As filed with the Securities and Exchange Commission on March 12, 1999
Registration No. 333-51977
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
----------------------------------
AMENDMENT NO. 3
FORM SB-2/A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------------------
AGRI BIO-SCIENCES, INC.
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(Exact name of Registrant specified in charter)
Delaware 6159 76-0481583
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(State of (Primary Industrial (I.R.S. Employer
Incorporation) Classification) I.D.#)
AGRI BIO-SCIENCES, INC.
7806 OXFORDSHIRE DRIVE
SPRING, TEXAS 77379
TEL: (281) 320-7541
FAX: (281) 251-2643
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(Address, including zip code of principal place of
business and telephone number, including area code of
Registrant's principal executive offices.)
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)
Approximate date of commencement date or proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box [ ].
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed
Title of each class Proposed maximum
of securities to be Amount to be maximum offering aggregate Amount of
registered registered price per share offering price registration fee
<S> <C> <C> <C> <C>
Common Stock 100,000 $.00646(1) $646.00 $ .20(2)
($.001 par value
per share)
</TABLE>
(1) Based upon book value solely for purposes of calculating the registration
fee pursuant to Rule 457(f)(2).
(2) This fee has previously been paid.
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.
<PAGE>
PROSPECTUS
SUBJECT TO COMPLETION, DATED MARCH 12, 1999
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 ("Common Stock"), of Agri Bio-Sciences, Inc., a Delaware corporation
(the "Company"). This Prospectus is being furnished to the stockholders of GS
Financial Services, Inc., a Delaware corporation ("GS Financial"), in connection
with the distribution (the "Distribution") to GS Financial's stockholders of the
100,000 shares of Common Stock covered by this Prospectus, pursuant to the terms
of a Consulting and Distribution Agreement dated as of March 12, 1998 by and
between GS Financial and the Company (the "Distribution Agreement").
One share of 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 Common Stock in the Distribution (the "Record Date").
No consideration will be paid by GS Financial's stockholders for the
shares of Common Stock to be received by them in the Distribution. There is
currently no public trading market for the shares of Common Stock and there can
be no assurance that such a market will develop after completion of the
Distribution. The Company intends to apply to a member of the National
Association of Securities Dealers, Inc. to make a market in the 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 _____ 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.
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PRICE UNDERWRITING PROCEEDS
TO DISCOUNTS AND TO
PUBLIC COMMISSIONS COMPANY
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Per share... $.00646(1) $ -0- $ -0-(2)
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Total... $646.66(1) $ -0- $ -0-(2)
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(1) Based upon the book value of the Company as of December 31, 1997.
(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." 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 and will be paid by the Company in their
entirety.
The date of this Prospectus is ________________________, 1999.
<PAGE>
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 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.
In connection with the Distribution covered by this Prospectus, the
Company is registering as a reporting company under the Securities Exchange Act
of 1934 (the "Exchange Act"). As a consequence, the Company will file with the
Commission Annual Reports on Form 10-KSB, which will contain audited financial
statements. After they are filed, these Annual Reports and audited financial
statements can be inspected at, and copies downloaded from, the Commission's
World Wide Web site at the Internet address stated in the previous paragraph.
These Annual Reports and audited financial statements can also be inspected, and
copies thereof may be obtained at prescribed rates, at the office of the
Commission at the address also stated in the previous paragraph.
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 THE COMPANY SINCE THE DATE OF THIS PROSPECTUS.
TABLE OF CONTENTS
<TABLE>
<S> <C>
AVAILABLE INFORMATION ...........................................................................................4
PROSPECTUS SUMMARY ..............................................................................................6
RISK FACTORS ....................................................................................................8
USE OF PROCEEDS ................................................................................................13
THE DISTRIBUTION ...............................................................................................13
CERTAIN FEDERAL INCOME TAX CONSEQUENCES .......................................................................15
BUSINESS .......................................................................................................18
PLAN OF OPERATION ..............................................................................................23
DIVIDEND POLICY ................................................................................................24
MANAGEMENT OF THE COMPANY ......................................................................................24
CERTAIN TRANSACTIONS ...........................................................................................28
PRINCIPAL STOCKHOLDERS .........................................................................................29
DESCRIPTION OF CAPITAL STOCK ...................................................................................30
SHARES ELIGIBLE FOR FUTURE SALE ................................................................................35
LEGAL MATTERS ..................................................................................................36
EXPERTS ........................................................................................................36
INDEX TO FINANCIAL STATEMENTS .................................................................................F-1
</TABLE>
<PAGE>
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 this Prospectus.
Prospective shareholders are urged to read carefully this Prospectus in its
entirety.
Company Agri Bio-Sciences, Inc., formerly known as Agri Environmental
Sciences, Inc. (the "Company"), was formed on May 30, 1995 as a Texas
corporation. On December 22, 1997, the Company was reincorporated as a Delaware
corporation by means of a migratory merger. The Company produces a fertilizer
known as "Micro Min." Micro Min is produced by blending micronutrients (such as
zinc, manganese, iron, copper, cobalt, molybdenum and boron) with
montmorillonite (an agricultural clay) so as to electrochemically bond the
micronutrients to the montmorillonite to produce a blended fertilizer. The
resulting fertilizer allows the bond between the micronutrients and the
montmorillonite to be dissolved during a time when the micronutrients are most
required by plants. As a blended fertilizer comprised completely of
micronutrients and an inert material, Micro Min is believed to be unique to the
world market. See "BUSINESS." The Company has entered into a exclusive sale and
purchase agreement with Global Farm Sciences, Inc., a corporation affiliated
with the Company ("Global"), to market Micro Min in certain geographical areas
of the world. See "BUSINESS - SALES AND MARKETING." Global's initial target
market for Micro Min will be the country of Mexico. Secondary target markets are
expect to include Central and South America and the Middle East. See "BUSINESS -
SALES AND MARKETING." 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
Distributing GS Financial Services, Inc., a Delaware corporation.
Company
Primary To enable the Company to become a publicly traded corporation
Purposes of and realize the benefits resulting therefrom.
Distribution
Securities 100,000 shares of the Common Stock, par value $.001 per share
to be
Distributed
Distribution Each stockholder of GS Financial will receive one share of
Ratio Common Stock for each 9/10ths of share of GS Financial Common
Stock owned on the Record Date.
Fractional Fractional shares will not be issued. Any share of Common
Shares Stock to be distributed otherwise constituting a
fractional share will be rounded up to one whole share of
Common Stock.
Record Date Close of business on ____________________ _____, 1999.
Delivery of Certificates representing the shares of Common Stock to
Certificates which GS Financial stockholders are entitled are being
delivered to GS Financial stockholders simultaneously with
this Prospectus.
Tax The Distribution is not being structured on a basis tax-free
Con- to GS Financial stockholders, and management believes that
sequences the Distribution could not be structured on such a basis.
Management believes that shares of Common Stock comprising the
Distribution and received by GS Financial's stockholders will
be taxable to such stockholders upon receipt in accordance
with tax law governing dividends and returns of capital.
See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES."
Trading There is no current public trading market for the shares of
Common Stock. Subject to the market sponsorship of a market
maker, shares of Common Stock will be traded in the
over-the-counter market on the OTC Electronic Bulletin Board.
Transfer The transfer agent and registrar for the Common Stock is Atlas
Agent & Stock Transfer Corporation, with offices at 5899 South State
Registrar Street, Salt Lake City, Utah 84107.
Dividend The payment and amount of cash dividends on the Common Stock
Policy after the Distribution will be at the discretion of the
Company's Board of Directors. The Company has not heretofor
paid any dividends, and the Company does not currently
anticipate paying any dividends on its Common Stock. The
Company's dividend policy will be reviewed by the Company's
Board of Directors at such future times as may be
appropriate, and payment of dividends will depend upon the
Company's financial position, capital requirements and such
other factors as the Company's Board of Directors believes
relevant.
Use of The Company will not receive any proceeds from the Common
Proceeds Stock comprising the Distribution.
Risk Stockholders should carefully consider the matters discussed
Factors under the section entitled "RISK FACTORS" in this Prospectus.
The Company has only a limited operating history and is
subject to all of the inherent risks of a developing business
enterprise. The Company has no constant and continual flow of
revenues.
<PAGE>
RISK 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"). These forward-looking
statements reflect the Company's views with respect to future events and
financial performance. Section 27A(b)(2)(D) of the Securities Act and Section
21E(b)(2)(D) of 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.
When used in this Prospectus with respect to the Company the words
"estimate," "project," "intend," "expect," "believe," "anticipate," "plan," 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. 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, integration
of acquisitions and competitive pricing pressures, all as detailed from time to
time in the filings of the Company and GS Financial made with the Commission.
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," and "BUSINESS." The Company 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 the Company
before making any investment decisions with respect to the 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.
The Company is engaged in research and development and has not
commenced commercial production. 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 product and product sales
generate sufficient revenue to fund its continuing operations. There can be no
assurance that sales of the Company's product 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 "BUSINESS - SALES AND MARKETING."
CAPITAL REQUIREMENTS
The Company does not expect to have large capital requirements that it
will not be able to meet from cash flow from operations. The Company has only
minimal overhead, which has thus far been financed through amounts advanced by a
director of the Company. To address the variable costs associated with
production, management intends to require down payments on purchase orders in
amounts equal to 50% of the purchase prices of the purchase orders. Such down
payments are expected to cover all direct costs of producing the related
product. As a result of the preceding facts and arrangements, the Company does
not believe that it will need any financing over the next 12 months or in the
foreseeable future. Nevertheless, while the director who has financed the
Company's overhead has indicated that he intends to continue to do so, he is
under no legal obligation to do so and may cease at any time. Moreover, there
can be no assurance that the Company will be successful in requiring 50% down
payments on purchase orders. Without continued advances for overhead and 50%
down payments on purchase orders, the Company would be required to seek
alternative sources of financing, and there can be no assurance that the Company
would be successful in obtaining alternative sources of financing on acceptable
terms or at all for that matter.
MEXICAN GOVERNMENTAL, POLITICAL, ECONOMIC AND SOCIAL FACTORS
The Company's initial sales efforts will take place in Mexico, and
approximately 90% of its revenues in 1999 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 "RISK FACTORS - Peso Devaluation; Exchange
Controls." Mexican Gross Domestic Product 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 financial condition and results of operations. While the
Mexican economy has begun to recover, complete recovery has not yet been
achieved 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 CONTROLS
While the Company's sales are expected to be 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 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.
UNCERTAINTY OF PRODUCT ACCEPTANCE; LIMITED NUMBER OF PRODUCTS.
To date, the Company has received no meaningful revenue from the sale
of its product. While the Company believes that its product is commercially
viable, developing products for the agricultural marketplaces is inherently
difficult and uncertain. There can be no assurance that significant market
demand for the Company's product will ever develop. See "BUSINESS - SALES AND
MARKETING. Moreover, the Company currently intends to manufacture only one
product for the foreseeable future. At the present, the success of the Company
depends entirely upon the Company's ability to manufacture, and cause this
single product to be sold, all on a profitable basis. This lack of product
diversification may make the results of the Company's operations more volatile
than they would be if the Company manufactured more than one product.
RELIANCE ON THIRD PARTY AND RELATED PARTY TRANSACTIONS.
The Company expects that it will entirely depend upon Global to
generate sales of the Company's product, and the ability of Global to sell the
Company's product is unpredictable. The Company has entered into a exclusive
sale and purchase agreement with Global (the "Global Agreement") in this
connection. See "BUSINESS SALES AND MARKETING." The Company will have limited
control over Global's selling activities. There can be no assurance that Global
will be successful in selling the Company's product. If Global's selling efforts
are not successful, the Company's business, results of operations and financial
condition will be materially adversely affected. Moreover, the Global Agreement
was not the result of arms-length negotiations. Accordingly, there can be no
assurance that the terms and conditions of this agreement are as favorable to
the Company as those that could have been obtained from unaffiliated third
parties. There can be no assurance that the sales efforts to be exerted by
Global under the Global agreement will be exerted at the level of quality the
Company expects, or that such agreement will not be modified in the future.
Moreover, Global is a thinly capitalized corporation, and there can be no
assurance that the Company could meaningfully enforce its agreement with Global.
Also, see "BUSINESS - SALES AND MARKETING - Exclusive Sale and Purchase
Arrangement."
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 product
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 product. There are few
barriers to entry into the market for the Company's product, 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
product 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
The terms of the license granted by the Minister of Agriculture of
Mexico, pursuant to which the Company has the right to import and sell its
micronutrient fertilizer in Mexico, are subject to government regulation. There
can be no assurance that additional licenses to import products similar to or
the same as those granted or expected to be granted 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.
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 of these
individuals may have a material adverse effect on the business, operations,
revenue and business prospects of the Company. The Company maintains key man
life insurance on M.M. Kalish in the amonut of $1.0 million, but does not
maintain key man life insurance on Robert A. Kalish. Neither of Messrs. Kalish
and Kalish devotes full time to the business of the Company. See "MANAGEMENT OF
THE COMPANY."
COMPETITION
To the best of its knowledge, management believes there is no direct
competition with the Company's product and services at this time in the blended
micronutrient fertilizer market. However, there can be no assurance that the
Company will not in the future be required to compete directly with other,
larger companies having greater financial, marketing and production capabilities
than the Company. See "BUSINESS - COMPETITION."
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 CAPITAL STOCK."
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. There can be no assurance that the
Company will be successful in this attempt. The liquidity of the Common Stock
may be adversely affected, and purchasers of the Common Stock may have
difficulty selling the Common Stock, if the Company is unsuccessful in
qualifying the Common Stock for trading in a suitable trading market. The 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 Common Stock by
affiliates of the Company. See "SHARES ELIGIBLE FOR FUTURE SALE."
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."
INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Certain provisions of the Company's Certificate of Incorporation and
By-Laws and certain agreements that the Company has entered into with certain of
its directors and officers provide that the Company shall indemnify any
director, officer, agent and/or employee as to those liabilities and on those
terms and conditions as are specified in the General Corporation Law of Delaware
or in such agreements. Further, the Company may purchase and maintain insurance
on behalf of any such persons whether or not the Company would have the power to
indemnify such person against the liability insured against. The foregoing could
result in substantial expenditures by the Company and prevent any recovery from
such officers, directors, agents and employees for losses incurred by the
Company as a result of their actions. Further, the Commission takes the position
that indemnification against liability under the Securities Act is against the
public policy as expressed in the Securities Act, and is, therefore,
unenforceable.
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 MARKET.
There is presently no public market for the Common Stock, and there is
no assurance that a public market for such securities will develop after
completion of the Distribution, 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
Management believes that the trading price of the Common Stock is
likely to start below $5.00 per share. If the trading price of the Common Stock
were to start and remain below $5.00 per share, trading in the Common Stock
would be subject to the requirements of certain rules promulgated under the
Exchange Act which require additional disclosure by broker-dealers in connection
with any trades generally involving any non-NASDAQ equity security that has a
market price of less than $5.00 per share, subject to certain exceptions. Such
rules require the delivery, prior to any penny stock transaction, of a
disclosure schedule explaining the penny stock market and the risks associated
therewith, and impose various sales practice requirements on broker-dealers who
sell penny stocks to persons other than established customers and accredited
investors (generally institutions). For these types of transactions, the
broker-dealer must make a special suitability determination for the purchaser
and have received the purchaser's written consent to the transaction prior to
sale. The additional burdens imposed upon broker-dealers by such requirements
may discourage broker-dealers from effecting transactions in the Common Stock
affected, which could severely limit the market liquidity of the Common Stock.
FOR ALL OF THE AFORESAID REASONS AND OTHERS SET FORTH HEREIN, THE SHARES COVERED
BY THIS PROSPECTUS INVOLVE A HIGH DEGREE OF RISK. STOCKHOLDERS SHOULD BE AWARE
OF THESE AND OTHER FACTORS SET FORTH IN THIS PROSPECTUS.
<PAGE>
USE OF PROCEEDS
Pursuant to the Distribution, GS Financial will provide consulting
services to the Company and receive from the Company 100,000 shares of Common
Stock. Such shares of Common Stock will be distributed to GS Financial
stockholders as of the 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 Common Stock.
THE DISTRIBUTION
The following information describes certain aspects of the proposed
Distribution as well as certain contractual arrangements that will exist between
the Company and GS Financial following the completion of the Distribution.
REASONS FOR THE DISTRIBUTION
After research into other possible alternatives, the management of the
Company determined that the Distribution presented the fastest and least
expensive method of accessing the United States 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. Further, the
management of the Company believed that the distribution of shares of Common
Stock to the stockholders of GS Financial in the Distribution will provide the
basis for the creation of a public market for the Common Stock 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."
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
certificates representing one share of Common Stock for each 9/10th of a share
of GS Financial Common Stock held by such holder as of the Record Date. See "THE
DISTRIBUTION -- Manner of Effecting the Distribution." GS Financial's Board of
Directors is causing GS Financial to distribute shares of Common Stock herewith
to GS Financial Stockholders as of the Record Date. Fractional shares will not
be issued. Any share of Common Stock to be distributed otherwise constituting a
fractional share will be rounded up to one whole share of Common Stock.
MANNER OF EFFECTING THE DISTRIBUTION
GS Financial's transfer agent, Continental Stock Transfer & Trust
Company, will act as the Distribution Agent for the Distribution and is
delivering certificates for Common Stock with this Prospectus to holders of
record of GS Financial Common Stock as of the close of business on the Record
Date on the basis of one share of Common Stock for every 9/10th of a share of GS
Financial Common Stock held on the Record Date. All shares of Common Stock will
be fully paid and nonassessable and the holders thereof will not be entitled to
preemptive rights. See "DESCRIPTION OF THE COMPANY CAPITAL STOCK."
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 COMMON STOCK IN THE DISTRIBUTION. THE DISTRIBUTION AGENT IS SENDING YOU YOUR
AGRI STOCK CERTIFICATES WITH THIS PROSPECTUS.
EFFECTS OF DISTRIBUTION
Immediately following the completion of the Distribution, the Company
will be an independent, publicly-owned company, and it is contemplated that the
shares of Common Stock will be quoted on the Electronic Bulletin Board under the
trading symbol "AGBI." See "RISK FACTORS - Listing of Common Stock; Restrictions
on Resale."
LISTING OF COMMON STOCK; RESTRICTIONS ON RESALE
The Company intends to apply to a member of the National Association of
Securities Dealers, Inc. to make a market in the Common Stock and provide a
quotation on the NASD inter-dealer Electronic Bulletin Board under the trading
symbol "AGBI." The 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 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 Common Stock by
affiliates of the Company. See "SHARES ELIGIBLE FOR FUTURE SALE."
TREATMENT OF INDEBTEDNESS
The Distribution Agreement provides that neither GS Financial nor the
Company will assume or be responsible for any debts or obligations of the other.
EXPENSES
In accordance with the terms of the Distribution Agreement, the Company
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 listing application fees as to this Prospectus
and related Registration Statement) shall be paid by the Company. The Company
estimates that the transaction expenses will approximate $33,000.
INDEMNIFICATION AND INSURANCE
The Distribution Agreement provides that from and after the
Distribution Date (as defined therein), GS Financial will indemnify, defend and
hold harmless the Company and its subsidiaries, as well as the directors and
officers of the Company and the various the Company subsidiaries (collectively,
the "the Company 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,
except to the extent that such claims result from information given by the
Company Indemnitees for inclusion in this Prospectus or such Registration
Statement, and (iii) liabilities related to the operation of GS Financial.
The Distribution Agreement also provides that from and after the
Distribution Date, the Company 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 from and against all losses
arising out of or relating to (i) any breach, whether before or after the
Distribution Date, by the Company of any provision of the Distribution
Agreement, (ii) any claims arising out of this Prospectus or the Registration
Statement pertaining thereto due to information given by the Company Indemnitees
for inclusion in this Prospectus or such Registration Statement,and (iii)
liabilities related to the operation of the Company.
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
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 Service 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
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
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
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 Service. 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 Service 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.
BUSINESS
OVERVIEW
Agri Bio-Sciences, Inc. (the "Company") was formed on May 30, 1995 as a
Texas corporation under the name "Agri Environmental Sciences, Inc." The Company
changed its corporate name to its current name about October 1997. On December
22, 1997, the Company was reincorporated as a Delaware corporation by means of a
migratory merger. The Company is in a developmental stage and has not yet
commenced full-scale sales, marketing and production activities.
The Company has developed a fertilizer known as "Micro Min." Micro Min
is produced by blending micronutrients (such as zinc, manganese, iron, copper,
cobalt, molybdenum and boron) with montmorillonite (an agricultural clay) so as
to electrochemically bond the micronutrients to the montmorillonite to produce a
blended fertilizer. The resulting fertilizer allows the bond between the
micronutrients and the montmorillonite to be dissolved during a time when the
micronutrients are most required by plants. As a blended fertilizer comprised
completely of micronutrients and an inert material, Micro Min is believed to be
unique to the world market.
Micro Min has been in the process of development and refinement for
over the past 25 years by the Company and a couple of predecessor companies. The
rights to Micro Min, and the Company's plant and certain of its equipment, were
acquired by a stockholder of the Company in 1995 from Anvil Mineral Mining
Corporation ("AMMC"), which was then in a liquidation bankruptcy proceeding. The
acquired items were subsequently contributed to the Company. Management believes
AMMC failed due to internal problems of its shareholders rather than the merits
of Micro Min. AMMC had acquired the rights to Micro Min in the early 1980's from
Mack Ravenhorst, who developed Micro Min and had tried for a number of year to
exploit it commercially without any meaningful success. Part of the delay in the
full-scale exploitation of Micro Min has resulted from the extended period of
time it takes to qualify a product in a particular foreign country and to
develop the marketing relationships necessary to sell a product in that country.
After an extended period of time and a concerted effort, the Company has
qualified Micro Min in Mexico, Columbia and Spain, and believes that it now has
the necessary marketing relationships to exploit Micro Min on a full-scale
basis.
The Company has decided not to sell and market Micro Min itself. This
decision was based on the Company's desire not to bear the risk that selling
expenses might offset a large portion of (or in fact exceed) revenues from sales
and the related risks resulting from possible exchange rate fluctuations that
may result from sales in a foreign country for foreign currencies. Instead, the
Company will concentrate solely on the manufacture of Micro Min. The Company has
decided to engage another company to sell Micro Min and thus bear the risk of
selling and any risks resulting from possible exchange rate fluctuations.
Therefore, the Company has entered into a exclusive sale and purchase agreement
(the "Global Agreement") with Global Farm Sciences, Inc., a corporation
affiliated with the Company ("Global"), to market Micro Min in certain
geographical areas of the world. See "BUSINESS - SALES AND MARKETING."
The initial target market for Micro Min will be the country of Mexico.
Secondary target markets are expected to include Central and South America and
the Middle East. Mexico was selected as the initial target market due to the
extensive agricultural needs of the country and the fairly extensive contacts
that management has had with the country over the years.
In connection with the registration of the 100,000 shares of Common
Stock covered by this Prospectus, GS Financial is distributing to its
stockholders such 100,000 shares of Common Stock on the basis of one share of
Common Stock for each 9/10th of a share of common stock of GS Financial issued
and outstanding on the Record Date. This Distribution is being undertaken so
that the Company will henceforth be an independent publicly traded corporation.
While the Company's public company status is expected to benefit the Company in
the future for a variety of reasons (such as providing greater ease in raising
capital), the Distribution and such status is not expected to have any immediate
effect on the business of the Company.
THE PRODUCT
Micro Min is a formula of micronutrients blended with montmorillonite
(an agricultural clay). The blending process electrochemically bonds the
micronutrients to the montmorillonite. The bond between the micronutrients and
the montmorillonite is dissolved during times when the micronutrients are most
required by plant life. Management believes that the time-released
characteristic of Micro Min gives it an inherent advantage over other forms of
micronutrients fertilizers, which could be toxic to crops if excess quantities
were applied directly to them. Over the years, Micro Min has been developed in
an increasingly more concentrated form. Management believes that Micro Min is
the only blended fertilizer composed of micronutrient and an inert material on
the world market today. However, Micro Min is not now being produced, nor has it
ever been sold, in commercial quantities.
Micro Min is expected to be packaged in 10 kilogram bags, placed on
pallets and stretch wrapped and then placed in inventory at the Company's plant
site. See "BUSINESS - MANUFACTURING FACILITY." Once produced, Micro Min can be
moved in containerized shipments of 19 metric tons each or placed in railroad
freight cars containing 50 metric tons each, depending on where the product is
to be shipped.
Since the early 1980's, with the assistance of various governmental
agencies in Mexico, many test plots involving Micro Min were started in and
around the state of Tlaxcala, Mexico. 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. The results of this testing
seemed to indicate the following:
(1) Farmers experienced between 10% and 15% more crop production;
(2) Crops contained higher protein averages than without Micro Min;
(3) Second season lab reports seem to indicate that farmers
achieved healthier and more manageable soils requiring less
fertilization each succeeding growing period; and
(4) The resulting increase in crop production and the savings on
macronutrients more then offset the costs of the Micro Min.
Despite the testing described above, the Company has spent only a minimal amount
on research and development over the past two years.
Because of the effectiveness of Micro Min, the Minister of Agriculture
of Mexico awarded to the Company the only existing license to import and sell
micronutrient fertilizer in every state of Mexico. Micro Min has also been
endorsed by the chief of all laboratories operated by the Minister of
Agriculture. After receiving the Company's product license from Mexico, the
Company proceeded with similar field tests in Colombia and Spain. During these
tests, Micro Min proved to be a successful fertilizer for their area soils.
After the conclusion of these field tests, product licenses were issued by both
of these countries for the importation of Micro Min.
The Company has produced and holds in its inventory 250 metric tons of
Micro Min product. Of this inventory, 128 metric tons are now held at the
Company's plant site and 122 metric tons are being held in Mexico for the
commencement of the Company's full-scale sales and marketing efforts.
MANUFACTURING FACILITY
The Company owns a plant facility situated on a seven-acre tract of
land located on Dicky Ware Street, in downtown Bay Springs, Mississippi. The
plant is not now being operated on an on-going commercial basis. However, the
Company intends to activate on-going commercial production in the immediate
future, and the Company does not now foresee any problem in doing so.
The plant facility consists of a metal building containing about 15,000
square feet under roof. The roof of this building was recently renovated. During
this renovation, the Company removed a 5,000 square foot section of the covered
area of the plant during August 1997 and inserted a completely new metal
building directly inside the present structure, thereby fortifying the complete
plant facility. The roof of the plant was also repaired in those areas that
required attention. The equipment in the plant consists primarily of a 40'x8'
dryer for the montmorillonite, a blender and a bagging machine. All equipment in
the plant is in good repair and completely ready for production of the Company's
micronutrient product Micro Min. 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 United States port for containerized or palletized
shipment by sea to any foreign port.
During testing and operating with a three man team, the plant proved
capable of manufacturing 20 metric tons of Micro Min during an eight-hour shift.
If needed, the plant could have two eight-hour shifts per day manufacturing
product and one eight-hour shift devoted solely to building and equipment
maintenance. Management anticipates that the plant could operate 22 days per
month, 12 months per year. With three shifts working for the foregoing periods
of time, the plant could produce 10,560 metric tons annually. The Company
expects to install a California Pellet Mill pelletizer into the plant facility
if Global reaches its sales projections in 1999. Such pelletizers are able to
produce 20 metric tons of pelletized product per hour which will provide the
plant with the expected product manufacturing capability of 84,480 metric tons
annually, based on the Company's assumptions regarding its levels of operations.
Under the terms of the Global Agreement, Global will purchase a metric
ton of Micro Min at a price of $620.00 (FOB). Management believes that the
direct cost of producing a metric ton of Micro Min will be approximately $315,
thus yielding upon sale a direct profit of approximately $305 per metric ton.
Pursuant to the Global Agreement, Global must purchase at least 2,000 metric
tons of Micro Min in 1999 and 2000 and 3,000 metric tons of Micro Min in each of
the succeeding years. Management actually expects that purchases under the
Global Agreement will exceed the minimum required purchases, but there can be no
assurance in this regard. The Global Agreement was intended to free the Company
of any and all cost factors originating outside its plant facility in Bay
Springs, Mississippi. All costs incurred in all sales efforts by Global will be
paid by Global. Moreover, all freight charges to anywhere in the product sales
territory assigned to Global will be strictly Global's responsibility. In
addition, all sales personnel and their expenses will likewise be paid by
Global. The Global Agreement was structured to ensure that the Company would
realize a profit from the Global Agreement.
SALES AND MARKETING
Overview
The Company's initial sales and marketing plan focused on the
establishment of relationships with critical governmental and
quasi--governmental agencies in the Company's target markets. The Company
intended to demonstrate to these agencies the effectiveness of Micro Min and the
benefits that farmers would realize by its use and application. In this
connection, the Company intended to establish a network of laboratories to
provide soil, plant and water testing and recommendations to farmers. Because it
was believed that the farmers of the third world have generally not applied
micronutrients to their fields, the Company expected to find deficiencies with
regard to micronutrients in the soils that were tested. The Company could then
recommend (with the expected endorsement of a governmental or
quasi--governmental agency) that the farmers use Micro Min to remedy these
deficiencies. After careful consideration, the Company decided not to pursue
sales and marketing in the United States initially due to the costs believed
necessary to penetrate the United States market adequately.
In connection with its initial sales and marketing plan, the Company
developed plans and specifications for computerized soil, plant and water
analysis laboratories, one of which was actually installed in the Dominican
Republic. 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, would 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 Kilogram/acre
terms. These laboratories were specifically designed for mass sample analysis
using the most advanced technology available. To complete the laboratory
packages, the Company wrote complete testing protocols to be used by every
instrument in these laboratories.
The Company also developed a proprietary computer software program for
use in the laboratories. This software has the capability of rendering final and
definitive reports on soil, water, and plants from samples submitted for
testing. The Company's laboratories would be capable of analyzing soil, plant
and water samples and immediately transmitting raw data to an on-line computer,
which mathematically extrapolates the data and scans the computer's programmed
memory for an exact fertilizer recommendation. Within days, the programmed
computer is able to provide farmers written reports containing the complete
results of the analyses of their samples and a complete fertilizer
recommendation. To offer further assistance to the farmers, the computer is
programmed with the latest technical data concerning local soils, rainfall, and
temperatures. The information obtained during the testing is also retained in
the computer's on-line data base 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 a laboratory. This will enable sales efforts to plot continuous
sales strategies in any given farming community.
Because of an agreement that the Company has reached in principle with
Intertek Testing Services, a laboratory testing company ("ITS"), the Company
does not now intend to pursue its laboratory programs. See "BUSINESS -- SALES
AND MARKETING - Intertek Testing Services." However, as discussed below, the
Company will license its software to ITS. In addition, the Company will no
longer focus on the establishment of relationships with critical governmental
and quasi--governmental agencies in its target markets. Instead, the Company has
entered into an exclusive sale and purchase agreement with Global Farm Sciences,
Inc., which will act as the exclusive purchaser and reseller of the Company's
product.
Exclusive Sale and Purchase Arrangement
Global Farm Sciences, Inc., a Texas corporation ("Global"), was formed
in December 1997 by Lester H. Stephens, M. Manny Kalish and Patrick N. Morgan
(founders and board members of the Company) for the purpose of selling the
Company's product to foreign entities. On August 27, 1998, the Company signed a
five-year exclusive product sales agreement with Global. This Agreement requires
Global to purchase 2,000 metric tons of Micro Min during the year 1999 and 2000
and thereafter purchase 3,000 metric tons of Micro Min during each succeeding
year. Global must pay $620.00 per metric ton in United States dollars, FOB the
Company's plant facility in Bay Springs, Mississippi. Global must remit 50% of
the purchase price with each purchase order for Micro Min forwarded to the
Company. (This initial amount provides the Company with adequate funds to
produce one metric ton of product and thereby provides the Company with the
necessary funds to keep the plant in operation). Thereafter, Global must remit
the remaining 50% payment of its purchase order to the Company within ninety 90
days of their receipt of the product FOB the plant. The Global agreement may be
terminated prior to its five-year term upon the occurrence of certain customary
termination events, such as breach of contract or bankruptcy. For the
foreseeable future, Global intends to rely on its relationship with The National
College of Agricultural Engineers for purposes of generating sales of Micro Min.
The National College of Agricultural Engineers
The National College of Agricultural Engineers (the "College") is an
association of graduates of various agricultural colleges mandated by Article 3
of the Constitution of Mexico. The College is charged with the formation of
programs that will benefit the farmers of Mexico. Each of Mexico's 32 states
also has a College of Agricultural Engineers organization, and these state
colleges are also recognized by the federal government. The primary purpose of
these state Colleges is to assist farmers in the various states with the
operation of their farms. Each of the state colleges has 10 branch office, each
having approximately 50 persons engaged in the business of selling agricultural
products as members of the state college for a total of approximately 16,000
member salespersons throughout the entire college system.
On July 28, 1998, Ing. Sergio Samaniego, president-elect of the
College, met in Mexico City with the presidents of the 32 state colleges. The
Company's proposed program of laboratory testing and fertilization was brought
to the floor by Samaniego and explained in great detail. Many of the engineers
present know of Global's operation in Mexico and of the Company's computer
software advantage. Samaniego presented the Company's proposed program as a
program that each of the state colleges could embrace for the years 1998-1999.
Samaniego brought the matter to the floor for a vote and the project was
accepted unanimously as a "body of work" for all 32 state colleges and the
national College. It was decided that the national College would manage the
program and work directly with each president of each state college. Samaniego
also volunteered to start with an eight-state area at the outset and expand to
include every state in Mexico in soil, water and plant testing for farmers. The
state colleges at all levels would sell the farmers whatever fertilizers they
would require under this program. Samaniego informed Global that he intends to
work with the farmers in the eight-state initial sales target area and to use
farm credits extended to the farmer by the Mexico federal government to finance
purchases by them of Micro Min and other fertilizers and farm implements. The
College intends to invite the farmers in the initial targeted eight-state
targeted sales area to use their farm credits for such purchases.
The Company has not entered into any legally binding, definitive
agreement with the College regarding their relationship, although it is
currently negotiating with the College in an attempt to do so.
Intertek Testing Services
On August 31, 1998, the Company reached an agreement in principle with
Intertek Testing Services ("ITS") whereby (for nominal consideration) the
Company will license to ITS the Company's computer software programs and testing
protocols for 102 different crops. ITS has 14 laboratories located in various
states of Mexico and numerous laboratories in 102 countries worldwide. ITS is
highly recognized as one of the leaders in the world of third party inspectors.
ITS has all instruments and personnel necessary to do soil, water and plant
testing in conjunction with the Company's computer software and testing
protocols. As discussed above, the Company expects that the soils of Mexican and
other third world farmers will generally be deficient in micronutrients. Because
the Company has the only blended micronutrient fertilizer on the world market,
the Company expects that it will greatly benefit from fertilizer recommendations
made as a result of ITS's soil, plant and water testing. Because of its
agreement in principle with ITS, the Company does not now intend to pursue its
previously planned laboratory programs. The Company has not entered into any
legally binding, definitive agreement with ITS regarding their relationship,
although it is currently negotiating with ITS in an attempt to do so.
PROPRIETARY RIGHTS
The Company regards various features and design aspects of its product
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 product, 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
product 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
Management believes there are no other commercial blended micronutrient
fertilizers available in the market place. Therefor, management believes there
is no direct competition as of the date of this Prospectus. However, there can
be no assurance that the Company will not in the future be required to compete
directly with other, larger companies having greater financial, marketing and
production capabilities. The Company does not regard other fertilizer companies
as direct (or even indirect) competitors because the products offered by them
are complementary to and not competitive with the product offered by the
Company. The Company's primary challenge lies not in head-to-head competition
with similar products, but in educating farmers as to the need to use the
micronutrient products of the Company as well as the macronutrient products more
widely-accepted historically.
EMPLOYEES
As of the date of this Prospectus, the Company has only one full time
employees who serves as the manager of the Company's plant. All other business
and corporate functions are performed by the officers and directors without
compensation.
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.
PLAN OF OPERATION
The Company currently remains in a developmental stage. It has not yet
commenced full-scale sales, marketing or production activities, has not
generated any revenue from operations and will not generate revenue from
operations until it commences sales of its product. There can be no assurance
that the Company will be able to generate meaningful revenue or achieve
profitable operations. The following is a summary of the Company's plan of
operation over the next 12 months.
Global Farm Sciences, Inc., the affiliate responsible for selling the
Company's product, has established a relationship with the Mexican National
College of Agricultural Engineers (the "College"). The College is an association
of graduates of various agricultural colleges mandated by Article 3 of the
Constitution of Mexico. Each of Mexico's 32 states also has a College of
Agricultural Engineers organization. Each of the state colleges has 10 branch
office, each having approximately 50 member salespersons for a total of
approximately 16,000 member salespersons throughout the entire College. Top
officials with the College have adopted the Company's proposed program of
laboratory testing and fertilization as their national program for the period
1998-1999. This program would include (among other things) laboratory testing
provided by Intertek Testing Services ("ITS") and the recommendation to farmers
of the use of Micro Min. Global and the College are currently negotiating a
definitive agreement regarding their relationship, and Global and ITS are also
currently negotiating a definitive agreement regarding their relationship. One
of the Company's primary goals in the immediate future is to complete these
definitive agreements. There can be no assurance that definitive agreements will
be entered into or that the relationships between Global and the College, and
Global and ITS, will continue. If these relationships fail to continue, the
Company intends to resume its original sales and marketing plan described above.
See "BUSINESS SALES AND MARKETING - Overview."
In addition, Global has entered into an informal agreement with a
INTAGRO, a company based in Veracruz, Mexican. INTAGRO has been in business for
over 15 years and has 50 offices throughout Mexico and approximately 450
salespersons. Most of these salespersons is a graduate in agricultural, is a
member of his state college of agriculture, has been employed by INTAGRO for a
considerable period of time, and is very familiar with the farmers in his sales
territory. INTAGRO has pledged to have its salespersons begin preliminary
efforts to sell the Company's products by March 1, 1999. These preliminary
efforts will consist of sales contacts and soil samplings. Each INTAGRO
salesperson is expected to contact approximately 45 farmer per week with regard
to the Company's products.
The Company will have little participation in the sales program. The
Company intends for the College's program and INTAGRO's efforts to be the
primary, if not exclusive, means to market the Company's product over the next
12 months.
The Company does not believe that it will need any financings over the next 12
months for the reasons stated in the remainder of this paragraph. Pursuant to
the exclusive sale and purchase agreement the Company and Global have entered
into, the Company expects that it will receive purchase orders from Global in
minimum amounts of 100 metric tons for aggregate minimum purchase prices per
purchase order of appromixately $62,000. Under the terms of the exclusive sale
and purchase agreement, Global is required to pay one-half of the aggregate
purchase price of a purchase order as a downpayment at the time that the
purchase order is placed. Based on the Company's estimates, the downpayment will
be sufficient to cover all direct costs associated with the fufillment of the
purchase order. Accordingly, the risk of inadequate production funding is
negligible. However, if there is a small shortfall, management has indicated
that they will be willing to advance the amount of the shortfall, although they
are under no legal obligation and may not be legally compelled to do so. The
Company has only minimal overhead, which has thus far been financed through
amounts advanced by M. Manny Kalish, a director of the Company. Mr. Kalish has
indicated that he intends to continue to provide limited financing of overhead,
but he is under no legal obligation and may not be legally compelled to do so
and may cease at any time.
Moreover, the Company does not intend to conduct any further research
and development over the next 12 months. However, if Global meets its sales
expectations, the Company expects to add (during the next 12 months) a
California Pellet Mill pelletizer and 10 additional employees to meet the demand
for additional production.
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 COMPANY
EXECUTIVE 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 1999.
<TABLE>
<CAPTION>
NAME TITLE AGE
<S> <C> <C>
Leslie L. Lemak, M.D. Chairman of the Board of Directors 80
Lester H. Stephens President and Director 71
Anthony A. Mierzwa Director 85
Patrick N. Morgan Secretary, Treasurer and Director 80
M. Manny Kalish Director 70
Vernon L. Medlin, M.D. Director 66
Robert A. Kalish Vice President 49
</TABLE>
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.
Anthony A. Mierzwa is retired from a 40 year career as a real estate
developer in the Houston area.
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.
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.
Vernon L. Medlin, M.D. practices radiology in Corpus Christi, Texas
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
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
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. 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 due 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. 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. 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 Prospectus, 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
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
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 M. Manny Kalish and Leonard Krawczyk, founding
shareholders of the Company, contributed to the Company the Bay Springs,
Mississippi plant site and 250 tons of bagged fertilizer at their combined
original cost of $200,000, for 4,000,000 and 6,000,000 shares of stock,
respectively, and a note payable for $100,000. In late 1996, the total
outstanding shares of Mr. Krawczyk 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 six 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 five 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, 2000.
The Company has entered into a five-year exclusive sale and purchase
agreement with Global Farm Sciences, Inc., an affiliate of the Company
("Global"), for the purpose of selling the Company's product to foreign
entities. This agreement requires Global to purchase 2,000 metric tons of Micro
Min during the year 1999 and 2000 and thereafter purchase 3,000 metric tons of
Micro Min during each succeeding year. Global must pay $620.00 per metric ton in
United States dollars, FOB the Company's plant facility in Bay Springs,
Mississippi. Global must remit 50% of the purchase price with each purchase
order for Micro Min forwarded to the Company. Thereafter, Global must remit the
remaining 50% payment of its purchase order to the Company within ninety 90 days
of their receipt of the product FOB the plant. The Global agreement may be
terminated prior to its five-year term upon the occurrence of certain customary
termination events, such as breach of contract or bankruptcy. For more
information about Global and this Agreement, see "BUSINESS - SALES AND MARKETING
Exclusive Sale and Purchase Arrangement."
PRINCIPAL STOCKHOLDERS
The shares of Common Stock held by GS Financial represent less than 5%
of the outstanding shares of Common Stock prior to the Distribution. All the
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 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 October 9, 1998, the amount of
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.
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER PERCENTAGE OF
BENEFICIAL OWNER OF SHARES SHARES OUTSTANDING(1)
<S> <C> <C> <C>
M.M. Kalish 4,897,500(2) 38.1%
7806 Oxfordshire Drive
Spring, Texas 77379
Lester H. Stephens 1,440,000(3) 11.2%
5211 Court of York
Houston, Texas 77069
Vernon L. Medlin, M.D. 1,368,000(4) 10.6%
1242 Sandpiper
Corpus Christi, Texas 78412
Leslie L. Lemak, M.D. 1,243,000(5) 9.7%
5457 Sugar Hill
Houston, Texas 77056
Patrick N. Morgan 767,000(6) 6.0%
819 Hedwig Way
Houston, Texas 77024
Anthony A. Mierzwa 793,000(7) 6.2%
1323 South Boulevard
Houston, Texas 77006
Officers and Directors as a Group 10,508,500(1) 81.8%
</TABLE>
________________________
(1) Includes 1,750,000 shares issuable in connection with options or
warrants exercisable within 60 days of this Prospectus. The numbers and
percentages of shares outstanding both before and after the
Distribution will remain the same.
(2) Includes 500,000 shares issuable in connection with options or
warrants exercisable within 60 days of this Prospectus.
(3) Includes 250,000 shares issuable in connection with options or warrants
exercisable within 60 days of this Prospectus, 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.
(4) Includes 250,000 shares issuable in connection with options or warrants
exercisable within 60 days of this Prospectus, 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.
(5) Includes 250,000 shares issuable in connection with options or warrants
exercisable within 60 days of this Prospectus, 300,000 shares owned or
record by Lemak family members to which Dr. Lemak disclaims any
interest.
(6) Includes 250,000 shares issuable in connection with options or
warrants exercisable within 60 days of this Prospectus.
(7) Includes 250,000 shares issuable in connection with options or warrants
exercisable within 60 days of this Prospectus, 100,000 shares owned of
record by a member of the Mierzwa family to which Mr. Mierzwa disclaims
any interest.
DESCRIPTION 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
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. 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.
<PAGE>
DEFENSES AGAINST HOSTILE TAKEOVERS
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. 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. 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. 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. 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. 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. 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. 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. 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
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 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, 2000.
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
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
the Company, 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 Common Stock will be issuable upon the
exercise of options held by Directors of the Company.
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
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.
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Index ..............................................................................................F - 1
Audited Financial Statements:
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
Interim Financial Statements:
Balance Sheet as of September 30, 1998 .............................................................G - 1
Statement of Expenses for the Nine Months Ended
September 30, 1998 ........................................................................G - 2
Statement of Stockholders' Equity for the
Nine Months Ended September 30, 1998 ......................................................G - 3
Statement of Cash Flow for the Nine Months Ended
September 30, 1998 .........................................................................G - 4
Notes to Financial Statements .......................................................................G - 5
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Agri Bio-Sciences, Inc.
Houston, Texas
We 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.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 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 periods then ended in conformity with generally accepted accounting
principles.
February 2, 1998, (except for Note 2,
as to which the date is March 5, 1998)
MALONE & BAILEY, PLLC
Houston, Texas
<PAGE>
AGRI BIO-SCIENCES, INC.
(formerly Agri Environmental Sciences, Inc.)
(A Development Stage Company)
Balance Sheets
December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
ASSETS
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
LIABILITIES
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
</TABLE>
See notes to financial statements.
F-3
<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
<TABLE>
<CAPTION>
May 30, 1995
(Inception) to
December 31,
1997 1996 1997
<S> <C> <C> <C>
EXPENSES
Fees paid for services
by stockholders $ 30,250 $ 38,150 $168,400
Other administrative expenses 154,671 31,416 186,087
Interest 13,595 10,000 23,595
Depreciation 750 750
NET (DEFICIT) $(199,266) $(179,566) $(378,832)
(Loss) per common share $(.02) $(.02)
Weighted average
shares outstanding 9,707,500 7,315,000
</TABLE>
See notes to financial statements.
F-4
<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
<TABLE>
<CAPTION>
Deficit
Accumulated
During the
Common Stock Paid in Development
Shares $ Capital Stage Totals
<S> <C> <C> <C> <C> <C>
Balances, December 31, 1995 0 0 $ 0 $ 0 $ 0
Shares issued in exchange 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 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
</TABLE>
See notes to financial statements.
F-5
<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
<TABLE>
<CAPTION>
May 30, 1995
(Inception) to
December 31,
1997 1996 1997
<S> <C> <C> <C>
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
</TABLE>
See notes to financial statements.
F-6
<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
<TABLE>
<CAPTION>
May 30, 1995
Inception) to
December 31,
1997 1996 1997
<S> <C> <C> <C>
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
</TABLE>
See notes to financial statements.
F-7
<PAGE>
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. (AGRI) (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 AGRI
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 AGRI in August 1997 by exchanging 340,000 shares of
AGRI for 100% of the outstanding stock of AFS. This exchange of shares was
accounted for as a reorganization of entities under common control using the
pooling of interests method.
The financial statements are presented as if the Company has operated as a
single continuous company.
Nature of Business. AGRI 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.
Deposits consists of two credit card advance deposits.
F-8
<PAGE>
AGRI BIO-SCIENCES, INC.
(formerly Agri Environmental Sciences, Inc.)
Notes to Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 AGRI 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, AGRI began construction
modifications to make the plant operational again. The plant was pronounced
operational in fall, 1997, with operations to begin when sales occur.
NOTE 2 - NOTE PAYABLE TO STERLING BANK
In March, 1997, AGRI 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.
F-9
<PAGE>
AGRI BIO-SCIENCES, INC.
(formerly Agri Environmental Sciences, Inc.)
Notes to Financial Statements
NOTE 4 - INSIDER COMMON STOCK RE-SALES
In late 1996, AGRI 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.
F-10
<PAGE>
AGRI BIO-SCIENCES, INC.
(formerly Agri Environmental Sciences, Inc.)
(A Development Stage Company)
Balance Sheet
September 30, 1998
UNAUDITED
ASSETS
Cash $ 3,830
Fertilizer plant and equipment, net of $4,500
accumulated depreciation 169,386
Deposits 12,500
TOTAL ASSETS $185,716
LIABILITIES
Accounts payable$ 9,432
Due to current majority stockholder 52,000
Due to former stockholder 100,000
TOTAL LIABILITIES 161,432
STOCKHOLDERS' EQUITY
Common stock, $.001 par value, 20,000,000
shares authorized, 10,900,000 issued and
outstanding 10,900
Paid in capital 572,250
Deficit Accumulated During the Development Stage (558,866)
TOTAL STOCKHOLDERS' EQUITY 24,284
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $185,716
G-1
<PAGE>
AGRI BIO-SCIENCES, INC.
(formerly Agri Environmental Sciences, Inc.)
(A Development Stage Company)
Statement of Expenses
Nine Months Ended September 30, 1998 and 1997
UNAUDITED
<TABLE>
<CAPTION>
May 30, 1995
(Inception) to
Nine Months Ended September 30,
1998 1997 1998
---------- --------- -------
<S> <C> <C> <C>
EXPENSES
Fees paid for services by
stockholders $ 30,250 $ 168,400
Other administrative expenses $ 73,574 122,998 259,661
Writedown of inventory 100,000 100,000
Interest 2,710 707 26,305
Depreciation 3,750 750 4,500
--------- --------- ---------
NET (Deficit) $(180,034) $(154,705) $(558,866)
========= ========= ====================
(Loss) per common share $(.02) $(.02)
Weighted average shares outstanding 10,777,778 9,697,500
</TABLE>
<PAGE>
AGRI BIO-SCIENCES, INC.
(formerly Agri Environmental Sciences, Inc.)
(A Development Stage Company)
Statement of Stockholders' Equity
9 Months Ended September 30, 1998
UNAUDITED
<TABLE>
<CAPTION>
Deficit
Accumulated
During the
Common Stock Paid in Development
Shares $ Capital Stage Totals
---------- -------- -------- ---------- -------
<S> <C> <C> <C> <C> <C>
Balances,
December 31, 1997 10,350,000 $ 10,350 $435,300 $(378,832) $ 66,818
Shares issued for cash 550,000 550 136,950 137,500
Net (deficit) (180,034) (180,034)
---------- -------- -------- --------- --------
Balances,
September 30, 1998 10,900,000 $ 10,900 $572,250 $(558,866) $ 24,284
========== ======== ======== ========= ========
</TABLE>
<PAGE>
AGRI BIO-SCIENCES, INC.
(formerly Agri Environmental Sciences, Inc.)
(A Development Stage Company)
Statement of Cash Flows
9 Months Ended September 30, 1998 and 1997
UNAUDITED
<TABLE>
<CAPTION>
May 30, 1995
(Inception) to
September 30,
1998 1997 1998
---------- ---------- -------
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net loss $(180,034) $(154,705) $(558,866)
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 3,750 750 4,500
Common stock issued for services 67,650
Writedown of inventory value 100,000 100,000
Contribution of imputed interest 20,000
Changes in:
Other current assets 7,500 (19,400)
Accounts payable 4,927 5,212 9,432
Accrued expenses ( 1,200)
NET CASH USED BY
OPERATING ACTIVITIES ( 65,057) (168,143) (357,284)
--------- --------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Plant site construction and equipment
purchases (66,829) ( 73,886)
Additions to deposits ( 12,500)
--------- --------
NET CASH USED FOR
INVESTING ACTIVITIES ( 66,829) ( 86,386)
--------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Sales of common stock for cash 137,500 255,000 895,500
Purchase of stock from a former
shareholder (200,000) (500,000)
Proceeds from the current major
shareholder 52,000 52,000
Repayment of bank credit line (128,210) 119,000
-------- ----------- ---------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 61,290 174,000 447,500
--------- ----------------------------------
NET INCREASE (DECREASE) IN CASH ( 3,767) ( 60,972) 3,830
CASH AT BEGINNING OF PERIOD 7,597 78,777
-------- ---------
CASH AT END OF PERIOD $ 3,830 $ 17,805 $ 3,830
======== ========= ========
</TABLE>
<PAGE>
AGRI BIO-SCIENCES, INC.
(formerly Agri Environmental Sciences, Inc.)
Notes to Financial Statements
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
The unaudited condensed consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information. They include all adjustments which in the opinion of management are
necessary in order to make the financial statements not misleading. The
financial statements contained herein should be read in conjunction with the
audited financial statements of the Company. Accordingly, footnote disclosure
which would substantially duplicate the disclosure in those statements has been
omitted.
NOTE 2 - INSIDER COMMON STOCK RE-SALES
From time to time, the founding and largest single shareholder sells a portion
of his personal stock to third parties. He then loans these monies to the
Company. During the first 9 months of 1998, he sold 60,000 shares to other
shareholders for $15,000. During this same period, he loaned the Company
$52,000, which is repayable one year from issue date with 8% interest.
NOTE 3 - 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
expiration date has been extended to September 18, 2000.
<PAGE>
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.
<TABLE>
<CAPTION>
ITEM AMOUNT
<S> <C>
Registration fees ........................................................................................$ ______
Stock transfer agent's fee .................................................................................._____
Printing and engraving .....................................................................................5,000*
Postage ....................................................................................................1,000*
Legal .....................................................................................................15,000
Accounting .................................................................................................5,000
TOTAL .....................................................................................................$ ______
</TABLE>
* Estimate
- --------------------
ITEM 26..RECENT SALES OF UNREGISTERED SECURITIES
The following is a summary of the transactions by the Company during the
past three years 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 this connection, the Company relied primarily upon Rule 504 of
Regulation D, although the Company also believes that such issuance qualifies
under each of Rule 505 and 506 of Regulation D as well. The Company been
informed that GS Financial Services, Inc. is both accredited and sophisticated.
In addition, the Company gave to GS Financial Services, Inc. an opportunity to
review any and all information about the Company as it cared to review.
.........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.
.........ITEM 27. EXHIBITS.
.........(A) EXHIBITS:
<TABLE>
<S> <C>
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 - Marketing Agreement with Global Farm Sciences, Inc.*
10.9 - Product License covering the Republic of Mexico.*
23.1 - Consent of Sonfield & Sonfield (included as part of Exhibit 5.1).*
23.2 - Consent of Malone & Bailey, PLLC*
</TABLE>
-------------------------
* Previously filed.
<PAGE>
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.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/Leslie L. Lemak, M.D. Chairman of the Board of Directors March 12, 1999
- ---------------------------
Leslie L. Lemak, M.D.
/s/Lester H. Stephens Director, President & Chief Executive Officer March 12, 1999
Lester H. Stephens
/s/Vernon L. Medlin, M.D. Director March 12, 1999
Vernon L. Medlin, M.D.
/s/M.M. Kalish Director March 12, 1999
M. M. Kalish
/s/Patrick N. Morgan Director and Secretary March 12, 1999
Patrick N. Morgan
- ----------------------
/s/ Anthony A. Mierzva Director, Chief Financial Officer and March 12, 1999
Anthony A. Mierzwa Chief Accounting Officer
</TABLE>
<PAGE>
<TABLE>
<S> <C>
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 - Marketing Agreement with Global Farm Sciences, Inc.*
10.9 - Product License covering the Republic of Mexico.*
23.1 - Consent of Sonfield & Sonfield (included as part of Exhibit 5.1).*
23.2 - Consent of Malone & Bailey, PLLC*
-------------------------
</TABLE>
Previously filed.
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
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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
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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.
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(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
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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,
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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
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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.
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amended 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".
MALONE & BAILEY, PLLC
Houston, Texas
