal income tax purposes, such
dividend will be treated first as a nontaxable return of capital which will be
applied against and reduce the adjusted tax basis of the common stock of the
holder. Any amount in excess of the holder's adjusted tax basis would then be
taxed as capital gain, and will be long-term capital gain if the holder's
holding period for the common stock exceeds one year. For purposes of the
remainder of this discussion of federal income tax consequences, the term
"dividend" refers to a distribution out of current or accumulated earnings and
profits and taxed as ordinary income as described above, unless the context
indicates otherwise.
The 70% (and in some cases, 80%) dividends received deduction may be
available with respect to dividends paid by the company to holders which are
corporations. However, a corporate holder that disposes of shares within 45
days of their date of acquisition cannot claim the dividends received
deduction for dividends on such shares. (These time periods are extended for
periods during which the taxpayer's risk of loss with respect to such shares
is diminished, for example, by an offsetting position.) In addition, under
section 246A of the Code, if a corporation incurs indebtedness for the purpose
of making or carrying a portfolio stock investment (which would include the
common stock), the 70% (or in some cases, 80%) deduction for dividends
received will generally be disallowed with respect to the dividends on that
portion of such stock which was acquired or carried by means of such
indebtedness
Section 1059 of the Code imposes a special basis reduction rule that
requires a corporate shareholder to reduce its basis (but not below zero) for
stock owned by it to the extent of the nontaxed portion of any extraordinary
dividend if as of the earliest of the date on which the corporation declares,
announces or agrees to the amount or payment of such dividend the corporate
shareholder has not held such stock for more than two years. Generally, the
nontaxed portion of an extraordinary dividend is the amount excluded from
income under section 243 of the Code (relating to the deduction for dividends
received by corporations). An extraordinary dividend is generally defined as
a dividend equaling or exceeding a prescribed threshold percentage (5% for
Bonds and 10% for common stock) of the corporate shareholder's adjusted basis
in such stock. Under certain circumstances the corporate shareholder may
elect to use fair market value rather than adjusted basis in computing the
threshold percentage for determining whether an extraordinary dividend has
been received. In addition, a corporate shareholder shall recognize, in the
year such stock is sold or otherwise disposed of, as gain from the sale or
exchange of stock, an amount equal to the aggregate nontaxed portions of any
extraordinary dividends with respect to such stock which did not reduce the
basis of such stock by reason of the limitation on reducing basis below zero
TAXPAYER RELIEF ACT Taxpayer Relief Act
The Taxpayer Relief Act of 1997 ("TRA 1997") was signed into law on
August 5, 1997. TRA 1997 contains certain restrictions involving a
distribution or "spin off" to stockholders of portions of a business
enterprise, accompanied by a merger or acquisition of a specific unit of the
business enterprise involving a third party acquiror. The Distribution is not
affected by the restrictions imposed by TRA 1997.
BACKUP WITHHOLDING Backup Withholding
United States information reporting requirements and backup withholding
at the rate of 31% may apply with respect to dividends paid on, and proceeds
from the taxable sale, exchange or other disposition of GS Financial Common
Stock, unless the stockholder (i) is a corporation or comes within certain
other exempt categories, and, when required, demonstrates these facts, or (ii)
provides a correct taxpayer identification number, certifies as to no loss of
exemption from backup withholding and otherwise complies with applicable
requirements of the backup withholding rules. A stockholder who does not
supply GS Financial with his, her or its correct taxpayer identification
number may be subject to penalties imposed by the IRS. Any amount withheld
under these rules will be refunded or credited against the stockholder's
federal income tax liability. Stockholders should consult their tax advisers
as to their qualification for exemption from backup withholding and the
procedure for obtaining such an exemption. If information reporting
requirements apply to a stockholder, the amount of dividends paid with respect
to such shares will be reported annually to the IRS and to such stockholder.
These back-up withholding tax and information reporting rules currently
are under review by the United States Treasury Department and proposed
Treasury Regulations issued on April 15, 1996 would modify certain of such
rules generally with respect to payments made after December 31, 1997.
Accordingly, the application of such rules may be changed.
CERTAIN STATE TAX CONSEQUENCESCertain State Tax Consequences
Because each state's income tax laws vary, it is impossible to predict
the income tax consequences to the holders of Bonds in all of the state taxing
jurisdictions in which they are already subject to tax. Bondholders are urged
to consult their own tax advisors with respect to state income and corporate
franchise tax consequences arising out of the purchase, ownership and
disposition of Bonds.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion is based upon and should be read in conjunction
with the Financial Statements and the notes thereto, included elsewhere in
this Prospectus.
GENERAL General
This Prospectus contains certain statements regarding future trends which
are subject to various risks and uncertainties. Such trends, and their
anticipated impact on the Company, could differ materially from those
discussed in this Prospectus. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed in "Risk Factors"
and elsewhere in this Prospectus.
Agri Bio-Sciences, Inc. (formerly Agri Environmental Sciences, Inc.) was
formed May 30, 1995 as a Texas corporation and is in the development stage.
Effective December 22, 1997, a separate company with the same name was
incorporated in Delaware and the Texas corporation merged into the Delaware
corporation for the purpose of reincorporation in the State of Delaware.
There was no activity during 1995.
A sister corporation, Agri Financial Group, Inc. (AFS), was formed by
seven Agri Bio shareholders in March, 1997 for the purpose of financing a
joint venture soil analysis laboratory in Tlaxcala, Mexico with a Mexican
university. This sister corporation was merged with the Agri Bio in August,
1997 by exchanging 340,000 shares of Agri Bio for the total outstanding shares
of AFS, and is consolidated for financial reporting purposes using the pooling
of interests method of accounting.
OPERATING RESULTS Operating Results
The Company has not yet commenced operations, has not generated any
revenue from operations and will not generate revenue from operations until it
commences sales of products. There can be no assurance that the company will
be able to successfully generate meaningful revenue or achieve profitable
operations.
LIQUIDITY AND CAPITAL RESOURCES Liquidity and Capital Resources
Since inception, the Company has been dependent upon the proceeds of the
private sales of common stock, and bank borrowings to acquire and improve its
plant facilities and develop its proposed business plan. Management believes
that the proceeds from the sale of products presently held in inventory and
future production will support its financing needs for a period of at least 12
months following the date of this Prospectus. However, there can be no
assurance that the Company will have sufficient capital resources to permit it
to fully implement its business plan.
IMPACT OF THE YEAR 2000 ISSUE Impact of the Year 2000 Issue
As the year 2000 approaches, an issue has emerged regarding how existing
application software programs and operating systems can accommodate
information that employs dates after December 31, 1999. Management believes
that its proprietary agricultural software that has been developed for soil
and water analysis is year 2000 compliant. Therefore, based on information
currently available, management does not anticipate that the Company will
incur significant operating expenses or be required to incur material costs
because of the year 2000.
BUSINESS BUSINESS
OVERVIEW Overview
The Company has developed a process that blends certain micronutrient
fertilizers with montmorillonite clay and produces a blended micronutrient
fertilizer which is efficiently absorbed by soil. The product is branded
'Micro Min' and is manufactured in the Company's facility located in Bay
Springs, Mississippi. The Company has a permanent product license for Micro
Min granted by the central government covering the Republic of Mexico. In
addition, the product is licensed for sale in Egypt, Spain and Columbia.
The Company is in the process of negotiating agreements with unions and
or other agencies in the Mexican states to exclusively sell the product Micro
Min. These agencies have already issued purchase orders for the product,
Micro Min, and 80 metric tons is currently in warehouses in four of these
states. Management has been told that the product as presently being sold and
distributed throughout that area.
Management has elected not to be in the sales business throughout the
third world. The board of directors has decided that it is more cost
effective to engage others in host countries who are able to sell Company
products much more efficiently and effectively while the Company blends and
packages the product in the USA. Therefore, the Company has decided to sign
an exclusive sales contract with a Mexican organization adequately financed to
handle sales identified to date.
THE PRODUCT The Product
The Company blends a proven formula of micronutrients with
montmorillonite, (an agricultural clay), in order to electrochemically bond
them into a blended fertilizer unique to the world market. These blends of
micronutrients are then safely liberated in the soil and at a moment when they
are most required by plants through cation exchange, soluble sulfates, and
mineralization.
Because this micronutrient application is in a more concentrated form,
the farmer pays only a fraction of previous costs and, according to actual
usage, could increase his yield from 10 to 20 percent (and sometimes even
more). Better seed germination and soil fertilization are just two of the
additional benefits resulting from a healthier and balanced soil.
RESEARCH AND DEVELOPMENT Research and Development
OverviewOverview. (1) the Company has the only blended 100%
micronutrient fertilizer on the world market and is already licensed,
registered and recognized in Mexico. (As well as Colombia, Egypt, Spain and
the United States).
(2) Farmers on the testing program in Mexico, have experienced
between 10% and 15% more crop production; developed a healthier soil requiring
less fertilization each succeeding growing period; and more importantly, these
farmers discovered that their crops contain higher protein averages than
without Micro Min.
(3) Second season lab reports provides exclusive evidence that the
farmers are in fact achieving healthier and more manageable soils.
(4) Mexican farmer's have concluded that the resulting increase in
crop production and the savings on NPK more then offset the costs of the lab
analysis and the Company's micronutrient fertilizer.
(5) This marketing summary should prove to be very beneficial to the
Company associated companies in determining corporate progress for their
company during the period of 1 997 - 1998. It is estimated that sales during
this period will effectively provide plant operations with cash flow to
properly maintain the plant with in-house inventory and create sales
opportunities for the sales entities.
Test PlotsTest Plots. With the gracious assistance of the governor of
Tlaxcala, Mexico; the National Commission for the Arid Zones; the Secretary of
Agriculture; and the technicians and farmers of the state; many test plots
involving Micro Min were started in and around the state by the Company.
All of these plots were organized and supervised by state agronomists
using their normal application of fertilizers and adding Micro Min in certain
predetermined areas. Each and every test plot proved beyond any doubt that
Micro Min not only increased crop production but certainly brought life back
into the soil.
Product LicensesProduct Licenses. Because of the effectiveness of the
Company's micronutrient fertilizer, the Minister of Agriculture, Mexico,
awarded the Company a license to import and sell the Company's product Micro
Min in every state of Mexico. While this license was approved by the minister
of agriculture, it was also endorsed by the chief of all laboratories in
Mexico.
Immediately after receiving the Company's product license from Mexico,
the Company proceeded with similar field tests in Colombia, South America;
Spain and Egypt; and in every instance proved the Company's product a
successful fertilizer for their area soils. After careful and determined
analytical analyses of end results, product licenses were issued by each of
these countries for the importation of the Company's micronutrient fertilizer
product Micro Min.
GOVERNMENT REGULATION Government Regulations
NAFTANAFTA. Since NAFTA, the need for proper soil, water and plant
laboratory analysis is now more important to that country's farmers then ever
before. In drafting the NAFTA agreement, Mexico needed to express a clause
therein which would enable farmers of their country to freely export to the
USA. Currently the farmers ship to a Mexican - USA port and the total
shipment is only then inspected by the USDA. If any part of the shipment is
found wanting, the entire shipment is refused. If a shipment is refused, the
Mexican farmers lose the entire cargo of produce. A most devastating effect
on all farmers big or small.
However, the NAFTA Agreement does provide an addendum which indicates, in
substance, that the states of Mexico shall be authorized to have their own
laboratories to test produce being exported to the USA if such laboratories
have been approved by the USDA.
In this regard, the farmer unions in many states of Mexico are very much
aware of the agricultural work accomplished by the Company in their country
and are also aware of the fact that the Company has already installed a USDA
certified laboratory in the Dominican Republic. Further, these same unions
also realize that their government recognizes the Company as an approved
authority for such laboratory installations in Mexico,
SALES AND MARKETING Sales and Marketing
OverviewOverview. At the outset, management of the Company determined
that all initial market studies indicated that there was not a single proven
blended micronutrient fertilizer product on the world market. Further, every
country studied proved to be woefully lacking in those very critical
fertilizer management skills. Authorities in these countries represented that
proper fertilization was indeed critical to their economies which depended on
their agricultural output to feed their people. At the same time, they also
obtain hard currency through exports of agricultural products.
Sales of Micro Min will start immediately after signing this contract
with payments being made for product with each purchase order submitted. In
other words, all product purchase orders will be accompanied with a cashier's
check. Product will be FOB the Company's plant facility in Bay Springs,
Mississippi, USA. All freight and other costs will be borne by the sales
company as will all in-country advertising, brochures and any other hand-outs
deemed necessary.
MexicoMexico. The "second arm" of the Minister of Agriculture is
responsible for many important areas of agriculture throughout the country.
All government experimental stations, licensing of products, supervising
federal laboratories and much more comes under the supervision of INIFAP.
Their director is Ing. Jorge Kondo, a strong supporter of the Company's
laboratory program and software.
SECRETARIA de the Company CULTURA
Republic of Mexico
INIFAP
Instituto Nacional de Investigaciones
Forestales Agricolas Y Pecuarias
The "third" arm of the Minister of Agriculture is the National Campocina
Federation (National Farmer Federation) which is headed by Lic. Beatriz
Paredas. Her assistant is Lic. Hector Ortiz Ortiz. During a meeting with
Ortiz by the Company in Mexico, the Company confirmed that their organization
is interested in the Company's projects in Mexico and would assist as they
could. (A national program is a desired outcome of this relationship).
SECRETARIA de the Company CULTURA
Republic of Mexico
CNC
Confederacion National Campocina
In that meeting with Ortiz, the Company understood that should the
Company's laboratory program and product meet with the success all involved
seem to project, his organization may wish to participate. This participation
means selling Micro Min throughout the thousands of government agricultural
warehouses in the country.
Each of the following Mexican states have agreed to participate in the
program and at least one major farmer's union has agreed to distribute the
product and laboratory services:
TlaxcalaTlaxcala Cesavetlax Comite Estal Sanidad Vegetal is an
--------
organization of the Secretaria of Agriculture, state of Tlaxcala. This is a
-----
governmental office which works under the state's secretary of agriculture for
rural development. The director of rural development, Mr. Dionicio Perianez,
has forwarded a communique to this Company indicating that his office will
assist in providing the state's farmers with the Company's technology and
product.
University of TlaxcalaUniversity of Tlaxcala The University of Tlaxcala
------------------------
is autonomous and is the standard bearer for agricultural research for the
entire state. It is interesting to note that the University of Tlaxcala has
recently received a complete soil, water and plant testing laboratory as a
gift. Soon thereafter, the University appointed Robert A. Kalish, (the
Company Director of Analytical Services), to its faculty as Director of
Laboratories, Asesor Technico, Secretaria de Fornento Agopecurario,
Universidad Autonoma de Tlaxcala, and has requested that he direct their
laboratory operations.
During 1997, there was a joint venture between the University, the
farmer's Produce Federation and this company to each "chip in" $15,000.00 so
that the lab could be a computerized soil, water and plant testing laboratory.
Primarily, the laboratory will do soil, water and plant testing from samples
delivered by the state's farmers. However, it will also be an adjunct of the
agriculture school to train students to become future farmers of the state.
(Also a CADRE of personnel for the Company's laboratories to be installed in
other areas of the state and country).
SinolaSinola (Association of Farmers of the River Culiacan) A.A.R.C
------
SINALOA STATE LIC BENJAMIN ARAMBURO PERAZO, General Manager CULIACAN, SINALOA,
MEXICO. One of the fastest growing agricultural areas of Mexico is the areas
of Sinaloa, Nayarit, Sonora and Baja California Sur. A four (4) state area
that ships ninety (90) percent of their produce to the USA. The Company has
worked with the management of AARC previously and they are now prepared to
represent the Company's product in that four state area.
AARC is a major farmer union organization with warehouse facilities in
the state. They also sell fertilizers and seeds to the other ten (101 farmer
unions of the state of Sinaloa. AARC wishes to be the main Micro Min
distributor for those four (4) areas.
AARC currently has a laboratory facility but it is NOT able to properly
serve its membership because of faulty testing protocols and/or old and
uncalibrated instruments. However, they want the Company to assist in
up-dating their lab so that they can serve their state-wide customers and
eventually be certified by the USDA.
VeracruzVeracruz. Ing. Pedro Ernesto Del Castillo, Secretary of Agriculture,
- --------
Veracruz State, Delagate for SAGAR (Minister of Agriculture, Mexico) JALAPA,
VERA, MEXICO. In a recent meeting with Robert Kalish, Ing. Castillo stated
that wanted to "detonate" the Company's laboratory services within the state.
Upon being asked what he meant, the agriculture secretary stated that
wanted to make the program state-wide immediately and would finance fifty
percent of the initial costs of laboratory tests requested by the state's
farmers.
Each state in Mexico has an official state organization called "Produce de
Fundacion." The organization represents the farmers in the state and is given
a budget each year to help the farmers acquire needed agriculture technology.
The general manager of the Produce organization in Veracruz in Ing. German
Bravo who believes an effective soil, water and plant testing laboratory with
efficient software which help the local farmers. SR. Bravo has advised
management that Micro Min is the only blended micronutrient fertilizer he will
recommend to the farmers of his state.
The state of Veracruz also received a new laboratory facility and they
too have asked us to add the Company's computer software program to their
computer and train their personnel in laboratory operations. New testing
protocols and instrument calibration are also necessary here. Veracruz state
is now the biggest agriculture state in Mexico. (Just passing Sinaloa).
PueblaPuebla. The Arch Bishop of Puebla has recently completed a new $800,000
- ------
building which he is dedicating to the farmers of the state. It is the
Arch Bishop's plan to train 100 farmers per month in this new facility. These
farmers will eat sleep and go to classes there for one entire month while they
undergo classroom instructions in agriculture. The Arc Bishop has agreed and
asked the Company to provide a small but adequate soil testing laboratory in
this new building to assist in the training.
To assist the Arch Bishop, the Mexican sales company, Global Farm Sciences,
Inc., a Texas corporation, formed by three Company founders and board members,
contracted with the largest fertilize company in the state, Cofertipue, to
sell the product Micro Min. The signed contract guarantees to supply the lab
with 10,000 soil samples during the year 1998 at a price of 100 pesos each
(US$12.05). Cofertipue serves 73,000 farmers which represents 107,000
hectares (267,500 acres). Management believes they will purchase one bag per
acre which represents 2,675 metric tons of Micro Min.
Mexican Sales CompanyMexican Sales Company. The Mexican sales company
owned by affiliates of the Company, Global Farm Sciences, Inc. will be
directly responsible for all sales and laboratory installations and operations
in Puebla, Veracruz and Sinola. They will also:
* Train all personnel
* Install and calibrate all instruments
* Provide all testing protocols for each instrument of the laboratory
* Provide written standards for each instrument
The laboratory program planning and product sales efforts are designed to
be an ever widening endeavor which will eventually encompass every state of
Mexico.
Also, it is anticipated that each laboratory installed will generate
sufficient income to the state (or farmer's union) to enable them to maintain
the facility each year of operation and still maintain a very good bottom line
for the farmer participating organizations.
As labs continue to operate, they in turn provide funds to provide
additional labs in their state. This lab income activity will continue in
each area until every state in Mexico has as many labs and sales offices as
are necessary to handle all of their farmer union business.
It is this corporation's intention to produce the best possible bottom
line. To do that, management must first reorganize the corporation so that it
is a product producing company ONLY and not an international sales entity.
Management wishes to produce and sell the product FOB the Company's plant
facility, Bay Springs, Mississippi. In that way the bottom line increases
with additional sales and the bottom line increases by producing more product
per man hour using faster equipment. In effect, the Company's could produce
and sell FOB 50,000 metric tons as easily as 40,000 MT.
Management intends to sign a contract with an affiliate to handle all
sales of Micro Min product in the Mexican market place. That sales company
will be sufficiently funded and will operate in conjunction with the many
farmer organizations and state officials the Company now has interfaced with
in Mexico. the Company has produced 250 metric tons of Micro Min product and
held it in reserve pending entry into the sales area from research and
development. The Company has recently allowed certain farmer groups in five
(5) strategic areas of Mexico to forward purchase orders for 20 metric tons
each. This means that 10,000 farmers will buy these bags of Micro Min and
place the contents on their soils between August and December, 1998. The
Company still has 150 metric tons in reserve. (This reserve will be used
during the period of reorganization of the new Mexican sales company and the
new crop cycle in Mexico).
Micro Min has always proven 100% effective on all crops. However, a
first year application of Micro Min has always resulted in extremely
successful crops. Higher yields (more seeds germinated) and crops appear
healthier and more robust.
Management now believes that the above 100 MT of Micro Min fertilizer
being applied by the farmers in the five state area will be similarly
outstanding. Management also believes that those 10,000 farmers will report
their crop increases to their unions as well as to other farmers in their
state. In essence, management is expecting that this "word of mouth" will
stimulate the farmer's unions to organize their members into a solid
laboratory testing program and a completely new fertilizer application agenda,
one that the Company recommends.
Getting the Mexican sales company started gives management time to
respond to expected initial sales by using the 150 MT in reserve and then
having the sales company start their purchasing of Micro Min by paying cash
with purchase orders. Cash with P/Os will do much in producing the product
ordered and also in providing some inventory. This inventory will increase as
additional sales are received. In other words, management intends to
recommend the use of profits to provide initial inventory. (During these
first stages of plant operations.)
The country of Mexico is really a small city when it comes to news in any
area of Mexico that reeks of profit. The Company expects that many of the
Company's "friends" in government agriculture will want to come on board in
some form or fashion. This is expected and desired. There are many areas in
the Company's sales endeavors where the "right" agri person would prove
extremely useful. Management has spoken to many and will, undoubtedly, speak
to many more.
The Company also intends to devote time and energy working directly with
the Mexican Minister of Agriculture's office and with the secretary of
agriculture in each of the states of Mexico. In this regard, the Company
intend to install a computer system powerful enough to receive "downloaded"
data from each of the computers located in every laboratory in their country.
(An operation devised by us to consolidate all agricultural endeavors
countrywide for the particular use of the minister's office. It will be a
first in their history). Such computers and software as are necessary will be
"donated" by the Company's Mexican sales company to the federal office
concerned. The Company have indicated this offer to the minister's people in
Mexico City and they were intrigued at the benefits that could be derived from
such a data base.
Sales Forecast. Sales ForecastSales of Micro Min can be expected to
increase as additional labs are installed. Each lab recommends the proper
fertilizer for the farmer which includes micro- as well as macro- nutrients.
Since the farmers of the third world have not applied micronutrients to their
fields, it is concluded that Micro Min is direfully needed on every acre of
Mexican soil.
It is management's intent to have the Company's sales entity place
laboratories strategically throughout the country wherein every farmer will be
able to avail himself of the many services an the Company type laboratory can
provide. It is the Company's intention at the outset to utilize the
university laboratories located in Veracruz and the Company's joint laboratory
in Tlaxcala to effectively start the program of soil, water and plant testing
for the farmers in those areas.
Historically, a farmer will have his farm tested at least once a year to
determine pH and nitrogen content. One may assume that if a farmer has three
hectares, he will take soil samples from each hectare and then combine these
soils to make one representative sample. Therefore, to determine the number
of tests required each year in any given area, one would count the number of
farmers and not the number of hectares under cultivation. Since there are
millions of farmers in the 12 states in which the Company is currently active,
one may assume that any given number of laboratories will not be enough to
satisfy the total farmers need for proper analyses of his farm. However, soil
testing is an integral part of the farmers world and without such tests, the
farmer is growing "blind." Therefore, labs will be installed on an "as and
where needed" basis.
The Company have cited here only five (5) states in Mexico currently
under the Company's initial sales program. However, once the farmers in those
areas are successful and are growing bigger and better crops, their neighbors
in adjacent states can be expected to insist on also having the Company's
services and product in their areas.
In a very real sense, the Company's sales of product is limitless, The
farmers of Mexico are the Company's customers. The actual potential is one
ton of Micro Min for each one hundred hectares of agricultural land in Mexico
per year.
It is expected that once the Company's lab and product concepts are
implemented by the farmer unions of Mexico, then all of the other Latin
American countries will quickly follow that lead. Also, there is no
correlation between effort and profit. The Company's bottom line is above
normal and guarantees the corporation a more then ample return on investment
with sufficient cash flow to insure continued corporate growth.
MANUFACTURING FACILITyManufacturing Facility
The Company owns a complete product manufacturing facility located on a 7
acre site in Bay Springs, Mississippi. The plant has a 75 foot railroad spur
and truck loading capabilities for 20 metric ton containers. The rail spur
allows product to be moved by rail to any USA port for containerized shipment
by sea to any foreign port worldwide. The plant has a present capacity of 20
metric tons of product per day and can be increased to 20 metric tons per hour
by the addition of a CPM product pelletizer.
LABORATORIESLaboratories
Management believes that the importance of applying the exact amount and
type of those fertilizers necessary can never be over emphasized. Proper
fertilization means the difference between profit and loss, and the difference
between high quality and low quality crop production. Historically, farmers
the world over have applied fertilizers determined by word-of-mouth or
hand-me-down formulas. They all have since come to realize that this process
has proven more disastrous for the farmer (and, subsequently to governmental
agricultural programs and budgets as well).
Management believes that in order to correctly recommend a proper
fertilizer management program for any farmer or agricultural agency, one MUST
first have access to a complete and up-to-date soil, water and plant
laboratory. Such a laboratory must be specifically designed for mass sample
analysis using the most advanced technology available; a facility that would
benefit the individual farmer and at the same time dovetail with all federal
agricultural programs currently in progress.
The Company's laboratory is just such a facility. Attaining this status
through years of research and development. The Company's computer's
agricultural software programs alone required many years of massive research
and efforts by Robert A. Kalish, the Company's director for laboratory
sciences. This computerized laboratory program proved to be so successful
during use in the field that Mexico's chief of laboratory services, (Minister
of Agriculture's office), formally approved the Company's laboratory for
service to their farmers nationwide.
The Company's laboratory is capable of analyzing soil, plant and water
samples and immediately transmitting raw data to the on-line computer which
mathematically extrapolates it and scans it's programmed memory for an exact
fertilizer recommendation. The programmed computer is thereby able to provide
farmers, (within days), written reports containing the complete results of the
analyses of their samples and a complete and total fertilizer recommendation.
The Company's laboratory designs range from that of a very computerized
emission spectrophotometry laboratory down to a portable field kit of the
quality a soil chemist would require. All designs, however, offer the farmer,
cattleman, technician and cooperative, a professional analytic service
programmed to deliver analytic reports with fertilizer recommendations,
methods of application and commentaries, all in common sense Kg/acre terms.
Some of these reports include:
- - reports with graphs, and comments;
- - field summaries with averages;
- - fertilizer recommendations;
- - production projections;
- - on-line data bank information retrieval;
- - the total number of acres under production;
- - the number of acres per crop by zones;
- - the total cost of fertilizers, agro-chemicals, seeds, labor and
- - equipment costs, per crop, acre, farm and zone; fertilizer distribution
maps;
- - on-line retrieval by independent work stations capable of being
installed kilometers away from the laboratory and data bank.
- - the Company's laboratories determine production necessities and
potentials locally, regionally, and nationally, providing integrated
agricultural support.
To offer further assistance to the farmers, the computer is programmed
with the latest technical data concerning local soils; rainfall; and
temperatures. This memory data services incoming raw data from every sample.
Thus the farmer and cooperative, or state agency, is assured that their
particular soil, and fertilizer recommendations, are directly related to the
crop being grown.
All such analytic data contained in the computer data bank may then be
disseminated in report form to all interested parties. And, of course, this
data is maintained for further use by the individual farmer in the form of
year to year reports.
Data BankData Bank. Laboratory analytical data is stored in the Company's
unique computerized agricultural data base, so that a complete summary of each
farmer's soil, water or plant samples may be accompanied by fertilizer,
planting, cultivation, and/or harvesting recommendations, This report is then
delivered to the farmer as a complete technical package.
This information is also retained in the computer's on-line data bank to
be compared, managed, and accessed over and over again for further use by
authorized entities, and for comparison in the retesting by farmers of these
same soils at any later date.
Also, the data base will retain the name, address and any other pertinent
data on each farmer registered at the laboratory. This will enable sales
efforts to plot continuous sales strategies in any given farming community.
To complete the laboratory package, the Company has written the complete
testing protocols to be used by every instrument in these laboratories. These
analytic methods were shown to authorities in the National Institute of
Standards and Technology and Texas A&M University with enthusiastic reception.
It is also interesting to note that leading agronomists have recognized
the need for soil balancing and proper fertilization and many have determined
that the Company's computerized soil, plant and water analysis laboratories
represent the best method yet devised for assisting farmers in obtaining soil
balances and properly managing all fertilizer applications.
The Company has a laboratory specifically designed for mass sample
analysis using the most advanced technology available. The total software
package is proprietary and is internally protected from use by a computer
other then the unit designated.
Laboratory Certification Laboratory CertificationHowever, the Company
will not ask for USDA certification for these laboratories immediately.
Laboratory certification can only be granted to those laboratories that are
under the Company's full time direct supervision. That means that instruments
are continuously updated and calibrated; individual tests are being made
according to the Company's protocols and reports are signed and certified by
Company authorized personnel. It is imperative that laboratory protocols
always meet with USDA standards and all critical laboratory personnel meet
USDA standards of perfection in training and experience.
The universities of Tlaxcala and Veracruz labs are mainly for issuing
soil, water and plant testing reports for farmers of their area who simply
require fertilizer recommendations and assistance with problem crops or soil
and the training of students for future employment in other laboratories.
AARC management and their membership have already indicated their
willingness to conclude a product sales arrangement with the Company and have
written a letter requesting an exclusive sales territory in Mexico. (See
letter attached hereto).
AARC has the following exclusive area:
Sinaloa, Baja California Sur, Nayarit and Sonora
PROPRIETARY RIGHTS Proprietary Rights
The Company regards various features and design aspects of its products
as proprietary and relies primarily on a combination of trademark, copyright
and trade secret laws and employee and third-party nondisclosure agreements to
protect its proprietary rights. The Company has been issued one copyright
covering its soil testing software, has applied for a patent covering the
blended micronutrient fertilizer product and intends to continue to apply for
patents, as appropriate, for its future technologies and products. There are
few barriers to entry into the market for the Company's products, and there
can be no assurance that any patents applied for by the Company will be
granted or that the scope of the Company's patent or any patents granted in
the future will be broad enough to protect against the use of similar
technologies by the Company's competitors. There can be no assurance,
therefore, that any of the Company's competitors, some of whom have far
greater resources than the Company, will not independently develop
technologies that are substantially equivalent or superior to the Company's
technology. Further, the Company intends to distribute its products in a
number of foreign countries. The laws of those countries may not protect the
Company's proprietary rights to the same extent as the laws of the United
States.
The Company may be involved from time to time in litigation to determine
the enforceability, scope and validity of any proprietary rights of the
Company or of third parties asserting infringement claims against the Company.
Any such litigation could result in substantial costs to the Company and
diversion of efforts by the Company's management and technical personnel. See
"Risk Factors - Risks of Limited Protection for Company's Intellectual
Property and Proprietary Rights and Infringement of Third Parties' Rights."
COMPETITION Competition
Management believes there are no other commercial blended micronutrient
fertilizers available in the market place. Therefor, management believes
there is no competition as of the date of this Prospectus.
EMPLOYEES Employees
As of the date of this Prospectus, the Company has no full time employees.
All corporate functions are performed by the officers and directors without
compensation.
LEGAL PROCEEDINGS Legal Proceedings
The Company is not a party to any litigation and no provision has been
reflected in the Company's financial statements for any litigation.
DIVIDEND POLICY DIVIDEND POLICY
The Company has never paid dividends on the Common Stock and it does not
anticipate that it will pay dividends or alter its dividend policy in the
foreseeable future. The payment of dividends by the Company on the Common
Stock will depend on its earnings and financial condition, and such other
factors as the Board of Directors may consider relevant.
MANAGEMENT OF THE COMPANYMANAGEMENT OF THE COMPANY
EXECUTIVE OFFICERS AND DIRECTORSExecutive Officers and Directors
Set forth below are the identities of the directors, executive officers
and significant employees of the Company and a brief account of their business
experience, especially during the last 5 years, including their principal
occupations and employment during that period and the names and principal
businesses of any corporations or organizations in which such occupations and
employment was carried on. All offices with the Company have been held since
December 1997 and expire in December 1998.
NAME TITLE AGE
---- ----- ---
Leslie L. Lemak, M.D. Chairman of the Board of Directors 80
Lester H. Stephens President and Director 71
Vernon L. Medlin, M.D. Director 66
Anthony A. Mierzwa Treasurer and Director 85
Patrick N. Morgan Secretary and Director 80
M. Manny Kalish Director 70
Robert A. Kalish Vice President 49
Leslie L. Lemak, M.D. has been a practicing physician in the state of
Texas for more than twenty years and is now retired.
Lester H. Stephens is retired from EXXON where he served as an executive
Geophysicist for 35 years. After retiring, Mr. Stephens accepted a
professorship of Geophysics at the University of South Carolina. Mr. Stephens
has taken charge of this corporation's plant facility in Bay Springs,
Mississippi, and literally transformed it into an assembling line type of
production facility prepared to meet the most demanding amount of product
scheduling.
Vernon L. Medlin, M.D. practices radiology in Corpus Christi, Texas
Anthony A. Mierzwa is retired from a 40 year career as a real estate
developer in the Houston area.
M. Manny Kalish has spent the past ten years developing this the
Company's unique agricultural program for the Mexican, Colombian and Egyptian
market place. It was this research and development that Robert A. Kalish
successfully used as the platform to develop a very unique software program
for the proprietary soil, water and plant testing laboratory. Robert has
installed one of these unique laboratories in the Dominican Republic under the
sponsorship of the USDA; and has recently installed a laboratory in the state
of Tlaxcala (Mexico) under the sponsorship of the University of Tlaxcala, the
secretary of agriculture of the state, and this corporation.
Patrick N. Morgan has been a real estate developer in the Houston area
for the past 50 years. Mr. Morgan was responsible for the land development of
the Champion's area of Houston and was personally involved in the development
of the Champion's Golf Course and club house. Mr. Morgan is semi retired
today but spends time as the secretary of the Champion's Golf Club, Houston,
Texas, as well as a member of the board of the corporation.
Robert Alexander Kalish has been a Technical Consultant, Secretaria
de Fornento Agropecuario, Tlaxcala, Tlaxcala, Mexico since 1996 and Technical
Director, Laboratory, Department of AgroBiology, University of Tlaxcala,
Tlaxcala, Mexico since 1995. From 1993 to 1995 Mr. Kalish was Director,
Agricultural/Environmental Laboratory; Director, Asgrow national seed
production program; Medco Egypt Co., Cairo, Egypt. From 1991 through 1993 Mr.
Kalish was Chief of Party, USAID National Agricultural-Environmental
Laboratory Installation Project #517-0189-03G, Santo Domingo, Dominican
Republic and Instructor, Agrophysics, School of Soil Sciences, Department of
Agronomy, Cairo University, Cairo, Egypt from 1989 to 1990. From 1990 on he
has been VP Agri Technologies, Inc (Research & Development) and from 1986
through 1988 Mr. Kalish was Director of Analytic Services, Anvil
Micronutrients Corp., Houston, Texas. From 1980 through 1983 he served as
Director of Analytic Services, Anvil Mineral Mining Corporation, Bay Springs,
Mississippi (Mexican Gov't agricultural-environmental laboratory installation
project) and from 1973 to 1978 he was Asst. Technical Director, Anvil Mineral
Mining Corporation, Bay Springs, Mississippi. In 1972 Mr. Kalish served as
Instructor, Mathematical Logic, San Francisco State University, San Francisco,
California and from 1971 to 1972 he was Director, Logic Laboratory, San
Francisco State University, San Francisco, California.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS Compensation of Directors and
Executive Officers
The officers and directors of the Company are receiving no compensation
for their services for the Company. No compensation is proposed to be paid to
any officer or director of the Company prior to the commencement of
operations. After the commencement of operations, the present officers and
directors shall continue as officers and directors of the Company. There are
no present plans, arrangements, or understandings concerning any change in
compensation for any of the officers or directors.
STOCK INCENTIVE PLAN Stock Incentive Plan
The board of directors of the Company has approved and adopted by written
consent, the Agri Bio-Sciences, Inc. Stock Incentive Plan (the "Stock
Incentive Plan"). The purpose of the Stock Incentive Plan is to provide
deferred stock incentives to certain key employees and directors of the
Company who contribute significantly to the long-term performance and growth
of the Company. The following description of the Stock Incentive Plan is
qualified by the Stock Incentive Plan itself.
General Provisions of the Stock Incentive Plan. General Provisions of the
Stock Incentive Plan The Stock Incentive Plan will be administered by the
Board of Directors or a committee of the Board of Directors duly authorized
and given authority by the Board of Directors to administer the Stock
Incentive Plan (the Board of Directors or such designated Committee as
administrator of the Stock Incentive Plan shall be hereinafter referred to as
the "Board"). The Board will have exclusive authority to administer the Stock
Incentive Plan including without limitation, to select the employees to be
granted awards under the Stock Incentive Plan, to determine the type, size and
terms of the awards to be made, to determine the time when awards will be
granted, and to prescribe the form of instruments evidencing awards made under
the Stock Incentive Plan. The Board will be authorized to establish, amend
and rescind any rules and regulations relating to the Stock Incentive Plan as
may be necessary for efficient administration of the Stock Incentive Plan.
Any Board action will require a majority vote of the members of the Board.
Three types of awards are available under the Stock Incentive Plan: (i)
nonqualified stock options or incentive stock, (ii) stock appreciation rights,
and (iii) restricted stock. An aggregate of 2,500,000 shares of Common Stock
may be issued pursuant to the Stock Incentive Plan, subject to adjustment to
prevent dilution dud to merger, consolidation, stock split or other
recapitalization of the Company.
The Stock Incentive Plan will not affect the right or power of the
Company or its stockholders to make or authorize any major corporate
transaction such as a merger, dissolution or sale of assets. If the Company
is dissolved, liquidated or merged out of existence, each participant will be
entitled to a benefit as though he became fully vested in all previous awards
to him immediately prior to or concurrently with such dissolution, liquidation
or merger. The Board may provide that an option or stock appreciation right
will be fully exercisable, or that a share of restricted stock will be free of
such restriction upon a change in control of the Company.
The Stock Incentive Plan may be amended at any time and from time to time
by the Board of Directors but no amendment which increases the aggregate
number of shares of Common Stock that may be issued pursuant to the Stock
Incentive Plan will be effective unless it is approved by the stockholders of
the Company. The Stock Incentive Plan will terminate upon the earlier of the
adoption of a resolution by the Board of Directors terminating the Stock
Incentive Plan, or ten years from the date of the Stock Incentive Plan's
approval by the Board of Directors December 1, 1997.
Stock Options and Stock Appreciation Rights. Stock Options and Stock
Appreciation Rights Stock options are rights to purchase shares of Common
Stock. Stock appreciation rights are rights to receive, without payment to
the Company, cash and/or shares of Common Stock in lieu of the purchase of
shares of Common Stock under the stock option to which the stock appreciation
right is attached. The Board may grant stock options in its discretion under
the Stock Incentive Plan. The option price shall be determined by the Board
at the time the option is granted and shall not be less than the par value of
such shares.
The Board will determine the number of shares of Common Stock to be
subject to any option awarded. The option will not be transferable by the
recipient except by the laws of descent and distribution. The option period
and date of exercise will be determined by the Board and may not exceed ten
years. The option of any person who dies may be exercised by his executors,
administrators, heirs or distributors if done so within one year after the
date of that person's death with respect to any Common Stock as to which the
decedent could have exercised the option at the time of this death. Upon
exercise of an option, the participant may pay for Common Stock so acquired in
cash, with Common Stock (the value of which will be the fair market value at
the date of exercise), in a combination of both cash and Common Stock, or, in
the discretion of the Board, by promissory note. For purposes of determining
the amount, if any, of the purchase price satisfied by payment with Common
Stock, fair market value is the mean between the highest and lowest sales
price per share of Common Stock on a given day on the principal exchange upon
which the stock trades or some other quotation source designated by the Board.
The Board may, in its discretion, attach a stock appreciation right to an
option awarded under the Stock Incentive Plan. A stock appreciation right is
exercisable only to the extent that the option to which it is attached is
exercisable. A stock appreciation right entitles the optionee to receive a
payment equal to the appreciated value of each share of Common Stock under
option in lieu of exercising the option to which the right is attached. The
appreciated value is the amount by which the fair market value of a share of
Common Stock exceeds the option exercise price for that share of Common Stock.
A holder of a stock appreciation right may receive cash, Common Stock or a
combination of both upon surrendering to the Company the unexercised option to
which the stock appreciation right is attached. The Company must elect its
method of payment within fifteen business days after the receipt of written
notice of an intention to exercise the stock appreciation right.
Any person granted an incentive stock option under the Stock Incentive
Plan who makes a disposition, within the meaning of 425(c) of the Internal
Revenue Code of 1986, as amended ("Code"), and the regulations promulgated
thereunder, of any shares of Common Stock issued to him pursuant to his
exercise of an option within two years from the date of the granting of such
option or within one year after the date any shares are transferred to him
pursuant to the exercise of the incentive stock option must within ten days of
the disposition notify the Company and immediately deliver to the Company any
amount of federal income tax withholding required by law.
A person to whom a stock option or stock appreciation right is awarded
will have no rights as a stockholder with respect to any shares of Common
Stock issuable pursuant to the stock option or stock appreciation rights until
actual issuance of a stock certificate for Common Stock.
Restricted Stock. Restricted Stock The Board may in its discretion award
Common Stock that is subject to certain restrictions on transferability. This
restricted stock issued pursuant to the Stock Incentive Plan may not be sold,
assigned, transferred, pledged, hypothecated or otherwise disposed of, except
by the laws of descent and distribution, for a period of time as determined by
the Board, from the date on which the award is granted. The Company will have
the option to repurchase the shares of restricted Common Stock at such price
as the Board shall have fixed, in its sole discretion, when the award was
made, which option will be exercisable at such times and upon the occurrence
of such events as the Board shall establish when the restricted stock award is
granted. The Company may also exercise its option to repurchase the
restricted Common Stock if prior to the expiration of the restricted period,
the participant has not paid to the Company amounts required to be withhold
pursuant to federal, state or local income tax laws, Certificates for
restricted stock will bear an appropriate legend referring to the
restrictions. A holder of restricted stock may exercise all rights of
ownership incident to such stock including the right to vote and receive
dividends, subject to any limitations the Board may impose.
Tax Information. Tax Information A recipient of an incentive stock option
or a non-qualified stock option will not recognize income at the time of the
grant of the option. On the exercise of a non-qualified stock option, the
amount by which the fair market value of Common Stock on the date of exercise
exceeds the option price will generally be taxable to the holder as ordinary
income, and will be deductible for tax purposes by the Company. The
disposition of Common Stock acquired upon exercise of a non-qualified option
will ordinarily result in capital gain or loss. In the case of officers who
are subject to the restrictions of Section 16(b) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), the date for measuring the
amount of ordinary income to be recognized upon the exercise of a
non-qualified stock option will generally be six months after exercise rather
than the date of exercise.
On the exercise of an option that qualifies as an "incentive stock
option" within the meaning of the Code, the holder will not recognize any
income and the Company will not be entitled to a deduction for tax purposes.
However, the difference between the exercise price and the fair market value
of Common Stock received on the date of the exercise will be treated as an
"item of tax preference" to the holder that may be subject to the alternative
minimum tax. The disposition of Common Stock acquired upon exercise of an
incentive stock option will ordinarily result in capital gain or loss, however
if the holder disposes of Common Stock acquired upon the exercise of an
incentive stock option within two years after the date of grant or one year
after the date of exercise (a "disqualifying disposition"), the holder will
recognize ordinary income, and the Company will be entitled to a deduction for
tax purposes in the amount of the excess of the fair market value of the
shares of Common Stock on the date the option was exercised over the option
price (or, in certain circumstances, the gain on sale, if less). Otherwise,
the Company will not be entitled to any deduction for tax purposes upon
disposition of such Common Stock. Any excess of the amount realized by the
holder on the disqualifying disposition over the fair market of Common Stock
on the date of exercise of the option will be capital gain.
If an incentive option is exercised through the use of Common Stock
previously owned by the holder, such exercise generally will not be considered
a taxable disposition of the previously owned Common Stock and thus no gain or
loss will be recognized with respect to such Common Stock upon exercise.
However, if the previously owned Common Stock was acquired by the exercise of
an incentive stock option or other tax qualified stock option and the holding
period requirements for Common Stock were not satisfied at the time the
previously owned Common Stock was used to exercise the incentive option, such
use would constitute a disqualifying disposition of such previously owned
Common Stock resulting in the recognition of ordinary income (but, under
proposed Treasury regulations, not any additional gain in capital gain) in the
amount described above.
The amount of any cash or the fair market value of any Common Stock
received upon the exercise of stock appreciation rights under the Stock
Incentive Plan will be subject to ordinary income tax in the year of receipt
and the Company will be entitled to a deduction for such amount. However, if
the holder receives Common Stock upon the exercise of stock appreciation
rights and is then subject to the restrictions of Section 16(b) of the
Exchange Act; unless the holder elects otherwise, the amount of Ordinary
income and deduction will be measured at the time such restrictions lapse.
Generally, a grant of restricted stock under the Stock Incentive Plan
will not result in taxable income to the employee or deduction to the Company
in the year of the grant. The value of Common Stock will be taxable to the
employee and compensation income in the years in which the restrictions on
Common Stock lapse. Such value will be the fair market value of Common Stock
on the dates the restrictions terminate, less any amount the recipient may
have paid for Common Stock at the time of the issuance. An employee, however,
may elect to treat the fair market value of Common Stock on the date of such
grant (less restricted stock, provided the employee makes the election within
thirty days after the date of the grant. If such an election is made and the
employee later forfeits Common Stock to the Company, the employee will not be
allowed to deduct at a later date the amount he had earlier included as
compensation income. In any case, the Company will receive a deduction
corresponding in amount and time to the amount of compensation included in the
employee's income in the year in which that amount is so included.
As of the date of this Private Placement Memorandum, 1,750,000 incentive
stock options have been granted to officers and directors at an exercise price
of $.50 per share under the Stock Incentive Plan.
LIMITATIONS OF LIABILITY OF DIRECTORS Limitations of Liability of Directors
The Company's Certificate of Incorporation provides that directors will
not be personally liable for monetary damages for breach of their fiduciary
duties, except for breaches of the duty of loyalty, acts or omissions not in
good faith or involving intentional misconduct or a knowing violation of law,
unlawful dividends or transactions involving an improper personal benefit.
Moreover, if Delaware law were to change in the future to permit the further
elimination or limitation the personal liability of directors, the liability
of a director of the Company would be eliminated or limited to the fullest
extent permitted by Delaware law, as so amended.
CERTAIN TRANSACTIONS CERTAIN TRANSACTIONS
In March, 1997, the Company opened a $150,000 credit line with Sterling
Bank, collateralized by a $150,000 certificate of deposit owned by the
remaining founding shareholder. This loan is payable upon demand, with
interest at 6.9% and fluctuating with prime rate. This credit line was paid
in full on March 5, 1998 from additional shareholder capital contributions.
In August, 1996 a founding shareholder contributed the Bay Springs,
Mississippi plant site and 250 tons of bagged fertilizer at his combined
original cost of $200,000, for 4,000,000 shares of stock and a note payable
for $100,000. In late 1996, the total outstanding shares of this founding
shareholder were repurchased for $300,000 cash and a second note for $200,000.
This second note was paid off in 1997. The original $100,000 note, bearing no
interest, is still outstanding. Imputed interest at 10% is added for 1996 and
1997 as a shareholder contribution of capital.
In late 1996, the Company retired 760,000 shares of the 6,160,000
originally issued to the founding shareholder. During the first 6 months of
1997, this shareholder sold another 1,225,000 shares to other shareholders for
$245,000.
In connection with the issuance of common stock, 1,500,000 options were
issued to 5 directors and shareholders in January, 1997 with an exercise price
of $.50. An additional 250,000 options were issued to the remaining director
and shareholder in April, 1998 with an exercise price of $.50. The options
expire September 18, 1998.
In December 1997 Global Farm Sciences, Inc., a Texas corporation, was
formed by three Company founders and board members for the purpose of selling
the Company's fertilizer product to foreign companies. As of February 2,
1998, no capitalization or business activity has occurred.
PRINCIPAL STOCKHOLDERS OF AGRI BIO-SCIENCES, INC. PRINCIPAL STOCKHOLDERS OF
AGRI BIO-SCIENCES, INC.
The shares of Agri Bio Common Stock held by GS Financial represent less
than 5% of the outstanding shares of Common Stock prior to the Distribution,
all the Agri Bio Common Stock owned by GS Financial will be distributed to
shareholders of GS Financial in connection with the Distribution, and the
Company knows of no owner of Company Common Stock who is also an owner of
shares of GS Financial. Therefore, the tables assumes that each of the
persons named below own no shares of GS Financial Common Stock and no options
to acquire GS Financial common stock exercisable within 60 days of such date.
The following table sets forth as of December 31, 1997, the amount of Agri Bio
Common Stock beneficially owned by (i) each person known by the Company to own
beneficially 5% or more of its outstanding shares of Common Stock prior to the
Distribution, (ii) each Director, (iii) each executive officer, and (iv) all
Directors and executive officers of the Company as a group. Except as
otherwise indicated, the Company believes that the beneficial owners of the
Common Stock listed below, based on information furnished by such owners, have
sole voting and investment power with respect to such shares, subject to
community property laws where applicable.
PERCENTAGE OF SHARES OUTSTANDING(1)
--------------------------------------
NAME AND ADDRESS OF NUMBER BEFORE AFTER
BENEFICIAL OWNER OF SHARES DISTRIBUTION DISTRIBUTION
- --------------------- ---------- ------------ ------------
M.M. Kalish 4,897,500(1) 40.48% 40.14%
7806 Oxfordshire Drive
Spring, Texas 77379
Lester H. Stephens 1,533,000(1)(2) 12.67% 12.57%
5211 Court of York
Houston, Texas 77069
Vernon L. Medlin, M.D. 1,268,000(1)(3) 10.48% 10.39%
1242 Sandpiper
Corpus Christi, Texas 78412
Leslie L. Lemak, M.D. 1,243,000(1)(4) 10.27% 10.19%
5457 Sugar Hill
Houston, Texas 77056
Patrick N. Morgan 767,000(1) 6.34% 6.29%
819 Hedwig Way
Houston, Texas 77024
Anthony A. Mierzwa 743,000(1)(5) 6.14% 6.09%
1323 South Boulevard
Houston, Texas 77006
Officers and Directors as a Group 10,451,500(1) 86.38% 85.67%
(6 persons)
________________________
(1) Includes 1,750,000 shares issuable in connection with options or
warrants exercisable within 60 days of this Prospectus.
(2) Includes 900,000 shares owned of record by the Stephens Family Trust
and 250,000 shares owned of record by Stephens family members to which Mr.
Stephens disclaims any interest.
(3) Includes 625,000 shares owned of record by Black Cloud Partners, LLP
and 125,000 shares owned of record by Medlin family members to which Dr.
Medlin disclaims any interest.
(4) Includes 300,000 shares owned or record by Lemak family members to
which Dr. Lemak disclaims any interest.
(5) Includes 100,000 shares owned of record by a member of the Mierzwa
family to which Mr. Mierzwa disclaims any interest.
PARENTSParents
The parents of the Company are its board of directors. No shareholder of
the Company owns sufficient stock to exercise control over the Company through
stock ownership.
DESCRIPTION OF CAPITAL STOCKDESCRIPTION OF CAPITAL STOCK
The Company is authorized to issue 20 million shares of common stock,
$0.001 par value, and 5 million shares of preferred stock. The presently
outstanding shares of Common Stock are fully paid and nonassessable. There
are no shares of preferred stock issued and outstanding.
COMMON STOCK Common Stock
The authorized Common Stock consists of 20,000,000 shares, $.001 par
value, of which 10,350,000 shares were issued and outstanding as of December
31, 1997. The holders of Common Stock are entitled to one vote per share on
the election of directors and on all other matters submitted to a vote of
stockholders. Shares of Common Stock do not have preemptive rights or
cumulative voting rights. The Company's Certificate of Incorporation, as
amended, provides that the board of directors shall be divided into three
classes, as nearly equal in number as possible, and that at each annual
meeting of stockholders all of the directors of one class shall be elected for
a three-year term. The affirmative vote of not less than 75% of the
outstanding shares of Common Stock is required to approve a merger or
consolidation, a transfer of substantially all the assets, certain issuances
and transfers of the Company's securities to other entities or a dissolution
of the Company, unless the Board of Directors of the Company has approved the
transaction. Additionally, certain business combinations involving the
Company and any holder of 15% or more of the Company's outstanding voting
stock must be approved by at least 66.67% of such voting stock, exclusive of
the stock owned by the 15% stockholders, unless approved by a majority of the
directors not affiliated with such holder or certain price and procedural
requirements are met. These provisions, together with the authorization to
issue preferred stock on terms designated by the Board of Directors, described
above, could be used as anti-takeover devices.
The holders of Common Stock are entitled to receive dividends ratably
when, as and if declared by the Board of Directors, and upon liquidation are
entitled to share ratably in the Company's net assets. Payment of dividends
on the Common Stock may be subject to restrictions contained in any future
agreement in connection with the issuance of Preferred Stock. See
"Description of Preferred Stock." The decision to pay dividends is subject to
any agreements with holders of preferred stock issued in the future and such
other financial considerations as the Board of Directors of the Company may
deem relevant. No assurance can be given as to the timing or amount of any
dividend that the Company may declare on the Common Stock.
The Company's By-Laws provide that, subject to certain limitations
discussed below, any stockholder entitled to vote in the election of directors
generally may nominate one or more persons for election as directors at a
meeting. The Company's By-Laws also provide that a stockholder must give
written notice of such stockholder's intent to make such nomination or
nominations, either by personal delivery or by United States mail, postage
prepaid, to the Secretary of the Company not later than (i) with respect to an
election to be held at an Annual Meeting of Stockholders, 90 days prior to the
anniversary date of the date of the immediately preceding Annual Meeting, and
(ii) with respect to an election to be held at a Special Meeting of
Stockholders for the election of directors, the close of business on the tenth
day following the date on which a written statement setting forth the date of
such meeting is first mailed to stockholders provided that such statement is
mailed no earlier than 120 days prior to the date of such meeting.
Notwithstanding the foregoing, if an existing director is not standing for
re-election to a directorship which is the subject of an election at such
meeting or if a vacancy exists as to a directorship which is the subject of an
election, whether as a result of resignation, death, an increase in the number
of directors, or otherwise, then a stockholder may make a nomination with
respect to such directorship at any time not later than the close of business
on the tenth day following the date on which a written statement setting forth
the fact that such directorship is to be elected and the name of the nominee
proposed by the Board of Directors is first mailed to stockholders. Each
notice of a nomination from a stockholder shall set forth: (a) the name and
address of the stockholder who intends to make the nomination and of the
person or persons to be nominated; (b) a representation that the stockholder
is a holder of record of stock of the Company entitled to vote at such meeting
and intends to appear in person or by proxy at the meeting to nominate the
person or persons specified in the notice; (c) a description of all
arrangements or understandings between the stockholder and each nominee and
any other person or persons (naming such person or persons) pursuant to which
the nomination or nominations are to be made by the stockholder, (d) such
other information regarding each nominee proposed by such stockholder as would
be required to be included in a proxy statement filed pursuant to the Exchange
Act and the rules and regulations thereunder (or any subsequent provisions
replacing such Act, rules or regulations); and (e) the consent of each nominee
to serve as a director of the Company if so elected. The presiding officer of
the meeting may refuse to acknowledge the nomination of any person not made in
compliance with the foregoing procedure.
DEFENSES AGAINST HOSTILE TAKEOVERS Defenses Against Hostile Takeovers
Introduction. Introduction While the following discussion summarizes the
reasons for, and the operation and effects of, certain provisions of the
Company's Certificate of Incorporation which management has identified as
potentially having an anti-takeover effect, it is not intended to be a
complete description of all potential anti-takeover effects, and it is
qualified in its entirety by reference to the Company's Certificate of
Incorporation and By-Laws, copies of which are available from the Company,
which should be reviewed for more detailed information.
In general, the anti-takeover provisions in Delaware law and the
Company's Certificate of Incorporation are designed to minimize the Company's
susceptibility to sudden acquisitions of control which have not been
negotiated with and approved by the Company's Board of Directors. As a
result, these provisions may tend to make it more difficult to remove the
incumbent members of the Board of Directors. The provisions would not
prohibit an acquisition of control of the Company or a tender offer for all of
the Company's capital stock. The provisions are designed to discourage any
tender offer or other attempt to gain control of the Company in a transaction
that is not approved by the Board of Directors, by making it more difficult
for a person or group to obtain control of the Company in a short time and
then impose its will on the remaining stockholders. However, to the extent
these provisions successfully discourage the acquisition of control of the
Company or tender offers for all or part of the Company's capital stock
without approval of the Board of Directors, they may have the effect of
preventing an acquisition or tender offer which might be viewed by
stockholders to be in their best interests.
Tender offers or other non-open market acquisitions of stock are usually
made at prices above the prevailing market price of a company's stock. In
addition, acquisitions of stock by persons attempting to acquire control
through market purchases may cause the market price of the stock to reach
levels which are higher than would otherwise be the case. Anti-takeover
provisions may discourage such purchases, particularly those of less than all
of the company's stock, and may thereby deprive stockholders of an opportunity
to sell their stock at a temporarily higher price. These provisions may
therefore decrease the likelihood that a tender offer will be made, and, if
made, will be successful. As a result, the provisions may adversely affect
those stockholders who would desire to participate in a tender offer. These
provisions may also serve to insulate incumbent management from change and to
discourage not only sudden or hostile takeover attempts, but any attempts to
acquire control which are not approved by the Board of Directors, whether or
not stockholders deem such transactions to be in their best interests.
Authorized Shares of Capital Stock. Authorized Shares of Capital Stock
The Company's Certificate of Incorporation authorizes the issuance of up to
5,000 shares of serial preferred stock. Shares of the Company's serial
preferred stock with voting rights could be issued and would then represent an
additional class of stock required to approve any proposed acquisition. This
preferred stock, together with authorized but unissued shares of Common Stock
(the Certificate of Incorporation authorizes the issuance of up to 20,000
shares), could represent additional capital stock required to be purchased by
an acquiror. Issuance of such additional shares may dilute the voting
interest of the Company's stockholders. If the Board of Directors of the
Company determined to issue an additional class of voting preferred stock to a
person opposed to a proposed acquisition, such person might be able to prevent
the acquisition single-handedly.
Stockholder Meetings. Stockholder Meetings Delaware law provides that the
annual stockholder meeting may be called by a corporation's board of directors
or by such person or persons as may be authorized by a corporation's
certificate of incorporation or By-Laws. The Company's Certificate of
Incorporation provides that annual stockholder meetings may be called only by
the Company's Board of Directors or a duly designated committee of the Board.
Although the Company believes that this provision will discourage stockholder
attempts to disrupt the business of the Company between annual meetings, its
effect may be to deter hostile takeovers by making it more difficult for a
person or entity to obtain immediate control of the Company between one annual
meeting as a forum to address certain other matters and discourage takeovers
which are desired by the stockholders. The Company's Certificate of
Incorporation also provides that stockholder action may be taken only at a
special or annual stockholder meeting and not by written consent.
Classified Board of Directors and Removal of Directors. Classified Board
of Directors and Removal of Directors The Company's Certificate of
Incorporation provides that The Company's Board of Directors is to be divided
into three classes which shall be as nearly equal in number as possible. The
directors in each class serve for terms of three years, with the terms of one
class expiring each year. Each class currently consists of approximately
one-third of the number of directors. Each director will serve until his
successor is elected and qualified.
A classified Board of Directors could make it more difficult for
stockholders, including those holding a majority of the Company's outstanding
stock, to force an immediate change in the composition of a majority of the
Board of Directors. Since the terms of only one-third of the incumbent
directors expire each year, it requires at least two annual elections for the
stockholders to change a majority, whereas a majority of a non-classified
Board may be changed in one year. In the absence of the provisions of the
Company's Certificate of Incorporation classifying the Board, all of the
directors would be elected each year. The provision for a staggered Board of
Directors affects every election of directors and is not triggered by the
occurrence of a particular event such as a hostile takeover. Thus a staggered
Board of Directors makes it more difficult for stockholders to change the
majority of directors even when the reason for the change would be unrelated
to a takeover.
The Company's Certificate of Incorporation provides that a director may
not be removed except for cause by the affirmative vote of the holders of 75%
of the outstanding shares of capital stock entitled to vote at an election of
directors. This provision may, under certain circumstances, impede the
removal of a director and thus preclude the acquisition of control of the
Company through the removal of existing directors and the election of nominees
to fill in the newly created vacancies. The supermajority vote requirement
would make it difficult for the stockholders of the Company to remove
directors, even if the stockholders believe such removal would be beneficial.
Restriction of Maximum Number of Directors and Filling Vacancies on the
Board of Directors. Restriction of Maximum Number of Directors and Filling
Vacancies on the Board of Directors Delaware law requires that the board of
directors of a corporation consist of one or more members and that the number
of directors shall be set by the corporation's By-Laws, unless it is set by
the corporation's certificate of incorporation. The Company's Certificate of
Incorporation provides that the number of directors (exclusive of directors,
if any, to be elected by the holders of preferred stock) shall not be less
than five or more than 15, as shall be provided from time to time in
accordance with the Company By-Laws. The power to determine the number of
directors within these numerical limitations and the power to fill vacancies,
whether occurring by reason of an increase in the number of directors or by
resignation, is vested in the Company's Board of Directors. The overall
effect of such provisions may be to prevent a person or entity from quickly
acquiring control of the Company through an increase in the number of the
Company's directors and election of nominees to fill the newly created
vacancies and thus allow existing management to continue in office.
Stockholder Vote Required to Approve Business Combinations with Related
Persons. Stockholder Vote required to Approve Business Combinations with
Related Persons The Company's Certificate of Incorporation generally requires
the approval of the holders of 75% of the Company's outstanding voting stock
(and any class or series entitled to vote separately), and a majority of the
outstanding stock not beneficially owned by a related person (as defined) (up
to a maximum requirement of 85% of the outstanding voting stock), to approve
business combinations (as defined) involving the related person, except in
cases where the business combination has been approved in advance by
two-thirds of those members of the Company's Board of Directors who were
directors prior to the time when the related person became a related person.
Under Delaware law, absent these provisions, business combinations generally,
including mergers, consolidations and sales of substantially all of the assets
of the Company must, subject to certain exceptions, be approved by the vote of
the holders of a majority of the Company's outstanding voting stock. One
exception under Delaware law to the majority approval requirement applies to
business combinations (as defined) involving stockholders owning 15% of the
outstanding voting stock of a corporation for less than three years. In order
to obtain stockholder approval of a business combination with such a related
person, the holders of two-thirds of the outstanding voting stock, excluding
the stock owned by the 15% stockholder, must approve the transaction.
Alternatively, the 15% stockholder must satisfy other requirements under
Delaware law relating to (i) the percentage of stock acquired by such person
in the transaction which resulted in such person's ownership becoming subject
to the law, or (ii) approval of the board of directors of such person's
acquisition of the stock of the Delaware corporation. Delaware law does not
contain price criteria. The supermajority stockholder vote requirements under
the Certificate of Incorporation and Delaware law may have the effect of
foreclosing mergers and other business combinations which the holders of a
majority of the Company's stock deem desirable and place the power to prevent
such a transaction in the hands of a minority of the Company's stockholders
Under Delaware law, there is no cumulative voting by stockholders for the
election of the Company's directors. The absence of cumulative voting rights
effectively means that the holders of a majority of the stock voted at a
stockholder meeting may, if they so choose, elect all directors of the
Company, thus precluding a small group of stockholders from controlling the
election of one or more representatives to the Company's Board of Directors.
Advance Notice Requirements for Nomination of Directors and Proposal of
New Business at Annual Stockholder Meetings. Advance Notice Requirements for
Nomination of Directors and Proposal of New Business at Annual Stockholder
Meetings The Company's Certificate of Incorporation generally provides that
any stockholder desiring to make a nomination for the election of directors or
a proposal for new business at a stockholder meeting must submit written
notice not less than 30 or more than 60 days in advance of the meeting. This
advance notice requirement may give management time to solicit its own proxies
in an attempt to defeat any dissident slate of nominations, should management
determine that doing so is in the best interests of stockholders generally.
Similarly, adequate advance notice of stockholder proposals will give
management time to study such proposals and to determine whether to recommend
to the stockholders that such proposals be adopted. In certain instances,
such provisions could make it more difficult to oppose management's nominees
or proposals, even if the stockholders believe such nominees or proposals are
in their interests. Making the period for nomination of directors and
introducing new business a period not less than 10 days prior to notice of a
stockholder meeting may tend to discourage persons from bringing up matters
disclosed in the proxy materials furnished by the Company and could inhibit
the ability of stockholders to bring up new business in response to recent
developments.
Limitations on Acquisitions of Capital Stock. Limitations on Acquisitions
of Capital Stock The Company's Certificate of Incorporation generally provides
that if any person were to acquire beneficial ownership of more than 20% of
any class of the Company's outstanding Common Stock, each vote in excess of
20% would be reduced to one-hundredth of a vote, with the reduction allocated
proportionately among the record holders of the stock beneficially owned by
the acquiring person. The limitation on voting rights of shares beneficially
owned in excess of 20% of the Company's outstanding Common Stock, would
discourage stockholders from acquiring a substantial percentage of the
Company's stock in the open market, without disclosing their intentions, prior
to approaching management to negotiate an acquisition of the Company's
remaining stock. The effect of these provisions is to require amendment of
the Certificate of Incorporation, which requires Board approval, before a
stockholder can acquire a large block of the Company's Common Stock. As a
result, these provisions may deter takeovers by potential acquirors who would
have acquired a large holding before making an offer for the remaining stock,
even though the eventual takeover offer might have been on terms favorable to
the remaining stockholders.
Supermajority Voting Requirement for Amendment of Certain Provisions of
the Certificate of Incorporation. Supermajority Voting Requirement for
Amendment of Certain Provisions of the Certificate of Incorporation The
Company's Certificate of Incorporation provides that specified provisions
contained in the Certificate of Incorporation may not be repealed or amended
except upon the affirmative vote of the holders of not less than seventy-five
percent of the outstanding stock entitled to vote. This requirement exceeds
the majority vote that would otherwise be required by Delaware law for the
repeal or amendment of the Certificate of Incorporation. Specific provisions
subject to the supermajority vote requirement are (i) Article X, governing the
calling of stockholder meetings and the requirement that stockholder action be
taken only at annual or special meetings, (ii) Article XI, requiring written
notice to the Company of nominations for the election of directors and new
business proposals, (iii) Article XII, governing the number and terms of the
Company's directors, (iv) Article XIII, governing the removal of directors,
(v) Article XIV, limiting acquisitions of 20% or more of the Company's stock,
(vi) Article XV, governing approval of business combinations involving related
persons, (vii) Article XVI, relating to the consideration of various factors
in the evaluation of business combinations, (viii) Article XVII, providing for
indemnification of directors, officers, employees and agents, (ix) Article
XVIII, limiting directors' liability, and (x) Articles XIX and XX, governing
the required stockholder vote for amending the By-Laws and Certificate of
Incorporation, respectively. Article XX is intended to prevent the holders of
less than 75% of the Company's outstanding voting stock from circumventing any
of the foregoing provisions by amending the Certificate of Incorporation to
delete or modify one of such provisions. This provision would enable the
holders of more than 25% of the Company's voting stock to prevent amendments
to the Certificate of Incorporation or By-Laws even if they were favored by
the holders of a majority of the voting stock.
PREFERRED STOCK Preferred Stock
The Board of Directors of the Company is authorized by its Certificate of
Incorporation, without any action on the part of stockholders, to issue
preferred stock in one or more series, with such voting powers, full or
limited but not to exceed one vote per share, or without voting powers, and
with such designations, preferences, limitations, descriptions and terms
thereof, including the extent, if any, to which the holders of the shares of
any such series will be entitled to vote as a class or otherwise with respect
to the election of directors or otherwise, all as shall, to the extent
permitted under the laws of the State of Delaware, be determined by the Board
of Directors of the Company. Thus, the Board of Directors, without
stockholder approval, may authorize the issuance of preferred stock which
could make it more difficult for another company to effect certain business
combinations with the Company.
COMMON STOCK OPTIONSCommon Stock Options
In connection with the issuance of common stock, 1,500,000 options were
issued to 5 directors and shareholders in January, 1997 with an exercise price
of $.50. An additional 250,000 options were issued to the remaining director
and shareholder in April, 1998 with an exercise price of $.50. The options
expire September 18, 1998.
REGISTRAR AND TRANSFER AGENT Registrar and Transfer Agent
The transfer agent for the Common Stock is Atlas Stock Transfer
Corporation, Salt Lake City, Utah.
SHARES ELIGIBLE FOR FUTURE SALE SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Distribution, there has been no trading market for the Common
Stock. The Company will attempt to have the Common Stock quoted on the NASD
OTC the Electronic Bulletin Board. However, there can be no assurance that
any active trading market for the Common Stock will develop and, if developed,
will continue after the Distribution. The quotation of the Common Stock on
the Electronic Bulletin Board is conditioned upon the Company meeting certain
requirements with respect to the availability of public information and a
broker-dealer making a market in the Common Stock. See "Risk Factors - Risk
of Low-Price ("Penny") Stocks." No broker-dealer has agreed to make a market
in the Common Stock, there can be no assurance that any broker-dealer will
make a market in the Common Stock or, if so, that it will continue for any
specific period of time. See "Risk Factors - Absence of Prior Trading
Market."
Upon completion of the Distribution, the Company will have 10,450,000
shares of Common Stock outstanding, of which 8,701,500 are held by
"affiliates" of the Company. The remaining 1,748,500 shares, which includes
the 100,000 shares acquired in the Distribution, will be freely tradable
without restriction or further registration under the Securities Act. Shares
held by "affiliates" of Agri Bio, will be subject to the limitations of Rule
144 promulgated under the Securities Act.
In general, under Rule 144, a person (or persons whose shares are required to
be aggregated), including any affiliate of the Company, who beneficially owns
"restricted shares" for a period of at least one year is entitled to sell
within any three month period, shares equal in number to the greater of (i) 1%
of the then outstanding shares of Common Stock (approximately 104,500 shares
immediately after the Distribution); or (ii) the average weekly trading volume
of the Common Stock during the four calendar weeks preceding the filing of the
required notice of sale with the Commission. In addition , any person (or
person whose shares are aggregated) who is not, at the time of the sale or
during the preceding three months, an affiliate of the Company, and who has
beneficially owned restricted shares for at least two years, can sell such
shares under Rule 144 without regard to the notice, manner of sale, public
information or volume limitations described above. Following the
Distribution, approximately 1.75 million shares of Company Common Stock will
be issuable upon the exercise of options held by Directors of the Company.
LEGAL MATTERS LEGAL MATTERS
Certain legal matters in connection with the Distribution will be passed
upon for Agri Bio-Sciences, Inc. by Sonfield & Sonfield, Houston, Texas.
EXPERTS EXPERTS
The audited financial statements of Agri Bio-Sciences, Inc. at December
31, 1997, appearing in this Prospectus and elsewhere in the Registration
Statement have been audited by Malone & Bailey, PLLC, independent public
accountants, as set forth in their report thereon appearing elsewhere herein,
and are included in reliance upon the authority of such firm as experts in
giving such report.
F - 1
INDEX TO FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
Index F - 1
Report of Independent Public Accountants F - 2
Balance Sheets as of December 31, 1997 F - 3
Statements of Expenses for the Years Ended December 31, 1997 and 1996 and the
Period from
May 30, 1995 (Date of Inception) to December 31, 1997 F -4
Statements of Stockholders' Equity for the Years Ended December 31, 1997
and 1996 and the Period
from May 30, 1995 (Date of Inception) to December 31, 1997 F -5
Statements of Cash Flow for the Years Ended December 31, 1997 and 1996
and the Period from
May 30, 1995 (Date of Inception) to December 31, 1997 F -6
Notes to Financial Statements F - 8
See notes to financial statements.
F - 7
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
Agri Bio-Sciences, Inc.
Houston, Texas
The Company have audited the accompanying balance sheet of Agri Bio-Sciences,
Inc. (a Delaware corporation) as of December 31, 1997 and 1996, and the
related statements of expenses, stockholders' equity, and cash flows for the
years then ended and for the period from inception (May 30, 1995) to December
31, 1997. 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.
The Company conducted our audits in accordance with generally accepted
auditing standards. Those standards require that the Company 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. The Company believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Agri Bio-Sciences, Inc. as of
December 31, 1997 and 1996, and the results of its operations and its cash
flows for the initial period then ended in conformity with generally accepted
accounting principles.
/s/ MALONE & BAILEY, PLLC
- -----------------------------
Houston, Texas
February 2, 1998, (except for Note 2,
as to which the date is March 5, 1998)
<PAGE>
AGRI BIO-SCIENCES, INC.
(FORMERLY AGRI ENVIRONMENTAL SCIENCES, INC.)
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
1997 1996
--------- --------------
Cash $ 7,597 $ 78,777
Inventory - packaged fertilizer 100,000 100,000
Other current assets 7,500
Fertilizer plant and equipment, net 173,136 107,807
Deposits 12,500 12,500
----------- ----------
TOTAL ASSETS $ 300,733 $ 299,084
========= =========
Note payable to Sterling Bank $128,210
Accrued expenses 5,705
Due to former stockholder 100,000 $ 300,000
---------- ---------
TOTAL LIABILITIES 233,915 300,000
---------- ----------
STOCKHOLDERS' EQUITY
Common stock, $.001 par value, 20,000,000
shares authorized, 10,350,000 and
9,065,000 issued and outstanding 10,350 9,065
Paid in capital 435,300 169,585
Deficit Accumulated During the
Development Stage (378,832) (179,566)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 66,818 ( 916)
---------- -------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 300,733 $ 299,084
========= =========
<PAGE>
AGRI BIO-SCIENCES, INC.
(FORMERLY AGRI ENVIRONMENTAL SCIENCES, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF EXPENSES
YEARS ENDED DECEMBER 31, 1997 AND 1996,
AND THE PERIOD FROM MAY 30, 1995 (DATE OF INCEPTION)
TO DECEMBER 31, 1997
May 30, 1995
(Inception) to
December 31,
1997 1996 1997
-------- ---------- ----------
EXPENSES
Fees paid for services by stockholders $ 30,250 $
138,150 $ 168,400
Other administrative expenses 154,671 31,416
186,087
Interest 13,595 10,000 23,595
Depreciation 750 750
------------ -------------
NET LOSS $ 199,266 $ 179,566 $ 378,832
========= ========= =========
(Loss) per common share $(.02) $(.02)
Weighted average shares outstanding 10,815,000 7,315,000
<PAGE>
AGRI BIO-SCIENCES, INC.
(FORMERLY AGRI ENVIRONMENTAL SCIENCES, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996,
AND THE PERIOD FROM MAY 30, 1995 (DATE OF INCEPTION)
TO DECEMBER 31, 1997
Deficit
Accumulated
During the
Common Stock Paid in Development
Shares $ Capital Stage
---------- ----------- --------- --------
Totals
- ------
Balances, December 31, 1995 0 0 $ 0
$ 0 $ 0
Shares issued in exchange for
fertilizer plant site contributed
at inception 4,000,000 400 99,600
100,000
Shares issued for services
- to founding shareholder 5,565,000 5,565 50,085
55,650
- to consultants 1,000,000 1,000 9,000
10,000
Shares issued for cash 2,500,000 2,500 500,500
503,000
Imputed interest on note due to
former shareholder 10,000 10,000
Shares repurchased for cash
and a note payable (4,000,000) ( 400) (499,600)
(500,000)
Net (deficit) ________ ________ _________
(179,566) (179,566)
---- ------------
Balances, December 31, 1996 9,065,000 9,065 169,585
(179,566) ( 916)
Shares issued for cash 1,275,000 1,275 253,725
255,000
Shares issued for services 10,000 10 1,990
2,000
Imputed interest on note due to
former shareholder 10,000 10,000
Net (deficit) ________ ________ _________ (199,266)
----------
(199,266)
- ----------
Balances, December 31, 1997 10,350,000 $ 10,350 $435,300
========== =========== ========
$(378,832) $ 66,818
========= =============
<PAGE>
AGRI BIO-SCIENCES, INC.
(FORMERLY AGRI ENVIRONMENTAL SCIENCES, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOW
YEARS ENDED DECEMBER 31, 1997 AND 1996, AND
THE PERIOD FROM MAY 30, 1995 (DATE OF INCEPTION)
TO DECEMBER 31, 1997
May 30, 1995
(Inception) to
December 31,
1997 1996 1997
--------- -------------- --------------
CASH FLOW FROM OPERATING
ACTIVITIES
Net loss $(199,266) $(179,566) $(378,832)
Adjustments to reconcile net income to
net cash provided by operating activities:
Common stock issued for services 2,000 65,650 67,650
Contribution of imputed interest 10,000 10,000 20,000
Increase in other current assets ( 7,500) ( 7,500)
Increase in accrued expenses 5,705 _______
--------------------
5,705
----
NET CASH USED BY
OPERATING ACTIVITIES (189,061) (103,916) (292,977)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Plant site construction and equipment
purchases ( 65,329) ( 7,807) ( 73,136)
Additions to deposits ( 12,500) ( 12,500)
----------- -----------
NET CASH USED FOR
INVESTING ACTIVITIES ( 65,329) ( 20,307) (
----------- ----------- ---
85,636)
--
CASH FLOWS FROM FINANCING ACTIVITIES
Sales of common stock for cash 255,000 503,000
758,000
Reduction of debt owed to a former
shareholder (200,000) (200,000)
Proceeds from (payments to) a bank 128,210 128,210
Cash paid to repurchase shares from
a founding shareholder (300,000) (300,000)
---------- ----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 183,210 203,000 386,210
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH $( 71,180) $ 78,777 $
7,597
<PAGE>
AGRI BIO-SCIENCES, INC.
(FORMERLY AGRI ENVIRONMENTAL SCIENCES, INC.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOW
YEARS ENDED DECEMBER 31, 1997 AND 1996,
AND THE PERIOD FROM MAY 30, 1995 (DATE OF INCEPTION)
TO DECEMBER 31, 1997
May 30, 1995
(Inception) to
December 31,
1997 1996 1997
--------- -------------- --------------
NET INCREASE (DECREASE) IN CASH
(from previous page) $( 71,180) $ 78,777 $
7,597
CASH AT BEGINNING OF PERIOD 78,777 _______ ______
-------------- ------
CASH AT END OF PERIOD $ 7,597 $ 78,777 $ 7,597
=========== ========== ===========
SUPPLEMENTAL DISCLOSURES
Interest paid $ 2,395 $ 0 $
0
Non-cash investing and financing activities
Contribution of plant site at inception 100,000 100,000
Purchase of bagged fertilizer for note payable 100,000 100,000
F - 9
AGRI BIO-SCIENCES, INC.
(FORMERLY AGRI ENVIRONMENTAL SCIENCES, INC.)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Incorporation. Agri Bio-Sciences, Inc. (the Company) (formerly Agri
- -------------
Environmental Sciences, Inc.) was formed May 30, 1995 as a Texas corporation.
- --------
On December 22, 1997, a separate company with the same name was incorporated
in Delaware and the Texas corporation merged into the Delaware corporation.
There was no activity during 1995.
A sister corporation, Agri Financial Group, Inc. (AFS), was formed by seven
the Company shareholders in March, 1997 for the purpose of financing a joint
venture soil analysis laboratory in Tlaxcala, Mexico with a Mexican
university. This sister corporation was merged with the Company in August,
1997 by exchanging 340,000 shares of the Company for the total outstanding
shares of AFS, and is shown as consolidated using the pooling of interests
method of accounting.
The financial statements are presented as if the Company has operated as a
single continuous company.
Nature of Business. The Company was formed to manufacture clay-based
- --------------------
commercial agricultural fertilizer and sell it to markets in third world
- --------
countries. As of February 2, 1998, there were negotiations with agricultural
- -----
agencies in Mexico for pending shipments. There have been no sales or
shipments of fertilizer to date.
Inventory consists of about 220 tons of packaged fertilizer remaining from the
- ---------
plant's previous operational period ending in 1994. It is valued at $100,000
which is the price paid by a founding shareholder, including travel and other
acquisition costs. The estimated selling price net of freight is $175,000.
Other current assets as December 31, 1997 consists of prepaid freight for the
- ---------------------
pending fertilizer shipments, prepaid legal fees and an advance to a Mexican
agent pending performance of requested services.
Fertilizer Plant. The fertilizer plant consists of a 24,000 square foot
- -----------------
production and storage building located on 7 acres of land in Bay Springs,
- -----
Mississippi. The plant was acquired by the Company in 1996 as a contribution
- ---
from a founding shareholder and is valued at the $100,000 cash price paid by
the founding shareholder in 1993. The plant has not operated since its former
owner filed for bankruptcy in 1992. Beginning in 1996, the Company began
construction modifications to make the plant operational again. The plant was
pronounced operational in fall, 1997, with operations to begin when sales
occur.
Deposits consists of two credit card advance deposits.
- --------
NOTE 2 - NOTE PAYABLE TO STERLING BANK
In March, 1997, the Company opened a $150,000 credit line with Sterling Bank,
collateralized by a $150,000 certificate of deposit owned by the remaining
founding shareholder. This loan is payable upon demand, with interest at 6.9%
and fluctuating with prime rate. This credit line was paid in full on March
5, 1998 from additional shareholder capital contributions.
NOTE 3 - PAYMENTS TO FOUNDING SHAREHOLDERS
In August, 1996 a founding shareholder contributed the Bay Springs,
Mississippi plant site and 250 tons of bagged fertilizer at his combined
original cost of $200,000, for 4,000,000 shares of stock and a note payable
for $100,000. In late 1996, the total outstanding shares of this founding
shareholder were repurchased for $300,000 cash and a second note for $200,000.
This second note was paid off in 1997. The original $100,000 note, bearing no
interest, is still outstanding. Imputed interest at 10% is added for 1996 and
1997 as a shareholder contribution of capital.
NOTE 4 - INSIDER COMMON STOCK RE-SALES
In late 1996, the Company retired 760,000 shares of the 6,160,000 originally
issued to the founding shareholder. During the first 6 months of 1997, this
shareholder sold another 1,225,000 shares to other shareholders for $245,000.
NOTE 5 - COMMON STOCK OPTIONS
In connection with the issuance of common stock, 1,500,000 options were issued
to 5 shareholders in January, 1997 with an exercise price of $.50. The
options expire September 18, 1998.
NOTE 6 - SISTER SALES CORPORATION
In December 1997 Global Farm Sciences, Inc., a Texas corporation, was formed
by a Company founder and board member for the purpose of selling the Company's
fertilizer product to foreign companies. As of February 2, 1998, no
capitalization or business activity has occurred.
II - 4
PART II
INFORMATION NOT REQUIRED
IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is incorporated under Delaware Law. Section 145 of the
General Corporation Law of Delaware provides that:
(a) A corporation may indemnify any person, including officers
and directors, who was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or
in the right of the corporation) by reason of the fact that he is or was a
director, officer, employee or agent of another corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding
if he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation, and with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful.
(b) A corporation may indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation under the same
conditions, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of
all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
Article XV of the Certificate of Incorporation of the Registrant
provides, in effect, that subject to certain limited circumstances, the
Company will indemnify its officers and directors to the extent permitted by
Delaware Law. The Company is not insured for liabilities it may incur
pursuant to Article XV of its Certificate of Incorporation relating to the
indemnification of officers and directors of the Company and its subsidiaries
or affiliates.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
ITEM AMOUNT
---- ------
Registration fees $ ______
----------------- ---------
Stock transfer agent's fee _____
-----
Printing and engraving 5,000 (1)
----- ---
Postage 1,000 (1)
----- ---
Legal 15,000
------
Accounting 5,000
-----
Moody's publication fee 3,500
-----
TOTAL $ ______
--------
(1) Estimate
- --------------------
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
The following is a summary of the transactions by the Company since its
incorporation on December 22, 1997, involving sales of its securities that
were not registered under the Securities Act of 1933, as amended (the
"Securities Act"):
In April 1998 the Registrant issued 100,000 shares of its Common Stock to GS
Financial Services, Inc., a Delaware corporation in consideration of
consulting services rendered by GS financial Services, Inc.
The securities were not registered under the Securities Act of 1933 in
reliance upon the exemption from registration provided by Section 4(2) of the
Securities Act and Regulation D thereunder.
In December, 1997 the Registrant issued 10,350.000 shares pro rata to the
shareholders of Agri Bio-Sciences, Inc., a Texas corporation, in exchange for
the same number (100%) of the issued and outstanding shares of capital stock
of the Texas corporation. The shares were issued for the sole purpose of
reincorporation in Delaware without registration under the Securities Act in
reliance on Section 4(2) of such Act as a transaction not involving a public
offering. In addition, the recipients of the shares represented their
intentions to acquire the securities for investment only and not with a view
to or for sale in connection with any distribution thereof and appropriate
legends were affixed to the share certificates.
The issuance of the 10,350,000 shares was followed by a merger of the
Texas corporation, a wholly owned subsidiary of the Registrant, into the
Registrant to complete the reincorporation in Delaware.
ITEM 27. EXHIBITS.
(A) EXHIBITS:
2.1 - Consulting and Distribution Agreement
3.1 - Certificate of Incorporation.
3.2 - By-Laws.
4.1 - Form of Common Stock certificate.
5.1 - Opinion of Sonfield & Sonfield with respect to legality of the
securities.
8.1 - Opinion of Sonfield & Sonfield with respect to tax matters
(included as part of Exhibit 5.1).
10.1 - Indemnification Agreement between the Company and Lester H.
Stephens.
10.2 - Indemnification Agreement between the Company and M.M.
Kalish.
10.3 - Indemnification Agreement between the Company and Patrick N.
Morgan.
10.4 - Indemnification Agreement between the Company and Anthony A.
Mierzwa.
10.5 - Indemnification Agreement between the Company and Leslie L.
Lemak, M.D.
10.6 - Indemnification Agreement between the Company and Vernon L.
Medlin, M.D.
10.7 - Agri Bio-Sciences, Inc. Stock Incentive Plan.
10.8 - Lease Agreement covering office space.**
10.9 - Marketing Agreement with Global Farm Sciences, Inc.**
10.10 - Product License covering the Republic of Mexico.**
10.11 - Product License covering Columbia.**
10.12 - Product License covering Egypt.**
10.13 - Product License covering Spain.**
23.1 - Consent of Sonfield & Sonfield (included as part of Exhibit
5.1).
23.2 - Consent of Malone & Bailey, PLLC
_________________________
** To be filed by amendment.
(B) AUDITED FINANCIAL STATEMENTS AS OF AND FOR THE PERIOD ENDED
DECEMBER 31, 1997:
Independent auditors' report.
Balance Sheets
Statement of Expenses
Statements of Stockholders' Equity
Statements of Cash Flow
Notes to Financial Statements
UNDERTAKINGS
The undersigned registrant will:
(d) Provide to the Transfer Agent upon the effective date of the
Distribution Agreement certificates in such denominations and registered in
such names as required by the Transfer Agent to permit prompt delivery to each
GS Financial shareholder.
(e) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions described
under Item 24 above, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
(f) The undersigned registrant will:
(1) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act as part of this registration statement as of the time
the Commission declared it effective.
(2) For determining any liability under the Securities Act,
treat each post-effective amendment that contains a form of prospectus as a
new registration statement for the securities offered in the registration
statement, and that offering of the securities at that time as the initial
bona fide offering of those securities.
<PAGE>
SIGNATURES
IN ACCORDANCE WITH THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE
REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS
ALL OF THE REQUIREMENTS FOR FILING ON FORM SB-2 AND AUTHORIZED THIS
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF SPRING, STATE OF TEXAS, ON THE
RESPECTIVE DATES SET OPPOSITE THE SIGNATURES HEREINBELOW.
AGRI BIO-SCIENCES, INC.
By: /s/Lester H. Stephens
-------------------------
Lester H. Stephens
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
Signature Title Date
--------- ----- ----
/s/Leslie L. Lemak, M.D. Chairman of the Board of
- ---------------------------
Leslie L. Lemak, M.D. Directors April ___, 1998
/s/Lester H. Stephens Director, President & Chief
- -----------------------
Lester H. Stephens Executive Officer April ___, 1998
/s/Vernon L. Medlin, M.D. Director
- ----------------------------
Vernon L. Medlin, M.D. April ___, 1998
/s/M.M. Kalish Director
- ---------------
M. M. Kalish April ___, 1998
/s/Patrick N. Morgan Director and Secretary April ___, 1998
- ---------------------
Patrick N. Morgan
/s/Anthony A. Mierzwa Director, Treasurer Chief Financial Officer
- -----------------------
Anthony A. Mierzwa and Chief Accounting Officer April ___,
1998
EXHIBITS:
3.1 - Certificate of Incorporation.
3.2 - By-Laws.
4.1 - Form of Common Stock certificate.
5.1 - Opinion of Sonfield & Sonfield with respect to legality of the
securities.
8.1 - Opinion of Sonfield & Sonfield with respect to tax matters
(included as part of Exhibit 5.1).
10.1 - Indemnification Agreement between the Company and Lester H.
Stephens.
10.2 - Indemnification Agreement between the Company and M.M.
Kalish.
10.3 - Indemnification Agreement between the Company and Patrick N.
Morgan.
10.4 - Indemnification Agreement between the Company and Anthony A.
Mierzwa.
10.5 - Indemnification Agreement between the Company and Leslie L.
Lemak, M.D.
10.6 - Indemnification Agreement between the Company and Vernon L.
Medlin, M.D.
10.7 - Agri Bio-Sciences, Inc. Stock Incentive Plan.
10.8 - Lease Agreement covering office space.**
10.9 - Marketing Agreement with Global Farm Sciences, Inc.**
10.10 - Product License covering the Republic of Mexico.**
10.11 - Product License covering Columbia.**
10.12 - Product License covering Egypt.**
10.13 - Product License covering Spain.**
23.1 - Consent of Sonfield & Sonfield (included as part of Exhibit
5.1).
23.2 - Consent of Malone & Bailey, PLLC
_________________________
** To be filed by amendment.
2.1 - Page 1
Page ii
EXHIBIT 2.1
CONSULTING AND DISTRIBUTION AGREEMENT
BY AND BETWEEN
AGRI BIO-SCIENCES, INC.
AND
GS FINANCIAL SERVICES, INC.
DATED AS OF
MARCH 12, 1998
Page i
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
Section 1.1 General 1
Agreement 1
Affiliate 1
Agent 1
Commission 1
Distribution Date 1
Distribution Record Date 1
Distribution Shares 2
Documents 2
Exchange Act 2
Effective Date 2
Effective Time 2
NASD 2
Person 2
Prospectus 2
Registration Expenses 2
Registration Statement 2
Restricted Securities 2
Commission 2
Securities 2
Securities Act 2
Shelf Registration 2
Term 2
Transfer Agent 2
Section 1.2 References; Interpretation 2
ARTICLE II
APPOINTMENT AND SERVICES OF CONSULTANT
Section 2.1 Appointment of Consultant 3
Section 2.2 Limitations on Services 4
Section 2.3 Payments to Consultant 4
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 3.1 Representations and Warranties of the Company 5
Section 3.2 Consultant's Representations and Warranties 7
Section 3.3 Covenants of Consultant 7
Section 3.4 Covenants of the Company 8
ARTICLE IV
THE DISTRIBUTION
Section 4.1 Issuance, Sale and Delivery of the Shares 9
Section 4.2 Conditions to the tc Distribution 10
ARTICLE V
REGISTRATION OF AGRI BIO SHARES
Section 5.1 Registration Procedures 13
Section 5.2 Registration Expenses 14
ARTICLE VI
INDEMNIFICATION
Section 6.1 Indemnification by Company 15
Section 6.2 Indemnification by Consultant 15
Section 6.3 Conduct of Indemnification Proceedings 17
Section 6.4 Contribution 17
ARTICLE VII
DISPUTE RESOLUTION
Section 7.1 Consulting and Distribution Agreement Disputes 18
Section 7.2 Arbitration in Accordance with American Arbitration Association
Rules 18
Section 7.3 Final and Binding Awards 18
Section 7.4 Costs of Arbitration 18
Section 7.5 Settlement by Mutual Agreement 18
SECTION VIII
MISCELLANEOUS
Section 8.1 No Inconsistent Agreements 18
Section 8.2 Survival of Obligations 18
Section 8.3 Severability 19
Section 8.4 Entire Agreement, Amendment 19
Section 8.5 Notices 19
Section 8.6 Assignability 19
Section 8.7 Governing Law 19
Section 8.8 Waiver and Further Agreement 20
Section 8.9 Headings of No Effect 20
Exhibit 2.1 - Page
CONSULTING AND DISTRIBUTION AGREEMENT
AGREEMENT, dated as of March 12, 1998 between Agri Bio-Sciences, Inc., a
Delaware corporation (the "Company"), and GS Financial Services, Inc., a
Delaware corporation (the "Consultant").
W I T N E S S E T H:
-------------------
WHEREAS, the Company has agreed to engage the Consultant to provide the
company with strategic advice related to the company's overall business
strategy, including sources of financing and access to the public capital
markets;
WHEREAS, the Company has agreed to compensate the Consultant for its
services by issuing common stock of the Company to consultant;
WHEREAS, Consultant has agreed to provide such services upon the terms
and for the consideration described herein;
WHEREAS, Consultant has agreed to distribute the Company's Common Stock
to the Consultant's shareholder's; and
WHEREAS, the company and the Consultant now desire to memorialize their
respective agreements in a formal written agreement.
NOW THEREFORE in consideration of the mutual promises and benefits to be
derived from this Agreement, the Company and the Consultant hereby agree as
follows:
ARTICLE I ARTICLE I
DEFINITIONS DEFINITIONS
SECTION 1.1 GENERAL. Section 1.1 General As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
Agreement: AgreementThis Consulting and Distribution Agreement as
amended or supplemented from time to time.
Affiliate: AffiliateAffiliate of any Person shall mean any Person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such person. For purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the
foregoing.
Agent: AgentAny Person authorized to act and who acts on behalf of any
other Person with respect to the transactions contemplated by the Documents.
Commission: CommissionThe Securities and Exchange Commission.
Distribution Date: Distribution Date The date selected by the Company to
issue the Distribution Shares, which shall occur not later than the first
business day after the Effective Date, as the date on which the Distribution
shall be effected.
Distribution Record Date: Distribution Record Date shall mean such date
as may hereafter be determined by GS Financial's Board of Directors as the
record date for determining the stockholders of GS Financial entitled to
receive the Distribution Shares.
Distribution Shares: Distribution SharesCommon voting shares of the
Company, par value $.001, issued to Consultant pursuant to the provisions of
Section 2.3(a).
Documents: DocumentsThis Agreement, the Registration Statement, together
with any exhibits, schedules or other attachments thereto.
Exchange Act: Exchange ActThe Securities Exchange Act of 1934, as
amended from time to time.
Effective Date: Effective DateThe date on which the distribution of the
Distribution Shares contemplated by this Agreement is authorized to commence
pursuant to the Securities Act.
Effective Time: Effective TimeThe time on the Effective Date when the
distribution of the Distribution Shares contemplated by this Agreement is
authorized to commence pursuant to the Securities Act.
NASD: NASDThe National Association of Securities Dealers, Inc.
Person: Personshall mean and include an individual, a partnership, a
joint venture, a corporation, a trust, an association, a company, an
unincorporated organization, a government or any department, political
subdivision or agency thereof.
Prospectus: ProspectusThe prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement with
respect to the terms of the distribution of any portion of the Distribution
Shares covered by such Registration Statement and by all other amendments and
supplements to the Prospectus, including post-effective amendments and all
documents incorporated by reference in such prospectus. If the prospectus
filed pursuant to Rule 424(b) or Rule 424(c) of the Securities Act shall
differ from the Prospectus, the term "Prospectus" shall also include the
prospectus filed pursuant to such Rule.
Registration Expenses: Registration ExpensesSee Section 5.2 hereof.
Registration Statement: Registration StatementAny registration statement
of the Company which covers any of the Distribution Shares pursuant to the
provisions of this Agreement, including the Prospectus, amendments and
supplements to such Registration Statement, including post-effective
amendments, all exhibits and all documents incorporated by reference in such
Registration Statement.
Restricted Securities: Restricted SecuritiesThe Distribution Shares upon
original issuance thereof, as provided in Section 2.3 hereof.
Rules and Regulations: CommissionThe rules and regulations of the
Commission.
Securities: SecuritiesThe Company's common stock, $.001 par value, to be
issued by the Company.
Securities Act: Securities ActThe Securities Act of 1933, as amended
from time to time.
Shelf Registration: Shelf RegistrationSee Section 3(a) hereof.
Term: TermThe duration of this Agreement specified in Section 2.1.
Transfer Agent: Transfer Agentshall mean Continental Stock Transfer and
Trust Company, and its successors and assigns.
SECTION 1.2 REFERENCES; INTERPRETATION. Section 1.2 References;
Interpretation References to a "Schedule" or an "Exhibit" are, unless
otherwise specified, to one of the Schedules or Exhibits attached to this
Consulting and Distribution Agreement, and references to a "Section" are,
unless otherwise specified, to one of the Sections of this Consulting and
Distribution Agreement.
ARTICLE II ARTICLE II
APPOINTMENT AND SERVICES OF CONSULTANTAPPOINTMENT AND SERVICES OF CONSULTANT
SECTION 2.1 APPOINTMENT OF CONSULTANT. Section 2.1 Appointment of
Consultant Effective upon the date of this Agreement the Company retains
Consultant to render management and financial consulting services, as
described below, to the Company for a period terminating on December 31, 1998
(the "Term").
(a) During the Term Consultant shall render to the company management
consulting advice in the areas of strategic planning, business strategy,
merger and acquisition planning, administration and such other related
management services as shall reasonably be requested by the Board of Directors
of the company in connection with the operation of the business of the
Company. Notwithstanding the foregoing, Consultant shall not be required to
devote a specified amount of time to the performance of services hereunder.
(b) Consultant shall act generally as the Company's shareholders and
financial public relations advisor, essentially acting (i) as advisor to the
Company with respect to market makers, broker-dealers, and shareholders; as
well as (ii) at the request of the Company act as liaison between the Company
and such persons and or organizations or firms; and (iii) as advisor to the
Company with respect to communications and information, which may include, but
not necessarily be limited to the writing of a corporate profile and review of
any research reports.
(c) Consultant shall assist in establishing and advising the Company
with respect to interviews of the Company officers by the financial media,
interviews of the Company officers by analysts, broker-dealers and other
members of the financial community.
(d) Consultant shall seek to make the Company, its management, its
products, and its financial performance and prospects, known to financial
media, financial publications, broker-dealers, institutional investors, market
makers, analysts, investment advisors and other members of the financial
community and the public generally.
(e) Consultant will develop and implement a marketing program which
includes, but is not necessarily limited to, the following: (i) review and
analysis of all aspects of the Company's strategic goals and recommend
feasibility and achievability of expressed goals, (ii) provide access to firms
and brokers interested in participating in the Company's growth strategy and
conduct the necessary due diligence and obtain the required approvals
necessary for those firms to participate. Consultant will interview and make
recommendations on any firms or brokers referred by the Company with regard to
their participation, (iii) Consultant shall be available to respond to calls
from brokers inquiring about the Company.
(f) Consultant, in providing the foregoing services, shall be
responsible for all costs for providing the services, including but not
limited to, out-of-pocket expenses for postage, local and overnight delivery
services, telephone and other communication charges, when originated from
Consultant's offices.
(g) Consultant's compensation under this Consulting Agreement shall be
deemed to include the above unless expressly provided herein.
(h) Consultant shall not be required to be based in any particular place
to perform its duties hereunder.
(i) Consultant has the right to place advertisements in financial and
other newspapers and journals at its own expense describing its services to
the Company. Such expense shall not be reimbursable.
(j) Consultant shall use its reasonable best efforts to introduce the
Company to one or more members of the NASD who will secure the necessary
regulatory approvals and agree to make a market in the Distribution Shares
commencing on the Distribution Date. Consultant will undertake to secure the
agreement by such market makers a sufficient time in advance of the Effective
Date to allow the Company to include an appropriate statement to such effect
in the Prospectus.
(k) Subject to the other provisions of this Agreement, Consultant will
distribute not less than 80% of the Distribution Shares to the shareholders of
Consultant.
SECTION 2.2 LIMITATIONS ON SERVICES Section 2.2 Limitations on Services
Consultant understands that it is necessary to comply with certain
responsibilities and obligations imposed by the Securities Act, the Exchange
Act other federal and state securities laws, rules and regulations of national
and regional stock exchanges, including the New York Stock Exchange, the NASD,
internal compliance departments of broker-dealers and others. In order to
assure compliance with all such rules, regulations and requirements,
Consultant agrees to the following:
(a) Consultant shall not release any financial or other information or
data about the Company without the consent and approval of the Company.
(b) Consultant shall not conduct any meetings with financial analysts
without informing the Company, in advance, of any proposed meeting and the
agenda or format of such meeting. The Company may elect to have a
representative of the Company attend such meeting.
(c) Consultant shall not release any information or data about the
Company to any selected person(s), entity, or group if Consultant is aware
that such information or data has not been generally released or promulgated
and the Company requests that said information or data is not to be so
released or promulgated.
(d) After filing of a Registration Statement by the Company, Consultant
shall not engage in any public relations efforts without approval of the
Company or its counsel.
SECTION 2.3 PAYMENTS TO CONSULTANT. Section 2.3 Payments to Consultant
The Company shall pay to Consultant the following:
(a) The Distribution Shares shall be that number of shares which,
immediately after issuance, equals five percent (5%) of the total number of
outstanding common voting shares, par value $.001, of the Company.
(b) Consultant has such knowledge and experience in financial and
business matters that Consultant is capable of evaluating the merits and risks
of an investment in the Company. Consultant is familiar with the nature and
extent of the risks inherent in investments in unregistered securities and in
the business in which the Company engages and has determined that an
investment in the Company is consistent with its investment objectives and
income prospects. Consultant represents and warrants that it is an
"accredited investor" as defined in Rule 501(a) of Regulation D promulgated
under the Securities Act. Consultant is acquiring the Distribution Shares
solely for its own account for investment purposes only and not with a view
toward resale or distribution of such shares, either in whole or in part
except pursuant to an effective Registration Statement.
(c) Consultant understands that (i) the Distribution Shares issued to
Consultant have not been registered under the Securities Act, or any
applicable state securities laws and therefore, are Restricted Securities as
defined in Rule 144 of the Securities Act; (ii) Consultant cannot distribute
to its shareholders, sell or otherwise transfer such shares unless they are
registered under the Securities Act and any applicable state securities laws
or unless exemptions from such registration requirements are available, (iii)
until such shares are registered under the Securities Act, a legend will be
placed on any certificate or certificates evidencing the Distribution Shares,
stating that such securities have not been registered under the Securities Act
and setting forth or referring to the restrictions on transferability and
sales of such securities and (iv) the Company will place stop transfer
instructions against such securities and the certificates for such securities
to restrict the transfer thereof. Consultant agrees not to resell the Shares
without compliance with the Securities Act and any applicable state securities
laws.
(d) Consultant understands and agrees that (i) Consultant will not be
treated as an employee of the Company for federal tax purposes; (ii) Company
will not withhold on behalf of Consultant pursuant to this Agreement any sums
for income tax, unemployment insurance, social security, or any other
withholding pursuant to any law or requirement of any governmental body
relating to Consultant; (iii) all of such payments, withholdings, and
benefits, if any, are the sole responsibility of Consultant; and (iv)
Consultant will indemnify and hold Company harmless from any and all loss or
liability arising with respect to such payments, withholdings, and benefits,
if any. In the event the Internal Revenue Service or any other governmental
agency should question or challenge the independent contractor status of
Consultant, the parties agree that Consultant and Company shall have the right
to participate in any discussion or negotiation occurring with such agency or
agencies, irrespective of who initiates the discussion or negotiations.
SECTION 2.4 BACKGROUND OF CONSULTANT. Section 2.4 Background of
Consultant Consultant hereby represents to the Company and the Company
acknowledges receipt of notice that:
On April 20, 1990, the NASD censured Graystone Nash, Incorporated and its
President, Thomas V. Ackerly. The Association fined Graystone Nash,
Incorporated and Thomas V. Ackerly $1,325,000 jointly and severely, and
expelled Graystone Nash, Incorporated from membership in the Association and
barred Thomas V. Ackerly from association with a member of the Association.
Additionally, the Commission brought an action against Graystone Nash,
Incorporated and Thomas V. Ackerly, its President, and on April 21, 1993, a
judgment was entered against the Company and Thomas V. Ackerly in the amount
of $60,565,581.00 plus interest beginning January 1, 1989. The action was
appealed and on June 1, 1994, the judgment was reversed. Graystone Nash,
Incorporated was not represented by counsel in the new review ordered and the
judgment still stands against it. Thomas V. Ackerly, acting as his own
counsel, presented to the court additional information for review. Upon
review by the Court, on July 10, 1995, the judgment and pre-judgment interest
was waived as to Thomas V. Ackerly. As a result of the above actions, the
subsidiary Graystone Nash, Incorporated was forced to close and cease
operations.
ARTICLE III ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS REPRESENTATIONS, WARRANTIES AND
COVENANTS
SECTION 3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Section 3.1
Representations and Warranties of the Company The Company hereby represents
and warrants to and covenants and agrees with the Consultant as follows:
(a) The execution and delivery performance of this Agreement by the
Company has been duly and validly authorized and constitutes valid and binding
obligations of the Company, legally enforceable in accordance with their
terms.
(b) The execution and delivery of this Agreement, the consummation of the
transactions herein contemplated, and Compliance with the terms of this
Agreements will not conflict with, or constitute a default under any material
indenture, mortgage, deed of trust, or other agreement or instrument to which
the Company is now a party or the Certificate of Incorporation and any
amendments thereto, or by-laws of the Company, or any law, order, rule or
regulation, writ, injunction or decree of any government, governmental
instrumentality, or court, domestic or foreign, having jurisdiction over the
Company or its business or properties.
(c) On the Effective Date, the Registration Statement and the Prospectus,
and on the Distribution Date the Prospectus (as amended or as supplemented if
the Company shall have filed with the Commission an amendment thereof or
supplement thereto), will comply with the provisions of the Securities Act,
and the Rules and Regulations, and will contain all statements which are
required to be stated therein in accordance with the Securities Act and the
Rules and Regulations and will not contain an untrue statement of a material
fact and will not omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, provided, however,
that none of the representations and warranties contained in this subsection
(b) shall extend to the Consultant in respect of any statements in or
omissions from the Registration Statement and/or the Prospectus, based upon
information furnished in writing to the Company by or on behalf of by
Consultant specifically for use in connection with the preparation thereof.
(d) The Company has been duly incorporated and is now and at each
Distribution Date will be validly existing as a corporation in good standing
under the laws of the State of its incorporation and location, having power
and authority (corporate and other) to own its properties and conduct its
business as described in the Prospectus. The Company is now and at each
Distribution Date will be duly qualified to do business as a foreign
corporation in good standing in all of the jurisdictions in which it owns or
leases property or in which the conduct of its business requires such
qualification. The Company has no subsidiaries, except as are set forth in
the Prospectus.
(e) The financial statements of the Company included in the Registration
Statement and Prospectus fairly present the financial position, results of
operations and other information purported to be shown therein, of the Company
at the respective dates and for the respective periods to which they apply;
and such financial statements have been prepared in conformity with generally
accepted accounting principles, consistently applied throughout the periods
involved, and are in accordance with the books and records of the Company.
(f) The accountants who have certified the financial statements which were
included as a part of the Registration Statement and the Prospectus, and who,
as experts, have certified or reviewed other information of a financial or
accounting nature which are contained in the Registration Statement and the
Prospectus, are independent public accountants as required under the
Securities Act and the Rules and Regulations.
(g) Subsequent to the respective dates as of which information is given in
the Prospectus and prior to each Distribution Date, and except as contemplated
in the Prospectus (i) the Company has not incurred, nor will it incur, any
material liabilities or obligations, direct or contingent, nor has it, nor
will it have entered into any material transactions not in the ordinary course
of business and (ii) there has not been, and will not have been, any material
adverse change in the condition (financial or otherwise) of the Company
whether or not arising from transactions in the ordinary course of business.
(h) The real and personal properties of the Company as shown in the
Prospectus, are owned by the Company by good marketable title in fee simple,
free and clear of all liens, encumbrances an equities of record, or otherwise,
except those specifically referred to in the Prospectus, and except those
which do not materially adversely affect the use or value of such assets and
except the lien of current taxes not now due, or are held by the Company by
valid leases, none of which is in default. The Company in all material
respects has full right to maintain and operate its business and properties
as the same are now operated or proposed to be operated and is complying with
all laws, ordinances and regulations applicable thereto.
(i) The Company has no material contingent obligations, nor are its
properties or business subject to any material risks, which may be reasonably
anticipated, which are not disclosed in the Prospectus.
(j) There are no actions, suits or proceedings at law or in equity pending
or to the Company's knowledge threatened against the Company and there are no
proceedings pending, or to the knowledge of the Company threatened, against
the Company before or by any Federal or State Commission, regulatory body, or
administrative agency or other governmental body, wherein an unfavorable
ruling, decision or finding would materially adversely affect the business,
franchise, licenses, permits, operations or financial condition or income of
the Company, which are not disclosed in the Prospectus.
(k) The outstanding Common Stock of the Company has been duly and validly
issued and is fully-paid and non-assessable; the outstanding Common Stock of
the Company and the Distribution Shares will conform to all statements with
regard thereto contained in the Prospectus. The Distribution Shares have been
duly and validly authorized by proper corporate authority; are duly and
validly issued, fully-paid and non-assessable, and are not subject to any
pre-emptive right of any stockholder of the Company.
(l) The certificate or certificates required to be furnished to the
Consultant pursuant to the provisions of Section 4.2 (h) hereof will be true
and correct.
(m) No officer or director of the Company has taken, and each officer and
director has agreed that he will not take, directly or indirectly, any action
designed to stabilize or manipulate the price of the Distribution Shares, in
the open market following the Distribution Date or any other type of action
designed to, or that may reasonably be expected to cause or result in such
stabilization or manipulation, or that may reasonably be expected to
facilitate the initial distribution, or resale, of the Distribution Shares.
(n) The Company, its officers, directors and shareholders understand that
Consultant has not and does not represent that any part of the Distribution
Shares will (i) be authorized for quotation on the NASD Automated Quotation
System (NASDAQ) or the Electronic Bulletin Board or, (ii) any NASD member firm
will agree to make a market in the Distribution Shares.
(o) All of the aforesaid representations, agreements, and warranties shall
survive delivery of all or any part of the Distribution Shares.
SECTION 3.2 CONSULTANT'S REPRESENTATIONS AND WARRANTIES. Section 3.2
Consultant's Representations and Warranties The Consultant represents and
warrants to and agrees with the Company that:
(a) The execution and delivery performance of this Agreement by the
Consultant has been duly and validly authorized and constitutes valid and
binding obligations of the Consultant, legally enforceable in accordance with
their terms.
(b) The execution and delivery of this Agreement, the consummation of the
transactions herein contemplated, and Compliance with the terms of this
Agreements will not conflict with, or constitute a default under any material
indenture, mortgage, deed of trust, or other agreement or instrument to which
the Consultant is now a party or the Certificate of Incorporation and any
amendments thereto, or by-laws of the Consultant, or any law, order, rule or
regulation, writ, injunction or decree of any government, governmental
instrumentality, or court, domestic or foreign, having jurisdiction over the
Consultant or its business or properties.
(c) Consultant represents and warrants that all payments and other
valuable considerations paid or to be paid under this agreement constitute
compensation for services rendered; that this agreement and all payments and
other valuable considerations and the use of those payments and valuable
considerations are non-political in nature; and that said payments and
valuable considerations shall not be used to influence, sway or bribe any
government or municipal party, either domestic or foreign, in any way.
(d) During the term of this agreement, Consultant shall not engage in any
activities that directly conflict with the interest of the Company. The
Company hereby acknowledges notification by Consultant and understands that
Consultant does, and shall, represent and service other and multiple clients
in the same manner as it does the Company, and that the Company is not an
exclusive client of Consultant.
(e) During the Term the Consultant shall not anywhere in the United States
engage in business in competition with the Company (unless the Board of
Directors of the company shall have authorized such activity), either for its
own account, as an investor (except for investments of less than five percent
of the securities of a corporation subject to the reporting requirements of
Section 13 Section 15(d) of the Securities Exchange Act of 1934, as amended),
or as a partner or joint venturer, or as a partner or joint venturer, or as a
consultant, employee, agent or salesman for any other person, or as an officer
or director of a corporation or otherwise.
SECTION 3.3 COVENANTS OF CONSULTANT. Section 3.3 Covenants of
Consultant The parties hereto recognize that a major need of the Company is to
preserve its specialized knowledge, trade secrets, and confidential
information. The strength and good will of the Company is derived from the
specialized knowledge, trade secrets, and confidential information generated
from experience with the activities undertaken by the Company and its
subsidiaries. The disclosure of this information and knowledge to competitors
would be beneficial to them and detrimental to the Company, as would the
disclosure of information about the marketing practices, pricing practices,
costs, profit margins, design specifications, analytical techniques, and
similar items of the Company and its subsidiaries. By reason of his being a
Consultant to the Company, Consultant has or will have access to, and will
obtain, specialized knowledge, trade secrets and confidential information
about the Company's operations and the operations of its subsidiaries, which
operations extend through the United States. Therefore, Consultant hereby
agrees as follows, recognizing that the Company is relying on these agreements
in entering into this Agreement:
(a) During and after the Term Consultant will not use, disclose to
others, or publish any inventions or any confidential business information
about the affairs of the Company, including but not limited to confidential
information concerning the Company's products, methods, engineering designs
and standards, analytical techniques, technical information, customer
information, employee information, and other confidential information acquired
by him in the course of his past or future services for the Company.
Consultant agrees to hold as the Company's property all memoranda, books,
papers, letters, formulas and other data, and all copies thereof and
therefrom, in any way relating to the Company's business and affairs, whether
made by him or otherwise coming into his possession, and on termination of his
employment, or on demand of the Company, at any time, to deliver the same to
the Company within twenty four hours of such termination or demand.
(b) During the Term Consultant will not induce any employee of the
Company to leave the Company's employ or hire any such employee (unless the
Board of Directors of the Company shall have authorized such employment and
the Company shall have consented thereto in writing).
SECTION 3.4 COVENANTS OF THE COMPANY. Section 3.4 Covenants of the
Company The Company covenants and agrees with the Consultant that:
(a) After the date hereof, the Company will not at any time, whether
before or after the Effective Date, file any amendment to the Registration
Statement or the Prospectus of which the Consultant shall not previously have
been advised and furnished with a copy, or which the Consultant or the
Consultant's counsel, shall have reasonably objected to in writing on the
ground that it is not in compliance with the Securities Act or the Rules and
Regulations.
(b) The Company will use its best efforts to cause the Registration
Statement to become effective as promptly as reasonably practicable and will
advise the Consultant, and will confirm such advice in writing, (i) when the
Registration Statement shall have become effective and when any amendment
thereto shall have become effective, and when any amendment of or supplement
to the Prospectus shall be filed with the Commission, (ii) when the Commission
shall make request or suggestion for any amendment to the Registration
Statement or the Prospectus or for additional information and the nature and
substance thereof, and (iii) of the issuance by the Commission of an order
suspending the effectiveness of the Registration Statement or of the
initiation of any proceedings for that purpose, and will use every reasonable
effort to prevent the issuance of such an order, or if such an order shall be
issued, to obtain the withdrawal thereof at the earliest possible moment.
(c) The Company will prepare and file with the Commission, promptly upon
request of the Consultant, such amendments, or supplements to the Registration
Statement or Prospectus, in form satisfactory to counsel to the Company, as in
the reasonable opinion of counsel to the Consultant may be necessary or
advisable in connection with the offering or distribution of the Distribution
Shares; and will use its best efforts to cause the same to become effective as
promptly as possible.
(d) The Company will, when and as requested by the Consultant, supply
all necessary documents, exhibits and information, and execute all such
applications, instruments and papers as may be required or desirable in the
opinion of the Consultant's counsel to qualify the Distribution Shares or such
part thereof as the Consultant may determine, for distribution under the
so-called Blue Sky Laws of such states as the Consultant shall designate, and
to continue such qualification in effect so long as required for the purposes
of the distribution of the Distribution Shares, provided, however, that the
Company shall not be required to qualify as a foreign corporation or to file a
consent to service of process in any state in any action other than one
arising out of the offering or distribution of the Distribution Shares. The
Company shall pay the filing fees and all other expenses in connection with
any such qualification. Company's counsel shall prepare and file the
necessary Blue Sky filings and the Company shall pay its fees and
disbursements relating thereto as discussed herein.
(e) The Company at its own expense will give and continue to give such
financial statements and other information to and as may be required by the
Commission, or the proper public bodies of the State in which the Distribution
Shares may be qualified.
(f) Neither the Company nor any of its affiliates will take any action
which will impair the effectiveness of the Registration Statement contemplated
by this Agreement.
(g) The Company will pay all fees, taxes and expenses incident to the
performance of its obligations under this Agreement, including expenses and
original issue and transfer taxes incident to the original issue and
distribution of the Distribution Shares, fees and expenses of counsel and
accountants for the Company and expenses incident to the preparation, printing
and filing under the Securities Act of the Registration Statement and
Prospectus (including all exhibits thereto) and all amendment thereto, the
cost of printing the Preliminary Prospectuses and the Prospectus, whether or
not the Distribution and other transactions contemplated in this Agreement are
consummated. In addition, the Company will pay all expenses relative to the
qualification of the Distribution Shares under the Blue Sky Laws of the States
designated by Consultant, together with appropriate state filing fees,
including fees of special counsel, if listing on a national stock exchange is
agreed upon by the Company and the Consultant or a merit review state which
may require local counsel.
(h) The Company will, as promptly as possible after each annual fiscal
period, render and distribute reports to its stockholders, which will include
a statement of its operations during such period and its balance sheets as of
the end of such period.
(i) The Company will make generally available to its security holders,
as soon as practicable, but in no event later than 15 months after the
Effective Date, an earnings statement of the Company (which need not be
audited) in reasonable detail, covering a period of at least twelve months
beginning after the Effective Date, which earnings statement shall satisfy the
provisions of Section 11 (a) of the Securities Act.
(j) Within 10 days following the Distribution Date, the Company will
apply for listing on Moody's Over-The-Counter Industrial Manual and Standard &
Poor's Corporate Description Manual.
ARTICLE IV ARTICLE IV
THE DISTRIBUTION THE DISTRIBUTION
SECTION 4.1 ISSUANCE, SALE AND DELIVERY OF THE SHARES. Section 4.1
Issuance, Sale and Delivery of the Shares
(a) Consultant shall deliver to the Transfer Agent on or prior to the
Distribution Date the share certificates representing the Distribution Shares
and shall instruct the Transfer Agent to distribute, on or as soon as
practicable following the Distribution Date, such Distribution Shares to
holders of record of shares of Consultant on the Distribution Record Date as
further contemplated by the Prospectus and this Agreement. The Company shall
provide all share certificates that the Transfer Agent shall require in order
to effect the Distribution.
(b) The Parties hereto represent that at the Distribution Date, the
representations and warranties herein contained and the statements contained
in all certificates theretofor or simultaneously delivered by any party to
another pursuant to the Agreement, shall in all respects be true and correct.
(c) The Company will give irrevocable instructions to its Transfer Agent
to deliver to the Consultant (at the company's expense) for a period of three
years from the first Distribution Date of the Distribution Shares, daily
advice sheets showing any transfers of Distribution Shares and from time to
time during the aforesaid period a complete Stockholders' list will be
furnished by the Company when requested by the Consultant.
SECTION 4.2 CONDITIONS TO THE DISTRIBUTION Section 4.2 Conditions to
the tc Distribution The Consultant's obligation to effect the distribution
hereunder, shall be subject to the accuracy as of the date hereof and as of
such Distribution Date, of the representations and warranties on the part of
the Company herein contained, to the performance by the company of all its
agreements herein contained, to the fulfillment of or compliance by the
Company with all covenants and conditions hereof, and to the following
additional conditions:
(a) On or prior to each Distribution Date, no order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceeding for that purpose shall have been initiated or threatened by the
Commission or be pending; any request for additional information on the part
of the Commission (to be included in the Registration Statement or the
Prospectus or otherwise) shall have been complied with to the satisfaction of
the Commission; and neither the Registration Statement nor any amendment
thereto shall have been filed to which counsel to the Consultant shall have
reasonably objected, in writing.
(b) On or prior to the first Distribution Date, the Distribution Shares
shall have (i) been authorized for quotation on the NASD Automated Quotation
System (NASDAQ) or the Electronic Bulletin Board and at least one NASD member
firm has agreed to make a market in the Distribution Shares, or (ii) the
Distribution Shares have been approved for listing on a regional, national or
international exchange.
(c) The Consultant shall not have disclosed in writing to the Company
that the Registration Statement or Prospectus or any amendment or supplement
thereto contains an untrue statement of a fact which, in the opinion of
counsel to the Consultant, is material, or omits to state a fact which, in the
opinion of such counsel, is material and is required to be stated therein, or
is necessary to make the statements therein not misleading.
(d) Between the date hereof and each Distribution Date, the Company
shall not have sustained any loss on account of fire, explosion, flood,
accident, calamity or other cause, of such character as materially adversely
affects its business or property, whether or not such loss is covered by
insurance.
(e) Between the date hereof and each Distribution Date there shall be no
material litigation instituted or to the knowledge of the Company threatened
against the Company and there shall be no proceeding instituted or to the
knowledge of the Company threatened against the Company before or by any
federal or state commission, regulatory body or administrative agency or other
governmental body, domestic or foreign, wherein an unfavorable ruling,
decision or finding would materially adversely affect the business,
franchises, licenses, permits, operations or financial condition or income of
the Company.
(f) Except as contemplated herein or as set forth in the Registration
Statement and Prospectus, during the period subsequent to the Effective Date
and prior to each Distribution Date, (i) the Company (A) shall have conducted
its business in the usual and ordinary manner as the same was being conducted
on the date of the filing of the initial Registration Statement and (B) except
in the ordinary course of its business, the Company shall not have incurred
any liabilities or obligations (direct or contingent), or disposed of any of
its assets, or entered into any material transaction or suffered or
experienced any substantially adverse change in its condition, financial or
otherwise. On each Distribution Date, the capital stock and surplus accounts
of the Company shall be substantially as great as at its last financial report
without considering the proceeds from the distribution of the Distribution
Shares.
(g) The authorization of the Distribution Shares, the Registration
Statement, the Prospectus and all corporate proceedings and other legal
matters incident thereto and to this Agreement, shall be reasonably
satisfactory in all material respects to counsel to the Consultant.
(h) The Company shall have furnished to the Consultant the opinion,
dated the first Distribution Date, addressed to the Consultant, or its counsel
that:
(i) The Company has been duly incorporated and is a validly existing
corporation in good standing under the laws of the State of its incorporation
with full corporate power and authority to own and operate its properties and
to carry on its business as set forth in the Registration Statement and
Prospectus, and has an authorized and outstanding capitalization as set forth
in the Registration Statement and Prospectus, and the Company is duly licensed
or qualified as a foreign corporation in all jurisdictions in which by reason
of maintaining an office in such jurisdiction or by owning or leasing real
property in such jurisdiction it is required to be so licensed or qualified,
except where the failure to do so would not have a material adverse effect on
the business, properties or operations of the Company.
(ii) The Distribution Shares, and the outstanding Common Stock of the
Company, conform to the statements concerning them in the Registration
Statement and Prospectus; the outstanding Common Stock of the Company has been
duly and validly issued and is fully-paid and non-assessable and does not have
any pre-emptive rights applicable thereto; the Distribution Shares have been
duly and validly authorized are duly and validly issued, fully-paid and
non-assessable and have no pre-emptive right applicable thereto.
(iii) No consents, approvals, authorizations or orders of agencies,
officers or other regulatory authorities are necessary for the valid
distribution of the Distribution Shares hereunder, except such as may be
required under the Securities Act or state securities or Blue Sky Laws.
(iv) The Registration Statement has become effective under the Securities
Act and, to the best of the knowledge of such counsel, no order suspending the
effectiveness of the Registration Statement has been issued and no proceedings
for that purpose have been instituted or are pending or contemplated under the
Securities Act, and the Registration Statement and Prospectus, and each
amendment thereof and supplement thereto, comply as to form in all material
respects with the requirements of the Securities Act and the Rules and
Regulations (except that no opinion need be expressed as to financial
statements and financial data contained in the Registration Statement or
Prospectus), and nothing has come to the attention of such counsel which would
lead such counsel to believe that either the Registration Statement or the
Prospectus or any such amendment or supplement contains any 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, and such
counsel is familiar with all contracts referred to in the Registration
Statement or in the Prospectus and such contracts are sufficiently summarized
or disclosed therein, or filed as exhibits thereto, as required, and such
counsel does not know of any other contracts required to be summarized or
disclosed or filed, and such counsel does not know of any legal or
governmental proceedings pending or threatened to which the Company is a
party, or in which property of the Company is the subject, of a character
required to be disclosed in the Registration Statement or the Prospectus which
are not disclosed and properly described therein.
(v) Based upon the Company's representations, the Company (a) owns the
real and personal properties shown in the Prospectus as being owned by it by
good and marketable title, free and clear of all liens, encumbrances and
equities of record, except for those expressly referred to in the Prospectus,
and except for those which do not in the reasonable opinion of such counsel
materially affect the use or value of such assets, and except for the lien of
current taxes not due, or (b) holds by valid lease, its properties as shown in
the Prospectus, and to the best of our knowledge is not in violation of any
applicable laws, ordinances and regulations applicable thereto.
(vi) The Agreement has been duly authorized and executed by the Company
and is a valid and binding agreement of the Company, except no opinion need be
given regarding contribution and indemnification under Article VI and
enforceability under laws affecting creditors' rights.
(vii) To the best of the knowledge of such counsel, the warranties and
representations referred to in sub-paragraphs (d), (j) and (k) of Section 3.1
hereof are true and correct.
Such opinion shall also cover such other matters incident to the
transactions contemplated by this Agreement as the Consultant shall reasonably
request.
At any Distribution Date, subsequent to the first Distribution Date, the
Company shall have furnished to the Consultant the opinion of such counsel,
dated such Distribution Date confirming in all respects, as of such
Distribution Date, the opinion given by such counsel on the first Distribution
Date pursuant to this Section 4.2 (h).
(i) The Company shall have furnished to the Consultant a certificate of
the President and the Treasurer of the Company, dated as of the first
Distribution Date, to the effect that:
(i) The representations and warranties of the Company in this Agreement
are true and correct at and as of such Distribution Date, and the Company has
complied with all the agreements and satisfied all the conditions on its part
to be performed or satisfied at or prior to the first Distribution Date;
(ii) The Registration Statement has become effective and no order
suspending the effectiveness of the Registration Statement has been issued,
and, to the best of the knowledge of the respective signers, no proceeding for
that purpose has been initiated or is threatened by the Commission:
(iii) The respective signers have each carefully examined the
Registration Statement and the Prospectus and any amendments and supplements
thereto, and to the best of their knowledge the Registration Statement and the
Prospectus and any amendments and supplements thereto and all statements
contained therein are true and correct, and neither the Registration Statement
nor the Prospectus nor any amendment or supplement thereto includes any untrue
statement of a material fact or omits to state any material fact required to
be stated therein or necessary to make the statements therein not misleading
and, since the Effective Date, there has occurred no event required to be set
forth in an amended or supplemented Prospectus which has not been so set
forth.
(iv) Except as set forth in the Registration Statement and Prospectus
since the respective dates as of which or periods for which information is
given in the Registration Statement and Prospectus and prior to the date of
such certificate (A) there has not been any substantially adverse change,
financial or otherwise, in the affairs or condition of the Company and (B) the
Company has not incurred any material liabilities, direct or contingent, or
entered into any material transactions, otherwise than in the ordinary course
of business.
At any Distribution Date, subsequent to the first Distribution Date, you
shall be furnished a letter from the President and Treasurer of the Company,
confirming in all respects, as of such Distribution Date, the opinion given by
such President and Treasurer on the first Distribution Date pursuant to this
Section 4.2(i).
(j) The Company shall have furnished to the Consultant at the
Distribution Date, such other certificates, additional to those specifically
mentioned herein, as the Consultant may have reasonably requested as to the
accuracy and completeness of any statement in the Registration Statement or
the Prospectus, or in any amendment or supplement thereto; of the
representations and warranties of the Company herein; as to the performance by
the Company of its obligations hereunder, or as to the fulfillment of the
conditions concurrent and precedent to its obligations hereunder, which are
required to be performed or fulfilled on or prior to the Distribution Date.
All the opinions, letters, certificates and evidence mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance satisfactory to
counsel to the Consultant, whose approval shall not be unreasonably withheld.
The Consultant reserves the right to waive any of the conditions herein set
forth.
ARTICLE V ARTICLE V
REGISTRATION OF AGRI BIO SHARES REGISTRATION OF AGRI BIO SHARES
SECTION 5.1 REGISTRATION PROCEDURES. Section 5.1 Registration
Procedures In connection with the Company's registration obligations pursuant
to Section 3.1 hereof, the company will use its best efforts to effect such
registrations to permit the distribution of the Distribution Shares in
accordance with the intended method or methods of distribution thereof, and
pursuant thereto the Company will as expeditiously as possible:
(a) Prepare and file with the Commission, as soon as practicable, a
Registration Statement or Registration Statements relating to the applicable
registration on any appropriate form under the Securities Act, which form
shall be available for the distribution of the Distribution Shares in
accordance with the intended method or methods of distribution thereof and
shall include all financial statements required by the Commission to be filed
therewith, and use its best efforts to cause such Registration Statement to
become effective; provided, however, that before filing a Registration
Statement or Prospectus or any amendments or supplements thereto, including
documents incorporated by reference after the initial filing of the
Registration Statement, the Company will furnish to the Consultant copies of
all such documents proposed to be filed, and the Company will not file any
registration Statement or amendment thereto or any Prospectus or any
supplement thereto (including such documents incorporated by reference) to
which the Consultant shall reasonably object;
(b) Prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be necessary to
keep the Registration Statement effective for the applicable period, or such
shorter period which will terminate when all Distribution Shares covered by
such Registration Statement have been distributed; cause the Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented to
be filed with the Commission pursuant to Rule 424 under the Securities Act;
(c) Notify the Consultant promptly, and (if requested by Consultant)
confirm such advice in writing, (i) when the Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with respect to
the Registration Statement or any post-effective amendment, when the same has
become effective, (ii) of any request by the Commission for amendments or
supplements to the Registration Statement or the Prospectus or for additional
information, (iii) of the issuance by the Commission of any stop order
suspending the effectiveness to the Registration Statement for the initiation
of any proceedings for that purpose, (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Distribution Shares for distribution in any jurisdiction or the initiation or
threatening of any proceeding for such purpose and (v) of the happening of any
event which makes any statement made in the Registration Statement, the
Prospectus or any document incorporated therein by reference untrue or which
requires the making of any changes in the Registration Statement, the
Prospectus or any document incorporated therein by reference in order to make
the statements therein not misleading;
(d) Make every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of the Registration Statement at the earliest
possible moment;
(e) If requested by the Consultant, promptly incorporate in a Prospectus
supplement or post-effective amendment such information as the Consultant
requests to be included therein relating to the distribution of the
Distribution Shares and make all required filings of such Prospectus
supplement or post-effective amendment;
(f) Furnish to Consultant, without charge, at least one copy of the
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules, all documents incorporated therein by
reference and all exhibits (including those incorporated by reference);
(g) Deliver to Consultant without charge, as many copies of the
Prospectus (including each preliminary prospectus) and any amendment or
supplement thereto as such Persons may reasonably request; the Company
consents to the use of the Prospectus or any amendment or supplement thereto
by Consultant in connection with the distribution of the Distribution Shares
covered by the Prospectus or any amendment or supplement thereto;
(h) Prior to any public offering of Distribution Shares, register or
qualify or cooperate with the Consultant and its counsel in connection with
the registration or qualification of such Distribution Shares covered by the
Registration Statement; provided, however, that the Company will not be
required to qualify generally to do business in any jurisdiction where it is
not then so qualified or to take any action which would subject it to general
service of process in any such jurisdiction where it is not then so subject;
(i) Cooperate with the Consultant to facilitate the timely preparation
and delivery of certificates representing Distribution Shares to be
distributed, which certificates shall not bear any restrictive legends; and
enable such Distribution Shares to be in such denominations and registered in
such names as the managing Consultant or Consultants may request at least two
business days prior to any distribution of Distribution Shares to the
shareholders of Consultant;
(j) Use its best efforts to cause the Distribution Shares covered by the
applicable Registration Statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable the
Consultant to consummate the distribution of such Distribution Shares;
(k) Upon the occurrence of any event contemplated by subparagraph (c)(v)
above, prepare a supplement or post-effective amendment to the Registration
Statement or the related Prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter delivered
to the purchasers of the Distribution Shares, the Prospectus will not contain
an untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading;
(l) Use its best efforts to cause all Distribution Shares covered by the
Registration Statement to be listed on each securities exchange on which
similar securities issued by the Company are then listed if requested by the
Consultant or, if not listed, to become listed or qualified for quotation on
the NASDAQ Stock Market or the Electronic Bulletin Board;
(m) Provide a CUSIP number for all Distribution Shares, not later than
the effective date of the applicable Registration Statement;
(n) Make generally available to its security holders earnings statements
satisfying the provisions of Section 11(a) of the Securities Act, no later
than 45 days after the end of any 12-month period (or 90 days, if such period
is a fiscal year) commencing at the end of any fiscal quarter in which
Distribution Shares.
The Company may require Consultant to furnish to the Company such
information regarding the distribution of the Distribution Shares as the
Company may from time to time reasonably request in writing.
Consultant agrees by acquisition of the Distribution Shares that, upon
receipt of any notice from the Company of the happening of any event of the
kind described in Section 5.1(c)(iii) or 5.1(k) hereof, such holder will
forthwith discontinue disposition of Distribution Shares until such holder's
receipt of the copies of the supplemented or amended Prospectus contemplated
by Section 5.1(c)(iii) or 5.1(k) hereof, or until it is advised in writing
(the "Advice") by the Company that the use of the Prospectus may be resumed,
and has received copies of any additional or supplemental filings which are
incorporated by reference in the Prospectus, and if so directed by the
Company, Consultant will deliver to the Company (at the Company's expense) all
copies, other than permanent file copies then in possession or control of
Consultant at the time of receipt of such notice.
SECTION 5.2 REGISTRATION EXPENSES. Section 5.2 Registration Expenses
All expenses incident to the Company's performance of or compliance with this
Agreement, including without limitation all registration and filing fees, fees
with respect to filings required to be made with the NASD fees and expenses of
compliance with state securities or blue sky laws (including reasonable fees
and disbursements of counsel in connection with blue sky registrations of
qualifications of the Distribution Shares and determination of their
eligibility for investment under the laws of such jurisdictions as the
Consultant may reasonably designate), printing expenses, messenger, telephone
and delivery expenses, and fees and disbursements of counsel for the Company
and of all independent certified public accountants of the company securities
acts liability insurance if the Company so desires and fees and expenses of
other Persons retained by the Company (all such expenses being herein called
"Registration Expenses") will be borne by the Company, regardless of whether
the Registration Statement becomes effective, except as otherwise required by
applicable laws. The Company will, in any event, pay its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting expenses incurred in connection with
the listing of the securities to be registered on any securities exchange or
qualified for quotation by the NASDAQ Stock Market on the Electronic Bulletin
Board and the fees and expenses of any Person, including special experts,
retained by the Company.
ARTICLE VI ARTICLE VI
INDEMNIFICATION INDEMNIFICATION
SECTION 6.1 INDEMNIFICATION BY COMPANY. Section 6.1 Indemnification by
Company The Company agrees to indemnify and hold harmless the Consultant and
each person who controls the Consultant within the meaning of Section 15 of
the Securities Act against any and all losses, claims, damages or liabilities,
joint or several, to which they or any of them may become subject under the
Securities Act or any other statute or at common law and to reimburse persons
indemnified as above for any legal or other expense (including the cost of any
investigation and preparation) incurred by them in connection with any
litigation whether or not resulting in any liability, but only insofar as such
losses, claims, liabilities and litigation arise out of or are based upon any
untrue statement in the Registration Statement or an amendment or supplement
thereto or alleged untrue statement of a material fact required to be stated
in the Registration Statement or necessary to make the statement therein not
misleading, all as of the date when the Registration Statement or such
amendment, as the case may be, becomes effective, or any untrue statement or
alleged untrue statement of a material fact contained in the Prospectus or any
supplement thereto, or any omission or alleged omission to state therein a
material fact necessary in order to make the statements therein, in the light
of the circumstances under which they are made, not misleading; provided,
However, that the indemnity agreement contained in this Section 6.1 shall not
apply to amounts paid in settlement of any such litigation if such settlement
is effected without the consent of the Company, nor shall it apply to the
Consultant or any person controlling the Consultant in respect of any such
losses, claims, damages, liabilities or actions arising out of, or based upon,
any such untrue statement or alleged untrue statement, or any such omission or
alleged omission, if such statement or omission was made in reliance upon
information or furnished in writing to the Company by or on behalf of such
Consultant specifically for use in connection with the preparation of the
Registration Statement or the Prospectus or any such amendment thereof or
supplement thereto.
The Consultant agrees within twenty days after the receipt by it of
written notice of the commencement of any action against it or against any
person controlling it as aforesaid, in respect of which indemnity may be
sought from the Company on account of the indemnity agreement contained in
this Section 6.1, to notify the Company in writing of the commencement
thereof. The omission of the Consultant so to notify the Company of any such
action shall relieve the Company from any liability which it may have to the
Consultant or any person controlling it as aforesaid on account of the
indemnity agreement contained in this Section 6.1, but shall not relieve the
Company from any other liability which it may have to the Consultant or such
controlling person. In case any such action shall be brought against the
Consultant or any such controlling person and the Consultant shall notify the
Company of the commencement thereof, the Company shall be entitled to
participate in (and, to the extent that it shall wish, to direct) the defense
thereof at its own expense but such defense shall be conducted by counsel of
recognized standing and satisfactory to the Consultant or such controlling
person or persons, defendant or defendants in the litigation. The Company
agrees to notify the Consultant promptly of the commencement of any litigation
or proceeding against it or such controlling person, or which it may be
advised, in connection with the issue and distribution of any of its
securities and to furnish to the Consultant, at its request, copies of all
pleadings therein and permit the Consultant to be an observer therein and
appraise the Consultant of all developments therein, all at the Company's
expense.
SECTION 6.2 INDEMNIFICATION BY CONSULTANT. Section 6.2 Indemnification
by Consultant The Consultant agrees, in the same manner and to the same extent
as set forth in Section 6.1 above, to indemnify and hold harmless the Company,
the directors of the Company, each officer who signs the Registration
Statement, and each person, if any, who controls the company within the
meaning of Section 15 of the Securities Act, with respect to any statement in
or omission from the Registration Statement or any amendment thereto, or the
Prospectus (as amended or as supplemented, if amended or supplemented as
aforesaid), if such statement or omission was made in reliance upon
information or furnished in writing to the Company by the Consultant, or on
its behalf, specifically for use in connection with the preparation of the
Registration Statement or the Prospectus or any such amendment thereof or
supplement thereto. The Consultant shall not be liable for amounts paid in
settlement of any such litigation if such settlement was effected without its
consent. In case of commencement of any action, in respect of which indemnity
may be sought from the Consultant on account of the indemnity agreement
contained in this Section 6.2, each person agreed to be indemnified by the
Consultant shall have the same obligation to notify the Consultant as the
Consultant has toward the Company in Section 6.1 above, subject to the same
loss of indemnity in the event such notice is not given, and the Consultant
shall have the same right to participate in (and, to the extent that it shall
wish, to direct) the defense of such action at its own expense, but such
defense shall be conducted by counsel of recognized standing and satisfactory
to the Company. The Consultant agrees to notify the Company promptly of the
commencement of any litigation or proceeding against it or against any such
controlling person, of which it may be advised, in connection with the issue
and distribution of any of the securities of the Company, and to furnish to
the Company at its request copies of all pleadings therein and permit the
Company to be an observer therein and apprise it of all developments therein,
all at the Consultant's expense.
The respective indemnity agreements between the Consultant and the
Company contained in Sections 6.1 and 6.2 above, and the representations and
warranties of the Company set forth in Section 3.1 hereof or elsewhere in this
Agreement, shall remain operative and in full force and effect, regardless of
any investigation made by or on behalf of the Consultant or is or on behalf of
any controlling person of the Consultant or the Company or any such officer or
director or any controlling person of the Company, and shall survive the
delivery of the Stock, and any successor of the Company, and the Consultant,
or of any controlling person of the Company or the Consultant, as the case may
be, shall be entitled to the benefit of the respective indemnity agreements.
In order to provide for just and equitable contribution under the
Securities Act in any case in which (i) any person entitled to indemnification
under this Article VI makes claim for indemnification pursuant hereto but it
is judicially determined (by the entry of a final judgment or decree by a
court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Article VI provides
for indemnification in such case, or (ii) contribution under the Securities
Act may be required on the part of any such person in circumstances for which
indemnification is provided under this Article VI, then, and in each such
case, the Company and the Consultant shall contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (after any
contribution from others) in such proportion so that the Consultant is
responsible for the proportion that the number of Distribution Shares covered
by the Prospectus bears to the total number of outstanding shares of Common
Stock of the Company and the Company is responsible for the remaining portion;
provided, that, in any such case, no person guilty of a fraudulent
misrepresentation (within the meaning of Section 11 (f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
Within twenty days after receipt by any party to this Agreement (or its
representative) of notice of the commencement of any action, suit or
proceeding, such party will, if a claim for contribution in respect thereof is
to be made against another party (the "contributing party"), notify the
contributing party, in writing, of the commencement thereof, but the omission
so to notify the contributing party will not relieve it from any liability
which it may have to any other party other than for contribution hereunder.
In case any such action, suit or proceeding is brought against any party, and
such party so notifies a contributing party or his or its representative of
the commencement thereof within the aforesaid twenty days, the contributions
party will be entitled to participate therein with the notifying party and any
other contributing party similarly notified. Any such contributing party
shall not be liable to any party seeking contribution on account of any
settlement of any claim, action or proceeding effected by such party seeking
contribution without the written consent of such contributing party. The
contribution provisions contained in this Article VI are in addition to any
other rights or remedies which either party hereto may have with respect to
the other or hereunder.
The Company agrees to indemnify and hold harmless, to the full extent
permitted by law, Consultant, its officers, directors and employees and each
Person who controls Consultant (within the meaning of the Securities Act)
against all losses, claims, damages, liabilities and expenses caused by any
untrue or alleged untrue statement of a material fact contained in any
Registration Statement, Prospectus or preliminary prospectus or any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as the same are caused by or contained in any information furnished in
writing to the Company by, or on behalf of, Consultant expressly for use
therein; provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage, liability or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in any such Registration Statement,
Prospectus or preliminary prospectus if (i) Consultant failed to deliver a
copy of the Prospectus to the person asserting such loss, claim, damage,
liability or expense after the Company had furnished Consultant with the
number of copies of the same requested by Consultant and (ii) the Prospectus
corrected such untrue statement or omission; provided, further however, that
the Company shall not be liable in any such case to the extent that any such
loss, claim, damage, liability or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
in the Prospectus, if such untrue statement or alleged untrue statement,
omission or alleged omission is corrected in an amendment or supplement to the
Prospectus and the Consultant thereafter fails to deliver such Prospectus as
so amended or supplemented prior to or concurrently with the distribution of
the Distribution Shares to the person asserting such loss, claim, damage,
liability or expense after the Company had furnished Consultant with the
number of copies of the same requested by Consultant.
SECTION 6.3 CONDUCT OF INDEMNIFICATION PROCEEDINGS. Section 6.3
Conduct of Indemnification Proceedings Any Person entitled to indemnification
hereunder will (i) give prompt notice to the indemnifying party of any claim
with respect to which it seeks indemnification and (ii) permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party; provided, however, that any Person
entitled to indemnification hereunder shall have the right to employ separate
counsel and to participate in the defense of such claim, but the fees and
expenses of such separate counsel shall be at the expense of such Person
unless (a) the indemnifying party has agreed to pay such fees or expenses, or
(b) the indemnifying party shall have failed to assume the defense of such
claim and employ counsel reasonably satisfactory to such Person or (c) in the
reasonable judgment of any such Person, based upon advice of its counsel, a
conflict of interest may exist between such Person and the indemnifying party
with respect to such claims or such Person may have one or more legal defenses
available to it which are different from or additional to those available to
the indemnifying party (in either of which cases, if the person notifies the
indemnifying party in writing that such Person elects to employ separate
counsel at the expense of the indemnifying party, the indemnifying party shall
not have the right to assume the defense of such claim on behalf of such
Person). If such defense is not assumed by the indemnifying party, the
indemnifying party will not be subject to any liability for any settlement
made without its consent (but such consent shall not be unreasonably
withheld). No indemnified party will be required to consent to entry of any
judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation. An indemnifying party who is not entitled to, or elects not to,
assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable
judgment of any indemnified party a conflict of interest may exist between
such indemnified party and any other of such indemnified parties with respect
to such claim, in which event the indemnifying party shall be obligated to pay
the fees and expenses of such additional counsel or counsels; provided,
however, that the indemnifying party shall only be obligated to pay the fees
and expenses of up to two additional counsels.
SECTION 6.4 CONTRIBUTION. Section 6.4 Contribution If for any reason
the indemnification provided for in the preceding Sections 6.1, 6.2 and 6.3 is
unavailable to any indemnified party or is insufficient to hold it harmless as
contemplated by the preceding Sections 6.1, 6.2 and 6.3, then the indemnifying
party shall contribute to the amount paid or payable by the indemnified party
as a result of such loss, claim, damage or liability in such proportion as is
appropriate to reflect not only the relative benefits received by the
indemnified party and the indemnifying party, but also the relative fault of
the indemnified party and the indemnifying party, as well as any other
relevant equitable considerations; provided, however, that Consultant shall be
required to contribute an amount greater than the dollar amount of the
proceeds received by Consultant from any sale of Distribution Shares. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
ARTICLE VII ARTICLE VII
DISPUTE RESOLUTION DISPUTE RESOLUTION
SECTION 7.1 CONSULTING AND DISTRIBUTION AGREEMENT DISPUTES. Section 7.1
Consulting and Distribution Agreement Disputes In the event of a controversy,
dispute or claim arising out of, in connection with, or in relation to the
interpretation, performance, nonperformance, validity or breach of this
Agreement or otherwise arising out of, or in any way related to this
Agreement, including, without limitation, any claim based on contract, tort,
statute or constitution (singly, an "Agreement Dispute" and collectively,
"Agreement Disputes"), the party asserting the Agreement Dispute shall give
written notice to the other party of the existence and nature of such
Agreement Dispute. Thereafter, the general counsels (or other designated
representatives) of the respective parties shall negotiate in good faith for a
period no less than 60 days after the date of the notice in an attempt to
settle such Agreement Dispute. If after such 60 calendar day period such
representatives are unable to settle such Agreement Dispute, any party hereto
may commence arbitration by giving written notice to all other party that such
Agreement Dispute has been referred to the American Arbitration Association
for arbitration in accordance with the provisions of this Article.
SECTION 7.2 ARBITRATION IN ACCORDANCE WITH AMERICAN ARBITRATION
ASSOCIATION RULES. Section 7.2 Arbitration in Accordance with American
Arbitration Association Rules All Agreement Disputes shall be settled by
arbitration in Houston, Texas, before a single arbitrator in accordance with
the rules of the American Arbitration Association (the "Rules"). The
arbitrator shall be selected by the mutual agreement of all parties, but if
they do not so agree within twenty (20) days after the date of the notice of
arbitration referred to above, the selection shall be made pursuant to the
Rules from the panels of arbitrators maintained by the American Arbitration
Association. The arbitrator shall be an individual with substantial
professional experience with regard to resolving or settling sophisticated
commercial disputes.
SECTION 7.3 FINAL AND BINDING AWARDS.Section 7.3 Final and Binding
Awards Any award rendered by the arbitrator shall be conclusive and binding
upon the parties hereto; provided, however, that any such award shall be
accompanied by a written opinion of the arbitrator giving the reasons for the
award. This provision for arbitration shall be specifically enforceable by the
parties and the decision of the arbitrator in accordance therewith shall be
final and binding, and there shall be no right of appeal therefrom. The
parties agree to comply with any award made in any such arbitration
proceedings that has become final in accordance with the Rules, and agree to
the entry of a judgment in any jurisdiction upon any award rendered in such
proceedings becoming final under the Rules.
SECTION 7.4 COSTS OF ARBITRATION. Section 7.4 Costs of Arbitration In
the award the arbitrator shall allocate, in his or her discretion, among the
parties to the arbitration all costs of the arbitration, including, without
limitation, the fees and expenses of the arbitrator and reasonable attorneys'
fees, costs and expert witness expenses of the parties. Absent such an
allocation by the arbitrator, each party shall pay its own expenses of
arbitration, and the expenses of the arbitrator shall be equally shared.
SECTION 7.5 SETTLEMENT BY MUTUAL AGREEMENT. Section 7.5 Settlement by
Mutual Agreement Nothing contained in this Article shall prevent the parties
from settling any Agreement Dispute by mutual agreement at any time.
SECTION VIII SECTION VIII
MISCELLANEOUS MISCELLANEOUS
SECTION 8.1 NO INCONSISTENT AGREEMENTS. Section 8.1 No Inconsistent
Agreements The Company will not on or after the date of this Agreement enter
into any agreement with respect to its securities which is inconsistent with
this Agreement or otherwise conflicts with the provisions hereof. In the
event the Company has previously entered into any agreement with respect to
its securities granting any registration rights to any Person, the rights
granted to the Consultant hereunder do not in any way conflict with and are
not inconsistent with the rights granted to the holders of the Company's
securities under any such agreements.
SECTION 8.2 SURVIVAL OF OBLIGATIONS. Section 8.2 Survival of
Obligations The obligations of the parties under Sections 6 and 7 of this
Agreement shall survive the termination for any reason of this Agreement
(whether such termination is by the Company, by the Consultant, upon the
expiration of this Agreement or otherwise).
SECTION 8.3 SEVERABILITY. Section 8.3 Severability In case any one or
more of the provisions or part of the provision contained in this Agreement
shall for any reason be held to be invalid, illegal or unenforceable in any
respect in any jurisdiction, such invalidity, illegality or unenforceability
shall be deemed not to affect any other jurisdiction or any other provision or
part of a provision of this Agreement, but this Agreement shall be reformed
and construed in such jurisdiction as if such provision or part of a provision
held to be invalid or illegal or unenforceable had never been contained herein
and such provision or part reformed so that it would be valid, legal and
enforceable in such jurisdiction to the maximum extent possible. In
furtherance and not in limitation of the foregoing, the Company and Consultant
each intend that the covenants contained in Sections 4 and 5 shall be deemed
to be a series of separate covenants, one for each county of the State of
Texas and one for each and every other state, territory or jurisdiction of the
United States and any foreign country set forth therein. If, in any judicial
proceeding, a court shall refuse to enforce any of such separate covenants,
then such enforceable covenants shall be deemed eliminated from the provisions
hereof for the purpose of such proceedings to the extent necessary to permit
the remaining separate covenants to be enforced in such proceedings. If, in
any judicial proceeding, a court shall refuse to enforce any one or more of
such separate covenants because the total time thereof is deemed to be
excessive or unreasonable, then it is the intent of the parties hereto that
such covenants, which would otherwise be unenforceable due to such excessive
or unreasonable period of time, be enforced for such lesser period of time as
shall be deemed reasonable and not excessive by such court.
SECTION 8.4 ENTIRE AGREEMENT, AMENDMENT. Section 8.4 Entire Agreement,
Amendment This Agreement contains the entire agreement between the Company and
the Consultant with respect to the subject matter thereof. Consultant
acknowledges that it neither holds any right, warrant or option to acquire
securities of the company, nor has the right to any such rights, warrants or
options, except pursuant to the is Agreement. This Agreement may not be
amended, waived, changed, modified or discharged except by an instrument in
writing executed by or on behalf of the party against whom any amendment,
waiver, change, modification or discharge is sought.
SECTION 8.5 NOTICES. Section 8.5 Notices All notices and other
communications provided for or permitted hereunder shall be made in writing
and shall be deemed to have duly given if delivered by hand-delivery,
registered first-class mail, postage prepaid, telex, telecopier, or air
courier guaranteeing overnight delivery as follows:
To the Company: To the Consultant
Agri Bio-Sciences, Inc. GS Financial Services, Inc.
7806 Oxfordshire Drive 45 Wall Street, Penthouse 3
Spring, Texas 77379 New York, New York 10005
Attn: Lester H. Stephens, President Attn: Thomas V. Ackerly, President
with an additional copy by like means to:
Sonfield & Sonfield
770 South Post Oak Lane
Houston, Texas 77056
Attn: Robert L. Sonfield, Jr., Esq.
and/or to such other persons and addresses as any party shall have
specified in writing to the other.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt acknowledged, if telecopied; and on
the next business day if timely delivered to an air courier guaranteeing
overnight delivery.
SECTION 8.6 AsSIGNABILITY. Section 8.6 Assignability This Agreement
shall be assignable by either party on the express consent of the other and
shall be binding upon, and shall inure to the benefit of, the successors and
assigns of the parties.
SECTION 8.7 GOVERNING LAW. Section 8.7 Governing Law This Agreement
shall be governed by and construed under the laws of the State of Delaware.
SECTION 8.8 WAIVER AND FURTHER AGREEMENT. Section 8.8 Waiver and
Further Agreement Any waiver of any breach of any terms or conditions of this
Agreement shall not operate as a waiver of any other breach of such terms or
conditions or any other term or condition, nor shall any failure to enforce
any provision hereof operate as a waiver of such provision or of any other
provision hereof. Each of the parties hereto agrees to execute all such
further instruments and documents and to take all such further action as the
other party may reasonably require in order to effectuate the terms and
purposes of this Agreement.
SECTION 8.9 HEADING OF NO EFFECT. Section 8.9 Headings of No Effect
The paragraph headings contained in this Agreement are for reference purposes
only and shall not in any way affect the meaning or interpretation of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
AGRI BIO-SCIENCES, INC.
By: /s/Lester H. Stephens
-----------------------
Lester H. Stephens, President
GS FINANCIAL SERVICES, INC.
By: /s/Thomas V. Ackerly
----------------------
Thomas V. Ackerly, President
3.1 - Page
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
AGRI BIO-SCIENCES, INC.
ARTICLE I
NAME
The name of the Corporation is Agri Bio-Sciences, Inc.
ARTICLE II
DURATION
The Corporation is to have perpetual existence.
ARTICLE III
REGISTERED OFFICE AND AGENT
The address of its registered office in the State of Delaware is the
Corporation Trust Center at 1209 Orange Street, in the City of Wilmington,
County of New Castle, State of Delaware. The name of its registered agent at
such address is The Corporation Trust Company.
ARTICLE IV
PURPOSES
The purpose for which the Corporation is organized is to transact all
lawful business for which corporations may be incorporated pursuant to the
laws of the State of Delaware. The Corporation shall have all the powers of a
corporation organized under the General Corporation Law of the State of
Delaware.
ARTICLE V
CAPITAL STOCK
The aggregate number of shares of all classes of capital stock which the
Corporation has authority to issue is 25,000,000 of which 20,000,000 are to be
shares of common stock, $.001 par value per share, and of which 5,000,000 are
to be shares of serial preferred stock, $.001 par value per share. The shares
may be issued by the Corporation from time to time as approved by the board of
directors of the Corporation without the approval of the stockholders except
as otherwise provided in this Article V or the rules of a national securities
exchange if applicable. The consideration for the issuance of the shares
shall be paid to or received by the Corporation in full before their issuance
and shall not be less than the par value per share. The consideration for the
issuance of the shares shall be cash, services rendered, personal property
(tangible or intangible), real property, leases of real property or any
combination of the foregoing. In the absence of actual fraud in the
transaction, the judgment of the board of directors as to the value of such
consideration shall be conclusive. Upon payment of such consideration such
shares shall be deemed to be fully paid and nonassessable. In the case of a
stock dividend, the part of the surplus of the Corporation which is
transferred to stated capital upon the issuance of shares as a stock dividend
shall be deemed to be the consideration for their issuance.
A description of the different classes and series (if any) of the
Corporation's capital stock, and a statement of the relative powers,
designations, preferences and rights of the shares of each class and series
(if any) of capital stock, and the qualifications, limitations or restrictions
thereof, are as follows:
A. Common Stock. Except as provided in this Certificate, the holders
------------
of the common stock shall exclusively posses all voting power. Subject to the
provisions of this Certificate, each holder of shares of common stock shall be
entitled to one vote for each share held by such holders.
Whenever there shall have been paid, or declared and set aside for
payment, to the holders of the outstanding shares of any class or series of
stock having preference over the common stock as to the payment of dividends,
the full amount of dividends and sinking fund or retirement fund or other
retirement payments, if any, to which such holders are respectively entitled
in preference to the common stock, then dividends may be paid on the common
stock, and on any class or series of stock entitled to participate therewith
as to dividends, out of any assets legally available for the payment of
dividends, but only when and as declared by the board of directors of the
Corporation.
In the event of any liquidation, dissolution or winding up of the
Corporation, after there shall have been paid, or declared and set aside for
payment, to the holders of the outstanding shares of any class having
preference over the common stock in any such event, the full preferential
amounts to which they are respectively entitled, the holders of the common
stock and of any class or series of stock entitled to participate therewith,
in whole or in part, as to distribution of assets shall be entitled, after
payment or provision for payment of all debts and liabilities of the
Corporation, to receive the remaining assets of the Corporation available for
distribution, in cash or in kind.
Each share of common stock shall have the same relative powers,
preferences and rights as, and shall be identical in all respects with, all
the other shares of common stock of the Corporation.
B. Serial Preferred Stock. Except as provided in this Certificate,
----------------------
the board of directors of the Corporation is authorized, by resolution or
resolutions from time to time adopted, to provide for the issuance of serial
preferred stock in series and to fix and state the powers, designations,
preferences and relative, participating, optional or other special rights of
the shares of each such series, and the qualifications, limitation or
restrictions thereof, including, but not limited to determination of any of
the following:
(1) the distinctive serial designation and the number of shares
constituting such series;
(2) the rights in respect of dividends, if any, to be paid on
the shares of such series, whether dividends shall be cumulative and, if so,
from which date or dates, the payment or date or dates for dividends, and the
participating or other special rights, if any, with respect to dividends;
(3) the voting powers, full or limited, if any, of the shares of
such series;
(4) whether the shares of such series shall be redeemable and,
if so, the price or prices at which, and the terms and conditions upon which
such shares may be redeemed;
(5) the amount or amounts payable upon the shares of such series
in the event of voluntary or involuntary liquidation, dissolution or winding
up of the Corporation;
(6) whether the shares of such series shall be entitled to the
benefits of a sinking or retirement fund to be applied to the purchase or
redemption of such shares, and, if so entitled, the amount of such fund and
the manner of its application, including the price or prices at which such
shares may be redeemed or purchased through the application of such funds;
(7) whether the shares of such series shall be convertible into,
or exchangeable for, shares of any other class or classes or any other series
of the same or any other class or classes of stock of the Corporation and, if
so convertible or exchangeable, the conversion price or prices, or the rate or
rates of exchange, and the adjustments thereof, if any, at which such
conversion or exchange may be made, and any other terms and conditions of such
conversion or exchange;
(8) the subscription or purchase price and form of consideration
for which the shares of such series shall be issued; and
(9) whether the shares of such series which are redeemed or
converted shall have the status of authorized but unissued shares of serial
preferred stock and whether such shares may be reissued as shares of the same
or any other series of serial preferred stock.
Each share of each series of serial preferred stock shall have the same
relative powers, preferences and rights as, and shall be identical in all
respects with, all the other shares of the Corporation of the same series,
except the times from which dividends on shares which may be issued from time
to time of any such series may begin to accrue.
ARTICLE VI
PREEMPTIVE RIGHTS
No holder of any of the shares of any class or series of stock or of
options, warrants or other rights to purchase shares of any class or series of
stock or of other securities of the Corporation shall have any preemptive
right to purchase or subscribe for any unissued stock of any class or series,
or any unissued bonds, certificates of indebtedness, debentures or other
securities convertible into or exchangeable for stock or carrying any right to
purchase stock may be issued pursuant to resolution of the board of directors
of the Corporation to such persons, firms, corporations or associations,
whether or not holders thereof, and upon such terms as may be deemed advisable
by the board of directors in the exercise of its sole discretion.
ARTICLE VII
REPURCHASE OF SHARES
The Corporation may from time to time, pursuant to authorization by the
board of directors of the Corporation and without action by the stockholders,
purchase or otherwise acquire shares of any class, bonds, debentures, notes,
scrip, warrants, obligations, evidences or indebtedness, or other securities
of the Corporation in such manner, upon such terms, and in such amounts as the
board of directors shall determine; subject, however, to such limitations or
restrictions, if any, as are contained in the express terms of any class of
shares of the Corporation outstanding at the time of the purchase or
acquisition in question or as are imposed by law.
ARTICLE VIII
MEETINGS OF STOCKHOLDERS; CUMULATIVE VOTING
A. No action that is required or permitted to be taken by the
stockholders of the Corporation at any annual or special meeting of
stockholders may be effected by written consent of stockholders in lieu of a
meeting of stockholders, unless the action to be effected by written consent
of stockholders and the taking of such action by such written consent have
expressly been approved in advance by the board of directors of the
Corporation.
B. Special meeting of the stockholders of the Corporation for any
purpose or purposes may be called at any time by the board of directors of the
Corporation, or by a committee of the board of directors which as been duly
designated by the board of directors and whose powers and authorities, as
provided in a resolution of the board of directors or in the bylaws of the
Corporation, include the power and authority to call such meetings but such
special meetings may not be called by another person or persons.
C. There shall be no cumulative voting by stockholders of any class
or series in the election of directors of the Corporation.
D. Meetings of stockholders may be held at such place as the bylaws
may provide.
ARTICLE IX
NOTICE FOR NOMINATIONS AND PROPOSALS
A. Nominations for the election of directors and proposals for any
new business to be taken up at any annual or special meeting of stockholders
may be made by the board of directors of the Corporation or by any stockholder
of the Corporation entitled to vote generally in the election of directors.
In order for a stockholder of the Corporation to make any such nominations
and/or proposals at an annual meeting or such proposals at a special meeting,
he or she shall give notice thereof in writing, delivered or mailed by first
class United States mail, postage prepaid, to the Secretary of the Corporation
of less than thirty days nor more than sixty days prior to any such meeting;
provided, however, that if less than forty days' notice of the meeting is
given to stockholders, such written notice shall be delivered or mailed, as
prescribed, to the Secretary of the Corporation not later than the close of
the tenth day following the day on which notice of the meeting was mailed to
stockholders. Each such notice given by a stockholder with respect to
nominations for the election of directors shall set forth (1) the name, age,
business address and, if known, residence address of each nominee proposed in
such notice, (2) the principal occupation or employment of each such nominee,
and (3) the number of shares of stock of the Corporation which are
beneficially owned by each such nominee. In addition, the stockholder making
such nomination shall promptly provide any other information reasonably
requested by the Corporation.
B. Each such notice given by a stockholder to the Secretary with
respect to business proposals to bring before a meeting shall set forth in
writing as to each matter: (1) a brief description of the business desired to
be brought before the meeting and the reasons for conducting such business at
the meeting; (2) the name and address, as they appear on the Corporation's
books, of the stockholder proposing such business; (3) the class and number of
shares of the Corporation which are beneficially owned by the stockholder; and
(4) any material interest of the stockholder in such business.
Notwithstanding anything in this Certificate to the contrary, no business
shall be conducted at the meeting except in accordance with the procedures set
forth in this Article.
C. The Chairman of the annual or special meeting of stockholders may,
if the facts warrant, determine and declare to such meeting that a nomination
or proposal was not made in accordance with the foregoing procedure, and, if
he should so determine, he shall so declare to the meeting and the defective
nomination or proposal shall be disregarded and laid over for action at the
next succeeding adjourned, special or annual meeting of the stockholders
taking place thirty days or more thereafter. This provision shall not require
the holding of any adjourned or special meeting of stockholders for the
purpose of considering such defective nomination or proposal.
ARTICLE X
DIRECTORS
A. Number; Vacancies. The number of directors of the Corporation
-----------------
shall be such number, not less than one nor more than 15 (exclusive of
directors, if any, to be elected by holders of preferred stock of the
Corporation), as shall be provided from time to time in a resolution adopted
by the board of directors, provided that no decrease in the number of
directors shall have the effect of shortening the term of any incumbent
director, and provided further that no action shall be taken to decrease or
increase the number of directors from time to time unless at least two-thirds
of the directors then in office shall concur in said action. Exclusive of
directors, if any, elected by holders of preferred stock, vacancies in the
board of directors of the Corporation, however caused, and newly created
directorships shall be filled by a vote of two-thirds of the directors then in
office, whether or not a quorum, and any director so chosen shall hold office
for a term expiring at the annual meeting of stockholders at which the term of
the class to which the director has been chosen expires and when the
director's successor is elected and qualified. The board of directors shall
be classified in accordance with the provisions of Section B of this Article
X.
B. Classified Board. The board of directors of the Corporation
-----------------
(other than directors which may be elected by the holders of preferred stock),
shall be divided into three classes of directors which shall be designated
Class I, Class II and Class III. The members of each class shall be elected
for a term of three years and until their successors are elected and
qualified. Such classes shall be as nearly equal in number as the then total
number of directors constituting the entire board of directors shall permit,
exclusive of directors, if any, elected by holders of preferred stock, with
the terms of office of all members of one class expiring each year. Should
the number of directors not be equally divisible by three, the excess director
or directors shall be assigned to Classes I or II as follows: (1) if there
shall be an excess of one directorship over the number equally divisible by
three, such extra directorship shall be classified in Class I; and (2) if
there be an excess of two directorships over a number equally divisible by
three, one shall be classified in Class I and the other in Class II. At the
organizational meeting of the Corporation, directors of Class I shall be
elected to hold office for a term expiring at the first annual meeting of
stockholders, directors of Class II shall be elected to hold office for a term
expiring at the second succeeding annual meeting of stockholders and directors
of Class III shall be elected to hold office for a term expiring at the third
succeeding annual meeting thereafter. Thereafter, at each succeeding annual
meeting, directors of each class shall be elected for three year terms.
Notwithstanding the foregoing, the director whose term shall expire at any
annual meeting shall continue to serve until such time as his successor shall
have been duly elected and shall have qualified unless his position on the
board of directors shall have been abolished by action taken to reduce the
size of the board of directors prior to said meeting.
Should the number of directors of the Corporation be reduced, the
directorship(s) eliminated shall be allocated among classes as appropriate so
that the number of directors in each class is as specified in the position(s)
to be abolished. Notwithstanding the foregoing, no decrease in the number of
directors shall have the effect of shortening the term of any incumbent
director. Should the number of directors of the Corporation be increased,
other than directors which may be elected by the holders of preferred stock,
the additional directorships shall be allocated among classes as appropriate
so that the number of directors in each class is as specified in the
immediately preceding paragraph.
Whenever the holders of any one or more series of preferred stock of the
Corporation shall have the right, voting separately as a class, to elect one
or more directors of the Corporation, the board of directors shall include
said directors so elected and not be in addition to the number of directors
fixed as provided in this Article X. Notwithstanding the foregoing, and
except as otherwise may be required by law, whenever the holders of any one or
more series of preferred stock of the Corporation elect one or more directors
of the Corporation, the terms of the director or directors elected by such
holders shall expire at the next succeeding annual meeting of stockholders.
ARTICLE XI
REMOVAL OF DIRECTORS
Notwithstanding any other provision of this Certificate or the bylaws of
the Corporation, any director or all the directors of a single class (but not
the entire board of directors) of the Corporation may be removed, at any time,
but only for cause and only by the affirmative vote of the holders of at least
75% of the voting power of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) cast at a meeting of the
stockholders called for that purpose. Notwithstanding the foregoing, whenever
the holders of any one or more series of preferred stock of the Corporation
shall have the right, voting separately as a class, to elect one or more
directors of the Corporation, the preceding provisions of this Article XI
shall not apply with respect to the director or directors elected by such
holders of preferred stock.
ARTICLE XII
ACQUISITION OF CAPITAL STOCK
A. For the purpose of this Article:
(1) The term "Act" shall mean the Securities Exchange Act of
1934, as amended, and any successor statute.
(2) The term "acting in concert" shall mean (i) knowing
participation in a joint activity or conscious parallel action towards a
common goal whether or not pursuant to an express agreement, and (ii) a
combination or pooling of voting or other interest in the Corporation's
outstanding shares of capitol stock for a common purpose, pursuant to any
contract, understanding, relationship, agreement or other arrangement, whether
written or otherwise.
(3) The term "acquire," "acquisition" or "acquiring" with
respect to the acquisition of any security of the Corporation shall refer to
the acquisition of such security by any means whatsoever, including without
limitation, an acquisition of such security by gift, by operation of law, by
will or by intestacy, whether voluntarily or involuntarily.
(4) The term "Code" means the Internal Revenue Code of 1986, as
amended, and any successor statute.
(5) The term "Common Stock" means all Common Stock of the
Corporation and any other securities issued by the Corporation (other than the
Warrants) which are treated as stock for purposes of Section 382 of the Code.
(6) The term "Fair Market Value" of the Common Stock shall mean
the average of the daily closing prices of the Common Stock for 15 consecutive
trading days commencing 20 trading days before the date of such computation
The closing price is the last reported sale price on the principal securities
exchange on which the Common Stock is listed or, if the Common Stock is not
listed on any national securities exchange, the NASDAQ National Marked System,
or, if the Common Stock is not designated for trading on the NASDAQ National
Market System, the average of the closing bid and asked prices as reported on
NASDAQ or, if not so reported, as furnished by the National Quotation Bureau
Incorporated. In the absence of such a quotation, the Corporation shall
determine the current market rice on a reasonable and appropriate basis of the
average of the daily closing prices for 15 consecutive trading days commencing
20 trading days before the date of such computation.
(7) The term "own," "owing," "ownership" or "owning" refer to
the ownership of securities within the meaning of Section 382 of the Code
after taking into account the attribution rules of Section 382(l)(3) of the
Code and the regulations promulgated hereunder (except insofar as such
attribution would be inconsistent with provisions of this Article XII relating
to Warrants).
(8) The term "Person" shall mean any individual, firm,
corporation, partnership, joint venture or other entity and shall include any
group composed of such person and any other person with whom such person or
any Affiliate or Associate (as those terms are defined in Rule 12b-2 of the
General Rules and Regulations under the Act) of such person has any agreement,
arrangement or understanding, directly or indirectly, for the purposes of
acquiring, holding, voting or disposing of Common Stock or Warrants, and any
other person who is a member of such group.
(9) The term "Transfer Agent" shall mean the transfer agent with
respect to the Common Stock nominated and appointed by the Board of Directors
from time to time.
(10) The term "Warrant" shall mean any securities issued or
assumed by the Corporation, or any securities issuable by the Corporation in
respect to issued securities which are convertible into, or which include the
right to acquire, shares of Common Stock, whether or not the right to make
such conversion or acquisition is subject to any contingencies, including,
without limitation, warrants, options, calls, contracts to acquire securities,
convertible debt instruments or any other interests treated as an option
pursuant to Section 382(l)(3) of the Code.
(11) The term "Warrant Agent" shall mean any warrant agent for
any Warrants nominated and appointed by the Board of Directors from time to
time.
B. (1) If, at any time during the ten years from the effective
date of this Certificate, any Person shall acquire the beneficial ownership
(as determined pursuant to Rules 13d-3 and 13d-5 under the Act) of more than
20% of any class of Common Stock, then the record holders of Common stock
beneficially owned by such acquiring Person shall have only the voting rights
set forth in this paragraph B on any matter requiring their vote or consent.
With respect to each vote in excess of 20% of the voting power of the
outstanding shares of Common Stock which such record holders would otherwise
be entitled to cast without giving effect to this paragraph B, the record
holders in the aggregate shall be entitled to cast only one-hundredth of a
vote. A Person who is a record owner of shares of Common Stock that are
beneficially owned simultaneously by more than one person shall have, with
respect to such shares, the right to cast the least number of votes that such
person would be entitled to cast under this paragraph B by virtue of such
shares being so beneficially owned by any of such acquiring Persons. The
effect of the reduction in voting power required by this paragraph B shall be
given effect in determination the presence of a quorum for purposes of
convening a meeting of the stockholders of the Corporation
(2) The limitation on voting rights prescribed by this paragraph
B shall terminate and be of no force and effect as of the earliest to occur
of:
(i) the date that any person becomes the beneficial owner
of shares of stock representing at least 75% of the total number of votes
entitled to be cast in respect of all outstanding shares of stock, before
giving effect to the reduction in votes prescribed by this paragraph B; or
(ii) the date (the "Reference Date") one day prior to the
date on which, as a result of such limitation of voting rights, the Common
Stock will be delisted from (including by ceasing to be temporarily or
provisionally authorized for listing with) the New York Stock Exchange (the
"NYSE") or the American Stock Exchange (the "AMEX"), or be no longer
authorized for inclusion (including by ceasing to be provisionally or
temporarily authorized for inclusion) on the National Association of
Securities Dealers, Inc. Automated Quotation System/National Market System
("NASDAQ/NMS"); provided, however, that (a) such termination shall not occur
until the earlier of (x) the 90th day after the Reference Date or (y) the
first day on or after a Reference Date that there is not pending a proceeding
under the rules of the NYSE, the AMEX or the NASDAQ/NMS or any other
administrative or judicial proceeding challenging such delisting or removal of
authorization of the Common Stock, an application for listing of the Common
stock with the NYSE or the AMEX or for authorization for the Common Stock to
be including on the NASDAQ/NMS, or an appeal with respect to any such
application, and (b) such termination shall not occur by virtue of such
delisting or lack of authorization if on or prior to the earlier of the 90th
day after the Reference Date or the day on which no proceeding, application or
appeal of the type described in (y) above is pending, the Common Stock is
approved for listing or continued listing on the NYSE or the AMEX or
authorized for inclusion or continued inclusion on the NASDAQ/NMS (including
any such approval or authorization which is temporary or provisional).
Nothing contained herein shall be construed so as to prevent the Common Stock
from continuing to be listed with the NYSE or AMEX or continuing to be
authorized for inclusion on the NASDAQ/NMS in the event that the NYSE, AMEX or
NASDAQ/NMS, as the case may be, adopts a rule or is governed by an order,
decree, ruling or regulation of the Securities and Exchange Commission which
provides in whole or in part that companies having common stock with
differential voting rights listed on the NYSE or the Amex or authorized for
inclusion on the NASDAQ/NMS may continue to be so listed or included.
C. The restrictions contained in this Article XII shall not apply to
(1) any underwriter or member of an underwriting or selling group involving a
public sale or resale of securities of the Corporation or a subsidiary
thereof; provided, however, that upon completion of the sale or resale of such
securities, no such underwriter or member of such selling group is a
beneficial owner of more than 4.9% of any class of equity security of the
Corporation, (2) any revocable proxy granted pursuant to a proxy solicitation
in compliance with section 14 of the Act by a stockholder of the Corporation
or (3) any employee benefit plans of the Corporation. In addition, the
Continuing Directors of the Corporation, the officers and employees of the
Corporation and its subsidiaries, the directors of subsidiaries of the
Corporation, the employee benefit plans of the Corporation and its
subsidiaries, entities organized or established by the Corporation or any
subsidiary thereof pursuant to the terms of such plans and trustees and
fiduciaries with respect to such plans acting in such capacity shall not be
deemed to be a group with respect to their beneficial ownership of voting
stock of the Corporation solely by virtue of their being directors, officers
or employees of the Corporation or a subsidiary thereof or by virtue of the
Continuing Directors of the Corporation, the officers and employees of the
Corporation and its subsidiaries and the directors of subsidiaries of the
Corporation being fiduciaries or beneficiaries of an employee benefit plan of
the Corporation or a subsidiary of the Corporation. Notwithstanding the
foregoing, no director, officer or employee of the Corporation or any of its
subsidiaries or group of any of them shall be exempt from the provisions of
this Article XII should any such person or group become a beneficial owner of
more than 20% of any class of equity security of the Corporation.
D. A majority of the Continuing Directors, as defined in Article
XIII, shall have the power to construe and apply the provisions of paragraphs
B, C and D of this Article XII and to make all determinations necessary or
desirable to implement such provisions, including but not limited to matters
with respect to (1) the number of shares beneficially owned by any person, (2)
whether a person has an agreement, arrangement or understanding with another
as to the matters referred to in the definition of beneficial ownership, (3)
the application of any other definition or operative provision of this Article
XII to the given facts or (4) any other matter relating to the applicability
or effect of paragraphs B, C and D of this Article XII. Any constructions,
applications, or determinations made by the Continuing Directors pursuant to
paragraphs B, C and D of this Article XII in good faith and on the basis of
such information and assistance as was then reasonably available for such
purpose shall be conclusive and binding upon the Corporation and its
stockholders.
E. All certificates evidencing ownership of Common Stock or ownership
of Warrants of the Corporation shall bear a conspicuous legend in compliance
with the General Corporation Law of Delaware describing the restrictions on
transfers set forth in this Article XII.
F. If any provision of this Article XII or any application of any
such provision is determined to be invalid by any federal or state court
having jurisdiction over the issues, the validity of the remaining provisions
shall not be affected and other applications of such provision shall be
affected only to the extent necessary to comply with the determination of such
court.
ARTICLE XIII
APPROVAL OF CERTAIN BUSINESS COMBINATIONS
The stockholder vote required to approve Business Combinations (as
hereinafter defined) shall be as set forth in this section.
A. (1) Except as otherwise expressly provided in this Article
XIII, and in addition to any other vote required by law, the affirmative vote
required by law, the affirmative vote of the holders of (i) at least 75% of
the voting power of the outstanding shares entitled to vote thereon (and, if
any class or series of shares is entitled to vote thereon separately the
affirmative vote of the holders of at least 75% of the outstanding shares of
each such class or series), and (ii) at least a majority of the outstanding
shares entitled to vote thereon, not including shares deemed beneficially
owned by a Related Person (as hereinafter defined), shall be required in order
to authorize any of the following:
(a) any merger or consolidation of the Corporation or a
subsidiary of the Corporation with or into a Related person (as hereinafter
defined);
(b) any sale, lease, exchange, transfer or other
disposition, including without limitation, a mortgage or pledge, of all or any
Substantial Part (as hereinafter defined) of the assets of the Corporation
(including without limitation any voting securities of a subsidiary) or of a
subsidiary, to a Related Person;
(c) any merger or consolidation of a Related Person with or
into the Corporation or a subsidiary of the Corporation;
(d) any sale, lease, exchange, transfer or other
disposition of all or any Substantial Part of the assets of a Related Person
to the Corporation or a subsidiary of the Corporation;
(e) the issuance of any securities of the Corporation or a
subsidiary of the Corporation to a Related Person other than on a pro rata
basis to all holders of capital stock of the Corporation of the same class or
classes held by the Related person, pursuant to a stock split, stock dividend
or distribution or warrants or rights, and other than in connection with the
exercise or conversion of securities exercisable for or convertible into
securities of the Corporation or any of its subsidiaries which securities have
been distributed pro rata to all holders of capital stock of the Corporation;
(f) the acquisition by the Corporation or a subsidiary of
the Corporation of any securities of a Related Person;
(g) any reclassification of the common stock of the
Corporation, or any recapitalization involving the common stock of the
Corporation or any similar transaction (whether or not with or into or
otherwise involving a Related Person) that has the effect directly or
indirectly, of increasing by more than 1% the proportionate share of the
outstanding shares of any class of equity or convertible securities of the
Corporation or any subsidiary that are directly or indirectly owned by any
Related Person; and
(h) any agreement, contract or other arrangement providing
for any of the transactions described in this Article XIII.
(2) Such affirmative vote shall be required notwithstanding any
other provision of this Certificate, any provision of law, or any agreement
with any regulatory agency or national securities exchange which might
otherwise permit a lesser vote or no vote; provided, however, that in no
instance shall the provisions of this Article XIII require the vote of greater
than 85% of the voting power of the outstanding shares entitled to vote
thereon for the approval of a Business Combination.
(3) The term "Business Combination" as used in this Article XIII
shall mean any transaction which is referred to in any one or more of
subparagraphs A(1)(a) through (h) above.
B. The provisions of paragraph A shall not be applicable to any
particular Business Combination, and such Business Combination shall require
only such affirmative vote as is required by any other provision of this
Certificate, any provision of law, or any agreement with any regulatory agency
or national securities exchange, if the Business Combination shall have been
approved in advance by a two-thirds vote of the Continuing Directors (as
hereinafter defined; provided, however, that such approval shall only be
effective if obtained at a meeting at which a continuing Director Quorum (as
hereinafter defined) is present.
C. For the purposes of this Article XIII the following definitions
apply:
(1) The term "Related Person" shall mean and include (i) any
individual, corporation, partnership or other person or entity which together
with its "affiliates" or "associates" (as those terms are defined in the Act)
"beneficially owns" (as that there is defined in the Act) in the aggregate 10%
or more of the outstanding shares of the common stock of the Corporation; and
(ii) any "affiliate" or "associate" (as those terms are defined in the Act) of
any such individual, Corporation, partnership or other person or entity;
provided, however, that the term "Related Person" shall not include the
Corporation, any subsidiary of the Corporation, any employee benefit plan,
employee stock plan of the Corporation or of any subsidiary of the
Corporation, or any trust established by the Corporation in connection with
the foregoing, or any person or entity organized, appointed, established or
holding shares of capital stock of the Corporation for or pursuant to the
terms of any such plan, nor shall such term encompass shares of capital stock
of the Corporation held by any of the foregoing (whether or not held in a
fiduciary capacity or otherwise). Without limitation, any shares of the
common stock of the Corporation which any Related Person has the right to
acquire pursuant to any agreement, or upon exercise or conversion rights,
warrants or options, or otherwise, shall be deemed "beneficially owned" by
such Related Person.
(2) The term "Substantial Part" shall mean more than 25% of the
total assets of the entity at issue, as of the end of its most recent fiscal
year ending prior to the time the determination is made.
(3) The term "Continuing Director" shall mean any member of the
board of directors of the Corporation who is unaffiliated with and who is not
the Related Person and was a member of the board prior to the time that the
Related Person became a Related Person, and any successor of a Continuing
Director who is unaffiliated with and who is not the Related Person and is
recommended to succeed a Continuing Director by a majority of Continuing
Directors then on the board.
(4) The term "Continuing Director Quorum" shall mean two-thirds
of the Continuing Directors capable of exercising the powers conferred on
them.
ARTICLE XIV
EVALUATION OF BUSINESS COMBINATIONS
In connection with the exercise of its judgment in determining what is in
the best interests of the Corporation and of the stockholders, when evaluating
a Business Combination (as defined in Article XIII) or a tender or exchange
offer, the board of directors of the Corporation shall, in addition to
considering the adequacy of the amount to be paid in connection with any such
transaction, consider all of the following factors and any other factors which
it deems relevant; (A) the social and economic effects of the transaction on
the Corporation and its subsidiaries, employees and customers, creditors and
other elements of the communities in which the Corporation and its
subsidiaries operate or are located; (B) the business and financial condition
and earnings prospects of the acquiring person or entity, including, but not
limited to, debt service and other existing financial obligations, financial
obligations to be incurred in connection with the acquisition and other likely
financial obligations of the acquiring person or entity and the possible
effect of such conditions upon the Corporation and its subsidiaries and the
other elements of the communities in which the Corporation and its
subsidiaries operate or are located; and (C) the competence, experience, and
integrity of the acquiring person or entity and its or their management.
ARTICLE XV
INDEMNIFICATION
Any person who was or is a party or is threatened to be made a party to
any threatened, pending, or completed action, suit, or proceeding, whether
civil, criminal, administrative, or investigative (whether or not by or in the
right of the corporation) by reason of the fact that he is or was a director,
officer, incorporator, employee, or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer,
incorporator, employee, partner, trustee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise (including an employee
benefit plan), shall be entitled to be indemnified by the corporation to the
full extent then permitted by law against expenses (including counsel fees and
disbursements), judgments, fines (including excise taxes assessed on a person
with respect to an employee benefit plan), and amounts paid in settlement
incurred by him in connection with such action, suit, or proceeding. Such
right of indemnification shall inure whether or not the claim asserted is
based on matters which antedate the adoption of this Article XV. Such right
of indemnification shall continue as to a person who has ceased to be a
director, officer, incorporator, employee, partner, trustee, or agent and
shall inure to the benefit of the heirs and personal representatives of such a
person. The indemnification provided by this Article XV shall not be deemed
exclusive of any other rights which may be provided now or in the future under
any provision currently in effect or hereafter adopted of the bylaws, by any
agreement, by vote of stockholders, by resolution of disinterested directors,
by provisions of law, or otherwise.
ARTICLE XVI
LIMITATIONS ON DIRECTORS' LIABILITY
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except: (A) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (B) for acts or omissions that
are not in good faith or that involve intentional misconduct or a knowing
violation of law, (C) under Section 174 of the General Corporation Law of the
State of Delaware, or (D) for any transaction from which the director derived
any improper personal benefit. If the General Corporation law of the State of
Delaware is amended after the date of filing of this Certificate to further
eliminate or limit the personal liability of directors, then the liability of
a director of the Corporation shall be eliminated or limited to the fullest
extent permitted by the General Corporation Law of the State of Delaware, as
so amended.
Any repeal or modification of the foregoing paragraph by the stockholders
of the Corporation shall not adversely affect any right or protection of a
director of the Corporation existing at the time of such repeal or
modification.
ARTICLE XVII
AMENDMENT OF BYLAWS
In furtherance and not in limitation of the powers conferred by statute,
the board of directors of the Corporation is expressly authorized to adopt,
repeal, alter, amend and rescind the bylaws of the Corporation by a vote of
two-thirds of the board of directors. Notwithstanding any other provision of
this Certificate or the bylaws of the Corporation, and in addition to any
affirmative vote required by law (and notwithstanding the fact that some
lesser percentage may be specified by law), the bylaws shall be adopted,
repealed, altered, amended or rescinded by the stockholders of the Corporation
only by the vote of the holders of not less than 75% of the voting power of
the outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as one
class) cast at a meeting of the stockholders called for that purpose (provided
that notice of such proposed adoption, repeal, alteration, amendment or
rescission is included in the notice of such meeting), or, as set forth above,
by the board of directors.
ARTICLE XVIII
AMENDMENT OF CERTIFICATE OF INCORPORATION
Subject to the provisions hereof, the Corporation reserves the right to
repeal, alter, amend or rescind any provision contained in this Certificate in
the manner now or hereafter prescribed by law, and all rights conferred on
stockholders herein are granted subject to this reservation. Notwithstanding
the foregoing at any time and from time to time, the provisions set forth in
Articles VIII, IX, X, XI, XII, XIII, XIV, XV, XVI, XVII and this Article XVIII
may be repealed, altered, amended or rescinded in any respect only if the same
is approved by the affirmative vote of the holders of not less than 75% of the
voting power of the outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors (considered for this
purpose as a single class) cast at a meeting of the stockholders called for
that purpose (provided that notice of such proposed adoption, repeal,
alteration, amendment or rescission is included in the notice of such
meeting).
ARTICLE XIX
The name and address of the incorporator is:
Danyel Owens
770 South Post Oak Lane
Suite 435
Houston, Texas 77056
I, THE UNDERSIGNED, being the incorporator, for the purpose of forming a
corporation pursuant to the General Corporation Law of Delaware, does make and
file this Certificate of Incorporation, hereby declaring and certifying that
the facts herein stated are true, and accordingly have hereunto set my hand
this 20th day of December, 1997.
/s/Danyel Owens
- ----------------
Danyel Owens
3.2 - Page
EXHIBIT 3.2
AGRI BIO-SCIENCES, INC.
A DELAWARE CORPORATION
BY LAWS
ARTICLE I
PRINCIPAL EXECUTIVE OFFICE
The principal executive office of Agri Bio-Sciences, Inc., (the "Corporation")
shall be at 7806 Oxfordshire Drive, Spring, Texas 77379. The Corporation may
also have offices at such other places within or without the State of Texas as
the board of directors shall from time to time determine.
ARTICLE II
STOCKHOLDERS
SECTION 1. Place of Meetings. All annual and special meetings of
-----------------
stockholders shall be held at the principal executive office of the
Corporation or at such other place within or without the State of Delaware as
the board of directors may determine and as designated in the notice of such
meeting.
SECTION 2. Annual Meeting. A meetings of the stockholders of the
--------------
Corporation for the election of directors and for the transaction of any other
business of the Corporation shall be held annually at such date and time as
the board of directors may determine.
SECTION 3. Special Meetings. Special meeting of the stockholders of
----------------
the Corporation for any purpose or purposes may be called at any time by the
board of directors of the Corporation, or by a committee of the board of
directors which as been duly designated by the board of directors and whose
powers and authorities, as provided in a resolution of the board of directors
or in the By Laws of the Corporation, include the power and authority to call
such meetings but such special meetings may not be called by another person or
persons.
SECTION 4. Conduct of Meetings. Annual and special meetings shall be
-------------------
conducted in accordance with these By Laws or as otherwise prescribed by the
board of directors. The chairman or the chief executive officer of the
Corporation shall preside at such meetings.
SECTION 5. Notice of Meeting. Written notice stating the place, day
-----------------
and hour of the meeting and the purpose or purposes for which the meeting is
called shall be mailed by the secretary or the officer performing his duties,
not less than ten days nor more than fifty days before the meeting to each
stockholder of record entitled to vote at such meeting. If mailed, such
notice shall be deemed to be delivered when deposited in the United States
mail, addressed to the stockholder at his address as it appears on the stock
transfer books or records of the Corporation as of the record date prescribed
in Section 6, with postage thereon prepaid. If a stockholder be present at a
meeting, or in writing waive notice thereof before or after the meeting,
notice of the meeting to such stockholder shall be unnecessary. When any
stockholders' meeting, either annual or special, is adjourned for thirty days
or more, notice of the adjourned meeting shall be given as in the case of an
original meeting. It shall not be necessary to give any notice of the time
and place of any meeting adjourned for less than thirty days or of the
business to be transacted at such adjourned meeting, other than an
announcement at the meeting at which such adjournment is taken.
SECTION 6. Fixing of Record Date. For the purpose of determining
---------------------
stockholders entitled to notice of or to vote at any meeting of stockholders,
or any adjournment thereof, or stockholders entitled to receive payment of any
dividend, or in order to make a determination of stockholders for any other
proper purpose, the board of directors shall fix in advance a date as the
record date for any such determination of stockholders. Such date in any case
shall be not more than sixty days, and in case of a meeting of stockholders,
not less than ten days prior to the date on which the particular action,
requiring such determination of stockholders, is to be taken.
When a determination of stockholders entitled to vote at any meeting of
stockholders has been made as provided in this section, such determination
shall apply to any adjournment thereof.
SECTION 7. Voting Lists. The officer or agent having charge of the
------------
stock transfer books for shares of the Corporation shall make, at least ten
days before each meeting of stockholders, a complete record of the
stockholders entitled to vote at such meeting or any adjournment thereof, with
the address of and the number of shares held by each. The record, for a
period of ten days before such meeting, shall be kept on file at the principal
executive office of the Corporation, whether within or outside the State of
Texas, and shall be subject to inspection by any stockholder for any purpose
germane to the meeting at any time during usual business hours. Such record
shall also be produced and kept open at the time and place of the meeting and
shall be subject to the inspection of any stockholder for any purpose germane
to the meeting during the whole time of the meeting. The original stock
transfer books shall be prima facie evidence as to who are the stockholders
entitled to examine such record or transfer books or to vote at any meeting of
stockholders.
SECTION 8. Quorum. One-fourth of the outstanding shares of the
------
Corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of stockholders. If less than one-fourth of
the outstanding shares are represented at a meeting, a majority of the shares
so represented may adjourn the meeting from time to time without further
notice. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted
at the meeting as originally notified. The stockholders present at a duly
organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less than a
quorum.
SECTION 9. Proxies. At all meetings of stockholders, a stockholder
-------
may vote by proxy executed in writing by the stockholder or by his duly
authorized attorney in fact. Proxies solicited on behalf of the management
shall be voted as directed by the stockholder or, in the absence of such
direction, as determined by a majority of the board of directors. No proxy
shall be valid after eleven months from the date of its execution unless
otherwise provided in the proxy.
SECTION 10. Voting. At each election for directors every stockholder
------
entitled to vote at such election shall be entitled to one vote for each share
of stock held. Unless otherwise provided by the Certificate of Incorporation,
by statute, or by these By Laws, a majority of those votes cast by
stockholders at a lawful meeting shall be sufficient to pass on a transaction
or matter, except in the election of directors, which election shall be
determined by a plurality of the votes of the shares present in person or by
proxy at the meeting and entitled to vote on the election of directors.
SECTION 11. Voting of Shares in the Name of Two or More Persons.
---------------------------------------------------
When ownership of stock stands in the name of two or more persons, in the
absence of written directions to the Corporation to the contrary, at any
meeting of the stockholders of the Corporation any one or more of such
stockholders may cast, in person or by proxy, all votes to which such
ownership is entitled. In the event an attempt is made to cast conflicting
votes, in person or by proxy, by the several persons in whose name shares of
stock stand, the vote or votes to which these persons are entitled shall be
cast as directed by a majority of those holding such stock and present in
person or by proxy at such meeting, but no votes shall be cast for such stock
if a majority cannot agree.
SECTION 12. Voting of Shares by Certain Holders. Shares standing in
-----------------------------------
the name of another corporation may be voted by any officer, agent or proxy as
the By Laws of such corporation may prescribe, or, in the absence of such
provision, as the board of directors of such corporation may determine.
Shares held by an administrator, executor, guardian or conservator may be
voted by him, either in person or by proxy, without a transfer of such shares
into his name. Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him without a transfer of such shares into his name. Shares standing
in the name of a receiver may be voted by such receiver, and shares held by or
under the control of a receiver may be voted by such receiver without the
transfer thereof into his name if authority to do so is contained in an
appropriate order of the court or other public authority by which such
receiver was appointed.
A stockholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Neither treasury shares of its own stock held by the Corporation, nor shares
held by another corporation, if a majority of the shares entitled to vote for
the election of directors of such other corporation are held by the
Corporation, shall be voted at any meeting or counted in determining the total
number of outstanding shares at any given time for purposes of any meeting.
SECTION 13. Inspectors of Election. In advance of any meeting of
------------------------
stockholders, the chairman of the board or the board of directors may appoint
any persons, other than nominees for office, as inspectors of election to act
at such meeting or any adjournment thereof. The number of inspectors shall be
either one or three. If the board of directors so appoints either one or
three inspectors, that appointment shall not be altered at the meeting. If
inspectors of election are not so appointed, the chairman of the board may
make such appointment at the meeting. In case any person appointed as
inspector fails to appear or fails or refuses to act, the vacancy may be
filled by appointment in advance of the meeting or at the meeting by the
chairman of the board or the president.
Unless otherwise prescribed by applicable law, the duties of such inspectors
shall include: determining the number of shares of stock and the voting power
of each share, the shares of stock represented at the meeting, the existence
of a quorum, the authenticity, validity and effect of proxies; receiving
votes, ballots or consents; hearing and determining all challenges and
questions in any way arising in connection with the right to vote; counting
and tabulating all votes or consents; determining the result; and such acts as
may be proper to conduct the election or vote with fairness to all
stockholders.
SECTION 14. Nominating Committee. The board of directors or a
---------------------
committee appointed by the board of directors shall act as nominating
committee for selecting the management nominees for election as directors.
Except in the case of a nominee substituted as a result of the death or other
incapacity of a management nominee, the nominating committee shall deliver
written nominations to the secretary at least twenty days prior to the date of
the annual meeting. Provided such committee makes such nominations, no
nominations for directors except those made by the nominating committee shall
be voted upon at the annual meeting unless other nominations by stockholders
are made in writing and delivered to the secretary of the Corporation in
accordance with the provisions of the Corporation's Certificate of
Incorporation.
SECTION 15. New Business. Any new business to be taken up at the
------------
annual meeting shall be stated in writing and filed with the secretary of the
Corporation in accordance with the provisions of the Corporation's Certificate
of Incorporation. This provision shall not prevent the consideration and
approval or disapproval at the annual meeting of reports of officers,
directors and committees, but in connection with such reports no new business
shall be acted upon at such annual meeting unless stated and filed as provided
in the Corporation's Certificate of Incorporation.
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. General Powers. The business and affairs of the
---------------
Corporation shall be under the direction of its board of directors. The
chairman shall preside at all meetings of the board of directors.
SECTION 2. Number, Term and Election. The number of directors of the
-------------------------
Corporation shall be such number, not less than one nor more than 15
(exclusive of directors, if any, to be elected by holders of preferred stock
of the Corporation), as shall be provided from time to time in a resolution
adopted by the board of directors, provided that no decrease in the number of
directors shall have the effect of shortening the term of any incumbent
director, and provided further that no action shall be taken to decrease or
increase the number of directors from time to time unless at least two-thirds
of the directors then in office shall concur in said action. Exclusive of
directors, if any, elected by holders of preferred stock, vacancies in the
board of directors of the Corporation, however caused, and newly created
directorships shall be filled by a vote of two-thirds of the directors then in
office, whether or not a quorum, and any director so chosen shall hold office
for a term expiring at the annual meeting of stockholders at which the term of
the class to which the director has been chosen expires and when the
director's successor is elected and qualified. The board of directors shall
be classified in accordance with the provisions of Section 3 of this Article
III.
SECTION 3. Classified Board. The board of directors of the
-----------------
Corporation (other than directors which may be elected by the holders of
preferred stock), shall be divided into three classes of directors which shall
be designated Class I, Class II and Class III. The members of each class
shall be elected for a term of three years and until their successors are
elected and qualified. Such classes shall be as nearly equal in number as the
then total number of directors constituting the entire board of directors
shall permit, exclusive of directors, if any, elected by holders of preferred
stock, with the terms of office of all members of one class expiring each
year. Should the number of directors not be equally divisible by three, the
excess director or directors shall be assigned to Classes I or II as follows:
(1) if there shall be an excess of one directorship over the number equally
divisible by three, such extra directorship shall be classified in Class I;
and (2) if there be an excess of two directorships over a number equally
divisible by three, one shall be classified in Class I and the other in Class
II. At the organizational meeting of the Corporation, directors of Class I
shall be elected to hold office for a term expiring at the first annual
meeting of stockholders, directors of Class II shall be elected to hold office
for a term expiring at the second succeeding annual meeting of stockholders
and directors of Class III shall be elected to hold office for a term expiring
at the third succeeding annual meeting thereafter. Thereafter, at each
succeeding annual meeting, directors of each class shall be elected for three
year terms. Notwithstanding the foregoing, the director whose term shall
expire at any annual meeting shall continue to serve until such time as his
successor shall have been duly elected and shall have qualified unless his
position on the board of directors shall have been abolished by action taken
to reduce the size of the board of directors prior to said meeting.
Should the number of directors of the Corporation be reduced, the
directorship(s) eliminated shall be allocated among classes as appropriate so
that the number of directors in each class is as specified in the position(s)
to be abolished. Notwithstanding the foregoing, no decrease in the number of
directors shall have the effect of shortening the term of any incumbent
director. Should the number of directors of the Corporation be increased,
other than directors which may be elected by the holders of preferred stock,
the additional directorships shall be allocated among classes as appropriate
so that the number of directors in each class is as specified in the
immediately preceding paragraph.
Whenever the holders of any one or more series of preferred stock of the
Corporation shall have the right, voting separately as a class, to elect one
or more directors of the Corporation, the board of directors shall include
said directors so elected and not be in addition to the number of directors
fixed as provided in this Article III. Notwithstanding the foregoing, and
except as otherwise may be required By Law, whenever the holders of any one or
more series of preferred stock of the Corporation elect one or more directors
of the Corporation, the terms of the director or directors elected by such
holders shall expire at the next succeeding annual meeting of stockholders.
SECTION 4. Regular Meetings. A regular meeting of the board of
----------------
directors shall be held at such time and place as shall be determined by
resolution of the board of directors without other notice than such
resolution.
SECTION 5. Special Meetings. Special meetings of the board of
-----------------
directors may be called by or at the request of the chairman, the chief
executive officer or one-third of the directors. The person calling the
special meetings of the board of directors may fix any place as the place for
holding any special meeting of the board of directors called by such persons.
Members of the board of the directors may participate in special meetings
by means of telephone conference or similar communications equipment by which
all persons participating in the meeting can hear each other. Such
participation shall constitute presence in person.
SECTION 6. Notice. Written notice of any special meeting shall be
------
given to each director at least two days previous thereto delivered personally
or by telegram or at least seven days previous thereto delivered by mail at
the address at which the director is most likely to be reached. Such notice
shall be deemed to be delivered when deposited in the United States mail so
addressed, with postage thereon prepaid if mailed or when delivered to the
telegraph company if sent by telegram. Any director may waive notice of any
meeting by a writing filed with the secretary. The attendance of a director
at a meeting shall constitute a waiver of notice of such meeting, except where
a director attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
meeting of the board of directors need be specified in the notice or waiver of
notice of such meeting.
SECTION 7. Quorum. A majority of the number of directors fixed by
------
Section 2 shall constitute a quorum for the transaction of business at any
meeting of the board of directors, but if less than such majority is present
at a meeting, a majority of the directors present may adjourn the meeting from
time to time. Notice of any adjourned meeting shall be given in the same
manner as prescribed by Section 5 of this Article III.
SECTION 8. Manner of Acting. The act of the majority of the
------------------
directors present at a meeting at which a quorum is present shall be the act
of the board of directors, unless a greater number is prescribed by these By
Laws, the Certificate of Incorporation, or the General Corporation Law of the
State of Delaware.
SECTION 9. Action Without a Meeting. Any action required or
---------------------------
permitted to be taken by the board of directors at a meeting may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all of the directors.
SECTION 10. Resignation. Any director may resign at any time by
-----------
sending a written notice of such resignation to the home office of the
Corporation addressed to the chairman. Unless otherwise specified therein
such resignation shall take effect upon receipt thereof by the chairman.
SECTION 11. Vacancies. Any vacancy occurring on the board of
---------
directors shall be filled in accordance with the provisions of the
Corporation's Certificate of Incorporation. Any directorship to be filled by
reason of an increase in the number of directors may be filled by the
affirmative vote of two-thirds of the directors then in office or by election
at an annual meeting or at a special meeting of the stockholders held for that
purpose. The term of such director shall be in accordance with the provisions
of the Corporation's Certificate of Incorporation.
SECTION 12. Removal of Directors. Any director or the entire board
--------------------
of directors may be removed only in accordance with the provisions of the
Corporation's Certificate of Incorporation.
SECTION 13. Compensation. Directors, as such, may receive
------------
compensation for service on the board of directors. Members of either
standing or special committees may be allowed such compensation as the board
of directors may determine.
SECTION 14. Age Limitation. No person 70 years or more of age shall
--------------
be eligible for election, reelection, appointment or reappointment to the
board of the Corporation. No director shall serve as such beyond the annual
meeting of the Corporation immediately following the director becoming 70
years of age. This age limitation does not apply to an advisory director.
ARTICLE IV
COMMITTEES OF THE BOARD OF DIRECTORS
The board of directors may, by resolution passed by a majority of the
whole board, designate one or more committees, as they may determine to be
necessary or appropriate for the conduct of the business of the Corporation,
and may prescribe the duties, constitution and procedures thereof. Each
committee shall consist of one or more directors of the Corporation appointed
by the chairman. The chairman may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee.
The chairman shall have power at any time to change the members of, to
fill vacancies in, and to discharge any committee of the board. Any member of
any such committee may resign at any time by giving notice to the Corporation;
provided, however, that notice to the board, the chairman of the board, the
chief executive officer, the chairman of such committee, or the secretary
shall be deemed to constitute notice to the Corporation. Such resignation
shall take effect upon receipt of such notice or at any later time specified
therein; and, unless otherwise specified therein, acceptance of such
resignation shall not be necessary to make it effective. Any member of any
such committee may be removed at any time, either with or without cause, by
the affirmative vote of a majority of the authorized number of directors at
any meeting of the board called for that purpose.
ARTICLE V
OFFICERS
SECTION 1. Positions. The officers of the Corporation shall be a
---------
chairman, a president, one or more vice presidents, a secretary and a
treasurer, each of whom shall be elected by the board of directors. The board
of directors may designate one or more vice presidents as executive vice
president or senior vice president. The board of directors may also elect or
authorize the appointment of such other officers as the business of the
Corporation may require. The officers shall have such authority and perform
such duties as the board of directors may from time to time authorize or
determine. In the absence of action by the board of directors, the officers
shall have such powers and duties as generally pertain to their respective
offices.
SECTION 2. Election and Term of Office. The officers of the
------------------------------
Corporation shall be elected annually by the board of directors at the first
meeting of the board of directors held after each annual meeting of the
stockholders. If the election of officers is not held at such meeting, such
election shall be held as soon thereafter as possible. Each officer shall
hold office until his successor shall have been duly elected and qualified or
until his death or until he shall resign or shall have been removed in the
manner hereinafter provided. Election or appointment of an officer, employee
or agent shall not of itself create contract rights. The board of directors
may authorize the Corporation to enter into an employment contract with any
officer in accordance with state law; but no such contract shall impair the
right of the board of directors to remove any officer at any time in
accordance with Section 3 of this Article V.
SECTION 3. Removal. Any officer may be removed by vote of two-thirds
-------
of the board of directors whenever, in its judgment, the best interests of the
Corporation will be served thereby, but such removal, other than for cause,
shall be without prejudice to the contract rights, if any, of the person so
removed.
SECTION 4. Vacancies. A vacancy in any office because of death,
---------
resignation, removal, disqualification or otherwise, may be filled by the
board of directors for the unexpired portion of the term.
SECTION 5. Remuneration. The remuneration of the officers shall be
------------
fixed from time to time by the board of directors, and no officer shall be
prevented from receiving such salary by reason of the fact that he is also a
director of the Corporation.
SECTION 6. Age Limitation. No person 70 or more years of age shall
--------------
be eligible for election, reelection, appointment or reappointment as an
officer of the Corporation. No officer shall serve beyond the annual meeting
of the Corporation immediately following the officer becoming 70 or more years
of age.
ARTICLE VI
CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 1. Contracts. To the extent permitted by applicable law, and
---------
except as otherwise prescribed by the Corporation's Certificate of
Incorporation or these By Laws with respect to certificates for shares, the
board of directors or the executive committee may authorize any officer,
employee, or agent of the Corporation to enter into any contract or execute
and deliver any instrument in the name of and on behalf of the Corporation.
Such authority may be general or confined to specific instances.
SECTION 2. Loans. No loans shall be contracted on behalf of the
-----
Corporation and no evidence of indebtedness shall be issued in its name unless
authorized by the board of directors. Such authority may be general or
confined to specific instances.
SECTION 3. Checks, Drafts, Etc. All checks, drafts or other orders
-------------------
for the payment of money, notes or other evidences of indebtedness issued in
the name of the Corporation shall be signed by one or more officers, employees
or agents of the Corporation in such manner, including in facsimile form, as
shall from time to time be determined by resolution of the board of directors.
SECTION 4. Deposits. All funds of the Corporation not otherwise
--------
employed shall be deposited from time to time to the credit of the Corporation
in any of its duly authorized depositories as the board of directors may
select.
ARTICLE VII
CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. Certificates for Shares. The shares of the Corporation
-----------------------
shall be represented by certificates signed by the chairman of the board of
directors or the president or a vice president and by the treasurer or an
assistant treasurer or the secretary or an assistant secretary of the
Corporation, and may be sealed with the seal of the Corporation or a facsimile
thereof. Any or all of the signatures upon a certificate may be facsimiles if
the certificate is countersigned by a transfer agent, or registered by a
registrar, other than the Corporation itself or an employee of the
Corporation. If any officer who has signed or whose facsimile signature has
been placed upon such certificate shall have ceased to be such officer before
the certificate is issued, it may be issued by the Corporation with the same
effect as if he were such officer at the date of its issue.
SECTION 2. Form of Share Certificates. All certificates representing
--------------------------
shares issued by the Corporation shall set forth upon the face or back that
the Corporation will furnish to any stockholder upon request and without
charge a full statement of the designations, preferences, limitations, and
relative rights of the shares of each class authorized to be issued, the
variations in the relative rights and preferences between the shares of each
such series so far as the same have been fixed and determined, and the
authority of the board of directors to fix and determine the relative rights
and preferences of subsequent series.
Each certificate representing shares shall state upon the face thereof:
that the Corporation is organized under the laws of the State of Delaware; the
name of the person to whom issued; the number and class of shares, the
designation of the series, if any, which such certificate represents; the par
value of each share represented by such certificate, or a statement that the
shares are without par value. Other matters in regard to the form of the
certificates shall be determined by the board of directors.
SECTION 3. Payment for Shares. No certificate shall be issued for
------------------
any share until such share is fully paid.
SECTION 4. Form of Payment for Shares. The consideration for the
--------------------------
issuance of shares shall be paid in accordance with the provisions of the
Corporation's Certificate of Incorporation.
SECTION 5. Transfer of Shares. Transfer of shares of capital stock
------------------
of the Corporation shall be made only on its stock transfer books. Authority
for such transfer shall be given only to the holder of record thereof or by
his legal representative, who shall furnish proper evidence of such authority,
or by his attorney thereunto authorized by power of attorney duly executed and
filed with the Corporation. Such transfer shall be made only on surrender for
cancellation of the certificate for such shares. The person in whose name
shares of capital stock stand on the books of the Corporation shall be deemed
by the Corporation to be the owner thereof for all purposes.
SECTION 6. Lost Certificates. The board of directors may direct a
-----------------
new certificate to be issued in place of any certificate theretofore issued by
the Corporation alleged to have been lost, stolen, or destroyed, upon the
making of an affidavit of that fact by the person claiming the certificate of
stock to be lost, stolen, or destroyed. When authorizing such issue of a new
certificate, the board of directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen, or
destroyed certificate, or his legal representative, to give the Corporation a
bond in such sum as it may direct as indemnity against any claim that may be
made against the Corporation with respect to the certificate alleged to have
been lost, stolen, or destroyed.
ARTICLE VIII
FISCAL YEAR; ANNUAL AUDIT
The fiscal year of the Corporation shall end on the last day of December
of each year. The Corporation shall be subject to an annual audit as of the
end of its fiscal year by independent public accountants appointed by and
responsible to the board of directors.
ARTICLE IX
DIVIDENDS
Dividends upon the stock of the Corporation, subject to the provisions of
the Certificate of Incorporation, if any, may be declared by the board of
directors at any regular or special meeting, pursuant to law. Dividends may
be paid in cash, in property or in the Corporation's own stock.
ARTICLE X
CORPORATION SEAL
The corporate seal of the Corporation shall be in such form as the board
of directors shall prescribe.
ARTICLE XI
AMENDMENTS
In accordance with the Corporation's Certificate of Incorporation, these
By Laws may be repealed, altered, amended or rescinded by the stockholders of
the Corporation only by vote of not less than 75% of the voting power of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as one
class) cast at a meeting of the stockholders called for that purpose (provided
that notice of such proposed repeal, alteration, amendment or rescission is
included in the notice of such meeting). In addition, the board of directors
may repeal, alter, amend or rescind these By Laws by vote of two-thirds of the
board of directors at a legal meeting held in accordance with the provisions
of these By Laws.
AGRI BIO-SCIENCES, INC.
4.1 - Page 1
EXHIBIT 4.1
FORM OF COMMON STOCK CERTIFICATE
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED
OR SOLD UNLESS PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR AN AVAILABLE
EXEMPTION FROM REGISTRATION.
Number ____ __________ Shares
AGRI BIO-SCIENCES, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
This Certifies that
SPECIMENSPECIMEN
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, $.001 PAR VALUE, OF
Agri Bio-Sciences, Inc. transferable on the books of the Company by the holder
hereof in person or by duly authorized attorney upon surrender of this
certificate properly endorsed.
Witness the manual signatures of the Company's duly authorized officers.
Dated: ________________
Patrick N. Morgan, Secretary Lester H. Stephens, President
4.1 - Page 2
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers
unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
(Please print or typewrite name and address, including postal zip code, of
assignee)
the within Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
Attorney to transfer said Certificate on the books of the Certificate
Registrar, with full power of substitution in the premises.
Dated:
Signature Guaranteed:
NOTICE: The signature to this assignment must correspond with the name as
it appears upon the face of the within Certificate in every particular,
without alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member firm of the New York Stock Exchange or a commercial
bank or trust company.
Exhibit 5.1 - Page 1
EXHIBIT 5.1
S O N F I E L D & S O N F I E L D
A PROFESSIONAL CORPORATION
LEON SONFIELD (1865-1934) ATTORNEYS AT LAW NEW YORK
GEORGE M. SONFIELD (1899-1967) LOS ANGELES
ROBERT L. SONFIELD (1893-1972) WASHINGTON, D.C.
____________________ 770 SOUTH POST OAK LANE
HOUSTON, TEXAS 77056
FRANKLIN D. ROOSEVELT, JR. (1914-1988) [email protected]
TELECOPIER (713) 877-1547
ROBERT L. SONFIELD, JR. ____
MANAGING DIRECTOR TELEPHONE (713) 877-8333
May 5, 1998
Board of Directors
Agri Bio-Sciences, Inc.
7806 Oxfordshire Drive
Spring, Texas 77379
Ladies and Gentlemen:
In our capacity as counsel for Agri Bio-Sciences, Inc. (the "Company"),
we have participated in the corporate proceedings relative to the
authorization and issuance of 100,000 shares of common stock, par value $.001
per share ("Agri Bio Common Stock") to GS Financial Serivices, Inc.'s ("GS
Financial") and the distribution of the Agri Bio Common Stock to the
stockholders of GS Financial (the "Distribution"), pursuant to the terms of an
Consulting and Distribution Agreement by and between GS Financial and the
Company (the "Distribution Agreement"). A copy of the Distribution Agreement
is included as an exhibit to the registration statement of which the
Prospectus is a part, all as set out and described in the Company's
Registration Statement on Form SB-2 (File No. ______) under the Securities Act
of 1933 (the "Registration Statement"). We have also participated in the
preparation and filing of the Registration Statement including the federal
income tax information set out therein under the caption "Certain Federal
Income Tax Consequences" and elsewhere in the Prospectus constituting a part
of the Registration Statement.
Based upon the foregoing and upon our examination of originals (or copies
certified to our satisfaction) of such corporate records of the Company and
other documents as we have deemed necessary as a basis for the opinions
hereinafter expressed, and assuming the accuracy and completeness of all
information supplied us by the Company, having regard for the legal
considerations which we deem relevant, we are of the opinion that:
(1) The Company is a corporation duly organized and validly
existing under the laws of the State of Delaware;
(2) The Company has taken all requisite corporate action and all
action required by the laws of the State of Delaware with respect to the
authorization, issuance and sale of Agri Bio Common Stock to be issued
pursuant to the Registration Statement;
(3) The 100,000 shares of Agri Bio Common Stock, when issued and
distributed pursuant to the Registration Statement, will be validly issued,
fully paid and nonassessable shares of common stock of the Company;
(4) Based upon the current provisions of federal income tax laws
and regulations, and on current authoritative interpretations thereof, we
believe the discussion in the Registration Statement under the caption
"Certain Federal Income Tax Consequences" of the federal income tax laws
relevant to the prospective investors, although necessarily general, considers
each material federal income tax issue of significance to GS Financial
stockholders and the result which, more likely than not, would obtain under
the laws and regulations in effect as of the date hereof.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the references to our firm in the Registration
Statement.
Yours very truly,
/s/Sonfield & Sonfield
- ------------------------
SONFIELD & SONFIELD
Exhibit 10.1 - Page 5
EXHIBIT 10.1
FORM OF INDEMNIFICATION AGREEMENT BETWEEN
THE COMPANY AND LESTER H. STEPHENS
INDEMNIFICATION AGREEMENT
AGREEMENT, effective as of January 7, 1998, between Agri Bio-Sciences,
Inc., a Delaware corporation (the "Company"), and Lester H. Stephens
("Indemnitee").
WHEREAS, Indemnitee is a director (or officer) of the Company;
WHEREAS, both the Company and Indemnitee recognize the increased risk of
litigation and other claims being asserted against directors and officers of
public companies at a time when it has become increasingly difficult to obtain
adequate insurance coverage at reasonable costs;
WHEREAS, in recognition of Indemnitees need for substantial protection
against personal liability in order to enhance Indemnitees continued service
to the Company in an effective manner, the Company wishes to provide in this
Agreement for the identification of and the advancing of expenses to
Indemnitee to the full extent (whether partial or complete) permitted by law
and as set forth in this Agreement, and, to the extent insurance is
maintained, for the continued coverage of Indemnitee under the Company's
directors' and officers' liability insurance policies, regardless of any
future change in the Certificate of Incorporation, By-Laws, composition of the
Board of Directors, or structure of the Company.;
NOW, THEREFORE, in consideration of the premises and of Indemnitee's
service to the Company, directly or indirectly, and intending to be legally
bound hereby, the parties hereto agree as follows:
1. In the event Indemnitee was, is, or becomes a party to or a witness or
other participant in, or is threatened to be made a party to or a witness or
other participant in, any threatened, pending or completed action, suit or
proceeding, or any inquiry or investigation, whether conducted by the Company
or any other party, that Indemnitee in good faith believes might lead to any
such action, suit or proceeding, whether civil, criminal, administrative,
investigative or otherwise (a "Claim") by reason of (or arising in part out
of) the fact that Indemnitee is or was a director, officer, employee, agent or
fiduciary of the Company, or is or was serving at the request of the Company
as a director, officer, employee, trustee, agent or fiduciary of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, or by reason of anything done or not done by Indemnitee in any
such capacity (an "Indemnifiable Event"), the Company shall indemnify
Indemnitee to the full extent permitted by law (the determination of which
shall be made by the Reviewing Party referred to below) as soon as practicable
but in any event no later than thirty days after written demand is presented
to the Company, against any and all expenses (including attorneys' fees and
all other costs, expenses, and obligations paid or incurred in connection with
investigating, preparing for and defending or participating in the defense of
(including on appeal) any Claim relating to any Indemnifiable Event)
(collectively "Expenses"), judgments, fines, penalties and amounts paid in
settlement (including all interest, assessments and other charges paid or
payable in connection with or in respect of such judgments, fines, penalties
or amounts paid in settlement) of such Claim and, if so requested by
Indemnitee, the Company shall advance (within two business days of such
request) any and all such Expenses to Indemnitee; provided, however, that (i)
the foregoing obligation of the Company shall not apply to a Claim that was
commenced by the Indemnitee without the prior approval of the Board of
Directors of the Company unless the Claim was commenced after a Change in
Control (as defined in Section 5 herein); (ii) the foregoing obligation of
the Company shall be subject to the condition that an appropriate person or
body (the "Reviewing Party") shall not have determined (in a written opinion
in any case in which the special, independent counsel referred to in Section 4
hereof is involved) that Indemnitee would not be permitted to be indemnified
for such Expenses under applicable law; and (iii) if, when and to the extent
that the Reviewing Party determines that Indemnitee would not be permitted to
be indemnified for such Expenses under applicable law, the Company shall be
entitled to be reimbursed by Indemnitee (who hereby agrees to reimburse the
Company) for all such amounts theretofore paid (unless Indemnitee has
commenced legal proceedings in a court of competent jurisdiction to secure a
determination that Indemnitee should be indemnified under applicable law, in
which event Indemnitee shall not be required to so reimburse the Company until
a final judicial determination requiring such reimbursement is made with
respect thereto as to which all rights of appeal therefrom have been exhausted
or lapsed) and the Company shall not be obligated to indemnify or advance any
additional amounts to Indemnitee under this Agreement (unless there has been a
determination by a court of competent jurisdiction that the Indemnitee would
be permitted to be so indemnified or entitled to such expense advances under
applicable law).
2. If there has not been a Change in Control of the Company (as
hereinafter defined), the Reviewing Party shall be (1) quorum of the Board of
Directors consisting of directors who are not parties to the action, suit or
proceeding acting by majority vote, or, (2) if such a quorum is not
obtainable, or, even if obtainable, a quorum of disinterested directors so
directs, independent legal counsel by the use of a written opinion or (3) the
stockholders. If there has been a Change in Control of the Company, the
Reviewing Party shall be the special, independent counsel referred to in
Section 4 hereof.
3. If Indemnitee has not been indemnified by the expiration of the
foregoing thirty-day period or received expense advances or if the Reviewing
Party determines that Indemnitee would not be permitted to be indemnified or
be entitled to receive expense advances within two days of the request
therefor in whole or in part under applicable law, Indemnitee shall have the
right to commence litigation seeking from the court a finding that Indemnitee
is entitled to indemnification and expense advances or enforcement of
Indemnitee's entitlement to indemnification and expense advances or
challenging any determination by the Reviewing Party or any aspect thereof
that Indemnitee is not entitled to be indemnified or receive expense advances
and the burden of proving that indemnification or advancement of expenses is
not appropriate shall be on the Company; any determination by the Reviewing
Party in favor of Indemnitee shall be conclusive and binding on the Company,
unless facts supplied by Indemnitee which form the basis for the determination
are subsequently determined to have been materially incorrect at the time
supplied. Indemnitee agrees to bring any such litigation in any court in the
States of Texas having subject matter jurisdiction thereof and in which venue
is proper, and the Company hereby consents to service of process and to appear
in any such proceeding.
4. The Company agrees that if there is a Change in Control of the Company
(as hereinafter defined), then with respect to all matters thereafter arising
concerning the rights of Indemnitee to indemnity payments and expense advances
under this Agreement or any other agreement or By-laws now or hereafter in
effect relating to Claims for Indemnifiable Events, the Company shall seek
legal advice only from special, independent counsel selected by Indemnitee who
a majority of the disinterested Directors approves (which approval shall not
be unreasonably withheld), and who has not otherwise performed services for
the Company or Indemnitee. Such counsel, among other things, shall determine
whether and to what extent Indemnitee is permitted to be indemnified or is
entitled to expense advances under applicable law and shall render its written
opinion to the Company and Indemnitee to such effect. The Company agrees to
pay the reasonable fees of the special, independent counsel referred to above
and to fully indemnify such counsel against any and all expenses (including
attorney's fees), claims, liabilities and damages arising out of or relating
to this Agreement or its engagement pursuant hereto except for willful
misconduct or gross negligence.
5. For purposes of this Agreement, (a) "Change in Control of the Company"
shall be deemed to have occurred if (i) any "person" (as such term is used in
Sections 13(d)(3) and 14(d) of the Securities Exchange Act of 1934, as
amended), other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company, is or becomes the beneficial owner (as
defined in Rule 13d-3 under said Act), directly or indirectly, of securities
of the Company representing 20% or more of the combined voting power of the
Company's then outstanding securities, or (ii) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board of Directors of the Company and any new director whose election by
the Board of Directors or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the beginning of
the period or whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority thereof, or (iii) the
stockholders of the Company approve a merger or consolidation of the Company
with any other corporation, other than a merger or consolidation which would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least 80% of the
combined voting power of the voting securities of the Company of such
surviving entity outstanding immediately after such merger or consolidation,
or if the stockholders of the Company approve a plan of complete liquidation
of the Company or an agreement for the sale or disposition by the Company of
all or substantially all the Company's assets.
6. To the extent Indemnitee is successful in such proceeding, the Company
shall indemnify Indemnitee against any and all expenses (including attorney's
fees) which are incurred by the Indemnitee in connection with any claim
asserted or action brought by Indemnitee for (i) indemnification or advance
payment of Expenses by the Company under this Agreement or any other agreement
or Company By-laws now or hereafter in effect relating to Claims for
Indemnifiable Events and/or (ii) recovery under any directors' and officers'
liability insurance policies maintained by the Company, regardless of whether
Indemnitee ultimately is determined to be entitled to such indemnification,
advance payment of Expenses or insurance recovery, as the case may be.
7. If Indemnitee is entitled under any provision of this Agreement to
indemnification by the Company for some or a portion of the Expenses,
judgments, fines, penalties and amounts paid in settlement of any Claim but
not, however, for all of the total amount thereof, the Company shall
nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee
is entitled. Notwithstanding any other provision of this Agreement, to the
extent that Indemnitee has been successful on the merits or otherwise in the
defense of any Claim relating in whole or in part to any Indemnifiable Event
or in defense of any issue or matter therein, including dismissal without
prejudice, Indemnitee shall be indemnified against all Expenses incurred in
connection therewith.
8. For purposes of this Agreement, the termination of any Claim by
judgment, order, settlement (whether with or without court approval) or
conviction, or upon a plea of nolo contendere, or its equivalent, shall not
create a presumption that Indemnitee did not meet any particular standard of
conduct or have any particular belief or that a court has determined that
Indemnitee is not entitled to indemnification or expense advance or that
indemnification or expense advance is not permitted by applicable law.
9. The Company hereby agrees that, so long as Indemnitee shall continue to
serve in a capacity referred to in Section 1 hereof, and thereafter so long as
Indemnitee shall be subject to any possible claim or threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that Indemnitee served in any capacity
referred to in Section 1 hereof, the Company shall maintain in effect for the
benefit of Indemnitee any Directors' and Officers' Liability Insurance
presently in force and effect, providing, in all respects, coverage at least
comparable to that presently provided; provided, however, if, in the business
judgment of the then Board, either (a) the premium cost for such insurance is
substantially disproportionate to the amount of coverage, or (b) the coverage
provided by such insurance is so limited by exclusions that there is
insufficient benefit from such insurance, then and in that event the Company
shall not be required to maintain such insurance but shall and hereby agrees
to the full extent permitted by law to hold harmless and indemnify Indemnitee
to the fullest extent of the coverage which would otherwise have been provided
for the benefit of Indemnitee.
10. (a) In the event of any changes after the date of this Agreement
in any applicable law, statute, or rule which expands the right of the Company
to indemnify a person serving in a capacity referred to in Section 1 hereof,
such change shall be within the purview of Indemnitee's rights, and the
Company's obligations, under this Agreement. In the event of any changes in
any applicable law, statute, or rule which narrow the right of the Company to
indemnify a person serving in a capacity referred to in Section 1 hereof, such
changes, to the extent not otherwise required by such law, statute or rule to
be applied to this Agreement, shall have no effect on this Agreement or the
parties' rights and obligations hereunder.
(b) The indemnification provided by this Agreement shall not be deemed
exclusive of any rights to which Indemnitee may be entitled under the
Company's Certificate of Incorporation, its By-laws, any agreement, any vote
of stockholders or disinterested directors, laws and regulations in effect now
or in the future, or otherwise, both as to action in Indemnitee's official
capacity and as to action in another capacity while holding such office.
11. If the indemnification provided in Section 1 is unavailable and may
not be paid to Indemnitee because such indemnification is not permitted by
law, then in respect of any threatened, pending or completed action, suit or
proceeding in which the Company is jointly liable with Indemnitee (or would be
if joined in such action, suit or proceeding), the Company shall contribute to
the full extent permitted by law, to the amount of expenses, judgments, fines
(including excise taxes and penalties) and amounts paid in settlement actually
and reasonably incurred and paid or payable by Indemnitee in such proportion
as is appropriate to reflect (i) the relative benefits received by the Company
on the one hand and Indemnitee on the other hand from the transaction from
which such action, suit or proceeding arose, and (ii) the relative fault of
the Company on the one hand and of Indemnitee on the other in connection with
the events which resulted in such expenses, judgments, fines or settlement
amounts, as well as any other relevant equitable considerations. The relative
fault of the Company on the one hand and of Indemnitee on the other shall be
determined by reference to among other things, the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent the
circumstances resulting in such expenses, judgments, fines or settlement
amounts. The Company agrees that it would not be just and equitable if
contribution pursuant to this paragraph were determined by pro rata allocation
or any other method of allocation which does not take account of the foregoing
equitable considerations.
12. All obligations of the Company contained herein shall continue during
the period Indemnitee serves in a capacity referred to in Section 1 hereof of
the Company and shall continue thereafter so long as Indemnitee shall be
subject to any possible Claim relating to an Indemnifiable Event.
13. (a) Promptly after receipt by Indemnitee of notice of the
commencement of any Claim relating to an Indemnifiable Event or proceeding in
which Indemnitee is made or is threatened to be made a party or a witness,
Indemnitee shall notify the Company of the commencement of such Claim; but the
omission so to notify the Company shall not relieve the Company from any
obligation it may have to indemnify or advance expenses to Indemnitee
otherwise than under this Agreement.
(b) Indemnitee shall not settle any claim or action in any manner which
would impose on the Company any penalty, constraint, or obligation to hold
harmless or indemnify Indemnitee pursuant to this Agreement without the
Company's prior written consent, which consent shall not be unreasonably
withheld.
14. If any Claim relating to an Indemnifiable Event, commenced against
Indemnitee is also commenced against the Company, the Company shall be
entitled to participate therein at its own expense, and, except as otherwise
provided hereinbelow, to the extent that it may wish, the Company shall be
entitled to assume the defense thereof. After notice from the Company to
Indemnitee of its election to assume the defense of any Claim, the Company
shall not be obligated to Indemnitee under this Agreement for any legal or
other expenses subsequently incurred by Indemnitee in connection with the
defense thereof other than reasonable costs of investigation, travel, and
lodging expenses arising out of Indemnitee's participation in such Claim.
Indemnitee shall have the right to employ Indemnitee's own counsel in such
Claim, but the fees and expenses of such counsel incurred after notice from
the Company to Indemnitee of its assumption of the defense thereof shall be at
the expense of Indemnitee unless (i) otherwise authorized by the Company, (ii)
Indemnitee shall have reasonably concluded, and so notified the Company, that
there may be a conflict of interest between the Company and Indemnitee in the
conduct of the defense of such Claim, or (iii) the Company shall not in fact
have employed counsel to assume the defense of such Claim, in which cases the
fees and expenses of Indemnitee's counsel shall be at the expense of the
Company. The Company shall not be entitled to assume the defense of any Claim
brought by or on behalf of the Company or its stockholders or as to which
Indemnitee shall have made the conclusion set forth in (ii) of this Section
14.
15. No supplement, modification or amendment of this Agreement shall be
binding unless executed in writing by both of the parties hereto. No waiver
of any of the provisions of this Agreement shall be deemed or shall constitute
a waiver of any other provisions hereof (whether or not similar) nor shall
such waiver constitute a continuing waiver.
16. In the event of payment under this Agreement, the Company shall be
subrogated to the extent of such payment to all of the rights of recovery of
Indemnitee, who shall execute all papers required and shall do everything that
may be necessary to secure such rights, including the execution of such
documents necessary to enable the Company effectively to bring suit to enforce
such rights.
17. The Company shall not be liable under this Agreement to make any
payment in connection with any claim made against Indemnitee to the extent
Indemnitee has otherwise actually received payment (under any insurance
policy, By-law or otherwise) of the amounts otherwise indemnifiable hereunder.
18. This Agreement shall be binding upon and inure to the benefit of and
be enforceable by the parties hereto and their respective successors, assigns,
including any direct or indirect successor by purchase, merger, consolidation
or otherwise to all or substantially all of the business and/or assets of the
Company, spouses, heirs, executors, and personal and legal representatives.
This Agreement shall continue in effect regardless of whether Indemnitee
continues to serve as an officer or director of the Company or of any other
enterprise at the Company's request.
19. The provisions of this Agreement shall be severable in the event that
any of the provisions hereof (including any provision within a single section,
paragraph or sentence) are held by a court of competent jurisdiction to be
invalid, void or otherwise unenforceable, and the remaining provisions shall
remain enforceable to the full extent permitted by law.
20. This Agreement shall be governed by and construed in accordance with
the laws of the State of Texas applicable to contracts made and to be
performed in such state, but excluding any conflicts-of-law rule or principle
which might refer such governance, construction or enforcement to the laws of
another state or country.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
and as of the day and year first above written.
AGRI BIO-SCIENCES, INC.
By: /s/Lester H. Stephens
-----------------------
Lester H. Stephens, President
INDEMNITEE
/s/ Lester H. Stephens
- -------------------------
Lester H. Stephens
Exhibit 10.2 - Page 5
EXHIBIT 10.2
FORM OF INDEMNIFICATION AGREEMENT BETWEEN
THE COMPANY AND M.M. KALISH
INDEMNIFICATION AGREEMENT
AGREEMENT, effective as of January 7, 1998, between Agri Bio-Sciences,
Inc., a Delaware corporation (the "Company"), and M. M. Kalish ("Indemnitee").
WHEREAS, Indemnitee is a director (or officer) of the Company;
WHEREAS, both the Company and Indemnitee recognize the increased risk of
litigation and other claims being asserted against directors and officers of
public companies at a time when it has become increasingly difficult to obtain
adequate insurance coverage at reasonable costs;
WHEREAS, in recognition of Indemnitees need for substantial protection
against personal liability in order to enhance Indemnitees continued service
to the Company in an effective manner, the Company wishes to provide in this
Agreement for the identification of and the advancing of expenses to
Indemnitee to the full extent (whether partial or complete) permitted by law
and as set forth in this Agreement, and, to the extent insurance is
maintained, for the continued coverage of Indemnitee under the Company's
directors' and officers' liability insurance policies, regardless of any
future change in the Certificate of Incorporation, By-Laws, composition of the
Board of Directors, or structure of the Company.;
NOW, THEREFORE, in consideration of the premises and of Indemnitee's
service to the Company, directly or indirectly, and intending to be legally
bound hereby, the parties hereto agree as follows:
1. In the event Indemnitee was, is, or becomes a party to or a witness or
other participant in, or is threatened to be made a party to or a witness or
other participant in, any threatened, pending or completed action, suit or
proceeding, or any inquiry or investigation, whether conducted by the Company
or any other party, that Indemnitee in good faith believes might lead to any
such action, suit or proceeding, whether civil, criminal, administrative,
investigative or otherwise (a "Claim") by reason of (or arising in part out
of) the fact that Indemnitee is or was a director, officer, employee, agent or
fiduciary of the Company, or is or was serving at the request of the Company
as a director, officer, employee, trustee, agent or fiduciary of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, or by reason of anything done or not done by Indemnitee in any
such capacity (an "Indemnifiable Event"), the Company shall indemnify
Indemnitee to the full extent permitted by law (the determination of which
shall be made by the Reviewing Party referred to below) as soon as practicable
but in any event no later than thirty days after written demand is presented
to the Company, against any and all expenses (including attorneys' fees and
all other costs, expenses, and obligations paid or incurred in connection with
investigating, preparing for and defending or participating in the defense of
(including on appeal) any Claim relating to any Indemnifiable Event)
(collectively "Expenses"), judgments, fines, penalties and amounts paid in
settlement (including all interest, assessments and other charges paid or
payable in connection with or in respect of such judgments, fines, penalties
or amounts paid in settlement) of such Claim and, if so requested by
Indemnitee, the Company shall advance (within two business days of such
request) any and all such Expenses to Indemnitee; provided, however, that (i)
the foregoing obligation of the Company shall not apply to a Claim that was
commenced by the Indemnitee without the prior approval of the Board of
Directors of the Company unless the Claim was commenced after a Change in
Control (as defined in Section 5 herein); (ii) the foregoing obligation of
the Company shall be subject to the condition that an appropriate person or
body (the "Reviewing Party") shall not have determined (in a written opinion
in any case in which the special, independent counsel referred to in Section 4
hereof is involved) that Indemnitee would not be permitted to be indemnified
for such Expenses under applicable law; and (iii) if, when and to the extent
that the Reviewing Party determines that Indemnitee would not be permitted to
be indemnified for such Expenses under applicable law, the Company shall be
entitled to be reimbursed by Indemnitee (who hereby agrees to reimburse the
Company) for all such amounts theretofore paid (unless Indemnitee has
commenced legal proceedings in a court of competent jurisdiction to secure a
determination that Indemnitee should be indemnified under applicable law, in
which event Indemnitee shall not be required to so reimburse the Company until
a final judicial determination requiring such reimbursement is made with
respect thereto as to which all rights of appeal therefrom have been exhausted
or lapsed) and the Company shall not be obligated to indemnify or advance any
additional amounts to Indemnitee under this Agreement (unless there has been a
determination by a court of competent jurisdiction that the Indemnitee would
be permitted to be so indemnified or entitled to such expense advances under
applicable law).
2. If there has not been a Change in Control of the Company (as
hereinafter defined), the Reviewing Party shall be (1) quorum of the Board of
Directors consisting of directors who are not parties to the action, suit or
proceeding acting by majority vote, or, (2) if such a quorum is not
obtainable, or, even if obtainable, a quorum of disinterested directors so
directs, independent legal counsel by the use of a written opinion or (3) the
stockholders. If there has been a Change in Control of the Company, the
Reviewing Party shall be the special, independent counsel referred to in
Section 4 hereof.
3. If Indemnitee has not been indemnified by the expiration of the
foregoing thirty-day period or received expense advances or if the Reviewing
Party determines that Indemnitee would not be permitted to be indemnified or
be entitled to receive expense advances within two days of the request
therefor in whole or in part under applicable law, Indemnitee shall have the
right to commence litigation seeking from the court a finding that Indemnitee
is entitled to indemnification and expense advances or enforcement of
Indemnitee's entitlement to indemnification and expense advances or
challenging any determination by the Reviewing Party or any aspect thereof
that Indemnitee is not entitled to be indemnified or receive expense advances
and the burden of proving that indemnification or advancement of expenses is
not appropriate shall be on the Company; any determination by the Reviewing
Party in favor of Indemnitee shall be conclusive and binding on the Company,
unless facts supplied by Indemnitee which form the basis for the determination
are subsequently determined to have been materially incorrect at the time
supplied. Indemnitee agrees to bring any such litigation in any court in the
States of Texas having subject matter jurisdiction thereof and in which venue
is proper, and the Company hereby consents to service of process and to appear
in any such proceeding.
4. The Company agrees that if there is a Change in Control of the Company
(as hereinafter defined), then with respect to all matters thereafter arising
concerning the rights of Indemnitee to indemnity payments and expense advances
under this Agreement or any other agreement or By-laws now or hereafter in
effect relating to Claims for Indemnifiable Events, the Company shall seek
legal advice only from special, independent counsel selected by Indemnitee who
a majority of the disinterested Directors approves (which approval shall not
be unreasonably withheld), and who has not otherwise performed services for
the Company or Indemnitee. Such counsel, among other things, shall determine
whether and to what extent Indemnitee is permitted to be indemnified or is
entitled to expense advances under applicable law and shall render its written
opinion to the Company and Indemnitee to such effect. The Company agrees to
pay the reasonable fees of the special, independent counsel referred to above
and to fully indemnify such counsel against any and all expenses (including
attorney's fees), claims, liabilities and damages arising out of or relating
to this Agreement or its engagement pursuant hereto except for willful
misconduct or gross negligence.
5. For purposes of this Agreement, (a) "Change in Control of the Company"
shall be deemed to have occurred if (i) any "person" (as such term is used in
Sections 13(d)(3) and 14(d) of the Securities Exchange Act of 1934, as
amended), other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company, is or becomes the beneficial owner (as
defined in Rule 13d-3 under said Act), directly or indirectly, of securities
of the Company representing 20% or more of the combined voting power of the
Company's then outstanding securities, or (ii) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board of Directors of the Company and any new director whose election by
the Board of Directors or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the beginning of
the period or whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority thereof, or (iii) the
stockholders of the Company approve a merger or consolidation of the Company
with any other corporation, other than a merger or consolidation which would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least 80% of the
combined voting power of the voting securities of the Company of such
surviving entity outstanding immediately after such merger or consolidation,
or if the stockholders of the Company approve a plan of complete liquidation
of the Company or an agreement for the sale or disposition by the Company of
all or substantially all the Company's assets.
6. To the extent Indemnitee is successful in such proceeding, the Company
shall indemnify Indemnitee against any and all expenses (including attorney's
fees) which are incurred by the Indemnitee in connection with any claim
asserted or action brought by Indemnitee for (i) indemnification or advance
payment of Expenses by the Company under this Agreement or any other agreement
or Company By-laws now or hereafter in effect relating to Claims for
Indemnifiable Events and/or (ii) recovery under any directors' and officers'
liability insurance policies maintained by the Company, regardless of whether
Indemnitee ultimately is determined to be entitled to such indemnification,
advance payment of Expenses or insurance recovery, as the case may be.
7. If Indemnitee is entitled under any provision of this Agreement to
indemnification by the Company for some or a portion of the Expenses,
judgments, fines, penalties and amounts paid in settlement of any Claim but
not, however, for all of the total amount thereof, the Company shall
nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee
is entitled. Notwithstanding any other provision of this Agreement, to the
extent that Indemnitee has been successful on the merits or otherwise in the
defense of any Claim relating in whole or in part to any Indemnifiable Event
or in defense of any issue or matter therein, including dismissal without
prejudice, Indemnitee shall be indemnified against all Expenses incurred in
connection therewith.
8. For purposes of this Agreement, the termination of any Claim by
judgment, order, settlement (whether with or without court approval) or
conviction, or upon a plea of nolo contendere, or its equivalent, shall not
create a presumption that Indemnitee did not meet any particular standard of
conduct or have any particular belief or that a court has determined that
Indemnitee is not entitled to indemnification or expense advance or that
indemnification or expense advance is not permitted by applicable law.
9. The Company hereby agrees that, so long as Indemnitee shall continue to
serve in a capacity referred to in Section 1 hereof, and thereafter so long as
Indemnitee shall be subject to any possible claim or threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that Indemnitee served in any capacity
referred to in Section 1 hereof, the Company shall maintain in effect for the
benefit of Indemnitee any Directors' and Officers' Liability Insurance
presently in force and effect, providing, in all respects, coverage at least
comparable to that presently provided; provided, however, if, in the business
judgment of the then Board, either (a) the premium cost for such insurance is
substantially disproportionate to the amount of coverage, or (b) the coverage
provided by such insurance is so limited by exclusions that there is
insufficient benefit from such insurance, then and in that event the Company
shall not be required to maintain such insurance but shall and hereby agrees
to the full extent permitted by law to hold harmless and indemnify Indemnitee
to the fullest extent of the coverage which would otherwise have been provided
for the benefit of Indemnitee.
10. (a) In the event of any changes after the date of this Agreement
in any applicable law, statute, or rule which expands the right of the Company
to indemnify a person serving in a capacity referred to in Section 1 hereof,
such change shall be within the purview of Indemnitee's rights, and the
Company's obligations, under this Agreement. In the event of any changes in
any applicable law, statute, or rule which narrow the right of the Company to
indemnify a person serving in a capacity referred to in Section 1 hereof, such
changes, to the extent not otherwise required by such law, statute or rule to
be applied to this Agreement, shall have no effect on this Agreement or the
parties' rights and obligations hereunder.
(b) The indemnification provided by this Agreement shall not be deemed
exclusive of any rights to which Indemnitee may be entitled under the
Company's Certificate of Incorporation, its By-laws, any agreement, any vote
of stockholders or disinterested directors, laws and regulations in effect now
or in the future, or otherwise, both as to action in Indemnitee's official
capacity and as to action in another capacity while holding such office.
11. If the indemnification provided in Section 1 is unavailable and may
not be paid to Indemnitee because such indemnification is not permitted by
law, then in respect of any threatened, pending or completed action, suit or
proceeding in which the Company is jointly liable with Indemnitee (or would be
if joined in such action, suit or proceeding), the Company shall contribute to
the full extent permitted by law, to the amount of expenses, judgments, fines
(including excise taxes and penalties) and amounts paid in settlement actually
and reasonably incurred and paid or payable by Indemnitee in such proportion
as is appropriate to reflect (i) the relative benefits received by the Company
on the one hand and Indemnitee on the other hand from the transaction from
which such action, suit or proceeding arose, and (ii) the relative fault of
the Company on the one hand and of Indemnitee on the other in connection with
the events which resulted in such expenses, judgments, fines or settlement
amounts, as well as any other relevant equitable considerations. The relative
fault of the Company on the one hand and of Indemnitee on the other shall be
determined by reference to among other things, the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent the
circumstances resulting in such expenses, judgments, fines or settlement
amounts. The Company agrees that it would not be just and equitable if
contribution pursuant to this paragraph were determined by pro rata allocation
or any other method of allocation which does not take account of the foregoing
equitable considerations.
12. All obligations of the Company contained herein shall continue during
the period Indemnitee serves in a capacity referred to in Section 1 hereof of
the Company and shall continue thereafter so long as Indemnitee shall be
subject to any possible Claim relating to an Indemnifiable Event.
13. (a) Promptly after receipt by Indemnitee of notice of the
commencement of any Claim relating to an Indemnifiable Event or proceeding in
which Indemnitee is made or is threatened to be made a party or a witness,
Indemnitee shall notify the Company of the commencement of such Claim; but the
omission so to notify the Company shall not relieve the Company from any
obligation it may have to indemnify or advance expenses to Indemnitee
otherwise than under this Agreement.
(b) Indemnitee shall not settle any claim or action in any manner which
would impose on the Company any penalty, constraint, or obligation to hold
harmless or indemnify Indemnitee pursuant to this Agreement without the
Company's prior written consent, which consent shall not be unreasonably
withheld.
14. If any Claim relating to an Indemnifiable Event, commenced against
Indemnitee is also commenced against the Company, the Company shall be
entitled to participate therein at its own expense, and, except as otherwise
provided hereinbelow, to the extent that it may wish, the Company shall be
entitled to assume the defense thereof. After notice from the Company to
Indemnitee of its election to assume the defense of any Claim, the Company
shall not be obligated to Indemnitee under this Agreement for any legal or
other expenses subsequently incurred by Indemnitee in connection with the
defense thereof other than reasonable costs of investigation, travel, and
lodging expenses arising out of Indemnitee's participation in such Claim.
Indemnitee shall have the right to employ Indemnitee's own counsel in such
Claim, but the fees and expenses of such counsel incurred after notice from
the Company to Indemnitee of its assumption of the defense thereof shall be at
the expense of Indemnitee unless (i) otherwise authorized by the Company, (ii)
Indemnitee shall have reasonably concluded, and so notified the Company, that
there may be a conflict of interest between the Company and Indemnitee in the
conduct of the defense of such Claim, or (iii) the Company shall not in fact
have employed counsel to assume the defense of such Claim, in which cases the
fees and expenses of Indemnitee's counsel shall be at the expense of the
Company. The Company shall not be entitled to assume the defense of any Claim
brought by or on behalf of the Company or its stockholders or as to which
Indemnitee shall have made the conclusion set forth in (ii) of this Section
14.
15. No supplement, modification or amendment of this Agreement shall be
binding unless executed in writing by both of the parties hereto. No waiver
of any of the provisions of this Agreement shall be deemed or shall constitute
a waiver of any other provisions hereof (whether or not similar) nor shall
such waiver constitute a continuing waiver.
16. In the event of payment under this Agreement, the Company shall be
subrogated to the extent of such payment to all of the rights of recovery of
Indemnitee, who shall execute all papers required and shall do everything that
may be necessary to secure such rights, including the execution of such
documents necessary to enable the Company effectively to bring suit to enforce
such rights.
17. The Company shall not be liable under this Agreement to make any
payment in connection with any claim made against Indemnitee to the extent
Indemnitee has otherwise actually received payment (under any insurance
policy, By-law or otherwise) of the amounts otherwise indemnifiable hereunder.
18. This Agreement shall be binding upon and inure to the benefit of and
be enforceable by the parties hereto and their respective successors, assigns,
including any direct or indirect successor by purchase, merger, consolidation
or otherwise to all or substantially all of the business and/or assets of the
Company, spouses, heirs, executors, and personal and legal representatives.
This Agreement shall continue in effect regardless of whether Indemnitee
continues to serve as an officer or director of the Company or of any other
enterprise at the Company's request.
19. The provisions of this Agreement shall be severable in the event that
any of the provisions hereof (including any provision within a single section,
paragraph or sentence) are held by a court of competent jurisdiction to be
invalid, void or otherwise unenforceable, and the remaining provisions shall
remain enforceable to the full extent permitted by law.
20. This Agreement shall be governed by and construed in accordance with
the laws of the State of Texas applicable to contracts made and to be
performed in such state, but excluding any conflicts-of-law rule or principle
which might refer such governance, construction or enforcement to the laws of
another state or country.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
and as of the day and year first above written.
AGRI BIO-SCIENCES, INC.
By: /s/Lester H. Stephens
-----------------------
Lester H. Stephens, President
INDEMNITEE
/s/ M. M. Kalish
- -------------------
M. M. Kalish
Exhibit 10.3 - Page 5
EXHIBIT 10.3
FORM OF INDEMNIFICATION AGREEMENT BETWEEN
THE COMPANY AND PATRICK N. MORGAN
INDEMNIFICATION AGREEMENT
AGREEMENT, effective as of January 7, 1998, between Agri Bio-Sciences,
Inc., a Delaware corporation (the "Company"), and Patrick N. Morgan
("Indemnitee").
WHEREAS, Indemnitee is a director (or officer) of the Company;
WHEREAS, both the Company and Indemnitee recognize the increased risk of
litigation and other claims being asserted against directors and officers of
public companies at a time when it has become increasingly difficult to obtain
adequate insurance coverage at reasonable costs;
WHEREAS, in recognition of Indemnitees need for substantial protection
against personal liability in order to enhance Indemnitees continued service
to the Company in an effective manner, the Company wishes to provide in this
Agreement for the identification of and the advancing of expenses to
Indemnitee to the full extent (whether partial or complete) permitted by law
and as set forth in this Agreement, and, to the extent insurance is
maintained, for the continued coverage of Indemnitee under the Company's
directors' and officers' liability insurance policies, regardless of any
future change in the Certificate of Incorporation, By-Laws, composition of the
Board of Directors, or structure of the Company.;
NOW, THEREFORE, in consideration of the premises and of Indemnitee's
service to the Company, directly or indirectly, and intending to be legally
bound hereby, the parties hereto agree as follows:
1. In the event Indemnitee was, is, or becomes a party to or a witness or
other participant in, or is threatened to be made a party to or a witness or
other participant in, any threatened, pending or completed action, suit or
proceeding, or any inquiry or investigation, whether conducted by the Company
or any other party, that Indemnitee in good faith believes might lead to any
such action, suit or proceeding, whether civil, criminal, administrative,
investigative or otherwise (a "Claim") by reason of (or arising in part out
of) the fact that Indemnitee is or was a director, officer, employee, agent or
fiduciary of the Company, or is or was serving at the request of the Company
as a director, officer, employee, trustee, agent or fiduciary of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, or by reason of anything done or not done by Indemnitee in any
such capacity (an "Indemnifiable Event"), the Company shall indemnify
Indemnitee to the full extent permitted by law (the determination of which
shall be made by the Reviewing Party referred to below) as soon as practicable
but in any event no later than thirty days after written demand is presented
to the Company, against any and all expenses (including attorneys' fees and
all other costs, expenses, and obligations paid or incurred in connection with
investigating, preparing for and defending or participating in the defense of
(including on appeal) any Claim relating to any Indemnifiable Event)
(collectively "Expenses"), judgments, fines, penalties and amounts paid in
settlement (including all interest, assessments and other charges paid or
payable in connection with or in respect of such judgments, fines, penalties
or amounts paid in settlement) of such Claim and, if so requested by
Indemnitee, the Company shall advance (within two business days of such
request) any and all such Expenses to Indemnitee; provided, however, that (i)
the foregoing obligation of the Company shall not apply to a Claim that was
commenced by the Indemnitee without the prior approval of the Board of
Directors of the Company unless the Claim was commenced after a Change in
Control (as defined in Section 5 herein); (ii) the foregoing obligation of
the Company shall be subject to the condition that an appropriate person or
body (the "Reviewing Party") shall not have determined (in a written opinion
in any case in which the special, independent counsel referred to in Section 4
hereof is involved) that Indemnitee would not be permitted to be indemnified
for such Expenses under applicable law; and (iii) if, when and to the extent
that the Reviewing Party determines that Indemnitee would not be permitted to
be indemnified for such Expenses under applicable law, the Company shall be
entitled to be reimbursed by Indemnitee (who hereby agrees to reimburse the
Company) for all such amounts theretofore paid (unless Indemnitee has
commenced legal proceedings in a court of competent jurisdiction to secure a
determination that Indemnitee should be indemnified under applicable law, in
which event Indemnitee shall not be required to so reimburse the Company until
a final judicial determination requiring such reimbursement is made with
respect thereto as to which all rights of appeal therefrom have been exhausted
or lapsed) and the Company shall not be obligated to indemnify or advance any
additional amounts to Indemnitee under this Agreement (unless there has been a
determination by a court of competent jurisdiction that the Indemnitee would
be permitted to be so indemnified or entitled to such expense advances under
applicable law).
2. If there has not been a Change in Control of the Company (as
hereinafter defined), the Reviewing Party shall be (1) quorum of the Board of
Directors consisting of directors who are not parties to the action, suit or
proceeding acting by majority vote, or, (2) if such a quorum is not
obtainable, or, even if obtainable, a quorum of disinterested directors so
directs, independent legal counsel by the use of a written opinion or (3) the
stockholders. If there has been a Change in Control of the Company, the
Reviewing Party shall be the special, independent counsel referred to in
Section 4 hereof.
3. If Indemnitee has not been indemnified by the expiration of the
foregoing thirty-day period or received expense advances or if the Reviewing
Party determines that Indemnitee would not be permitted to be indemnified or
be entitled to receive expense advances within two days of the request
therefor in whole or in part under applicable law, Indemnitee shall have the
right to commence litigation seeking from the court a finding that Indemnitee
is entitled to indemnification and expense advances or enforcement of
Indemnitee's entitlement to indemnification and expense advances or
challenging any determination by the Reviewing Party or any aspect thereof
that Indemnitee is not entitled to be indemnified or receive expense advances
and the burden of proving that indemnification or advancement of expenses is
not appropriate shall be on the Company; any determination by the Reviewing
Party in favor of Indemnitee shall be conclusive and binding on the Company,
unless facts supplied by Indemnitee which form the basis for the determination
are subsequently determined to have been materially incorrect at the time
supplied. Indemnitee agrees to bring any such litigation in any court in the
States of Texas having subject matter jurisdiction thereof and in which venue
is proper, and the Company hereby consents to service of process and to appear
in any such proceeding.
4. The Company agrees that if there is a Change in Control of the Company
(as hereinafter defined), then with respect to all matters thereafter arising
concerning the rights of Indemnitee to indemnity payments and expense advances
under this Agreement or any other agreement or By-laws now or hereafter in
effect relating to Claims for Indemnifiable Events, the Company shall seek
legal advice only from special, independent counsel selected by Indemnitee who
a majority of the disinterested Directors approves (which approval shall not
be unreasonably withheld), and who has not otherwise performed services for
the Company or Indemnitee. Such counsel, among other things, shall determine
whether and to what extent Indemnitee is permitted to be indemnified or is
entitled to expense advances under applicable law and shall render its written
opinion to the Company and Indemnitee to such effect. The Company agrees to
pay the reasonable fees of the special, independent counsel referred to above
and to fully indemnify such counsel against any and all expenses (including
attorney's fees), claims, liabilities and damages arising out of or relating
to this Agreement or its engagement pursuant hereto except for willful
misconduct or gross negligence.
5. For purposes of this Agreement, (a) "Change in Control of the Company"
shall be deemed to have occurred if (i) any "person" (as such term is used in
Sections 13(d)(3) and 14(d) of the Securities Exchange Act of 1934, as
amended), other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company, is or becomes the beneficial owner (as
defined in Rule 13d-3 under said Act), directly or indirectly, of securities
of the Company representing 20% or more of the combined voting power of the
Company's then outstanding securities, or (ii) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board of Directors of the Company and any new director whose election by
the Board of Directors or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the beginning of
the period or whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority thereof, or (iii) the
stockholders of the Company approve a merger or consolidation of the Company
with any other corporation, other than a merger or consolidation which would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least 80% of the
combined voting power of the voting securities of the Company of such
surviving entity outstanding immediately after such merger or consolidation,
or if the stockholders of the Company approve a plan of complete liquidation
of the Company or an agreement for the sale or disposition by the Company of
all or substantially all the Company's assets.
6. To the extent Indemnitee is successful in such proceeding, the Company
shall indemnify Indemnitee against any and all expenses (including attorney's
fees) which are incurred by the Indemnitee in connection with any claim
asserted or action brought by Indemnitee for (i) indemnification or advance
payment of Expenses by the Company under this Agreement or any other agreement
or Company By-laws now or hereafter in effect relating to Claims for
Indemnifiable Events and/or (ii) recovery under any directors' and officers'
liability insurance policies maintained by the Company, regardless of whether
Indemnitee ultimately is determined to be entitled to such indemnification,
advance payment of Expenses or insurance recovery, as the case may be.
7. If Indemnitee is entitled under any provision of this Agreement to
indemnification by the Company for some or a portion of the Expenses,
judgments, fines, penalties and amounts paid in settlement of any Claim but
not, however, for all of the total amount thereof, the Company shall
nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee
is entitled. Notwithstanding any other provision of this Agreement, to the
extent that Indemnitee has been successful on the merits or otherwise in the
defense of any Claim relating in whole or in part to any Indemnifiable Event
or in defense of any issue or matter therein, including dismissal without
prejudice, Indemnitee shall be indemnified against all Expenses incurred in
connection therewith.
8. For purposes of this Agreement, the termination of any Claim by
judgment, order, settlement (whether with or without court approval) or
conviction, or upon a plea of nolo contendere, or its equivalent, shall not
create a presumption that Indemnitee did not meet any particular standard of
conduct or have any particular belief or that a court has determined that
Indemnitee is not entitled to indemnification or expense advance or that
indemnification or expense advance is not permitted by applicable law.
9. The Company hereby agrees that, so long as Indemnitee shall continue to
serve in a capacity referred to in Section 1 hereof, and thereafter so long as
Indemnitee shall be subject to any possible claim or threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that Indemnitee served in any capacity
referred to in Section 1 hereof, the Company shall maintain in effect for the
benefit of Indemnitee any Directors' and Officers' Liability Insurance
presently in force and effect, providing, in all respects, coverage at least
comparable to that presently provided; provided, however, if, in the business
judgment of the then Board, either (a) the premium cost for such insurance is
substantially disproportionate to the amount of coverage, or (b) the coverage
provided by such insurance is so limited by exclusions that there is
insufficient benefit from such insurance, then and in that event the Company
shall not be required to maintain such insurance but shall and hereby agrees
to the full extent permitted by law to hold harmless and indemnify Indemnitee
to the fullest extent of the coverage which would otherwise have been provided
for the benefit of Indemnitee.
10. (a) In the event of any changes after the date of this Agreement
in any applicable law, statute, or rule which expands the right of the Company
to indemnify a person serving in a capacity referred to in Section 1 hereof,
such change shall be within the purview of Indemnitee's rights, and the
Company's obligations, under this Agreement. In the event of any changes in
any applicable law, statute, or rule which narrow the right of the Company to
indemnify a person serving in a capacity referred to in Section 1 hereof, such
changes, to the extent not otherwise required by such law, statute or rule to
be applied to this Agreement, shall have no effect on this Agreement or the
parties' rights and obligations hereunder.
(b) The indemnification provided by this Agreement shall not be deemed
exclusive of any rights to which Indemnitee may be entitled under the
Company's Certificate of Incorporation, its By-laws, any agreement, any vote
of stockholders or disinterested directors, laws and regulations in effect now
or in the future, or otherwise, both as to action in Indemnitee's official
capacity and as to action in another capacity while holding such office.
11. If the indemnification provided in Section 1 is unavailable and may
not be paid to Indemnitee because such indemnification is not permitted by
law, then in respect of any threatened, pending or completed action, suit or
proceeding in which the Company is jointly liable with Indemnitee (or would be
if joined in such action, suit or proceeding), the Company shall contribute to
the full extent permitted by law, to the amount of expenses, judgments, fines
(including excise taxes and penalties) and amounts paid in settlement actually
and reasonably incurred and paid or payable by Indemnitee in such proportion
as is appropriate to reflect (i) the relative benefits received by the Company
on the one hand and Indemnitee on the other hand from the transaction from
which such action, suit or proceeding arose, and (ii) the relative fault of
the Company on the one hand and of Indemnitee on the other in connection with
the events which resulted in such expenses, judgments, fines or settlement
amounts, as well as any other relevant equitable considerations. The relative
fault of the Company on the one hand and of Indemnitee on the other shall be
determined by reference to among other things, the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent the
circumstances resulting in such expenses, judgments, fines or settlement
amounts. The Company agrees that it would not be just and equitable if
contribution pursuant to this paragraph were determined by pro rata allocation
or any other method of allocation which does not take account of the foregoing
equitable considerations.
12. All obligations of the Company contained herein shall continue during
the period Indemnitee serves in a capacity referred to in Section 1 hereof of
the Company and shall continue thereafter so long as Indemnitee shall be
subject to any possible Claim relating to an Indemnifiable Event.
13. (a) Promptly after receipt by Indemnitee of notice of the
commencement of any Claim relating to an Indemnifiable Event or proceeding in
which Indemnitee is made or is threatened to be made a party or a witness,
Indemnitee shall notify the Company of the commencement of such Claim; but the
omission so to notify the Company shall not relieve the Company from any
obligation it may have to indemnify or advance expenses to Indemnitee
otherwise than under this Agreement.
(b) Indemnitee shall not settle any claim or action in any manner which
would impose on the Company any penalty, constraint, or obligation to hold
harmless or indemnify Indemnitee pursuant to this Agreement without the
Company's prior written consent, which consent shall not be unreasonably
withheld.
14. If any Claim relating to an Indemnifiable Event, commenced against
Indemnitee is also commenced against the Company, the Company shall be
entitled to participate therein at its own expense, and, except as otherwise
provided hereinbelow, to the extent that it may wish, the Company shall be
entitled to assume the defense thereof. After notice from the Company to
Indemnitee of its election to assume the defense of any Claim, the Company
shall not be obligated to Indemnitee under this Agreement for any legal or
other expenses subsequently incurred by Indemnitee in connection with the
defense thereof other than reasonable costs of investigation, travel, and
lodging expenses arising out of Indemnitee's participation in such Claim.
Indemnitee shall have the right to employ Indemnitee's own counsel in such
Claim, but the fees and expenses of such counsel incurred after notice from
the Company to Indemnitee of its assumption of the defense thereof shall be at
the expense of Indemnitee unless (i) otherwise authorized by the Company, (ii)
Indemnitee shall have reasonably concluded, and so notified the Company, that
there may be a conflict of interest between the Company and Indemnitee in the
conduct of the defense of such Claim, or (iii) the Company shall not in fact
have employed counsel to assume the defense of such Claim, in which cases the
fees and expenses of Indemnitee's counsel shall be at the expense of the
Company. The Company shall not be entitled to assume the defense of any Claim
brought by or on behalf of the Company or its stockholders or as to which
Indemnitee shall have made the conclusion set forth in (ii) of this Section
14.
15. No supplement, modification or amendment of this Agreement shall be
binding unless executed in writing by both of the parties hereto. No waiver
of any of the provisions of this Agreement shall be deemed or shall constitute
a waiver of any other provisions hereof (whether or not similar) nor shall
such waiver constitute a continuing waiver.
16. In the event of payment under this Agreement, the Company shall be
subrogated to the extent of such payment to all of the rights of recovery of
Indemnitee, who shall execute all papers required and shall do everything that
may be necessary to secure such rights, including the execution of such
documents necessary to enable the Company effectively to bring suit to enforce
such rights.
17. The Company shall not be liable under this Agreement to make any
payment in connection with any claim made against Indemnitee to the extent
Indemnitee has otherwise actually received payment (under any insurance
policy, By-law or otherwise) of the amounts otherwise indemnifiable hereunder.
18. This Agreement shall be binding upon and inure to the benefit of and
be enforceable by the parties hereto and their respective successors, assigns,
including any direct or indirect successor by purchase, merger, consolidation
or otherwise to all or substantially all of the business and/or assets of the
Company, spouses, heirs, executors, and personal and legal representatives.
This Agreement shall continue in effect regardless of whether Indemnitee
continues to serve as an officer or director of the Company or of any other
enterprise at the Company's request.
19. The provisions of this Agreement shall be severable in the event that
any of the provisions hereof (including any provision within a single section,
paragraph or sentence) are held by a court of competent jurisdiction to be
invalid, void or otherwise unenforceable, and the remaining provisions shall
remain enforceable to the full extent permitted by law.
20. This Agreement shall be governed by and construed in accordance with
the laws of the State of Texas applicable to contracts made and to be
performed in such state, but excluding any conflicts-of-law rule or principle
which might refer such governance, construction or enforcement to the laws of
another state or country.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
and as of the day and year first above written.
AGRI BIO-SCIENCES, INC.
By: /s/Lester H. Stephens
-----------------------
Lester H. Stephens, President
INDEMNITEE
/s/ Patrick N. Morgan
- ------------------------
Patrick N. Morgan
Exhibit 10.4 - Page 5
EXHIBIT 10.4
FORM OF INDEMNIFICATION AGREEMENT BETWEEN
THE COMPANY AND ANTHONY A. MIERZWA
INDEMNIFICATION AGREEMENT
AGREEMENT, effective as of January 7, 1998, between Agri Bio-Sciences,
Inc., a Delaware corporation (the "Company"), and Anthony A. Mierzwa
("Indemnitee").
WHEREAS, Indemnitee is a director (or officer) of the Company;
WHEREAS, both the Company and Indemnitee recognize the increased risk of
litigation and other claims being asserted against directors and officers of
public companies at a time when it has become increasingly difficult to obtain
adequate insurance coverage at reasonable costs;
WHEREAS, in recognition of Indemnitees need for substantial protection
against personal liability in order to enhance Indemnitees continued service
to the Company in an effective manner, the Company wishes to provide in this
Agreement for the identification of and the advancing of expenses to
Indemnitee to the full extent (whether partial or complete) permitted by law
and as set forth in this Agreement, and, to the extent insurance is
maintained, for the continued coverage of Indemnitee under the Company's
directors' and officers' liability insurance policies, regardless of any
future change in the Certificate of Incorporation, By-Laws, composition of the
Board of Directors, or structure of the Company.;
NOW, THEREFORE, in consideration of the premises and of Indemnitee's
service to the Company, directly or indirectly, and intending to be legally
bound hereby, the parties hereto agree as follows:
1. In the event Indemnitee was, is, or becomes a party to or a witness or
other participant in, or is threatened to be made a party to or a witness or
other participant in, any threatened, pending or completed action, suit or
proceeding, or any inquiry or investigation, whether conducted by the Company
or any other party, that Indemnitee in good faith believes might lead to any
such action, suit or proceeding, whether civil, criminal, administrative,
investigative or otherwise (a "Claim") by reason of (or arising in part out
of) the fact that Indemnitee is or was a director, officer, employee, agent or
fiduciary of the Company, or is or was serving at the request of the Company
as a director, officer, employee, trustee, agent or fiduciary of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, or by reason of anything done or not done by Indemnitee in any
such capacity (an "Indemnifiable Event"), the Company shall indemnify
Indemnitee to the full extent permitted by law (the determination of which
shall be made by the Reviewing Party referred to below) as soon as practicable
but in any event no later than thirty days after written demand is presented
to the Company, against any and all expenses (including attorneys' fees and
all other costs, expenses, and obligations paid or incurred in connection with
investigating, preparing for and defending or participating in the defense of
(including on appeal) any Claim relating to any Indemnifiable Event)
(collectively "Expenses"), judgments, fines, penalties and amounts paid in
settlement (including all interest, assessments and other charges paid or
payable in connection with or in respect of such judgments, fines, penalties
or amounts paid in settlement) of such Claim and, if so requested by
Indemnitee, the Company shall advance (within two business days of such
request) any and all such Expenses to Indemnitee; provided, however, that (i)
the foregoing obligation of the Company shall not apply to a Claim that was
commenced by the Indemnitee without the prior approval of the Board of
Directors of the Company unless the Claim was commenced after a Change in
Control (as defined in Section 5 herein); (ii) the foregoing obligation of
the Company shall be subject to the condition that an appropriate person or
body (the "Reviewing Party") shall not have determined (in a written opinion
in any case in which the special, independent counsel referred to in Section 4
hereof is involved) that Indemnitee would not be permitted to be indemnified
for such Expenses under applicable law; and (iii) if, when and to the extent
that the Reviewing Party determines that Indemnitee would not be permitted to
be indemnified for such Expenses under applicable law, the Company shall be
entitled to be reimbursed by Indemnitee (who hereby agrees to reimburse the
Company) for all such amounts theretofore paid (unless Indemnitee has
commenced legal proceedings in a court of competent jurisdiction to secure a
determination that Indemnitee should be indemnified under applicable law, in
which event Indemnitee shall not be required to so reimburse the Company until
a final judicial determination requiring such reimbursement is made with
respect thereto as to which all rights of appeal therefrom have been exhausted
or lapsed) and the Company shall not be obligated to indemnify or advance any
additional amounts to Indemnitee under this Agreement (unless there has been a
determination by a court of competent jurisdiction that the Indemnitee would
be permitted to be so indemnified or entitled to such expense advances under
applicable law).
2. If there has not been a Change in Control of the Company (as
hereinafter defined), the Reviewing Party shall be (1) quorum of the Board of
Directors consisting of directors who are not parties to the action, suit or
proceeding acting by majority vote, or, (2) if such a quorum is not
obtainable, or, even if obtainable, a quorum of disinterested directors so
directs, independent legal counsel by the use of a written opinion or (3) the
stockholders. If there has been a Change in Control of the Company, the
Reviewing Party shall be the special, independent counsel referred to in
Section 4 hereof.
3. If Indemnitee has not been indemnified by the expiration of the
foregoing thirty-day period or received expense advances or if the Reviewing
Party determines that Indemnitee would not be permitted to be indemnified or
be entitled to receive expense advances within two days of the request
therefor in whole or in part under applicable law, Indemnitee shall have the
right to commence litigation seeking from the court a finding that Indemnitee
is entitled to indemnification and expense advances or enforcement of
Indemnitee's entitlement to indemnification and expense advances or
challenging any determination by the Reviewing Party or any aspect thereof
that Indemnitee is not entitled to be indemnified or receive expense advances
and the burden of proving that indemnification or advancement of expenses is
not appropriate shall be on the Company; any determination by the Reviewing
Party in favor of Indemnitee shall be conclusive and binding on the Company,
unless facts supplied by Indemnitee which form the basis for the determination
are subsequently determined to have been materially incorrect at the time
supplied. Indemnitee agrees to bring any such litigation in any court in the
States of Texas having subject matter jurisdiction thereof and in which venue
is proper, and the Company hereby consents to service of process and to appear
in any such proceeding.
4. The Company agrees that if there is a Change in Control of the Company
(as hereinafter defined), then with respect to all matters thereafter arising
concerning the rights of Indemnitee to indemnity payments and expense advances
under this Agreement or any other agreement or By-laws now or hereafter in
effect relating to Claims for Indemnifiable Events, the Company shall seek
legal advice only from special, independent counsel selected by Indemnitee who
a majority of the disinterested Directors approves (which approval shall not
be unreasonably withheld), and who has not otherwise performed services for
the Company or Indemnitee. Such counsel, among other things, shall determine
whether and to what extent Indemnitee is permitted to be indemnified or is
entitled to expense advances under applicable law and shall render its written
opinion to the Company and Indemnitee to such effect. The Company agrees to
pay the reasonable fees of the special, independent counsel referred to above
and to fully indemnify such counsel against any and all expenses (including
attorney's fees), claims, liabilities and damages arising out of or relating
to this Agreement or its engagement pursuant hereto except for willful
misconduct or gross negligence.
5. For purposes of this Agreement, (a) "Change in Control of the Company"
shall be deemed to have occurred if (i) any "person" (as such term is used in
Sections 13(d)(3) and 14(d) of the Securities Exchange Act of 1934, as
amended), other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company, is or becomes the beneficial owner (as
defined in Rule 13d-3 under said Act), directly or indirectly, of securities
of the Company representing 20% or more of the combined voting power of the
Company's then outstanding securities, or (ii) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board of Directors of the Company and any new director whose election by
the Board of Directors or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the beginning of
the period or whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority thereof, or (iii) the
stockholders of the Company approve a merger or consolidation of the Company
with any other corporation, other than a merger or consolidation which would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least 80% of the
combined voting power of the voting securities of the Company of such
surviving entity outstanding immediately after such merger or consolidation,
or if the stockholders of the Company approve a plan of complete liquidation
of the Company or an agreement for the sale or disposition by the Company of
all or substantially all the Company's assets.
6. To the extent Indemnitee is successful in such proceeding, the Company
shall indemnify Indemnitee against any and all expenses (including attorney's
fees) which are incurred by the Indemnitee in connection with any claim
asserted or action brought by Indemnitee for (i) indemnification or advance
payment of Expenses by the Company under this Agreement or any other agreement
or Company By-laws now or hereafter in effect relating to Claims for
Indemnifiable Events and/or (ii) recovery under any directors' and officers'
liability insurance policies maintained by the Company, regardless of whether
Indemnitee ultimately is determined to be entitled to such indemnification,
advance payment of Expenses or insurance recovery, as the case may be.
7. If Indemnitee is entitled under any provision of this Agreement to
indemnification by the Company for some or a portion of the Expenses,
judgments, fines, penalties and amounts paid in settlement of any Claim but
not, however, for all of the total amount thereof, the Company shall
nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee
is entitled. Notwithstanding any other provision of this Agreement, to the
extent that Indemnitee has been successful on the merits or otherwise in the
defense of any Claim relating in whole or in part to any Indemnifiable Event
or in defense of any issue or matter therein, including dismissal without
prejudice, Indemnitee shall be indemnified against all Expenses incurred in
connection therewith.
8. For purposes of this Agreement, the termination of any Claim by
judgment, order, settlement (whether with or without court approval) or
conviction, or upon a plea of nolo contendere, or its equivalent, shall not
create a presumption that Indemnitee did not meet any particular standard of
conduct or have any particular belief or that a court has determined that
Indemnitee is not entitled to indemnification or expense advance or that
indemnification or expense advance is not permitted by applicable law.
9. The Company hereby agrees that, so long as Indemnitee shall continue to
serve in a capacity referred to in Section 1 hereof, and thereafter so long as
Indemnitee shall be subject to any possible claim or threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that Indemnitee served in any capacity
referred to in Section 1 hereof, the Company shall maintain in effect for the
benefit of Indemnitee any Directors' and Officers' Liability Insurance
presently in force and effect, providing, in all respects, coverage at least
comparable to that presently provided; provided, however, if, in the business
judgment of the then Board, either (a) the premium cost for such insurance is
substantially disproportionate to the amount of coverage, or (b) the coverage
provided by such insurance is so limited by exclusions that there is
insufficient benefit from such insurance, then and in that event the Company
shall not be required to maintain such insurance but shall and hereby agrees
to the full extent permitted by law to hold harmless and indemnify Indemnitee
to the fullest extent of the coverage which would otherwise have been provided
for the benefit of Indemnitee.
10. (a) In the event of any changes after the date of this Agreement
in any applicable law, statute, or rule which expands the right of the Company
to indemnify a person serving in a capacity referred to in Section 1 hereof,
such change shall be within the purview of Indemnitee's rights, and the
Company's obligations, under this Agreement. In the event of any changes in
any applicable law, statute, or rule which narrow the right of the Company to
indemnify a person serving in a capacity referred to in Section 1 hereof, such
changes, to the extent not otherwise required by such law, statute or rule to
be applied to this Agreement, shall have no effect on this Agreement or the
parties' rights and obligations hereunder.
(b) The indemnification provided by this Agreement shall not be deemed
exclusive of any rights to which Indemnitee may be entitled under the
Company's Certificate of Incorporation, its By-laws, any agreement, any vote
of stockholders or disinterested directors, laws and regulations in effect now
or in the future, or otherwise, both as to action in Indemnitee's official
capacity and as to action in another capacity while holding such office.
11. If the indemnification provided in Section 1 is unavailable and may
not be paid to Indemnitee because such indemnification is not permitted by
law, then in respect of any threatened, pending or completed action, suit or
proceeding in which the Company is jointly liable with Indemnitee (or would be
if joined in such action, suit or proceeding), the Company shall contribute to
the full extent permitted by law, to the amount of expenses, judgments, fines
(including excise taxes and penalties) and amounts paid in settlement actually
and reasonably incurred and paid or payable by Indemnitee in such proportion
as is appropriate to reflect (i) the relative benefits received by the Company
on the one hand and Indemnitee on the other hand from the transaction from
which such action, suit or proceeding arose, and (ii) the relative fault of
the Company on the one hand and of Indemnitee on the other in connection with
the events which resulted in such expenses, judgments, fines or settlement
amounts, as well as any other relevant equitable considerations. The relative
fault of the Company on the one hand and of Indemnitee on the other shall be
determined by reference to among other things, the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent the
circumstances resulting in such expenses, judgments, fines or settlement
amounts. The Company agrees that it would not be just and equitable if
contribution pursuant to this paragraph were determined by pro rata allocation
or any other method of allocation which does not take account of the foregoing
equitable considerations.
12. All obligations of the Company contained herein shall continue during
the period Indemnitee serves in a capacity referred to in Section 1 hereof of
the Company and shall continue thereafter so long as Indemnitee shall be
subject to any possible Claim relating to an Indemnifiable Event.
13. (a) Promptly after receipt by Indemnitee of notice of the
commencement of any Claim relating to an Indemnifiable Event or proceeding in
which Indemnitee is made or is threatened to be made a party or a witness,
Indemnitee shall notify the Company of the commencement of such Claim; but the
omission so to notify the Company shall not relieve the Company from any
obligation it may have to indemnify or advance expenses to Indemnitee
otherwise than under this Agreement.
(b) Indemnitee shall not settle any claim or action in any manner which
would impose on the Company any penalty, constraint, or obligation to hold
harmless or indemnify Indemnitee pursuant to this Agreement without the
Company's prior written consent, which consent shall not be unreasonably
withheld.
14. If any Claim relating to an Indemnifiable Event, commenced against
Indemnitee is also commenced against the Company, the Company shall be
entitled to participate therein at its own expense, and, except as otherwise
provided hereinbelow, to the extent that it may wish, the Company shall be
entitled to assume the defense thereof. After notice from the Company to
Indemnitee of its election to assume the defense of any Claim, the Company
shall not be obligated to Indemnitee under this Agreement for any legal or
other expenses subsequently incurred by Indemnitee in connection with the
defense thereof other than reasonable costs of investigation, travel, and
lodging expenses arising out of Indemnitee's participation in such Claim.
Indemnitee shall have the right to employ Indemnitee's own counsel in such
Claim, but the fees and expenses of such counsel incurred after notice from
the Company to Indemnitee of its assumption of the defense thereof shall be at
the expense of Indemnitee unless (i) otherwise authorized by the Company, (ii)
Indemnitee shall have reasonably concluded, and so notified the Company, that
there may be a conflict of interest between the Company and Indemnitee in the
conduct of the defense of such Claim, or (iii) the Company shall not in fact
have employed counsel to assume the defense of such Claim, in which cases the
fees and expenses of Indemnitee's counsel shall be at the expense of the
Company. The Company shall not be entitled to assume the defense of any Claim
brought by or on behalf of the Company or its stockholders or as to which
Indemnitee shall have made the conclusion set forth in (ii) of this Section
14.
15. No supplement, modification or amendment of this Agreement shall be
binding unless executed in writing by both of the parties hereto. No waiver
of any of the provisions of this Agreement shall be deemed or shall constitute
a waiver of any other provisions hereof (whether or not similar) nor shall
such waiver constitute a continuing waiver.
16. In the event of payment under this Agreement, the Company shall be
subrogated to the extent of such payment to all of the rights of recovery of
Indemnitee, who shall execute all papers required and shall do everything that
may be necessary to secure such rights, including the execution of such
documents necessary to enable the Company effectively to bring suit to enforce
such rights.
17. The Company shall not be liable under this Agreement to make any
payment in connection with any claim made against Indemnitee to the extent
Indemnitee has otherwise actually received payment (under any insurance
policy, By-law or otherwise) of the amounts otherwise indemnifiable hereunder.
18. This Agreement shall be binding upon and inure to the benefit of and
be enforceable by the parties hereto and their respective successors, assigns,
including any direct or indirect successor by purchase, merger, consolidation
or otherwise to all or substantially all of the business and/or assets of the
Company, spouses, heirs, executors, and personal and legal representatives.
This Agreement shall continue in effect regardless of whether Indemnitee
continues to serve as an officer or director of the Company or of any other
enterprise at the Company's request.
19. The provisions of this Agreement shall be severable in the event that
any of the provisions hereof (including any provision within a single section,
paragraph or sentence) are held by a court of competent jurisdiction to be
invalid, void or otherwise unenforceable, and the remaining provisions shall
remain enforceable to the full extent permitted by law.
20. This Agreement shall be governed by and construed in accordance with
the laws of the State of Texas applicable to contracts made and to be
performed in such state, but excluding any conflicts-of-law rule or principle
which might refer such governance, construction or enforcement to the laws of
another state or country.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
and as of the day and year first above written.
AGRI BIO-SCIENCES, INC.
By: /s/Lester H. Stephens
-----------------------
Lester H. Stephens, President
INDEMNITEE
/s/ Anthony A. Mierzwa
- -------------------------
Anthony A. Mierzwa
Exhibit 10.5 - Page 5
EXHIBIT 10.5
FORM OF INDEMNIFICATION AGREEMENT BETWEEN
THE COMPANY AND LESLIE L. LEMAK, M.D.
INDEMNIFICATION AGREEMENT
AGREEMENT, effective as of January 7, 1998, between Agri Bio-Sciences,
Inc., a Delaware corporation (the "Company"), and Leslie L. Lemak, M.D.
("Indemnitee").
WHEREAS, Indemnitee is a director (or officer) of the Company;
WHEREAS, both the Company and Indemnitee recognize the increased risk of
litigation and other claims being asserted against directors and officers of
public companies at a time when it has become increasingly difficult to obtain
adequate insurance coverage at reasonable costs;
WHEREAS, in recognition of Indemnitees need for substantial protection
against personal liability in order to enhance Indemnitees continued service
to the Company in an effective manner, the Company wishes to provide in this
Agreement for the identification of and the advancing of expenses to
Indemnitee to the full extent (whether partial or complete) permitted by law
and as set forth in this Agreement, and, to the extent insurance is
maintained, for the continued coverage of Indemnitee under the Company's
directors' and officers' liability insurance policies, regardless of any
future change in the Certificate of Incorporation, By-Laws, composition of the
Board of Directors, or structure of the Company.;
NOW, THEREFORE, in consideration of the premises and of Indemnitee's
service to the Company, directly or indirectly, and intending to be legally
bound hereby, the parties hereto agree as follows:
1. In the event Indemnitee was, is, or becomes a party to or a witness or
other participant in, or is threatened to be made a party to or a witness or
other participant in, any threatened, pending or completed action, suit or
proceeding, or any inquiry or investigation, whether conducted by the Company
or any other party, that Indemnitee in good faith believes might lead to any
such action, suit or proceeding, whether civil, criminal, administrative,
investigative or otherwise (a "Claim") by reason of (or arising in part out
of) the fact that Indemnitee is or was a director, officer, employee, agent or
fiduciary of the Company, or is or was serving at the request of the Company
as a director, officer, employee, trustee, agent or fiduciary of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, or by reason of anything done or not done by Indemnitee in any
such capacity (an "Indemnifiable Event"), the Company shall indemnify
Indemnitee to the full extent permitted by law (the determination of which
shall be made by the Reviewing Party referred to below) as soon as practicable
but in any event no later than thirty days after written demand is presented
to the Company, against any and all expenses (including attorneys' fees and
all other costs, expenses, and obligations paid or incurred in connection with
investigating, preparing for and defending or participating in the defense of
(including on appeal) any Claim relating to any Indemnifiable Event)
(collectively "Expenses"), judgments, fines, penalties and amounts paid in
settlement (including all interest, assessments and other charges paid or
payable in connection with or in respect of such judgments, fines, penalties
or amounts paid in settlement) of such Claim and, if so requested by
Indemnitee, the Company shall advance (within two business days of such
request) any and all such Expenses to Indemnitee; provided, however, that (i)
the foregoing obligation of the Company shall not apply to a Claim that was
commenced by the Indemnitee without the prior approval of the Board of
Directors of the Company unless the Claim was commenced after a Change in
Control (as defined in Section 5 herein); (ii) the foregoing obligation of
the Company shall be subject to the condition that an appropriate person or
body (the "Reviewing Party") shall not have determined (in a written opinion
in any case in which the special, independent counsel referred to in Section 4
hereof is involved) that Indemnitee would not be permitted to be indemnified
for such Expenses under applicable law; and (iii) if, when and to the extent
that the Reviewing Party determines that Indemnitee would not be permitted to
be indemnified for such Expenses under applicable law, the Company shall be
entitled to be reimbursed by Indemnitee (who hereby agrees to reimburse the
Company) for all such amounts theretofore paid (unless Indemnitee has
commenced legal proceedings in a court of competent jurisdiction to secure a
determination that Indemnitee should be indemnified under applicable law, in
which event Indemnitee shall not be required to so reimburse the Company until
a final judicial determination requiring such reimbursement is made with
respect thereto as to which all rights of appeal therefrom have been exhausted
or lapsed) and the Company shall not be obligated to indemnify or advance any
additional amounts to Indemnitee under this Agreement (unless there has been a
determination by a court of competent jurisdiction that the Indemnitee would
be permitted to be so indemnified or entitled to such expense advances under
applicable law).
2. If there has not been a Change in Control of the Company (as
hereinafter defined), the Reviewing Party shall be (1) quorum of the Board of
Directors consisting of directors who are not parties to the action, suit or
proceeding acting by majority vote, or, (2) if such a quorum is not
obtainable, or, even if obtainable, a quorum of disinterested directors so
directs, independent legal counsel by the use of a written opinion or (3) the
stockholders. If there has been a Change in Control of the Company, the
Reviewing Party shall be the special, independent counsel referred to in
Section 4 hereof.
3. If Indemnitee has not been indemnified by the expiration of the
foregoing thirty-day period or received expense advances or if the Reviewing
Party determines that Indemnitee would not be permitted to be indemnified or
be entitled to receive expense advances within two days of the request
therefor in whole or in part under applicable law, Indemnitee shall have the
right to commence litigation seeking from the court a finding that Indemnitee
is entitled to indemnification and expense advances or enforcement of
Indemnitee's entitlement to indemnification and expense advances or
challenging any determination by the Reviewing Party or any aspect thereof
that Indemnitee is not entitled to be indemnified or receive expense advances
and the burden of proving that indemnification or advancement of expenses is
not appropriate shall be on the Company; any determination by the Reviewing
Party in favor of Indemnitee shall be conclusive and binding on the Company,
unless facts supplied by Indemnitee which form the basis for the determination
are subsequently determined to have been materially incorrect at the time
supplied. Indemnitee agrees to bring any such litigation in any court in the
States of Texas having subject matter jurisdiction thereof and in which venue
is proper, and the Company hereby consents to service of process and to appear
in any such proceeding.
4. The Company agrees that if there is a Change in Control of the Company
(as hereinafter defined), then with respect to all matters thereafter arising
concerning the rights of Indemnitee to indemnity payments and expense advances
under this Agreement or any other agreement or By-laws now or hereafter in
effect relating to Claims for Indemnifiable Events, the Company shall seek
legal advice only from special, independent counsel selected by Indemnitee who
a majority of the disinterested Directors approves (which approval shall not
be unreasonably withheld), and who has not otherwise performed services for
the Company or Indemnitee. Such counsel, among other things, shall determine
whether and to what extent Indemnitee is permitted to be indemnified or is
entitled to expense advances under applicable law and shall render its written
opinion to the Company and Indemnitee to such effect. The Company agrees to
pay the reasonable fees of the special, independent counsel referred to above
and to fully indemnify such counsel against any and all expenses (including
attorney's fees), claims, liabilities and damages arising out of or relating
to this Agreement or its engagement pursuant hereto except for willful
misconduct or gross negligence.
5. For purposes of this Agreement, (a) "Change in Control of the Company"
shall be deemed to have occurred if (i) any "person" (as such term is used in
Sections 13(d)(3) and 14(d) of the Securities Exchange Act of 1934, as
amended), other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company, is or becomes the beneficial owner (as
defined in Rule 13d-3 under said Act), directly or indirectly, of securities
of the Company representing 20% or more of the combined voting power of the
Company's then outstanding securities, or (ii) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board of Directors of the Company and any new director whose election by
the Board of Directors or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the beginning of
the period or whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority thereof, or (iii) the
stockholders of the Company approve a merger or consolidation of the Company
with any other corporation, other than a merger or consolidation which would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least 80% of the
combined voting power of the voting securities of the Company of such
surviving entity outstanding immediately after such merger or consolidation,
or if the stockholders of the Company approve a plan of complete liquidation
of the Company or an agreement for the sale or disposition by the Company of
all or substantially all the Company's assets.
6. To the extent Indemnitee is successful in such proceeding, the Company
shall indemnify Indemnitee against any and all expenses (including attorney's
fees) which are incurred by the Indemnitee in connection with any claim
asserted or action brought by Indemnitee for (i) indemnification or advance
payment of Expenses by the Company under this Agreement or any other agreement
or Company By-laws now or hereafter in effect relating to Claims for
Indemnifiable Events and/or (ii) recovery under any directors' and officers'
liability insurance policies maintained by the Company, regardless of whether
Indemnitee ultimately is determined to be entitled to such indemnification,
advance payment of Expenses or insurance recovery, as the case may be.
7. If Indemnitee is entitled under any provision of this Agreement to
indemnification by the Company for some or a portion of the Expenses,
judgments, fines, penalties and amounts paid in settlement of any Claim but
not, however, for all of the total amount thereof, the Company shall
nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee
is entitled. Notwithstanding any other provision of this Agreement, to the
extent that Indemnitee has been successful on the merits or otherwise in the
defense of any Claim relating in whole or in part to any Indemnifiable Event
or in defense of any issue or matter therein, including dismissal without
prejudice, Indemnitee shall be indemnified against all Expenses incurred in
connection therewith.
8. For purposes of this Agreement, the termination of any Claim by
judgment, order, settlement (whether with or without court approval) or
conviction, or upon a plea of nolo contendere, or its equivalent, shall not
create a presumption that Indemnitee did not meet any particular standard of
conduct or have any particular belief or that a court has determined that
Indemnitee is not entitled to indemnification or expense advance or that
indemnification or expense advance is not permitted by applicable law.
9. The Company hereby agrees that, so long as Indemnitee shall continue to
serve in a capacity referred to in Section 1 hereof, and thereafter so long as
Indemnitee shall be subject to any possible claim or threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that Indemnitee served in any capacity
referred to in Section 1 hereof, the Company shall maintain in effect for the
benefit of Indemnitee any Directors' and Officers' Liability Insurance
presently in force and effect, providing, in all respects, coverage at least
comparable to that presently provided; provided, however, if, in the business
judgment of the then Board, either (a) the premium cost for such insurance is
substantially disproportionate to the amount of coverage, or (b) the coverage
provided by such insurance is so limited by exclusions that there is
insufficient benefit from such insurance, then and in that event the Company
shall not be required to maintain such insurance but shall and hereby agrees
to the full extent permitted by law to hold harmless and indemnify Indemnitee
to the fullest extent of the coverage which would otherwise have been provided
for the benefit of Indemnitee.
10. (a) In the event of any changes after the date of this Agreement
in any applicable law, statute, or rule which expands the right of the Company
to indemnify a person serving in a capacity referred to in Section 1 hereof,
such change shall be within the purview of Indemnitee's rights, and the
Company's obligations, under this Agreement. In the event of any changes in
any applicable law, statute, or rule which narrow the right of the Company to
indemnify a person serving in a capacity referred to in Section 1 hereof, such
changes, to the extent not otherwise required by such law, statute or rule to
be applied to this Agreement, shall have no effect on this Agreement or the
parties' rights and obligations hereunder.
(b) The indemnification provided by this Agreement shall not be deemed
exclusive of any rights to which Indemnitee may be entitled under the
Company's Certificate of Incorporation, its By-laws, any agreement, any vote
of stockholders or disinterested directors, laws and regulations in effect now
or in the future, or otherwise, both as to action in Indemnitee's official
capacity and as to action in another capacity while holding such office.
11. If the indemnification provided in Section 1 is unavailable and may
not be paid to Indemnitee because such indemnification is not permitted by
law, then in respect of any threatened, pending or completed action, suit or
proceeding in which the Company is jointly liable with Indemnitee (or would be
if joined in such action, suit or proceeding), the Company shall contribute to
the full extent permitted by law, to the amount of expenses, judgments, fines
(including excise taxes and penalties) and amounts paid in settlement actually
and reasonably incurred and paid or payable by Indemnitee in such proportion
as is appropriate to reflect (i) the relative benefits received by the Company
on the one hand and Indemnitee on the other hand from the transaction from
which such action, suit or proceeding arose, and (ii) the relative fault of
the Company on the one hand and of Indemnitee on the other in connection with
the events which resulted in such expenses, judgments, fines or settlement
amounts, as well as any other relevant equitable considerations. The relative
fault of the Company on the one hand and of Indemnitee on the other shall be
determined by reference to among other things, the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent the
circumstances resulting in such expenses, judgments, fines or settlement
amounts. The Company agrees that it would not be just and equitable if
contribution pursuant to this paragraph were determined by pro rata allocation
or any other method of allocation which does not take account of the foregoing
equitable considerations.
12. All obligations of the Company contained herein shall continue during
the period Indemnitee serves in a capacity referred to in Section 1 hereof of
the Company and shall continue thereafter so long as Indemnitee shall be
subject to any possible Claim relating to an Indemnifiable Event.
13. (a) Promptly after receipt by Indemnitee of notice of the
commencement of any Claim relating to an Indemnifiable Event or proceeding in
which Indemnitee is made or is threatened to be made a party or a witness,
Indemnitee shall notify the Company of the commencement of such Claim; but the
omission so to notify the Company shall not relieve the Company from any
obligation it may have to indemnify or advance expenses to Indemnitee
otherwise than under this Agreement.
(b) Indemnitee shall not settle any claim or action in any manner which
would impose on the Company any penalty, constraint, or obligation to hold
harmless or indemnify Indemnitee pursuant to this Agreement without the
Company's prior written consent, which consent shall not be unreasonably
withheld.
14. If any Claim relating to an Indemnifiable Event, commenced against
Indemnitee is also commenced against the Company, the Company shall be
entitled to participate therein at its own expense, and, except as otherwise
provided hereinbelow, to the extent that it may wish, the Company shall be
entitled to assume the defense thereof. After notice from the Company to
Indemnitee of its election to assume the defense of any Claim, the Company
shall not be obligated to Indemnitee under this Agreement for any legal or
other expenses subsequently incurred by Indemnitee in connection with the
defense thereof other than reasonable costs of investigation, travel, and
lodging expenses arising out of Indemnitee's participation in such Claim.
Indemnitee shall have the right to employ Indemnitee's own counsel in such
Claim, but the fees and expenses of such counsel incurred after notice from
the Company to Indemnitee of its assumption of the defense thereof shall be at
the expense of Indemnitee unless (i) otherwise authorized by the Company, (ii)
Indemnitee shall have reasonably concluded, and so notified the Company, that
there may be a conflict of interest between the Company and Indemnitee in the
conduct of the defense of such Claim, or (iii) the Company shall not in fact
have employed counsel to assume the defense of such Claim, in which cases the
fees and expenses of Indemnitee's counsel shall be at the expense of the
Company. The Company shall not be entitled to assume the defense of any Claim
brought by or on behalf of the Company or its stockholders or as to which
Indemnitee shall have made the conclusion set forth in (ii) of this Section
14.
15. No supplement, modification or amendment of this Agreement shall be
binding unless executed in writing by both of the parties hereto. No waiver
of any of the provisions of this Agreement shall be deemed or shall constitute
a waiver of any other provisions hereof (whether or not similar) nor shall
such waiver constitute a continuing waiver.
16. In the event of payment under this Agreement, the Company shall be
subrogated to the extent of such payment to all of the rights of recovery of
Indemnitee, who shall execute all papers required and shall do everything that
may be necessary to secure such rights, including the execution of such
documents necessary to enable the Company effectively to bring suit to enforce
such rights.
17. The Company shall not be liable under this Agreement to make any
payment in connection with any claim made against Indemnitee to the extent
Indemnitee has otherwise actually received payment (under any insurance
policy, By-law or otherwise) of the amounts otherwise indemnifiable hereunder.
18. This Agreement shall be binding upon and inure to the benefit of and
be enforceable by the parties hereto and their respective successors, assigns,
including any direct or indirect successor by purchase, merger, consolidation
or otherwise to all or substantially all of the business and/or assets of the
Company, spouses, heirs, executors, and personal and legal representatives.
This Agreement shall continue in effect regardless of whether Indemnitee
continues to serve as an officer or director of the Company or of any other
enterprise at the Company's request.
19. The provisions of this Agreement shall be severable in the event that
any of the provisions hereof (including any provision within a single section,
paragraph or sentence) are held by a court of competent jurisdiction to be
invalid, void or otherwise unenforceable, and the remaining provisions shall
remain enforceable to the full extent permitted by law.
20. This Agreement shall be governed by and construed in accordance with
the laws of the State of Texas applicable to contracts made and to be
performed in such state, but excluding any conflicts-of-law rule or principle
which might refer such governance, construction or enforcement to the laws of
another state or country.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
and as of the day and year first above written.
AGRI BIO-SCIENCES, INC.
By: /s/Lester H. Stephens
-----------------------
Lester H. Stephens, President
INDEMNITEE
/s/ Leslie L. Lemak, M.D.
- -----------------------------
Leslie L. Lemak, M.D.
Exhibit 10.6 - Page 5
EXHIBIT 10.6
FORM OF INDEMNIFICATION AGREEMENT BETWEEN
THE COMPANY AND VERNON L. MEDLIN, M.D.
INDEMNIFICATION AGREEMENT
AGREEMENT, effective as of January 7, 1998, between Agri Bio-Sciences,
Inc., a Delaware corporation (the "Company"), and Vernon L. Medlin, M.D.
("Indemnitee").
WHEREAS, Indemnitee is a director (or officer) of the Company;
WHEREAS, both the Company and Indemnitee recognize the increased risk of
litigation and other claims being asserted against directors and officers of
public companies at a time when it has become increasingly difficult to obtain
adequate insurance coverage at reasonable costs;
WHEREAS, in recognition of Indemnitees need for substantial protection
against personal liability in order to enhance Indemnitees continued service
to the Company in an effective manner, the Company wishes to provide in this
Agreement for the identification of and the advancing of expenses to
Indemnitee to the full extent (whether partial or complete) permitted by law
and as set forth in this Agreement, and, to the extent insurance is
maintained, for the continued coverage of Indemnitee under the Company's
directors' and officers' liability insurance policies, regardless of any
future change in the Certificate of Incorporation, By-Laws, composition of the
Board of Directors, or structure of the Company.;
NOW, THEREFORE, in consideration of the premises and of Indemnitee's
service to the Company, directly or indirectly, and intending to be legally
bound hereby, the parties hereto agree as follows:
1. In the event Indemnitee was, is, or becomes a party to or a witness or
other participant in, or is threatened to be made a party to or a witness or
other participant in, any threatened, pending or completed action, suit or
proceeding, or any inquiry or investigation, whether conducted by the Company
or any other party, that Indemnitee in good faith believes might lead to any
such action, suit or proceeding, whether civil, criminal, administrative,
investigative or otherwise (a "Claim") by reason of (or arising in part out
of) the fact that Indemnitee is or was a director, officer, employee, agent or
fiduciary of the Company, or is or was serving at the request of the Company
as a director, officer, employee, trustee, agent or fiduciary of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, or by reason of anything done or not done by Indemnitee in any
such capacity (an "Indemnifiable Event"), the Company shall indemnify
Indemnitee to the full extent permitted by law (the determination of which
shall be made by the Reviewing Party referred to below) as soon as practicable
but in any event no later than thirty days after written demand is presented
to the Company, against any and all expenses (including attorneys' fees and
all other costs, expenses, and obligations paid or incurred in connection with
investigating, preparing for and defending or participating in the defense of
(including on appeal) any Claim relating to any Indemnifiable Event)
(collectively "Expenses"), judgments, fines, penalties and amounts paid in
settlement (including all interest, assessments and other charges paid or
payable in connection with or in respect of such judgments, fines, penalties
or amounts paid in settlement) of such Claim and, if so requested by
Indemnitee, the Company shall advance (within two business days of such
request) any and all such Expenses to Indemnitee; provided, however, that (i)
the foregoing obligation of the Company shall not apply to a Claim that was
commenced by the Indemnitee without the prior approval of the Board of
Directors of the Company unless the Claim was commenced after a Change in
Control (as defined in Section 5 herein); (ii) the foregoing obligation of
the Company shall be subject to the condition that an appropriate person or
body (the "Reviewing Party") shall not have determined (in a written opinion
in any case in which the special, independent counsel referred to in Section 4
hereof is involved) that Indemnitee would not be permitted to be indemnified
for such Expenses under applicable law; and (iii) if, when and to the extent
that the Reviewing Party determines that Indemnitee would not be permitted to
be indemnified for such Expenses under applicable law, the Company shall be
entitled to be reimbursed by Indemnitee (who hereby agrees to reimburse the
Company) for all such amounts theretofore paid (unless Indemnitee has
commenced legal proceedings in a court of competent jurisdiction to secure a
determination that Indemnitee should be indemnified under applicable law, in
which event Indemnitee shall not be required to so reimburse the Company until
a final judicial determination requiring such reimbursement is made with
respect thereto as to which all rights of appeal therefrom have been exhausted
or lapsed) and the Company shall not be obligated to indemnify or advance any
additional amounts to Indemnitee under this Agreement (unless there has been a
determination by a court of competent jurisdiction that the Indemnitee would
be permitted to be so indemnified or entitled to such expense advances under
applicable law).
2. If there has not been a Change in Control of the Company (as
hereinafter defined), the Reviewing Party shall be (1) quorum of the Board of
Directors consisting of directors who are not parties to the action, suit or
proceeding acting by majority vote, or, (2) if such a quorum is not
obtainable, or, even if obtainable, a quorum of disinterested directors so
directs, independent legal counsel by the use of a written opinion or (3) the
stockholders. If there has been a Change in Control of the Company, the
Reviewing Party shall be the special, independent counsel referred to in
Section 4 hereof.
3. If Indemnitee has not been indemnified by the expiration of the
foregoing thirty-day period or received expense advances or if the Reviewing
Party determines that Indemnitee would not be permitted to be indemnified or
be entitled to receive expense advances within two days of the request
therefor in whole or in part under applicable law, Indemnitee shall have the
right to commence litigation seeking from the court a finding that Indemnitee
is entitled to indemnification and expense advances or enforcement of
Indemnitee's entitlement to indemnification and expense advances or
challenging any determination by the Reviewing Party or any aspect thereof
that Indemnitee is not entitled to be indemnified or receive expense advances
and the burden of proving that indemnification or advancement of expenses is
not appropriate shall be on the Company; any determination by the Reviewing
Party in favor of Indemnitee shall be conclusive and binding on the Company,
unless facts supplied by Indemnitee which form the basis for the determination
are subsequently determined to have been materially incorrect at the time
supplied. Indemnitee agrees to bring any such litigation in any court in the
States of Texas having subject matter jurisdiction thereof and in which venue
is proper, and the Company hereby consents to service of process and to appear
in any such proceeding.
4. The Company agrees that if there is a Change in Control of the Company
(as hereinafter defined), then with respect to all matters thereafter arising
concerning the rights of Indemnitee to indemnity payments and expense advances
under this Agreement or any other agreement or By-laws now or hereafter in
effect relating to Claims for Indemnifiable Events, the Company shall seek
legal advice only from special, independent counsel selected by Indemnitee who
a majority of the disinterested Directors approves (which approval shall not
be unreasonably withheld), and who has not otherwise performed services for
the Company or Indemnitee. Such counsel, among other things, shall determine
whether and to what extent Indemnitee is permitted to be indemnified or is
entitled to expense advances under applicable law and shall render its written
opinion to the Company and Indemnitee to such effect. The Company agrees to
pay the reasonable fees of the special, independent counsel referred to above
and to fully indemnify such counsel against any and all expenses (including
attorney's fees), claims, liabilities and damages arising out of or relating
to this Agreement or its engagement pursuant hereto except for willful
misconduct or gross negligence.
5. For purposes of this Agreement, (a) "Change in Control of the Company"
shall be deemed to have occurred if (i) any "person" (as such term is used in
Sections 13(d)(3) and 14(d) of the Securities Exchange Act of 1934, as
amended), other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company, is or becomes the beneficial owner (as
defined in Rule 13d-3 under said Act), directly or indirectly, of securities
of the Company representing 20% or more of the combined voting power of the
Company's then outstanding securities, or (ii) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board of Directors of the Company and any new director whose election by
the Board of Directors or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the beginning of
the period or whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority thereof, or (iii) the
stockholders of the Company approve a merger or consolidation of the Company
with any other corporation, other than a merger or consolidation which would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least 80% of the
combined voting power of the voting securities of the Company of such
surviving entity outstanding immediately after such merger or consolidation,
or if the stockholders of the Company approve a plan of complete liquidation
of the Company or an agreement for the sale or disposition by the Company of
all or substantially all the Company's assets.
6. To the extent Indemnitee is successful in such proceeding, the Company
shall indemnify Indemnitee against any and all expenses (including attorney's
fees) which are incurred by the Indemnitee in connection with any claim
asserted or action brought by Indemnitee for (i) indemnification or advance
payment of Expenses by the Company under this Agreement or any other agreement
or Company By-laws now or hereafter in effect relating to Claims for
Indemnifiable Events and/or (ii) recovery under any directors' and officers'
liability insurance policies maintained by the Company, regardless of whether
Indemnitee ultimately is determined to be entitled to such indemnification,
advance payment of Expenses or insurance recovery, as the case may be.
7. If Indemnitee is entitled under any provision of this Agreement to
indemnification by the Company for some or a portion of the Expenses,
judgments, fines, penalties and amounts paid in settlement of any Claim but
not, however, for all of the total amount thereof, the Company shall
nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee
is entitled. Notwithstanding any other provision of this Agreement, to the
extent that Indemnitee has been successful on the merits or otherwise in the
defense of any Claim relating in whole or in part to any Indemnifiable Event
or in defense of any issue or matter therein, including dismissal without
prejudice, Indemnitee shall be indemnified against all Expenses incurred in
connection therewith.
8. For purposes of this Agreement, the termination of any Claim by
judgment, order, settlement (whether with or without court approval) or
conviction, or upon a plea of nolo contendere, or its equivalent, shall not
create a presumption that Indemnitee did not meet any particular standard of
conduct or have any particular belief or that a court has determined that
Indemnitee is not entitled to indemnification or expense advance or that
indemnification or expense advance is not permitted by applicable law.
9. The Company hereby agrees that, so long as Indemnitee shall continue to
serve in a capacity referred to in Section 1 hereof, and thereafter so long as
Indemnitee shall be subject to any possible claim or threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that Indemnitee served in any capacity
referred to in Section 1 hereof, the Company shall maintain in effect for the
benefit of Indemnitee any Directors' and Officers' Liability Insurance
presently in force and effect, providing, in all respects, coverage at least
comparable to that presently provided; provided, however, if, in the business
judgment of the then Board, either (a) the premium cost for such insurance is
substantially disproportionate to the amount of coverage, or (b) the coverage
provided by such insurance is so limited by exclusions that there is
insufficient benefit from such insurance, then and in that event the Company
shall not be required to maintain such insurance but shall and hereby agrees
to the full extent permitted by law to hold harmless and indemnify Indemnitee
to the fullest extent of the coverage which would otherwise have been provided
for the benefit of Indemnitee.
10. (a) In the event of any changes after the date of this Agreement
in any applicable law, statute, or rule which expands the right of the Company
to indemnify a person serving in a capacity referred to in Section 1 hereof,
such change shall be within the purview of Indemnitee's rights, and the
Company's obligations, under this Agreement. In the event of any changes in
any applicable law, statute, or rule which narrow the right of the Company to
indemnify a person serving in a capacity referred to in Section 1 hereof, such
changes, to the extent not otherwise required by such law, statute or rule to
be applied to this Agreement, shall have no effect on this Agreement or the
parties' rights and obligations hereunder.
(b) The indemnification provided by this Agreement shall not be deemed
exclusive of any rights to which Indemnitee may be entitled under the
Company's Certificate of Incorporation, its By-laws, any agreement, any vote
of stockholders or disinterested directors, laws and regulations in effect now
or in the future, or otherwise, both as to action in Indemnitee's official
capacity and as to action in another capacity while holding such office.
11. If the indemnification provided in Section 1 is unavailable and may
not be paid to Indemnitee because such indemnification is not permitted by
law, then in respect of any threatened, pending or completed action, suit or
proceeding in which the Company is jointly liable with Indemnitee (or would be
if joined in such action, suit or proceeding), the Company shall contribute to
the full extent permitted by law, to the amount of expenses, judgments, fines
(including excise taxes and penalties) and amounts paid in settlement actually
and reasonably incurred and paid or payable by Indemnitee in such proportion
as is appropriate to reflect (i) the relative benefits received by the Company
on the one hand and Indemnitee on the other hand from the transaction from
which such action, suit or proceeding arose, and (ii) the relative fault of
the Company on the one hand and of Indemnitee on the other in connection with
the events which resulted in such expenses, judgments, fines or settlement
amounts, as well as any other relevant equitable considerations. The relative
fault of the Company on the one hand and of Indemnitee on the other shall be
determined by reference to among other things, the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent the
circumstances resulting in such expenses, judgments, fines or settlement
amounts. The Company agrees that it would not be just and equitable if
contribution pursuant to this paragraph were determined by pro rata allocation
or any other method of allocation which does not take account of the foregoing
equitable considerations.
12. All obligations of the Company contained herein shall continue during
the period Indemnitee serves in a capacity referred to in Section 1 hereof of
the Company and shall continue thereafter so long as Indemnitee shall be
subject to any possible Claim relating to an Indemnifiable Event.
13. (a) Promptly after receipt by Indemnitee of notice of the
commencement of any Claim relating to an Indemnifiable Event or proceeding in
which Indemnitee is made or is threatened to be made a party or a witness,
Indemnitee shall notify the Company of the commencement of such Claim; but the
omission so to notify the Company shall not relieve the Company from any
obligation it may have to indemnify or advance expenses to Indemnitee
otherwise than under this Agreement.
(b) Indemnitee shall not settle any claim or action in any manner which
would impose on the Company any penalty, constraint, or obligation to hold
harmless or indemnify Indemnitee pursuant to this Agreement without the
Company's prior written consent, which consent shall not be unreasonably
withheld.
14. If any Claim relating to an Indemnifiable Event, commenced against
Indemnitee is also commenced against the Company, the Company shall be
entitled to participate therein at its own expense, and, except as otherwise
provided hereinbelow, to the extent that it may wish, the Company shall be
entitled to assume the defense thereof. After notice from the Company to
Indemnitee of its election to assume the defense of any Claim, the Company
shall not be obligated to Indemnitee under this Agreement for any legal or
other expenses subsequently incurred by Indemnitee in connection with the
defense thereof other than reasonable costs of investigation, travel, and
lodging expenses arising out of Indemnitee's participation in such Claim.
Indemnitee shall have the right to employ Indemnitee's own counsel in such
Claim, but the fees and expenses of such counsel incurred after notice from
the Company to Indemnitee of its assumption of the defense thereof shall be at
the expense of Indemnitee unless (i) otherwise authorized by the Company, (ii)
Indemnitee shall have reasonably concluded, and so notified the Company, that
there may be a conflict of interest between the Company and Indemnitee in the
conduct of the defense of such Claim, or (iii) the Company shall not in fact
have employed counsel to assume the defense of such Claim, in which cases the
fees and expenses of Indemnitee's counsel shall be at the expense of the
Company. The Company shall not be entitled to assume the defense of any Claim
brought by or on behalf of the Company or its stockholders or as to which
Indemnitee shall have made the conclusion set forth in (ii) of this Section
14.
15. No supplement, modification or amendment of this Agreement shall be
binding unless executed in writing by both of the parties hereto. No waiver
of any of the provisions of this Agreement shall be deemed or shall constitute
a waiver of any other provisions hereof (whether or not similar) nor shall
such waiver constitute a continuing waiver.
16. In the event of payment under this Agreement, the Company shall be
subrogated to the extent of such payment to all of the rights of recovery of
Indemnitee, who shall execute all papers required and shall do everything that
may be necessary to secure such rights, including the execution of such
documents necessary to enable the Company effectively to bring suit to enforce
such rights.
17. The Company shall not be liable under this Agreement to make any
payment in connection with any claim made against Indemnitee to the extent
Indemnitee has otherwise actually received payment (under any insurance
policy, By-law or otherwise) of the amounts otherwise indemnifiable hereunder.
18. This Agreement shall be binding upon and inure to the benefit of and
be enforceable by the parties hereto and their respective successors, assigns,
including any direct or indirect successor by purchase, merger, consolidation
or otherwise to all or substantially all of the business and/or assets of the
Company, spouses, heirs, executors, and personal and legal representatives.
This Agreement shall continue in effect regardless of whether Indemnitee
continues to serve as an officer or director of the Company or of any other
enterprise at the Company's request.
19. The provisions of this Agreement shall be severable in the event that
any of the provisions hereof (including any provision within a single section,
paragraph or sentence) are held by a court of competent jurisdiction to be
invalid, void or otherwise unenforceable, and the remaining provisions shall
remain enforceable to the full extent permitted by law.
20. This Agreement shall be governed by and construed in accordance with
the laws of the State of Texas applicable to contracts made and to be
performed in such state, but excluding any conflicts-of-law rule or principle
which might refer such governance, construction or enforcement to the laws of
another state or country.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
and as of the day and year first above written.
AGRI BIO-SCIENCES, INC.
By: /s/Lester H. Stephens
-----------------------
Lester H. Stephens, President
INDEMNITEE
/s/ Vernon L. Medlin, M.D.
- ------------------------------
Vernon L. Medlin, M.D.
Exhibit 10.7 - Page
EXHIBIT 10.7
AGRI BIO-SCIENCES, INC.
STOCK INCENTIVE PLAN
1.
PURPOSE
The purpose of this Stock Incentive Plan (the "Plan") is to advance the
interests of Agri Bio-Sciences, Inc. Inc. (the "Company") and its stockholders
by providing deferred stock incentives in addition to current compensation to
certain key executives, certain directors and key employees of the Company and
of its subsidiaries who contribute significantly to the long-term performance
and growth of the Company and such subsidiaries. As used in this Plan,
subsidiary includes parent of the Company and any subsidiary of the Company
within the meaning of Sections 425(e) and (f) of the Internal Revenue Code of
1986, as amended ("Code"), respectively.
2.
ADMINISTRATION
The Plan shall be administered by the Board of Directors of the Company
(the "Board of Directors") or a committee of the Board of Directors duly
authorized and given authority by the Board of Directors to administer the
Plan (the Board of Directors or such duly authorized committee hereinafter
referred to as the "Board"), as such is from time to time constituted.
The Board shall have all the powers vested in it by the terms of the
Plan, such powers to include exclusive authority (within the limitation
described herein) to select the employees to be granted Awards under the Plan,
to determine the type, size and terms of the Awards to be made to each
employee selected, to determine the time when Awards will be granted, and to
prescribe the form of the instruments evidencing Awards made under the Plan.
The Board shall be authorized to interpret the Plan and the Awards granted
under the Plan, to establish, amend and rescind any rules and regulations
relating to the Plan, and to make any other determinations which it believes
necessary or advisable for the administration of the Plan. The Board may
correct any defect or supply any omission or reconcile any inconsistency in
the Plan or in any Award in the Manner and to the extent the Board deems
desirable to carry it into effect. Any decision of the Board in the
administration of the Plan, as described herein, shall be final and
conclusive. The Board may act only by a majority of its members in office,
except that the members thereof may authorize any one or more of their number
of any officer of the Company to execute and deliver documents on behalf of
the Board. No member of the Board shall be liable for anything done or omitted
to be done by him or by any other member of the Board in connection with the
Plan, except for his own willful misconduct or as expressly provided by
statute.
3.
PARTICIPATION
Subject to the provisions of the Plan, the Board shall have exclusive
power to select the directors and officers and other key employees of the
Company and its subsidiaries participating in the Plan to be granted Awards
under the Plan.
4.
AWARDS UNDER THE PLAN
(a) Type of Awards. Awards under the Plan may be of three types: (i)
---------------
"Nonqualified Stock Options" or "Incentive Stock Options," (ii) "Stock
Appreciation Rights" attached to Stock Options, or (iii) "Restricted Stock."
Stock Options are rights to purchase shares of Common Stock of the Company
having a par value of $.001 per share (the "Common Stock"). Stock Appreciation
Rights are rights to receive, without payment to the Company, cash and/or
shares of Common Stock in lieu of the purchase of shares of Common Stock under
the Stock Option to which the Stock Appreciation Rights are subject to the
terms, conditions and restrictions specified in Paragraph 5. Restricted Stock
is a share of Common Stock which is subject to the repurchase option and the
other terms, conditions and restrictions described in Paragraph 6.
(b) Maximum Number of Shares That May Be Issued. There may be issued
-------------------------------------------
under the Plan (as Restricted Stock or pursuant to the exercise of Stock
Options or Stock Appreciation Rights) an aggregate of not more than two
million shares of Common Stock, subject to adjustment as provided in Paragraph
7. In addition to Common Stock actually so issued, there shall be deemed to
have been issued pursuant to the Plan (and therefore no longer available in
connection with Awards) a number of shares equal to the aggregate of the
number of shares of Common Stock under option in respect of which Stock
Appreciation Rights granted pursuant to subparagraph 5(f) shall have been
exercised minus the number of shares of Common Stock, if any, issued upon
exercise of such Stock Appreciation Rights. Common Stock issued pursuant to
the Plan may be either authorized but unissued shares or reacquired shares, or
both. If any Common Stock issued as Restricted Stock shall be repurchased
pursuant to the option described in Paragraph 6 below, or if any Common Stock
issued under the Plan shall be reacquired pursuant to restrictions imposed at
the time of issuance, such shares may again be issued under the Plan.
(c) Rights with Respect to Common Stock.
----------------------------------------
(i) An employee to whom an Award of Restricted Stock has been
made shall have, after issuance to him of a certificate for the number of
shares of Common Stock awarded and prior to the expiration of the Restricted
Period or the earlier repurchase of such shares of Common Stock as herein
provided, ownership of such shares of Common Stock, including the right to
vote the same and to receive dividends thereon, subject however, to the
options, restrictions and limitations imposed thereon pursuant to the Plan.
(ii) An employee to whom an Award of Stock Option or Stock
Appreciation Rights is made (and any person succeeding to such an employee's
rights pursuant to the Plan) shall have no rights as a stockholder with
respect to any shares of Common Stock issuable pursuant to any such Stock
Option or Stock Appreciation Rights until the date of the issuance of a stock
certificate to him for such shares. Except as provided in Paragraph 8, no
adjustment shall be made for dividends, distributions or other rights (whether
ordinary or extraordinary, and whether in cash, securities or other property)
for which the record date is prior to the date such stock certificate is
issued.
(d) Exercise of Options and Stock Appreciation Rights: Expiration of
----------------------------------------------------------------
Restrictions Applicable to Restricted Stock. Options and Stock Appreciation
- ---------------------------------------------
Rights shall be subject to such terms and conditions upon exercisability as
the Board may determine consistent with the provisions of this Plan.
Repurchase and other restrictions applicable to Restricted Stock shall be such
as are determined in the discretion of the Board consistent with the
provisions of the Plan. The Board may determine to permit any Option granted
hereunder to be exercisable immediately upon the date of grant or any time
thereafter. The Board may determine to permit any Stock Appreciation Right
granted hereunder to be exercisable not less than six months after the initial
award of the Option containing, or the amendment or supplementation of any
existing Option Agreement adding the Stock Appreciation Right; provided,
however, that this limitation shall not apply in the event of death or
disability. The Board may determine that there shall be no restrictions
applicable to Restricted Stock awarded under the Plan.
5.
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
The Board may grant Stock Options (to which may but need not be attached
Stock Appreciation Rights as specified in subparagraph 5(f). Each Stock Option
(referred to herein as an "Option") granted under the Plan shall be evidenced
by an instrument in such form as the Board shall prescribe from time to time
in accordance with the Plan and shall comply with the following terms and
conditions (and with such other terms and conditions, including but not
limited to restrictions upon the Option or the shares of Common Stock issuable
upon exercise thereof, as the Board, in its discretion, shall establish):
(a) The Option price shall be determined by the Board at the
time the Option is granted and shall not be less than the par value of such
shares of Common stock.
(b) The Board will determine the number of shares of Common
Stock to be subject to each Option. The number of shares of Common Stock
subject to an outstanding Option will be reduced on a share for share basis to
the extent that shares of Common Stock under such Option are used to calculate
the cash and/or shares of Common Stock received pursuant to exercise of a
Stock Appreciation Right attached to such Option.
(c) The Option shall not be transferable by the optionee other
than by will or the laws of descent and distribution, and shall be exercisable
during his lifetime only to him.
(d) The Board will determine the conditions and terms governing
the exercise of granted Options; provided, however that no Option shall be
exercisable:
(i) after the expiration of ten years from the date it is
granted and may be exercised during the period prior to its expiration only at
such time or times as the Board may establish;
(ii) unless payment in United States dollars by cash or
check is made for the shares being acquired thereby in full at the time of
exercise, or at the option of the holder of such Option, in Common Stock
theretofore owned by such holder (or any combination of cash and Common
Stock).
For purposes of determining the amount, if any, of the purchase
price satisfied by payment of Common Stock under clause (ii) above, such
Common Stock shall be valued at its fair market value on the date of exercise.
Fair market value means the fair market value of one share of Common Stock on
the date in question, which is deemed to be the mean between the highest and
lowest sales prices per share of Common Stock on any national stock exchange
upon which Common Stock is listed, or if Common Stock is not listed on any
national stock exchange, the mean between the highest closing bid and lowest
closing asked prices for Common Stock as reported by the National Association
of Securities Dealers NASDAQ System, or if not reported by such system, the
mean between the closing bid and asked prices as quoted by such quotation
source as shall be designated by the Board on that date. If there shall have
been no sale on the date in question, fair market value shall be determined by
reference the last preceding date on which such a sale or sales were so
reported. If the Common Stock is not listed or admitted to trading on the New
York Stock Exchange, any National Securities Exchange quoted on the NASDAQ
National Markets Systems or in the over-the-counter market, then, the fair
market value shall be as set by, or in a manner established by, the Board of
Directors of the Corporation in good faith. Any Common Stock delivered in
satisfaction of all or a portion of the purchase price shall be appropriately
endorsed for transfer and assigned to the Company. The Board may, in its
discretion and to the extent permitted by the laws of the State of Delaware
determine to permit the holder of an Option to satisfy the purchase price of
the shares as to which an Option is exercised by delivery of the Option
holder's promissory note, such note to be subject to such terms and conditions
as the Board may determine. The Board may, in its discretion and to the extent
permitted by the laws of the State of Delaware, determine to cause the Company
to lend to the holder of an Option, funds on such terms and conditions as the
Board may determine to be appropriate, sufficient for the holder of an Option
to pay the purchase price of the shares as to which an Option is to be
exercised.
(e) If any person to whom an Option has been granted shall die
holding an Option which has not been fully exercised, his executors,
administrators, heirs or distributees, as the case may be, may, at any time
within one year after the date of such death (but in no event after the Option
has expired under the provisions of subparagraph 5(d)(i) hereon, exercise the
Option with respect to any shares as to which the decedent could have
exercised the Option at the time of his death.
(f) If the Board, in its discretion, so determines, there may be
attached to the Option a Stock Appreciation Right which shall be subject to
such terms and conditions, not inconsistent with the Plan, as the Board shall
impose, including the following:
(i) A Stock Appreciation Right may be exercised only to the
extent that the option to which it is attached is at the time exercisable.
However, if the option to which the Stock Appreciation Right is attached is
exercisable and if the optionee is at the relevant time an officer or director
of the Company who is required to file reports pursuant to Section 16(a) of
the Securities Exchange Act of 1934, as amended ("Exchange Act") ("Covered
Participant") - the Stock Appreciation Right may, subject to the approval of
the Board, be exercised, under such terms and conditions as may be specified
by the Board;
(ii) A Stock Appreciation Right shall entitle the optionee
(or any person entitled to act under the provisions of subparagraph 5(e)
hereunder to surrender unexercised the Option to which the Stock Appreciation
Right is attached (or any portion of such Option) to the Company and to
receive from the Company in exchange therefor that number of shares of Common
Stock having an aggregate value equal to (or, in the discretion of the Board,
less than) the excess of the value of one share over the option price per
share times the number of shares subject to the option, or portion thereof,
which is so surrendered. The Company shall be entitled to elect to settle its
obligation arising out of the exercise of a Stock Appreciation Right, by the
payment of cash equal to the aggregate value of the shares it would otherwise
be obligated to deliver or partly by the payment of cash and partly by the
delivery of shares of Common Stock. Any such election shall be made within 15
business days after the receipt by the Board of written notice of the exercise
of the Stock Appreciation Right. The value of a share of Common Stock for this
purpose shall be the fair market value thereon on the last business day next
preceding the date of the election to exercise the Stock Appreciation Right;
(iii) No fractional shares shall be delivered under this
subparagraph 5(f) but in lieu thereof a cash adjustment shall be made.
(g) The Option agreement evidencing any incentive stock option
granted under this Plan shall provide that if the optionee makes a
disposition, within the meaning of Section 425(c) of the code and the
regulations promulgated thereunder, of any share or shares of Common Stock
issued to him pursuant to his exercise of an Option granted under this Plan
within the two-year period commencing on the day after the date of the
granting of such Option or within a one-year period commencing on the day
after the date of transfer of the share or shares to him pursuant to the
exercise of such Option, he shall, within ten days of such disposition, notify
the Company thereof and immediately deliver to the Company any amount of
federal income tax withholding required by law.
6.
RESTRICTED STOCK
Each Award of Restricted Stock under the Plan shall be evidenced by an
instrument in such form as the Board shall prescribe from time to time in
accordance with the Plan and shall comply with the following terms and
conditions (and with such other terms and conditions as the Board, in its
discretion, shall establish):
(a) The Board shall determine the number of shares of Common
Stock to be issued to a participant pursuant to the Award.
(b) Shares of Common Stock issued to a participant in accordance
with the Award may not be sold, assigned, transferred, pledged, hypothecated
or otherwise disposed of, except by will or the laws of descent and
distribution, for such period as the Board shall determine, from the date on
which the Award is granted (the "Restricted Period"). The Company will have
the option to repurchase the shares subject to the Award at such price as the
Board shall have fixed, in its sole discretion, when the Award was made, which
option will be exercisable at such times and upon the occurrence of such
events as the Board shall establish when the Award is granted or if, on or
prior to the expiration of the Restricted Period or the earlier lapse of the
Option, the participant has not paid to the Company an amount equal to any
Federal, State or local income or other taxes which the Company determines is
required to be withheld in respect of such shares. Such option shall be
exercisable on such terms, in such manner and during such period as shall be
determined by the Board when the Award is made. Certificates for shares of
Common Stock issued pursuant to Restricted Stock Awards shall bear an
appropriate legend referring to the foregoing Option and other restrictions
and to the fact that the shares are partly paid. Any attempt to dispose of any
such shares of Common Stock in contravention of the foregoing Option and other
restrictions shall be null and void and without effect. If shares of Common
Stock issued pursuant to a Restricted Stock Award shall be repurchased
pursuant to the Option described above, the participant, or in the event of
his death, his personal representative, shall forthwith deliver to the
Secretary of the Company the certificates for the shares of Common Stock
awarded to the participant, accompanied by such instruments of transfer, if
any, as may reasonably be required by the Secretary of the Company. If the
Option described above is not exercised by the company during such period as
is specified by the Board when the Award is made, such Option and the
restrictions imposed pursuant to the first sentence of this subparagraph 6(b)
shall terminate and be of no further force and effect.
7.
STOCK DIVIDENDS, STOCK SPLITS, REORGANIZATIONS AND
CERTAIN OTHER CORPORATION TRANSACTIONS
(a) Exercise of Corporate Powers. The existence of outstanding
-----------------------------
awards of Options, Stock Appreciation Rights or Restricted Stock shall not
affect in any way the right or power of the Company or its stockholders to
make or authorize any or all adjustments, recapitalization, reorganization or
other changes in the Company's capital structure or its business or any merger
or consolidation of the Company, or any issue of bonds, debentures, preferred
or prior preference stocks ahead of or affecting the Company's shares of
Common Stock or the rights thereof, or the dissolution or liquidation of the
Company, or any sale or transfer of all or any part of its assets or business,
or any other corporate act or proceeding whether of a similar character or
otherwise.
(b) Recapitalization of the Company. If, while there are Options,
-------------------------------
Stock Appreciation Rights or Restricted Stock outstanding, the Company shall
effect any subdivision or consolidation of shares of Common Stock or other
capital readjustment, the payment of a stock dividend, stock split,
combination of shares or recapitalization or other increase or reduction in
the number of shares of Common Stock outstanding, without receiving
compensation therefor in money, services or property, then the number of
shares of Common Stock available under the Plan and the number of Options,
Stock Appreciation Rights or Restricted Stock which may thereafter be
exercised shall (i) in the event of an increase in the number of shares
outstanding, be proportionately increased and the fair market value of the
Options, Stock Appreciation Rights or Restricted Stock awarded as of the date
of the award shall be proportionately reduced; and (ii) in the event of a
reduction in the number of shares outstanding, be proportionately reduced, and
the fair market value of the Options, Stock Appreciation Rights or Restricted
Stock awarded as of the date of the Award shall be proportionately increased.
(c) Reorganization of the Company. If the Company is reorganized, or
-----------------------------
merged or consolidated or a party to a plan of exchange with another
corporation pursuant to which reorganization, merger, consolidation or plan of
exchange stockholders of the Company receive any shares of Common Stock or
other securities, or if the Company shall distribute securities of another
corporation to its stockholders, each Participant shall be entitled to receive
in lieu of the number of unexercised Options, Stock Appreciation Rights or
Restricted Stock at the date of award, to which such holder would have been
entitled pursuant to the terms of the agreement of merger of consolidation, if
immediately prior to such merger or consolidation such holder had been the
holder of record of a number of shares of Common Stock equal to the number of
the unexercised Options or Stock Appreciation Rights previously awarded to
him, and Restricted Stock shall be treated the same as unrestricted
outstanding shares of Common Stock; provided, that, anything herein contained
to the contrary notwithstanding, upon the dissolution or liquidation of the
Company or upon any merger or consolidation of the Company where it is not the
surviving corporation, each Participant shall be entitled to a benefit as
though he had become fully vested in all Options, Stock Appreciation Rights
and Restricted Stock previously awarded to him and then outstanding under this
Plan, and had terminated employment with the Company immediately prior to or
concurrently with such dissolution or liquidation or merger or consolidation.
(d) Issue of Common Stock by the Company. Except as hereinabove
------------------------------------
expressly provided, the issue by the Company of shares of stock of any class,
or securities convertible into shares of stock of any class, for cash or
property, or for labor or services, either upon direct sale or upon the
exercise of rights or warrants to subscribe therefor, or upon any conversion
of shares or obligations of the Company convertible into such shares or other
securities, shall not affect, and no adjustment by reason thereof shall be
made with respect to, the number of, or fair market value of, any Options or
Stock Appreciation Rights then outstanding under previous awards but holders
of Restricted Stock shall be treated the same as the holders of outstanding
unrestricted shares of Common Stock
(e) Change In Control. The Board may, in its sole discretion,
-------------------
provide that an Option or Stock Appreciation Right shall become fully
exercisable or that a share of Restricted Stock shall be free of any
restrictions upon a Change in Control of the Company (as defined in the next
sentence). "Change in Control" of the Company shall be conclusively deemed to
have occurred if (and only if) any of the following shall have taken place:
(i) a change in control is reported by the Company in response to either Item
6(e) of Schedule 14(a) of Regulation 14(a) promulgated under the Exchange Act
or Item 1 of Form 8-K promulgated under the Exchange Act; (ii) any "person"
(as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act) is
or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing forty
percent or more of the combined voting power of the company's then outstanding
securities; or (iii) following the election or removal of directors, a
majority of the Board of Directors consists of individuals who were not
members of the Board of Directors two years before such election or removal,
unless the election of each director who was not a director at the beginning
of such two-year period has been approved in advance by directors representing
at least a majority of the directors then in office who were directors at the
beginning of the two-year period.
(f) Change in Authorized Common Stock. In the event that the number
----------------------------------
of shares of Common Stock which the corporation is authorized to issue
pursuant to its Certificate of Incorporation is increased or decreased, the
aggregate maximum number of shares of Common Stock which may be issued under
the Plan specified in paragraph 4(b) shall be increased or decreased
proportionately.
8.
DESIGNATIONS OF BENEFICIARY BY PARTICIPANT
A participant may name a beneficiary to receive any payment to which he
may be entitled in respect of Awards under the Plan in the event of his death,
on a form to be provided by the Board. A participant may change his
beneficiary from time to time in the same manner. If no designated beneficiary
is living on the date on which any amount becomes payable to a participant's
beneficiary, such payment will be made to the participant's executors or
administrators, and the term "beneficiary" as used in the Plan shall include
such person or persons.
9.
TAXES
(a) The Company may make such provisions as it deems appropriate for
the withholding of any taxes which it determines is required in connection
with any Options or Stock Appreciation Rights or Restricted Stock granted
under this Plan.
(b) Notwithstanding the terms of subparagraph 9(a), any participant
may pay all or any portion of the taxes required or allowed to be withheld by
the Company if paid to him in connection with the exercise of an Option, Stock
Appreciation Right or vesting of any Award of Restricted Stock by electing to
have the Company withhold shares of Common Stock, or by delivering previously
owned shares of Common Stock, having a fair market value, determined in
accordance with subparagraph 5(d), equal to the amount required to be withheld
or paid. A Participant must take the foregoing election on or before the date
that the amount of tax to be withheld is determined ("Tax Date"). Such
elections are irrevocable and subject to disapproval by the Board. Elections
by Covered Participants are subject to the following additional restrictions:
(i) such election may not be made within six months of the grant of the Award,
provided that this limitation shall not apply in the event of death or
disability, and (ii) such election must be made either six months or more
prior to the Tax Date or in a Window Period (as defined herein). Where the Tax
Date in respect of an Award is deferred until after exercise or expiration of
restrictions and the Covered Participant elects share withholding, the full
amount of shares of Common Stock will be issued or transferred to him upon
exercise of the Option or exercise of the Stock Appreciation Right or
expiration of restrictions of the Restricted Stock, as the case may be, but
the Covered Participant shall be unconditionally obligated to tender back to
the Company the number of shares necessary to discharge the Company's
withholding obligation or his estimated tax obligation on the Tax Date. As
used herein, Window Period means the period commencing on the third business
day following the Company's release of a quarterly or annual summary statement
of sales and earnings and ending on the twelfth business day following such
release.
10.
MISCELLANEOUS PROVISIONS
(a) No employee or other person shall have any claim or right to be
granted an Award under the Plan. Neither the Plan nor any action taken
hereunder shall be construed as giving any employee any right to be retained
in the employ of the Company or any subsidiary.
(b) A participant's rights and interest under the Plan may not be
assigned or transferred in whole or in part either directly or by operation of
law or otherwise (except in the event of a participant's death), including but
not by way of limitation, execution, levy, garnishment, attachment, pledge,
bankruptcy or in any other manner and no such right or interest of any
participant in the Plan shall be subject to any obligation or liability of
such participant.
(c) No shares of Common Stock shall be issued hereunder unless
counsel for the Company shall be satisfied that such issuance will be in
compliance with applicable federal and state securities laws.
(d) The expenses of the Plan shall be borne by the Company.
(e) The Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or make any other segregation of assets
to assure the payment of any Award under the Plan and payment of Awards shall
be subordinate to the claims of the Company's general creditors.
By accepting any Award or other benefit under the Plan, each participant
and each person claiming under or through him shall be conclusively deemed to
have indicated his acceptance and ratification of, and consent to, any action
taken under the Plan by the Company or the Board.
11.
AMENDMENT OR DISCONTINUANCE
The Plan may be amended at any time and from time to time by the Board of
Directors but no amendment which increases the aggregate number of shares of
Common Stock which may be issued pursuant to the Plan shall be effective
unless and until the same is approved by the stockholders of the Company. No
amendment of the Plan shall adversely affect any right of any participant with
respect to any Award theretofore granted without such participant's written
consent.
12.
TERMINATION
This Plan shall terminate upon the earlier of the following dates or
events to occur:
(a) upon the adoption of a resolution of the Board of Directors
terminating the Plan; or
(b) ten years from the date hereof
No termination of the Plan shall alter or impair any of the rights or
obligations of any person, without his consent, under any Award theretofore
granted under the Plan.
13.
STOCKHOLDER ADOPTION
The Plan is approved and adopted by the stockholders of the Company by
written consent in the manner required by the laws of the State of Delaware as
of December 22, 1997.
AGRI BIO-SCIENCES, INC.
Exhibit 23.2 - Page
EXHIBIT 23.2
CONSENT OF MALONE & BAILEY, PLLC
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Agri Bio-Sciences,
Inc. on Form SB-2 of our report dated February 2, 1998 (except for Note 2, as
to which the date is March 5, 1998) relating to the financial statement
schedules appearing elsewhere in this Registration Statement.
We also consent to the reference to us under the heading "Experts."
/s/Malone & Bailey, PLLC
- ---------------------------
MALONE & BAILEY, PLLC
Houston, Texas
April 27, 1998
